68. Liability for Breach of Trust

(1) Subject to these Regulations and to the terms of the Trust, a Trustee shall be liable for a Breach of Trust committed by the Trustee or in which the Trustee has concurred.

(2) A Trustee who is liable for a Breach of Trust shall be liable for:

• (a) the loss or depreciation in value of the Trust Property resulting from such breach; and
• (b) the profit, if any, which would have accrued to the Trust Property if there had been no such breach.

(3) Where there are two or more breaches of Trust, a Trustee shall not set off a gain from one Breach of Trust against the loss resulting from another Breach of Trust.

(4) A Trustee shall not be liable for a Breach of Trust committed prior to his appointment, if such Breach of Trust was committed by some other person.

(5) A Trustee shall not be liable for a Breach of Trust committed by a co-Trustee unless:

• (a) he becomes aware or ought to have become aware of the commission of such breach or of the intention of his co-Trustee to commit a Breach of Trust; and
• (b) he actively conceals such breach or such intention or fails within a reasonable time to take proper steps to protect or restore the Trust Property or prevent such breach.

(6) A Beneficiary may:

• (a) relieve a Trustee of liability to him for a Breach of Trust; or
• (b) indemnify a Trustee against liability for a Breach of Trust.

(7) Subsection 68(6) shall not apply unless the Beneficiary:

• (a) has legal capacity;
• (b) has full knowledge of all material facts; and
• (c) is not improperly induced by the Trustee to take action under subsection 68(6).

(8) Where two or more Trustees are liable in respect of a Breach of Trust, they shall be liable jointly and severally.

(9) A Trustee who becomes aware of a Breach of Trust under subsection 68(4) shall take all reasonable steps to have such breach remedied.

(10) Nothing in terms of a Trust shall relieve, release, or exonerate a Trustee from liability for Breach of Trust arising from his own fraud, wilful misconduct or gross negligence.

69. Remedies for Breach of Trust

To remedy a Breach of Trust that has occurred or may occur, the Court may:

• (a) compel the Trustee to perform the Trustee’s duties;
• (b) restrain the Trustee from committing a Breach of Trust;
• (c) compel the Trustee to redress a Breach of Trust by paying money, restoring Property, or other means;
• (d) order a Trustee to account;
• (e) appoint a special fiduciary to take possession of the Trust Property and administer the Trust;
• (f) suspend the Trustee;
• (g) remove the Trustee as provided in section 51 (Removal of Trustee by Court or under the terms of a Trust);
• (h) reduce or deny compensation to the Trustee;
• (i) subject to section 77 (Protection of persons dealing with Trustees), invalidate an act of the Trustee, impose a lien or a Constructive Trust on Trust Property, or trace Trust Property wrongfully disposed of and recover the Property or its proceeds; or
• (j) order any other appropriate relief.

70. Damages in absence of a breach

(1) Except as expressly provided in the terms of the Trust, a Trustee is accountable to the Trust for any profit made by the Trustee arising from the administration of the Trust, even absent a Breach of Trust.

(2) Except as expressly provided in the terms of the Trust, absent a Breach of Trust, a Trustee is not liable for a loss or depreciation in the value of Trust Property or for not having made a profit.

71. Legal fees and costs

In a judicial proceeding involving the administration of a Trust, the Court, as justice and equity may require, may award costs and expenses, including reasonable lawyers’ fees, to any party, to be paid by another party or from the Trust that is the subject of the controversy.

72. Limitation of action against Trustee

(1) A person may not commence a proceeding against a Trustee for Breach of Trust more than 3 years after the date such person or a representative of such person receives a report from the Trustee that adequately disclosed information that could form the basis for a potential claim for Breach of Trust and informed such person or his representative of the time allowed for commencing a proceeding.

(2) A report adequately discloses the existence of a potential claim for Breach of Trust if it provides sufficient information so that such person or representative knows of the potential claim or should have inquired into its existence.

(3) If subsection 72(1) does not apply, a judicial proceeding by such person against a Trustee for Breach of Trust shall be commenced within 7 years after the first to occur of:

• (a) the removal, resignation, or death of the Trustee;
• (b) in relation to a claim by a Beneficiary, the termination of the Beneficiary’s interest in the Trust; or
• (c) the termination of the Trust.

(4) No period of limitation shall apply to an action brought against a Trustee:

• (a) in respect of any fraud to which the Trustee was a party or to which the Trustee was privy; or
• (b) to recover from the Trustee Trust Property:

(i) in the Trustee’s possession;

(ii) under the Trustee’s control; or

(iii) previously received by the Trustee and converted to the Trustee’s use.

(5) This section applies also to proceedings brought against an Enforcer.

73. Reliance on Trust Instrument

Any person who acts in reasonable reliance on the terms of the Trust as expressed in the Trust Instrument is not liable for a Breach of Trust to the extent the breach resulted from the reliance.

74. Exculpation or insurance of Trustee

(1) A term of a Trust relieving a Trustee of liability for Breach of Trust is unenforceable to the extent that it:

• (a) relieves the Trustee of liability for Breach of Trust committed in bad faith or with reckless indifference to the purposes of the Trust or the interests of the Beneficiaries; or
• (b) was inserted as the result of an abuse by the Trustee of a fiduciary or confidential relationship to the Settlor.

(2) Any insurance purchased and maintained by the Trust in respect of a Trustee must not include insurance in respect of any liability the Trustee may incur:

• (a) to the Trust or a Beneficiary; or
• (b) to pay a fine in respect of an offence; or
• (c) any costs the Trustee may incur:

(i) in defending criminal proceedings in which the Trustee is convicted; or

(ii) in defending civil proceedings brought by a successor Trustee or a Beneficiary in which judgment is given against the Trustee.

75. Beneficiary’s consent, release or ratification

(1) Subject to subsection 68(10) (Liability for Breach of Trust), a Trustee is not liable to a Beneficiary for Breach of Trust if the Beneficiary consented to the conduct constituting the breach, released the Trustee from liability for the breach as provided in subsection 68(6) (Liability for Breach of Trust) or ratified the transaction constituting the breach, unless:

• (a) the consent, release, or ratification of the Beneficiary was induced by improper conduct of the Trustee; or
• (b) at the time of the consent, release, or ratification, the Beneficiary did not know of the Beneficiary’s rights or of the material facts relating to the breach.

(2) Where a Trustee commits a Breach of Trust at the instigation or at the request or with the consent of a Beneficiary, the Court may by order impound all or part of the interest of the Beneficiary by way of indemnity to the Trustee or any person claiming through the Trustee.

76. Limitation on personal liability of Trustee

(1) Except as otherwise provided in the contract, a Trustee is not personally liable on a contract properly entered into in the Trustee’s fiduciary capacity in the course of administering the Trust if the Trustee in the contract disclosed the fiduciary capacity.

(2) A Trustee is personally liable for torts committed in the course of administering a Trust, or for obligations arising from ownership or control of Trust Property only if the Trustee is personally at fault.

(3) A claim based on a contract entered into by a Trustee in the Trustee’s fiduciary capacity or an obligation arising from ownership or control of Trust Property, or on a tort committed in the course of administering a Trust, may be asserted in a judicial proceeding against the Trustee in the Trustee’s fiduciary capacity, whether or not the Trustee is personally liable for the claim.

77. Protection of persons dealing with Trustees

(1) A person other than a Beneficiary who in good faith assists a Trustee, or who in good faith and for value deals with a Trustee, without knowledge that the Trustee is exceeding or improperly exercising the Trustee’s powers is protected from liability as if the Trustee properly exercised the power.

(2) A person other than a Beneficiary who in good faith deals with a Trustee is not required to inquire into the extent of the Trustee’s powers or the propriety of their exercise.

(3) A person who in good faith delivers assets to a Trustee need not ensure their proper application.

(4) A person other than a Beneficiary who in good faith assists a former Trustee or who in good faith and for value deals with a former Trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former Trustee were still a Trustee.

(5) Comparable protective provisions of other AIFC Law relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.

78. Trustees of more than one Trust

A Trustee acting as such for more than one Trust shall not, in the absence of fraud or bad faith, be affected by notice of matter in relation to a particular Trust if the Trustee has obtained notice of it merely by reason of acting or having acted for the business of another Trust.