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Breach of Trust: Presented By: George Lee Zhao Yan

A breach of trust occurs when a trustee fails to comply with their duties outlined in a trust instrument or equity. There are two types: civil and criminal. Civil breach involves indirect benefit without intent to steal, while criminal breach involves intentionally misappropriating trust property. For civil breach, trustees are personally liable and remedies include restorative damages. For criminal breach under Malaysian law, imprisonment up to 10 years and a fine are possible punishments. Defenses include beneficiary consent or expiration of the limitation period.

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343 views8 pages

Breach of Trust: Presented By: George Lee Zhao Yan

A breach of trust occurs when a trustee fails to comply with their duties outlined in a trust instrument or equity. There are two types: civil and criminal. Civil breach involves indirect benefit without intent to steal, while criminal breach involves intentionally misappropriating trust property. For civil breach, trustees are personally liable and remedies include restorative damages. For criminal breach under Malaysian law, imprisonment up to 10 years and a fine are possible punishments. Defenses include beneficiary consent or expiration of the limitation period.

Uploaded by

George Lee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Breach of Trust

Presented by: George Lee Zhao Yan


Learning Objectives

At the end of this lesson, students are expected to:

• Define what is a 'breach of trust'

• Understand the nature of liability in both types of breach


of trust

• Be informed about the remedies for a breach of trust

• Appreciate the defences available


Defining Breach of Trust
• Failure of a trustee to comply with duties laid down in a trust
instrument and also under equity

• Breach of trust can occur through inactions or positive


actions. For example:
– Inaction: A trustee failed to invest the trust fund
– Positive action: A trustee misappropriated the trust fund

• In Malaysian law, there are two types of breach of trust: Civil


Breach of Trust and Criminal Breach of Trust.

• Sources of law: Common law, Civil Law Act 1956, Trustee Act
1949, Penal Code.
Nature of Liability (Civil BOT)
• A civil breach of trust occurs when a trustee has not conformed to his duties
as a trustee without the intention to misappropriate the property entrusted.

• It would normally involve situations where the trustee has unjustly benefited
indirectly from his dubious actions.

• Generally, in a civil breach of trust situation, liability inter se will be borne by


the trustee.

• Liability inter se means there is a personal liability towards the beneficiary. It


also means that if there are joint trustees in the situation, a breach of trust
committed by one trustee does not engage liabilities on other trustees
automatically.

• For a civil breach of trust, the court will grant restorative remedies for the
beneficiaries in question.
Remedies for Civil Breach of Trust
i. Restorative damages will be awarded to the beneficiaries.

ii. The trustee is only liable restore damages done to the beneficiaries which
was as a direct result of his breach of trust.
Case: Target Holdings v. Redferns [1995] 3 WLR 352

i. The breach of trust committed by one trustee does not result in the liabilities
of his co-trustee provided that the co-trustee has undertaken his
responsibilities in good faith.
Case: Re Lucking Will Trusts [1968] 1 WLR 866
Statute: Trustee Act 1949 - s. 35 Implied Indemnity of trustees

i. A trustee will not be liable to co-trustees for indemnities if he or she has


acted in good faith, despite the fact that his action has resulted in a
collective loss.
Case: Bahin v. Hughes [1886] 31 Ch D 390
Nature of Liability (Criminal BOT)
According to the Penal Code (s. 405), a criminal breach of trust occurs when
the following elements are proven:

• The trustee was entrusted with dominion or in any manner over a property. In
other words, a property was handled to the trustee for his control, but was still
owned by the beneficiary.
Case: State of Gujarat v. Jaswantlal Natahalal [1968] Cri LJ 803

• The trustee misappropriates or converts the property for his own use.
Misappropriation means to assign it to a wrong person or a wrong cause.
Dishonesty means the intention to cause wrongful gains or wrongful loss.
Case: Sohan lal v. Emperor [1915] AIR All 380 (Misappropriation)
Statute: Penal Code - s.23 & s.24 (Dishonesty)

• The trustee dishonestly disposes the property in violation of any direction of law
or legal contract.
Case: Murni bin Hj Mohd Taha v. PP [1986] 1 MLJ 260
Remedies for Criminal Breach of Trust
i. Penal Code (s. 406):

Whoever commits criminal breach of trust shall be punished with


imprisonment for a term not exceeding ten years and with whipping, and
shall also be liable to a fine.
Defences available
i. Beneficiaries either consented or participated in the breach

ii. Beneficiaries showed their approval through 'release or


acquiescence' to the conduct of the trustee

iii. Expiration of 6 years (Limitation Act 1953)

iv. Statutory relief under s. 63 of the Trustee Act 1949 - for trustees
acting reasonably and honestly

v. The trustee acted in accordance with the advices of a solicitor

vi. Breach by a single trustee

vii. Breach of trust in relation to exemption clauses in the trust


agreement

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