Clarity Guide 8: trustee protection — exoneration and indemnity clauses

Mistakes can happen, and individual and corporate trustees can be held liable for a breach of trust, whether it was deliberate, negligent or innocent. This guide from Nabarro explains the differences between exoneration and indemnity clauses in a scheme’s trust deed and rules.

Exoneration clauses (also known as exemption clauses) operate so that a trustee is not liable to the scheme’s beneficiaries for any breach of trust (unless there has been actual fraud or dishonesty). They can cover a wide range of conduct, including: “negligence”; “gross negligence”, innocent breaches and “wilful default”. The precise wording of an exoneration clause, and so the scope of trustee protection, will vary from scheme to scheme (if included at all).

The Courts have (repeatedly) held that exoneration clauses cannot exempt trustees from liability arising because of “actual fraud” or dishonesty…

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