Trusts are as Vulnerable to Claims as Trustees

Category: Castleacre News

Dec 10

In the latest edition of STEP magazine our trustee and trust insurance advisor, Paul Rose, explains just how vulnerable a trust can become if a claim is made against one or all of the trustees.

Paul Rose, Castleacre Insurance

In this month’s STEP we explored a case that emerged in 2019- Price v Saundry and Anor. It was a good example of how, not just trustees, but the trust itself can become vulnerable when a claim arises:

Price V Saundry and Anor 2019

The beneficiary of a Trust, Mrs Price, took a trustee, Mrs Saundry, to court over the Trust’s accounts, in particular a lack of transparency with regards to receipts, payments and allocation of property to the Trust. The judge found in favour of the beneficiary and claimant, Mrs Price, and ordered the trustee, Mrs Saundry, to repay nearly £53,000, plus any interest earnt, to the trust, but there was a sting in the tail for the beneficiary.

The judge stated that despite finding in Mrs Price’s favour it was not proven that poor management of the accounts was in fact breach of trust by the trustee. He could not be certain that the trustee, Mrs Saundry, had been acting in her own interests (a case of serious misconduct) rather than the interests of the trust; as a result, the defendant was still entitled to an indemnity from the trust, meaning that both the trustee, Mrs Saundry, and the beneficiary, Mrs Price, could both reclaim all their costs from the trust. Although the beneficiary had won her case against the trustee the court’s decision to award costs to both sides, directly from the trust itself, had a detrimental impact on the trust assets and on Mrs Price, the beneficiary. Significant legal costs had been incurred on both sides and, had there been trustee indemnity insurance in place, the costs of both parties and the repayment would have been reimbursed by insurers rather than through the trust. If Mrs Price accepted the initial court judgement, without insurance cover in place, the trust would be significantly diminished even though she had won her case.

Mrs Price decided to appeal the judgement as there seemed reasonable proof that the trustee had been partially guided by self-interest and that this could amount to serious misconduct. Luckily for Mrs Price the Court of Appeal agreed and reversed the original decision. The trustee, Mrs Saundry, was deprived of her indemnity and was ordered to pay both her own costs and the claimant, Mrs Price’s costs, from her personal account.

The Court of Appeal might have upheld the original judgement, costs would have risen substantially and would have been reimbursed via the trust with a serious impact on trust assets and the beneficiary Mrs Price. If a trustee indemnity insurance had been in place at the outset the Trust, trustee and beneficiary would have been protected.

You can download and read the full article Trustee Article STEP Dec 2020

Find out more about Trust and Trustee Insurance by downloading our brochure Castleacre Guide to Trustee and Trusts Insurance