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Problem scenario
Theresa died in 2008. By her will she settled a trust of £20,000 cash on trustees for the benefit of her nephew Bill and her niece Barbara, 'in equal shares upon their attaining the age of 21'. At the date of Theresa's death Bill was 13 and Barbara was 15. Theresa had also made a gift in her will of £10,000 to another nephew, Barry.
The trustees are Tricia, Tracy and Barry. Tricia is a solicitor.
In January 2012, Tricia urged Tracy and Barry to join her in investing in a private limited company which, she said, promised to be a very profitable investment. She explained to the trustees that although the investment was 'technically unauthorised' (the trust instrument prohibited investment in private companies) it was very perfectly sound. In the event the trustees went ahead with the investment in the company, having first obtained the consent of Bill and Barbara, who had been told that the investment was a safe one'.
Shortly after making the investment the shares rose in value and yielded large dividends to the trust, but later they fell in value and today they are practically worthless.
It is now April 2018 and Bill and Barbara have issued proceedings against the trustees. Advise the trustees as to the possible extent of their liability to the trust and any defences which might be open to them.