Armitage v Nurse - Detailed case brief, including page/paragraph references Topic: Trusts PDF

Preview

Summary

Detailed case brief, including page/paragraph references
Topic: Trusts...

Description

Armitage v Nurse. Area of law concerned:

Trustee liability

Court: Date:

19 March 1998

Judge: Counsel: Summary of Facts:

The Trust 11/10/1984- Trust settled. Paula’s mother was life tenant under the marriage settlement and Paula, then 17, was entitled in remainder. The settled property consisted mostly of land farmed by a family company (GW Nurse). Paula’s mother and grandmother were the sole directors and shareholders. The property was partitioned between Paula and her mother. Paula’s mother received part of the land together with £230,000, whilst Paula received the remainder together with a sum of £30,000/ her share was directed to be held on the trusts of a settlement prepared for her benefit. Under this trust the trustees held the income upon trust to accumulate it until Paula attained 25 with power to pay it to her or to apply it for her benefit. Thereafter, and until Paula attained 40, they held the income upon trust to pay it to her. Clause 15: no trustee shall be liable for any loss or damage which may happen to Paula’s fund or any part thereof or the income thereof at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud. 250 at B

Pleadings: 1- Breach of trust in allowing the company to farm Paula’s land as well as the land transferred to her mother, which was expressly forbidden by clause 12 2- Breach of trust in failing to supervise the company’s management of Paula’s land 3- Trustees failed to make proper enquiry into the reaons why the value of Paula’s land fell dramatically between 1984 and upon being sold in 1987 4- Trustees failed to obtain proper payment of interest in respect of a loan made to Paula’s mother. Relief sought: Issues:

Relevant Statute(s): Procedural History:

Plaintiff/Appellant’s arguments

In a settlement the context requires the word ‘fraud’ to be given an extended meaning as the courts of equity found. (Nocton v Lord Ashburton- “in chancery the term ‘fraud’ has come to be described what falls short of deceit.”)

Defendant/Respondent’s arguments: Result: Judge’s reasoning:

In my judgment, clause 15 is apt to exclude liability for breach of trust in absence of dishonest intention on the part of the trustee whose conduct is impugned. 250 at G

Breach, fraud and dishonesty A breach of trust may be deliberate or inadvertent. It may consist of actual misappropriation or merely a want of skill and care in management. A breach of trust is very broad 251 at B

By consciously acting beyond their powers, trustees may deliberately commit a breach of trust, but if they do so in good faith and honest belief that they are acting in the beneficiaries’ interest, their conduct is not fraudulent. A deliberate breach is not necessarily fraudulent. 251 at C

If a trustee acts in a way in which he does not honestly believe is in the interests of beneficiaries then he is acting dishonestly. It is irrelevant as to whether he stands (or believe he stands) to gain from the actions. Dishonesty definition. At F

In my judgment clause 15 exempts the trustee from liability for loss or damage to the trust property no matter how indolent, imprudent, lacking in diligence, negligent or wilful he may have been, so long as he has not acted dishonestly. Application of cl15. At F

Permitted Scope of exemption clauses. Paula says that such wide exemption clauses must be void as repugnancy or as contrary to public policy. At H

What is pleased is, at the very lowest, culpable and probably gross negligence. Can a trustee exemption clause excuse liability for gross negligence? 253 at E

There is an irreducible core of obligations owed by trustees to beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts.

253 at G

However, I do not accept the further submission that these core obligations include duties of skill, care, prudence and diligence. Does not extend that far. At H

The duties of trustees to perform the trusts honestly and in good faith for the benefit of the beneficiaries is the minimum necessary to give substance to the trusts, but in my opinion it is sufficient. Bottom 253 to top 254

It would be very surprising if our law drew the line between liability for ordinary negligence and liability for gross negligence. Differs from most civil law systems but that is English approach 254 at B

There is no authority for the preposition that it is contrary to public policy to exclude liability for gross negligence by an appropriate clause clearly worded to have that effect 256 at B

At the same time, it must be acknowledged that the view is widely held that these clauses have gone too far, and that trustees who charge for their services and who, as professional men, would not dream of excluding liability for ordinary professional negligence should not be able to rely on a trustee exemption clause excluding liability for gross negligence. Views that exemption clauses are becoming too wide-ranging. 256 at D

But this is a matter for parliament to decide. At D

Do the pleadings even allege fraud? Fraud must be distinctly alleged and as distinctly proved. 256 at G

No 259 at G

What can be learned from this case....