What is a Breach of Trust?
Breach means to break, and a breach of trust is essentially a broken trust, a way in which someone fails to fulfill promises connected to something or someone entrusted to him/her. In the business sense you’ll see the term breach of trust sometimes associated specifically with the administration of trusts. For instance the trustee of an estate could spend all the money in it, or merely fail to do his/her job. Breach of trust may also be used in other business contexts, not merely administration of trust funds, to show how a person deliberately or through neglect failed to act in the terms specified in agreements; an accountant who embezzles funds breaks trust with his clients. There are many examples of the way in which a broken trust may occur, but they all have things in common. The breach of trust violates the terms of the agreement between the parties involved. Second, the person who breaks the trust has been entrusted with something: administering funds, investing someone else’s m
A breach of trust can happen when: • you carry out an act as a trustee which you are not authorised to do under the trust deed and rules (unless agreed by the court or directed by the Pensions Regulator); • you fail to do something which you should have done under the trust deed and rules; or • you do not perform one or more of the duties that you have under trust law or pensions law or do not perform them with sufficient care. The breach of trust may be unintentional (for example, because of an administrative error), or it may be caused by negligence or through fraudulent and dishonest behaviour.
It’s important to realise, however, that if anything goes wrong, you could be personally liable for any loss which you or, any trustee, cause to the scheme as a result of a breach of trust. Even if you stop being a trustee, you are still liable for the decisions you took when you were a trustee. A breach of trust happens when: • you carry out an act as a trustee which you are not authorised to do under the trust deed and rules (unless agreed by the court or directed by The Pensions Regulator) • you fail to do something which you should have done under the trust deed and rules • you do not perform one or more of the duties that you have under trust law or pensions legislation Although rare, a breach of trust could also happen through fraudulent or dishonest behaviour. More commonly, though, breaches of trust happen unintentionally. For example, this could be due simply to an administrative error or oversight.
