234 High Holborn, London WC1V 7DN

Connect On WHATSAPP : +44 7474941704 Uninterrupted Access 24x7, 100% Confidential. Connect Now

1.c) Celia, Hugh and Binkie are trustees to the Grommet family trust. The trust deeds contain a clause prohibiting trustees from making investments without taking professional advice. In 2015 Binkie persuades Celia and Hugh to sign some documents releasing £10,000 for the purpose of investing that money in Possett PLC. It later emerges that the money was paid into Binkie’s own personal bank account. Binkie has been found liable for breach of trust. Advise Celia and Hugh.


Trustees are entrusted with certain responsibilities and duties by the trust and these are to be followed by the trustees. These duties may be fiduciary and statutory in nature. The present case, involves the breach of trustee duties by the trustees and the evaluation of the legal consequences of the breach of trust. Advice for Celia and Hugh.


A trustee is a person with duties towards the trust and the trust beneficiary, where duties may be of both fiduciary and non fiduciary nature. In the case of Binkie, the duties which have been breached by him specifically are- fiduciary duties include to act in good faith, not to make a profit from the trust, not to allow his self-interest conflict with his duty to the trust, and not to act to his own or someone else’s benefit without the consent of the beneficiary. In this case, Binkie has unjustly enriched himself from the trust property and he is in breach of constructive trust.18

In the case of Celia and Hugh, the duties that they have breached are in relation to powers of investing the trust property and the non-fiduciary duties that are mentioned in the trust deed or the Trust Act 2000. Breach of non-fiduciary duties will lead to the liability of the trustees to pay equitable compensation to the trust for any loss sustained by the trust. In Hallows v Lloyd,19 the duties of the trustee were laid down and included the duty of the trustee to ascertain the terms of the trust that they are required to administer.20 The trustees are required to follow the terms of the trust.In this particular case, one of the terms of the trust is, a prohibition on trustees ‘from making investments without taking professional advice.’ This has not been followed by the trustees.

The power to invest the trust property is one of the most important powers of the trustees. The Trustee Investment Act 2000, s.3(1) provides that a ‘trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust’. This gives a wide power to the trustee. However, the trustee must exercise this power with care and prudence. The Trustee Investment Act 2000, s.4 provides the standard investment criteria and s.5 provides that before making any investment the trustee must ‘obtain and consider proper advice about the way in which, having regard to the standard investment criteria, the power should be exercised.’21 It is also pertinent to mention here that in the context of taking advice for making investments, advice is considered proper only when it is taken by a person ‘who is reasonably believed by the trustee to be qualified to give it by his ability in and practical experience of financial and other matters relating to the proposed investment.’22

It is considered that the objective behind these provisions of the Trustee Act 2000, especially s.5, is to ensure that the trustees consider if the investment sought to be undertaken is a prudent investment and would be beneficial to the trust or not.23 Ultimately, the institution of trust is established with the specific purpose of safeguarding the trust property for the benefit of the beneficiary. At the same time, the power of investment is given to the trustee so that he can help grow the trust capital as well as generate income from the trust property. This, as mentioned above, is one of the most important powers of the trustee and it has to be applied with care. For that purpose, the Trustee Act 2000 also puts the trustee under a duty to take care. 24 This duty to take care is of the standard of that which is reasonable under the given circumstances. Under Schedule 1, para 1 of the Act, the duty to take care applies in relation to exercising the power to invest the trust property. In particular, the duty to take care applies with respect to ss.4 and 5, therefore, the trustee is bound to take advice from the appropriate

persons before investing trust property and this is also part of the trustee’s duty to take care. 25 In other words, the failure to take such advice would be a breach of the duty to take care. In Jeffrey v Gretton,26 the trustees were held to be in breach of trust for their failure to take advice before undertaking to repair the trust property themselves and without keeping the investment under review as per the requirements of the Trustee Act 2000, s.4(2).

Considering the principle of law laid down in Jeffrey v Gretton, it is clear that in the present case all the three trustees, that is, Celia, Hugh and Binkie are in breach of trust under s.4(2). This is because they have failed to take proper professional consultation before investing the trust property. It is pertinent to mention here, that this is a statutory requirement and in this case, it is also a specific clause in the terms of the trust.

In Cowan v Scargill,27 it was held that the main duty of the trustees is to use their powers in the ‘best interests of the present and future beneficiaries of the trust.’28

In this case, the trustees have not exercised their powers to invest properly as they have not taken advice as is required from the appropriate professional people.

As far as the liability of Celia, Hugh and Binkley is concerned, they are jointly and severally liable. Here the trust fund has been depleted by £10,000. Each of the three trustees can be made liable or all three can be made jointly liable to make good the trust fund. In Hale v Adams,29 it was established that if one of the trustees has sold the trust property and received and then lost the money, with the other trustees not bothering to make enquiries about the sale proceeds, all the trustees can be made jointly and severally liable to make good the loss to the trust fund.30

The other pertinent question that arises in this case is, that if all the trustees are jointly or severally liable, then can Celia and Hugh claim indemnity against Binkie for misappropriation of the trust funds? Binkie has unjustly enriched himself at the cost of the trust fund. In Boardman v Phipps31 it was held that the trustee is under duty of loyalty and the duty to avoid conflicts of interest. In Bank of Cyprus v Menelaou,32 the Supreme Court had held that where there is sufficient causal connection between the enrichment of one person and the loss suffered by another, it is unjust enrichment. In the present situation, Binkie has enriched himself unjustly at the expense of the trust fund.

Based upon an earlier authority, Bahin v Hughes,33 the general principle is that where the trustees have also been responsible for the loss to the trust fund due to their failure to enquire into the actions of the erring trustee, they cannot get indemnity against the erring trustee. However, under the provisions of the Civil Liability Contribution Act 1978, s.1, a ‘contribution’ based upon the principles of equity can be ordered by the court in favour of the innocent trustees. Therefore, a contribution or a full indemnity may be ordered by the court in favour of Celia and Hugh.


All the three trustees are liable for breach of trust. Binkie is also liable for unjust enrichment. The liability of the trustees is joint and several. However, Celia and Hugh can claim some contribution as an indemnity from Binkie.

Get In Touch

Our best expert will help you with tha answer of your question with best explanation.

DISCLAIMER :The work we provide is for reference purposes. We strictly follow the rule of not providing assignments as finalised work. But you can take help from our work.

Back to Top
Call Back Chat Now
Live Chat with Humans