Hayim v Citibank NA: PC 1987

(Hong Kong) The plaintiffs were the testator’s sons, who were beneficiaries under his American will. He also executed a Hong Kong will under which the residue of his property outside the United States was to be held on trust for sale on the trusts of the American will. The terms of the trust enabled the trustee of the American will to give directions to the trustee of the Hong Kong will in respect of the retention of a house in Hong Kong in the interests of the elderly residents of the house. The plaintiffs began proceedings in Hong Kong against the first defendant, the trustee of the American will, and the second defendant, the trustee of the Hong Kong will, for an order that the house be sold and for damages to be awarded against the second defendant for breach of the trusts of the Hong Kong will by the delay of the second defendant in selling the house. No relief was sought against the first defendant. The board considered whether the plaintiff could bring a derivative action against HK for breach of trust on account of their failure to sell a house in Hong Kong.
Held: The terms of the trust enabled C to give directions to HK in respect of the retention of this house in the interests of the elderly residents of the house. There were no special circumstances entitling the plaintiffs to bring proceedings directly against the second defendant, but that in any event no breach of the trusts of the Hong Kong will had been committed by the second defendant in implementing the lawful instructions of the first defendant.
Lord Templeman said that: ‘when a trustee commits a breach of trust or is involved in a conflict of interest and duty or in other exceptional circumstances a beneficiary may be allowed to sue a third party in the place of the trustee. But a beneficiary allowed to take proceedings cannot be in a better position than a trustee carrying out his duties in a proper manner . .’ and
‘The authorities cited by Mr Nugee only demonstrate that when the trustee commits a breach of trust or is involved in a conflict of interest and duty or in other exceptional circumstances a beneficiary may be allowed to sue a third party in place of the trustee. The beneficiary allowed to take proceedings cannot be in a better position than the trustee carrying out his duty in an improper manner.’
The authorities also: ‘demonstrate that a beneficiary has no cause of action against the third party save in exceptional circumstances, which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate, or to protect the interests of the beneficiary in the trust estate.’

Judges:

Lord Templeman

Citations:

[1987] 1 AC 730, [1987] 3 WLR 83

Jurisdiction:

Commonwealth

Cited by:

CitedRoberts v Gill and Co and Another CA 15-Jul-2008
The claimant sought damages in negligence against solicitors who had advised the executors in an estate of which he was a beneficiary. He now sought to amend his claim to make a claim in his personal and in derivative capacities. Sums had been paid . .
CitedRoberts v Gill and Co Solicitors and Others SC 19-May-2010
The claimant beneficiary in the estate sought damages against solicitors who had acted for the claimant’s brother, the administrator, saying they had allowed him to take control of the assets in the estate. The will provided that property was to be . .
Lists of cited by and citing cases may be incomplete.

Trusts, Litigation Practice

Updated: 05 May 2022; Ref: scu.279803