Liability for Procuring or Assisting in a Breach of Trust

Exploring the Paradox of Trustee Liability in Cases of Forgery and Fraud

Mehvish Ally

Lawyer

A curious feature of trust law is that many types of forgery—whether involving documents or works of art—are treated with similar seriousness. Forgeries strike at the heart of authenticity, a principle the law protects with great care. Because of this, cases involving forged documents or fraudulent assets require a nuanced and structured legal response.

One of the most influential cases on this topic is Eaves v Hickson (1861). In Eaves, a father forged a marriage certificate to make his five children appear legitimate. He presented this forged document to the trustee, who then distributed the children's shares of the estate under the false assumption that they were lawful heirs. This case established the foundational principle that when someone induces a trustee to misapply or misdirect trust property, the law must examine two separate and sometimes conflicting trustee duties.

The first duty is strict liability: a trustee is automatically responsible for any misapplication of trust property, even if the mistake occurred through no personal fault. Under this principle, beneficiaries may “falsify” the trust accounts—essentially undoing the misapplication—and compel the trustee to personally restore the property.

The second duty is more forgiving. As established in Speight v Gaunt, a trustee is not liable for loss of trust property resulting from fraud or theft if they acted prudently and without negligence. Trustees are not considered insurers of the trust assets; they must act carefully, but they are not expected to foresee every deception.

Eaves revolves around document forgery. To contrast, the case law addressing art forgery highlights the same underlying concepts in a different form. In Speight v Gaunt, the trustee was authorized to invest in art as part of the trust instrument. Although the artwork purchased turned out to be a forgery, the trustee was not held liable. He exercised appropriate judgment and was deceived despite acting within the boundaries of his authority.

Despite differences in context—documents versus artwork—the unifying theme is the law’s demand for authenticity. Historically, this principle traces back to the English practice of sealing documents and marking works with the creator’s emblem. Authenticity protects the integrity of transactions, preserves trust, and ensures honesty in dealings.

Trustees therefore owe duties not only to beneficiaries but also to the broader public. The complexity and potential conflicts inherent in trustee duties make it unwise for an individual to serve as trustee for too many trusts simultaneously. When duties collide, the trustee can be caught between strict liability on one hand and reasonable protection from liability on the other.

Ultimately, when a trustee misapplies trust property—even unintentionally—the consequence can be severe: beneficiaries may be forced to revoke or falsify the trust to correct the error. Revoking a trust is a significant legal event, not undertaken lightly, and illustrates the heavy responsibility trustees carry when managing trust assets.