(ChD and CA) By sect. 11 of the Settled Land Act, 1890 (which Act and the Settled Land Act, 1882, are to be read and construed together as one Act): ‘Where money is required for the purpose of discharging an incumbrance on the settled land or part thereof, the tenant for life may raise the money so required . . on mortgage of the settled land . . and the money so raised shall be capital money for that purpose, and may be paid or applied accordingly;’ but ‘incumbrance’ under that section does not include a life annuity. By sect. 53 of the Settled Land Act, 1882, ‘a tenant for life shall, in exercising any power under this Act, have regard to the interests of all parties entitled under the settlement, and shall, in relation to the exercise thereof by him, be deemed to be in the position and to have the duties and liabilities of a trustee for those parties.’
The tenant for life of settled land, part of which was mortgaged and part was not, and the whole of which was charged with the payment of certain life annuities, proposed to raise a sum of money by mortgaging the settled land (including the part of it not then subject to any mortgage) in order to pay off the existing mortgages and certain pecuniary legacies given by the settlement. The proposed mortgage would, by virtue of sects. 20 and 21 of the Settled Land Act, 1882, take priority over the annuities and all other charges and estates created by the settlement.
It was not proposed to pay off the annuitants out of the money to be raised, nor could they be so paid off; and, having regard to the estimated probable sum which would be produced by a sale of the land under the powers given by the Settled Land Acts, it appeared that such a sale would preserve, whilst the proposed mortgage would unjustly prejudice, their interests. It was assumed that the tenant for life in deciding to effect the proposed mortgage was acting honestly, and with the desire, bona fide, to preserve his family estates for those intended by the settlor to enjoy them.
Held: That sect. 11 of the Settled Land Act, 1890, gave the tenant for life power to mortgage the unmortgaged part of the settled land in order
to pay off the incumbrances on the other part; but that, having regard to sect. 53 of the Settled Land Act, 1882, and to the circumstances, the Court had power to interfere, and ought to interfere, to restrain him from effecting the proposed mortgage.
The Court of Appeal intervened to prevent a trustee about to act in a manner which was within his powers but detrimental to other beneficiaries applying the following principle: ‘But, . . to preserve the estates for those intended by the settlor to enjoy them, still an honest trustee may fail to see that he is acting unjustly towards those whose interests he is bound to consider and to protect; and, if he is so acting, and the court can see it although he cannot, it is in my opinion the duty of the court to interfere.’
Kekewich J, Lindley LJ
 UKLawRpCh 67, (1893) 2 Ch 531
England and Wales
Cited – Lehtimaki and Others v Cooper SC 29-Jul-2020
Charitable Company- Directors’ Status and Duties
A married couple set up a charitable foundation to assist children in developing countries. When the marriage failed an attempt was made to establish a second foundation with funds from the first, as part of W leaving the Trust. Court approval was . .
Lists of cited by and citing cases may be incomplete.
Updated: 29 August 2021; Ref: scu.653170