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You are here: BAILII >> Databases >> The Law Commission >> TRUSTEE EXEMPTION CLAUSES (A Consultation Paper) [2003] EWLC 171(5) (1 May 2003) URL: http://www.bailii.org/ew/other/EWLC/2003/171(5).html Cite as: [2003] EWLC 171(5) |
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PART V
CONSULTATION QUESTIONS
Introduction5.1 In this Part we list the specific questions for consultees which we raised in Part IV. We welcome comments from readers on any, or all, of these questions. We would also be grateful for comments on any other issues raised by this consultation paper. 5.2 It would be very helpful if, when responding, readers could note the paragraph number of the summary that follows.
Consultation questions5.3 We do not consider that an outright prohibition of trustee exemption clauses is justified or necessary. Do consultees agree?
(Paragraph 4.19)
5.4 We do consider that some legislative regulation of trustee exemption clauses is justified and necessary. Do consultees agree?(Paragraph 4.20)
5.5 We provisionally propose that all trustees should be given power to make payments out of the trust fund to purchase indemnity insurance to cover their liability for breach of trust. Do consultees agree?(Paragraph 4.32)
5.6 We consider that the case for regulation of the use of trustee exemption clauses by professional trustees is very strong, but that lay trustees should in general continue to be able to rely upon trustee exemption clauses. We provisionally propose therefore that any statutory regulation of such clauses should make a distinction, in broad terms, between professional trustees and lay trustees. Do consultees agree?Consultees are asked whether they agree with the provisional proposal that any distinction between lay trustees and professional trustees be made on the basis set out in paras 4.36 and 4.37 above.
(Paragraph 4.39)
5.7 While we consider that those advising a settlor (whether or not they are also the trustees) should be expected, as a matter of good practice, to bring the attention of their client to any trustee exemption clause and to explain its legal consequences, we do not consider that it is appropriate that this should be a statutory requirement. Do consultees agree?(Paragraph 4.45)
5.8 We invite views on statutory regulation of trustee exemption clauses such that a clause can only be relied upon by a trustee to exclude or restrict his or her liability for breach of trust in so far as the clause satisfies a requirement of reasonableness.In so far as consultees support the imposition of a reasonableness requirement, do they consider it desirable that there be a list of matters to which regard is to be had in determining whether a particular clause satisfies the requirement?
If so, could they indicate the matters which they consider should be included in such a list?
(Paragraph 4.52)
5.9 We do not consider it satisfactory to combine an outright prohibition of trustee exemption clauses with the exercise of a judicial discretion to exculpate trustees who have acted honestly and reasonably and who ought fairly to be excused for their breach of trust (the New Zealand model). Do consultees agree?(Paragraph 4.66)
5.10 We do not consider that the concept of gross negligence is sufficiently clear or distinctive as to form the basis of regulation of trustee exemption clauses. We do not therefore propose that those who wish to claim for breach of trust should be obliged to establish that the trustees were guilty of gross negligence in order to deny them resort to any exemption clause in the trust instrument. Do consultees agree?We invite views of consultees on the proposal that professional trustees should be unable to rely upon a trustee exemption clause where their conduct has been so unreasonable, irresponsible or incompetent that in fairness to the beneficiary the trustee should not be excused.
(Paragraph 4.78)
5.11 We provisionally propose that a professional trustee should not be able to rely on any provision in a trust instrument excluding liability for breach of trust arising from negligence and that clauses purporting to should not be given effect. Do consultees agree?(Paragraph 4.85)
5.12 We invite views as to whether professional trustees should not be able to exclude liability for breach of trust where it is not reasonable for the trustees to rely upon a trustee exemption clause contained in the trust instrument by reference to all the circumstances including the nature and extent of the breach of trust itself.(Paragraph 4.86)
5.13 We provisionally propose that in so far as professional trustees may not exclude liability for breach of trust they should not be permitted to claim indemnity from the trust fund.We do not consider that duty exclusion clauses or extended powers clauses should be prohibited. However, we provisionally propose that in determining whether professional trustees have been negligent, the court should have the power to disapply duty exclusion clauses or extended powers clauses where reliance on such clauses would be inconsistent with the overall purposes of the trust and it would be unreasonable in the circumstances for the trustee to be exempted from liability. Do consultees agree?
(Paragraph 4.97)
5.14 We provisionally propose that any regulation of trustee exemption clauses should be made applicable not only to trusts governed by English law but also to persons carrying on a trust business in England and Wales. Do consultees agree?(Paragraph 4.99)
5.15 We provisionally propose that any legislative reform of trustee exemption clauses should apply to any breaches of trust which occur on or after the date when the legislation comes into force but that it should not apply to breaches of trust which precede that date. Do consultees agree?(Paragraph 4.101)
5.16 We would welcome comments on the substance of Part III of this Paper from consultees, and we would find any information or views about the regulatory impact of our provisional proposals extremely helpful.(Paragraph 4.104)
