is an

English trusts law English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trust law, Trusts were a creation of the English law of English property law, property and English contract law, obligations, a ...

case, concerning the

duty of care In Tort, tort law, a duty of care is a legal Law of obligations, obligation that is imposed on an individual, requiring adherence to a standard of care, standard of Reasonable person, reasonable care to avoid careless acts that could foreseeab ...

owed by a trustee when exercising the power of investment.

Facts

Elizabeth Whiteley and her children sued the executors of Benjamin Whiteley's will (of 19 March 1874). The will contained a power to invest the fund in certain investments, including “real securities in England or Wales.” £5,000 of the trust money had been lost. £3,000 was invested in a mortgage at 5% return in the freehold of a ten-acre brick field near

Pontefract Pontefract is a historic market town in the City of Wakefield, a metropolitan district in West Yorkshire, England. It lies to the east of Wakefield and south of Castleford. Historically part of the West Riding of Yorkshire, it is one of the ...

, “with the engine-house, sheds, brick and pipe kilns, and buildings thereon, and all fixtures and fittings thereon.” £2,000 was invested on mortgages at 5% in four small freehold houses, including a shop, in

Salford Salford ( ) is a City status in the United Kingdom, city in Greater Manchester, England, on the western bank of the River Irwell which forms its boundary with Manchester city centre. Landmarks include the former Salford Town Hall, town hall, ...

, Lancashire. The brickfield owners went bankrupt in October 1884 and the owner of the four houses filed for petition for liquidation. There was insufficient money to pay the trust fund.

Judgments

Chancery Court

Bacon VC held in the

Chancery Court The Court of Chancery was a court of equity in England and Wales that followed a set of loose rules to avoid a slow pace of change and possible harshness (or "inequity") of the common law. The Chancery had jurisdiction over all matters of eq ...

that the brickfield investment was unauthorised, and the trustees were responsible for its failure. The trustees failed to exercise sufficient caution, but they had done so in the case of the houses. The trustees appealed.

Court of Appeal

The

Court of Appeal An appellate court, commonly called a court of appeal(s), appeal court, court of second instance or second instance court, is any court of law that is empowered to Hearing (law), hear a Legal case, case upon appeal from a trial court or other ...

upheld Bacon VC's decision, that the trustees were liable for repayment of the £3,000 invested in the brickfield. They held that a trustee must exercise the standard of care of an ordinary prudent businessman, applying any special knowledge he may have.

Cotton LJ Sir Henry Cotton (20 May 1821 – 22 February 1892) was a British judge. He was a Lord Justice of Appeal from 1877, when he was made a Privy Counsellor, until his retirement in 1890. Early life He was born in Leytonstone. His father William ...

stated,

Lindley LJ Nathaniel Lindley, Baron Lindley, (29 November 1828 – 9 December 1921) was an English judge. Early life He was the second son of the botanist Dr. John Lindley, born at Acton Green, London. From his mother's side, he was descended from Sir Edw ...

followed.

Lopes LJ Henry Charles Lopes, 1st Baron Ludlow, (3 October 1828 – 25 December 1899) was a British judge and Conservative Party politician. Background and education Ludlow was a younger son of Sir Ralph Lopes, 2nd Baronet, and the uncle of Henry Lop ...

concurred.

House of Lords

Lord Halsbury LC affirmed the Court of Appeal. Lord Watson held that in administering and managing trust property (distinguished from the investment sphere), Lord Fitzgerald concurred.

Notes