EFFECTIVENESS AND DESIRABILITY OF EXCLUSION CLAUSES

EFFECTIVENESS AND DESIRABILITY OF EXCLUSION CLAUSES

A fundamental principle of trusteeship is that a trustee¡¦s failure to carry out their duties under a trust is a breach of trust and so the beneficiaries may take action to recover any loss flowing from that breach (The Lawyer, 14 April 2003). Often trust deeds contain clauses that purport to limit the extent of the trusties¡¦ duties or their liability for certain acts they might undertake in carrying out their duties.


The case Armitage v Nurse (1997) 2 All ER 705) was a case in which the exemption clause stated that trustees would not be liable for loss or damage to the trust funds or its income ¡§unless such loss or damage shall be caused by the trustees¡¦ own actual fraud¡¨. Fraud in this sense effectively means dishonesty, i.e. either knowing something to have been wrong or showing a reckless disregard as to whether it was wrong or right (Derry v Peek (1889) 14 App Cas 337). The beneficiaries argued that the ...