A claim was made against a trustee for compensation for losses incurred during the administration of the trust.
Held: For a court to order an account by a trustee on the basis of wilful default, and make the defendant liable not only for assets which have come to their hands but also in respect of assets which ought to have come to their hands, the claimant must plead and prove at least one act of wilful default. Higher standards may be expected of professional trustees.
Brightman J considered the nature of the remedy of restitution: ‘the so-called restitution which the [trustee] must now make to the plaintiffs . . is in reality compensation for loss suffered by the plaintiffs . . not readily distinguishable from damages except with the aid of a powerful legal microscope.’ and ‘The trustee’s obligation is to restore to the trust estate the assets of which he has deprived it.’ and
‘The bank, as trustee, was bound to act in relation to the shares and to the controlling position which they conferred, in the same manner as a prudent man of business. The prudent man of business will act in such manner as is necessary to safeguard his investment. He will do this in two ways. If facts come to his knowledge which tell him that the company’s affairs are not being conducted as they should be, or which put him on enquiry, he will take appropriate action. Appropriate action will no doubt consist in the first instance of enquiry of and consultation with the directors, and in the last but most unlikely resort, the convening of a general meeting to replace one or more directors. What the prudent man of business will not do is to content himself with the receipt of such information on the affairs of the company as a shareholder ordinarily receives at annual general meetings. Since he has the power to do so, he will go further and see that he has sufficient information to enable him to make a responsible decision from time to time either to let matters proceed as they are proceeding, or to intervene if he is dissatisfied.’
The normal order in hostile litigation is for costs to be taxed on a standard basis.
A proper rate of interest to be awarded, in the absence of special circumstances, to compensate beneficiaries and trust funds for non-receipt from a trustee of money that ought to have been received was that allowed from time to time on the Short Term Investment Account, a rate which may be taken to be not more favourable than base rate less 0.5 per cent.
Brightman J
[1980] Ch 515
England and Wales
Cited by:
Cited – Malhotra v Dhawan CA 26-Feb-1997
There had been litigation as to the payment due on fees earned during the partnership. One party had destroyed the evidence which would have settled many issues. The court discussed the principle that it should presume all against a destroyer of . .
Cited – Jones and others v Firkin-Flood ChD 17-Oct-2008
The trustees had contracted to sell shares in a private company held within the estate. A family member now claimed that they were held in trust after a settlement of a possible challenge to the will based in lack of testamentary capacity and undue . .
Cited – Carlisle and Cumbria United Independent Supporters’ Society Ltd v CUFC Holdings Ltd and Others CA 5-May-2010
The claimant supporters’ club had brought an action to prevent a substantial shareholder in the first defendant company from selling off land owned by the club for no consideration. The parties had reached a settlement after a protracted claim . .
Cited – AIB Group (UK) Plc v Mark Redler and Co Solicitors SC 5-Nov-2014
Bank not to recover more than its losses
The court was asked as to the remedy available to the appellant bank against the respondent, a firm of solicitors, for breach of the solicitors’ custodial duties in respect of money entrusted to them for the purpose of completing a loan which was to . .
These lists may be incomplete.
Updated: 24 June 2021; Ref: scu.193790
