Learoyd v Whiteley
When investing trust money, trustees must take the care that an ordinary prudent man would take if he were investing for people for whom he felt morally bound to provide.
Facts
The trustees of a will lent trust money on a mortgage of a brickworks, on the basis of valuations that did not distinguish between the value of the land and the value of the buildings and machinery, which were specialised. The brickworks failed, and the security was insufficient to repay the loan. The beneficiaries sued the trustees.
Legal principle
The House of Lords held that the trustees were liable. Lord Watson said that, as a general rule, the law requires of a trustee no higher degree of diligence than a man of ordinary prudence would exercise in the management of his own private affairs, but that, in investing trust money, the trustee must avoid all investments that are attended with hazard. Lord Halsbury LC said that the trustee must act as an ordinary prudent man would act if he were investing for other people for whom he felt morally bound to provide. The trustees had not taken proper advice about the value of the security.
Related cases on trustees: duties, powers and variation of trusts
- Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515
- Butler-Sloss v Charity Commission for England and Wales [2022] EWHC 974 (Ch), [2022] Ch 371
- Chapman v Chapman [1954] AC 429
- Cowan v Scargill [1985] Ch 270
- Goulding v James [1997] 2 All ER 239
- Harries v Church Commissioners for England [1992] 1 WLR 1241
- Re Lucking's Will Trusts [1968] 1 WLR 866
- Nestle v National Westminster Bank plc [1993] 1 WLR 1260
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
