Armitage v Nurse
A trustee exemption clause can validly exclude liability for gross negligence, but not for fraud or dishonesty.
Facts
Paula Armitage was a beneficiary of a settlement which held farmland. The settlement included a clause providing that no trustee would be liable for any loss or damage to the trust fund unless caused by his own actual fraud. Paula claimed that the trustees had managed the land negligently, causing a large fall in its value, and that the exemption clause did not protect them.
Legal principle
The Court of Appeal held that the clause was valid, and that it protected the trustees from liability for negligence, however gross, but not for actual fraud. Millett LJ said that there is an irreducible core of obligations owed by trustees to the beneficiaries and enforceable by them, which is fundamental to the concept of a trust, and that this core is the duty to perform the trust honestly and in good faith for the benefit of the beneficiaries. Actual fraud means dishonesty, which includes a deliberate breach of trust that the trustee knows is contrary to the interests of the beneficiaries, or is recklessly indifferent to them. A clause excluding liability for gross negligence is not contrary to public policy.
Related cases on breach of trust and defences
- AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503
- Bahin v Hughes (1886) 31 Ch D 390
- Re Dawson (deceased) [1966] 2 NSWR 211
- Re Diplock [1948] Ch 465
- Re Evans (deceased) [1999] 2 All ER 777
- Fletcher v Collis [1905] 2 Ch 24
- Head v Gould [1898] 2 Ch 250
- Ministry of Health v Simpson [1951] AC 251
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
