Joseph Campbell, ‘The Undesirability of the Rule in Hardoon v Belilios

ABSTRACT
Effective from 22 November 2019, the New South Wales Parliament has abolished the rule in Hardoon v Belilios. That rule takes its name from the decision in 1901 of the Privy Council, delivered by Lord Lindley on appeal from Hong Kong, in Hardoon v Belilios. The rule requires that a beneficiary of a trust who is sui juris and absolutely entitled to the trust property has a personal obligation to indemnify the trustee for liabilities incurred in the proper administration of the trust, unless he could show some good reason why the trustee should bear them personally. This personal liability of the beneficiary is additional to the right of indemnity from the trust assets that the trustee has, both under the general law and under statute. .

This paper presents reasons why jurisdictions other than New South Wales should abolish the rule. Part 1 outlines the decision in Hardoon v Belilios, and the rule formulated in it. Part 2 argues that Lord Lindley’s decision was not justified by the cases on which his Lordship based it. Part 3 presents arguments for the abolition of the rule. They are that there are problems of unfairness and arbitrariness in the application of the rule, that the justification of principle that Lord Lindley gave for it is not acceptable, and that there are unresolved problems concerning the application of the rule.

Campbell, Joseph, The Undesirability of the Rule in Hardoon v Belilios (December 1, 2020). Trust Law International, 34:3,2020, pp 131-164,

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