On Damages Liability Of Instructed Trustee

This paper aims to analyze the trustee’s liability for damages under an instructing trust.In judicial practice,there are three different judicial paths to handle the cases involving damages paid by the instructed trustee: first,the instructed trustee falls within the scope of entrustment legal relationship,and the rules of the Contract Law shall be applied;second,the instructed trustee falls within the scope of trust legal relationship,and the rules of trust law shall be applied;third,after making a judgment that the instructed trustee falls within the scope of trust legal relationship,the rules of the Contract Law or the thinking of contractual adjudication is applied to the instructed trustee’s liability for damages.The second path is the only correct path to handle the cases involving damages paid by the instructed trustee.The above differences mainly arise from three factors: first,the unclear nature of the basic legal relationship of instructing trust;second,confusion as to the obligations of the instructed trustee;third,the confusion and omission in the damage rules of the Trust Law,which has led to the result that the Trust Law has been ignored and not applied.Chapter 1 is the introduction of the issue of the instructed trustee’s liability for damages.On the basis of clarifying the basic contents of instructing trust,this chapter points out three different judicial paths for determining the instructed trustee’s liability for damages,and further analyzes three major reasons for the above differences.Chapter 2 aims to clearly indicate the nature of the legal relationship on which the trust is based.Section 1 points out that there are two elements of the act of trust under the civil law system,i.e.,the elements of burden act and the elements of disposal act.Section 2 analyzes whether the instructing trust meets the above elements,and it definitely points out that the instructed trustee will not disengage from the legal relationship of trust and change it to legal relationship of entrustment due to the lack of positive discretion to the trust property.Chapter 3 is discussed about the instructed trustee’s obligations.Section 1 points out that the fiduciary duties of general trustees shall not be weakened or transferred due to the lack of positive discretion of the trustee to exercise the trust property.In addition to the obligation of supervising and obeying the instruction party of the trust,the obligations of the instructed trustee within the scope of its authority are not fundamentally different from those of general trustees,for the purpose of supervising and obeying the instruction party of the instructing trust.Section 2 analyzes the difference between the obligations of the instructed trustee and the contractual obligations,pointing out that there are fundamental differences between the obligations of the instructed trustee and the contractual obligations in terms of value orientation,generation path and liability for damages.In judicial practice,the rules of contract law or the contractual thinking shall not be applied to deal with the cases of damages paid by the instructed trustee.Chapter 4 focuses on the trustee’s damages rules under the Trust Law.Section 1points out that the Trust Law of China comprehensively structures the trustee’s damages rule from the perspectives of trust violation and specific obligation violation.The legal nature of the trustee’s liability for damages is liability for non-performance of debt,and under special circumstances,it also has the nature of tort liability.Section2 points out that although Article 22 of the Trust Law of China combines the right to claim damages and the right of revocation,from the perspective of comparative law and the legislation process of the Trust Law of China,Article 22 of the Trust Law provides an independent right to claim damages,which is a general provision of the trustee’s damages rules.The right holder can freely choose to apply the right of claim for damages or the right of revocation to protect his rights and interests,and under certain circumstances,they may be applied concurrently.According to Article 22 of the Trust Law,the trustor and the beneficiary are the subjects of rights,the scope of damages is subject to losses and profits suffered by the trustor and The doctrine of liability fixation is the principle of fault presumption,and there is no order of priority among the methods of damages.Section 3 points out that "seeking benefits for a third party by taking advantage of trust property" and "receiving bribes or seeking benefits by taking advantage of trust information" shall be subject to Article 26 of the Trust Law,but seeking trust opportunity shall be subject to Article 22 of the Trust Law.The attribution of benefits under article 26 of the Trust Law is contrary to the principle of loss compensation,and cannot be legally supported by unjust enrichment or quasi-uncaused management.Our country can refer to Japanese legislation,and profits shall be presumed to be losses under specific cases,in order to achieve the dual purposes of unifying the theory of damage compensation and protecting the interests of beneficiaries.Chapter 5 mainly discusses the validity of exemption clause of fiduciary duty.Section 1 specifies the general forms of exemption provisions and points out that the formulation process and presentation of exemption provisions are crucial to the validity of exemption provisions.Section 2 analyzes the effectiveness of the exemption clauses of duty of loyalty,duty of care,obligation of separate management and obligation of information disclosure one by one,specifically as follows: A trustee cannot exclude the rule of "no profiteering" by an exemption clause,but can exclude the application of the rule of "no conflicts of interest";(2)duty of care.The exemption clause regarding gross negligence is null and void,and the exemption clause regarding general negligence must distinguish between a professional fiduciary and a non-professional fiduciary,the former is null and void while the latter has legal effect;(3)separate management obligation.The separate management obligation for different trust properties can be excluded by agreement,but the separate management obligation for the inherent property and the trust property of the trustee cannot be exempted;(4)the exemption clause regarding obligation of information disclosure is null and void.