Limits to limitation of liability

Trustees act personally.  However, trustees can contract out of personal liability.  For example if trustees enter into an agreement for sale and purchase of land the trustees can obtain the benefit of a standard limitation of liability (if there is one) or reach agreement on the inclusion of a suitable limitation.

That said, limitations of liability, like trusts, are not magic.   If a limitation of liability is to be relied upon, it must be positively put forward.  This was recently confirmed when defendant trustees found liable on a summary judgment application (on account of a loss arising from the resale of a purchase in respect of which the trustees defaulted) were unsuccessful when they sought recall of the judgment on the basis of the limitation. The court holding that defendants have the onus of raising any defence in the first instance, including a limitation of liability.

The court also confirmed that the judgment debtor trustees could be examined not just as to the trust’s means, but each trustee’s personal means.

This is a useful reminder about the danger of relying on a limitation of liability without appreciating any inherent limits and what must be done to be able to benefit from the limitation.

References:

• Re Estate Patricia Amstead Leary; Reynolds, Leary and Duncan v Barratt, Bartlett and Harrison as trustees of the Barratt Family Trust [2013] NZHC 2992