Chapter 17 Self-Test Questions

'A claimant has a primary right to a remedy upon the infringement of an equitable duty.'

True.

False.

Which of the following are true?

Fiduciaries owe only fiduciary duties.

The majority of duties owed by a fiduciary are fiduciary duties.

Fiduciaries owe both fiduciary and non-fiduciary duties.

Fiduciaries do not necessarily owe fiduciary duties.

Which of the following are true?

Whenever a trustee breaches a trust duty they are acting in breach of fiduciary duty.

In most instances, where a trustee breaches a trust duty, they will be acting in breach of fiduciary duty.

Fiduciary duties and trust duties are the same, so a trustee in breach of one is also in breach of the other.

Not all breaches of trust are also breaches of fiduciary duty.

Which of the following are true?
There may be more than one correct answer.

Whenever a trustee breaches the trust, they are automatically liable to the beneficiary.

A trustee will not be automatically liable on breach as the beneficiary may not have suffered any loss.

A trustee will not be automatically liable on breach as they may have an exemption clause.

A trustee will not be automatically liable on breach as the beneficiary may have consented to the breach.

'Exemption clauses cannot exclude liability for breach of the statutory duty of care.'

True.

False.

According to Millett LJ in Armitage v Nurse, what duties are contained in the irreducible core of duties?

The duty of care.

The duty to perform the trust honestly for the benefit of the beneficiaries.

The duty to invest for the benefit of the beneficiaries.

The duty to exercise the powers prescribed by the trust.

Liability for which of the following duties can be excluded?

The duty of care.

The duty to perform the trust honestly for the benefit of the beneficiaries.

The no-profit fiduciary duty.

The no-conflict fiduciary duty.

Jill is a professional trustee. Jill was unsure whether exercising a power in a particular way would amount to a breach of trust. Jill sought legal advice. Jill followed the advice given, but it was wrong. She acted in breach of trust and caused damage to the interests of the beneficiaries.
Might Jill be relieved of liability under section 61?

Jill is likely to be relieved of liability as she acted reasonably and honestly in following the legal advice.

Jill is not likely to be relieved of liability as she is a professional and a higher standard of reasonable conduct is expected.

Jill has not acted with the level of care expected and so would not be relieved of liability.

Jill is likely to be relieved of liability as she acted in the best interests of the beneficiaries and that is sufficient.

Why might it be appropriate to extend the Unfair Contract Terms Act 1977 to cover exemption clauses in trust documents?

The Act applies only to unreasonable terms. There is no reason why it should not apply to unreasonable terms in trust instruments.

Trusts are now viewed as contractual devices and so it is reasonable that the trust documents fall within the statutory regulation of contract.

Beneficiaries have no role in negotiating the terms of the trust and so deserve the protection of the legislation to prevent unfair terms affecting their rights.

All exemption clauses are necessarily unreasonable and so should be regulated by the Act.

'Trustees are not liable for the acts of their co-trustees.'

True.

False.

Sam and Veronica are trustees. Both act in breach of trust. The beneficiary sues only Sam to obtain compensation. What does it mean for Sam to seek a contribution?

Sam can ask Veronica to contribute to the liability and pay her share of the compensation.

Sam can seek a contribution from the trust fund to cover the liability.

Sam can apply to the court to require Veronica to contribute towards the remedy.

Sam can seek a contribution from the court itself.

When might Veronica be fully liable to indemnify Sam?

When Veronica has obtained the entire benefit of the breach of trust.

When Veronica is a professional trustee.

When Veronica is solely responsible for the breach of trust.

When Sam let Veronica do all of the work without participating in the decision-making process.

'Where trustees are personally liable to a third-party creditor, they are always entitled to be indemnified from the trust fund.'

True.

False.

A trustee is liable in their personal capacity, but they do not have sufficient funds to discharge the liability. Can the third party seek to discharge the liability from the trust assets?

The trust property does not belong to the trustee absolutely and so cannot be used to discharge the trustee's liability.

The trustee is entitled to be indemnified from the trust fund and so the third party can use the trustee's right to indemnification to discharge the liability.

The trustee has legal title to the trust property and so the third party can use trust assets to discharge the liability.

The trustee can take a loan of the trust property to discharge the liability as long as the trustee replaces the value within the trust fund.

'It is possible for trustees to take out indemnity insurance to cover liability for breach of trust.'

True.

False.

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