Fraudulent Breach of Trust

A Trustee commits a Breach of Trust if the Trustee violates any duty which the Trustee owes as a Trustee to the beneficiaries of the Trust. {Tito v Waddell (No. 2) [1997] Ch 106 at 247-8; [1977] 3 All 129; 2 WLR 496 per Megarry VC}.

A Trustee is guilty of fraud if the trustee knowlingly commits an act amounting to a Breach of Trust, the nature of which is such that the Trustee must be taken to have known that the act was contrary to law {Re Sale Hotel and Botanical Gardens Co. Ltd (Hesketh’s case) (1897) 77 LT 68; Hicks v Trustee Executors and Agency Co Ltd (1901) 27 VLR 389; 23 ALT 98}.

The Trustee must be party or privy to the fraud or fraudulent Breach of Trust, which means that there must be some moral complicity in the wrongdoing of the trustee.

Limitations of Actions for a fraudulent Breach of Trust.

In Victoria, Queensland, South Australia and Tasmania no limitations period applies to an action by beneficiaries with respect of fraud or fraudulent breach of trust and actions to recover trust property converted by a trustee.

In NSW, ACT and NT there is a limitations period of 12 years which runs from the date on which the person entitled to bring the actin first discovered, or with reasonable diligence could have discovered, the facts giving rise to the cause of action.

Limitations of Actions for a non-fraudulent Breach of Trust

Where a beneficiary is entitled to a future interest in trust property, no right of action is deemed to accrue until the interest falls into possession

Section 21(2) of the Limitations of Actions Act 1958 (Vic)

Fraudulent Concealment

A Limitations Period does not begin to run in the case of a fraudulent concealment of the cause of action.

In Tito V Waddell (n0.2) [1977] Ch 106 at [244] it was stated:

(1) Fraudulent concealment. I can take fraudulent concealment most briefly of all. The term “concealed fraud” is still often used to describe this head. This is misleading, in that it suggests that this head applies only when it is fraud that is concealed, and that any process of concealment suffices, whereas in fact the head applies whatever the right of action, though not unless the process of concealing the right of action is shown to be fraudulent. “Fraudulent concealment” thus seems  to me to be the preferable term. For most purposes it is a sufficiently accurate description of the words in section 26 (b) of the Act of 1939: “the right of action is concealed by the fraud” of the persons in question, namely, “of the defendant or his agent or of any person through whom he claims or his agent”: see section 26 (a).
As I have indicated, the word “fraud” is here used in a sense which embraces conduct or inactivity which falls far short of fraud at common law: see, e.g., Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563; King v. Victor Parsons & Co. [1973] 1 W.L.R. 29. Indeed, as the authorities stand, it can be said that in the ordinary use of language not only does “fraud” not mean “fraud” but also “concealed” does not mean “concealed,” since any unconscionable failure to reveal is enough.

 

 

 

 

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