Top Eight Toughest Law Topics: Equity & Trusts

2013-04-10 04:22 PMCurrent Affairs

Eggs were demolished, fun was had, and now it’s back to the grind. Luckily we’ve got the perfect remedy to help you power on through revision. We’ve teamed up with Sweet & Maxwell to give you weekly exclusive extracts from their Nutshells revision series on what you say are the trickiest topics. Bring on the next tough nut!

The world of law at your feet...


Joy! Rapture! This week it’s the turn of Equity and Trusts. True to form we’ve counted your votes from the Facebook page, and can now officially proclaim Breach of Trust and Associated Remedies as ‘pretty flippin’ hard’!


So here’s your free extract courtesy of Sweet & Maxwell, complete with a link to the full chapter.


Breach of Trust and Associated Remedies

Extracted from Nutshell Equity & Trusts (Ninth Edition) by Michael Haley, Sweet & Maxwell.


A trustee assumes a range of duties and responsibilities, breach of which exposes him to liability in an action by the beneficiary. The trustee has a liability either to compensate for loss or to account for gains subsequent to the breach. The essential principle is the same whether the trust is express or implied. Not surprisingly, the beneficiaries have a number of remedies against the trustee and sometimes third parties for a breach of trust.


This Chapter focuses on possible breaches of duty and the range of remedies that a beneficiary may pursue of both a personal and proprietary nature. A trustee may be liable for both acts of omission (failing to do what he ought to do) and acts of commission (doing what he should not do). There are many examples of breach in a variety of different circumstances. It is difficult, therefore, to lay down any exhaustive list of possible breaches that will give rise to trustee liability.


Categories of Breach


Nevertheless, breaches of trust by a trustee fall within three broad categories:


- gaining an unauthorised profit;

- failing to act with care and skill in the administration of the trust; and

- misapplications of trust property.

Liability for breach

Liability of a Trustee for His Own Acts


If the trustee commits a breach of trust, he is liable to the trust for any loss incurred or personal gain made. In the case of an unauthorised investment, he is liable for the loss incurred when it is sold (Knott v Cottee (1852)). Where the trustee wrongfully retains an unauthorised investment, he is liable for the difference between the price he obtains when it is sold and the price that would have been obtained had he sold it at the right time (Fry v Fry (1859)). If a trustee improperly realises an authorised investment, he must replace it or pay the difference between the price obtained and the cost of repurchasing the investment (Phillipson v Gatty (1848)).


Former trustees


A trustee is not, however, liable for breaches of trust committed by his predecessors (Re Strahan (1856)). He should, nevertheless, sort out any irregularities discovered when taking office, including obtaining satisfaction from the previous trustees. If the trustee fails to do so, he may himself be liable for loss arising from this omission. If the trustee takes the appropriate steps on appointment, he is entitled to assume that there has been no preexisting breach of trust (Re Strahan (1856)).




On retirement, a trustee (or, if he is deceased, his estate) will still remain liable for breaches of trust that occurred during his stewardship (Head v Gould (1898)). Generally, a trustee is not liable for breaches committed by his successors unless his retirement occurred so that the breach could be committed or to avoid his becoming involved with it.


Alas! It’s too much of a squeeze to fit the whole chapter in this space. Click on the link here to access the PDF for the whole chapter where the knowledge continues. You can find some useful key cases and diagrams too.


You can find the full range of Topic Guides together with Nutcases and tips on revising using Westlaw UK at the Nutshells Law Revision website.


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