Commentary on Sections Part 1 – Trusts Damages
66.Section 39 of the Act implements recommendation 66. It is concerned with the satisfaction of awards of damages for loss suffered by a third party resulting from trustees’ acts or omissions in the ordinary course of administering the trust. Subsection (2) provides that the general rule is that such damages are payable only from the trust property; therefore, the trustees are not personally liable. If, however, the Court of Session is satisfied that a trustee has failed to meet the required duty of care, as specified by section 31 of the Act, and the delictual act or omission was in any way attributable to that failure, then it may specify that the damages are payable (in whole or in part) from that trustee’s private property to reflect the trustee’s personal failure with the balance, if any, coming from trust funds. Section 39 applies irrespective of when the trust was created but only in relation to acts or omissions which occur after commencement of the section (subsection (4)).
67.Section 40 of the Act implements recommendation 67. It specifies how an injured party can raise proceedings in delict following a loss sustained as a result of the acts or omissions of one or more trustees. Subsection (2) states that the party may choose to raise a court action against either the trustees as a body (i.e. against all of the trustees in that capacity) or against the individual trustee(s) at fault (or jointly and severally against both). The advantage of being able to sue the individual(s) directly is that, if the trust property is insufficient to meet the award of damages, the pursuer can enforce it against the individual(s) at fault without the need for a second court action. Subsection (3) permits the body of trustees, if they are sued on their own, to bring in as a defender any individual trustee so that the action lies against those considered to be personally at fault as well as against the general body of trustees.
68.Section 41 of the Act implements recommendation 68. Where the trustees as a body have been found liable in delict, but no individual trustee has incurred personal liability, the damages will be paid out of the trust property. If, however, the award exceeds the value of that property, the trustees themselves are liable for the excess. Subsection (2) provides that any trustee who makes a contribution to that excess can seek to recover the costs from the other trustees. Subsection (3) states that this is subject to the relief which the court may grant under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 (by which it determines the proportion of the award which each trustee must contribute). Section 41 applies irrespective of when the trust was created but only in relation to liability incurred after commencement of the section (subsection (4)).
69.Section 42 of the Act implements recommendation 69. It makes particular provision for liability arising from obligations under environmental law or occupier’s liability. Depending on the nature of the trust property, this can be a significant source of concern for trustees, beneficiaries and any third parties where trustees bear such responsibilities as landowners. By subsections (1) and (2), where such liability falls on trustees in the ordinary course of administering the trust, damages are payable out of the trust property only. But subsection (3) provides that, where a trustee has breached the duty of care set out in section 31, the Court of Session may specify that damages are payable partly from the trust property and partly from that trustee’s private property. In this way, innocent trustees are protected from personal liability. Section 42 applies irrespective of when the trust was created but only in respect of liability arising after commencement of the section (subsection (4)).