UNIVERSITY OF SIERRA LEONE

FOURAH BAY COLLEGE

Assignment

Name: Fatima Ngaojia

ID NUMBER: 50185

Module: Law of Trust

Year: LLB (Hons 1)

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The Law of Trust (Assignment).

Question) Tim and Ted are trustees of a fund of 2 million (new leones) established by the will of
Mr. Jonathan to be held for each of Jonathan's children in equal shares on reaching the age of
18. Jonathan has three (3) children. One is The Good, Good was aged 15, The Bad, aged 16 and
The Ugly, aged 12. Tim and Ted were solicitors but Ted was a family friend.

A fellow called Jack who is a trainee of an investment company tells Tim and Ted that shares in
a property company in a country called Loko Loko present a fantastic and wonderful investment
opportunity by issuing a cheque for as much as they can out of the trust fund. Tim and Ted write
to Adama and her sister, Fatu saying "the offer of Tim and Ted was too good to be true. What do
you think of the offer?" And they indicated in their chat "reply ASAP". They both reply
immediately. One of the children called The Bad in a sarcastic way says to Tim and Ted "Why
not?" Adama's sister added by saying "it was a fantastic deal".

Tim and Ted hand over a cheque, a bomber cheque to the tune of *5 million* (new leones)
drawn on the trust made out to Jack personally. However, Jack did not invest the money as
promised but decided to try his luck on Mercury and he spent the remainder on buying cars with
the hope to sell and make profit and invested the remaining sum on Ali Osusu with the hope that
Ali will use those monies to do the normal osusu rounds and collects whatever he gets as profit
which he will hand over to Jack on commission and Jack who will eventually retire the rest as
the investment sum.

Advise Adama's sister and The Ugly on any action which they can take and against whom.

Answer)
Advice to Adama’s Sister
A key concept in trust law is the principle of "locus standi," which refers to the right of a party
to bring a lawsuit. Generally, only those who have a direct interest in the trust, such as
beneficiaries, have the standing to sue trustees for mismanagement or breaches of fiduciary duty.
Therefore, Adama's sister has no interest, whatsoever, to the trust fund . She lack the "Locus
standi" to sue. In Gartside v. IRC [1968] AC 553, the House of Lords established that only
beneficiaries who have a direct interest in the trust property can sue trustees. The court held that
a potential beneficiary (one who might benefit in the future) does not have the standing to sue
because their interest is not sufficiently concrete. Similarly, in O'Rourke v. Darbishire [1920]
AC 581,, it was determined that a non-beneficiary does not have the standing to sue the trustees.
Only those with a beneficial interest have the right to compel the trustees to act in accordance
with the trust.

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Therefore, ONLY Ugly can be advised as to what and against whom legal Actions can be
initiated.

In doing that the following breaches are identified with their appropriate remedies:

Potential Claims against Tim and Ted (Trustees)

A) Breach of Fiduciary Duties:

Trustees are required to act with the care, skill, and diligence that a prudent person would
exercise in managing the affairs of others. In Speight v Gaunt (1883) 9 App Cas 1 at 19. It was
held that "When acting as a trustee, one must exercise the same level of care and responsibility
that an ordinary prudent person would exercise when managing an investment for the benefit of
others for whom they have a moral obligation to provide. This requirement helps minimize the
level of risk that a trustee may take when managing a trust.". Tim and Ted failed in this duty by
making a significant investment without proper due diligence, relying on the advice of a trainee,
and failing to consider the risks involved. This principle was also illustrated in Jones v Lock
1865 LR 1 Ch App 25 – In this case it was established that trustees have a fiduciary duty to act
in the best interests of the beneficiaries and must not profit personally from the trust. . Similarly,
trustees must invest trust funds in a way that balances risk and return, prioritizing the
preservation of capital and reasonable growth. The investment in Loko Loko was speculative and
imprudent, especially given the size of the investment relative to the trust fund. Lastly, trustees
must act in the best interests of the beneficiaries and avoid conflicts of interest. Writing a cheque
to Jack personally, without proper safeguards or verification, likely violates this duty.

Even though, one of the beneficiaries( Bad) casually backed the investment idea, his opinion
should not be rely upon, as he was still a child and cannot give consent. Moreover, Tim and Ted
should have been prudently asses the risk thereof before such investment. As established in Re
Londonderry's Settlement [1965] Ch 918, where it was held that trustees must act in the best
interests of the beneficiaries and are not bound to follow their wishes if it contradicts their
fiduciary duties. The trustees' duty is to act independently and consider the long-term interests of
all beneficiaries; also, in Re Whiteley [1910] 1 Ch 600, the court ruled on a similar note that
trustees must act prudently and cannot be swayed by the wishes of beneficiaries, including
minors. Trustees should invest and manage the trust property as a prudent person would, avoid
undue risk.

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Potential Claim against Jack
A) Fraud or Misrepresentation:

Jack clearly misrepresented the investment opportunity and never intended to invest the funds as
stated; he may be liable for fraud. The fact that he used the money for personal ventures
(Mercury, cars, Ali Osusu) instead of the promised investment indicates potential fraudulent
intent. In Eaves v Hickson [1861] 30 Beav 136, a third party forged documents that led the
trustees to mistakenly pay out trust funds to someone not entitled to them, the court found the
third party liable for the fraud, and the trustees were ordered to recover the funds from the
fraudulent party.

Possible Remedies for Ugly- One of the Trust's Beneficiaries

1. Petition for Trustee Removal: A petition can be filed in the appropriate court to remove Tim
and Ted as trustees due to their mismanagement and failure to act in the best interest of the
beneficiaries. The case in Lewin v. Wilson (1886) set an early precedent for the removal of
trustees for breach of trust. The court established that trustees could be removed if they acted
against the beneficiaries' interests. Other cases include, Miller v. Cameron (1936), where the
High Court of Australia held that the main criterion for removal is whether the continuance of
the trustee would be detrimental to the interests of the beneficiaries. As clearly seen from the
matter, Tim and Ted did not serve the best interest of the beneficiaries. Another similar case is
Re Beloved Wilkes Charity (1851) where the misconduct and negligence of trustees in
managing the trust property, leading to their removal.

2. Constructive Trusts: The Court can impose a constructive trust on Jack, the third party, who
has fraudulently received trust fund, compelling him to return the properties bought or its value
to the trust to address the misappropriation of the trust fund.

3. Tracing and Recovery of Assets: Legal action can be taken against Jack to trace the trust
funds and recover any assets purchased with those funds. This might involve court orders to
seize and sell the cars Jack purchased and to recover any funds from the investment in Ali's
Osusu. As it was held in BANQUE BELGE v HAMBROUCK (1921) 1 KB 321.

4. Restoration of Trust Fund: Ugly can seek to have Tim and Ted personally restores the trust
fund to its original state (2 million new leones), including any lost profits that would have
accrued if the funds had been prudently invested.

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