Breaches of trust
We appreciate the importance of a legacy to a charity, which is a key source of funding for the charity, and the harmful impact that a trust dispute may have on the legacy by reducing the legacy.
We can help charities to resolve trust disputes in order to protect the legacies they are entitled to receive as beneficiaries of estates by:
- Reviewing the management of assets of the estate, including how funds are being spent, and addressing concerns over the administration of trusts.
- Bringing claims against trustees for mismanaging trust assets and funds to ensure that charities receive their rightful share from an estate and recover any losses caused by the actions of trustees.
What is a trust?
A trust is a legal arrangement where someone or a group of people are made responsible for assets for the benefit of another group of people.
The people assigned to administer the trust are known as trustees and those benefiting the beneficiaries, which usually include charities. The person who sets up the trust is known as the settlor.
The assets are held in the trust and will be released at the desired time. This might be on a desired date or event such as someone turning 18 and becoming an adult.
Breach of trust
We act for beneficiaries, including charities, in bringing claims against trustees where they are in breach of trust.
We also act for trustees, including charities, in defending such actions.
A breach of trust is an act (or a failure to act) by a trustee that is not authorised either by the trust document or by law.
Typical examples include:
- Where a trustee breaches a fiduciary duty such as the duty to bring trust property under their control and act impartially.
- Where a trustee distributes trust assets to a beneficiary, who is not entitled to them under the terms of the trust document.
- Where a trustee invests the trust fund in a way not permitted by his express or statutory powers of investment.
- Where a trustee breaches a fiduciary duty such as the duty not to profit from the trust, for example, by selling one of his own assets to the trust.
- The trustee in the exercise of their power or discretion acts otherwise than with absolute honesty, or fails to observe the required standard of care.
Loss arising from the breach of trust
To substantiate an action for breach of trust, a beneficiary, including a charity, will normally have to demonstrate that loss has been caused. We will be able to advise on this once we have spoken to you and taken some details.
The trustee’s liability will be to restore the trust fund to the position it would have been in if the breach had not occurred.
What action can be taken to remedy a breach of trust?
We are able to issue court proceedings against the trustees to recover the loss from them.
We can obtain interim injunctions to protect the trust whilst the action proceeds.
We are able to obtain court orders for the removal of trustees from acting.
Several defences are available to trustees.
The trust document may authorise the trustee to do something that is not permitted by the general law. For example, self-dealing may be allowed subject to conditions, and will then not be a breach of trust if those conditions are met.
The trust document may excuse a trustee from liability for something that is a breach of trust, this is referred to as a trustee exemption or exoneration clause. However, trustees have a minimum duty to perform the trusts honestly and in good faith for the benefit of the beneficiaries. An exemption clause cannot excuse a trustee who either knows that his act or omission is contrary to the beneficiaries’ interests or is recklessly indifferent to the beneficiaries’ interests.
We are able to review the trust document and advise if any defence is available to the trustee.
Setting a trust aside
We can also advise as to whether a trust can be set aside.
Recent court action in various jurisdictions have demonstrated that trusts which at first sight appear to be valid may be set aside and the assets claimed by relatives, creditors and the Revenue where:
- The assets are situated in a jurisdiction which does not recognise trusts.
- The trust deed is in effect a will which is incorrectly executed.
- The trust was intended to defraud creditors.
- The trust property can be clawed back under anti-avoidance legislation.
- The trust is found to be a “sham”, such as where the settlor retains overall control of both the trust and the assets of the trust.
- The trust lacks so many of the usual incidents or characteristics of a trust that it was in reality a different legal arrangement.
- There has been a clear breach of the fiduciary duty of trustees, company directors, agents or protectors.
- The trust fails to appoint any validly appointed trustees.
Time limits for bringing a claim
There are different time limits for bringing different types of claim. The time limit is known as the ‘limitation period’.
For most breach of trust claims the limitation period is normally 6 years from the date of knowledge of the breach, unless fraud is alleged.
If you think you have claim you should act quickly in seeking legal advice to find out which limitation period will apply to your claim.
We offer a number of alternative funding options which include:
- Fixed fees.
- Hourly rates.
- Conditional Fee Agreements (no win no fee).
- Contingency fees.
- Before the event insurance.
What should you do now?
Whether you are a charity beneficiary unhappy with the way your trust is being handled or a charity trustee in need of some advice, we are always happy to talk on an initial no obligation and informal basis so please email or call one of the team.