17 October, 2018
A trust, unlike a limited company, has no legal personality and the assets of the trust are vested in trustees. Trustees are the only persons capable of assuming rights and obligations in relation to the assets and administration of the trust.
A person who is appointed as a trustee assumes the liabilities of a trustee and that liability exposes the trust assets and his/her own personal assets to those liabilities.
So what are the duties of a trustee, and what is the extent of a trustee's liability?
Duties of a trustee can be fairly onerous, and in short a trustee must:
These duties can be wide ranging, and a breach of these duties can lead to a claim against the trustee personally.
Trustees must understand that they can be held personally liable for poor decisions made in relation to the trust, whether made directly by them or by another trustee. It's important that trustees understand this before accepting an appointment.
The primary remedy for a breach of trust is the reconstruction of the trust estate. This means a trustee's obligation is to restore the trust fund to the position it would have been in had the breach not occurred. The trustee will be personally liable to account to the trust for loss that occurs as a result of their breach of trust. This can act fairly harshly against a trustee, and so:
A claim against the trustee for loss suffered will usually be accompanied by a an application to remove a trustee.