Trust duties are obligations contained in the trust instrument or imposed by law, which must be carried out by the trustees. The trustees’ failure to carry out their duties is a breach of trust and the trust beneficiaries (subject to the existence of an exemption clause) may take action to recover any loss caused to the trust by the trustees’ failure.
The relatively unrestricted nature of trustees’ liability for breach of trust has resulted in the use of common form clauses in trust instruments which exclude or restrict that liability. The terms of such clauses in early trust instruments were fairly narrow and they were strictly construed against trustees. However the changed nature of the trust assets, the use of the trust for purposes never before envisaged, the extended powers given to trustees and the fear of increasingly litigious beneficiaries has led to the inclusion of ever wider exemption clauses in trust instruments.
A typical trustee exemption clause may read as follows:
No Trustee shall be liable for any loss or damage which may happen to the Trust Fund...at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud. example clause
It is now relatively common to find express provisions in modern trust instruments inserted to protect trustees from their liabilities in respect of acts or omissions that would normally be regarded as breaches of trust. As the powers of trustees have increased as a result both of express provisions in trust instruments and by legislation, so has the breadth of trustee exemption clauses. When coupled with the less restrictive approach recently adopted by the courts to the construction of exemption clauses, it can be strongly argued that the protection offered to beneficiaries, one of the prime concerns of trust law, is weaker than in the past.
