On The Trustee’s Civil Liability Of Violating The Duty Of Prudent Investment

Trust is the product of Anglo-American law system, introduced by the civil law countries gradually because of its unique system advantages. The function of modern trust is shifting from negative property custody to active property appreciation, and trustee’s rights are expanding. But at the same time we see the risk of trustee’s abuse of rights is increasing. In the legal relationship of trust, only the trustee who is at the core has the right to participate in the actual management of the trust property, and adding value to the trust’s property is mainly based on the investment and management. So it is necessary to restrain the trustee through regulating the civil liability. Thus, there is great necessity and value to carry on researching in the civil liability problems that may be caused by the trustee’s duty of prudent investment, so as to give more protection to the rights of the trustor and the beneficiary, and regulate the trustee’s investment and management. Our country has initially established the trust law system, but it is not so applicable in practice about the trustee’s civil liability. In order to make trust play its real role, there should be a trade-off when we draw lesson from the successful experience of foreign countries, combining with China’s national conditions. Generally speaking, in this paper, the trustee’s civil liability is taken as research object, and the foundation upon which the civil liability needs to be produced is limited to the trustee’s duty of prudent investment. This paper mainly discusses how to take responsibility for the civil liability related to the duty of prudent investment when the trustee breaches it.The paper altogether divides into three major parts to launch the analysis and research towards the thesis.Part one: It elaborates the basic theoretical problems of mainly involved. From the background, content, standard and value, the first section makes a definition of the trustee’s duty of prudent investment in four aspects. The prudent duty of investment requires the trustee to consider the purpose of trust, trust period, assignment request and other situations of trust, being like a cautious investor to invest and manage the trust property. The second section makes a legal analysis on the trustee’s civil liability, including the reasons of civil liability that caused by violating the trustee’s prudent investment duty, the compensatory characteristics of the civil liability and the nature of this civil liability. This paper identifies the nature of civil liability as the composite characteristics of both liability for breach ofcontract and tort.Part two: In the premise that the trustee violates the duty of prudent investment. The first and second sections centre on the content of civil liability bearing system. On the basis of comparison and understanding of related rules in the two law systems, these two sections carry on analysis from two aspects, the basic legal framework and the special modes. The normal risk should be undertaken by the trust property itself. When the trustee is not in violation of the prudent investment duty or other fiduciary duties, there is no need for the trustee to undertake the obligation with his personal property. From the limitation principle, the doctrine of liability fixation, the methods of bearing liability and the exemptions, the first section is divided into four parts to be carried out in the theory of basic legal framework. In the second section, the trustee’s civil liability related to the joint trustees, the trustee’s agent, the rule of trust protector is discussed as the special modes.Part three: In terms of the structure of the former two, this part, accordingly, evaluates relevant system of “The trust law of the People’s Republic of China”. It puts forward some suggestions about setting up a more detailed standard on the duty of prudent investment, specifying the fault identification, extent of compensation, exception clause of trustee’s civil liability that caused by breach of the trustee’s prudent investment duty. In addition, it points out that special provisions for the special modes, and more appropriate condition settlements for the right relief of related people are valuable.