The Stourbridge Observer, Cradley Heath, Halesowen & District Chronicle.
Stourbridge, West Midlands, England, 1886-08-07 00:00:00

THE LIABILITY OF TRUSTEES.

In the Court of Appeal, on Saturday afternoon,
before Lords Justices Cotton, Lindley, and Lopes, the
case of Whiteley v. Learoyd was heard. This case is
of some importance to trustees with reference to
their liability for improper investments of trust
money. Benjamin Whiteley, who died in July, 1876,
by his will directed the defendants, whom he ap-
pointed trustees, to invest a sum of £5OOO and to
pay the income to the plaintiff during her life, and
after her death to stand possessed thereof in trust
for her children. The will contained a power
of investment in various securities, including
"real securities in England or Wales." The
will also contained the usual trustee clauses, in-
cluding an exemption from liability for involun-
tary losses. The trustees invested £3OOO of the
above-mentioned legacy upon a five per cent. mort-
gage, dated the 12th of January, 1878, by Messrs.
Barston and Hartley, brick and sanitary tube manu-
facturers, of a freehold brickfield, containing about
ten acres, with the machinery, brick and pipe kilns,
and buildings thereon, near Pontefract, in Yorkshire,
upon which premises the mortgagors were then
carrying on business. The interest was duly paid
until 1884, when Messrs. Barston and Hartley became
embarrassed, and in October, 1884, they were adjudi-
cated bankrupts. This action was commenced to
make the trustees liable for the loss occasioned by
the investment, on the ground that the mortgage was
an improper and unauthorised investment, and that
they had not made proper inquiries. The defendant
contended the investment was authorised, and that
they had taken the advice of their solicitor and a
competent surveyor before making the investment,
and had been informed that it was a good security
for the amount advanced, and that they were
therefore not liable. Vice Chancellor Bacon held
that the investment was improper and that the
trustees were liable, and they now appealed from
that decision. Mr. Hemming, Q.C., and Mr. W.
Baker appeared for the appellants; and Mr. Marten,
Q.C., and Mr. Seward -Brice for the respondents.
Lord Justice Cotton said that this was an investment
in real security. A mortgage of land would be real
security, and it was not less real security because
there were houses and plant for brick-making on it.
But because it was real security it did not follow
that the trustees were free from liability. They must
take such care in making an investment as a reason-
ably cautious man would, having regard to the
interests of the tenant for life and those
who were to take after her death. A trustee
was not bound to have special knowledge,
and must consult those who have, such as
counsel, solicitors, and surveyors. Here the de-
fendants had consulted their solicitor and a com-
petent surveyor, and were advised that the £3OOO
could safely be lent on this property. But it was a
property of small extent, having building and plant
on it which fitted it for a brick-field only, and an
ordinarily prudent man would have considered the
fact that the land alone was at the most not worth
more than £2OOO, and that the greater value depended
on theplant and machinery on it, and on the business
of brick-making being carried on there. That business
depended on many contingencies, such as the demand
for bricks, &c., and there were not many people who
would be ready to carry it on in the event of a sale.
The trustees, therefore, had not acted as prudent men
in investing such a large sum on the mortgage, and
were liable to make good the loss. Lord Justices
Lindley and Lopes concurred.