Trustees’ Duties II
Trustee (Authorised Investments) Act
TRUSTEE (AUTHORISED INVESTMENTS) ACT, 1958.
AN ACT TO PROVIDE FOR THE INVESTMENTS IN WHICH TRUST FUNDS MAY BE INVESTED, TO PROVIDE FOR INVESTMENT IN THOSE INVESTMENTS OF MONEY UNDER THE CONTROL OR SUBJECT TO THE ORDER OF ANY COURT AND TO PROVIDE FOR MATTERS RELATED TO THE MATTERS AFORESAID. [2nd April, 1958.]
BE IT ENACTED BY THE OIREACHTAS AS FOLLOWS:—
Authorised investments.
1.—The following section is hereby substituted for section 1 of the Trustee Act, 1893:
“1.—A trustee may, unless expressly forbidden by the instrument (if any) creating the trust, invest any trust funds in his hands, whether at the time in a state of investment or not, in manner following, that is to say:
(a) in securities of the Government (including Savings Certificates);
(b) in securities guaranteed as to capital and interest by the Minister for Finance;
(c) in the stock of the Bank of Ireland;
(d) in securities of the Electricity Supply Board;
(e) in securities of the Agricultural Credit Corporation, Limited;
(f) in securities of Bord na Móna;
(g) on real securities in the State;
(h) in securities or mortgages of any of the following authorities in the State:
(i) the council of a county,
(ii) the corporation of a county borough,
(iii) the corporation of Dun Laoghaire,
(iv) the Dublin Port and Docks Board,
(v) the Cork Harbour Commissioners,
(vi) the Limerick Harbour Commissioners,
(vii) the Waterford Harbour Commissioners;
(i) in debentures or debenture stock, quoted on a Stock Exchange, of any industrial or commercial company registered in the State, provided that the total of the debentures, debenture stock or debentures and debenture stock of the company does not exceed the paid-up share capital (including payments in respect of share premiums) and that a dividend of not less than five per cent. has been paid on the ordinary shares of the company in each of the five years last past before the date of investment;
(j) in an interest bearing deposit account with any of the following banks:
(i) Bank of Ireland,
(ii) Guinness & Mahon,
(iii) Hibernian Bank, Ltd.,
(iv) Munster & Leinster Bank, Ltd.,
(v) National Bank, Ltd.,
(vi) National City Bank, Ltd.,
(vii) Northern Bank, Ltd.,
(viii) Provincial Bank of Ireland, Ltd.,
(ix) Royal Bank of Ireland, Ltd.,
(x) Ulster Bank, Ltd.,
(xi) the Post Office Savings Bank,
(xii) a Trustee Savings Bank in the State;
(k) in British Government securities inscribed or registered in the State,
and may also from time to time vary any such investment.”
Variation by order of authorised investments·
2.—(1) The Minister for Finance may by order vary by addition or deletion—
(a) the investments specified in section 1 of the Trustee Act, 1893, as amended by section 1 of this Act, or
(b) where those investments have been varied by order under this subsection, those investments as so varied.
(2) Where an order is proposed to be made under this section, a draft thereof shall be laid before each House of the Oireachtas and the order shall not be made until a resolution approving of the draft has been passed by each such House.
(3) Before laying, pursuant to subsection (2) of this section, a draft before each House of the Oireachtas, the Minister shall consult—
(a) a Judge of the High Court nominated by the Chief Justice,
(b) the Governor of the Central Bank,
(c) the Public Trustee,
(d) the Chairman of the Irish Banks’ Standing Committee,
(e) the President of the Incorporated Law Society of Ireland,
(f) the President of the Dublin Stock Exchange, and
(g) the President of the Cork Stock Exchange in regard to the terms of the proposed order.
Investment of money under control or subject to order of Court.
3.—(1) Money under the control or subject to the order of any Court may be invested in—
(a) any of the investments specified in section 1 of the Trustee Act, 1893, as amended by section 1 of this Act, or
(b) where those investments have been varied by order under section 2 of this Act, any of those investments as so varied,
and shall not be invested in any other manner.
(2) This section shall have effect notwithstanding anything to the contrary contained in any other Act or any rule of court.
(3) This section shall not affect the jurisdiction of any court to direct or permit money under its control or subject to its order to be used for the benefit of any person entitled thereto or having an interest therein—
(a) in making payments in connection with the acquisition, use or management of any land or business, or any share in any business, or
(b) in subscribing for securities offered on advantageous terms to holders of the same kind of securities.
Redeemable bond insurance policies.
4.—(1) A trustee may effect redeemable bond insurance policies against redemption by drawing of bonds at a price less than current or cost price, and may, at his discretion and without obtaining the consent of any other person, pay the premiums on such policies—
(a) out of the income of the bonds or out of the income of any other property subject to the same trusts,
(b) out of the capital of the bonds or out of the capital of any other property subject to the same trusts, or
(c) partly out of such income and partly out of such capital.
(2) This section applies to trusts created either before or after the commencement of this Act, but nothing in this section shall authorise any trustee to do anything which he is in express terms forbidden to do, or to omit to do anything which he is in express terms directed to do, by the instrument creating the trust.
(3) In this section “trustee”, “trust”, “property” and “instrument” have the meanings assigned to them respectively by section 50 of the Trustee Act, 1893.
Saver for certain investments.
5.—Notwithstanding anything contained in this Act, where trust funds within the meaning of the Trustee Act, 1893, or money under the control of or subject to the order of any Court stand or stands invested in a manner which was authorised by law when the investment was effected but which, apart from this section, has ceased to be so authorised, authority is hereby given to continue to keep the funds or money invested in that manner.
S.I. No. 285/1967 –
Trustee (Authorised Investments) Order, 1967.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1967.
I, CHARLES J. HAUGHEY, Minister for Finance, in exercise of the powers conferred on me by subsection (1) of section 2 of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby make the following order:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1967.
2. Bank of Ireland 7 per cent. Loan Stock 1986/91 is hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by section 1 of the Trustee (Authorised Investments) Act, 1958 .
GIVEN under my Official Seal, this 14th day of December, 1967.
CHARLES J. HAUGHEY,
Minister for Finance.
EXPLANATORY NOTE.
This Order adds Bank of Ireland 7 per cent. Loan Stock 1986/91 to the list of investments in which trust funds may be invested. The list is set out in section 1 of the Trustee (Authorised Investments)S.I. No. 241/1969 –
Trustee (Authorised Investments) Order, 1969.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1969.
I, CHARLES J. HAUGHEY, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with sections 2 (2) and 2 (3) of that Act, hereby make the following order :
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1969.
2. Shares of Allied Irish Banks Limited are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by section 1 of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958).
GIVEN under my Official Seal, this 4th day of December, 1969.
CHARLES J. HAUGHEY,
Minister for Finance.
EXPLANATORY NOTE.
The Order adds the shares of Allied Irish Banks Limited to the list of investments in which trust funds may be invested. This list is set out in section (1) of the Trustee (Authorised Investments) Act, 1958 .
Act, 1958 S.I. No. 377/1974 –
Trustee (Authorised Investments) Order, 1974.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1974.
I, RICHIE RYAN, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows :
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1974.
2. Bank of Ireland 10% Convertible Subordinated Unsecured Loan Stock 1991/96 is hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by section 1 of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958).
GIVEN under my Official Seal, this 31st day of December, 1974.
RICHIE RYAN,
Minister for Finance.
EXPLANATORY NOTE.
This Order adds Bank of Ireland 10 per cent Loan Stock 1991/ 96 to the list of investments in which trust funds may be invested. The list is set out in section 1 of the Trustee (Authorised Investments) Act, 1958 .
S.I. No. 41/1977 –
Trustee (Authorised Investments) Order, 1977.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1977.
I, RICHIE RYAN, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1977.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised investments) Act, 1958 (No. 8 of 1958), that is to say—
(a) investment in Allied Irish Banks Limited 10 per cent. Convertible Unsecured Subordinated Loan Stock 1985,
(b) investment in an interest bearing deposit account with the Agricultural Credit Corporation Limited, and
(c) investment in an interest bearing deposit account with the Industrial Credit Company Limited.
GIVEN under my Official Seal, this 14th day of February, 1977.
RICHIE RYAN,
Minister for Finance.
EXPLANATORY NOTE.
This Order adds Allied Irish Banks Limited 10 per cent. Convertible Unsecured Subordinated Loan Stock 1985, deposit accounts with the Agricultural Credit Corporation Limited and deposit accounts with the Industrial Credit Company Limited to the list of investments in which trust funds may be invested. The list is set out in section 1 of the Trustee (Authorised Investments) Act, 1958 .
S.I. No. 344/1977 –
Trustee (Authorised Investments) (No. 2) Order, 1977.
TRUSTEE (AUTHORISED INVESTMENTS) (NO. 2) ORDER, 1977.
I, SEOIRSE Ó COLLA, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustees (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows :
1. This Order may be cited as the Trustee (Authorised Investments) (No. 2) Order, 1977.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say—
( a ) investment in interest-bearing deposit accounts with any of the following building societies:—
Irish Permanent Building Society,
Educational Building Society,
First National Building Society,
Irish Civil Service Building Society,
Irish Nationwide Building Society,
( b ) investment in interest-bearing deposit accounts with any of the following licensed banks:—
Algemene Bank Nederland (Ireland) Limited,
Allied Irish Finance Company Limited,
Allied Irish Investment Bank Limited,
Bank of America,
Bank of Ireland Finance Limited,
Bank of Nova Scotia,
Banque Nationale de Paris (Ireland) Limited,
Bowmaker (Ireland) Limited,
Citibank N.A.,
City of Dublin Bank Limited,
First National Bank of Chicago,
Forward Trust (Ireland) Limited,
Hill Samuel and Company (Ireland) Limited,
Investment Bank of Ireland Limited,
Lombard and Ulster Banking (Ireland) Limited,
Mercantile Credit Company of Ireland Limited,
Northern Bank Finance Corporation Limited,
Ulster Investment Bank Limited,
United Dominions Trust (Ireland) Limited,
( c ) investment in units of Bank of Ireland Gilt Edged Unit Trust, and,
( d ) investment in fixed interest securities issued in the State by the European Investment Bank, being securities registered in the State.
GIVEN under my Official Seal, this 16th day of November, 1977.
SEOIRSE Ó COLLA,
Minister for Finance.
EXPLANATORY NOTE.
This Order adds to the list of investments in which trust funds may be invested interest bearing deposit accounts with the above-named banks and building societies, units of Bank of Ireland Gilt Edged Unit Trust and securities issued in the State by the European Investment Bank. The list is set out in section 1 of the Trustee (Authorised Investments) Act, 1958 .
S.I. No. 407/1979 –
Trustee (Authorised Investments) Order, 1979.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1979.
I, MICHE�?L Ó CINNÉIDE, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1979.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 , (No. 8 of 1958), that is to say—
( a ) investment in interest-bearing deposit accounts with the following building society, that is to say, the Norwich Irish Building Society, and
( b ) investment in interest-bearing deposit accounts with any of the following licensed banks: —
Irish Intercontinental Bank Limited,
Royal Trust Company (Ireland) Limited,
Trinity Bank Limited.
GIVEN under my Official Seal this 18th day of December, 1979.
MICHE�?L Ó CINNÉIDE,
Minister For Finance.
EXPLANATORY NOTE
This Order extends the list of investments in which trust funds may be held, by the addition of interest-bearing deposit accounts with the named banks and building society.
S.I. No. 58/1983 –
Trustee (Authorised Investments) Order, 1983.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1983.
I, ALAN M. DUKES, Minister for Finance, in exercise of the powers conferred on me by Section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958) and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1983.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say, investment in interest-bearing deposit accounts with any of the following licensed banks:—
Barclays Bank International Limited,
Irish Bank of Commerce Limited,
Standard Chartered Bank Ireland Limited.
GIVEN under my Official Seal this 25th day of February, 1983.
ALAN M. DUKES,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trust funds may be held, by the addition of interest-bearing deposit accounts with the named banks.
S.I. No. 58/1983 –
Trustee (Authorised Investments) Order, 1983.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1983.
I, ALAN M. DUKES, Minister for Finance, in exercise of the powers conferred on me by Section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958) and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1983.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say, investment in interest-bearing deposit accounts with any of the following licensed banks:—
Barclays Bank International Limited,
Irish Bank of Commerce Limited,
Standard Chartered Bank Ireland Limited.
GIVEN under my Official Seal this 25th day of February, 1983.
ALAN M. DUKES,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trust funds may be held, by the addition of interest-bearing deposit accounts with the named banks.
S.I. No. 224/1985 –
Trustee (Authorised Investments) Order, 1985.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1985.
I, ALAN M. DUKES, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1985.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 , (No. 8 of 1958) that is to say, investment in interest-bearing deposit accounts with the following licensed bank:
Barclays Bank Ireland Limited.
GIVEN under my Official Seal, this 8th day of July, 1985.
ALAN M. DUKES,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trust funds may be held by the addition of interest-bearing deposit accounts with the named bank.S.I.
No. 372/1986 –
Trustee (Authorised Investments) Order, 1986.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1986.
I, JOHN BRUTON, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1986.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say—
(a) investment in interest-bearing deposit accounts with any of the following licensed banks—
Ansbacher & Company Limited, Smurfit Paribas Bank Limited,
and
(b) investment in units of Bank of Ireland Gilt and Bond Fund.
3. The following investments are hereby deleted from the investments specified in section 1 of the said Trustee Act, 1893, as amended by the said Trustee (Authorised Investments) Act, 1958 , and the Trustee (Authorised Investments) Order, 1979 ( S.I. No. 407 of 1979 ), that is to say, investment in interest-bearing deposit accounts with the following licenced bank:
Royal Trust Company (Ireland) Limited.
GIVEN under my Official Seal this 24th day of November, 1986.
JOHN BRUTON,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trusts funds may be held by the addition of interest-bearing deposit accounts with the two named banks and of units in the named investment fund. The Order also removes from the authorised list interest-bearing deposit accounts with the named company which no longer engages in banking operations.
S.I. No. 327/1990 –
Trustee (Authorised Investments) Order, 1990.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1990.
I, ALBERT REYNOLDS, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act 1958 , (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1990.
2. The following investments are hereby added to the investments specified in section 1 of the Trustee Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say—
( a ) investment in interest-bearing deposit accounts with Equity Bank Limited, Irish Life Building Society; and
( b ) investment in units of Bank of Ireland Corporate Unit Trust.
GIVEN under my Official Seal this 20th day of December 1990.
ALBERT REYNOLDS,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trust funds may be held by the addition of interest bearing deposit accounts with the two institutions named and of units in the named investment fund.
S.I. No. 75/1992 –
Trustee (Authorised Investments) Order, 1992.
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1992.
I, BERTIE AHERN, Minister for Finance, in exercise of the powers conferred on me by section 2 (1) of the Trustee (Authorised Investments) Act 1958 , (No. 8 of 1958), and having complied with subsections (2) and (3) of that section, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order, 1992.
2. The following investments are hereby added to the investments specified in section 1 of the Trustees Act, 1893, as amended by the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), that is to say—
( a ) investment in units of the Irish Life Charité Unit Trust, including each series launched, subject to the investments being only in Irish Life Charité Cash Fund and Charité Fixed Interest Fund,
( b ) investment in an interest bearing deposit account with ABN AMRO Bank NV, and
( c ) investment in units of the unit trust funds set out in the Schedule to this order being three AIB Unit Trusts, including each series launched.
SCHEDULE
Allied Irish High Income Fund,
Allied Irish Capital Growth Fund, and
Allied Irish Charicash.
GIVEN under my Official Seal, this 3rd day of April, 1992.
BERTIE AHERN,
Minister for Finance.
EXPLANATORY NOTE.
This Order extends the list of investments in which trust funds may be held by the addition of interest-bearing deposit accounts with a named bank and of units in the four named investment funds.
Trustee (Authorised Investments) Order
TRUSTEE (AUTHORISED INVESTMENTS) ORDER, 1998
I, CHARLIE McCREEVY, Minister for Finance, in exercise of the powers conferred on me by subsection (1) of section 2 (inserted by section 80 of the Central Bank Act, 1997 (No. 8 of 1997)) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsection
(3) of the said section 2, hereby order as follows:
1. (1) This Order may be cited as the Trustee (Authorised Investments) Order, 1998.
(2) This Order shall come into operation on the 9th day of March, 1998.
2. (1) In this Order –
“authorised credit institution” means –
(a) a person who is the holder of a licence under section 9 of the Central Bank Act, 1971 (No. 24 of 1971),
(b) a person referred to in section 7 (4)(a)(ii) (inserted by section 30 of the Central Bank Act, 1989 (No. 16 of 1989)) of the Central Bank Act, 1971,
(c) a building society within the meaning of the Building Societies Act, 1989 (No. 17 of 1989), or
(d) a person who is the holder of an authorisation under the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992 (S.1. No. 395 of 1992);
“authorised insurance undertaking” means the holder of an authorisation under the Insurance Acts and Regulations;
“the Bank” means the Central Bank of Ireland;
“the Life Assurance Regulations” means the European Communities (Life Assurance) Framework Regulations, 1994 (S.I. No. 360 of 1994); “recognised credit-rating agency” means a credit-rating agency recognised by the Bank for the purposes of Council Directive 93/6/EEC of 15 March 1993
(2) In this Order a reference to any Act of the Oireachtas or any instrument made under such an Act shall be construed as a reference to that Act or instrument as amended by or under any subsequent such Act or instrument.
3. The investments specified in section 1 (inserted by section 1 of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958)) of the Trustee Act, 1893, are hereby varied by-
(a) the deletion of the investments specified in that section, and
(b) the insertion in that section of the investments specified in the First Schedule to this Order.
4. (1) Subject to section 2 (4) (inserted by section 80 of the Central Bank Act, 1997 (No. 8 of 1997)) and section 5 (inserted by the said section
80) of the Trustee (Authorised Investments) Act, 1958, a trustee shall comply with the conditions specified in the Second Schedule to this Order in respect of the investment of trust funds.
(2) Nothing in that Schedule shall affect the powers of investment of a trustee of a scheme to which the Pensions Act, 1990 (No. 25 of 1990), applies.
(O.J. No L 141/1 of 11.6.93);
“recognised exchange” means an exchange recognised by the Bank for the
FIRST SCHEDULE
1. (1) securities issued by the State,
Article 3
purposes of Council Directive 93/6/EEC of 15 March 1993; “relevant collective investment scheme” means –
(a) a unit trust scheme authorised by the Bank under the Unit Trusts Act, 1990 (No. 37 of 1990),
(b) a designated investment company authorised by the Bank under Part XIII of the Companies Act, 1990 (No. 33 of 1990),
(c) a collective investment scheme authorised by the Bank under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989),
(d) a collective investment scheme established in another Member State of the European Communities that has been authorised in accordance with Council Directive 85/611/EEC of 20 December 1985 (O.J. No L 375/3 of 31.12.85), or
(e) any other collective investment scheme established in another state and approved by the Bank for the purpose of its being marketed in the State,
but excluding a collective investment scheme that is marketed solely to professional or qualifying investors of such class or classes as may be determined by the Bank;
“relevant State body” means a public company (within the meaning of the Companies Act, 1963 (No. 33 of 1963)) the majority of whose shares are held by a Minister of the Government or a body established by or under an Act of the Oireachtas (other than the Companies Acts, 1963 to 1990).
(2) securities guaranteed as to capital and interest by the Minister for Finance or any other Minister of the Government,
(3) securities (other than shares) of a relevant State body that either-
(a) had net assets of not less than £100 million at the end of each of the three financial years immediately preceding the date of the investment, or
(b) is referred to in section 7 (4)(a)(ii) (inserted by section 30 of the Central Bank Act, 1989) of the Central Bank Act, 1971,
(4) securities (other than shares) of an authorised credit institution-
(a) having maturity dates that are one year or less after the dates of their issue, or
(b) that are listed on a recognised exchange if such securities have maturity dates that are more than one year after the dates of their issue,
(5) securities of an issuer that have a rating-
(a) in the case of long-term securities, that is not lower than AA or its equivalent, or
(b) in the case of short-term securities, that is not lower than Al or its equivalent,
(6) an interest bearing deposit account with an authorised credit institution or, subject to section 137 (2) of the Central Bank Act, 1989, with the Bank,
(7) units or shares in a relevant collective investment scheme,
(8) annuity contracts specified at Class I of Annex I to the Life Assurance Regulations issued by an authorised insurance undertaking,
(9) life assurance contracts specified at Class I of Annex I to the Life Assurance Regulations issued by an authorised insurance undertaking and under which the capital sum repayable at maturity is not less than the capital sum invested,
(10) life assurance contracts specified at Class III of Annex I to the Life Assurance Regulations issued by an authorised insurance undertaking and linked to investment funds where an amount of those funds equal to not less than 90 per cent. of the net asset value thereof is held in cash deposits or in instruments that are listed on a recognised exchange,
(11) the equity of companies listed on the Irish Stock Exchange, being companies whose market capitalisation was not less than £100 million at the end of each of the three financial years immediately preceding the date of the investment,
(12) the equity of companies listed on a recognised exchange, being companies whose market capitalisation was not less than £500 million or its equivalent in the currency of another state at the end of each of
the three financial years immediately preceding the date of the investment.
2. In paragraph 1 (5) of this Schedule “rating” means a rating given by not less than two recognised credit-rating agencies or a rating given by one recognised credit-rating agency in a case in which a rating lower than that rating is not given by any other such agency.
SECOND SCHEDULE Article 4
1. A trustee shall not invest in instruments denominated in a currency other than the currency of the State if, immediately after the investment, the proportion of the trust funds invested in currencies other than the currency of the State would exceed 40 per cent of those funds.
2. A trustee shall not invest in a relevant collective investment scheme or in a life assurance contract of the class specified in paragraph 1(10) of the First Schedule to this Order if, immediately after the investment, the proportion of the trust funds invested in that particular scheme or, as may be appropriate, that particular contract would exceed one third of those funds.
3. (1) A trustee shall not invest in the equity of a company if, immediately after the investment, the proportion of the trust funds invested in that equity would exceed 10 per cent of those funds.
(2) Nothing in this paragraph shall prevent a trustee from taking up a bonus issue of shares, or a rights issue of shares, accruing to an investment of the trust funds in the equity of a company.
4. Where any part of the trust fund is invested in equities, the trustee shall review those investments at intervals of not more than six months.
GIVEN under my Official Seal, this 9th day of February, 1998.
CHARLIE McCREEVY
Minister for Finance.
EXPLANATORY NOTE
(This note is not part of the Instrument and does not purport to be a legal interpretation. )
This Order replaces the previous list of investments in which trust funds may be invested, as set out in section 1 of the Trustee (Authorised Investments) Act, 1958, with a new list. The Order also specifies conditions which, supject to the Trustee (Authorised Investments) Act, 1958, as amended by section 80 of the Central Bank Act, 1997, are to apply to the investment of trust funds. The Order comes into operation on 9 March, 1998.
Trustee (Authorised Investments) Order 1998 (Amendment) Order, 2002
View SIAmendments
I, Charlie McCreevy, Minister for Finance, in exercise of the powers conferred on me by subsection (1) of section 2 (inserted by section 80 of the Central Bank Act, 1997 (No. 8 of 1997)) of the Trustee (Authorised Investments) Act, 1958 (No. 8 of 1958), and having complied with subsection (3) of the said section 2, hereby order as follows:
1. This Order may be cited as the Trustee (Authorised Investments) Order 1998 (Amendment) Order 2002.
2. This Order comes into operation on the 2nd day of January, 2003.
3. The Trustee (Authorised Investments) Order 1998 is amended by substituting the following for the Second Schedule to that Order:
“SECOND SCHEDULE
1. A trustee shall not invest in instruments denominated in a currency other than the currency of the State if, immediately after the investment, the proportion of the trust funds invested in currencies other than the currency of the State would exceed 40 per cent. of those funds.
2. (1) A trustee shall not invest in the equity of a company if, immediately after the investment, the proportion of the trust funds invested in that equity would exceed 10 per cent. of those funds.
(2) Nothing in this paragraph shall prevent a trustee from taking up a bonus issue of shares, or a rights issue of shares, accruing to an investment of the trust funds in the equity of a company.
3. (1) In making an investment of trust funds a trustee shall take due account of –
(a) the nature of the liabilities of the Trust,
(b) an appropriate diversification of investments, including appropriate diversification of credit and counterparty risks, and
(c) an appropriate liquidity of investments.
(2) A trustee shall review the investment of trust funds at intervals of not more than six months.”
GIVEN under my Official Seal, this 18th day of December, 2002.
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CHARLIE McCREEVY
Minister for Finance.
EXPLANATORY NOTE
(This note is not part of the Instrument and does not purport to be a legal interpretation)
This Order amends the Second Schedule to the Trustee (Authorised Investments) Order, 1998 which specifies conditions to apply to the investment of trust funds affected by the Trustee (Authorised Investments) Act, 1958 . Its main effect is to remove the restriction on the proportion of trust funds which may be invested in a single collective investment scheme or insurance contract and to replace this with a requirement to have regard to certain considerations such as concentration of investment risk.
Cases
Re Lynch’s Trusts
[1931] IR 517
Johnston J: This matter comes before me on a summons taken out by the executors and trustees of the will of one, Cornelius Lynch, deceased, for the determination of certain questions arising upon the construction of the will of the deceased, and affecting the rights of the defendants as legatees and devisees under the will. The defendants are the infant children of Cornelius Lynch, and are wards of Court, under the care of the Chief Justice, who, on July 11th 1930, made an order giving liberty to the plaintiffs to take the present proceedings, and suggesting the questions which are set out in the summons. I do not know of any rule of law or practice which precludes me under such circumstances from giving the plaintiffs the assistance that they require.
The testator, who died in 1927, left five children, four daughters and one son, of whom the eldest, a daughter, is now thirteen years of age, and the youngest, also a daughter, is now four and a half. He left to his daughter, Annie, a legacy of £1,000, in these terms: “I bequeath to my daughter, Annie, the sum of one thousand pounds if and when she shall attain the age of twenty-one years, and in the meantime I direct that said legacy shall be lodged on deposit receipt in any bank my trustees may choose in the joint names of my trustees and my said daughter, and shall so remain during the minority of my said daughter; and on her attaining the age of twenty-one years the amount thereof, with the accrued interest, shall be paid to her; and it is my will that my trustees shall not otherwise invest said moneys.” Legacies of £1,000 are given to the other three daughters, Cornelia, Betty, and Mary, in identical terms. Then there is a provision for the disposal of each legacy, “with the accumulation of income,” in the event of any one or more of the daughters dying before attaining the age of twenty-one – an event which has not happened – and all the residue of the testator’s property of every kind is devised and bequeathed to Cornelius, the son, if and when he shall attain twenty-one years. There is then a provision that the net income from the testator’s lands shall be paid by the trustees to the widow, and used for the support and maintenance of herself and such of her children as may be minors, and the whole family is given the right of residence in the testator’s dwelling-house.
The testator directed that the whole of his residuary estate, “other than my said lands, house property and the furniture in my said dwelling-house,” should be realized, “and the proceeds thereof placed on deposit receipt in any bank my trustees may choose in their joint names and not otherwise invested, the interest thereon to accumulate, and the accumulation thereof with the principal to be paid to my said son on his attaining the age of twenty-one years.” There are also very precise directions as to the disposal of Cornelius’s share of the estate in the event of his not attaining twenty-one years of age.
This will might be described as a very tidy will. The provisions which I have set out, and others to which I have not alluded, have been framed and phrased with the most extreme care and orderliness, and the whole document displays great solicitude on the part of the testator for his family, and an earnest desire to make things as easy for them after his death as possible. Each girl is to get £1,000, and the boy is to get all that remains. Whilst the family is growing up, they are to reside in the dwelling-house – Eagle Lodge – with their mother, who is to have the net income arising from the whole of the lands for the support of herself and her children. Everything would have been all right if things had turned out as the testator had planned; but, unfortunately, they did not. The executors have placed upon deposit receipt four sums of £1,000, representing each of the legacies left to the four daughters, and a further sum of £1,000 on account of and in respect of, the son’s share in the realized residue. These sums are now represented by five deposit receipts, whose total face value is at present £5,202 7s 4d. The interest payable in respect of these deposit receipts is at the rate of £1 10s per cent, per annum, and the executors, after most exhaustive efforts, have been unable to get better terms from any bank. The net income arising from the whole of the lands available for the support of the whole family (the widow being entitled to her support equally with the minors) is only a sum of about £220. It is obvious that the sum is quite inadequate for the purpose, and if it is not supplemented from other sources must leave the family in an extremely miserable, not to say squalid, state of existence. It has been ascertained in Chambers in the Minor Matter that a sum of £365 per annum will be necessary for the proper support and maintenance of the five children, and in an affidavit by one of the trustees – a brother of the widow – it is stated that an additional sum of £100 per annum will be necessary in respect of the widow’s maintenance. I accept these figures as being both reasonable and proper. Mr McCullen, the trustee in question, states further in his affidavit that he was on very friendly terms with the testator, who had in his lifetime carried on a successful business as a cattle-dealer, and that he had maintained his family in a generous and comfortable manner, but that he had made a grave miscalculation as to the income that would be available from the letting of the lands for support of the family.
The first question that I am asked to decide is this: “Is there jurisdiction in the Court to apply the income from the money representing the legacies bequeathed by the said will to each of the said defendants towards the maintenance, support and education of each such defendant during his or her minority if the Court be of opinion that the moneys otherwise available for such maintenance, support, and education are insufficient?” My unhesitating answer to that question is in the affirmative. There is, apart from statute law, a number of cases in which Courts of Equity have exercised such jurisdiction in circumstances such as the present; but s 43 of the Conveyancing Act 1881, which is an express statutory provision for the proposition that is before me, obviates the necessity for any consideration of the former principles of the Courts of Equity in regard to such a matter. Sub-sect. 3 of that section provides that the section is to apply only if, and so far as, a contrary intention is not expressed in the instrument under which the interest of the infant arises. No such contrary intention is expressed in the will of the testator, unless the direction for the accumulation of the income until the legatee attains the age of twenty-one is to be regarded as such; but it was definitely decided by Pearson J, in In re Thatcher’s Trusts 26 Ch D 426, that such a direction is not an expression of a contrary intention. That decision is in accordance with the old equity cases, and was referred to with approval by O’Connor MR in In re Ramadge’s Settlement [1919] 1 IR 205.
The second question in the summons is of a different character. It is this: if the Court be of opinion that it is necessary or desirable in the interest of the said defendants in the circumstances of this estate to direct the investment during their respective minorities of the legacy of each such minor in manner other than by placing same upon deposit receipt, as directed by the said will is there jurisdiction in the Court to direct such investment? The situation that has given rise to this question is ludicrously pathetic. This family – the mother and her five young children – have a comfortable country house, suitably furnished, in which to reside. They have a net annual income from the lands amounting to £220, and they have a capital sum of £5,000 (not to speak of any further residue that may be realized on behalf of Cornelius), which, if invested in suitable trustee securities, would bring in a sum of nearly £250 a year, the whole being sufficient to enable the family to live comfortably, if not luxuriously. Owing, however, to the testator’s strange direction that the capital should be lodged in a bank on deposit receipt, earning interest at the rate of one and a half per cent., and that the executors should not “otherwise invest” it, the available cash, as Mr McCullen says, “is sufficient for the maintenance, support, and education of the said minors, even if no provision is made for the maintenance and support of the widow.” Must the minors wait for years before they can get the full benefit of the provision that has been made for them? Supposing that the testator had directed (as other testators have done in the past) that all the income of the estate should be accumulated until the children had attained twenty-one years would a Court of Equity be obliged to sit by and see the children starve? There is apt authority to the effect that this would not be done. The illustration that I have put differs from the present case in degree, but not, I think, in principle.
During the course of the argument some references were incidentally made to the famous bon mot concerning “judicious breaches of trust”; but a breach of trust is out of the question. Nothing can be done by the Court except in accordance with the settled principles of equity. As recently as 1913, in Badger v Badger [1913] 1 Ch 385 where there was a question as to the maintenance of an infant who was interested in a reversionary interest in real estate expectant upon the death of a lady aged 85 years, Hamilton LJ laid down this guiding principle: “I think it would be right to be ingenious in devising any form of order for the benefit of the infant, but we must confine ourselves within the limits of our jurisdiction.”
In the present case, what is the predominating trust which the will of this testator has constituted? It is, primarily, a trust for the distribution, in accordance with the expressed wishes of the testator, of his property, real and personal, amongst his widow and his five infant children when they come of age, and, pending that periods for the suitable support and maintenance of his family, and for the proper education of his children. That is the trust that is expressed in the will in plain and unambiguous language, and it represents the first and predominating object of the testator. All the minor and subsidiary directions in the will musts of course, be scrupulously observed by the trustees and the Court; but in so far as they conflict or are inconsistent with what I have described as the predominating purpose of the testator, they, of course, must give way. It does not require the exercise of much common sense to see that when the main purpose of a testator, as expressed in plain language, cannot be carried out by reason of a subsidiary direction, which renders the carrying out of the main purpose impossible, it is the subsidiary direction which must be disregarded, and not the main purpose. By the application of that principle in the present case I think that, under the circumstances that have arisen, the Court has undoubted jurisdiction to disregard the direction as to the lodgment of the legacies on deposit receipt, and to direct them to be in suitable trustee securities.
This principle has been well established by a long line of authority in Courts of Equity. The most recent of those cases is a decision of that great equity lawyer, Mr Justice Farwell, who, in a judgment of the utmost lucidity and persuasiveness, has placed this question, to my mind, beyond all doubt. In Walker v Duncombe [1901] 1 Ch 879, it appeared that a testator, who had left a very large settled estate, expressly directed that an infant tenant-in-tail should receive out of it a sum “not exceeding in the whole” £500 a year for his maintenance and education and that the rest should be accumulated. The net income of the settled property exceeded £14,000 yearly. Farwell J considered that he had power, notwithstanding the restrictive direction in the will as to the limited amount to be expended upon the infant, to sanction a scheme whereby £4,000 a year should be spent in keeping up the family mansion and maintaining the infant in a state suitable to his means and condition. Farwell J said:
“I decline to accept any suggestion that the Court has an inherent jurisdiction to alter a man’s will because it thinks it beneficial. It seems to me that is quite impossible. But in considering what is the true construction of the will, it is open to the Court to ascertain if there be a paramount intention expressed in the will, and if so, to consider whether particular directions are properly to be read as subordinate to such paramount intention, or are to be treated as independent positive provisions.”
The case of Havelock v Havelock 17 Ch D 807 is another case illustrating how far a Court of Equity is entitled to go, where the interests of minors are involved, for the purpose of carrying out the main purpose of a trust, even to the extent of disregarding subsidiary directions which are inconsistent with the main purpose, and I think that the same principle was at the root of the decision of Shadwell VC in Bridge v Brown 2 Y & C Ch Cas 181. I have been very kindly referred by counsel since the argument to the case of Minch v Minch 57 Ir LTR 135, which seems to have been decided by O’Connor MR upon the principle that was enunciated by Farwell J.
In the present case it is not proposed to interfere with the disposal of either the capital or income of the trust estate. The sole desire of the executors and trustees and of the Court is to carry out the trust for the support and maintenance of the widow, “and the support, maintenance and education of all my said children who may be under the age of twenty-one years.” Everyone – the widow and her co-executors and trustees, as well as the legal advisers of the parties, including the solicitor and counsel who represent the children – is not only willing, but anxious, that the proposal should be carried out as being necessary from the point of view of the trust, and as a method of considerably enhancing the value of the assets. As Mr Overend very forcibly points out, a contingency has arisen in regard to the income derivable from the landed property, which was very evidently unforeseen by the testator. It is necessary that the minors should continue to have what Lord Halsbury, in Barnes v Ross [1896] AC 625, calls “the inestimable advantage” of their mother’s care and help, and it is clear that that was contemplated by the testator. I am satisfied that, in the words of Farwell J, there is “a paramount intention expressed in the will,” and that it would be impossible to carry out that intention if the “particular direction” were adhered to. Hard cases may make bad law but sometimes they make good equity. Accordingly, I shall answer the second question in the affirmative.
Re Smith’s Estate
[1894] 1 IR 60 (Chancery Division)
Monroe J: The petition for sale in this case was filed by John Thomas Hinds and John O’Reilly, for the purpose of realizing the sum of £1000, money lent by the petitioners to the owner, on the security of a mortgage of the lands for sale. John Thomas Hinds, who was a solicitor, acted for the petitioners down to the date of his death in 1887. The property has realized only the sum of £700, and the surviving trustee, as well as the persons beneficially entitled to the incumbrance, deny the right of John Thomas Hinds to recover the costs of the proceedings, inasmuch as he was solicitor and trustee while the proceedings were being carried on, or they contend, in the alternative, and that he should not be allowed any profit costs.
The ordinary rule of equity on this matter is perfectly clear and distinct. A solicitor who is a trustee is not allowed to charge for his services in carrying out the trust, the obligation of which he has accepted. He may, if it be necessary to have a solicitor’s services, retain another. If he carry out the work himself, he must do it gratuitously, else his interest and his duty would be in conflict. To this general rule one exception was made in the case of Cradock v Piper 1 Mac N & G 664, which came before Lord Cottonham as Lord Chancellor. The exception amounts to this, that where a solicitor trustee carries on business in Court connected with the trust estate, and acts not merely for himself as a party to the proceedings, but also for some other party or parties, whether it be for a co-trustee, a cestui que trust or any other person interested, he will be allowed his full costs, provided these are not increased in any way by the fact of the solicitor acting also for himself.
This limitation of the general principle has been often questioned, but it has never been overruled. It was spoken of with disapproval by Lord Brougham in Mansion v Baillie 2 Macq HL Cas; and by Lord Carnworth in Broughton v Broughton 5 De GM & G 160; but it has been recognized as still a valid and existing authority by Mr Justice Chitty: In re Barber 34 Ch Div 77; and by the Court of Appeal: In re Corsellis Ibid. 675. Mr Todd sought to narrow the exception made in Cradock v Piper 1 Mac N & G 664 to the cases in which a trustee solicitor and his co-trustee were made co-defendants in a suit, and where the solicitor represented both, and he contended that it did not include those cases where a trustee solicitor instituted proceedings on behalf of himself and his co-trustee as plaintiff. For this he relied on some observations of Lord Justice Turner in Lincoln v Windsor 9 Hare 158, and of Lord Cranworth in Broughton v Broughton 5 De GM & G 160. There is, however, no decision to this effect, and the distinction is not taken by the Court of Appeal in Re Corsellis ibid 675. Indeed I find that part of the cost given to the solicitor in Craddock v Piper Mac N & G 664 were the profit costs, which he claimed as solicitor for himself and his co-trustee in instituting proceedings for the administration of the trust estate.
In my opinion, therefore, Mr Hinds is entitled to have his cost of these proceedings taxed in the ordinary way, and paid in priority to the claim of those beneficially entitled to the purchase-money, under the deed of mortgage. It was sought to show that the representatives of Mr Hinds should be debarred from all claim as to costs, as he had made an improper investment of the trust funds in a security which has proved deficient. No proof of this was laid before me, and a claim of a similar character made in a suit for the administration of Mr Hinds’ assets has been already rejected by the Court of Chancery.
Courtney v Rumley
(1871) IR 6 Eq 99 (Vice-Chancellor’s Court)
Chatterton V-C: The bill in this cause has been filed for the purpose of raising out of the defendants’ shares of the lands there mentioned their proportionate part of certain sums paid by the plaintiff for the purpose of obtaining grants in perpetuity of these lands, and of certain costs paid by the plaintiff in connexion with the obtaining of such grants. The lands were portion of the estate of the archiepiscopal see of Dublin, and were held by leases for years customarily renewable. A person named William Peck was, in his lifetime, entitled to sub-interests, carved, but not directly, out of the head lease, in three separate lots of these lands, under three distinct sub-leases, each having a toties quoties covenant for renewal. These lots have been called by the names of the persons under whom he so held them – Byrne’s lot, Rossiter’s lot, and Smyth’s lot. Peck, by his will, and a codicil thereto, both made in 1842, in which year he also died, appointed James Duggan and Mary Maguire his executor and executrix both of whom proved the will. Peck thereby bequeathed his interests in these premises with others, to his executor, Duggan, upon certain trusts under which, in the events that happened, three-fifths of the rents became payable to the defendants, and two-fifths to persons named O’Connor. Duggan survived Mary Maguire, and by his will appointed the plaintiff and Mary Anne Duggan, and John Classon, his executors. Duggan died in 1849, and his will was proved by the plaintiff and Classon. The plaintiff has survived his co-executors, and is the sole personal representative of Duggan, and therefore of the first testator, Peck, and as such he became possessed of the legal estate of Peck in these premises, and the person to obtain renewals of the leases, in trust for the defendants and the O’Connors. Irregularities had taken place in the lifetime of Peck, and also after his death, in taking out renewals of his sub-leases. No question now arises as to the lot called Byrne’s lot, of which a grant in perpetuity was obtained without litigation, the sum paid for this grant being £48 16s 8d. The plot called Rossiter’s plot was, in the year 1864, held by minors of that name, who were wards of this Court, and were the immediate reversioners upon Peck’s sublease, and the parties to renew or grant a perpetuity to his representatives. A sum of £79 5s 3d was paid to them for the purchase of the perpetuity fines, and interest on fines, to three-fifths of which the defendants do not dispute the liability of their shares of these premises. The sum of £11 2s 11d was paid by the plaintiff to the solicitor of these minors, for the costs of proceedings in the minor matter connected with the obtaining of a grant of the perpetuity, three-fifths of which, and also of the sum of £13 6s 7d, being the plaintiff’s own costs of these proceedings, the plaintiff claims to charge against the defendants’ shares, but the defendants dispute their liability to these sums. The principal contention is as to the third lot, called Smyth’s lot, in reference to which much litigation ensued, and the costs claimed are large.
It appears that the plaintiff had become an incumbrancer on the O’Connor’s two-fifths of these three lots, and instituted proceedings as such in the Landed Estates Court for a sale of them in the year 1859. Their shares were subsequently sold by that Court, and the plaintiff purchased them, and obtained a conveyance.
These three lots had been leased many years before by Peck, or the persons under whom he devised, to a person named Ennis, with a toties quoties convenant for renewal; and his representatives, in the year 1851, assigned this sub-interest to Parker. But Ennis had also, in the year 1812, acquired the interest in Smyth’s plot immediately above the interest of Peck, and thus was both landlord and tenant to Peck. The last renewal of this lot was granted by Smyth to Peck in the year 1806, at a rent of £5. Ennis’s representative assigned this superior interest to Parker at the same time as the sub-interest in all three lots – namely, by deed of the 12th September 1851. The title of these parties thus became very complicated, and, to add to the complication, the boundaries of these lots became so confused that it was almost, if not altogether, impossible to ascertain them. From some unexplained cause, no rent was, so far as has been ascertained, paid on foot of the lease from Smyth to Peck since its date in 1806, nor was any renewal of it ever granted to Peck or his representatives, who held it for over fifty years without any payment of rent or acknowledgment of title. This is the more remarkable from the fact that Ennis and his assignee, Parker, during so long a period paid to Peck and his representatives the full rent payable by the under lease, without making a deduction for the rent payable by Peck to Ennis under the lease or renewal of 1806. In the plaintiff’s petition in the Landed Estates Court for the sale of the O’Connors interest he erroneously described their tenure as fee-simple. This evidently proceeded from a mistaken notion that Peck and his representatives could have acquired the fee by possession without payment of rent under the circumstances I have stated. It appears that Parker, who was theretofore ignorant of his right to the rent reserved by the lease of 1806, became aware of it during the progress of some inquiries directed by the Landed Estates Court as to the boundaries, and he served a notice on the plaintiff, dated the 28th March 1861, to take out a renewal or grant in perpetuity. This led to proceedings in the matter of O’Connor’s Estate, which brought out the real title to this interest, and the mistake made as to the tenure was corrected, the plaintiff, on the 16th of August 1861 serving a notice on Parker, admitting his title, and assenting to take a grant in perpetuity from him, under the Church Temporalities Act. A negotiation then ensued as to the amount to be paid for rent, fines, and interest, and for the purchase of the perpetuity, in the course of which Parker, by a letter of 15th October 1861, claimed a sum of £180 Irish, for thirty-six years’ arrears of rent, and £40 19s. (late currency) for fines, with £39 1s 3d interest thereon. This claim was disputed by the plaintiff, who insisted that Parker was not entitled to claim any arrears of rent which accrued prior to the conveyance of the lands from Ennis to him in 1851, and also that only one renewal fine, being one guinea, with interest, was due. The plaintiff, it appears, was ignorant at this time that Parker had, pending these negotiations obtained an assignment from Ennis of all arrears of rent due to him prior to the assignment of 1851. The assignment of the arrears bears date the 15th October 1861, but it was concealed by Parker from the plaintiff, and not disclosed till the 19th January 1863, when it was mentioned as if casually in a letter from Parker’s solicitor to the plaintiff’s solicitor. According to the opinion of the Master of the Rolls, in the case of Courtney v Parker, this assignment made no difference in the liability of the parties seeking a renewal, as they were bound to pay all rent due, no matter to whom, as a condition for obtaining it. However, if the facts had been disclosed, it would have prevented any such objection being raised.
The draft of a grant in perpetuity was furnished by plaintiff’s solicitor to Parker’s solicitor in October 1861, and retained by the latter, though he was frequently applied to return it approved of or amended.
In the letter of Parker’s solicitor, of the 19th January 1863, already referred to, he states that Parker was advised he was entitled to be paid all rent due before granting a renewal, and that the plaintiff’s solicitor had been furnished with the amount claimed. This must refer to the last preceding letter of Mr Dodd, Mr Parker’s solicitor, dated the 18th December 1862, in which he claims, in default of proof of payment, all rent which had accrued from the grant of the last renewal – namely, the year 1806. But in the letter of the 19th January 1863, Mr Dodd asks that if plaintiff were dissatisfied with this amount he should either show some evidence of the period to which rent had been paid, or make a reasonable offer. A case had been submitted to counsel in December 1862, on behalf of the plaintiff, to advise as to Parker’s rights in respect of rent and renewal fines, stating that an offer had been made to pay all that had accrued since the assignment to Parker in 1851, on which counsel gave his opinion approving of the terms so offered. After plaintiff’s solicitors had been informed of the assignment to Parker, in 1861, of the arrears due prior to the assignment of 1851, this case was again laid before the same gentleman, who advised, upon grounds unnecessary to be stated, that no further concession should be made to Parker. On the 14th April 1864, Parker served a formal notice on the plaintiff, with particulars of his claim for rent, fines, and purchase money, the rent being again claimed from the 16th May 1806, and the fines and interest as before, and he demanded payment within a month, and stated that otherwise he would hold the plaintiff debarred from all right to a grant in perpetuity. A reply was given on the 27th of April 1864, offering £150 in full for all Parker’s demands; but this offer was not accepted. The plaintiff then presented a petition against Parker, under the Church Temporalities Acts, for a grant in perpetuity, in reply to which Parker filed an affidavit, in which he submits that the plaintiff had absolutely forfeited his right to a renewal or grant in perpetuity, but offers to waive it on payment of all arrears of rent from 1812, and renewal fines and interest since 1824, and of the costs he had been put to in the Landed Estates Court. The date of 1812 appears to have been mentioned as being the time at which Ennis acquired Smyth’s interest in the premises, since which time the plaintiff had admitted that no rent had been paid. The case came on for hearing before the Master of the Rolls in June 1864, and the questions of forfeiture, and the waiver of it, and of the terms on which the plaintiff was entitled to a grant, were fully argued. His Honour seemed to be of opinion that the proceedings in the Landed Estates Court did cause a forfeiture, but it was not necessary for him to decide the point, as he held that if there had been a forfeiture it had been waived by the respondent. He also held that the respondent’s right to require payment of the rent claimed was not limited by the Statute of Limitations, or by any presumption of payment. As to the latter point he expressed some doubt, but he seems to have decided it on the ground of the statements made by the plaintiff, that no rent had ever been paid since either 1806 or 1812, it does not seem very clear which. An account was accordingly directed, and the Master found that fifty-three years rent, from 1812, was due, amounting to £245 9s 11d, and one renewal fine, which, with interest, amounted to £1 6s 3d. The proportion of purchase money was found to be £68 10s 3d. There were also costs in the Landed Estates Court in O’Connor’s Estate awarded to Parker, amounting to £31 0s 4d, which plaintiff was held liable to pay as a condition of obtaining the grant, and he was also ordered to pay Parker’s costs of the petition matter in this Court; the whole amount, including further rent which had accrued, being £574 19s 9d. Parker had withheld the rent under his sub-lease during this controversy, and the amount of it, being £296 17s 10d, was deducted from the sum due to him, and left a balance of £278 1s 11d, which was paid him by the plaintiff, and thereupon a grant in perpetuity was executed by him to the plaintiff. The plaintiff seeks in this suit to establish a lien for three-fifths of this sum, and of his own costs incurred in these proceedings, and of the costs of the grants of the perpetuity of the three lots, upon the defendants’ three-fifths shares of the trust premises, and to raise the same, with interest, by sale.
The defendants admit the plaintiff’s right so far as regards the sums paid for obtaining the grants of Byrne’s and Rossiter’s lots, and also a portion of the sum paid for that of Smyth’s lot; but they dispute their liability to a sum of £11 2s 11d paid to the solicitor for the minors in Rossiters, minors, and a sum of £13 6s 7d claimed by plaintiff for his own costs in that matter. They also dispute their liability to payment of any costs in respect of Smyth’s lot, and to a portion of the arrears of rent paid to Parker, being the difference between the amount so paid and twenty years’ arrears, to which they admit their liability. They ground their defence upon the alleged misconduct of the plaintiff, which, they contend, occasioned the liability to these disputed sums.
The plaintiff’s position was originally that of executor of the surviving executor of William Peck, under whose will the defendants derive their interest in this property. The legal estate therein was vested in him as such executor in trust for the several legatees beneficially entitled. He subsequently purchased the interests of the person entitled to the other two-fifths, and became a co-owner with the defendants of the beneficial interest. This has been relied upon by the defendants as a circumstance prejudicial to the plaintiff’s case; for they allege that he, in order to advance his own interest, embarked in the litigation which they complain of, and that he sacrificed their interests to his own. I look upon this as affording an argument in the opposite direction, as I think it unlikely that a person who must himself in any event bear a share of any losses that may be occasioned by a particular course of proceeding will recklessly or negligently adopt it. The evidence here satisfies me that the acts of the plaintiff were done bona fide for the common interest of himself and the other persons entitled to this property, and that though he may have been unsuccessful, badly advised, or mistaken, he did not act less cautiously for the defendants than for himself.
It is not necessary for me in this case to consider whether the plaintiff was under any obligation to renew these leases. That he was justified in doing so the defendants concede by their admission of the liability to contribute to the sums paid for obtaining the grants in perpetuity, they derived considerable advantage by the obtaining of these grants, and as to that most in controversy – namely, the grant of Smyth’s lot the last renewal had expired very many years before, it was held but by a yearly tenancy at law, and they not only might have been, but, as is apparent, would have been, evicted from it and lost it altogether, if a renewal or grant in perpetuity had not been obtained. The plaintiff here does not seek to attach any personal liability upon the defendants, but only requires that they shall not take the benefit of the grants which he procured for them, without contributing their shares of what he paid for them. I should be warranted in sending this case into Chambers at once to take the accounts prayed by the bill, leaving the matters in dispute to be there adjusted: but as they have been fully discussed on the hearing, and as no further light can be thrown upon them by inquiry, I think it will save delay and expense if I now give my opinion as to the several heads of claim in controversy.
The principle upon which this Court acts in reference to the allowance of expenses to trustees is, that the trust property shall reimburse them all the charges and expenses incurred in the execution of the trust, and in this the Court will always deal liberally with a trustee acting bona fide. But when the costs or expenses claimed have been incurred through the misconduct or negligence of the trustee, he will not be allowed them. The fact of his having been unsuccessful in litigation, either as plaintiff or defendants, will not, in the absence of misconduct, disentitle him to be reimbursed his costs.
The first item in dispute is that of the costs in the matter of Rossiters, minors, which consists of two parts – namely, the costs paid the minors’ solicitor, amounting to £11 2s 11d, and the costs incurred by the plaintiff. As these minors, who were entitled to the reversion expectant on Peck’s lease, the wards of Court, it of course was necessary that the sanction of this Court should be obtained to the execution of any renewal or grant in perpetuity. Accordingly, by a report of the Master in that matter, made under an order of the 3rd December 1862, and bearing date the 15th of March 1864, it was found that the plaintiff and his then co-executrix were entitled to a grant in perpetuity of their portion of the minors’ lands, on payment of the sum of £79 5s 3d. Of this sum the plaintiff, as beneficial owner of two-fifths, was bound to contribute two-fifths, and the defendants the other three-fifths. It appears that the plaintiff had not at the time any money of the defendants in his hands available for payment of their share. The solicitor for the minors wrote to plaintiff’s solicitor in May 1864, requiring immediate payment, and this not having been made, he served notice of a motion on the 26th of May 1864, that the plaintiff and his co-executrix should forthwith proceed to complete the grant, and pay the said sum of £79 5s 3d, with interest, and the costs of the motion. Plaintiff’s solicitors served a notice in reply, dated the 28th of May, stating that it was not the intention of the plaintiff to oppose the motion, but that, as the defendants had failed to contribute their three-fifth shares of the sum due, plaintiff’s affidavit would be used on the motion, but not for the purpose of opposing same. Although there is not any direct evidence of there having been any prior application to the defendants for payment of their shares, which probably may be accounted for by the plaintiff s not being capable of giving evidence, I think there is sufficient in the case to warrant the inference that these ladies had been so applied to before the notice of motion was served. On the 30th of May they were served with a formal notice by the plaintiff’s solicitors, sending them a copy of the notice of motion, and stating that, as the plaintiff had not in his hands any money of theirs and as he had made application to them to pay their proportion of the sum required, plaintiff had made an affidavit which would be used on the motion. That affidavit was offered in evidence by the plaintiff, but was withdrawn on the objection of the defendants, to which I thought myself bound to yield. The motion was moved on the 31st of May, and an order made in the terms of the notice, and the guardian of the minors was declared entitled to her costs of the motion, and the order was made without prejudice to any question between the plaintiff and the persons who, it was alleged by him, were bound to contribute to the purchase of the perpetuity. The defendants admit that they never paid their share of the purchase-money, and the entire was subsequently paid by plaintiff out of his own funds. Under these circumstances, I cannot hold that the plaintiff is disentitled to claim against the trust estate at lease three-fifths of the costs so paid and incurred by him, they were, in my opinion, occasioned not by his misconduct, but partly, if not wholly by the default of the defendants in not providing funds for payment of their share of the purchase-money. I think there is sufficient to show that the delay in payment which occasioned the motion was caused by their not having paid their contribution. The defendants have relied on a letter written by one of them to the plaintiff, in reference to a small sum of costs charged by him in one of his accounts as paid to Parker in the matter of O’Connors’ Estate, and on letters of the same defendant to plaintiff’s solicitors, guarding against assenting to or undertaking to pay costs or expenses in reference to obtaining the grant of Byrne’s lot. In my opinion, these letters do not affect the question, except so far as they go to negative any presumption of assent on their part. They could not suppose that the grants which they desired to have could be obtained without costs of some kind, and, whether they assented or objected, they could not claim to enjoy the benefits so procured for them without bearing their share of all proper costs and expenses incurred in procuring those benefits. The sole question is, whether the costs claimed were occasioned by the misconduct of their trustee.
The next and the most important question is, as to the amount of rent paid, and the costs paid and incurred, in relation to Smyth’s lot. These costs consist of two portions – one, the costs paid Parker in the matter of O’Connor’s Estate, and the other the costs of both parties in the matter of Courtney v Parker. The former I do not think the plaintiff is entitled to. His proceedings in the Landed Estates Court were not in the character of trustee or executor, but as an incumbrancer in his own right upon shares of the O’Connors, in which the defendants here had no interest. It is true that inquiries were then directed and prosecuted which concerned the owners of all the shares; but these form but a small portion, if any, of the costs in question, the main portion, if not the whole, of which, were incurred in reference to the plaintiff’s unfounded claim to sell the fee. The plaintiff relied on its having been part of the terms upon which the grant was ordered to be made to him by Parker that these costs should be paid, but that does not in itself give him any right to claim contribution to them from the defendants. It was equitable to make the payment a condition as against the plaintiff, who was the only person with whom Parker was dealing, but he must go further in order to claim this sum against the defendants, and show that it was incurred by him as their trustee, in respect of their interests, and this he has failed to do.
In reference to the costs in Courtney v Parker, which are the largest item in dispute, I may observe that the objection to them is not to their amount, as it is not alleged that there was any impropriety in the conduct of that proceeding, or any unnecessary expense incurred in the progress of it. The objection is to the whole amount, on the ground that the proceeding was rendered necessary by the default of the plaintiff, and that it was never authorized or sanctioned by the defendants. The dispute between the plaintiff and Parker, which led to the institution of that matter, was certainly one of terms only, for Parker was willing to execute a grant of the perpetuity on his demands being complied with. There were two subjects of dispute one being the very large arrear of rent demanded by Parker, and the other the amount of renewal fines and interest claimed, which, though at first much beyond the sum properly payable, had, by Parker’s notice of the 14th of April 1864, been reduced to £6 9s. 2d. This latter sum, though still exceeding the amount due, which was only one guinea, was small in comparison of the claim for rent. Parker succeeded in maintaining his claim to the arrears of rent for fifty-three years, and it must, therefore, be taken that the plaintiff was not warranted in his refusal to pay that amount. If he had assented to the claim, in all probability Parker would have granted the perpetuity without suit. Was, then, the plaintiff guilty of such misconduct in not yielding to this claim as to disentitle him to the costs thereby occasioned? His position must be considered. He was the executor of Peck’s executor, and first became connected with the property in 1849. He was ignorant of the previous dealings with it, and was then, and for many years afterwards, unacquainted with the title. For at least thirty years Peck, his testator, had paid no rent; and during all that time, and down to 1861, neither Ennis, nor Parker, his assignee, had ever claimed payment, and they had paid the rent due by them under the sublease without making or seeking any deduction for the superior rent. The plaintiff acted on the opinion of counsel selected as being the friend and confidential adviser of the defendants. The defendants allege that, but for the plaintiff’s misconduct in claiming the fee, Parker would not have been entitled to claim ail these arrears. They submit by their answer that, by reason of the forfeiture incurred by the plaintiff, and his subsequent application for a grant in perpetuity, Parker was enabled to insist on payment of the arrears of rent for fifty years or thereabouts, instead of for twenty years only, which, as they are advised and submit, is all that Parker would have been entitled to were it not for the plaintiff’s disclaimer of his title and disregard of his notice. One of the matters now in dispute and which I have to decide is, whether the defendants’ shares of the premises are liable for rent which accrued more than twenty years before the notice of 1861. The defendants contend that they are not, and it may be fairly assumed that if the plaintiff had applied to them for their opinion as to the course to be taken by him before commencing his proceedings against Parker, they would have taken the same position then which they do now. The plaintiff did, in Courtney v Parker, insist upon this limit of twenty years. He was unsuccessful, but not on the ground of a forfeiture having given any right to Parker to claim more. It is not necessary now to consider whether the plaintiff’s conduct did work a forfeiture. The Master of the Rolls seems to have come to the conclusion that it did, and I express no opinion upon the subject. But he also came to the conclusion, and so held, that if any such forfeiture had been worked, it had been waived by Parker long before that proceeding had been instituted, and his judgment as to the amount of the arrears claimable did not proceed on the ground of any such forfeiture then existing, or of any right in Parker to claim a larger amount by reason of it. I am of opinion that the conduct of the plaintiff, which is relied on as having worked a forfeiture, did not give Parker any advantage in this respect that he would not have possessed as being the party to grant a renewal on the perpetuity. The ground expressed by his Honour for his judgment on this point was, that as the plaintiff had all through contended that no rent had been paid from 1812, at latest, he could not be held to insist that a presumption existed of payment up to twenty years before 1861, and on this point his Honour states that he entertained some doubt. A claim for so very large an amount of rent as fifty-three years, and especially under such circumstances, is certainly calculated to raise some doubt, and whether well or ill founded in the result, I cannot blame either the plaintiff or the defendants for not readily yielding to it. It was also urged for the defendants that the admission or contention by the plaintiff, that no rent had been paid since 1812 deprived him and the defendants of the benefit of that presumption. But it is not alleged that the statement was untrue, and the plaintiff was not in my opinion guilty of any misconduct in having made it. I am of opinion that the amount of rent which the plaintiff was held liable to pay was not incurred by reason of the alleged forfeiture of the right to renewal. I shall, therefore, hold the defendants’ shares bound to contribute to payment of the entire amount of rent so paid by the plaintiff. I have also come to the conclusion that the plaintiff was not guilty of misconduct, under the circumstances, in not yielding to Parker’s demand, and in submitting it for a judicial decision.
But the conduct of the defendants is also of importance. It is alleged by the plaintiff that they were kept informed all through these transactions of what was going on by the friend and adviser I have already referred to as being consulted as counsel upon these questions, and, from the qualified denial of this by the answer, I think there is some ground for the allegation. But, however that may be, I find that within a short time after the petition had been presented, and several days before it came on for hearing, the defendants’ solicitors placed themselves in communication with the plaintiff’s solicitors as to this property generally, and obtained very full information to the then position of the matter. In the letter of Messrs Dillon to Messrs Fitzgerald of the 31st May 1864, the filing of the petition is distinctly stated. On the 4th June a copy of the affidavit verifying the petition in full was sent to them, and any further information required was offered them. The defendants were thus put in possession of the nature and particulars of the proceeding, and as they do not appear to have asked for further information they must be taken not to have needed it. Surely, if they disapproved of the litigation and preferred to yield to Parker’s demands, they should have so informed the plaintiff at that time. But, instead of doing so, they allow the matter to proceed, and lead the plaintiff to suppose that they did not disapprove of what he was doing. They cannot in justice now turn round upon their trustee, who, I have no doubt, was acting bona fide and to the best of his judgment for the interest of both himself and his cestuis que trustent, and repudiate all liability to these costs. It is not sought to make them personally liable for them, but only to recover them out of the trust premises; and this, I think, the plaintiff is entitled to do. It is not to be forgotten that the plaintiff was bound by the covenant in the renewal to Parker to use his best exertions to procure renewals from his own landlord, and to grant renewals toties quoties to Parker.
I shall, therefore, declare the plaintiff entitled to three-fifths of the sums paid for rent and fines, and interest on fines, and the costs paid in Rossiters, minors, and Courtney v Parker, with interest on the sums so paid from the dates of payment, and to the costs properly and necessarily incurred by him to his own solicitors in these matters, but without interest. I shall declare that he is not entitled to any costs paid by him in reference to the proceedings in O’Connor’s Estate. The accounts must be taken on the basis of these declarations.
King v Anderson
(1874) IR 8 Eq 625 (Chancery Appeal)
Sir J Napier CS: The Appeal in this case has been brought against a decision of the Vice-Chancellor, by which he ordered the dismissal, with costs, of a bill that was filed on the 26th February 1872, for the purpose of setting aside a contract of purchase made on the 19th September 1859, and a deed of conveyance of the 11th November following, executed in pursuance of the contract. The property that is the subject-matter of the contract and the conveyance formerly belonged to the late Samuel Benjamin King, the husband of the plaintiff, and an officer in the naval service of the East India Company. It was hereditary property; part of it in the town of Baltinglass, held under renewable leases in perpetuity, partly under the Earl of Aldborough, and another part under a Mr Darcy.
In 1843 Mr King conveyed the property to his mother (Mrs Field), then a widow, upon trust, out of the rents and profits, to pay all rents and other outgoings, and to retain for her sole use and benefit during her life an annuity of £100 per annum, and then upon trust for the said Samuel Benjamin King, his heirs, executors, administrators, and assigns.
Under Mrs Field, the defendant, who resided at Baltinglass, was appointed in 1851 to be agent to collect the rents and manage the property. The plaintiff was married to Mr King in the year 1849; they came to Ireland early in 1853, and Mr King had to return to India early in the year 1855, and he died in September in that year. On the 24th January 1855, he executed a power of attorney to the plaintiff to act in his name during his absence, and on the 27th January he executed his will, in which he made the following devise of his property:
“I give, devise, and bequeath any interest I may have at the time of my death in and to certain houses and premises in and near the town of Baltinglass, in the county of Wicklow, in Ireland, to which I am entitled either as heir-at-law of my father, the late Thomas King, or otherwise, unto my wife, Alicia Hobart King, otherwise Malone, for the term of her natural life, free from the control of any future husband she may intermarry with, and for her sole use and benefit; and from and after her death I give, devise, and bequeath my said interest in said houses and premises in and near Baltinglass aforesaid to my son, Thomas Frazer King, and to his heirs and assigns for ever; and if it shall happen that my said son, Thomas Frazer King, shall die during the lifetime of his mother, the said Alicia Hoban King, or before he attains his age of twenty-one years, then and in either of said events I give, devise, and bequeath (subject, however, to the life estate of my said wife) the said interest I may have in said houses and premises in and near the town of Baltinglass to my sister, Anne Saunders King, for life, free from the control of any husband she may have, and after her decease to her children now living, or such of said children as may be then living, share and share alike, and to their heirs and assigns for ever; and if but one then living, the whole to that one. Provided always that in case after my death my said wife, Alicia Hobart King, otherwise Malone, at any time during her life think fit so to do, it may be lawful for her, and my will in such case is that she may be at liberty, to sell or otherwise absolutely dispose of the whole or any portion of the said houses and premises in and near Baltinglass aforesaid for the best price that can be had for the same, and that the proceeds, after such sale or sales (deducting all expenses), be invested by the said Alicia Hobart King in Government or landed security, and that the proceeds, or profits, or dividends, or annual interest arising therefrom shall follow and be applied in the same way as the several devises I have hereinbefore made with respect to said Baltinglass property.”
And the testator thereby appointed Samuel Benjamin King, Mrs Mary Taylor, and Alicia Hobart King, the plaintiff, the executors of his said will.
The defendant continued in his position of agent of the property, and also was appointed in 1854 to be the agent of the Earl of Aldborough. It is unnecessary to refer in detail to the letters that are as evidence to show the intimacy and the confidence between him and the plaintiff, and the position which he accepted and assumed with reference to the management of this property, with the professed object of acting for the benefit and in the interest of the plaintiff. I do not think that it is expedient or that it would be relevant to go into further detail at this stage, because not only is the case before the Vice-Chancellor fully reported in IR 8 Eq 147, but we all concur with the Vice-Chancellor in the conclusion at which he has arrived as to the effect of the evidence in showing that, before and at the time of the transaction that is sought to be set aside, the defendant was the agent of the plaintiff for the purpose of collecting the rents, and for the general management of the property, and that in this position an influence had been acquired by him, and a confidence obtained, that was sufficient to bring the case within the rule of a Court of Equity that applies to a purchase or other dealing for his own benefit by a trustee. “The principle of this rule,” says Lord Kingsdown in Smith v Kay 7 HL Cas 779, “applies to every case where influence is acquired and abused, where confidence is reposed and betrayed. The relations with which the Court of Equity most ordinarily deals are those of trustee and cestui que trust, and such like. It applies specially to those cases, for this reason – and this reason only – that from those relations the Court presumes confidence put and influence exerted. Whereas in all other cases, where those relations do not subsist, the confidence and the influence must be proved extrinsically; but where they are proved extrinsically, the rules of reason and of common sense, and the technical rules of a Court of Equity, are just as applicable in the one case as in the other.” Taking this to be clearly established, and that it governs the case of the defendant in relation to the purchase in question, the onus was thrown on him to prove to the satisfaction of the Court that he acted according to what the rule of the Court requires to be shown beyond question in such transactions, when they are impeached by a suit in Equity. “It is asked,” says Lord Eldon, in his instructive judgment in the case of Gibson v Jeyes 6 Ves 278, “Where is that rule to be found?” “I answer” (he replies), “in that great rule of the Court, that he who bargains in matter of advantage with a person placing confidence in him is bound to show that a reasonable use has been made of that confidence – a rule applying to trustees, attorneys, or any one else.”
The confidence that was placed in the defendant is very distinctly shown by several letters of the plaintiff. In her letter of 12th April 1859, to the defendant, she expresses her desire that he would get Lord Aldborough for a purchaser of part of the property, for the reasons she assigns; one of which is that, in her opinion, “he would be more likely to give a better and fairer price than any indifferent purchaser;” and she adds: “from your and his perfect knowledge of the title, &c., much time and law expenses would be saved me in disposing of the debris of the Baltinglass property.”
In the letters of Mr Willans to the defendant in 1855, the value and capabilities of the property were treated as peculiarly within the knowledge of the defendant – as, for instance, in that of 27th August 1855, in which Mr Willans says: “I understand Mr King will give the whole to his lordship as it now is – viz, £54 19s 10d profit rent, capable of being increased one-half at least, as I need not tell you, for £500.” At that time it was an object to Mrs King (who was then acting under a power of attorney) to get the money for the purpose of enabling her to join her husband in India; but after his death, at the close of that year, her position was altogether changed. Her title then accrued under her husband’s will; she became tenant for life of the property, with a power of sale at the best price that could be had, the proceeds to be invested in Government or landed security, for the benefit of those who were the devisees of the property, especially for her son, then an infant of tender years, who was to take in remainder after his mother’s death. It was her bounden duty under this power to sell to the best advantage (if at all), and to have the proceeds of such sale invested in the securities and on the trusts pointed out in the will of her husband.
In the reply of the defendant to her letter of the 12th April 1859, he says -”Lord Aldborough is away from Paris at the present, but I hope soon to be able to communicate with him respecting the Infirmary, &c, when I shall do all in my power for your interest.” This is dated from Baltinglass, “April 19 1859.”
In his letter, dated “Saturday Evening, July 8 1859,” he informs her that he was going to France, and would speak to Lord Aldborough about her matters. “I told you lately” (he says) “I had written to him about the purchase of the houses; but he has not replied directly, further than to say he would enter more fully into various matters I had brought before him when we should meet. I purpose leaving the nine o’clock packet from Kingstown on Monday morning, and trust at least to see you on my return.”
It would seem, from these letters, that at that time no intimation had come from either party as to a purchase by the defendant. What took place at the meeting in France as to a purchase of the property by Lord Aldborough is not disclosed in the evidence. In his answer to the original Bill, the defendant says, as to this, “I do not recollect the result of this application, but I communicated the result, whatever it was, truly to the plaintiff.” We are left without further evidence, either from the defendant himself or Lord Aldborough, as to what the defendant stated to his lordship with reference to this property, or what arrangement was then made between them. Whatever took place, the defendant has given no explanation as to the circumstances that led to the making of the proposal on his own behalf, on the 18th September 1859, to become the purchaser for himself.
At this time he certainly was “master of the situation.” He was agent of Lord Aldborough, and bound by his duty to enforce payment of the rents and fines; he was agent for the annuitant, who was to be paid out of the surplus profits after rent and fines were paid; he had undertaken to the plaintiff to do all in his power to get Lord Aldborough to purchase the interest she had power to sell; and, in his new capacity of proposed purchaser for himself, he was interested in magnifying the claims of Lord Aldborough against the property, and other circumstances whereby its value to Mrs King and her son would be depreciated. In addition, he was agent and owner in expectancy of the part held under Mr Darcy. The circumstances in the case were therefore such that the defendant was specially bound to show that in dealing with his principal for this benefit to himself, he had taken care to provide that, as against such a combination of interested and adverse influences, she had the full protection of some competent and disinterested adviser in the transaction. The plaintiff, moreover, was not absolute owner, but merely tenant for life, with a power of sale, limited and guarded in its terms, she was a trustee for her infant son, and therefore in a peculiar degree required the protection of adequate independent advice, which a Court of Equity inexorably requires in all this class of transactions between parties in a relation of confidence, and when one of them is exposed to influence capable of being exerted by the other.
On the 18th September 1859, the defendant writes his letter of proposal in the following terms:
“BALTINGLASS,
September 18 1859.
DEAR MRS KING, – I hereby propose to purchase all right, title, and interest possessed by you and Mrs Field, as representatives of the late Captain King, in the several holdings you have in the town of Baltinglass, subject to the renewal fines due thereon, and for which I agree to pay, on their being properly conveyed to me, the sum of £300, in manner as follows – that is to say, £50 in cash on the completion of the conveyance, and £50 on the 1st of August following, and an insurance for £200 on life of Mrs Field, with security for the amount of premium payable on same, together with a rent-charge of £20 a-year to Mrs Field for her own life, the cost of the deed of conveyance to be paid by me, and also the cost of releasing the deeds and leases connected with the property from the custody of William Russell as far as the sum of £25; any more charges for this purpose to be borne by Mrs King.
I am, dear Madam, yours truly,
“ROBERT HENRY ANDERSON.”
On the following day the acceptance of this by the plaintiff was written, at his direction, at the residence of the plaintiff:
19th September 1859.
RH ANDERSON, ESQ
DEAR SIR, – I accept your offer dated 18th September 1859, of £300 payable as proposed, and a rent-charge of £20 a-year to Mrs Field for her life, for all my interest in and several holdings I own as representative of the late Samuel B King, situate in the town of Baltinglass.
AH KING.”
No adviser intervened for her guidance and protection.
I cannot but observe that in the deed of 11th of November 1859, which the defendant got some one in the office of Mr Scott (Lord Aldborough’s solicitor) to prepare, the recital of the alleged power of sale in the will of the late Mr King is a paraphrase that omits the two material restrictions – that the sale should be for the best price that could be had; and that the purchase money should be invested in Government or landed security for the benefit of the devisees of the property. The execution of the deed by the plaintiff is attested by two of the clerks in Mr Scott’s office. Mr Scott does not appear to have been present on the occasion, or to have taken any ostensible part in the transaction at any stage of it. As to the constructive or imaginary receipt of the £300, £100 was to be paid afterwards by two instalments; and the remaining £200 was to be secured by a policy of insurance for that amount on the life of Mrs Field, the annuitant on the property. The £100 was obviously designed for the present use of the plaintiff herself, as appears from the letters of 9th November 1859, and the 24th January following. It is not clear that the whole of it was paid. The transaction in all its parts is so glaring a violation of those obligations which it is emphatically the duty of a Court of Equity to uphold and enforce, and it may be said “res ipsa loquitur.”
In the case of Rhodes v Bate LR 1 Ch App 252, which was cited by Mr Holmes in his very able and convincing argument, Lord Justice Turner states in emphatic and authoritative terms the great established principle of a Court of Equity, that “persons standing in a confidential relation towards others cannot entitle themselves to hold benefits, which those others may have conferred upon them, unless they can show to the satisfaction of the Court, that the persons by whom the benefits have been conferred had competent and independent advice in conferring them. This, in my opinion” (he says), “is a settled general principle of the Court, and I do not think that either the age or capacity of the person conferring the benefit, or the nature of the benefit conferred, affects this principle.”
In that case there was nothing to induce the Court to hold that the defendant had not acted with honesty of purpose, and Lord Justice Knight Bruce stated that at the conclusion of the argument his impression was altogether against the plaintiff, but he acknowledged that he ultimately came round to the view of Lord Justice Turner, and both agreed that the case was to be governed by the great principle and rule of the Court, that the person conferring the benefit on one standing in the relation of confidence and influence should have competent and independent advice, without which the transaction could not stand in a Court of Equity. This seems to me to be altogether conclusive, and makes it unnecessary, because it is irrelevant, to go into the consideration of what was the measure of the plaintiff’s intelligence, the extent of her knowledge as to the property, the intrinsic prudence of the bargain itself as to value, capability, or otherwise. A general rule of a court of equity is said by Lord Hardwicke to be part of the general law of the realm.
I observe that, in a letter of September 27th 1859, to Mrs Fraser, who was made a party to the conveyance of November 1859, for the purpose of releasing certain claims she was supposed to have had against the premises, the defendant seeks to explain and defend his then recent dealing with the plaintiff, and concludes by saying: “I don’t think Mrs King has proceeded so far in this matter solely on her own judgment; I believe she acts under the advice of her solicitor and guardian, Mr Burroughs.” Mrs Frazer’s letter is not in evidence.
In his answer to the original bill (par 18), the defendant says: “I do not recollect and cannot say, that I had any communication with any professional man acting on behalf of the plaintiff previously to the acceptance of the proposal; but in the course of its negotiation I asked the plaintiff what solicitor she would employ, and she asked me who was mine or Lord Aldborough’s solicitor, and I told her Mr Ralph Scott, of Gloucester-street, Dublin, and she replied that she would not desire any body better than Mr Scott. I submitted to said Ralph Scott all the particulars within my power relative to the proposed arrangement, and desired him to carry it out by the proper and necessary conveyance.”
In her affidavit, filed on the 13th of May 1873, the plaintiff says, in paragraph 10:
“When the said contract was made, I had consulted no one as to the advisability of the said sale except the said Robert Henry Anderson; I had no adviser except him and I had no knowledge of the state of the said premises, except what was derived from him.”
In paragraph 13 she says:
“I never knew, or to the best of my knowledge saw, Mr Ralph Scott. I executed the deed of conveyance in the bill mentioned, in what I was informed was his office, but I did not know that he was then present, and I understood at the time he was not present. Two clerks or assistants of his were there. I had never any communication with any solicitor about the said conveyance, and no solicitor advised me, was instructed by me, or acted on my behalf, in reference thereto.”
In the affidavit of the defendant, filed on the 15th of December 1873, he says, in paragraph 3, that although he had heard of the fact of Mr King having made a will he knew nothing of it or of its contents till the contract of sale to him of September 1859, was about being carried out by a regular conveyance; when (he says) “my impression and recollection is, I saw a copy of it in the hands of Mr Scott, the solicitor fixed upon by both parties for completing the sale.” How Mr Scott got this copy we may at least conjecture by referring to the letter of the defendant to the plaintiff, of the 27th of September 1859, in which he says: “I enclose the will, having taken a copy of it.”
In his letter to Mrs Frazer of the same date, in which he explains the terms of the contract in all its particulars, he shows that he was fully aware of the interest that the son of Mrs King had in the purchase-money to be paid on sale of the property under the power. It is in this letter he states his belief that Mrs King had not acted in the transaction solely (sic) on her own judgment, but that she acted under the advice of her solicitor and guardian, Mr Burroughs. No reference is here made to Mr Scott, as the adviser of Mrs King, in the acceptance of the defendant’s proposal, which had taken place before the date of this letter.
Doubtless, Mr Scott, or whoever acted in his office in the preparation of the deed in the following month of November, was furnished by the defendant with a copy of the will, which he had taken, as stated in his letter of the 27th September, when he returned the original to Mrs King. His memory is certainly not tenacious, as is manifest from the several instances in which it has proved to have been at fault. The plaintiff may have been perfectly willing that Mr Scott should be employed to prepare the conveyance; especially as, under the terms of the contract, it was to be at the cost of the defendant. I can find nothing to show more than this, that after the agreement with the defendant had been concluded between them, the plaintiff assented to the suggestion of the defendant that Mr Scott would be a proper person to prepare the instrument of conveyance. The evidence is decisive to show that, in negotiating and concluding the agreement, she had not the independent advice required by the law of the Court, and it was for the defendant to prove satisfactorily, as an essential part of his case, that she had the protection of a competent and independent adviser.
The correspondence in the time of Mr Willans may show that her husband had the opportunity of becoming acquainted with the condition and capabilities of the property in his life-time. When he made his will he could scarcely have believed that the devise of this property was but that of a damnosa hoereditas. Whatever may be the value of this part of the correspondence, it is, in my view of the case, altogether irrelevant to the material issue on which we have to decide, otherwise than as it shows the position of confidence and influence which the defendant was supposed to occupy, and which continued to exist. Taking it then as beyond doubt or question that the onus was on him to prove to the satisfaction of the Court that in the transaction of the purchase he had made a reasonable use of this confidence, especially as to having had the plaintiff protected in the manner required by law, I have no hesitation in saying that he has wholly failed in making out this, his only available defence. Some reliance was placed, in argument, upon alleged laches; and on the circumstance of an outlay upon the property by the defendant, and other dealings with it since the date of the deed of sale to him. I do not find the defence of laches expressly relied on in the pleadings, and I cannot admit that it is of any weight in the case. In the case of Murphy v O’Shea 2 Jo & Lat 422, Sir Edward Sugden decided that, although eleven years had elapsed before the filing of the bill to set aside a deed between principle and agent in that case, the plaintiffs were not barred of relief by laches, if otherwise entitled to it. Where there is no statutory enactment to govern by its authority, or to guide by analogy, the Court must consider the nature and circumstances of the case. In Napier v Staples 1 Moll R 231-2, Sir Anthony Hart says:
“Lapse of time and neglect do not form of themselves a rule, but give to the Judge a power and discretion to be used according to circumstances, and whenever a case arises where the inconvenience to the public administration of justice, or the prejudice to the individual overbalances the allowance of a just claim irregularly brought forward, it must be dealt with accordingly.”
The peculiar circumstances of the present case explain and (reasonably) excuse the forbearance of the plaintiff during the minority of her son; she had never suspected the defendant, in whom she had full confidence; but he must be taken to have known that no acquiescence on her part could bind the rights of her son; and that the property which he (the defendant) had acquired under the deed was bound by a trust, which made his expenditure a matter of risk and speculation. The Court has to consider the equities on both sides, and in upholding and enforcing the beneficial and protective law by which the transaction must be dealt with, care will be taken to avoid injustice.
In the decree provision will be made for repayment of so much of the advances and outlay bona fide made in beneficial expenditure on the property as shall be found to be fairly and justly claimable by the defendant, and also for preventing the disturbance of sub-tenancies created since the purchase.
The Vice-Chancellor has fallen into a mistake somewhat alike to that from which Lord Justice Knight Bruce was saved by conference with Lord Justice Turner, in Rhodes v Bate LR 1 Ch App 252, an authority which I willingly follow. The policy of the law is preventive, and, therefore, prohibits at the source the opportunity for the action of influences which it is sometimes difficult to estimate. It is the wisdom of the law to act upon the maxim, praestat cautela quam medela, and thus to secure protection for those who otherwise might be exposed to imposition and injustice.
The law of the Court for their protection exhibits the expansive power of our system of equity in the application of great fundamental principles to new combinations of fact, and varying circumstances. I am, therefore, of opinion, in which we all concur, that the decision of the Vice-Chancellor must be reversed, and a decree made in favour of the plaintiff, the terms of which will be stated by the Lord Justice of Appeal.
Lawson CS: The facts of this case have been so fully stated by Lord Commissioner Napier, that it is quite unnecessary for me to recapitulate them, but I wish to state my reasons for differing from the view of the Vice-Chancellor. The first question is as to the existence of a fiduciary relation between the plaintiff and defendant. The Vice-Chancellor’s judgment upon that point is very clear and I entirely concur in what he has said upon it. Anderson was, in the language of the letter of the 27th December 1854, “agent for all parties.” As agent for Lord Aldborough he was bound to secure the payment of the renewal fines, and he was in the same position as regards Mr Darcy. He was also agent for Mrs Dorothea Field whose interest it was to see that she got her annuity without thinking about the fines. The Kings on the other hand were interested in keeping down the fines, and the defendant was, in his character of intending purchaser, the man whose interest it was that the fines should be allowed to accumulate in order to depreciate the selling value of the property; he was, finally, the person who was to negotiate with Lord Aldborough for the Kings, and he thus acquired a knowledge of what they would be willing to take for their interest. Standing then in this position he buys from Mrs King and I may say from Mrs Dorothea Field also. The onus is thrown on him of proving that all was right and honest in the transaction. In the language so often used, “If persons engage in such transactions, they must not complain if they are called upon to show that they are righteous.” In my judgment, the defendant Anderson has entirely failed to sustain the burden of proof. It has been laid down that a person occupying his position must preserve the evidence to shew that in a transaction of this nature all was right. If there were nothing else, the absence of an independent adviser to guide the plaintiff would be fatal to the defendant’s case on the authority of Rhodes v Bate LR 1 Ch App 252. The lady was kept in ignorance of the fact that she was committing a breach of trust. Would not an independent solicitor have told her that the very thing she could not do was to sell the property for her own benefit, and if she had been possessed of that information, would not the whole motive that was urging her to sell have been destroyed? The defendant was aware of this, for he stated in one of his letters that the son was alone interested in the £300 purchase money. This case then stands on higher ground than mere inadequacy of consideration, though the consideration was wholly inadequate. For what was it? That Anderson should pay £480 for renewal fines. What would any person who had not a personal interest in securing the payment of those fines, as Anderson had, have advised her to do? Why surely not to lower the value of those lots which were worth something by throwing in those portions of the property on which an enormous sum had accrued due for renewal fines. There is nothing to show that Anderson ever let this lady know that he was entitled to Mr D’Arcy’s property in the premises. He should moreover have communicated to Lord Aldborough Mrs King’s offers to sell her interest, and I am not satisfied that he ever made any such communication. There is no documentary evidence as to his having done so, and if the communication was made verbally, Lord Aldborough might have proved it. All these considerations are important as showing the appellant’s helpless position, consequent on her not having had an independent adviser. It is plain that if she had enjoyed that advantage she never would have entered into this contract. Upon these grounds, and having regard to the fact that the onus probandi is thrown upon the respondent, and that not only has he failed to sustain it, but that on the contrary the case is covered with the gravest suspicion as regards him. I think the decision of the Vice-Chancellor should be reversed.
Christian LJ concurred.
The following is the curial portion of their Lordships’ order:
“This Court doth order that the decretal order of the Right Hon The Vice-Chancellor, bearing date the 16th day of February 1874, be and the same is hereby reversed. And this Court doth order that the deed of the 11th day of Nov 1859, and the agreement proposed in the letter of the 18th Sept 1859, and accepted by the plaintiff, as in the pleadings mentioned, be, and the same are hereby, set aside. And it is further ordered that the same be forthwith respectively given up to the Registrar of this Court to be cancelled. And let the following accounts and inquiries be taken and made at the Vice-Chancellor’s Chambers, viz: No 1. An account of the sums paid by the defendant Robert Henry Anderson to the plaintiff on foot of the purchase money in said deed and agreement mentioned, with interest from the time of such payments respectively at the rate of five pounds per cent. per annum. No 2. An account of the sums expended by the said defendant, since the date of said agreement, in permanent and unexhausted improvements on the premises of the bill mentioned. No 3. An account of the sums paid by the said defendant, on account of the annuity of £20, to the defendant Mrs Dorothea Ellen Field, or for head rents or renewal fines (if any), or of sums necessarily and properly incurred in procuring fee-farm grants or grants of any portion of said premises. No 4. An account of the sums (if any) which were in said defendant’s hands at the date of the said agreement, and which were properly applicable to any of the aforesaid purposes; also of the rents and profits of the said premises received by the said defendant since the date of the said agreement. And it is further ordered that the sums which shall be found payable by and to the parties respectively upon foot of the said accounts and inquiries he set off against each other, and a balance struck; and in case such balance shall be found due from the plaintiff, it is ordered that the plaintiff be at liberty to retain the same in liquidation of the costs hereinafter directed. And it is further ordered that the defendant Roben Henry Anderson do execute a re-conveyance of the said premises to the defendant Dorothea Ellen Field upon the trusts of the deed of the 23rd of August 1843, such re-conveyance to be settled by the Judge in Chamber, in case the parties differ with respect thereto, the plaintiff returning to the said Robert Henry Anderson, and, if necessary, reassigning, the policy of insurance of the life of the defendant Dorothea Ellen Field, in the pleadings mentioned, and giving up to the Registrar of this Court, to be cancelled, the bond bearing the date the 22nd day of Nov 1859, passed by the said defendant for securing payment of the premiums on said policy. This decree, and the re-conveyance hereby directed, to be without prejudice to any leases or lettings bona fide made by the said defendant Robert Henry Anderson, since the execution of the said deed of the 11th Nov. 1859, at fair letting value, and which the said plaintiff, by her Counsel in open Court, undertakes not to disturb. And it is further ordered that the defendant Robert Henry Anderson do pay to the plaintiff, Alicia Hobart King, otherwise Field, her costs down to and including the hearing in the Court of the Vice-Chancellor, when taxed and ascertained; and that the said plaintiff and defendant to abide their own costs of this appeal matter; and that the deposit of £10, lodged with the Registrar, to be handed back to the said plaintiff, Alicia Hobart King, otherwise Field, or to Messrs Hugh and William Stanley, or either of them, her Solicitors. And this Court doth remit this cause to the Court of the Vice-Chancellor; and doth reserve the further consideration of said cause to said last-mentioned Court, with liberty to the parties to apply therein as occasion may require.”
Re Harris’ Estate
[1907] 1 IR 32; 41 ILTR 18 (Court of Appeal)
Sir Samuel Walker C: The question in this case is whether the well-known rule established in Howe v Lord Dartmouth 7 Vest 137 applies to the bequest in this will, or whether the case is taken out of the rule by an intention to enjoy the property in specie being shown by the language of the will. The general rule is, that where there is a general residuary bequest of personal estate, including chattels real, to be enjoyed by persons in succession, the Court puts upon the bequest the interpretation that the persons indicated are to enjoy the same thing in succession, and converts the property as the only means of giving effect to that intention.
It is said, in at least one case, that a slight indication of intention to the contrary will be sufficient, but I adopt the rule laid down by James LJ, in Macdonald v Irvine 8 Ch D 101, that the rule in Howe v Lord Dartmouth 7 Ves 137 must be applied unless, upon the fair construction of the will, you find a sufficient indication of intention that it is not to be applied, and that the burden in every case is upon the person who says the rule of the Court ought not to be applied in the particular case.
There are numerous cases in which the burden was held to be discharged by the language of the particular will in question, and two especially were referred to by Mr Matheson: Collins v Collins ibid 703 and Pickering v Pickering 2 Myl & K 699, which he said were undistinguishable from the present.
The first consideration is the language of the will we have to construe: (His Lordship referred to the terms of the will). The leading subject dealt with all through is “the rest and remainder of my property of every kind.” It is out of that the annuity is given, and what is given to the husband for life in the first instance is “the remainder of the income to be derived from my said property or the investments representing the same”; this clause is more consistent with the interpretation “investments for the time being,” but the meaning is not very clear, and the same remaining income, after his decease, is given to the two nieces. It is out of the same property the £4,000 is to be raised if it becomes payable; and, subject to the annuity and the husband’s life estate, the appellant gets “one-half of my said property” absolutely, and the other two nieces the remaining half absolutely. Each of the devisees gets the same subject described in the same words, one getting it for life and the others in succession.
Prima facie, a clearer case for the application of the rule in Howe v Lord Dartmouth 7 Ves 137 cannot be stated.
Let us now see what were the bequests in the two cases mainly relied on. In Collins v Collins 2 Myl & K 703 the bequest was: “I give to my wife, Sarah Collins, all and every part of my property in every shape, and without any reserve, and in whatsoever manner it is situated, for her natural life; and at her death the property is left to be divided in the following manner.” The Master of the Rolls gives no reasons for his conclusions, but the argument shows that the points relied on were the words, in the wife’s case, “without any reserve,” and the language of the direction for the division as showing there was to be no conversion till after the decease of the wife.
In Pickering v Pickering 2 Beav 31; 4 Myl & Cr 289 the bequest was as follows:
“I give and bequeath to my said wife all the interest, rents, dividends, annual produce and profits, use and enjoyment of all my estate and effects whatsoever, real and personal, for and during the term of her natural life.”
It appears the executors paid the income to the wife as if she was entitled in specie for thirty years, which influenced Lord Cottenham in his decision, but he relies on – (1) Collins v Collins 2 Myl & K 703 in the direction to divide after the death; (2) the gift of the rents, dividends, annual produce and profits, during her life; (3) the language of the specific gift of the chattels; and, lastly, the gift, after her life, of “the rest and residue of the estate,” which was not the rest and residue at the testator’s death. The judgment of Lord Langdale proceeded mainly upon the language of the gift to the wife herself.
On the other hand, the case of Macdonald v Irvine 8 Ch D 101 seems a very strong authority in favour of the appellant: (His Lordship referred to the terms of the will there in question, and continued). Thesiger LJ, there said:
“I come to the consideration whether there can be gathered from the will and codicil in the present case any expression of intention that the property in question is to be enjoyed in specie. In almost all, if not all, the cases which have been cited in argument, where such an intention was found to exist, we find either words, in their natural and literal sense, importing use and enjoyment of the property in the state in which the testator left it at his death, or directions contained in the will as to the conversion of the property which were inconsistent with a conversion by the Court taking place upon the death of the testator.”
On those grounds he distinguished Collins v Collins 2 Myl & K 703 and Pickering v Pickering 2 Beav 34; 4 Myl & Cr 289. Baggallay LJ, who dissented, rested his judgment upon the language of the codicil, upon which, no doubt, there was much to be said.
The case of In re Game (1897) 1 Ch 881 is very like the present. There the testator, after certain specific bequests, directed that the rents and profits of his residuary real and personal estate which he might be possessed of or entitled to at the time of his decease, should be paid to his wife for life, for her own use and benefit, and after her death, he gave his residuary estate to others in succession, subject to certain annuities, and conferred upon the annuitants a power of distress. Stirling LJ, there held that neither the use of the word “rents,” nor the power of distress conferred on the annuitants, was enough to exclude the rule in Howe v Lord Dartmouth 7 Ves 137.
There may be a difficulty in reconciling all the cases cited, and an element of difference may be noted in some of them, as in Morgan v Morgan 14 Beav 72, by the direction as to varying investments.
But the case before the Court appears to me a typical one for applying the rule in Howe v Lord Dartmouth 7 Ves 137. What is dealt with, in the first instance, is “the rest and remainder of my property of every kind.” It is all through, both as regards the tenant for life and those taking in remainder, spoken of as “my said property.” There is no postponing of conversion beyond what is implied in every gift to a tenant for life and remaindermen. According to the argument, if three-fourths of the property consisted of wasting securities, there could be no conversion. Further, the £4,000 could clearly be raised out of the house property as well as the other.
Upon the whole, I see no sufficient indication of intention to prevent the application of the rule of law in Howe v Lord Dartmouth 7 Ves 137, and the order of Mr Justice Barton must be discharged.
FitzGibbon LJ: Not alone on its facts, but also on the language of Lord Cottenham, Pickering v Pickering 2 Beav 31; 4 Myl & Cr 289 is a good illustration of the difficulty that arises in cases such as this; and it goes far to show that the present is a typical case for acting on Howe v Lord Dartmouth 7 Ves 137, and holding that there is no evidence of an intention of the part of the testatrix that the property should be enjoyed in specie by the life-tenant, sufficient to prevent the duty, and the normal course, of realising and investing capital of a wasting nature.
In Pickering’s Case 3 Beav 31; 4 Myl & Cr 289 a son and mother had for thirty years acted on the principle that the mother was entitled to enjoy the property in specie, and, subsequently, in consequence of the failure of other property, it occurred to the son to get her to state an account on the opposite basis. After the mother’s death, proceedings were commenced to set aside this account, and Lord Cottenham held that the son was not entitled to maintain it as a settled account. The question as to conversion then arose upon the will, and the learned Judge held that, to avoid conversion, an affirmative intention must be found on the face of the will, or from the circumstances, that the testator’s property should be enjoyed by those to whom he gave limited interests in it, in the same condition in which he left it. It seems to be the fashion to go into small considerations in arriving at a conclusion. In Pickering’s Case 2 Beav 31; 4 Myl & Cr 289 the enumeration of the classes or property, and the different terms employed to describe the way in which it was to be enjoyed, would have gone far to lead me to the conclusion that the testator looked forward to the wife’s enjoying what he left behind him, by using it in the same way in which he would himself have used it if he were alive. He speaks of “interest, rents dividends, annual produce and profits, use and enjoyment, of all my estate and effects whatsoever, real and personal, for and during the term of her natural life.” The will here, on the contrary, speaks of “the remainder of the income to be derived from all my said property, or the investments representing the same.” This actually contemplates conversion and reinvestment, and amalgamation of all the assets into one cash-producing fund. Again, the direction that, in certain events, the annuity should cease, and that the large sum of £4000 should be raised “out of all my said property,” although contingent, shows that a state of facts was contemplated in which money would have to be raised out of the leaseholds as well as out of the rest of the property; but I can see no indication of any desire that a tenant for life, or other limited beneficiary, should keep wasting property in specie, so as to give him a more profitable enjoyment of it than those coming after him should have. The fact that the terms of years had only thirty and forty years to run, and that the ultimate devise of the capital might, in certain events, not come into full operation until the youngest child of Espine Ward attained the age of twenty-one years, shows that certain objects of the testatrix’s bounty would be placed at grave disadvantage from the wasting of the leasehold property, if conversion did not take place.
I regard this as a case not so much of the presumption of law as of the burden of proof, and I cannot find sufficient indication of intention that the property shall be enjoyed in specie, as distinct from its being all turned into permanent capital and enjoyed en masse, and, therefore, I am of opinion that Howe v Lord Dartmouth 7 Ves 137 applies, and that the appeal must be allowed.
Holmes LJ: In a case of this nature it must be a matter of guess-work what the testator or testatrix would have directed if the particular question under discussion before the Court had been brought to his or her attention at the time the will was made.
I see certain reasons in this case for thinking that in all probability, if the matter had been before the testatrix, she would have directed an immediate conversion. On the other hand, reasons might be suggested why she would have directed a postponement of the conversion until the death of the tenant for life. I have no right to form any opinion as between these two probabilities. It is important therefore to follow a rule of law if we have one; and the rule of law in Howe v Earl of Dartmouth 7 Ves 137 is one which is clear and definite. Prima facie, in cases of this nature there ought to be a conversion; but if any intention can be gathered from the will (and in many cases-a slight indication of intention is sufficient) that conversion is to be postponed, and that the property is to be enjoyed in specie during the lifetime of the tenant for life, that intention will prevail. I have carefully considered the provisions of this will, and I can find not the smallest evidence of such intention; in fact, the words used are the most general words that could be used in a gift of residue. (His Lordship referred to the will.)
If the rule be not applied in this case, I can hardly conceive any case in which it ought to be applied. It might as well be struck out as a rule of law altogether in favour of a rule that in every case, save where there is an actual direction for conversion, the property should be enjoyed in specie.
Re Abbott
[1934] IR 189 (High Court)
Meredith J: The case has been very well opened by Mr Matheson and very ably argued by the other counsel, who have given me the greatest assistance.
After the fullest consideration I have come back to my first impression. The testator provides for the payment of an annuity to his wife and provides for his daughter and for his grandchildren. He directs the income of his property to be divided between his daughter and his grandchildren for their lives, and then makes further provision as to what is to happen in the event of any of his grandchildren dying without leaving issue, or in the event of any of the beneficiaries doing certain acts. There is then a direction under which the property is to go, under what amounts to a general residuary devise and bequest, to be enjoyed by different persons in succession, and therefore the rule in Howe v Earl of Dartmouth 7 Ves 137 has to be considered.
That case was decided by Lord Eldon, and from circumstances, such as are present in this case, he inferred that the idea of the testator was that a fund should be enjoyed by the tenant for life, and subsequent to that life interest, the remainderman should enjoy the same fund, and that the only way of ensuring that was to invest the fund in securities of a permanent and non-wasting nature. The rule applies in many cases, but there are a number of exceptions where it does not apply, for example, where there is an intention indicated by the testator himself that the property shall be, or may be, enjoyed by the tenant for life, in the exact condition in which he left it.
I was referred to two very useful cases: In re Pitcairn [1896] 2 Ch 199 and Alcock v Sloper 2 My & K 699. The present case involves both the considerations involved in those cases. The testator gives his trustees power to sell and dispose of any portion of his property at their discretion. That phrase in the will would be meaningless unless the trustees had power to retain the property if they thought it advisable to do so. It is made still more clear when the words are contrasted with the words further down in the will where the testator directs “that all my said estate shall be sold.” That is a subsequent event and shows that the testator contemplates the possibility of there being no realisation unless and until the contingency referred to arises on the happening of which the entire property is to be sold. I therefore consider that the trustees had power to retain the property in its original state and to pay the income of the property in that state to the tenants for life. This view is reinforced by the words in the codicil which, to borrow the phrase of Sir John Leach, leaves the trustees “in a passive condition.” The testator contemplated the trustees retaining the bulk of the property and must be presumed to have intended the tenants for life to enjoy the property in specie.
For those reasons I consider that the rule in Howe v Earl of Dartmouth 7 Ves 137 as to conversion is excluded by the language of the testator himself.
Stewart v Kingsale
[1902] 1 IR 196 (
Porter MR: The recognised principle is that laid down by Vice-Chancellor James in Cox v Cox LR 8 Eq 343. He says, at p 344 of the report:
“The true principle in all these cases is, that neither the tenant for life nor the remainderman is to gain an advantage over the other – neither is to suffer more damage in proportion to his estate and interest than the other suffers – from the default of the obligor. The two must share the loss in the same way as they would have shared it had it occurred when they first became entitled in possession to the fund.”
In that case the tenant for life had received nothing out of the investment, so that the question arose in its simplest form, uncomplicated by what I have to determine here, viz how are the rights to be adjusted when the tenant for life has received interest for a part of the period during which it was payable?
Turner v Newport 2 Ph 14, a decision of Lord Cottenham, was not cited to Lord Romilly in Re Grabowski LR 6 Eq 12; and, though the facts are different and somewhat more complicated, entirely supports the principle of Vice-Chancellor James’ conclusion in Cox v Cox LR 8 Eq 343. Lord Cottenham says:
“This case, though certainly peculiar in its circumstances, appears to me to be governed by one of the most ordinary principles in the administration of assets. A portion of the testatrix’s estate consisted of a debt. The debtor’s estate was insolvent, and, for several years after the death of the testatrix, nothing was recovered, either in the shape of principal or interest. At length a sum is realized; and then, when the question arises what part of it is, as between the parties, to be considered as principal, the tenant for life is told, that, because the gross sum recovered is less than the amount of the original debt, she is to have nothing. Such a proposition is contrary to the plainest principles of justice, particularly when it is considered that the Court itself has restrained her from getting in the debt sooner, in the hope that more might be ultimately recovered. But the other proposition is equally untenable – that she is entitled to the whole of what has been recovered in respect of interest since the testatrix’s death. For, besides that there is nothing in the will to entitle the tenant for life to the interest of the residue in its actual state of investment at the death of the testatrix, the circumstances of the estate out of which this debt was to be paid may have been such as to make such a proposition doubly unfair towards the parties interested in the capital. Suppose, for instance, that if, while interest was accruing upon the debts, the fund for payment of them was producing no interest at all, or a lower rate of interest, it is obvious that the longer the recovery of the debts was protracted, the more those parties would be prejudiced; for the proportion of the fund which would be ultimately attributable to the capital of the debts would be continually diminishing. I think, therefore, that the proper course is that suggested by Mr Parry, viz to ascertain what the bond would have realized if the debtor’s had been administered at the expiration of a year after the testatrix’s death, and to allow the tenant for life interest at 4 per cent. on that amount.”
Innes v Mitchell 1 Ph 710, decided by Lord Lyndhurst, and in substance afterwards adopted with variation by Lord Cottenham, appears to have been argued before, and decided some time after Turner v Newport 2 Ph 14, although reported in the preceding volume of Phillips. In some respects it bears a close resemblance to that now before me.
In that case William Innes, by his will, gave to his three natural daughters, Ann, Sophia, and Heriot, the yearly sum of £300 among them, and to the longest liver; and he directed that “a sufficient sum should be invested in the public funds in the names of his executors as trustees for the three sisters, who were to divide the £300 equally between them while all of them were alive, and to the longest liver of them the whole.” By a codicil the testator gave and bequeathed “the £300 a year to be equally divided between the sisters during their lives, and to the longest liver, when the stock which produces that sum may then be sold for the use of such longest liver and her heirs.” He appointed his three daughters residuary legatees. After the death of the testator a sum of stock was set apart by the executors to answer the annuity of £300. The annuity was regularly paid to the three daughters until 1800, when Sophia died, after which it was regularly paid in equal moieties to the two survivors until 1816, when the surviving executor of the will died insolvent, having sold out the stock which had been set apart to answer the annuities, in consequence of which, there being then no other part of the testator’s estate available for the payment of the annuities, they ceased to be paid. After the deaths of the other two daughters of the testator, a sum of money, forming part of his residuary estate, but of less amount than the original fund set apart, became available. It was held that this sum was to be apportioned rateable between the arrears due to the two surviving daughters respectively at the time of the death of that one of them who died first and the sum originally set apart, and which belonged to the last survivor. Thus, the estate of the first of the three sisters who died is left out of account, because she was paid all she was entitled to up to her death in 1800.
The second to die was Heriot (Stewart). She lived till 1837; but her annuity was not paid after 1816, so that £3150 for twenty-one years arrears was then due to her estate. She had, however, received £150 each year from 1800 till 1816, making, I suppose, £2400 or thereabouts.
The last to die was Mrs Mitchell (Ann), and the arrears due to her were stated to be upwards of £5000; but this must have included a claim to arrears after Mrs Stewart’s death, a claim which was not in the first instance allowed, because on Mrs Stewart’s death Ann Mitchell became entitled under the will to the principal fund, though in another view she might have claimed the whole annuity instead. It was in this latter particular that Lord Cottenham varied the decree of his predecessor.
The point to be observed is that it never occurred to Lord Lyndhurst, or apparently to Lord Cottenham, to take into account the payments of the annuities regularly made down to 1816. The arrears only are dealt with.
So much for the older cases.
More recently the same question has been considered several times, notably in Re Grabowski LR 6 Eq 12; Cox v Cox LR 8 Eq 343; Re Moore 54 LJ Ch 432; Re Foster 45 Ch D 629, and some later cases.
Re Grabowski (1866) LR 6 Eq 12 may be briefly dismissed, as it has been overruled, or at least has never been followed or applied, and is inconsistent with all the other cases on the subject. Lord Romilly, MR, there held that the whole of the fund recovered should go to replace capital, regardless of the arrears of interest; but this view was manifestly wrong.
Cox v Cox (1869) LR 8 Eq 343 in effect overruled Re Grabowski LR 6 Eq 12. In Cox v Cox LR 8 Eq 343 by marriage settlement George Cox covenanted to pay to trustees, three months after his death, the sum of £6000, with interest from date of death till payment at 5 per cent. He also executed his bond conditioned to be void on payment of like amount with interest. The trusts of the money by the settlement were declared to be for the widow for life, with remainder (in the events that happened) for the benefit of the children of the marriage. Some years after Mr Cox’s death assets were recovered which were insufficient to fulfil the covenant and bond. It was held that a calculation must be made of what principal, if invested at the date of the obligor’s death at 4 per cent interest, would amount, with interest to the fund recovered. Interest at 4 per cent on this principal was to go to the tenant for life, and the rest was to be treated as capital. In that case the tenant for life had not received anything, so that no question of giving credits arose, save as far as it may be involved in the statement of the principle on which Sir WM James proceeded, as embodied in the language I have already quoted; and that language is, on this point, ambiguous, since the rights of the tenant for life under the settlement may mean either his rights as far as from the date of the settlement, or his rights as existing when the loss of capital occurred.
In Re Moore (1885) 54 LJ Ch 432. decided by Pearson J, it was held that the fund realized was divisible between tenant for life and remainderman in the proportions in which the arrears of interest bore to the entire original principal money, without allowing interest on either. This in effect follows Cox v Cox LR 8 Eq 343 unless the words used in the latter case are construed to apply to the whole original interest under the settlement.
Then comes Re Foster (1890) 45 Ch D 629, in which Mr Justice Kay referred to Maclaren v Stainton LR 11 Eq 382 and Re Tinkler’s Estate LR 90 Eq 456, neither of which greatly affects the present question, and then proceeded to enunciate a new rule or formula, materially different from anything to be discovered in the earlier decisions. In that case Thomas Foster, by will, gave his residuary estate to trustees upon trust for sale and to pay the income of the proceeds to his widow for life, with remainder to certain persons absolutely. After Mr Foster’s death, the trustees invested £7535, part of the residuary estate, on mortgage or freehold property at 5 per cent. The trustees afterwards entered into possession of the mortgaged property and paid the rents to the widow, as tenant for life until her death, but such rents were insufficient to keep down the interest; the total deficiency of interest at the date of the widow’s death amounting to £3400. Shortly after her death the trustees sold the mortgaged property. The sale realized £7005 only, being less than the principal mortgage money. In giving judgment Kay J, said:
“I am of opinion that the available fund should be apportioned between the tenant for life and the remaindermen, upon the basis of the following calculation. Treat the capital moneys which have been produced by the sale and all the moneys received by the tenant for life as the fund recovered from the mortgagees. Add them together. Then divide the total sum in this way: Estimate how much the tenant for life would have received if the mortgage interest had been regularly paid, deducting income tax. Then take the capital sum which the remaindermen would be entitled to on the supposition that the capital of the mortgage debt had been fully paid. Then divide the total between the tenant for life and the remaindermen in the proportion of these two amounts which each ought to have received; and in making that division the tenant for life should give credit for what she has actually received. If the sale did not take place until a little while after her death, then the remainderman ought to be credited with interest during that time. For the purpose of calculation they are entitled to receive the whole amount, together with interest at 5 per cent per annum from the death of the tenant for life. This would be a little addition to the sum which the remaindermen ought to receive. Then it will be the sum actually recovered by the tenant for life and the remaindermen. The total will be divisible between them – the remaindermen and the tenant for life – each taking that proportion. The tenant for life must give credit for what she has actually received.”
It will be observed that the learned Judge does not profess to give any authority for adopting this basis of calculation, nor any reason why it should be adopted in lieu of that previously existing, but leaves it to stand or fall on its own inherent merits. Cox v Cox LR 8 Eq 343 and Re Moore 54 LJ Ch 432 were however both cited in argument. Re Foster 45 Ch D 629 was followed with possibly a modification by Farwell J, in Re Bird [1901] 1 Ch 916. In that case Farwell J, says: “The question I have to answer is, how the loss caused by the breach of trust is to be borne. The authorities are in a perplexing condition, and I am unable to reconcile the decision of Pearson J, in In re Moore 54 LJ Ch 432 with that of Kay J, in In re Foster 45 Ch D 629. The present case is distinguishable from both those authorities, as in neither of them was the loss caused by a breach of trust.” He then quotes the principle stated by James, V-C, in Cox v Cox LR 8 Eq 343, and says “Applying this principle, I have first to ascertain what the fund for division ought to be on the assumption that the sale and wrongful investment never took place. In that case there would have been £10,021 Consols for division, and the tenant for life would have received the interest on those Consols down to her death. As a matter of fact, she received altogether the sum of £4066 in respect of the income of the wrongful investment. She was in no way responsible for, or indeed cognisant of, the breach of trust, and I could not order her executor to refund any portion of this income. But I am dealing with a case of adjustment of a loss as between tenant for life and remainderman, and so long as any funds are available for that purpose I must so apportion them as to throw the loss on income and capital rateably. The proper method of doing this is to ascertain the total amount of the dividends on £10,021 Consols that the tenant for life would have received if the sale and wrongful investment had not been made, and also to ascertain the value of £10.021 Consols at her death, the proper time for distributing the fund. This will show the amounts that ought to have been available for income and capital respectively. On the other hand, the fund in Court, plus the £4066 income actually received, minus accretions since the death of the tenant for life, which accretions belong to the remainderman, gives the aggregate amount actually produced by the wrongful investment up to the death of the tenant for life.
“In order to throw the loss on income and capital rateably, this aggregate must be divided between the estate of the tenant for life and the remainderman, according to the rule in In re Foster 45 Ch D 629, ie in the proportion which the total amount of dividends that the tenant for life would have received on the £10,021 Consols from the date of the wrongful investment to her death, bears to the value of £10,021 Consols at her death, her executor giving credit for the £4066 actually received, but not being liable to refund any over payment for the reason above stated.
Whether this is the proper mode of apportionment in a case where the loss has not arisen from a breach of trust is not for me to determine. There was a breach of trust in the present case, and I must restore the status quo as far as the funds available will permit.”
When the learned Judge explains that the actual decision does not extend beyond cases of breach of trust, he does not suggest any reason why it should not, if correct, apply to all cases of loss of trust funds, and I confess I do not see any reason founded upon principle why it should be so restricted. In In re Foster 45 Ch D 629 there was no breach of trust; at least, none is mentioned or suggested in the report.
In two other cases, of which only brief notices are to be found in the Weekly Notes, and there only, Re Barker WN 1897, 154 and Lyon v Mitchell WN 1899, 27, Stirling J, and North J, respectively followed Re Moore 54 LJ Ch 432, and not Re Foster 45 Ch D 629; and in the last case on the subject, Re Alston [1901] 2 Ch 584, Kekewich J, in a reasoned judgment followed Re Moore 54 LJ Ch 432. He says (p 589 of the report):
“A sum has been realized which is not sufficient to pay the principal and arrears of interest. The result is that it must be ascertained in some way what is the fair division between those who are entitled to interest and have not received it in full, and those who are entitled to the capital and will not receive it in full. It seems to me that the simplest and most logical way of dealing with that is to apportion the amount which you have actually got between the two estates which are beneficially interested in that amount – the estate of the tenant for life, or successive tenants for life, as in this case, on the one hand, and the estate of the remainderman on the other hand. The real question is what is due to each at the time of the realisation. Of course, if a tenant for life has received money he must give credit for that; but what you have to ascertain is what is due at the date you recover the money. That view, as I understand it, agrees with the decision of Pearson J, in In re Moore 54 LJ Ch 432. It does depart from the decision of Kay J, in In re Foster 45 Ch D 629, but the explanation of that decision may be that it is one only to be applied to the peculiar circumstances, and in the case of In re Barker WN 1897 154, Stirling J, appears to have intimated an opinion that the apportionment in In re Foster 45 Ch D 629 was intended to be confined to the case of a mortgagee in possession. That distinction does not altogether commend itself to my mind. In the present case the amount which has been recovered must be apportioned between capital and income in proportion to the amounts due at the date when it was recovered in respect of arrears of interest and in respect of principal. As between the successive tenants for life, and the amount attributed to interest will be apportioned in proportion to the arrears due to them respectively.”
The authorities are therefore, it must be confessed, in a somewhat confused state. I should, perhaps, also mentioned Ancketill’s Estate 27 LR Ir 331 in this country, in which Monroe J, followed Re Moore 54 LJ Ch 432; but Re Foster 45 Ch D 629 was not cited, and, perhaps, from the dates may not have been reported at the time, not was the precise question here involved discussed.
Conceiving myself, therefore, to be at liberty to act as may seem most just in the matter, I have to decide between Re Moore 54 LJ Ch 432, and Re Foster 45 Ch D 629; and I unhesitatingly prefer the former.
A tenant for life of a fund which becomes diminished by means of a breach of trust (to which he is not a party), or by the bankruptcy of a debtor, or by fall in value of the securities on which the trust money is invested, may have received the income of the fund before any such calamity for a long series of years. The amount of income so enjoyed may equal or largely exceed any sum which would be coming to him, on any equitable calculation, out of the remnant of the fund. In either case he will, under the decision of Re Foster 45 Ch D 629, receive nothing. Yet the payment of the income which has been received by him has in no way caused the loss or diminished the fund to which the remainderman is entitled. The diminution is caused by an act which wrongs both remainderman and tenant for life as from its date. Before its occurrence the income received was rightfully received. Each payment of income or interest belonged to the tenant for life. If withheld, he could have enforced each and every payment by regular process of law; and in no conceivable event could it be recovered back from him in the absence of fraud or the like.
Further, the calculation adopted in Re Foster 45 Ch D 629 is incapable of being applied in all cases so as always to carry out the principle it was designed to effectuate. Admittedly, payments of income regularly made before the loss cannot be recalled. Some of the cases state this in terms, and it is clear that it must be so, once it is shown that the payments were at the time in accordance with the trust.
Take, then, the case in which the tenant for life has received more than would be his on the principle of bringing past payments into the account. The remainderman then will receive less, it may be much less, than the calculation would give him, while the life tenant has had more, it may be much more, than his share.
In truth, the equity alleged is a halting and uncertain one, and in my opinion there is no solid basis for it. Even if in the case last put the excess of receipts by the tenant in life could be charged upon his interest in the future income of the diminished fund, that would be a precarious expedient, and would not ensure equality in the way equality is sought to be produced. But indeed I can find no sufficient reason for the practice. The rule in Re Moore 54 LJ Ch 432 ensures to those interested in the trust fund equality of treatment in respect of the rights and interests injuriously affected by the loss which diminishes the fund. But the loss of the fund ought only to affect injuriously the interests of those entitled to it as from the date of the loss. This must be the case where the loss is total. Why then should there be a difference when the loss is partial only I fail to see. Thus the date of the breach of trust, bankruptcy, or decline of securities, or the time at which it becomes apparent that there must be a loss (Ancketill’s Estate 27 LR Ir 331) is, in my opinion, the time at which persons entitled in succession are injured; and the adjustment as between them should commence and take effect as of that date; and this is, I conceive, the correct interpretation of what was said in Cox v Cox LR Eq 343.
In the present case I cannot see any other date to which this consequence is to be attached than the date of the sale. For all that appears, although the interest had partly fallen into arrear, the trust fund and interest on it might have been adequately secured all along till the sale.
Part of the proceeds of sale consists of guaranteed deposit of land stock retained to meet possible defaults of the purchasers. Till that is set free it cannot be dealt with in possession, so far as corpus is concerned, at present, for it may never be realized, though there is little doubt that it will. When it is set free it will be subject to the same principle; but the dividends of the stock in the meantime will belong to those persons interested in the capital and arrears, including, of course, the tenant for life.
O’Brien v Fitzgerald
(1851) 1 Ir Ch R 290
Smith MR:
Margaret H Comyn claims the dividends under a settlement of the 21st of November 1827, executed on her marriage. Thomas F. Comyn died on the 14th of August 1850, and it is contended on the part of the plaintiff that Margaret Helen Comyn is only entitled to an apportionment of the dividends, from the 14th of August to the 10th of October 1850. The right to the future dividends is not disputed.
It is admitted that in general there is no apportionment of the dividends of stock. The rule is stated in 1 Swanst. p 349, note: “The rule of law which refuses apportionments of rent in respect of time is applicable to all periodical payments becoming due at fixed intervals, not to sums accruing de die in diem; annuities therefore and dividends on money in the funds are not apportionable.” Several authorities are referred to. But it is contended that, by reason of the provisions of the settlement, and the contract then entered into, the general rule is not applicable to this case, and that the dividends are apportionable – (His Honour read the provisions of the settlement.)
It is contended that, as by the express provision of the deed, the interest on the sum secured by the mortgage was apportionable, when the mortgage was paid off and invested in stock, the trusts being the same, the dividends should also be apportionable. I do not concur in that argument. In the case of Pearly v Smith 3 Atk 260 “a purchaser from a husband of an interest in South Sea annuities during his life, remainder to other persons (which had been originally secured upon a mortgage, but by order of this Court had been transferred to Government securities), insisted that, notwithstanding the husband died before the Christmas half year became due, yet that he was entitled to be paid proportionably, at the rate of £4 per cent. for the time the husband lived, from Midsummer to the day of his death.” Lord Hardwicke said:
“If it had continued a mortgage, the purchaser would have been entitled to the demand he now makes, because there interest accrues every day for forbearance of the principal, though notwithstanding it is usual in mortgages to make it payable half-yearly. But South Sea annuities are by Act of Parliament considered merely as annuities, and therefore the purchaser here is not more entitled to receive the half-year’s dividends, which did not become due until after the husband’s death, than he would in the case of a common annuity payable half-yearly, where the annuitant (in whose place he stands) dies before the half-year is completed.”
There is another case to the same effect in the same volume of Atkyn’s Reports – Sherrard v Sherrard 3 Atk 502. It was decided in that case that where money is directed to be laid out in lands, and in the meantime invested in Government securities, though a tenant for life dies in the middle of a half-year, it should not be apportioned, but be paid to the reversioner. The Master of the Rolls said:
“The constant usage has been, where money is to be laid out on lands upon any settlement, and in the meantime invested in Government securities, that the entire half-year’s dividends should be paid to him in reversion, notwithstanding the tenant for life died in the middle of the half-year, and shall not be apportioned; otherwise indeed in the case of a mortgage.”
In the case of Rashleigh v Master 3 Br CC 99, a fund, which had been secured by a mortgage, was invested in £3 1/2 per cent stock. A question arose as to apportioning the dividends. The Lord Chancellor said: “The Court would not apportion dividends; parties consenting to lay out money in stock must abide the consequences.”
I have therefore come to the conclusion, that I am bound by the authorities to make the order in the terms of the notice.
Brereton v Day
[1895] 1 IR 518
Porter MR: The only question remaining for decision at present is as to the cost of putting the leasehold house in Merrion-square into repair, pursuant to the covenants contained in the lease of 30th March 1839.
Does the devisee for life take the house as she finds it cum onere? or is the cost of repairing to be borne by the tenant for life and the remainderman in proportion to their respective interests? or is the cost of effecting the needful repairs to be defrayed out of the testatrix’s residuary personal estate, so as to give the tenant for life possession of the dwelling in that condition in which it would have been if the testatrix had maintained it conformably to her covenant?
The first case on the point to which it is necessary to refer is Harris v Poyner 1 Dr 174, which was a decision of Kindersley, VC. The case has some facts which closely resemble the present, and the decision has the authority of an eminent Judge. At page 181 he says: “The testator, at the time when he died, having been in the possession, or the holder of this leasehold property, had, in violation of the covenants in the leases under which he held, suffered the property to fall into dilapidation; and it appears by the Master’s report, that the amount of the dilapidation which had occurred at the time when the testator died was £900. He had violated his covenants; and I must assume that the testator would have been liable to the landlord in an action for damages for breach of covenant. Shortly after the testator’s death, the landlord seems to have made application to the widow, and to have given formal notices to her, and to have called upon the parties to make good the dilapidations; upon which the widow and the son together took measures, the effect of which is that the widow, as I understand, paid the amount of the dilapidations – not all in one sum, but paid them by degrees, so as to satisfy the landlord’s demand. Then comes the question, Is the widow to bear that expense out of her own pocket, or is it to be borne by the testator’s residuary estate? Now the cases which have been cited, I confess do not appear to me to govern the present case. Whether in the case of a dry specific legacy of a separate leasehold, where the testator was liable for dilapidations at the time of his death – whether as between that specific legatee and the person entitled to the general residue of the personal estate, the specific legatee should discharge that amount of dilapidation out of the general estate or not – the principle of such a case does not appear to me to govern the present case at all. In the case before Lord Truro, Hickling v Boyer 3 MacN & G 635, his Lordship decided against the specific legatee, principally upon the terms used in the will, though he certainly goes on to say that, irrespective of those terms, and upon general principle, he should still have decided the same way; and I must assume that to be right. But, assuming it to be right (although, I confess, if it had been res integra, I should have questioned it very much – not upon the terms of the will in that case, but upon the general principle), that was a question as between the specific legatee of a separate leasehold, and the residuary legatee of general personal estate. Here it is a question as between the tenant for life and the remainderman or the reversioner, of an aggregate mass of property, all consisting the residuary real and personal estate, of which the leaseholds in question form only a component part”; and he accordingly decided that the repairs were to be borne by the residue and not by the tenant for life.
Hickling v Boyer 3 MacN & G 635 was a devise of leaseholds – “subject to the performance of the covenants,” &c. The residue was subject to payment of debts. The legatee took cum onere, including liability for repairs. Lord Truro decided the case not only on the terms of the gift, “subject,” &c, but on general principles. But the case was not one of tenant for life and remainderman, or tenant for life and residuary legatee; but merely as between a specific gift of leaseholds and the general residuary estate. And it is noticeable that a fund was set apart to protect the executors in case the specific legatee did not perform the obligation.
Re Courtier; Coles v Courtier 34 Ch Div 136 (distinguishing Re Fowler 16 Ch Div 723) decided there was no liability on the tenant for life to put in repair. Cotton LJ, says:
“With respect to that question, it is admitted that the words of the will are such that it cannot be contended that there is a trust for immediate conversion; but it is said that if the widow is to have the right to possess the leaseholds in specie, during her lifetime, she is bound to spend her money in putting them into sufficient repair, to satisfy the covenants of the leases. I think that there is no such obligation on her. She is not bound to the landlords under the covenants; the trustees are bound, and it is their duty to repair the houses, in accordance with the covenants in the leases, out of the corpus of the estate. There is no rule of law that the tenant for life is bound to do these repairs out of the rents and profits. She is to enjoy these leaseholds in specie, but she is under no covenants to repair, and there is nothing in the will to show that the testator intended her only to have the net rents, after making provisions for the liabilities that arose in the testator’s lifetime. It cannot be fairly left to the widow to make good the deficiencies of the testator. The appellants relied on In re Fowler 16 Ch D 723. But that was a very different case, and the question which arose there does not arise here. Here it is not a question whether the trustees are bound to keep up the houses, but whether the tenant for life is bound. In that case the question was whether trustees ought, out of rents and profits in their hands, to provide for the repairs, and Lord Justice Fry decided that, as under the terms of the will they were to receive the rents, and to preserve the property for the remaindermen, it was their duty to apply the rents in their hands towards the repairs. No question was decided there between the tenant for life and the remaindermen, only that the trustees, having the property in their hands, and having the duty to keep that part of the estate in repair, and, having nothing but rents and profits in their hands, they must apply them for this purpose. If it had been a decision between tenant for life and remaindermen, I should have had some difficulty in following it. But I consider it is no authority in the present case.”
And Bowen LJ, says:
“I am of the same opinion. The first question on this appeal is whether the tenant for life is bound to keep the leaseholds in such a state of repair as to prevent forfeiture. These houses are given to the widow during her life. What obligation is there on her ? Is she to take on herself the entire burden and repair them out of her own money, or only expend the income which she derives from the rents and profits of the property? Whichever way the point is put, the obligation is quite imaginary; it can arise nowhere unless it is to be found in the will. It is admitted that it is not to be found in the will, therefore it does not exist. The Lord Justice Cotton has explained the distinction between this case and In re Fowler 16 Ch D 723 and I agree with him. That case did not decide the rights, as between the tenant for life and the remaindermen.”
To the same effect are the observations of Fry LJ.
In Re Fowler; Fowler v O’Dell 16 Ch D 723 there was no other fund for repairs except the rents (see judgment, p 725), and the case is perhaps capable of being explained on that ground. But the case must be considered as at least of very doubtful authority (Re Courtier 34 Ch D 136), and one which affords no guidance, when the very peculiar circumstances alluded to does not exist.
I think it therefore plain, upon the authorities, that as between tenant for life of a leasehold, specifically bequeathed, and the general assets of the testator, there is no equity in favour of the latter to throw on the former the obligation of putting the leaseholds, which were dilapidated at the time of his death, in repair, and that Harris v Poyner 1 Dr 174 is an authority that the repairs ought to be defrayed out of the general estate.
But Serjeant Campion contended that if this be so, or at least if the entire cost cannot be thrown upon the tenant for life, the equitable doctrine of this Court which generally distributes the burden between tenant for life and remaindermen in proportion to their respective interests, calls for some adjustment of the payment in this case: and he suggested that if the trustees are called upon to pay the cost of putting in repair, interest upon the amount so expended ought to be charged against the tenant for life, during her enjoyment of the leasehold estate. And there is much good sense and apparent justice in this contention. In support of it, he relied on passages found in the judgments in Freke v Calmady; Re Hotchkys 32 Ch D 408.
In that case the facts were dissimilar to those before me. There was a devise to trustees of “all my freehold, leasehold, and copyhold lands and hereditaments, and all my real and personal estate, of what nature or kind soever, and wherever situate,” unto and to the use of Vincent Calmady, and two other persons therein named, their heirs, executors, administrators, and assigns, “upon trust at their discretion to sell and dispose of all such parts thereof as shall not consist of money, and out of the produce of such sale shall first pay all my just debts and my funeral and testamentary expenses, and shall then invest the residue of such moneys in, etc, and shall stand possessed of such real and personal estate, money, and securities upon trust to pay the rents, interest, and dividends, and annual produce thereof unto my dear friend Emily Tuson for and during their term of her natural life as and for her separate estate, and so that the same shall not be subject to the debts or control of any husband of hers, and that her receipts alone be a sufficient discharge for the same, and I direct that if the said Emily Tuson shall alien or dispose of the same, or charge the same or any part thereof by anticipation, whether by her own act or by act of the law, the same shall be thenceforth forfeited to the use of the said Vincent Calmady, his heirs executors, administrators, or assigns.” Then after providing that the trustees might effect the sales of all or any part of her estate, either by public auction or private contract, and empowering them to give receipts to purchasers, she proceeded: “And from and after the decease of the said Emily Tuson, I give, devise, and bequeath my said real and personal estate, and the securities on which the same may be invested unto and to the use of the said Vincent Calmady, his heirs, executors, administrators, and assigns for ever, according to the nature and quality thereof respectively.” Pancraswick estate was held in fee, in possession, unincumbered. Blatchborough estate was a reversion (subject to heavy mortgages), and was held in fee. The reversion fell in six years after the death of the testatrix. Besides being incumbered, the Blatchborough estate was in need of repairs, which ought to be effected in course of proper management. But the estate was one in fee simple, and not a leasehold. No obligation whatever attached to the testatrix to repair or put in repair. No such liability attached to the estate of the testatrix in any shape. So far as repairs were concerned, it was only a question of prudent management, the determination of which rested with the trustees, whether in the interests of all parties the repairs ought to be effected, and if so, how they should be borne – whether out of the income of the tenant for life or out of the corpus of the property. It is in reference to that question that Cotton LJ says (page 416): “What then, in that state of facts, is the right as between the tenant for life and the remainderman? The estate was to be vested in the trustees during the tenancy for life. In my opinion, in a case where trustees have property vested in them under circumstances like these, there is an obligation upon them, for the purpose of properly carrying out and performing their trust with regard to the property, to see that the property does not fall into decay from want of proper repair. But when the property has fallen into bad repair, the question will of course arise whether it is worth while to do the repairs. It may be that where there is a devise of two estates, one subject to an incumbrance not made by the testator, and the other not incumbered, it may not be worth while to expend any money out of the unincumbered estate for the repairs of the incumbered one, for it would be throwing away money to repair the property if the circumstances were such that no one but the incumbrancer would be benefited by the expenditure. Then of course the trustees would be wrong in applying anything not in mortgage to repair a property which, when repaired, would not be worth anything to the estate. No doubt, if it was clearly for the benefit of the whole residue to repair the mortgaged property, the Court would say that the trustees must do it, and that the money must be raised in such a way as not to throw the burthen unfairly either upon the tenant for life or upon the remainderman”; and again, “according to my view, the burden of repairing, if it is necessary and proper, ought to be thrown upon the estate in such a way as not to throw it entirely upon the tenant for life or upon the remainderman.”
And it is in reference to the same question that the observations of Lindley LJ, are directed. He says: “As regards the substantial question, that of the repairs, it appears to me there is no avoiding the application to this case of the rule laid down by Lord Hatterley in Powys v Blagrave Kay 495. The tenant for life is equitable tenant for life, and the remainderman is not entitled to throw upon her the burthen of keeping the property in repair. I think that it is perfectly plain. Whether the property is to be regarded as one property or as two appears to my mind to be for this purpose immaterial. The remainderman cannot be entitled to throw upon the tenant for life the burthen of the repairs by paying for them out of the rents. I quite agree with what Lord Justice Cotton has said that if it is shown that it is judicious to make repairs, and the trustees come to the Court for authority to make them, that authority will be given, but it will be given on equitable terms as to the mode of paying expenses. If such an application is made it will have to be considered whether the repairs are beneficial, and whether they ought to be made, and if so, how the trustees would be authorised to raise the money, whether by sale or mortgage, or in some other way, but it must be done in a mode which is equitable as between the tenant for life and the remainderman, and not so as to throw the whole burthen upon either.” The other questions in that case, viz – the incidence of the interest on the mortgages on the Blatchborough estate in reference to the rents of the Pancraswick estate, and the claim of the tenant for life to repudiate the devise of the former while accepting that of the latter, do not arise here at all. As regards the repairs, however, I should willingly do what was suggested there and urged by Serjeant Campion if I had any authority for it. But in my opinion there is none. Re Hotchkys 32 Ch D 408 has no application. Here there is a liability to the landlord for repairs – a liability for which the trustees and executors are liable and primarily liable. The liability was a debt of the testatrix. If the repairs be not made, the interest in the lease will be forfeited and may be evicted. Miss O’Grady is to have the house in Merrion-square as a place of personal residence, subject to her paying the rent and other outgoings. This she cannot do unless the testatrix’s covenant is satisfied so as to avoid the forfeiture. She is under no legal or equitable obligation whatever to put in repair (Powys v Blagrave) 4 DM & G 418. In cases where it is sought to apply the maxim “qui sentit commodum idem sentire debet et onus” there is always a preliminary question, what is the commodum? and the case I have quoted shows that in this case the commodum was meant to be the house in that state in which the testatrix was as between herself and the head landlord legally bound to leave it. If so, the legatee does not receive the commodum till the repairs are effected, and the onus which attaches to it is that which is expressed, namely, the payment of the rent and other outgoings, including (no doubt) the maintenance of the place in tenantable order when once repaired.
In Re Baring: Jeune v Baring [1893] 1 Ch 61 Kekewich J, followed Re Courtier 34 Ch D 136 so far as was necessary for the case before him: but there was not there any question of putting in repair as distinguished from keeping in repair. There is no indication that there had been any breach of covenant in the lifetime of the testator or afterwards. The case has therefore no bearing on the question here.
For these reasons I am of opinion that the cost of necessary repairs must be borne by the trustees out of the general residuary estate.
Re Peczenik’s ST
[1964] 1 WLR 720
BUCKLEY J: I have been referred to the decision of Jenkins Jin /n re Harari’s Settlement Trusts (1949] 1 All ER 430, and I recognise that there is a general rule that clauses in trust settlements which enlarge the power of trustees to invest beyond the class of investment which is authorised by the general law ought to be construed strictly.Nevertheless,I have to apply my mind to what is the proper construction to be placed upon the particular settlement before me, and that rule is not one which in any way imposes upon me the duty of putting any unduly restrictive construction upon the language which I have to consider. That was the view which Jenkins J took. He had to consider a settlement in which the trustees were authorised to invest ‘in or upon such investments as to them may seem fit’. He came to the conclusion that those words conferred upon the trustees a general wide discretion, and that, on the plain meaning of those words, they could invest in any investments which they honestly thought desirable whether or not authorised by the general law for the investment of trust funds.
I have, therefore, to consider, what is the meaning of the language used in this particular document which is before me. I agree with the suggestion which was made that the term ‘property holding com pany,’ which is not any kind of term of art, is one to which, in this context, I really can give no precise meaning, and I think I should ignore the reference to ‘property holding company,’ for I cannot see how those words, whatever meaning is given to them, could really extend what is already covered by the words ‘sharesstocks property’ in clause (1). Any investment in a company, whether a property holding company or a company of any other kind, must, it seems to me, be either a share, or stock, or some other form of property. I do not take the view, which was also urged before me, that ‘property’ here should be confined to real property. I see no reason for putting such a confined interpretation upon the words. Taking clause (1) by itself, it appears to me that the clause authorises the trustees to invest in any shares, any stock, or any property. It must, of course, be property of a kind capable of being treated as an investment, not property which is acquired merely for use and enjoyment. But, apart from that, it seems to me that clause (1) places no restriction upon the discretion of the trustees beyond saying that the investments must be investments in stocks or shares or something which can properly be described as property. The clause would not, I think, authorise investments merely upon personal security.
Harries v The Church’.Commissioners For England
[1992] 1 WLR 1241, Chancery Division
SIR DONALD NICHOLLS V-C: The Church Commissioners for England administer vast estates and large funds. At the end of 1990 their holdings of land were valued at about £1.7bn, their mortgages and loans at about £165m, and their stock exchange investments at about £780m. In 1990 these items yielded altogether an investment income of £164m. The Commissioners’ income included also some £66m derived principally from parish and diocesan contributions to clergy stipends. So the commissioners’ total income last year was £230m …
. . For some time there have been voices in the Church of England expressing disquiet at the investment policy of the commissioners. They do not question either the good faith or the investment expertise of the commissioners.Their concern is not that the commissioners have failed to get the best financial return from their property and investments. Their concern is that, in making investment deci sions, the commissioners are guided too rigorously by purely financial considerations, and that the commissioners give insufficient weight to what are now called ‘ethical’ considerations.
. . . In most cases the best interests of the charity require that the trustees’ choice of investments should be made solely on the basis of well-established criteria, having taken expert advice where appropriate and having due regard to such matters as the need to diversify, the need to balance income against capital growth, and the need to balance risk against return.
In a minority of cases the position will not be so straightforward.There will be some cases, I suspect comparatively rare, when the objects of the charity are such that investments of a particular type would conflict with the aims of the charity. Much-cited examples are those of cancer research companies and tobacco shares, trustees of temperance charities and brewery and distillery shares, and trustees of charities of the Society of Friends and shares in companies engaged in production of armaments. If, as would be likely in those examples, trustees were satisfied that investing in a company engaged in a particular type of business would conflict with the very objects their charity is seeking to achieve, they should not so invest. Carried to its logical conclusion the trustees should take this course even if it would be likely to result in significant financial detriment to the charity. The logical conclusion, whilst sound as a matter of legal analysis, is unlikely to arise in practice. It is not easy to think of an instance where in practice the exclusion for this reason of one or more companies or sectors from the whole range of investments open to trustees would be likely to leave them without an adequately wide range of investments from which to choose a properly diversified portfolio.
There will also be some cases, again I suspect comparatively rare, when trustees’ holdings of particu lar investments might hamper a charity’s work either by making potential recipients of aid unwilling to be helped because of the source of the charity’s money, or by alienating some of those who support the charity financially.In these cases the trustees will need to balance the difficulties they would encounter, or likely financial loss they would sustain, if they were to hold the investments against the risk of finan cial detriment if those investments were excluded from their portfolio. The greater the risk of financial detriment, the more certain the trustees should be of countervailing disadvantages to the charity before they incur that risk. Another circumstance where trustees would be entitled, or even required, to take into account non-financial criteria would be where the trust deed so provides.
. . . The instances I have given are not comprehensive. But I must emphasise that of their very nature, and by definition, investments are held by trustees to aid the work of the charity in a particular way: by generating money. That is the purpose for which they are held. That is their raison d’etre. Trustees cannot properly use assets held as an investment for other, viz., non-investment, purposes.
. . . Those who wish may do so with their own property, but that is not a proper function of trustees with trust assets held as an investment.
Trustees may, if they wish, accommodate the views of those who consider that on moral grounds a particular investment would be in conflict with the objects of the charity, so long as the trustees are satisfied that course would not involve a risk of significant financial detriment. But when they are not so satisfied trustees should not make investment decisions on the basis of preferring one view of whether on moral grounds in investment conflicts with the objects of the charity over another. This is so even when one view is more widely supported than the other.
I have sought above to consider charity trustees’ duties in relation to investment as a matter of basic principle. I was referred to no authority bearing directly on these matters. My attention was drawn to Cawon v Scargill [1985] Ch 270, a case concerning a pension fund. I believe the views I have set out accord with those expressed by Sir Robert Megarry V-C in that case, bearing in mind that he was considering trusts for the provision of financial benefits for individuals. In this case I am concerned with trusts of charities, whose purposes are multifarious.
The evidence does show that the commissioners have declined to adopt financially disadvanta geous policies advocated by, among others, the Bishop of Oxford. In October 1989 his bishop’s coun cil passed a resolution urging his diocesan board of finance to adopt certain specific criteria in relation to South Africa. For example, investments should not be directly or indirectly in groups of companies (other than banks, for the time being) which derived more than £1Om in annual profits from South Africa or more than three per cent of their worldwide profits from South African activities. As to that, the commissioners’ ethical policy excludes about 13 per cent of listed United Kingdom companies (by value) from consideration. The companies in which the commissioners hold shares that would be excluded under the suggested criteria would comprise a further 24 per cent (by value) of listed United Kingdom companies, making a total exclusion of about 37 per cent. The part of the market excluded by the criteria would include some of the largest United Kingdom companies whose shares make up a very important part of the commissioners’ total portfolio. The criteria would exclude two companies which make up 65 per cent of the oil sector, and a further two companies which make up 62 per cent of the chemical sector of the United Kindom equity market. Not surprisingly, the commissioners’ view is that a portfolio thus restricted would be much less balanced and diversified, and they would not regard it as prudent or in the interests of those for whom they provide.
The investment issue raised by this resolution is another example of a moral question to which there can be no certain answer. The commissioners do not invest in a company where more than a small part of its business is in South Africa. The policy advocated by the Bishop of Oxford’s council does not seek to exclude every company which has a South African business connection. The councils’ policy embodies fixed, and to this extent, artificial limits on the degree of South African involvement which is acceptable. As between these two alternatives, there can be no right or wrong answer. This is a ques tion of degree, and whether Christian ethics require a more restrictive policy than that adopted by the commissioners is a matter on which there can be literally endless argument and debate. The commis sioners are therefore right not to prefer one view over the other beyond the point at which they would incur a risk of significant financial detriment.
Another example raised before me concerned land owned by the commissioners in a village where local young people are finding housing impossible to afford. Such land, it was suggested by the plaintiffs, could be made available for low-cost housing at a price below open-market value. Investing instead in a more expensive housing development with a higher rate of return would undermine the credibility of the Christian message by the affront such a policy would cause to the needs and consciences of local people. I do not think this example advances the plaintiffs’ case. The commission ers are not a housing charity. There is force in the commissioners’ contention that local housing needs are or should be reflected in local planning policies. When planning permission is available for a particular type of development, it is not a proper function for the commissioners to sell their land at an under-value in order to further a social objective on which the local planning authority has taken a different view. This, once more, is an illustration of a circumstance in which different minds within the Church of England, applying the highest moral standards, will reach different conclusions. If the commissioners’ land is to be disposed of at an undervalue, they need an express power to do so.Such a disposition cannot properly be made in exercise of their power to make and change investments .
Target Holdings Ltd v Redferns (a firm)
[1996] 1 AC 421,
LORD BROWNE-WILKINSON: Say, as often occurs, a trustee commits a judicious breach of trust by investing in an unauthorised investment which proves to be very profitable to the trust. A carping beneficiary could insist that the unauthorised investment be sold and the proceeds invested in author ised investments: but the trustee would be under no liability to pay compensation either to the trust fund or to the beneficiary because the breach has caused no loss to the trust fund (at 433G).
Even where there is no difficulty in establishing that a breach of trust has produced a loss to the trust or an unauthorised gain for the trustee, the trustee might still escape liability if he can successfully raise a defence to the beneficiary’s claim. The defendant may plead statutory limitation or ‘!aches’, both of which are concerned to prevent claims being brought too long after the occurrence of the alleged breach. Appropriately worded exculpatory clauses in trust instruments may also be relied upon to defend allegations of breach. Most defences operate merely to excuse a breach of trust but defences which might be said actually to justify the breach include the advance authority of a court and the advance unanimous consent of the beneficiaries. The various defences are considered later in this chapter. We will also consider the possibility of a trustee being relieved of some or all of his liability in cases where he does not have a defence as such.