21 terms

Contractual Liability to Third Parties

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Gordon v Campbell (1842)
The contract was entered into by the trustees "as trustees" and their survivors and successors in office. It was very clear that they were not to be personally liable.
J & W Campbell & Co, Petrs (1899)
This is a case in which the trusts patrimony was unable to meet th debts incurred by the trust. The Bankruptcy Act makes the trust patrimony alone available for sequestration.
Brown v Sutherland (1872)
Where trustees enter a contract as individuals (usually through poor contract construction) they are personally liable. Only those who agreed were liable, if there is evidence that someone dissented they are exempt from personal liability.
Alexander's Trs v Dymock's Trs (1883)
Two groups of trustees entered into an agreement. Despite appearances, the contract was held to be "two houses" and there was no personal liability. The individual circumstances were so peculiar, there was a clear intention to bind themselves as trustees.
Bills of Exchange Act 1882, s26
Where there is indication that an agent signs for or on behalf of a principal there is no personal liability. But the mere addition of the description of agency to a signature does not exempt.
Muir v City of Glasgow Bank (1879)
An incorporated partnership, which did not allow allow for limited liability, crashed. The court felt bound be Lumsden and the trustees were personally liable.
Lumsden v Buchanan (1865)
Shareholders were personally liable in the bank crash. The trustees had entered "as trustees". However the bank deeds allowed only corporations or individuals to hold stock. As a trust is not a corporation (and has no legal personality) the trustees were held to be contracting personally.
Cuningham v Montgomerie (1879)
A trustee had to hand over all of the trust estate and his personal estate in order to pay the liquidator. It was held that trustees are not only entitled to be reimbursed from the trust patrimony, but also it can be used as a shield.
Gillespie and Paterson v City of Glasgow Bank (1979)
Any personal liability will be joint and several.
Roberts v City of Glasgow Bank (1879)
In theory, trustees are not liable for the actions of others. However, they will be if they agree to it or adopt it later.
Bell v City of Glasgow Bank (1879)
Assumed trustees will be liable under a contract that was entered into by previous trustees if the "adopted" it.
Thomson v McLachlan's Trs (1829)
Simply designing oneself as a trustee is not sufficient. This is seen as description rather than an exclusion of personal liability.
Guernsey (Trust Law 1989, s42)
As long as the third party was aware that they were transacting with trustees, and the trustees were acting in their capacity as trustees, there will be no personal liability.
Unifrom Trust Code, s1010
There is no liability in a contract properly entered into while administering the trust as long as the fiduciary relationship was disclosed. Thus, description is enough.
Sanders v Sanders' Trs (1880)
The trustees were not allowed to invest in unchartered banks. The investment was then ultra vires and completely liable without any recourse from the trust patrimony.
Hume
Third parties acquire good title by virtue of the fact the trustees are owners. The obligations to the beneficiaries do not themselves restrict the ability to transfer.
Cullen v Baillie (1846)
In regard to debts contracted by the trustees themselves, although it may be bona fide for the trust purposes, they will be personally bound unless it appears clear from the terms of the transaction that teh creditor expressly took the trust estate.
Bankruptcy (Scotland) Act 1985, s6(1)(a)
A trust estate is capable of being sequestrated in respect of debts incurred by the trust patrimony.
Adults with Incapacity (Scotland) Act 2000
There is not personal liability where the third party is aware that the trustee is acting in a representative capacity.
Trusts, s4
Certain powers are conferred on all trustees unless they are expressly prohibited by the trust deed.
Trusts, s2
There is no need for inquiry by third parties in order to be bona fide. Thus, certain acts cannot be challenged based on lack of vires.