Contributory Fault and Breach of Trust

Abstract

New Zealand and Canadian courts are willing to reduce the liability of a fiduciary for breach of fiduciary duty to take account of the claimant’s contributory fault, whereas English and Australian courts are not. The picture is less clear as regards breaches of trust not involving a breach of fiduciary duty, such as merely careless breaches of trust. English courts have assumed that there is no scope in any case of breach of trust for reducing trustee liability to take account of the beneficiary’s contributory fault, but this paper demonstrates that there is no binding authority to that effect. In the absence of authority the matter falls to be determined as a matter of principle. There are a number of obstacles of principle in the way of apportionment of liability between trustee and beneficiary on the ground of contributory fault. One significant obstacle is the basic difference between the compensatory aim of tortious liability and the traditional aim of trustee liability to reinstate the trust fund by means of the action for account. Another is the exemplary nature of trustee liability, which favours the enforcement of trust obligations even where this might over compensate individual beneficiaries. Significant though these obstacles are, it is demonstrated that they can be overcome in the case of a careless breach by the trustee of a bare trust. In such a case there is no significant difference between the conceptual basis for, and remedies for, negligently caused harm in tort actions and actions for breach of trust. The trustee’s fault-based liability in such a case should therefore be capable of reduction to take account of the beneficiary’s own fault.