Duty of care exemoption clauses

Speight v Gaunt [1883]

There is a duty to act as an ordinary, prudent man of business would act when taking care of someone who they feel morally obliged to provide for

Bartlett v Barclays Bank

facts: a family trust created with Barclays as trustee, beneficiaries sued as they argued trustees had 99% shares and should have used their powers to keep the board of directors accountable

decision: the bank were professional trustees and were held to a professional standard, standard of care differs depending on the type of trustee

Trustee act 2000 s1

trustees must exercise a duty of care having regards to

(a) any special knowledge or experience he has

(b) any special knowledge or experience that is reasonable to expect of a person acting in the course of their business/profession

personal liability

the trustee is liable for reparative compensation

- requirement to show breach of duty beforehand

Nestle v National Westminster Bank Plc

facts: a rich man set up a trust for his descendants, his granddaughter inherited £269k and sued arguing that the trustees should be held to a high professional standard and should have invested in shares so she would receive more

decision: you do not judge standard of care by looking at hindsight

however there was a breach as the trustees fell below the standard of care by not reviewing the investment plan

trustee act 1925 s61

If it appears to the court that a trustee... is or may be personally liable for any breach of trust, ... but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust, [...] then the court may relieve him either wholly or partly from personal liability for the same.

exemption clauses

DoC is not something the settlor has to impose or the trustee has to accept

- they are free to impose their own terms

Langbein's argument

- Trusts are set up by professionals and they are altered depending on what the settlor wants to do

- The law gives us some guidance if the trust deed is silent, but the primary thing to consider is the trust deed

- However, a trust is different from a contract in a sense that there are some minimal requirements which must be met to be considered a trust

Armitage v Nurse [1998]

You can exclude the standard of care for ordinary negligence but not gross negligence (fraud)

Give 2 reasons why you cannot exclude all liability

1. the conceptual minimum requires some liability on the trustee. If the beneficiaries have no rights enforceable against the trustees, there are no trustees

2. if no rights are enforceable, the trustees can do whatever they want with the property. This would give them the pseudo status of an owner

when will an exclusion clause fail?

A trustee who deliberately relies on an exclusion clause is not acting in good faith and is therefore not protected by it