Relief from liability for breach of trust: Trustee Act 1925 s.61
Agnes Kirby, an unpaid lay trustee of a small family trust in England, distributed £30,000 to a beneficiary in reliance on written advice from the trust's solicitors that the beneficiary was entitled. The advice was wrong and the payment was a breach of trust. Agnes acted in good faith, followed the advice carefully, and had no reason to doubt it. The trust deed contains no exemption clause. The other beneficiaries now sue her.
On what basis may the court relieve Agnes from personal liability?
Choose one answer to see the reasoning.
Worked answer
Correct answer B: The court may relieve her wholly or partly if she acted honestly and reasonably and ought fairly to be excused.
THE RULE TO REMEMBER
The court may relieve a trustee wholly or partly from liability for breach of trust if they acted honestly and reasonably and ought fairly to be excused (TA 1925 s.61).
Relief from liability for breach of trust: Trustee Act 1925 s.61
Section 61 of the Trustee Act 1925 gives the court a discretion where a trustee is or may be personally liable for a breach of trust. If the trustee has acted honestly and reasonably, and ought fairly to be excused for the breach and for omitting to obtain the court's directions, the court may relieve him either wholly or partly from personal liability. Agnes acted in good faith and reasonably: she took and carefully followed professional advice and had no reason to doubt it. She is also an unpaid lay trustee, a factor courts take into account. These facts make her a strong candidate for relief, in whole or in part. Relief is discretionary, however, and depends on all three elements being met. It is not automatic, and honesty alone is not enough. The trust's rights against the solicitors who gave the wrong advice are a separate matter.
Why A is wrong: Being unpaid is relevant to the discretion but gives no automatic immunity; trustees' liability for breach is strict.
Why C is wrong: Section 61 relief is a matter for the court, not for the beneficiaries' consent.
Why D is wrong: Section 61 operates whether or not the deed has an exemption clause.
Why E is wrong: The section requires the trustee to have acted honestly and reasonably; both are needed.
A little more practice done.
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