“dog-leg” claim

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A claim for breach of trust by a beneficiary against the directors of a trust corporation. The directors would not, under normal company law principles, be potential targets for a trust beneficiary; the directors ordinarily owe duties solely to the company, the trust corporation. However, in circumstances where the trust corporation is not prepared or able to pursue its own directors for breach of fiduciary duty and has no assets out of which a claim by beneficiaries for breach of trust may be satisfied, the beneficiaries may wish to pursue the directors of the trust corporation directly. The “dog-leg” claim has been used in an attempt to circumvent the general principle that a director cannot be pursued personally for a breach of duty to the company; it argues that a claim for breach of trust arising because of the breach of duty by individual directors of a trust corporation is held on trust for the beneficiaries. Such a claim has, however, received a very lukewarm reception. A “dog-leg” claim was considered arguable in HA v JAPT [1997] OPLR 123; however, other attempts to assert such a claim have failed (Gregson v HAE Trustees [2008] EWHC 1006 (Ch), [2008] WLR (D)146; Alhamrani v Alhamrani [2007] JRC 026 (a decision of the Royal Court of Jersey).

Subjects: Law.

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