Trustees are appointed to manage and administer trust assets in the best interests of the beneficiaries, following both the terms of the trust and the legal duties imposed on them. In England and Wales, trustees have a duty to act jointly and to make decisions collectively. However, disagreements can and do arise between trustees. In certain circumstances, these disputes may escalate to the point where one trustee considers taking legal action against another.
At Blackstone Solicitors, we regularly advise clients on disputes involving trustees, including cases where one trustee seeks to sue another. This article explains the legal principles involved, the circumstances in which such action might be taken, and the potential consequences.
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Understanding the Role and Duties of Trustees
Trustees are bound by both the trust instrument and the law. Their duties are wide-ranging and include:
- Acting in accordance with the trust deed – Trustees must strictly follow the terms of the trust.
- Acting in the best interests of beneficiaries – They must not prioritise their own interests over those of the beneficiaries.
- Exercising reasonable care and skill – Trustees must manage the trust diligently.
- Acting jointly – Except where the trust deed allows otherwise, trustees must act together in making decisions.
- Avoiding conflicts of interest – They must not put themselves in a position where their own interests conflict with their duties.
If a trustee fails to meet these obligations, it may amount to a breach of trust.
Can Trustees Take Action Against Each Other?
Yes, under English law, one trustee can take legal action against another trustee in certain situations. The key reason for such action is usually an alleged breach of trust or mismanagement of the trust’s assets.
It is important to note that trustees are collectively responsible for the trust’s administration. If one trustee commits a breach of trust, the other trustees may also be liable to the beneficiaries unless they can show that:
- They did not join in the breach.
- They took all reasonable steps to prevent it.
If a trustee becomes aware of another trustee’s wrongful conduct and fails to take action, they may be personally liable for resulting losses. This creates a strong incentive for trustees to hold each other accountable, including through legal proceedings if necessary.
Common Reasons One Trustee Might Sue Another
While trustees are encouraged to resolve disputes without litigation, there are situations where court action may be the only way to protect the trust and its beneficiaries. Common scenarios include:
- Misappropriation of Trust Assets
If a trustee uses trust funds for personal gain or diverts assets for unauthorised purposes, the other trustees may sue to recover the assets or obtain compensation for the trust.
- Failure to Keep Proper Accounts
Trustees have a duty to maintain accurate records and to provide accounts to beneficiaries when required. If a trustee refuses to produce accounts or conceals transactions, this may justify legal action.
- Breach of Investment Duties
Under the Trustee Act 2000, trustees must follow certain principles when investing trust assets, including diversification and suitability. If one trustee disregards these rules and causes a loss, the others may sue to recover the loss.
- Unauthorised Delegation of Duties
A trustee may not delegate their core decision-making responsibilities unless expressly permitted by the trust deed or law. If they do so and the trust suffers loss, another trustee may take action.
- Conflict of Interest
If a trustee enters into a transaction that benefits themselves at the expense of the trust, this could be a serious breach of trust warranting legal proceedings.
Legal Mechanisms for One Trustee to Sue Another
The law provides several routes for trustees to hold each other to account:
Breach of Trust Claims
If a trustee breaches their duties, another trustee may bring a claim on behalf of the trust to recover losses. This is often necessary to protect the trust from depletion.
Application for Directions
Before suing, a trustee can apply to the court for directions under Part 64 of the Civil Procedure Rules. This allows the court to clarify whether a proposed course of action is appropriate.
Removal of a Trustee
In cases of serious misconduct, a trustee can apply to the court for the removal of the offending trustee. The court’s primary concern is the welfare of the beneficiaries and the proper administration of the trust.
Indemnity Claims
A trustee who is held liable to beneficiaries due to another trustee’s breach may seek an indemnity from the trustee at fault.
The Role of the Court
When hearing a dispute between trustees, the court will focus on:
- Whether there has been a breach of trust.
- The extent of any loss to the trust.
- Whether removal of the trustee is necessary for the trust’s proper administration.
- Whether the dispute can be resolved without unnecessary expense to the trust.
The court has wide powers to order repayment, award damages, remove or replace trustees, and give binding directions.
Risks and Considerations Before Suing
Before initiating proceedings, a trustee should carefully consider:
- Costs – Litigation can be expensive. While trustees may recover reasonable costs from the trust if acting properly, the court can order them to pay personally if the claim is unfounded.
- Impact on Trust Administration – Legal action can delay the administration of the trust and increase tensions between trustees.
- Evidence – Strong documentary evidence of wrongdoing is essential to support the claim.
- Alternatives to Court – Mediation or negotiation should be considered first.
Alternatives to Litigation
Where possible, trustees should explore other avenues before going to court:
- Mediation – A neutral mediator can help resolve disputes confidentially and cost-effectively.
- Formal Meeting of Trustees – Issues can sometimes be resolved by discussing them in a structured setting.
- Independent Advice – Engaging an independent solicitor or accountant to review the trust’s finances can clarify matters and avoid unnecessary conflict.
How Blackstone Solicitors Can Help
At Blackstone Solicitors, we advise trustees across England and Wales on both preventing and resolving disputes. We can:
- Assess whether there are legal grounds for action against a co-trustee.
- Represent trustees in negotiations and mediation.
- Prepare and issue court proceedings where necessary.
- Seek the removal of a trustee who is acting improperly.
- Defend trustees against unfounded claims.
We understand the sensitive nature of disputes between trustees and aim to resolve matters quickly, preserving the value of the trust and minimising disruption to beneficiaries.
Conclusion
While trustees are expected to work together for the benefit of the beneficiaries, situations can arise where one trustee’s conduct is so problematic that another must take legal action. English law allows for this, but the decision to sue should not be taken lightly. Trustees must consider their duties, the potential costs, and the impact on the trust before proceeding.
Where serious breaches of trust occur, swift and decisive action is often necessary to protect the trust and its beneficiaries. Seeking early legal advice is the best way to ensure that you meet your obligations while minimising personal risk.
Blackstone Solicitors is here to guide trustees through these complex situations, offering practical, clear advice and strong representation at every stage.
Suing a trustee is a serious and complex legal matter. It requires a detailed understanding of trust law and the legal duties of a trustee. Our team at Blackstone Solicitors has extensive experience in handling these types of disputes. We can provide you with the guidance you need to understand your legal rights, assess the strength of your claim, and help you navigate the process.
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of dealing with trusts. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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