e9iyi.i,/^ ' :y'r'/7y9?t^ 
 
 ^ 
 
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 THE DUTIES 
 
 AND 
 
 LIABILITIES OF TEUSTEES
 
 THE DITTIES 
 
 AND 
 
 LIABILITIES OF TRUSTEES 
 
 SIX LECTURES 
 
 DELIVERED IN THE INNER TEMPLE DURING THE 
 
 HILARY SITTINGS, 1S96, AT THE REQUEST OF 
 
 THE COUNCIL OF LEGAL EDUCATION 
 
 AUGUSTINE BIRRELL, M.P. 
 
 ONE OF HER majesty's COUNSEL 
 
 ilonbon 
 MACMILLAN AND CO., Ltd. 
 
 NEW YORK : MACMILLAN & CO 
 1896 
 
 ^^
 
 IticHARD Clay and Sons, Limited 
 
 LONDON AND BUNGAY.
 
 PEEFACE 
 
 These Lectures were delivered at the 
 request of the Council of Legal Education, 
 and are now printed at the request of a 
 good many people who did not hear 
 them. 
 
 I have only a word to say by way of 
 preface. My learned friends in Lincoln's 
 Inn with whom it has been my happiness 
 to associate for twenty years, have no 
 concern with this little volume. Courage- 
 ous as they already are in their attack 
 upon a Trustee, and wily (if retained on 
 his behalf) in his defence, what is there 
 for me, of all men, to teach my brethren ? 
 Nothing whatever.
 
 VI PREFACE 
 
 My sole ol)ject has l)een, and I shall be 
 sorry if I have wholly failed to effect it, 
 to bring out in bold relief the plain duties 
 and the equally plain, but none the less 
 disagreeable, liabilities of express Trustees, 
 in such a manner as to engage the atten- 
 tion alike of the student of our law, and 
 of the many men and women, who, though 
 not lawyers, are yet Trustees. 
 
 In considering the provisions of the 
 recent Trustee Act of 1893, I have found 
 an edition of that Act edited with notes by 
 my two learned friends, Mr, Rudall and 
 Mr. J. W. Greig, and published by Jordan 
 and Sons of Chancery Lane, price six 
 shillings net, most useful and trust- 
 worthy. A. B. 
 
 li, New Square, 
 Lincoln's Inn.
 
 CONTENTS 
 
 FIRST LECTURE. 
 
 The Law of Trusts not yet codified — Importance 
 and interest of the subject — Different kinds of 
 Trusts : Express Trusts (Executed and Execu- 
 tory), Implied Trusts, Resulting Trusts, Con- 
 structive Trusts, Public Trusts and Private 
 Trusts — Object of these Lectures to ascertain 
 and explain present legal position of persons 
 who have accepted an express executed private 
 Trust either under a Will or Deed — In order to 
 ascertain this position reference must be had to 
 both Ca.se Law and Statute Law — Important 
 changes liave lately been made in the Law on 
 this subject by Statute, and a new disposition 
 and temper towards Trustees has been shown 
 by the Judges in important cases decided re- 
 cently — The present time is therefore a favour- 
 able opportunity to survey the subject, and to 
 consider, first, the Duties of Trustees, and then 
 their Liabilities — The First duty of a Trustee is 
 to make himself acquainted with the terms of 
 his Trust — His Second duty is always to bear
 
 VIU CONTENTS 
 
 PAGE 
 
 those terms in mind— His Third duty is never 
 to depart from them — His Fourth duty is to 
 take as much care of the Trust property as 
 (being a prudent man of business) he is accus- 
 tomed to take of liis own 1 — 35 
 
 SECOND LECTURE. 
 
 The Fifth duty of a Trustee is, in all investments, 
 and particularly in the case of investments on 
 mortgage of real or leasehold estate, to observe 
 to the letter both the provisions of the Trust, 
 Deed, or Will and the requii-ements of Parlia- 
 ment — His Sixth duty is to give the persons 
 beneficially interested in the Trust complete 
 information as to the state of the Trust Funds, 
 and otherwise, whenever required so to do, and 
 to furnish such persons with accounts .... 3G — G5 
 
 THIRD LECTURE. 
 
 The Seventh dutj' of a Trustee is not to make a 
 penny piece of personal profit out of the Trust 
 business, unless a professional man speciallj' 
 authorised bj' the Trust, Deed, or Will so to do 
 — His Eitjhth duty is to co-operate with liis 
 co-Trustee or co-Trustees in a friendly and 
 reasonable spirit, and to consult him or them 
 about all matters connected with the Trust, and 
 to retire (on being paid costs, charges, and ex- 
 penses) whenever requested so to do by the 
 parties interested — And Ninthly and Lastly,
 
 CONTENTS IX 
 
 PAGE 
 
 whenever any question of difficulty actually 
 arises as to the extent of his powers or the 
 nature of his duty, to take the opinion of a 
 Judge in Chambers by way of Summons . . 66 — 89 
 
 FOURTH LECTURE. 
 
 The Liabilities of Trustees are measured by their 
 duties — Every plain neglect of duty is a Breach 
 of Trust, and if a Breach of Trust results in 
 pecuniary loss, the Trustee committing it is 
 personally liable; e.g., to make an investment 
 of a kind not authorised by the terms of the 
 Trust is to neglect duties Nos. I., II., and III., 
 whilst to make an improvident investment on 
 a mortgage security (mortgage securities being 
 authorised by the Trust), is to neglect duties 
 Nos. IV. and V. — Active and Passive Breaches 
 of Trust — Liability for Breaches of Trust of a 
 Co-Trustee — Acquiescence — Concurrence and 
 Instigation of Beneficiaries in and to Breaches of 
 Trust 90—124 
 
 FIFTH LECTURE. 
 
 Two of the most frequent of innocent , Breaches of 
 Trust are Improper Investments, and continuing 
 to carry on Farming and other business opera- 
 tions for the benefit of Widows and Infants — 
 The present Law as to Investments and as to 
 carrying on business considered — What is Wilful 
 Default 125—152
 
 CONTENTS 
 
 SIXTH LECTURE. 
 
 PAOE 
 
 The Statute of Limitations may now be pleaded by 
 Trustees in certain circumstances : these cir- 
 cumstances considered — The delegation of 
 Trusts — Power of Trustees to authorise receipt 
 of money by their Solicitor — Forgery — Proposal 
 to have Official Trustees 153 — 183
 
 THE DUTIES 
 
 AND 
 
 LIABILITIES OF TEUSTEES
 
 THE DUTIES 
 
 LIABILITIES OF TKUSTEES 
 
 My distinguished predecessor in this 
 place, for chair I must not call it, Mr. 
 Willis, was luckier than I in his choice of 
 a subject, for abstruse though the law of 
 negotiable securities may Ije, it has this 
 advantage over my unwieldy theme — it 
 has been made the sul^ject matter of 
 scientific legislation. 
 
 The whole law was embodied in a Bill 
 carefully drafted by a most accomplished 
 lawyer ; this Bill was submitted to 
 
 IE B
 
 2 THE DUTIES AND LIABILITIES lect. 
 
 revision l)y select committees of l)otli 
 Houses of Parliament, and then passed 
 into Law without amendment or murmur. 
 After a decent interval the draftsman was 
 made a County Court judge. There are 
 thino's even in this world which are 
 
 o 
 
 exactly what they should be. 
 
 The student tliouoh he will not Ijc able 
 without much reading to comprehend the 
 full significance of the one hundred 
 clauses of 45 and 46 of the Queen, chap- 
 ter 61, intituled "An Act to codify the 
 law relating to Bills of Exchange, Cheques 
 and Promissory Notes," yet has the 
 satisfaction, and in legal matters it is a 
 very real satisfaction, of knowing that 
 with the statute kept open before him he 
 is not likely to overlook or be unmindful 
 of anything it really behoves him to 
 remember. 
 
 How different is my plight. My sub- 
 ject, The Duties and Liabilities of 
 Trustees^ is still at large in the library,
 
 I OF TRUSTEES 6 
 
 where it lurks in volumes of reports to be 
 counted by hundreds, or lies buried, but 
 with a hideous power of inopportune 
 resurrection, in some partially repealed 
 statute. 
 
 It is terribly easy not only to over- 
 look or (speaking frankly) to be ignorant 
 of a case, but to forget an Act of Parlia- 
 ment. 
 
 Towards the end of last sittings and 
 almost at the close of a case relating to 
 Trustees then being tried in the Chancery 
 division, it became apparent from an 
 observation made from the bench that all 
 the four counsel engaged in the case, 
 learned and experienced men as they 
 were, had not considered the provisions 
 of the most recent Trustee Act, that of 
 1894, though such provisions bore directly 
 upon the subject matter. 
 
 I advise the young practitioner which- 
 ever volume of the Law Reports he may 
 choose to neglect, not to let it be the one 
 
 B 2
 
 4 THE DUTIES AND LIABILITIES lect. 
 
 containing the statutes. Nobody knows 
 what oocs on in Parliament— our laws 
 are reformed in the dead of night in 
 silence and obscurity — yet none the less 
 are these statutes, unless wholly unintelli- 
 gible, l)inding alike upon the most head- 
 strong and self-opinionative of County 
 Court judges, and upon those sublimer 
 beings who, regardless of authority, oc- 
 cupy the scarlet benches of the House of 
 Lords. 
 
 But if I am oppressed by the difficulty 
 of my suljject, I am encouraged both by 
 its importance and its personal interest. 
 
 I am addrcssino- those who are or who 
 
 o 
 
 hope shortly to l)ecome lawyers ; in other 
 words I am addressing those who are 
 already or are almost certain to become 
 Trustees. 
 
 Here 1 have an advantasxe over Mr. 
 Willis, and I must make the most of it. 
 1 liave never, nervous and timid man 
 that I am, drawn a Ijill, or accej^ted a bill,
 
 I OF TRUSTEES 
 
 or endorsed a bill, and unless I strangely 
 misread my destiny, I shall never do any 
 of these things ; but despite his nervous- 
 ness and timidity, the unhappy being 
 who addresses you is the legal personal re- 
 presentative of nine deceased persons and 
 the Trustee of five marriage settlements. 
 
 It is our fate ; we can hardly hope to 
 resist it, and therefore to study the subject 
 becomes if not a pleasant, at all events a 
 pressing duty. The chart I have to draw 
 is of waters through which most of you 
 will have to plough your way. 
 
 First, let me make plain the scope and 
 "purport of this course of lectures. 
 
 I do not propose to inflict upon you 
 any learning as to uses and trusts before 
 the Statute 27, Henry VIII. ch. 10, or 
 after it. 
 
 I hope I shall never be guilty of 
 speaking disrespectfully of our old law, 
 the ancient learning. I would far sooner 
 spend an evening or tw^o re-reading
 
 6 THE DUTIES AND LIABILITIES lect. 
 
 Mr. Sanders' flimous essay on Uses and 
 Trusts, a treatise rendered delightful by 
 the precision of its language quite apart 
 from the fascination of its theme, than 1 
 would lose my time and temper over 
 many of the novels of the day ; but it 
 so happens that these lectures of mine as 
 I have planned them do not involve the 
 old law. 
 
 I need not do more than remind you 
 of the familiar classes into which trusts 
 are divided, for all this you can more 
 readily read for yourselves in the early 
 pages of Mr. Lewin's now swollen volume, 
 or in Mr. Godefrois' later work. 
 
 A trust is a confidence reposed in and 
 accepted by some person or persons, 
 ;iii<l it is an Express Trust when it 
 has been intentionally and deliberately 
 created, as when any one gives away 
 property to another but at the same time 
 declares that such property shall be held 
 or applied in a particular way for the
 
 I OF TRUSTEES 7 
 
 benefit of some person or persons other 
 than the formal donee, or of some other 
 person or persons as well as of the donee. 
 If this transaction is done once for all in a 
 completed form, it is an Executed Ex- 
 press Trust, but if it requires to be 
 supplemented by further acts on the part 
 of the creator of the trust, it is called an 
 Executory Express Trust. 
 
 Implied Trusts are trusts which are 
 inferred by minds trained in equitable 
 doctrines either from language employed 
 during a transaction or from the circum- 
 stances which surround the transaction. 
 An Implied Trust gives effect to an 
 intention attributed to the parties. 
 
 Resulting and Constructive Trusts are 
 the creatures of equitable rules, and arise 
 by operation of law and have nothing to 
 do with the declarations or supposed 
 wishes of the parties. Examples of these 
 different kinds of trusts are given in all 
 the text books.
 
 8 THE DUTIES AND LIABILITIES lect. 
 
 Only one other classification need be 
 mentioned — Public Trusts and Private 
 Trusts. Public Trusts are Charitable 
 Trusts and tlieir concerns are supposed 
 to occupy a good deal of the ample and 
 well-paid leisure of Her Majesty's 
 Attorney-General. 
 
 With one only of these divers trusts 
 are we concerned, tJie Express Executed 
 Private Trust. 
 
 Trusts of this class are created in the 
 vast majority of instances either by will 
 or by deed. 
 
 Do not go away and say that I said 
 a deed was necessary to create an 
 express executed private trust. I did 
 not say so. No deed is necessary. A 
 trust of personal estate may be created 
 or declared by word of mouth and proved 
 by parol evidence, and in the case 
 of land any document signed by the 
 creator of the trust containing the terms 
 of the trust and indicating the property
 
 I OF TRUSTEES 9 
 
 over which the trust extends will satisfy 
 the Statute of Frauds. 
 
 But for all that I propose to confine 
 your attention, if I am so fortunate as 
 to obtain it, to trusts declared by will or 
 by deed— the deed usually being what is 
 called a marriao;e settlement. 
 
 The Trustees, whose duties and liabil- 
 ities we are to consider, are those persons 
 who, l^eing appointed Trustees of pro- 
 perty by will or by deed, have accepted 
 the office. 
 
 Some old friend has died leaving a 
 wife and seven children, the eldest of 
 whom is fifteen the youngest two, and 
 when the will comes to be read, it 
 turns out that the testator has appointed 
 you an executor and Trustee, and has 
 bidden you, after paying his debts and 
 funeral expenses, to stand possessed of 
 the clear residue of his estate upon 
 trust, either to retain it in its then state 
 of investment, or to sell and re-invest in
 
 10 THE DUTIES AND LIABILITIES lect. 
 
 certain specified securities, to receive the 
 income and pay it to the widow during 
 her life, and after her death to divide 
 the trust estate equally amongst such of 
 the children as being boys shall live to 
 attain twenty-one or being girls shall 
 attain that age or marry under it. Well, it 
 does not do to be disagreeable at funerals. 
 The widow, poor thing, takes you apart 
 and after casually mentioning that she 
 has always liked you the best of her hus- 
 band's friends, tells you how the burden 
 of her sorrows will be lightened if you 
 consent to act. You do consent, and after 
 a glass of sherry and a biscuit, leave the 
 house of your old friend the Trustee of his 
 wife and of his children, and even it may 
 be, of his children's children. 
 
 Or possibly your sister is about to 
 marry a man in whom you see no reason 
 to place any unusual degree of confidence. 
 A settlement is proposed of her small 
 fortune — the trusts l)eing the usual
 
 I OF TRUSTEES 11 
 
 trusts of a marriage settlement, and 
 resembling those I have above briefly 
 indicated. You are asked to be a Trustee, 
 — it would be churlish to refuse — 
 you give your consent, the deed is pre- 
 pared and executed by the necessary 
 parties, the marriage is solemnised, the 
 married couple start for the Riviera or the 
 Isle of Wight, whilst you return to your 
 chambers a Trustee, to find on your table 
 instructions to settle a writ in an action 
 seeking to make some estimable members 
 of the class you have just joined, personally 
 liable to make good a breach of trust. 
 
 I have but one other preliminary ob- 
 servation to make, executors and Trustees 
 are often associated, but they are not the 
 same thing. By our law, men who die 
 possessed of property must have either 
 executors appointed by themselves, or 
 administrators appointed by others to 
 carry on their personce, to wind up their 
 aftairs, pay their funeral expenses and the
 
 12 THE DUTIES AND LIABILITIES lect. 
 
 costs of administration, and so ascertain 
 what (if any) clear residue is left to go 
 either as disposed of by the will or to the 
 next of kin according to law. With this 
 work of adminstration, Trustees as such 
 have nothino; to do. Their duties besfin 
 when the residue has been ascertained, 
 or when any specific sums to which 
 under the will they may as Trustees be 
 entitled, have l^een handed over to them, 
 discharged from all liability to meet the 
 debts and prior obligations of the testator. 
 The law reoulatingr the conduct of execu- 
 tors and Trustees though similar (for an 
 executor though not a Trustee is in a fidu- 
 ciary position) is not identical, their duties 
 being different. Still I cannot promise 
 to keep them c|uite separate all through 
 these lectures, for though an executor 
 is not a Trustee ah initio, he is very often 
 appointed a Trustee as well as an executor, 
 and the precise moment when his duties 
 as an executor come to an end and his
 
 I OF TRUSTEES 13 
 
 duties as a Trustee begin is hard to 
 ascertain. When does he underoo this 
 
 o 
 
 rare law change ? The late Sir John 
 Wickens, a very nice observer, used to 
 tell his pupils that it invariably took 
 place in the dead hours of the night, 
 but so close an investigation is to be 
 deprecated. 
 
 And now I think we are fairly afloat. 
 
 In the syllabus ^ which, by the kindness 
 of the council has been printed and cir- 
 culated, I have referred to important 
 changes recently made in the law relating 
 to Trustees by statute, and to a new 
 temper and disposition shown towards 
 Trustees by the judges of the High 
 Court. 
 
 Our laws, whether made by judges or 
 leoislators in Parliament assembled, re- 
 fleet more or less tardily and clumsily 
 men's feelings and opinions. The Zeit- 
 
 1 This Syllabus is substantially reproduced in 
 the Table of Contents.
 
 14 THE DUTIES AND LIABILITIES lect. 
 
 geist, or Time-spirit, Mr. Matthew Arnold 
 was so fond of, plays round the conscious- 
 ness of judges and legislators no less than 
 of poets and thinkers. 
 
 The changes made by statute will here- 
 after be considered in some detail. 
 
 As to the new temper and disposition 
 I have referred to, I do not hesitate to 
 attribute it to the thrice-blessed aboli- 
 tion of affidavit evidence on the trial of 
 actions in the Chancery division of the 
 Hioh Court of Justice. 
 
 o 
 
 The old Court of Cliancery had many 
 merits, great and striking merits, but it 
 remained for generation after generation 
 an entire stranger to flesh and blood. The 
 " Man from Shropshire," poor MissFlyte, 
 and the rest w^re regarded as mad, and 
 were hustled or wheedled out of court by 
 the ushers and forgotten as quickly as 
 possible. Chancery suits, above all things, 
 required an unruffled atmosphere, and 
 from year's end to year's end, the real live
 
 I OF TRUSTEES 15 
 
 suitor, whose pocket kept the whole thing 
 going, gave no hint of his actual existence. 
 If he were ruined, as he too often w^as, 
 it was done out of sight of judge and 
 counsel. The only person who was ever 
 called upon to witness his grief and 
 dismay was the country solicitor. 
 
 I am just of sufficient standing at the 
 bar to remember, as a student, the flutter 
 of excitement occasioned in the court of 
 a vice-chancellor when, on the hearing of 
 some petition for payment out of funds 
 in court, two or three married ladies 
 would, one Ijy one, be summoned to the 
 bench to hold a whispered colloquy with 
 the judge, who, as its result, usually as- 
 serted that the lady had consented to 
 allow her husband to receive her share. 
 To introduce these ladies to the judge, to 
 tell him their names, and the precise 
 amount of their respective shares, was 
 a piece of business generally supposed to 
 put a heavy tax upon the readiness and
 
 16 THE DUTIES AND LIABILITIES lect. 
 
 resource of a Chancery junior, and it was 
 at all events his nearest approach to the 
 flutter of nisi j^^'ius, or the excitement 
 of cross-examination. 
 
 In this atmosphere it was possible to 
 decree much injustice without becoming 
 painfully aware of it. Something was, 
 with the utmost pains and acumen, 
 evolved from a mass of carefully settled 
 affidavits, which something usually repre- 
 sented nothing that had ever actually 
 taken place anywhere, and to that some- 
 thing so evolved all sorts of direful 
 consequences fraught with disaster to 
 living human beings, were neatly pinned 
 by trained intellects. An order w^as made 
 accordingly and further consideration 
 adjourned. 
 
 Now it is all different. The real Trustee, 
 for example, goes into the Ijox — some 
 farmer, it may ])c, who from a sense of 
 cronyship has consented to act as a Trustee 
 under the will of a neighbour with wliom
 
 I OF TRUSTEES 17 
 
 on market days lie has often had a friendly 
 glass. There he stands, ignerant for cer- 
 tain, pigheaded very likely, quarrelsome 
 possibly, but honest, palpably honest and 
 perspiring. He is charged with losses 
 occasioned by his disregard of the strict 
 language of a will he never understood, 
 or for not having properly controlled the 
 actions of his co-trustee, the principal 
 attorney of his market town. 
 
 It may be necessary to ruin such a 
 man, to sell his horses and his cows, his 
 gig and his carts, and to drive him from 
 his old home, but it cannot be done with- 
 out a qualm. Hence has come about that 
 new spirit and temper to which I have 
 ventured to refer at too great length. 
 
 The present time is therefore a good 
 one to survey the subject and to consider, 
 first, the Duties and then the Liabilities 
 of Trustees. 
 
 We begin with Duties, for until there 
 has been a breach of duty there can be 
 
 C
 
 18 THE DUTIES AND LIABILITIES lect. 
 
 no breach of trust and therefore no lia- 
 bility. The case of a Trustee deceived 
 by a cleverly-contrived forgery is an ex- 
 ception to this general rule and will be 
 considered in its place. 
 
 No breach of duty — no breach of trust. 
 A trust estate may be utterly lost, but 
 unless it was so in consequence of a 
 breach of duty, the Trustee walks away 
 scatheless. 
 
 What then are the duties of a Trustee ? 
 
 The duties placed by me in the fore- 
 front have not usually such prominence 
 given them by the text-writers, nor is 
 this surprising, for the object of text- 
 writers is not so much hortatory as ex- 
 planatory. They are more concerned 
 with expounding the law than with es- 
 tablishing rules of conduct. But my aim 
 is severely practical, and I begin therefore 
 by asserting that the first duty of a 
 Trustee is to make himself acquainted 
 ivith the tertns of his trust.
 
 I OF TRUSTEES 19 
 
 For this purpose he should insist from 
 the first moment upon being provided 
 (of course at the expense of the estate) 
 with a full copy of the will or deed 
 under which he is about to act, and by 
 the terms of which he will thenceforth be 
 held bound, and also with an epitome for 
 readier reference of its chief provisions 
 and powers. 
 
 For a layman the epitome is at least as 
 important as the full copy, for though 
 lawyers' jargon is often most absurdly 
 abused, and, as compared with the jargon 
 of doctors, scientific men, patent agents, 
 stockbrokers, and theologians, is " the 
 well of English pure and undefiled," still, 
 as a matter of fact laymen do find it 
 hard to keep their attention fixed whilst 
 they are perusing a legal document set 
 out at length, particularly if it is not 
 divided (as there is no reason it should 
 not be) into paragraphs. 
 
 Having obtained at the expense of the 
 
 c 2
 
 20 THE DUTIES AND LIABILITIES LECT. 
 
 estate this full copy and epitome, it is 
 the first duty of a Trustee so to read 
 them as to acquire a real knowledge of 
 the trust he has accepted. In ninety- 
 nine cases out of a hundred the trusts 
 will present no difficulty of comprehen- 
 sion to a man of ordinary education, and 
 a Trustee who has once fairly compre- 
 hended his trust, sets out on his voyage 
 with every prospect of making a pros- 
 perous trip. 
 
 But at the risk of pleonasm, I push the 
 matter further home. Not only must the 
 Trustee acquire this knowledge, hut he must 
 never forget it. This is his Second Duty. 
 
 How often does it happen that the 
 newly-fledged Trustee, provided though 
 he may have been, either in consequence 
 of his own prudence or by the zeal of a 
 solicitor (not unmindful of costs), with 
 both a copy and an epitome of the will 
 or deed under which he acts, forthwith 
 and after but a hasty perusal, proceeds
 
 I OF TRUSTEES 21 
 
 to bury these documents at the very 
 bottom of a tin box, which is shoved 
 away in some rarely visited corner and 
 locked with a key not always forth- 
 coming. There they remain for years, 
 unconsulted and unthought of until, it 
 may be, complaint is made, and an action 
 threatened for a breach of trust. 
 
 The wise Trustee keeps these inform- 
 ing documents in the same drawer as his 
 cheque-book, and thus secures himself 
 from forgetting their existence ; whilst 
 not infrequently, in those idle moments 
 which will occur in the life of the busiest 
 man, he refreshes his memory by glancing 
 over their contents. 
 
 I should not blame, but applaud the 
 man, who, being a Trustee under 
 numerous wills or deeds, had the 
 various Investment Clauses copied, 
 framed, and hung over his wash-hand- 
 stand basin, as hard reading men in my 
 time at Cambridge used to do with their
 
 22 THE DUTIES AND LIABILITIES lect. 
 
 Paley sheets. But if he takes this step 
 it must be at his own expense. 
 
 An enormous number of breaches of 
 trust are occasioned either by ignorance 
 or by forgetfulness of the actual contents 
 of the documents creatine: the trust. 
 
 Simple as duties one and two may 
 seem to be, and indeed are, their obser- 
 vance would prevent a large proportion 
 of the breaches of trust usually com- 
 mitted by honest Trustees. 
 
 The third duty of a Trustee is to 
 adhere to the terms of his trust in all 
 things great and small, important, and 
 seemingly unimportant. This is his very 
 plainest duty ; no Trustee would ever 
 deny it, or pretend to be ignorant of it, 
 yet it is his hardest, unless from the very 
 beginning he makes up his mind to it, 
 and then it is as easy as eating bread 
 and butter. 
 
 The position of a Trustee tempted to 
 commit a breach of trust by the impor-
 
 I OF TRUSTEES 23 
 
 tunity of widows or the necessities of 
 orphans is not so very heartrending — if 
 only he recognises from the first wliat 
 he ought to recognise, namely, that he 
 has no right to make a new will for a 
 dead man or to depart from the contents 
 of duly executed deeds. Non possumus 
 is the one and the only answer for 
 badgered Trustees to give when pressed 
 to sell out London and North Western 
 stock and to purchase shares in South 
 African Gold Mines. Never argue or 
 reply to arguments, but barricade your- 
 self behind your will or your deed and 
 whilst profoundly regretting your in- 
 ability to oblige, refuse to budge a foot. 
 
 The storm will eventually blow over, it 
 may for a few days rain black-edged 
 envelopes on your table, full of domestic 
 details of increased expenditure — now 
 Jack is at school, and Jane has to have a 
 resident governess — but no7i possumus 
 will carry you through, and after a while
 
 24 THE DUTIES AND LIABILITIES lect. 
 
 there will be once more peace in your 
 Israel. 
 
 To behave like this is not to be can- 
 tankerous but to be honest, not to be pig- 
 headed but to be wise. Of course, if the 
 case is so urgent as really to excite your 
 genuine comjDassion, there is nothing in 
 the rules either of law or of equity to 
 prevent a Trustee out of Ins own 2')^'oper 
 moneys providing for the necessity of his 
 beneficiaries, and if he does so he may 
 possibly win their gratitude, but the 
 ordinary way of being open-handed with 
 other people's money seldom gathers any 
 harvest save discontent, dispute, and 
 litigation. 
 
 Now had my audience been composed 
 of laymen I should be sorely tempted to 
 bring my whole course of lectures to an 
 abrupt but I hope not wholly ineftective 
 conclusion. The three duties I have 
 stated, acquaintance, rcmeml)ran(;c, obedi- 
 ence, are in this matter the law and
 
 I OF TRUSTEES 25 
 
 prophets, for no doubt, whenever a 
 Trustee is confronted with an actual 
 difficulty, pr is threatened with litigation, 
 he has but one course open to him — to 
 consult his solicitor and to do what he is 
 told. 
 
 But addressing as I do lawyers, I must 
 abandon generalities and descend to 
 details, I do so with some genuine 
 reluctance, for the moment we come to 
 consider cases and even statutes, we are 
 apt to lose sight of those simple ele- 
 mentary duties, w^hich none the less lie at 
 the root of the matter. The native hue 
 of our resolution never to commit a breach 
 of trust becomes " sicklied o'er with the 
 pale cast of thought" as we study nice 
 distinctions between what is and what is 
 not a breach of trust. 
 
 But bidding a final farewell to primitive 
 truth, I approach the fourth duty of a 
 Trustee. 
 
 The fourth duty of a Trustee is to take
 
 26 THE DUTIES AND LIABILITIES lect. 
 
 as much care of the trust j^^'operty as 
 being a prudent man of business he is 
 accustomed to take of his own.^ 
 
 Lord Nortliington indeed, who was a 
 very strong man and an able thougli 
 somewhat hastily got up lawyer, electri- 
 fied Lincoln's Inn more than a hundred 
 years ago by this obiter dictum. " No 
 man can require or with reason expect 
 that a Trustee should manage another's 
 property with the same care and discre- 
 tion as he would his own," but, however 
 shrewd this remark may be as an apothegm 
 or criticism of life, it is bad law, and it is 
 never cited save for the purpose of 
 receiving censure. 
 
 ^ 'The duty of a Trustee is not to take such 
 ' care only as a prudent man would take if he had 
 ' only himself to consider ; the duty rather is to 
 ' take such care as an ordinary prudent man would 
 * take if he were minded to make an investment 
 ' for the benefit of other people for whom he felt 
 'morally bound to provide,' per Lindley, L.J., 
 Whiteley and Learoyd, 33 Chy. Div. 355.
 
 I OF TRUSTEES 27 
 
 " A Trustee," says Mr. Lewin, after 
 shuddering at tlie frank audacity of Lord 
 Northington, " is called upon to exert 
 precisely the same care and solicitude on 
 behalf of his cestui que trust as he would 
 do for himself, but a greater measure than 
 this a Court of Ec^uity does not exact." 
 
 With great deference to Mr. Lewin 
 this is wrong, not as wrong as Lord 
 Northington, but still wrong. It would 
 be no answer for a Trustee to say that he 
 had bestowed the same degree of care and 
 solicitude upon trust matters as he was 
 accustomed to bestow upon his own, 
 unless he could also go on and show that 
 in his own affairs he acted as a prudent 
 man of business of the day is supposed to 
 be accustomed to act. 
 
 Therefore in considering this fourth 
 duty we have to keep in our minds, and 
 if we are Trustees observe in our conduct, 
 rules of business, maxims of behaviour. 
 How does a prudent, reasonably timid,
 
 28 THE DUTIES AND LIABILITIES lect. 
 
 and justly distrustful man anxious to 
 avoid loss transact his own business ? It 
 is far easier to ask this question than to 
 answer it. 
 
 The bulk of business in this country is 
 carried on carelessly. A distinguished 
 judge has told me that sitting in the 
 Court of Appeal he once had to listen to 
 a learned Ijrother denouncing from the 
 bench as " grossly negligent," a course of 
 conduct habitually pursued by the dis- 
 tinguished judge himself in transacting 
 affairs for himself of a similar kind. 
 
 The truth is that in England business 
 is conducted on the principle that most 
 men are honest, and the larger a man's 
 transactions are, and the higher the 
 character of his usual associates in busi- 
 ness, the less mindful he is apt to become 
 of rules of conduct which are observed 
 l)y men of scantier fortune or less exalted 
 character. A busy man in a large way of 
 business prefers to run the risk of making
 
 I OF TRUSTEES 29 
 
 a few bad debts, and having to put up in 
 consequence with occasional loss than 
 perpetually to hamper and pester himself 
 with tiresome precautions. He is his own 
 master, and prefers to do business in his 
 own way, and at his own risk. But a 
 Trustee is not entitled thus to endanger 
 his trust estate — he must run no unneces- 
 sary or unusual risk. 
 
 But the question, How does a prudent 
 man of business behave who is not anxious 
 to save himself the trouble of proper pre- 
 cautions ? is one of difficulty, and to some 
 extent, as habits and customs of business 
 alter and grow, one which may be an- 
 swered differently at different times. For 
 example — take the case of transmitting 
 trust moneys. The now legalised custom of 
 crossed cheques enables such moneys to be 
 transmitted without risk in a manner which 
 would formerly have been impossible. 
 
 If a Trustee were honest and prudent, 
 and did all the work of the trust himself,
 
 30 THE DUTIES AND LIABILITIES lect. 
 
 110 losses except unavoidable losses would 
 ever occur to tlie estate, but this is what 
 has become out of the question. 
 
 Nobody who has anything else to do 
 could administer the smallest estate with- 
 out employing an agent or agents, and if 
 the estate includes lands to sell and 
 stocks or shares to convert, unless the 
 Trustee were both an auctioneer and a 
 stockbroker employ agents he must, and 
 if you employ agents you must trust 
 agents within the scope of their proper 
 authority. The solicitor must have the 
 deeds in order that he may prepare ab- 
 stracts of title or particulars and con- 
 ditions of salc.^ The auctioneer must be 
 
 1 Trustees should not permit deeds to remain in 
 their solicitors' custody for a longer period than is 
 necessary. Whilst dealings with the estate are 
 continvious, the deeds relating to that estate may 
 properly be left with the solicitors. But as soon 
 :is that necessity ceases the Trustees should regain 
 possession of tlie deeds.
 
 I OF TRUSTEES 31 
 
 allowed to receive the purchaser's de- 
 posits. The stockbroker must be supplied 
 with the scrip, and allowed to complete 
 the purchase or sale. The bankers must 
 be allowed to receive the estate when 
 converted into cash, and pending rein- 
 vestment or distribution. All these acts 
 involve parting with the custody of the 
 trust estate, or parts of it, and if the 
 solicitor or the auctioneer, or the stock- 
 broker play you false, or if the bank 
 breaks, a loss ensues for which the Trus- 
 tee will or will not be held responsible 
 accordinsj to whether the confidence he 
 has placed in those agents was or was not 
 warranted by the ordinary course of 
 business as conducted by prudent men. 
 
 There is nothing new in this law, for in 
 the celebrated case of Ex parte Belchier, 
 Ambler, page 218, it was held by that 
 great judge. Lord Harclwicke, that 
 Trustees are not bound personally to 
 transact such business connected with,
 
 32 THE DUTIES AND LIABILITIES lect. 
 
 or arising out of, the proper duties of 
 their trust, as according to the usual 
 mode of conducting business of a like 
 nature, persons acting with reasonable 
 care and prudence on their own account 
 would ordinarily conduct through mer- 
 cantile agents, and that when, according 
 to the usual and res:ular course of such 
 business, moneys receivable and payable 
 ought to pass through the hands of such 
 mercantile agents, that course may 
 properly be followed by Trustees, though 
 the moneys are trust moneys, and that if 
 under such circumstances, and without 
 any special misconduct or default on the 
 part of the Trustees a loss takes place 
 through any default or neglect of the 
 agent employed, the Trustees are not 
 liable to make good such loss. The 24th 
 Section of the Trustee Act of 1893 
 embodies this law, and provides that a 
 Trustee shall not be answerable for the 
 acts, receipts, neglects, or defaults, of any
 
 I OF TRUSTEES 33 
 
 banker, broker, or other person with 
 whom any trust moneys or securities may 
 be deposited, unless the same happen 
 through his own wilful default. 
 
 The question in each case, therefore, 
 always must be whether a Trustee has, 
 or has not, throughout the transaction 
 which has resulted in loss, followed the 
 usual and regular course of business 
 adopted by prudent men in transactions 
 of a similar nature. 
 
 In the now well-known case of Speight 
 V. Gaunt, which was ultimately decided 
 by the House of Lords in 1883, and is 
 reported in 9 App. Cas., p. 1, the law 
 expounded by Lord Hardwicke in the 
 middle of the last century, was adapted 
 and confirmed, and, as it were, carried 
 down to date by Lords Selborne, Black- 
 burn, and Watson. 
 
 In that case, a broker employed by a 
 Trustee to l)uy securities of a Municipal 
 Corporation, authorised by the trust, 
 
 D
 
 34 THE DUTIES AND LIABILITIES lect. 
 
 gave the Trustee ca bouo;lit note wliicli 
 purported to be subject to the rules of 
 the London Stock Exchange, and obtained 
 the purchase-money from the Trustee 
 upon the representation that it was pay- 
 able the next day, which was the next 
 account day on the London Exchange. 
 The broker never procured the securities, 
 but appropriated the money to his own 
 use, and finally became insolvent. Some 
 of the securities were, as a matter of fact, 
 procurable only from the Corporation 
 direct, and were not purchaseable in the 
 market, and there was some evidence 
 that the form of the bought note might 
 have suggested to an expert that the 
 loans were to be direct to tlie Corpora- 
 tion, but there was nothing, as the House 
 of Lords held, on the facts calculated to 
 excite suspicion in the mind of the 
 Trustee, or of an ordinary prudent man 
 of business, and it was accordingly held 
 that tlie Trustee was not liable to the
 
 I OF TRUSTEES 35 
 
 cestui que trust for the loss of the trust 
 funds. 
 
 Unhappily, human affairs have grown 
 too complicated to admit of the prepara- 
 tion of rules of conduct for prudent men, 
 wliich should be so framed as to cover 
 all the particular transactions Trustees 
 are called upon to conduct ; but I have 
 often wondered we are as ill-supplied as 
 we are with such manuals. The Com- 
 plete Tradesman of Daniel De Foe, 
 though not free from that irony which 
 seldom forsook its author, is a kind of 
 book wliich has been too scantily 
 reproduced in other branches of 
 business. 
 
 D 2
 
 II 
 
 In my first Lecture, after some pre- 
 fatory observations, I expounded to the 
 best of my ability four of the most 
 important duties of a Trustee. Do not 
 allow the first three to be obliterated 
 from your minds, namely, acquaintance 
 with, remembrance of, and o])edience to, 
 the terms of the trust ; for were these 
 duties observed, rare indeed would be 
 the occasions when Trustees should be 
 required to make good, out of their own 
 pockets, losses to their trust estate. 
 
 The fourth duty of a Trustee : — 
 namely, to take as much care of the 
 trust property as, being a prudent man
 
 LECT. 11 THE DUTIES OF TRUSTEES 37 
 
 of business, lie is accustomed to take 
 of his own, was explained in connec- 
 tion witli the early case of re Belchier, 
 in Amblers Reports (a decision of 
 that great judge, Lord Hardwicke, all of 
 whose reported judgments you will do 
 well to read, for well do they deserve the 
 praise that has been lavished upon them 
 as " prodigies of learning and industry " ), 
 and with the recent case of Sj^eight v. 
 Gaunt in the House of Lords. 
 
 I hope those of you who are seriously 
 minded to obtain benefit from this course 
 of Lectures have already read for your- 
 selves both these cases in their proper 
 places. It would be easy for me to fill 
 up my hour by reading long extracts 
 from the Reports, but as no such labour 
 on my part would save you the trouble, 
 if you wish really to become acquainted 
 with the law, of studying the Reports 
 for yourselves, I prefer, though it is a 
 great deal more trouble, to express as
 
 38 THE DUTIES AND LIABILITIES Lect. 
 
 much as possible in my own way and 
 in my own language w^liat I take to be 
 the law, and to give you the references 
 that will enable you to verify or correct 
 my impressions. 
 
 The fifth duty of a Trustee is in all 
 investments to observe to the letter the 
 provisions of the trust-deed, or will, and 
 in the case of investment on mortgage 
 of real or leasehold estate, the require- 
 ments of Parliament. 
 
 This subject of investments naturally 
 stands out very prominently amongst the 
 duties and liabilities of Trustees, for (so 
 some of my friends inform me) it is 
 very difficult to know how to invest 
 money. 
 
 But a Trustee is really in some respects 
 in a more advantageous position than a 
 private owner, because he has his 
 deed, or will to fall back upon. By 
 that alone is he judged — keeping within 
 the scope of his trust so long as he is
 
 II OF TRUSTEES 39 
 
 honest and does not deliberately inflict 
 loss upon the estate, he runs no risk 
 whatever. 
 
 Our first duty then is to consider the 
 investment clauses usually to be found 
 in modern wills and deeds. They may 
 be divided into two classes — wide clauses, 
 allowing a great range of investment, 
 and narrow clauses, greatly restricting 
 investment. For examples of wide 
 clauses of investment, I will refer you to 
 pages 68 and 70 of Mr. Wolstenholme's 
 Forms and Precedents, and to Key 
 and Elphinstone's Precedents, Vol. II. 
 
 Wide clauses, speaking generally, 
 include almost every class of rational 
 investment, and authorise a great many 
 investments which certainly do not 
 belong to what on the Stock Exchange 
 are called " gilt-edged " securities. Nar- 
 row clauses vary according to the 
 opinions or prejudices of the testator or 
 settlor. I have drawn wills in which no
 
 40 THE DUTIES AND LIABILITIES lect. 
 
 investment of the trust funds was 
 allowed, save in bank annuities. As a 
 rule investment clauses run upon very 
 similar lines, and since the Trustee Act, 
 1893, which by its first clause authorises 
 Trustees, unless expressly forbidden hy 
 the instrument ci^eating the trust, to 
 invest any trust funds in their hands in 
 any of the investments specified in the 
 clause, it may be said that in the 
 majority of cases Trustees have power to 
 make any of the investments mentioned 
 in that clause, though sometimes their 
 discretion is restricted by the terms of 
 the instrument creating the trust. 
 
 But you will not fail to notice from 
 the language of the Act itself, that it is 
 the instrument which in the first instance 
 governs the investment. There is no 
 restriction upon the power of testators 
 and settlors to frame investment clauses 
 for themselves. They may throw open 
 their clauses as wide as possible, or they
 
 n OF TRUSTEES 41 
 
 may close tliem as narrowly as they 
 choose. 
 
 Therefore, in considering the duty or 
 corresponding liability of a Trustee in 
 the matter of an investment, go first of 
 all to the instrument creating the trust, 
 and learn from it what may or may not 
 be done. 
 
 But for the purposes of my Lecture 
 I will assume that we have before us a 
 will or deed which authorises the Trustees 
 either in express terms or negatively by 
 not forbidding them, to invest the trust 
 funds in their own names in the securities 
 or any of them mentioned in the first 
 clause of the Act of 1893. 
 
 The first securities named in the Act 
 are Parliamentary stocks or public funds 
 or Government securities of the United 
 Kingdom. These may pass without 
 remark, being " gilt-edged " securities. 
 But about the second class of securities 
 authorised by the Act a good deal has to
 
 4'2 THE DUTIES AND LIABILITIES LECT. 
 
 be said. These are " real oi" heritahle 
 securities m Great Britain or Ireland." 
 
 Now first observe tliis means by way 
 oi mortgage and not by way oi purchase. 
 Trustees are not, in tlie absence of 
 express powers, authorised to huy land 
 as an investment, though they may 
 as mortgagees foreclose and so become 
 the owners both by law and in equity of 
 real estate. 
 
 You will observe that the statute in- 
 cludes Scotland and Ireland. As an 
 Imperial statute it could perhaj)s hardly 
 do otherwise, but apart from the Act 
 of 1893 a power in an English will or 
 deed to invest on real securities includes 
 only England and Wales, whilst the 
 Scotch Statute corresponding to the 
 Trustee Act 1893 does not authorise the 
 investment of Scotch moneys in Ireland. 
 
 Many testators and settlors take pains 
 to exclude Ireland from their investment 
 clauses, and in doing so no doubt give
 
 II OF TRUSTEES 43 
 
 themselves the pleasure of indulging in 
 their political convictions, but I am not 
 aware that there is any reason to suppose 
 that mortgagees of Irish estates have of 
 late years suffered proportionately any 
 greater losses either of capital or interest 
 than morto'affees of Enolish estates. But 
 anybody may well wish to keep out of 
 the Irish Land Courts. 
 
 What is popularly called a second 
 7no7'tgage is not within either the 
 Parliamentary section or the usual in- 
 vestment clause ; and this for a very 
 good reason. The subject matter of a 
 second mortgage is not land but only a 
 right by paying off a previous incum- 
 brance to secure the position of a true 
 morta;ao;ee. It follows from this that a 
 second mortgagee has not the custody of 
 the title-deeds, which always are (or 
 ought to be) in the possession of the first 
 mortgagee. 
 
 What is called a contributory mort-
 
 44 THE DUTIES AND LIABILITIES lect. 
 
 gage is also " taboo." A contributory 
 mortgage is a first mortgage rightly 
 enough, but as the moneys advanced by 
 the mortgagees have been produced by 
 various persons clubbing together their 
 resources and taking one security for the 
 total amount in the names of all the 
 borrowers, it has been held not to be 
 a proper investment for trust money " in 
 the name or names of the Trustees." 
 Webb V. Jonas, 39 Ch. Div. 660. 
 
 By virtue of the terms of the 5 th 
 clause of the Trustee Act 1893, a Trustee 
 who is authorised to invest in real 
 securities unless expressly forbidden by 
 the instrument creating the trust may 
 invest on mortgage of leasehold property 
 held for an unexpired term of not less 
 than 200 years and not su])ject to a 
 reservation of rent greater than a shilling 
 a year, or to any right of redemption 
 except for nonpayment of rent. 
 
 Let us now consider the case of an
 
 II OF TRUSTEES 45 
 
 advance of trust money on a first 
 morts^age in wliicli the Trustees are alone 
 interested, of freehold or copyhold 
 estates or of leasehold estate coming 
 within Section 5. How is such a 
 transaction to be carried out ? 
 
 We already know from our Fourth 
 Duty that the Trustee must act with 
 ordinary prudence — but happily now since 
 the Act of 1893, direct guidance has been 
 given us. Trustees are not left altogether 
 to find out for themselves what are rules 
 of prudence in such a transaction. Prior 
 to the Act of 1893 there was well known 
 in Lincoln's Inn what was called an 
 " ordinary rule " to the effect that 
 Trustees should not lend more than two- 
 thirds of the value on freehold land and 
 one-half on land and buildings used 
 in trade, and certainly this was a rule 
 which nowadays, at all events, does not 
 err on the side of excessive prudence. 
 See Frij v. Tapson, 28 Ch. Div. 268. It
 
 4G THE DUTIES AND LIABILITIES LECT. 
 
 was also a rule of conduct that the 
 Trustees should not lend except upon the 
 report of some valuer who was independ- 
 ent of the borrower. 
 
 But now it is not necessary to consider 
 the law prior to the new Act which, on 
 this subject at all events, amounts to a 
 code. 
 
 Section 8 of the Trustee Act, 1893, 
 Sub. -sec. 1, reads as follows : — 
 
 " A Trustee lending money on the security of 
 any property on whicli he can Lawfully lend, shall 
 not be chargeable with breach of trust by reasoti 
 only of the proportion borne by the am omit of the 
 loan to the value of the property at the time when 
 the loan was made, provided that it appears to the 
 court that in making the loan the Trustee was 
 acting upon a report as to the value of tlie property 
 made by a person whom he reasonably believed to 
 be an able, practical surveyor or valuer instructed 
 and employed independently of any owner of the 
 property, whether such surveyor or valuer carried 
 on business in the locality where the property is 
 situate or elsewhere, and that the amount of the 
 loan does not exceed two equal third parts of the 
 value of the property as stated in the i-eport, and
 
 II OF TRUSTEES 47 
 
 that the loan was made under the advice of the 
 surveyoi^ or valuer expressed in the report." 
 
 On this section Jive points may be 
 made. First, the property must be 
 within the trust — that is to say, it must 
 ])e property on which the Trustee can 
 lawfully lend, and therefore if by the deed 
 or will the Trustee can only lend on real 
 securities the property must belong to 
 that class. Second, there must be a 
 report of value by a practical surveyor 
 or valuer. Third, such surveyor or 
 valuer must be instructed and employed 
 independently of any owner of the 
 property. Fourth, the loan must not 
 exceed two-thirds of the value of the 
 property as stated in the report. Fifth, 
 the surveyor or valuer must expressly, 
 and in his report, advise the loan to be 
 made. 
 
 This section is a bulwark for the 
 Trustee. If he first satisfies himself that 
 the proposed security falls within the
 
 48 THE DUTIES AND LIABILITIES lect. 
 
 terms of his trust, and then proceeds to 
 take the steps so clearly indicated and 
 pointed out to him by the section, he 
 will run no risk for ha vino; made the 
 investment. 
 
 But nothing can get rid of the obliga- 
 tion of a Trustee to consider for himself 
 the character and nature of the security 
 he proposes to take by way of mortgage, 
 although if he has the report of the 
 surveyor referred to in Section 8, he need 
 not concern himself with a question of 
 value. For example : A Trustee must 
 remember in considering a proposed secur- 
 ity that a trade or business carried on 
 upon land, is not a real security within 
 the meaning of an Investment Clause, and 
 he must therefore distinguish, and require 
 the surveyor he employs to distinguish, 
 between the value of the land forming 
 the real security, and the value of any 
 trade or l)usiness carried on thereujjon 
 considered as a going concern. The lead-
 
 11 OF TRUSTEES 49 
 
 ing case upon this subject is Learoyd v. 
 Wliiteley, decided by the House of Lords 
 in the year 1887, and reported in 
 
 12 Appeal Cas., p. 727. In that case the 
 mistake honestly made by the Trustees 
 and l)y the surveyor they employed, was 
 that neither they nor he distinguished 
 between the value of the land forming 
 the security and the value of a brick- 
 making business carried on upon the land 
 considered as a going concern. In reading 
 this case, as you should do carefully, do 
 not forget that it was decided before the 
 Act of 1893, and as you read the report 
 keep asking yourself this question — How 
 would the present law, as established 
 by the Act of 1893, have affected the 
 decision ? 
 
 The initial question, Is the proposed 
 security within the trust ? must always be 
 for the Trustees, who, satisfied that it is, 
 should also ask themselves these further 
 questions. Is there anything special, or 
 
 E
 
 50 THE DUTIES AND LIABILITIES ldct. 
 
 unusual, or risky in the situation or char- 
 acter of the property ? If satisfied that 
 there is not, then the Trustees have only to 
 observe to the letter the requirements of 
 the statute, and if they do this they run 
 no further risk whatever for having 
 accepted the security, although it may 
 hereafter become their duty to realise it. 
 
 I will now consider the requirements in 
 a little more detail. 
 
 Fii'st the Report. This does not mean 
 that the Trustees are to pay the costs of 
 the report out of their estate. By no 
 means. In this country, and I expect in 
 every other, the borrower pays all. No 
 doubt an intending borrower, who believes 
 himself to be the owner of a very eligible 
 property, upon the security of which he 
 has no douljt he can obtain from a private 
 lender, who is not bound by statutory 
 requirements, the loan of which he stands 
 in need, is often unwilling to make him- 
 self liable to pay for a report by some
 
 II OF TRUSTEES 51 
 
 valuer he may not know, and who may 
 prove so unreasonable as not to put a 
 sufficiently high value upon the security 
 to justify Trustees in proceeding with the 
 transaction. If the report is favourable, 
 the borrower will not usually object to 
 pay for it, but if in consequence of the 
 report the Trustees refuse to lend it is 
 hard upon the borrower to have to pay 
 for the very document which prevents him 
 getting the money he requires. 
 
 This objection is sometimes pressed 
 upon Trustees as a reason for departing 
 from the obligation imposed by statute 
 — but they are fools if they do. Such a 
 report is a sine qua non. Trustees, be it 
 observed, need not lend on mortgage at 
 all unless they choose. They have, as a 
 rule, a wide range of investment from 
 which to select. If they do invest on 
 mortgage, which is always an anxious 
 transaction, they must pay regard to the 
 statute, unless by the terms of their trust 
 
 E 2
 
 52 THE DITTIES AND LIABILITIES lect. 
 
 deed tliey are expressly relieved from the 
 obligation of doing so. 
 
 The surveyor or valuer must be chosen 
 by the Trustees themselves, and he must 
 not be in any way acting for, or on be- 
 half of, the Ijorrower.; or if there is more 
 than one borrower, of any of them. There 
 is never any difficulty in finding out the 
 names of respectable and experienced 
 surveyors, and, although the statute does 
 not require they should carry on their 
 business in the locality in which the 
 property is situate, it is usually wisest to 
 employ men who have knowledge of the 
 district. 
 
 The surveyor or valuer employed ought 
 to Ije distinctly told in writing that the 
 moneys in question are trust moneys, and 
 that his report is to be made, having 
 regard to the provisions of Section 8 of 
 the Trustee Act, 1893, and he must be 
 required, at the end of ]iis valuation, for- 
 mally to advise the Trustees that they
 
 ir OF TRUSTEES 53 
 
 would be safe in advancing two-thirds of 
 the amount of the valuation. The report 
 should be signed by the surveyor or valuer 
 in his individual name, and not in that of 
 any firm of which he may be a member. 
 It is just as well not to tell the surveyor 
 or valuer the amount of the proposed 
 loan. 
 
 Having obtained such a written report 
 the Trustees must of course act upon it, if 
 they act at all, and not lend a farthing 
 more than the two equal thirds of the 
 valuation. 
 
 Another consideration arises. Suppose 
 Trustees authorised to lend money on 
 mortgage have been properly advised by 
 an independent surveyor or valuer that 
 they may safely lend a specified sum of 
 money on the security of a particular 
 property, and that they have done so. 
 Years go by — the interest is duly paid, but 
 depreciation in value sets in, and continues 
 to increase, so that loss in realisation is
 
 54 THE DUTIES AND LIABILITIES lect. 
 
 ultimately incurred. Are the Trustees 
 liable for a breach of trust in not having 
 realised ? In other words, was it the duty 
 of tlie Trustees in the early days of the 
 depreciation to call in the mortgage, and 
 failing that to exercise their power of sale ? 
 It is quite clear that Trustees are not 
 bound to realise a security the moment 
 there is a depreciation in its capital value. 
 Who is to know the precise moment when 
 depreciation begins, or who dare say when 
 it has reached its height ? Looking back 
 upon a series of years this may be done, 
 but at the time it is impossible. Never- 
 theless, apart from the Act of 1894, to 
 which I am just about to refer, there can 
 be no doubt that Trustees may in some 
 circumstances hold on too long and con- 
 sequently be guilty of a breach of duty 
 in not having called in or realised their 
 security, even though at the time when 
 the investment was originally made it 
 was a good one. But I do not think mere
 
 II OF TRUSTEES 55 
 
 non-realisation can ever be a breach of 
 trust unless the facts as to depreciation 
 have been clearly established to the 
 Trustee's knowledge in such a manner 
 as to make continued retention ol)viously 
 improvident and reckless. 
 
 The Trustee Act of 1894 provides by 
 its 4tli Section, that a Trustee shall 
 not he liable for breach of trust by 
 reason only of his having held an in- 
 vestment which has ceased to be an 
 iiivestment authorised by the instrument 
 of trust or by the general law. The 
 precise significance of this clause has 
 not yet been judicially determined, but 
 it clearly governs such a case as the 
 one I have just mentioned. Consequently 
 the mere non-realisation of a security 
 originally good, but which has depre- 
 ciated in value, is no longer a breach of 
 trust. This section has been held not to 
 be retrospective, so if at the date of the 
 passing of the Act a breach of trust
 
 56 THE DUTIES AND LIABILITIES lect. 
 
 hy reason of non-realisation has already 
 been committed, tlie Trustees are not 
 relieved (per Kekewich J. in re Chapman, 
 189G, 1 Chy. 323). 
 
 I may in this place conveniently 
 mention the 9th section of the Act of 
 1893, which is as follows : — 
 
 " Where a Trustee improperly advances trust- 
 money on a mortgage security which would at the 
 time of the inv^estment be a proper investment in 
 all respects for a smaller siim than is actually 
 advanced thereon, the security shall be deemed an 
 authorised investment for the smaller sum, and 
 the Trustee shall only be liable to make good the 
 sum advanced in excess thereof, with interest." 
 
 This enactment, which sufficiently 
 explains itself, is quite new law, and 
 is a rule of great convenience for 
 Trustees. 
 
 Returning to the 1st Section of the 
 Act of 1893, which enumerates the 
 investments Trustees are authorised to 
 make unless expressly forbidden 1)y the
 
 It OF TRUSTEES 5.7 
 
 instrument creatine- the trust. There 
 is not much in this lengthy cLause to 
 engage our attention, though the ^Yhole 
 list should be studied by Trustees and 
 their advisers. This observation may, 
 however, be made. By Sub-section (g) : 
 Trustees may invest trust moneys in the 
 debenture or rent charge, or guaranteed 
 or preference stock of any railway 
 company in Great Britain or Ireland, 
 incorporated by special Act of Parlia- 
 ment, and having during each of the 
 ten years last past before the date of 
 investment, paid a dividend of not less 
 than £3 per cent per annum on its 
 ordinary stock ; and by Sub-section (o) 
 Trustees are authorised to invest trust 
 moneys in any stocks, funds, or securities 
 for the time being authorised for the 
 investment of cash under the control or 
 subject to the order of the High 
 Court. 
 
 The investment of cash under the
 
 58 THE DUTIES AND LIABILITIES lkct. 
 
 control or subject to the order of the 
 High Court, is regulated by Rule 17 
 of Order 22 of the Rules of the 
 Supreme Court, and by that rule as it 
 now stands moneys may be invested in 
 debentures, preference guaranteed, or 
 rent charge stocks of railways in Great 
 Britain or Ireland, having for ten years 
 next before the date of investment paid 
 a dividend on ordinary stock or shares. 
 By Sub-section (g) therefore investments 
 of a particular kind may only be made 
 when a dividend of £3 per cent, has 
 been paid on ordinary stock, but ))y 
 Sub-section (o), and so long as Rule 17 
 remains unaltered, trust moneys may 
 be invested in similar kinds of securities 
 wliicli have paid any dividend on 
 ordinary stocks or shares. 
 
 Having regard to tlie possibility of 
 alteration in tiic rules of the Supreme 
 Court, Trustees making investments of 
 this kind will 1)C well advised to observe
 
 11 OF TRUSTEES 59 
 
 Sub-section (g) rather than to rely upon 
 Sub-section (o). 
 
 In making any new investment, or in 
 changing an old investment for a new 
 one, Trustees should require the stock- 
 broker they may employ to state in 
 ivriting the precise character of the in- 
 vestment he is about to make on their 
 behalf, for there are nowadays so many 
 different kinds of stocks and shares and 
 debentures that it is well to have the 
 actual investment specified in precise 
 lano'uao^e. Trustees should never invest 
 in bonds or other securities payable 
 to bearer. Apart from the great risks of 
 robbery and fraud such an investment is 
 not an investment in their own names 
 within the meaning of the majority of 
 investment clauses. Nice distinctions 
 may be struck between investments " in 
 their names or under their legal control " 
 and " in their names alone." Trustees 
 should give such distinctions a wide berth,
 
 GO THE DUTIES AND LIABILITIES lect. 
 
 and invest the moneys for which they are 
 responsible in their own names and in 
 securities requiring formal signed trans- 
 fers by all their number. 
 
 The sixth duty of a Trustee is to give 
 the persons henejicially interested in the 
 timst such information as to the state of 
 the trust funds and otherwise us they 
 may from time to time require, and to 
 furnish such j^ersons with accounts. This 
 is of course rudimentary law, yet 1 will 
 refer you to a case in the books, because 
 I think you should read it, as an example 
 of the enormous pains and care, cost and 
 cumbrousness of a Chancery suit in the 
 time of Lord Eldon. No one can have 
 any pretension to be considered a lawyer 
 who has not some acquaintance with the 
 old practice and methods. The case I 
 refer to occupies the first ninety pages of 
 the third volume of Mr. Sw^anston's Re- 
 ports, and is the case of Wcdker v. 
 Symonds. In the report you will find
 
 11 OF TRUSTEES 61 
 
 set out at great length a bill in Chancery,^ 
 a joint answer, some several answers, a 
 trust deed, a judgment of Sir Thomas 
 Plumer, the Master of the Rolls, a decree 
 of Lord Eldon's reversing the Master of 
 the Rolls and referrino; certain matters to 
 a master for his report, the master's 
 report, the proceedings before the Lord 
 Chancellor on exceptions and for further 
 directions, and then the judgment of the 
 Lord Chancellor. 
 
 The bill was filed in 1802, and the 
 final judgment of Lord Eldon w^as de- 
 
 ^ "I called on the solicitor whom I had em- 
 ployed in the suit lately commenced against me in 
 Chancery ; and here I first saw that foul monster 
 a Chancery Bill. A scroll it was of forty-two 
 pages in large folio to tell a story which needed 
 not to have taken up forty lines ! And stuffed 
 with such stupid, senseless, improbable lies (many 
 of them quite foreign to the question) as I believe 
 would have cost the compiler his life in any 
 heathen court either of Greece or Rome. And 
 this is equity in a Christian country." — Joltn 
 Wesley s Journal, Nov. 1744.
 
 62 THE DUTIES AND LIABILITIES lect. 
 
 livered at different times in April, May, 
 and June, 1818. A careful perusal of 
 this case — and it is n, very interesting 
 one — will give you considerable insight 
 into old Chancery proceedings and also 
 into the law of Trustees. 
 
 But for my present purpose I must Ije 
 content to quote the observations of Lord 
 Eldon on page 58. He says : — " It is the 
 duty of Trustees to afford to their cestui 
 que trust accurate information of the dis- 
 position of the trust fund — all the informa- 
 tion of which they are or ought to be in 
 possession." And again on page 73 : 
 " He who, undertaking to give informa- 
 tion, gives but half information, in the 
 doctrine of this court, conceals." 
 
 Therefore although my proposition 
 requires no authority, I am glad to give 
 that of Lord Eldon for it. A Trustee 
 must never withhold information. This 
 seems easy, l)ut it is not, for very often 
 the demand for information comes to the
 
 11 OF TRUSTEES 63 
 
 Trustees in a disao-reeable and even 
 
 o 
 
 insulting form. There are still too many 
 solicitors wlio, such is their ignorance, 
 conceive they are best consulting the 
 interests of their clients by writing the 
 most offensive letters it is possible to 
 imagine, imputing motives and half hint- 
 ing at fraud. Either to put such letters 
 into the fire and forget all about them, or 
 to write a furious reply is the alternative 
 which too frequently presents itself to 
 the honest and justly indignant Trustee. 
 But if he is wise he will do neither one 
 nor the other, he will keep the letter and 
 send the information. In the interesting 
 case ofLoivv. Bouveric, 1891, 3 Ch. p. 99, 
 the Lord Justice Lindley says : " The duty 
 of a Trustee is properly to preserve the 
 trust fund, to pay the income of the 
 corpus to those who are entitled to them 
 respectively, and to give all his cestui que 
 trust on demand, information with respect 
 to the mode in which the trust fund has
 
 64 THE DUTIES AND LIABILITIES lect. 
 
 been dealt witli and where it is." The 
 Lord Justice then proceeds to point out 
 that it is no part of the duty of a Trustee 
 to tell his cestui que trust which of the 
 latter's incumbrancers have given notice 
 of their charges, or to assist his cestui que 
 trust in sellino; or mortcao-insi; his bene- 
 ficial interest and in squandering or 
 anticipating his fortune. 
 
 As for accounts, a Trustee must always 
 keep and Ije ready to produce his 
 accounts. He is entitled to professional 
 assistance except it may be in the very 
 smallest and simplest of trusts. This 
 strict course is too often neglected in 
 England. North of the Tweed the 
 proceedings and accounts of a trust are 
 kept with as much formality as those of 
 a well-managed limited company. The 
 agent or writer keeps a minute book, in 
 which is recorded all the meetings and 
 the resolutions of the Trustees. At 
 stated intervals accounts are prepared
 
 n OF TRUSTEES 65 
 
 and vouched and balance .sheets struck 
 and preserved. If in Scotland they are 
 too punctilious, here in England we are 
 too lax, 
 
 A cestui que trust is entitled to inspect 
 the accounts at reasonable times and to 
 see the vouchers, but he is not entitled 
 to a co23y of the accounts save at his own 
 expense.
 
 Ill 
 
 The seventh duty of a Tru.stce is not to 
 make one penny-piece of projit out of 
 the trust business, unless he he a pro- 
 fessional man sp)ecially authorised hy the 
 instrument creating the tinist so to do. 
 
 There i.s no rule of Luv more deeply 
 rooted in our English system of Juris- 
 prudence than this. It is a rule without 
 an exception. It presses very hard upon 
 the natural man whose instinct it always 
 is to make a little money if he can, but 
 it has been applied Ijy the Courts of 
 Equity fearlessly — not only to Trustees 
 of the kind we are now speaking of, ])ut 
 to all 23ersons who stand in a fiduciary 
 relationship to others.
 
 LECT. Ill THE DUTIES OF TRUSTEES (Si 
 
 Nor is the present time one when either 
 Parliament or judges are likely to relax 
 the pressure of the rule in any single 
 respect. The lial)it of secret commissions 
 given and taken every day (so at least it 
 is confidently asserted) by persons in good 
 positions, who account themselves, and 
 are accounted, honest men, is one to l)e 
 scouted by courts of law. It is the plain 
 duty of legislators and judges to hand 
 down from one generation to another (so 
 far as they can) untarnished, and of full 
 authority, those principles of absolute 
 integrity to those who employ you, or on 
 whose behalf you profess to- act, which 
 are not only compatible with prosperity, 
 but are essential to commercial greatness 
 and well-established success. 
 
 If the rule I speak of has such a wide 
 extension, it naturally applies in una- 
 bated force, and unrelaxed Adgour, to 
 express Trustees. 
 
 I could easily enlarge upon this rule 
 
 F 2
 
 68 THE DUTIES AND LIABILITIES lect. 
 
 by citing some of the very numerous 
 cases where it has Ijeen applied ; l)ut 
 these cases are in reality more interesting 
 to the student of human nature than to 
 the lawyer, for they are but a record of 
 the failure of Trustees to make a little 
 money out of their trust. The judgment 
 of Lord Brougham in Docker v. Somes, 
 2 Mylne and Keen, page 655, is an ex- 
 cellent example of the elaborate eloquence 
 of that distinguished man. But it does 
 no more than express in ornate language 
 the rule I have already stated. 
 
 "Wherever," .says Lord Brougham, " a Trustee, 
 or one standing in the relation of a Trustee, viohites 
 his duty and deals with the trust estate for his 
 own behoof, the rule is that he shall account to 
 the cestui que trust for all the gain which he has 
 made. Thus, if trust money is laid out in buying 
 and selling land, and a profit made by tiie transac- 
 tion, that shall go not to the Trustee who has so 
 applied the money, but to the cestui que trust 
 whose money has been thus applied. In like 
 manner (and cases of this kind are more numerous) 
 where a Trustee or executor has used the fund
 
 in OF TRUSTEES 69 
 
 committed to his care in stock speculations, 
 though the loss, if any, must fall upon himself, yet 
 for evei-y farthing of profit he may make he shall 
 be accountable to the triist estate. So if he lay 
 out the trust money in a commercial adventure, 
 as in buying or fitting out a vessel for a voyage, 
 or pvit it in the trade of another person, from 
 which he is to derive a certain stipulated profit, 
 although I will not say that this has been decided, 
 I hold it to be quite clear that he mvist accovmt for 
 the profits received by the adventure or from the 
 concern." 
 
 But not only must Trustees not employ 
 their trust funds in speculations on their 
 own account, but they may not (unless 
 specially authorised so to do) make any 
 deductions from profits properly earned 
 by way of gift to themselves, or on ac- 
 count of the trouble they have expended, 
 or as a small reward for the benefits that 
 have accrued through their exertions to 
 their trust estate. A beneficiary, if of 
 full age and under no legal incapacity, 
 can no doubt ao;ree with his Trustee to 
 uive him somethino- for the trouble he
 
 70 THE DUTIES AND LIABILITIES lect. 
 
 has been put to in the matter of the 
 trust, ])ut such a transaction will be 
 viewed with suspicion and dislike by the 
 court ; and unless it can be shown that 
 the parties were really at arm's length, 
 and that no pressure was put either ac- 
 tually, or of the kind which naturally 
 flowed from the relationship between the 
 parties and the state of the case, it would 
 very probably be set aside at the instance 
 of the cestui que trust if he repented of 
 his bargain. See Barrett v. Hartley, 2 
 L.E. Eq., 789. 
 
 As an example of the severity of this 
 rule, and the ruthless way it has been 
 applied, I will refer to the case of a 
 solicitor who is a Trustee under a will or 
 deed which contains no power to charge 
 for professional services. Such a solicitor- 
 trustee is not entitled, nor is the firm of 
 which he is a partner entitled, to retain 
 profit costs incurred in an administration 
 action to which the Trustee was cpia
 
 m OF TRUSTEES 71 
 
 Trustee a defendant, nor is such a solici- 
 tor-trustee or liis firm entitled to profit- 
 costs incurred in the preparation of leases 
 and agreements of portions of the trust 
 estate. He is of course entitled to actual 
 expenses he has been put to in the matter, 
 but not to profit costs. 
 
 The judgment of Lord Cranworth in 
 the well-known case of Bronghton v. 
 Broughton, in 5 De G. M. and G., p. 160, 
 states the rule as follows : — 
 
 " The rule applicable to the subject has been 
 treated at the bar as if it were sufficiently enunci- 
 ated by saying that a Trustee shall not be able to 
 make a profit of his trust, but that is not stating 
 it so widely as it ought to be stated. The rule 
 really is that no one who has a duty to perform 
 shall place himself in a situation to have his 
 interests conflicting with that duty, and a case for 
 the application of the rule is that of a Trustee 
 himself doing acts which he might employ others 
 to perform, and taking payment in some way for 
 doing them. As the Trustee might make the pay- 
 ment to others, this court says he shall not make it 
 to himself, and it says the same iu the case of
 
 72 THE DUTIES AND LIABILITIES lect. 
 
 agents where they may employ others under them. 
 The good sense of the rule is obvious because it is 
 one of the duties of a Trustee to take care that 
 no improper charges are made by persons employed 
 for the estate. It has been often argued that a 
 sufficient check is afforded by the power of taxing 
 the chai'ges, but the answer to this is that that 
 check is not enough, and the creator of the trust 
 has a right to have that and also the check of the 
 Trustee. The result, therefoi-e, is that no person 
 in whom fiduciary duties are vested shall make a 
 profit of them by employing himself, because in 
 doing this he cannot perform one pai-t of his 
 trust, namely that of seeing that no improper 
 char<i;es are made." 
 
 In the more recent case of In re Cor- 
 sellis, 34 Cli. Div., p. 67b, the same view 
 may be found expounded. 
 
 The rule of Bronghton v. Broughton, 
 and in re CorseUis, is a wise one, because 
 the moment you allow exceptions to a rule 
 of this sort you insensibly imj)air its 
 authority, and the mind learns to dwell 
 on the exceptions, and to strike fine 
 distinctions, and thus the clear-cut signih-
 
 in OF TRUSTEES 73 
 
 cance of the rule itself becomes blurred 
 and blunted. 
 
 One exception has been successfully 
 foisted on the law in this very matter of 
 profit costs. In 1850 Lord Cottenham 
 was found in a melting mood, and he 
 allowed a Trustee, who was a solicitor, to 
 act for himself and a co-trustee, who was 
 not a solicitor, in a Chancery Suit, relat- 
 ing to the trust, and to retain the profit- 
 costs — if the costs of appearing for, and 
 acting for the two, had not increased the 
 expense — which naturally it would not do. 
 This was in the case of Cradock v. 
 P^>er, 1 McN. and G., page 664. One 
 can well understand how Lord Cottenham 
 came to this decision which indeed is 
 sensible enough, yet it has been a 
 troublesome decision, and has established 
 an anomaly in the practice. If you care- 
 fully read the decision of the judges in 
 the Court of Appeal in re Coy'sellis, you 
 will notice how tenderly anomalies are
 
 74 THE DUTIES AND LIABILITIES lkct. 
 
 treated by English judges. They soon 
 ])ecome like ancient monuments or tombs 
 in tlie Abbey, things too old to be 
 removed. For what after all was Cradock 
 V. Piper ? No more than a rule in the 
 Taxing Master's OfHce since 1850. No- 
 body has allowed his conduct to be 
 affected hy it ; no solicitor has ever 
 accepted the office of Trustee on the fcdtli 
 of it. It has in no way affected the title 
 to property, or the liberty of the subject, 
 or the freedom of contract. Still there it 
 is, and there it has been allowed to remain 
 out of respect to a tradition, the origin of 
 which is certain, and the date recent. 
 But it is fiercely restricted to proceedings 
 in Chancery, in cases where the solicitor- 
 trustee is co-defendant with trustees who 
 are not solicitors. 
 
 By special provision in the instrument 
 creating the trust, the Trustee being a pro- 
 fessional man, may Ije allowed to make the 
 usual charges ; and such a provision is now
 
 Ill OF TRUSTEES 75 
 
 usually inserted in carefully drawn docu- 
 ments. It runs as follows : " Any Trustee 
 being a solicitor, or other person engaged 
 in any profession or business, sliall be 
 entitled to ])e paid all usual professional 
 charges for business transacted, and acts 
 done by him, or any partner of his in 
 connection with the trusts hereof includ- 
 ing acts, which a Trustee, not Ijeing in 
 any profession or business, could have 
 done personally." In this connection it 
 is well to remember that a solicitor or 
 other professional Trustee or executor will 
 not be entitled to the benefit of this pro- 
 vision if he is an attesting witness to 
 the will — and this upon the ground that 
 this right, conferred upon a Trustee to 
 make professional charges, is a beneficial 
 interest arising under the w^ill, from 
 claiming which, an attesting witness is 
 precluded by the Wills Act, 1 Vict. Cap. 
 26, Sec. 15. See re in Pooley, 40 Ch. 
 Div., page 1.
 
 76 THE DUTIES AND LIABILITIES lf.ct. 
 
 The cirjlith duty of n Trustee is a 
 commonplace, as indeed most duties are. 
 It is to co-operate ivith the co-Trustee or 
 Trustees in a reasonahle and proper 
 spirit, and to consult ivith them about all 
 matters connected ivith the trust, and to 
 retire on being requested so to do by all 
 concerned. A Trustee should never get 
 into the hal)it of either leaving a co- 
 Trustee out of account or allowing him- 
 self to be so left out. The English law 
 does not recognise the distinction between 
 an acting and a non-acting Trustee. As a 
 matter of business, one Trustee must 
 usually take the initiative, and the other 
 or others be more or less lookers on, l)ut 
 they must be informed and critical 
 lookers-on, else they neglect their duty. 
 No step should be taken without the 
 conscious approval of all the Trustees. 
 
 Here the formal spirit of the Scotch 
 practice is in remarkable contrast to the 
 happy -go-luckiness of the English. With
 
 in OF TRUSTEES 77 
 
 US private express Trustees rarely meet 
 in conclave, nor is it usual to preserve a 
 record of their decisions. The trust 
 business is transacted through the post, 
 at odd moments of time, and in scraps of 
 conversation, and yet in theory our 
 law is stricter than the Scotch law. The 
 Scotch law allows a majority of the 
 Trustees to override a minority and 
 recognises a quorum sufficient for the 
 transaction of any trust business. Our 
 law does not recognise a majority, and 
 we have no quorum. All the Trustees 
 must be like-minded, and unless the 
 unwilling Trustee is obviously corrupt he 
 cannot be compelled, save by administra- 
 tion of the trust estate by the court, to 
 give up his opinion in deference to that 
 of his brethren. 
 
 The duty of a Trustee to retire is 
 worded too strongly. It is not the (hity of 
 a Trustee to retire even when called upon 
 so to do by all concerned. Unless guilty
 
 78 THE DUTIES AND LIABILITIES lect. 
 
 of misconduct, mentally incapable, per- 
 manently resident abroad, or a bankrupt, 
 lie is irremovable. Even the court will 
 not remove liim. But it always creates 
 a very bad impression when a man insists 
 upon retaining an unpaid office against 
 the wishes of his beneficiaries who are pre- 
 pared to nominate his successor. It argues 
 either corruption or cantankerousness, 
 and either disposition — the former legally, 
 the latter only morally — is a disqualifica- 
 tion for the office of a Trustee. It is 
 how^ever necessary to add that a Trustee 
 should never retire if he knows that the 
 object of the l)eneficiaries in getting rid 
 of him is to fill the vacant place with 
 some one whom they know will not refuse 
 his consent to a contemplated l)reach of 
 trust. 
 
 The tmith and last duty of a Trustee 
 is, ivhenever any question of difficulty 
 arises in the administration or manage- 
 ment of his trust estate to take the
 
 nr OF TRUSTEES 79 
 
 ojnnion of thejicdge in chaiiihers hy way 
 of summons. 
 
 Great revolutions are usually wrought 
 in silence, and such a revolution in our 
 Chancery practice was effected by what is 
 now called Order 55, Rules 3 to 13a, of 
 the rules of the Supreme Court. 
 
 You must all of you who intend to 
 practice the law in the Chancery Division 
 make yourselves intimately acquainted 
 with these rules and with the practice 
 which has grown up under them, which you 
 will find in what we call the " White " 
 book, namely the Annual Practice for 
 each year, edited by Mr. Thomas Snow. 
 These rules, or something more or less 
 like them, have now been in operation for 
 twenty years, and a practice has grown 
 up under them of enormous benefit to the 
 suitor and to the huge relief of Trustees. 
 The costs saved by these rules would 
 build a fleet of ironclads, 
 
 I am old enough to remember as a
 
 80 THE DUTIES! AND LIABILITIES lect. 
 
 student the old j)ractice of tlie Court of 
 Chancery, and the evolution of a particu- 
 lar kind of Chancery suit. A case was in 
 the first instance laid before a Chancery 
 counsel, as to the true construction of a 
 will, a copy of which accompanied the 
 papers. An experienced counsel was 
 usually able in a few moments to 
 tell into which of the many well- 
 known pitfalls the unhappy testator 
 had fallen. Sometimes he had left it 
 uncertain when the gifts he fondly in- 
 tended for his descendants vested — he 
 had employed the word "issue," did he 
 mean "children"? — when is the precise 
 period of distribution — or what the effect 
 of a gift over on death without issue ? 
 Either one of these, or some one or more 
 of the half hundred other teasing ques- 
 tions so apt to arise on every ill-drawn 
 will, was, or were, usually detected in a 
 more or less violent form. Tlitit was the 
 first step in a Chancery suit. The second
 
 Ill OF TRUSTEES 81 
 
 was for the counsel to write an opinion in 
 which he cited one or two of the cases with 
 which the courts were only too familiar, 
 Hill V. C/i ajwiayi, Leake v. Rohinson, 
 King V. Isaacson, Leeming v. Sheratt, 
 &c., &c., and to conclude by saying it was 
 impossible for the executors and Trustees 
 to take upon themselves the responsibility 
 of administering the estate under such a 
 will except under the direction of tlie 
 court. Then the papers left counsel's 
 chambers to return in a few days with 
 instructions to draw a bill of complaint. 
 These would be handed over to a pupil, 
 who would prepare the Bill according to 
 instructions, probably making a beneficiary 
 plaintiff, and the executors and Trustees 
 defendants. In the first paragraph the 
 will was set out omitting merely formal 
 parts — the date of the death occupied the 
 second paragraph — that of the probate 
 the third ; a few facts as to the state of 
 the family of the deceased were spread 
 
 G
 
 82 THE DUTIES AND LIABILITIES lect. 
 
 over tlie remaining paragraphs except the 
 last, which stated that doubts and diffi- 
 culties had arisen as to the true con- 
 struction of the testator's will, and it had 
 become necessary to administer his estate 
 under the direction of this honourable 
 court. To this bill an answer was not 
 usually considered necessary, and the 
 cause would be set down for trial and 
 marked " short," and some Saturday 
 morn in o; an order would be made directing; 
 the usual accounts and inquiries as to 
 debts, funeral, and testamentary ex- 
 penses, legacies, and incumbrances, and 
 so on. These accounts and inquiries were 
 taken, made, and answered by the chief 
 clerk, and involved numerous attendances 
 before him. In due course he would file 
 his certificate containing the result of the 
 accounts, and the facts elicited by his 
 inquiries — facts about which there was as 
 often as not no dispute at all, but all of 
 which had been proved strictly by affi-
 
 Ill OF TRUSTEES 83 
 
 davits and certificates of Ijirtlis, marriages, 
 and deaths. The cause would then be ripe 
 for hearing on furtljer consideration. 
 
 In July the courts of the Vice-Chan - 
 cellors and the Master of the Rolls used to 
 be blocked with Further Considerations, 
 and it rained briefs in Lincoln's Inn. The 
 briefs consisted frequently simply of the 
 pleadings, copy of the original decree, 
 and of the will ; the chief clerk's certifi- 
 cate, and draft minutes of the order it 
 was proposed to take on further con- 
 sideration. The cause would be called 
 on, and it was then not infrequently dis- 
 covered that having regard to the decided 
 cases the original doubt or difficulty, 
 whatever it was, which had given rise to 
 all these costly proceedings, was really not 
 capable of argument at all, and an order 
 was made in a couple of minutes declaring 
 the true construction of the will, and 
 dividing the residue, after payment of 
 costs, accordingly. 
 
 G 2
 
 84 THE DUTIES AND LIABILITIES lf.ct. 
 
 This waste of money, this squandering 
 of the scanty portions of orphans, is pain- 
 ful to contemplate even in the retrospect 
 of life. 
 
 All this is now over and done wdth. 
 Walk round the Chancery end of the 
 High Court on a Monday morning and 
 you will find only one judge, of first 
 instance, sitting in his robes trying wit- 
 ness actions ; the other judges are all 
 sitting in chambers, that is in their courts, 
 but at the talkie, and not upon the bench, 
 up to their eyes in summonses, mostly 
 originating summonses, taken out under 
 the order referred to. Leaders are con- 
 spicuous by their absence, and junior 
 counsel only are to be seen holding briefs 
 marked, it must be said, witli unreason- 
 ably low fees. It is hardly to exaggerate 
 to say that each one of these summonses 
 is a strangled Chancery suit. 
 
 Although I cannot here usefully go 
 through these rules or say anything likely
 
 ni OF TRUSTEES 85 
 
 to save you the trouble of making your- 
 selves personally acquainted with their 
 terms, I will set out that l^y them — 
 
 1. The Trustees under any deed or 
 instrument, or any of them, may take out 
 an Orisfinatino' Summons in the chambers 
 of a judge of the Chancery Division for 
 the determination without an administra- 
 tion of the trust of any of the following 
 questions or matters : — 
 
 (a) Any question affecting the rights 
 
 or interests of the person claiming 
 to be amongst others a cestui que 
 trust. 
 
 (b) The furnishing of any particular 
 
 accounts by the Trustees, and the 
 vouching, when necessary, of such 
 accounts. 
 
 (c) The payment into Court of any 
 
 money in the hands of Trustees. 
 
 (d) Directing the Trustees to do or 
 
 abstain from doing any particular 
 act.
 
 86 THE DUTIES AND LIABILITIES lkct. 
 
 ((') The approval of any sale, purchase, 
 
 compromise, or other transaction, 
 
 and 
 (f) Determination of any question 
 
 arisino' in the administration of 
 
 the estate. 
 2. In like manner an order may be 
 obtained in^ chambers for — 
 
 («) The administration of the personal 
 
 estate of a deceased man. 
 
 (b) The administration of his real 
 
 estate, and 
 
 (c) The administration of any trust. 
 Eule 10 of Order 55 expressly declares 
 
 that it shall not be obligatory on the 
 court or a judge to pronounce or make a 
 judgment or order, whether on summons 
 or otherwise, for the administration of any 
 trust or of the estate of any deceased 
 person, if the questions between the 
 parties can be properly determined with- 
 out such judgment or order. And by 
 llule 10a—
 
 Ill OF TRUSTEES 87 
 
 Upon an application for administration 
 or execution of trusts by a creditor or 
 beneficiary under a will intestacy or deed 
 of trust, where no accounts or insufficient 
 accounts have been rendered, the court or 
 a judge may in addition to the powers 
 already existing — 
 
 («) Order that the application shall 
 stand over for a certain time, and 
 that the executors and adminis- 
 trators or Trustees, in the mean- 
 time shall render to the applicant 
 a proper statement of their 
 accounts, with an intimation that 
 if this is not done they may be 
 made to pay the costs of the pro- 
 ceedings. 
 (h) When necessary to prevent pro- 
 ceedings by other creditors, or by 
 persons beneficially interested, 
 make the usual judgment or order 
 or administration, with a proviso 
 that no proceedings are to be taken
 
 88 THE DUTIES AND LIABILITIES lect. 
 
 under such judgment or order with- 
 out leave of the judge in person. 
 
 The young practitioner, nevertheless, 
 must be very careful as to his practice in 
 this matter of originating summons. You 
 will have solicitors' clerks bursting into 
 your chambers demanding that you should 
 off-hand settle what they call " Origin- 
 ators," but you must keep your head cool 
 and remember that an originating sum- 
 mons is to all intents and purposes an 
 action, and that though no doubt the old 
 rules as to parties have been somewhat 
 relaxed, nevertheless the judge, sitting in 
 chambers though he be, will insist upon 
 proper parties appearing before him, and 
 will not determine important points in 
 their absence. The rules of practice as to, 
 parties will be found in the White Book I 
 have before referred to. 
 
 Next, it must be remembered that there 
 are certain remedies wliich cannot l)c 
 pursued by way of originating summons,
 
 Ill OF TRUSTEES 89 
 
 tind especially remember tluit Trustees 
 cannot be charged with a breach of trust 
 hy originating summons. Sec Dowse v. 
 Gorton (1891), App. Cas. page 202. 
 
 Further, remember that the question 
 about which you wish to obtain the opinion 
 of the court, must actually have arisen — it 
 not being the practice of the court to 
 decide hypothetical questions which, in 
 the course of events, may never actually 
 arise.
 
 IV. 
 
 Well, Gentlemen, this concludes my 
 l^i'ief summary of the Duties of 
 Trustees. 
 
 I now approach the subject of their 
 Liabilities. I have already said the lia- 
 bilities of Trustees are to be measured by 
 their duties. Unless there is a breach of 
 duty there can be no breach of trust. 
 Every plain dereliction of duty is a 
 Ijreach of trust and if a breach of trust 
 results in pecuniary loss, the Trustee 
 committing it is personally liable : e.g. to 
 make an investment of a kind not 
 authorised !»}' the terms of the trust is 
 to neglect duties Nos. 1. IJ. and HI.,
 
 LECT. IV THE DUTIES OF TKUSTEES 91 
 
 whilst to make an improvident invest- 
 ment on a mortgage security (mortgage 
 securities Ijeing authorised ly the trust) 
 is to neoiect duties IV, and V. 
 
 o 
 
 A Trustee cannot be made liable to 
 make good out of his own pocket any loss 
 which has accrued to the estate unless it 
 can be shown that such loss w^as occa- 
 sioned by his doing what he ought not to 
 have done, or from his having omitted to 
 do what he ouo;ht to have done — he must 
 be guilty of sin either of commission or 
 omission. 
 
 Breaches of trust must therefore be 
 either active or j^ctssive. 
 
 Active breaches of trust rarely present 
 difficulty except in their proof. It is 
 unusual for an honest and ordinarily 
 careful Trustee to commit an active 
 breach of trust. To buy the trust pro- 
 perty on his own account is an active 
 breach of trust. In no circumstances 
 must a Trustee do this, nor should he get
 
 92 THE DUTIES AND LIABILITIES lect. 
 
 liis wife to do it out of her separate estate 
 — not even though the sale be by public 
 auction and he be away from home at 
 the time. 
 
 To lend trust money on a second mort- 
 gage or other unauthorised security — to 
 mix trust funds wdtli their own private 
 money' — these are active breaches of 
 trust ; and you can easily imagine others 
 besides the one I shall hereafter refer to. 
 at some length — the continuing to carry 
 on a testator's business without being; 
 authorised so to do by the terms of his 
 will. 
 
 Passive breaches of trust, i.e., breaches 
 resulting from omissions, are more likely 
 to be committed by the unwary Trustee. 
 
 I will proceed to give a few examples 
 by way of illustration. 
 
 A. Non-conversion of tlie trust estate 
 directed to be converted. 
 
 Here it specially l)ehoves the Trustee 
 to be on the look-out, for in times like
 
 IV OF TRUSTEES 93 
 
 these in which we live, depreciation of 
 property of every kind is at all events 
 not unlikely to occur. 
 
 Under a will it is upon the executors 
 rather than the Trustees that the duty of 
 realisation of the estate is cast, but as 
 after the payment of debts, funeral and 
 testamentary expenses, and legacies, a 
 will frequently declares trusts of the 
 balance, and very frequently appoints 
 the same persons Trustees who had been 
 named as executors, it is difficult in this 
 branch of the case to keep executors 
 and Trustees quite distinct in one's 
 mind. 
 
 Although there is no fixed rule of law 
 on the subject, executors are allowed a 
 year in which to manipulate their estate, 
 and, if they admit assets, to pay the 
 debts and pecuniary legacies. Executors 
 ought to adhere to this rule, for if they 
 do not and there is such a fall in the 
 value of the testator's estate as makes it
 
 94 THE DUTIES AND LIABILITIES lect. 
 
 impossible for tliem to pay the pecuniary 
 legatees in full, those gentlemen may say 
 to the executors — If you had sold with- 
 in your year you would have realised 
 enough to pay us in full, and as you neg- 
 lected so to do, you must make good the 
 difference out of your own pocket, and, 
 unless special circumstances can he shown, 
 the pecuniary legatees will not sa}^ this 
 in vain. 
 
 The motives for non-realisation are 
 usually pure. Stockbrokers advise that a 
 rise in a particular security largely held 
 by the testator is probalde, and that if it 
 occurs not only will there be enough to 
 pay pecuniary legatees in full, but some- 
 thing will l)e left over for the residuary 
 legatees. But to take this advice is to 
 run risk. Executors have no right to 
 nurse the estate at the possible expense 
 of the pecuniary legatees for the possible 
 l)cnefit of the residuary legatees. On 
 this point sec Buxton v. Buxton, 1 My.
 
 IV OF TRUSTEES 95 
 
 & C, page 80, and Grayhurn v. Clarh- 
 son, 3 L.R. Ch. App., page 605. 
 
 In the case of Trustees properly so- 
 called, there is no actual rule about a 
 year, but by analogy this period should 
 be kept in mind. See Sculthorpe v. 
 Tiqoper, 13 L. R. Eq., 232, where a 
 testator gave all the residue of his estate 
 to four Trustees upon trust, to sell either 
 immediately after his decease or so soon 
 thereafter as the Trustees might see fit 
 to do. Included in the testator's per- 
 sonal estate were shares in the Bir- 
 mingham Banking Company, which was 
 of high standing and repute at the 
 testator's death. The Trustees retained 
 these shares for two years and a quarter. 
 The bank suspended payment. It was 
 held that the Trustees, although they 
 had acted in perfect good faith, and as 
 they considered best, for the interests of 
 the beneficiaries, were bound to have sold 
 the bank shares within a reasonable time,
 
 96 THE DUTIES AND LIABILITIES lect. 
 
 wliicli was one year from the testator's 
 death and they were therefore lia])le to 
 make good the loss. 
 
 Trustees very frequently, and indeed in 
 all properly-drawn wills and settlements, 
 have a discretion given to them as to 
 when they should realise, and a power 
 to postpone realisation. If they have 
 such a discretionary power of postpone- 
 ment they may safely act as they may 
 be advised ; but they must never forget 
 that it is their duty to realise whenever 
 they think the right time has arrived, 
 and that the power conferred upon them 
 of postponement was not meant indefi- 
 nitely to allow them to keep things as 
 they are, but simply to enable them to 
 realise to the best possible advantage and 
 at the best possible moment. See in re 
 Northington, 13 Ch. Div., 654. See also, 
 and consider, inre Croivther (1895) 2 Ch., 
 p. 56; and in re Smith (1896) 1 C*li., 
 p. 171. In the latter case, Mr. Justice
 
 IV OF TRUSTEES 97 
 
 North held that a power to postpone the 
 sale of all or any part of the residue 
 devised and bequeathed on trust to sell, 
 and particularly to sell the testator's 
 business of a pawnbroker with all con- 
 venient speed, did not give power to 
 carry on the business for an indefinite 
 time. 
 
 Whilst on this subject of the duty of 
 conversion, it would be a crime not to 
 refer to the famous case of Hoive v. 
 Earl of DartrtioutJi, which you will 
 find reported and noted in the second 
 volume of White and Tudor's Leading 
 Cases. That case established the rule 
 that wdiere property of a wasting or 
 perishable nature, such, for example, as 
 leaseholds, is given to persons in succes- 
 sion, such property must at once be 
 converted in such a way as to produce 
 capital bearing interest. In Howe v. 
 Earl of Dartmouth there was no trust to 
 convert. If there is a direction to con- 
 
 H
 
 98 THE DUTIES AND LIABILITIES lect. 
 
 vert, there is no need of the rule of 
 Hoive V. Earl of Dm^tmouth, for the will 
 containing the direction must be o])eyed, 
 and disobedience is a breach of trust. 
 But the rule of Hoive v. Earl of Dart- 
 mouth is this, that even when there is no 
 direction to convert, if the property is 
 of a wasting or perishable nature, and 
 the testator has, by the way in which he 
 has disposed of it, shown an intention 
 that different persons should enjoy it 
 one after the other, then conversion 
 must take place; subject of course to 
 this, that the whole will or settlement 
 must be carefully read, to see whether or 
 no it contains any evidence of a contrary 
 intention. 
 
 A power in the will to retain any por- 
 tions of the testator's property in the 
 same state in which it should be at his 
 decease takes the case entirely out of 
 Howe V. Earl of Dartmouth, because of 
 the power given to the Trustees to retain
 
 IV OF TRUSTEES 99 
 
 the property in specie. See Gray v. 
 Siggers, 15 Ch. Div., p. 74, and see in re 
 Thomas (1891), 3 Ch. p. 482. 
 
 In my opinion, any person would be 
 well advised if he refused to be a Trustee 
 under a will which did not give the 
 Trustees complete discretion as to when 
 they should realise, and a power to post- 
 pone such realisation. 
 
 B. The second example I will give of a 
 passive breach of trust is non-accumula- 
 tion of the income for the benefit of the 
 person ultimately entitled. See in re 
 Emmett, 17 Ch. Div., 143. 
 
 c. A third example, and not an in- 
 frequent one, is neglect to enforce a 
 covenant. The case of Fenivick v. 
 Greenivell, 10 Beav., p. 412, is an 
 example of this kind of breach of trust. 
 By a marriage settlement it was 
 covenanted and agreed that £5,000 
 consols, part of the intended wife's 
 property, should be transferred to 
 
 H 2
 
 100 THE DUTIES AND LIABILITIES lect. 
 
 Trustees upon certain trusts for tlie 
 husband, wife and children. At the time 
 of the settlement a sum of £4,946 25. 8c/. 
 Three per cents, was standing in the 
 name of the wife — but the Trustees took 
 no steps to compel a transfer, and some 
 eleven years after the marriage the 
 husband and wife sold out the fund and 
 the husband misapplied it, and in due 
 course became bankrupt. The date of 
 the settlement was 1806, and the bill 
 was filled in 1846 by one of the children 
 of the marriage to make the Trustees 
 liable for the £5,000, which had been 
 lost by their neglect to get it transferred 
 into their names. The Master of the 
 Kolls came to the conclusion that he 
 could not see any sufficient reason why 
 the Trustees should not have procured 
 the transfer of the stock which belonged 
 to the lady at the time of the marriage, 
 and he observed: "It is with some reluc- 
 tance that I have come to the conclusion
 
 IV OF TRUSTEES 101 
 
 that tliese Trustees if tliey had used due 
 diligence might have recovered this 
 sum to the extent of £4,946. It is a 
 case of very great hardship. It does 
 not appear that these Trustees ever 
 looked into the settlement, but having 
 contracted obligations by the execution 
 of the deed they attempt to excuse 
 themselves by saying that they were 
 ignorant of the trust. This cannot avail 
 them." A declaration was made that the 
 Trustees were liable to make good the 
 £4,946 2s. 8d. bank three per cent, 
 annuities, and to pay the dividends which 
 might have accrued thereon from the 
 date of the husband's death, and also 
 the plaintiff's costs of the suit. 
 
 D. The last example I will give of a 
 passive breach of trust is the neglect to 
 ask for, and obtain, title-deeds relating to 
 the settled property. 
 
 The neglect of this duty is to fail to 
 observe duty No. IV. Every prudent
 
 102 THE DUTIES AND LIABILITIES lect. 
 
 man of business keeps in his own 
 possession or under his own exclusive 
 control the documents of title of his 
 property, whether deeds of conveyance 
 or of mortgage bonds, scrip or whatever 
 else they may be. To let other people 
 have access to these documents is to 
 invite fraud, and it may be to give to 
 third parties a superior equity to your 
 own. See Lloyd's Banking Company v. 
 Jones, 29 Ch. Div. 221, wdiere a 
 husband having deposited with his 
 bankers certain title-deeds together with 
 a memorandum of deposit as a continuing 
 security to the bankers for any over- 
 draft of his wife's current account, died 
 having bequeathed all his property to 
 his wife and appointed her his executrix. 
 After his death the deeds remained with 
 the bankers and the widow was allowed 
 to overdraw her account. Six months 
 after her husband's death the widow 
 married again. Prior to her re-marriage
 
 IV OF TRUSTEES 103 
 
 she assigned the houses to which the 
 title-deeds referred to her Trustee on 
 trust for herself for life, and after her 
 death in trust for an infant son of her 
 first marriage. The Trustee made no 
 inquiry about the title-deeds, and no 
 notice of the settlement was given to 
 the bankers, who obtained from the lady 
 and her new husband a fresh memorandum 
 of deposit, making the deeds a con- 
 tinuing security for any overdraft of 
 the husband's current account. At the 
 date of the wife's death the deeds were 
 still with the bankers, and at that 
 moment of time the husband's current 
 account was in credit. Five years after 
 the wife's death the Trustee made 
 inquiries and discovered that the deeds 
 which he had believed to be in the 
 custody of the solicitor, who had prepared 
 the settlement, were with the bankers. 
 He then gave the bankers notice of the 
 settlement and claimed the deeds, but it
 
 104 THE DUTIES AND LIABILITIES lecT. 
 
 was held that the omission of the Trustee 
 to inquire for the title-deeds was negli- 
 gence of such a character as prevented 
 him from availing himself of the legal 
 estate, to give him priority over the 
 equitable charge of the hankers, and that 
 his cestui que trust stood in no better 
 position. It was also held that the 
 bankers were entitled to priority in 
 respect of the amount due to them on 
 their security at the time at which they 
 received notice of the settlement. 
 
 On this point of custody of title-deeds 
 it is not easy to say what the precise rule 
 is, if, as ought always to be the case, there 
 are several Trustees. 
 
 Supposing there are three Trustees 
 which of them is to have physical 
 custody of the deeds ? 
 
 A box with three different locks 
 opened by three different keys one to 
 be kept Ijy each of the three Trustees is 
 not a very practical idea, and then, after
 
 IV OF TRUSTEES 105 
 
 all, wliere is the box to be kept ? Such 
 a precaution as this is not considered in 
 accordance with the habits of mankind, 
 see Cottam v. Eastern Counties Railway 
 Company, 1 J. and H., 247. The case of 
 Mendes v. Guedalla in 2 J. and H. 259, 
 is well worth your study. It deals with 
 the case of stocks and securities payable 
 to bearer and which pass by delivery, and 
 upon which the interest is payable upon 
 coupons half yearly. Lord Hatherley, 
 whilst Vice-Chancellor, held that such 
 securities may without breach of trust 
 be deposited in a box kept at a banker's 
 on account of all the Trustees, one being 
 allowed to keep the key in order to 
 obtain coupons, the Vice-Chancellor ob- 
 serving that he saw no irregularity in 
 one of the Trustees being left in posses- 
 sion of the key so long as the box was 
 deposited in the safe at the banker's. 
 The key must have been entrusted to 
 some person in order to get access half
 
 106 THE DUTIES AND LIABILITIES lect. 
 
 yearly to the coupons, and to no person 
 could it be entrusted for that purpose 
 with greater propriety than to one of the 
 Trustees. Still my advice to Trustees 
 is, do not hold securities payable to 
 bearer at all, but purchase inscribed stock 
 in the names of all the Trustees. Why 
 should any man gratuitously run such 
 risks ? Besides, as already observed, 
 bearer securities are not investments 
 "in the names" of the Trustees and 
 therefore are not authorised by the great 
 majority of investment clauses, and to hold 
 them is in most cases a breach of trust. 
 
 Passing away now from examples of 
 passive breaches of trust, we approach an 
 interesting and important point, the lia- 
 bility of one Trustee for the improper 
 acts or omissions of another. 
 
 Let me state the rule broadly and 
 affirmatively, and then consider by the 
 light of the cases, what qualifications it 
 may require.
 
 IV OF TRUSTEES 107 
 
 A co-Trustee is not liable for the acts 
 and defaults of his co-Trustee. 
 
 This has been the law for many a long 
 day, and is at least as old as the time of 
 Charles I. 
 
 The 24th Section of the Act of 1893 
 does but express in statutory form what 
 was already, and had long been, the law 
 when the Act was passed. Still you will 
 do well to get its language into your 
 heads. 
 
 " A Trustee shall, without prejudice to the 
 provisions of the instrument, if any, creating the 
 trust be chargeable only for moneys and securities 
 actually received by him, notwithstanding his 
 signing any receipt for the sake of conformity, 
 and shall be answerable and accountable only for 
 his own acts, receipts, neglects, or defaults, and 
 not for those of any other Trustee nor for any 
 banker, broker or other person with whom any trust 
 moneys or securities may be deposited, nor 
 for the insufficiency or deficiency of any secvu'ities, 
 nor for any other loss unless the same happens 
 through his own wilful default, and may reimburse 
 himself or pay or discharge out of the trust
 
 108 THE DUTIES AND LIABILITIES lect. 
 
 premises all expenses incurred iu or about the 
 execution of his trusts or powers," 
 
 In the case of Barnard v. Barnard, 3 
 D. a J. and S., 355, Lord Westbuiy 
 said — 
 
 " Ev^en if that which is assumed had been proved, 
 namely that Boyle (a Trustee) struck out the 
 crossing from the cheque and then I'eceived and 
 employed the money, I should have refused to 
 make the other Trustees liable for moneys which 
 their co-Trustee got into his possession without 
 their consent or knowledge, and by an act of dis- 
 honesty in fraudvilently substituting a new crossing 
 on the cheque to that affixed by the Trustees." 
 
 The case of Cottam v. Eastern Counties 
 Railway Company, is a valuable case to 
 study. There one of three Trustees Nvas 
 allowed to keep two railway debentures in 
 his hands and receive the interest. He 
 forged the signatures of his two co- 
 Trustees to a deed purporting to be a 
 transfer, and he delivered the debentures 
 with the transfer to the purchasers, who 
 acted throughout in })erfect good faith.
 
 IV OF TRUSTEES 109 
 
 The Eailway Company registered the 
 transfer and paid subsequent interest to 
 the purchasers. The forger was con- 
 victed of his crime. The two Trustees 
 then filed their bill praying that the 
 purchaser might be decreed to deliver 
 up the debentures, and that the Eailway 
 Company might be ordered to cancel the 
 transfer — and it was held that they were 
 entitled to the relief they sought. Had 
 the decision been otherwise the Trustees 
 would of course have been liable to their 
 beneficiaries to make good the loss. 
 On this head see the cases collected in 
 the second volume of White and Tudor s 
 Leading Cases, under the leading case of 
 Townley v. Sherho7me. 
 
 Unless therefore a breach of trust can 
 be alleged and proved against a Trustee 
 he cannot be made liable simply because 
 a co-Trustee of his has committed default, 
 but as I have already had occasion to 
 point out, negligence is a breach of
 
 110 THE DUTIES AND LIABILITIES lect. 
 
 trust, and if it is ]:)y the negligence of 
 one Trustee that another has been able 
 to commit a fraud, the negligent Trustee 
 is liable, not for the fraud of which he 
 is wholly innocent, Init for his negligence 
 which permitted it. 
 
 I will give one example of this obvious 
 application of the rule. In the case of 
 Trutch V. Lamprell, 20 Beav., 116, two 
 Trustees having properly sold out trust 
 money, one of them handed the cheque 
 for the proceeds to the other, who speedily 
 applied it for purposes of his own. It 
 was held that both Trustees were liable, 
 and as the one who had misappropriated 
 the money had disappeared, the effect of 
 course was that the honest, but careless 
 Trustee, had to replace the wdiole fund. 
 The Master of the Eolls observed : 
 
 " This is one of those painful cases which unfor- 
 tunately this court has constantly to deal with, 
 where Trustees, innocent of any desire to benefit 
 themselves, have failed to perform their duties, and
 
 IV OF TRUSTEES 111 
 
 the court is compelled to make them responsible. It 
 is constantly argued by counsel, but the conclusion 
 is as constantly rejected by the court, that a person 
 who acts is not an active Trustee and is not liable 
 becaiise he has only acted for conformity's sake. 
 It is a contradiction in terms to say that a Trustee 
 who acts is not an active Trustee by taking upon 
 himself the office of Trustee and acting. He be- 
 comes in that transaction at least an active 
 Trustee, and is bound properly to perform all the 
 duties appertaining to his office. I am of opinion 
 that it is impossible for Holmes to contend with 
 success that he was jvistified in paying over the 
 cheque to his co-Trustee." 
 
 I may here remark that there is no 
 obligation upon the Trustee who is a 
 defaulter to indemnify his innocent but 
 negligent brother. See Baliin v. Hughes, 
 31, Ch. Div., page 390. 
 
 I pass on now to a difficult yet in- 
 teresting branch of the law, namely, 
 Acquiescence. 
 
 A beneficiary who has acquiesced in a 
 breach of trust is debarred from com- 
 plaining of it.
 
 112 THE DUTIES AND LIABILITIES lect. 
 
 Acquiescence is a familiar defence to 
 an action for breach of trust, but it is by 
 no means a defence easy to establish at 
 the trial. 
 
 What is acquiescence ? It means as- 
 sent. It denotes an assenting state of 
 mind. A beneficiary who acquiesces is a 
 beneficiary who has assented. 
 
 Acquiescence is less than concurrence, 
 still less than instigation, it is merely 
 assent. 
 
 But assent to what ? Why — to a 
 breach of trust ! There can be no assent 
 in the sense of acquiescence unless there 
 is complete knowledge of all the circum- 
 stances which went to make up the breach 
 of trust. A partial knowledge, good 
 grounds for suspicion, are not sufficient 
 foundation for the state of mind known 
 to the law as acquiescence. 
 
 I do not know that you will find in 
 any case any authoritative once-for-all 
 definition of acquiescence in a breach of
 
 IV OF TRUSTEES 113 
 
 trust, but there is no great difficulty in 
 extracting from the cases a good working 
 knowledge of what is meant by acquies- 
 cence. 
 
 There must, I have already said, be 
 knowledge of the breach of trust, and the 
 knowledge must be positive and complete. 
 It is not enough to say that the bene- 
 ficiary was put upon inquiry, for a 
 beneficiary cannot be put upon inquiry as 
 he is not bound to do anything in self- 
 protection. It is the duty of his Trustee 
 to protect him. 
 
 And the knowledge must be complete, 
 for the beneficiary cannot be bound by 
 acquiescence unless he has been fully 
 informed of his rights, and of the 
 material facts and circumstances of the 
 case. 
 
 But knowledge by itself is not ac- 
 quiescence ; you may know without 
 assenting, and if you do not assent you 
 do not acquiesce. 
 
 I
 
 114 THE DUTIES AND LIABILITIES lect. 
 
 It is clear that a beneficiary is not 
 bound the moment a past breach of trust 
 comes to his knowledge to call the Trustee 
 to account, or to take proceedings to 
 make him liable. He may stand by 
 for, at all events, a reasonable time, 
 but if he waits too long the equitable 
 doctrine of laches and stale demands 
 may successfully be invoked against 
 him. 
 
 This equitable doctrine of laches and 
 stale demands must be carefully distin- 
 guished from the Statute of Limitations, 
 which, as we shall see in the last Lecture, 
 was for the first time applied to express 
 trusts in the year 1888. 
 
 Leaving out of our minds for the 
 moment the Statute of Limitations and 
 considering only the equitable doctrine of 
 laches and stale demands, you may ask, 
 what is a reasonable time during which a 
 beneficiary may stand by ? Twenty years 
 is an unreasonable time. A testator died
 
 IV OF TRUSTEES 115 
 
 in 1832 — tlie bulk of his property was 
 distributed in 1847, and on the 19th of 
 February, 1872, a bill in Chancery was 
 filed against the surviving Trustee, an 
 old gentleman of eighty-one, for adminis- 
 tration and for wilful default in respect 
 of a principal sum of £815. The bill 
 was dismissed, but without costs, as the 
 Trustee had failed to preserve accounts 
 and vouchers. Payne v. Evens, 18 L.R. 
 Eq., 356. 
 
 But a delay of three years or four years 
 will not prove fatal. See the case of 
 in re Cross, 20 Ch. Div. 109, but in read- 
 ing this case bear in mind the change in 
 the law introduced by the Trustee Act of 
 1888, Section 8, and consider how in re 
 Cross would have been decided had this 
 Act been then in force. 
 
 It follows from what I have fjaid that 
 it is very difficult to prove mere ac- 
 quiescence. It is a word constantly used, 
 and the judicious pleader seldom fails to 
 
 I 2
 
 116 THE DUTIES AND LIABILITIES lect. 
 
 plead it as a defence, but it is not very 
 frequently proved at the trial or inferred 
 by the judge. 
 
 Concurrence and Instigation are differ- 
 ent matters. Few things are more com- 
 mon than for a beneficiary to concur in 
 and even — such is the desire of poor 
 mortals for an increase of their income — 
 to instigate breaches of trust. 
 
 First Concurrence. 
 
 If the beneficiary actively concur in 
 the breach of trust he at all events can- 
 not call his Trustees to account. But as 
 the common run of English trusts are for 
 the benefit of a man or woman for life 
 and then to children, and as i\vQ bene- 
 ficiary who concurs in or procures the 
 breach of trust is usually tJie life-tenant 
 anxious for a larger income — though his 
 mouth may be closed, those of his fledg- 
 lings, his callow brood, remain wide open, 
 and they can on their parents' death call 
 the Trustee to account who has foolishly
 
 IV OF TRUSTEES 117 
 
 been tempted to try to increase the in- 
 come which maintained these ingrates in 
 the past. 
 
 However, the concurring beneficiary 
 cannot complain. 
 
 But concurrence just as much as ac- 
 quiescence implies complete knowledge. 
 Nothing must be kept back by the 
 Trustee, and the beneficiary must under- 
 stand the exact position and must know 
 that what is intended to be done and 
 what he wishes to be done is a breach 
 of trust. 
 
 Second Instigation. This needs no 
 expansion.^ 
 
 A beneficiary who concurs in or insti- 
 gates to a breach of trust cannot complain 
 of it. That is rudimentary law — elemen 
 tary justice. 
 
 1 " The ' legal mind ' chiefly consists in illus- 
 trating the obvious, explaining the self-evident, 
 and expatiating on the common-place. "^ — Ml'. 
 Disraeli writing to his sister.
 
 118 THE DUTIES AND LIABILITIES lect. 
 
 But it does not rest there. It has Ions; 
 been law that a beneficiary, at whose 
 instance or request a breach of trust has 
 been committed, can be required to in- 
 demnify the Trustees to the extent to 
 which the beneficiary had received benefit 
 from the breach of trust, and this upon 
 the ground that the liability ought 
 primarily to fall upon the person who 
 procured the breach of trust, and who, 
 having got the benefit of it, ought not to 
 be allowed to victimise the Trustees by 
 treating them as scapegoats. The leading 
 case on this subject is Rahy v. Ridehalgh 
 in 7 D.G. M. and G., page 104. 
 
 In that case personalty was bequeathed 
 upon trust for tenants for life with 
 executory trusts in remainder, but with- 
 out directions as to investment. The 
 Trustees, at the instance of the tenants 
 for life, abandoned their original inten- 
 tention of investing in the funds, and 
 invested on mortgage, so as to obtain an
 
 IV OF TRUSTEES 119 
 
 increased income. The securities proved 
 insufficient. The chiklren filed their bill 
 charging the Trustees with breach of 
 trust, and seeking to make them liable 
 for the deficiency. It was found, as a 
 fact, that the tenants for life were anxious 
 to secure as large an income as they 
 could, and that it was at their instance or 
 request that the moneys were lent upon 
 mortgage. The Lord Justice Turner in 
 the course of his judgment observed : 
 
 " Now the cestuis que Trustent for life who 
 instigated the Trustees to commit the breach of 
 trust have derived from that breach of trust the 
 advantage of enjoying the increased income of the 
 fund not duly invested according to the trust, and 
 the consequence of that is that the cestuis que 
 Trustent in remainder have a right to have that 
 income refunded and made good by the cestuis que 
 Trustent for life. It is trust money received by them 
 under a breach of trust to which they were privy, 
 and the effect, I apprehend, must be^ that as the 
 loss which ovight to fall on those who instigated the 
 breach of trust has been laid by the court upon the 
 Trustees, the Trustees are entitled to stand in the 
 place of the cestiiis que Trustent in remainder for
 
 120 THE DUTIES AND LIABILITIES lect. 
 
 the purpose of recovering from the cestuis que 
 Trustent for life who instigated the bx'each of 
 trust or their estates the benefit actually received 
 by them in consequence of such breach of trust." 
 
 This is unquestioned law, hxxt the facts 
 must always be investigated very closely 
 before it is applied in order to discover 
 that the beneficiaries who are alleged 
 to have concurred, were fully informed 
 of the state of the case. In Saivyer v. 
 Saivyer, 28 Ch. Div. 598, Mr. Justice 
 Chitty says : 
 
 '* I hold that the law is that for the Trustees to 
 be entitled to the order which they now ask against 
 the estate of the tenant for life, it must be shown 
 that the breach of trust was committed at the 
 instance and request of the cestuis que trust. I 
 make no distinction between instance and request, 
 but it must be shown clearly that the breach of 
 trust was instigated by them and that they were 
 acting and moving parties in it. It strikes me as 
 a novelty in law and a proposition not founded 
 on principle to say that the person who merely 
 consents is bound to do more than what he says 
 he consents to do.''
 
 IV OF TRUSTEES 121 
 
 Accordingly in that case, the learned 
 judge held that the beneficiary in ques- 
 tion, who was a married woman, had 
 not done anything to charge her separate 
 estate. However, since Rahy v. Ride- 
 halgh and Saivyer v. Sawyer and other 
 cases of a like character we have a statute 
 to help us, namely, Section 45 of the Act 
 of 1893, repealing Section 6 of the now 
 partially repealed Act of ,1888. Section 
 45 is as follows : — 
 
 " Where a Trustee commits a breach of trust at 
 the instigation or request or with the consent in 
 writing of a beneficiai'y, the High Court may, if it 
 thinks fit and notwithstanding that the beneficiary 
 may be a married woman entitled for her separate 
 use and resti'ained from anticipation, make such 
 order as to the court seems just for impounding all 
 or any part of the interest of the beneficiary in 
 the trust estate by way of indemnity to the 
 Trustee or person claiming through him." 
 
 This section adopts the old law, but 
 also extends it, for by the old law, the 
 liability was only to the extent to which
 
 122 THE DUTIES AND LIABILITIES LECT. 
 
 a concurring beneficiary had benefited, 
 but here there is no such limitation. Be 
 it also observed that the consent of the 
 beneficiary must be in writing, but not 
 the instigation or request. See Giiffith 
 V. Hughes (1892), 3 Ch., 105. There 
 used likewise to be a distinction between 
 the beneficiary who was himself a Trustee 
 and one who was not, but this distinction 
 has now ceased. 
 
 The statute, however, does not in any 
 way afTect what I may call the metaphy- 
 sics of the question. In order to make a 
 beneficiary liable under the Act in re- 
 spect, for example, of an improper invest- 
 ment, it must be shown not only that he 
 instigated, requested, or gave his written 
 consent to the investment, but that he 
 knew the facts which would make it a 
 breach of trust. Thus if a beneficiary 
 puts pressure upon his Trustees to invest 
 money on mortgage, full well knowing 
 that they were expressly forbidden by
 
 IV OF TRUSTEES 123 
 
 the instrument creating the trust so to 
 invest trust moneys, his interest in the 
 trust estate may be impounded by way 
 of indemnity. But if the trust deed 
 authorised such an investment, and all he 
 did was to put pressure upon his Trustees 
 to make an investment of that character, 
 and the Trustees proceeded so to do but 
 made an improper investment on insuffi- 
 cient security, the beneficiary could not 
 properly be said to have concurred in, or 
 instigated, or consented in writing: to a 
 breach of trust. But if the facts of the 
 security were brought to his notice, and 
 it was pointed out to him that it was of 
 insufficient value, and none the less he 
 pressed for its acceptance — in that case 
 he would fall within the section. See, 
 and carefully consider, the important case 
 of in re Somerset (1894), 1 Ch,, page 
 231. As to married women restrained 
 frcm anticipation instigating to a breach 
 of trust (a thing they are quite capable
 
 124 THE DUTIES OF TRUSTEES lect. iv 
 
 of doing), Judges still feel some hesita- 
 tion in impounding their interest by way 
 of indemnity to the too complaisant 
 Trustee. Were the Judge to l)e con- 
 vinced that the Trustee had consented to 
 commit the breach relying upon his being 
 able to impound the interest of the 
 married women he would probably refuse 
 to make the order.
 
 V 
 
 It will be, perliaps, useful to consider 
 in this Lecture two of tlie most usual 
 breaches of trust committed by honest 
 Trustees. With the fate of dishonest 
 Trustees we cannot be expected to concern 
 ourselves ; they may safely be left to the 
 tender mercies of the law. 
 
 The breaches of trust most frequently 
 committed by honest Trustees are — im- 
 proper investments, and continuing to 
 carry on a testator's business for the 
 benefit of his family when they are not 
 specially authorised so to do by the 
 terms of his will. 
 
 I will take investments first, for al'
 
 126 THE DUTIES AND LIABILITIES lect. 
 
 though I have already said a good deal 
 on this subject, I think I can usefully add 
 a little more. 
 
 Investments are of three kinds : 1. 
 They may belong to a class of security 
 which is authorised by the instrument 
 creating the trust ; or (2), They may 
 belong to a class of security which is un- 
 authorised Ijy that instrument ; or (3), 
 Though they may belong to an authorised 
 class of security they may be improper, 
 because insufficient, or for some other 
 special reason. 
 
 Note, first, it is the instrument creating 
 the trust which determines by its own 
 language what class of investment may 
 be made by the Trustee. 
 
 A Trustee cannot be blamed for making 
 an investment authorised by the terms of 
 his trust, unless it can be shown that the 
 investment so made was not made in 
 good faith — that is, with the honest desire 
 to make a wise investment. For example
 
 V OF TRUSTEES 127 
 
 if a Trustee were to be told by competent 
 persons that a particular security though 
 authorised by the terms of the instru- 
 ment was a bad one, and that from facts 
 which had come to their knowledge it 
 would soon be worthless, and yet in the 
 face of such advice the Trustee persisted in 
 making that investment, he might be 
 held responsible for it. 
 
 Second — For a Trustee to make an in- 
 vestment outside the scope of his authority 
 as defined by the instrument is to commit 
 a breach of trust ah initio, and to incur 
 the penalties I have already explained to 
 you. If the investment turns out well, all 
 the profit, though it be £100 per cent, per 
 annum, belongs to the beneficiaries ; if it 
 turns out ill, the whole loss falls upon the 
 Trustee. If there is any uncertainty about 
 it, it rests with the beneficiaries and with 
 them alone to decide what they will do — 
 whether to take the security or to fall 
 upon the Trustee.
 
 128 THE DUTIES AND LIABILITIES LECT. 
 
 I do not tliink tliere ought now to be 
 any great difficulty in determining in any 
 given case what is an authorised invest- 
 ment ; but Trustees will do well io con- 
 sider each investment separately as the 
 occasion for it arises, and to satisfy them- 
 selves before making it that it is w^ithiu 
 the scope of their authority. If a Trustee 
 first studies his investment clause, and 
 then, if necessary, carefully considers the 
 1st Section of the Trustee Act of 1893, and 
 requires from the stockbroker a written 
 statement of the nature and character of 
 the proposed investment, he will seldom, 
 I think, be in a difficulty as to the scope 
 of his authority. 
 
 A few technicalities he must remember, 
 as, for example, that a second mortgage 
 is not a real security, and that neither 
 a contributory mortgage nor a Bearer 
 security is an investment in his own 
 name. 
 
 And if he chooses, being authorised so
 
 V OF TRUSTEES 129 
 
 to do, to lend trust money on mortgage of 
 real security, he must slavishly regard the 
 provisions of the 8th Section of the Act 
 of 1893, all of which I have already gone 
 through in detail. 
 
 The 9th section of the Act of 1893, 
 already printed on p. 54, relates to in- 
 vestments of the third class, namely, 
 those which though authorised by the 
 trust are yet improper by reason of their 
 insufficiency. 
 
 Another example of this third kind of 
 investment, is when Trustees lend money 
 on an authorised security but to one of 
 themselves. This is an active breach of 
 trust. 
 
 If we seek a reason for its being so, 
 we may find it in the assumption of the 
 law that the whole number of the Trustees 
 bring to bear upon the question whether 
 or not there is to be a particular loan, an 
 impartial mind, and no man is to be taken 
 to be an impartial judge of either his own 
 
 K
 
 130 THE DUTIES AND LIABILITIES i.ect. 
 
 solvency or the real value of his pro- 
 perty. But there is really no need to 
 seek a reason for so elementary a rule. 
 Trustees are appointed to preserve an 
 estate in order that its usufruct, and ulti- 
 mately its capital value, may be applied 
 in a particular way, and if the guardians 
 of the estate become debtors to it, their 
 office can no longer be properly dis- 
 charged. There may be three Trustees 
 and the loan may be but to one of them, 
 but the two lenders may die leaving the 
 borrower the sole Trustee. 
 
 I do not think I can usefully add more 
 on the subject of investments. 
 
 There is, perhaps, no more frequent 
 honest breach of trust than that which is 
 committed by executors and Trustees who 
 continue to carry on their testator's 
 business with his assets though not 
 authorised so to do. 
 
 A farmer dies leaving behind him 
 growing crops and a small stock, worth
 
 V OF TRUSTEES 131 
 
 hardly anything at an auction. His 
 widow is a handy woman accustomed to 
 the management of the farm, and two or 
 three of the elder children are useful 
 about the house. They all implore the 
 executors and Trustees not to break up 
 their old home, where living is cheap, 
 and occupation provided for the elder 
 children, and the younger ones are left 
 free to obtain a few brief years of educa- 
 tion. The executors and Trustees, being- 
 good-natured men, yield to these 
 entreaties, postpone realisation, and 
 allow the few hundreds of ready money 
 that were in the bank, at the testator's 
 death, to be drawn upon for outgoings 
 connected with the business, which is 
 carried on after the usual fashion of 
 farmers in this country, without either 
 books or balance sheets. One of the 
 younger daughters marries early, and goes 
 away to live in a neighbouring town with 
 her husband, who begins to think that he 
 
 K 2
 
 132 THE DUTIES AND LIABILITIES lect. 
 
 would like to liandle his wife's share of 
 his dead father-in-law's estate. He con- 
 sults his cousin, a solicitor's clerk, who 
 pricks up his ears, gets a copy of the will, 
 and in due course writes a letter to the 
 Trustees asking for an account. These 
 gentlemen consult their solicitor, who 
 advises them to wind the whole thing up, 
 which they proceed to do. The result is 
 a net loss of a round sum of money for 
 every penny of which these Trustees are 
 personally liable, unless they can plead the 
 statute in manner hereafter appearing. 
 
 There is no getting out of it. Pity is 
 not only akin to love as the poet tells us, 
 but to breaches of trust as well. I know 
 it is impossible to block up the way to 
 men's hearts by legal maxims, but it is 
 the duty of a lawyer to make known 
 those maxims, and to explain the direful 
 consequences of disregarding them. 
 
 Executors and Trustees are not bound 
 the moment after a trader's death to put
 
 V OF TRUSTEEvS 133 
 
 an end to his trading concern, even 
 though they are not authorised to carry it 
 on. Their duty is to realise it as early as 
 possible as a going concern — for were they 
 not allowed this latitude they would have 
 to put up the shutters on the day of the 
 funeral, discharge the clerks and shopmen, 
 and thus destroy the goodwill. They are 
 allowed a reasonable time to wind up. 
 
 Mr. Justice North considered two years 
 not an unreasonable time within which 
 to dispose of a pawnbroker's business. 
 Li re Smith (1896), 1 Ch., 171. 
 
 But unless specially authorised by the 
 will to carry on the business and employ 
 the testator's assets or some portion of 
 them in it, it is a breach of trust to 
 carry it on save for the purpose of a 
 speedy realisation. 
 
 What is the penalty ? It is the old 
 familiar one. Are there any profits ? 
 They belong to the beneficiaries who may 
 pocket them without so much as a " thank
 
 134 THE DUTIES AND LIABILITIES lect. 
 
 you," and without allowing the Trustee 
 a halfpenny for personal remuneration. 
 Are there no profits, but only losses ? 
 Then those losses must be borne by the 
 Trustees. This is the pleasing option 
 which belongs to the beneficiaries, to take 
 all the profits or to have all the losses 
 made good. 
 
 But tJie case is sometimes a little com- 
 plicated. Supposing the Trustees have 
 carried on the business in conjunction with 
 others, or have mixed up their own moneys 
 in such a way as to make it difiicult to 
 determine what share of the profits can 
 be properly allocated to the testator's 
 assets — then, it may be, the beneficiaries 
 will have to be content with having their 
 capital returned to them with commercial 
 interest, namely five per cent, per 
 annum. 
 
 Partners who are not Trustees, but 
 have shared profits derived from the use 
 of trust property, arc, if personally impli-
 
 V OF TRUSTEES 135 
 
 cated, under the same liability as if them- 
 selves Trustees. 
 
 Flockton V. Bunning, which is reported 
 in a note to the well-known case of Vyse 
 V. Foster in 8 Ch. App. 309, was a case 
 of this kind. There a testator had for 
 several years prior to his death carried on 
 business as a turpentine and tar distiller 
 in partnership with his brother, who pre- 
 deceased him. At the testator's death 
 the business was in course of being wound 
 up and the assets sold and realised. The 
 proceeds of sale were received by his 
 widow, w4io was sole executrix under his 
 will, by the terms of which she was en- 
 titled to half the income of his real and 
 personal estate for her life, and the whole 
 fund, subject to such life-interest in a 
 moiety, was to be held uj)on trust for 
 such of his children as should attain 
 twenty-one equally. The testator had 
 thirteen children. Mrs. Flockton thought 
 it would be a o-ood tliino; for herself and
 
 136 THE DUTIES AND LIABILITIES lect. 
 
 children to carry on the turpentine trade, 
 and accordingly she entered into a part- 
 nership arrangement with the defendant 
 Bunning and another man— she con- 
 tributing a portion of the capital. The 
 partnership arrangements were from time 
 to time altered and readjusted, and the 
 business w^as carried on until 1864, when 
 the partnership was determined and the 
 widow was under a power in the articles 
 bought out at a valuation. She shortly 
 afterwards became bankrupt. Six of the 
 thirteen children being still infants filed 
 their bill against the widow, her late 
 partners, and others, asking for an account 
 of the dealings of the partners with the 
 partnership assets since the last account, 
 and for inquiries and other relief. It was 
 clear on the documents that Mrs. Flock- 
 ton's partners knew perfectly well that 
 she was working with trust funds. On 
 appeal Lord Hatherley, then Lord Justice, 
 said : —
 
 V OF TRUSTEES 137 
 
 " If, therefore, there ever can be a clear case 
 fixing persons with the legal consequences of 
 dealing with trust funds, this is that case. The 
 case of embarking assets in a new trade is a much 
 worse case than that of continuing the assets of a 
 deceased partner in a trade, for there is generally 
 great inconvenience in suddenly withdrawing them 
 from the business, and the retaining them too long 
 may be morally justifiable or at all events excus- 
 able. But I see no justification or excuse for 
 taking what you know to be trust property and 
 putting it into your business as part of your 
 capital. What then are the consequences follow- 
 ing from that act 1 The consequences, I apprehend, 
 must be these : The partners make themselves 
 co-owners of the fund and use it as co-partners. 
 In such a state of things they are just in the 
 same position as an original Trustee. Of the cases 
 cited Travis v. Milne, 9 Hare 141, was more to the 
 purpose than any other. The Vice-Chancellor 
 there makes a distinction between a fund advanced 
 by way of loan and a fund mixed up with the 
 consequences and liabilities of trade. In the one 
 case the firm are borrowing money, their liability 
 as to which may be probably more restricted than 
 their liability as to trust money which they appro- 
 priate as part of their capital. But in the case 
 before us there was a clear appropriation of the 
 trust fund by all the three partners. I cannot.
 
 138 THE DUTIES AND LIABILITIES lect. 
 
 therefore, feel any difficulty in saying that the 
 case is one to which Travers v. Milne is applicable, 
 and that it is brought to the ordinary case of 
 Trustees employing a trust fund and being un- 
 answerable for the use they make of it. The 
 decree therefore is substantially i-ight." 
 
 The decree tlius affirmed declared tliat 
 Mrs. Flockton and her late partners were 
 bound to restore and make good to the 
 plamtiffs such part of the assets of the 
 testator as had been employed by the 
 defendants in trade tooether with all 
 profits made by such employment, or 
 with interest at the rate of £5 per cent, 
 per annum upon what had been so 
 employed. 
 
 Having mentioned Vyse v. Foster, I 
 will just say that in that case the court 
 held that by the terms of the articles of 
 partnership a deceased partner's share 
 retained in the l)usiness was retained in 
 such a way as to amount to a debt due 
 from the partnership firm to the executors
 
 V OF TRUSTEES 139 
 
 of the deceased partner, and that although 
 the executors had unduly delayed the 
 calling in of this debt, such delay did not 
 entitle a beneficiary to share in the 
 profits of the business, and this not- 
 withstanding the fact that one of the 
 executors was himself a partner in the 
 firm. 
 
 I hope I have said enough to warn 
 executors and Trustees of the danger of 
 consenting to carry on any trade or 
 business save for the purpose of speedy 
 realisation unless they are expressly 
 authorised by the will so to do. 
 
 But suppose they are authorised the 
 consequences even then are disagreeable 
 enough. 
 
 In the first place they become per- 
 sonally liable for debts, although only 
 acting as executors or Trustees. See 
 Lahouchere v. Tucker, 11 Moore's Privy 
 Council Cases, 198. 
 
 In the case of in re Morgan, Pillgrem
 
 140 THE DUTIES AND LIABILITIES LECT. 
 
 V. Pillgrem, 18 Ch. Div., page 93, Mr. 
 Justice Fry, as he then was, observed — 
 
 " It appears to me that the principles which 
 regulate questions of this sort are y^ery clear. As 
 I understand them, where a Trustee or executor 
 carries on a business under the directions contained 
 in the will of the testator and in that character 
 contracts a debt, the debt is one for which an 
 action must be brought against the executor per- 
 sonally, and for which judgment must be obtained 
 de bonis 2}'>'02Jriis of the executor, and no action can 
 be succcessfvilly brought against the executor as 
 executor and no execution can be had de bonis 
 testatoris for this very simple reason that the debt 
 was not the debt of the testator." 
 
 The distinction must of course be borne 
 in mind in cases of this kind between 
 debts contracted in the business by the 
 testator himself whilst he was carrying it 
 on, and debts subsecpently contracted by 
 the executors or Trustees who continue to 
 carry on the business after the testator's 
 death in pursuance of directions contained 
 in his will. The creditors of the testator
 
 V OF TRUSTEES 141 
 
 himself have of course a right to be paid 
 out of his assets, and can take proceed- 
 ings to render such assets available for 
 the payment of their del:)ts. But the 
 subsequent creditors can only look to the 
 executor, and to the goods of the execu- 
 tor, and they have no original right to 
 be paid out of the testator's assets, nor 
 does it make any difference that the 
 executor has carried on the business in 
 his own name, or that the testator's 
 assets employed in it are ostensibly the 
 executor's own property. See Dmvso7i 
 V. Wood, 3 Taunt, page 256, and other 
 cases cited in in re Morgan, 18 Ch. 
 Div., 99. 
 
 But though the executor or Trustee 
 carrying on a business pursuant to the 
 directions contained in the will, is per- 
 sonally liable for debts contracted in 
 so doing, he is entitled to indemnity 
 in respect thereof out of the estate of the 
 deceased. This is a claim or right which
 
 142 THE DUTIES AND LIABILITIES leot. 
 
 lie lias as against all persons claiming 
 under the will. 
 
 This right to an indemnity will be 
 restricted to that specific portion of the 
 trust estate which the testator authorised 
 to be employed in the conduct of his 
 business. If he authorised the whole of 
 his estate to be so employed, of course the 
 Trustee may look to that whole, but if, on 
 the other hand, he stated the specific 
 amount he wished to be so employed, the 
 Trustee can only look for his indemnity 
 to that specific amount. 
 
 On this right of the executors and 
 Trustees to an indemnity a further right 
 has been grafted by legal decision, namely 
 the right of the creditors of the trade to 
 stand in the place of the executor and 
 Trustee, and to claim the benefit of that 
 right so as to obtain payment of their 
 debts. An excellent exposition of this 
 law will be found in the judgment of 
 the late Master of the Rolls, Sir George
 
 V OF TRUSTEES 143 
 
 Jessel, in the case of in re Johnson 
 Shearman v. Robinson, 15 Ch. Div., 548. 
 Sir George Jessel says on page 552 : 
 
 " I understand the doctrine to be this, that 
 where a Trustee is authorised by a testator or by 
 a settlor — for it makes no diiference — to carry on 
 a business with certain funds which he gives to 
 the Trustee for that pvirpose, the creditor who 
 trusts the executor has a right to say : ' I had the 
 personal liability of the man I trusted and I have 
 also a right to be put in his place against the 
 assets ; that is, I have a right to the benefit of 
 indemnity or lien which he has against the assets 
 devoted to the purposes of the trade.' The first 
 right is his general right by contract, because he 
 trusted the Trustee or executor ; he has a personal 
 right to sue him and to get judgment and make 
 him a bankrupt. The second right is a mere 
 corollary to these numerous cases in equity in 
 which persons are allowed to follow trust assets. 
 The trust assets having been devoted to carrying 
 on the trade it would not be right that the cestui 
 que trust should get the benefit of the trade 
 without paying the liabilities, therefore the court 
 says to him : ' You shall not set up a Trustee who 
 may be a man of straw and make him a bankrupt 
 to avoid the responsibility of the assets for carry- 
 ing on the trade.' The court puts the creditor, so
 
 144 THE DUTIES AND LIABILITIES lect. 
 
 to speak, as I understand it, in the place of the 
 Trustee." 
 
 In sucli cases it is a matter of necessity 
 that there shoukl be a special part of 
 the estate appropriated to carry on the 
 lousiness. See Strickland v. Symons, 26 
 Ch. Div., 245, whereby a marriage settle- 
 ment a lunatic asylum was assigned to 
 Trustees on trust at the request of the 
 husband to sell, but the Trustees were 
 to allow the husband to carry on the 
 business of the asylum on certain terms. 
 The husband became bankrupt, and 
 thereupon the surviving Trustee of the 
 settlement took possession of the asylum 
 and carried on the Inisiness there until 
 it was sold for a large sum of money. A 
 tradesman had supplied the Trustees 
 with goods for the use of the asylum. 
 He brought his action claiming payment 
 out of the trust funds of the settlement. 
 But it was held that he liad no right so 
 to do, as no special part of the estate
 
 V OF TRUSTEES 145 
 
 had been appropriated for carrying on 
 the asylum. Lord Selborne stated in 
 his judgment that it was impossible to 
 compare the case with ex parte Garland 
 10 Vesey 110, and the case of re Johnson, 
 which is referred to, and the other 
 cases where there has been an express 
 direction by the testator to carry on a 
 business, and where he specially ap- 
 propriated part of his property for that 
 purpose. And the Lord Chancellor 
 added : 
 
 "Those authorities proceed on this principle, 
 that where a particular part of a trust estate is 
 specifically dedicated to a particular purpose 
 which involves trade debts and liabilities, it is a 
 trust to use it for that particular purpose, and the 
 Trustee though personally liable for the debts 
 which he contracts in the course of the business, 
 has a right to be paid out of the specific assets 
 appropriated for that purpose, and the trade 
 creditors are not to be disappointed of payment so 
 far as the assets so appropriated are concerned." 
 
 I may add that creditors cannot be in 
 
 L
 
 146 THE DUTIES AND LIABILITIES lect. 
 
 any better position than the executor or 
 Trustee in whose shoes they seek to 
 stand, and if therefore the Trustee is 
 in default, the creditors are not entitled 
 to have their debts paid out of the 
 specific assets, unless and until the 
 default is made good. See in re 
 Johnson 15 Chy. D. 548. 
 
 An executor or Trustee who consents 
 to carry on the testator's business, even 
 when authorised so to do by his will, 
 certainly exposes himself to greater 
 liabilities than anybody ought to be 
 expected to accept at the request of 
 another. I must now leave the subject 
 and pass on. 
 
 There are two familiar and ominous 
 words often used in connection with 
 Trustees which require explanation — they 
 are, wilful default. 
 
 A Trustee is in wilful default who has 
 been guilty of a passive breach of trust, 
 that is to say, who has omitted to do
 
 V OF TRUSTEES 147 
 
 something which he ought as a Trustee 
 to have done. 
 
 There were two forms of calling a 
 Trustee to account in the old Court of 
 Chancery — one ran thus : — An account 
 of the principal money subject to the 
 trusts of the will or settlement received 
 by the defendants, the Trustees or 
 either of them, or by any person or 
 persons by their order, or for their use 
 as Trustees or Trustee. The other ran 
 thus : — An account of the principal money 
 subject to the trusts of the will or settle- 
 ment as have been received by the 
 Trustees or either of them, or by any 
 person or persons by their order or for 
 their use, or ivliich might hut /or their 
 ivilfid default have been so received. 
 
 Under the first or common decree or 
 order, a Trustee could not be made to 
 account for moneys he had not actually 
 received. For example : in re Fryer 3 
 K and J. 317, lands were devised 
 
 L 2
 
 148 THE DUTIES AND LIABILITIES LECT. 
 
 to three Trustees, upon trust for sale. 
 They were sold and the purchase money- 
 paid to one of them who was a solicitor, 
 and who acted in the matter of the sale 
 as solicitor for himself and the other 
 Trustees. This solicitor retained the 
 money and lost it, and the suit was 
 commenced for the administration of 
 the testator's estate and the common 
 decree was made. When the cause came 
 on for further consideration, counsel for 
 the plaintiff sought to charge one of 
 the defendants with the money so 
 allowed to remain in the hands of the 
 solicitor. But the Vice-Chancellor held 
 that the Trustee who had not received 
 the money could not upon the common 
 decree by which the question of wilful 
 neglect and default was not put in issue, 
 be made liable for its loss. Had the 
 decree been in the second form he might 
 very likely have been found liable to 
 make good the loss on account of his
 
 V OF TRUSTEES 149 
 
 negligence in allowing his co-Trustee to 
 retain the trust funds in his hands for 
 longer than was reasonably necessary. 
 
 To obtain an order on the footing 
 of wilful default, some one act of wdlful 
 default must be alleged and proved. 
 This was Lord Eldon's rule. In order 
 to obtain an inquiry as to wilful neglect 
 and default against an executor or a 
 Trustee, the plaintiff must allege and 
 prove at least one act of wilful neglect 
 or default. See observations of Lord 
 Justice Knight Bruce in Coape v. Carte?' 
 2 D.G. M. and G. 298, and of the 
 Vice-Chancellor Wood in Sleight v. 
 Laivson, 2 K. and J. 292. Under the 
 old practice some one instance of wilful 
 default had to be proved at the hearing 
 because no such inquiry could be added 
 afterwards. At the present day the 
 substance remains the same. If in the 
 prosecution of inquiries under an ordinary 
 decree, facts come out which if proved
 
 150 THE DUTIES AND LIABILITIES lect. 
 
 at the liearina: would have enabled the 
 plaintiff to obtain an inquiry as to 
 wilful default, then such an inquiry will 
 be added. But the rule still remains 
 that an account on the footing of wilful 
 neglect or default will not be granted 
 unless it has been pleaded, and until 
 evidence has been given of at least one 
 instance of wilful default. See obser- 
 vations of Lord Justice Cotton in re 
 Youngs, 30 Ch. Div., 431. 
 
 Mr. Justice Fry in Barber v. Mackrell 
 12 Ch. Div. 538, put the law thus :— 
 
 "Those cases" (as to wilful default) "appear 
 to me to come to this, that where wilful default is 
 not pleaded no order can be made on the footing 
 of wilful default either at the hearing or at any sub- 
 sequent time ; but that where wilful default has 
 been alleged, and a case is made for it on the 
 pleadings, an account on the footing of wilful 
 default can be directed either at the hearing or 
 trial of the action, or at any subsequent stage." 
 
 It is, however, the duty of the plaintiff 
 to be ready to prove his allegation at
 
 V OF TRUSTEES 151 
 
 the hearing, and if he is not ready the 
 court will not, unless a strong case is 
 made, postpone inquiry into the conduct 
 of the Trustees. See Smith v. Armitage, 
 24 Ch. Div.,727. 
 
 I may here repeat that accounts on 
 the footing of wilful default cannot be 
 directed on an originating summons, 
 even though the parties to be charged 
 are plaintiffs submitting to an account. 
 
 Where a beneficiary's action is not 
 confined to seeking relief in respect of a 
 particular breach of trust, but seeks a 
 general account of the trust estate on 
 the footing of wilful neglect and default, 
 all the Trustees and the personal repre- 
 sentatives of such of them as may be 
 dead are necessary parties to the suit — 
 Caj^pard v. Allen, 2 D.G. J. and S., 
 173. This rule is still one which requires 
 attention, though it has been more lately 
 decided that in an action brought by 
 cestui que trust against a sole surviving
 
 152 THE DUTIES OF TRUSTEES lect. v 
 
 Trustee for an account, and asking for a 
 declaration that he had committed 
 breaches of trust, the plaintiffs were not 
 l^ound to make the representatives of a 
 deceased Trustee parties — but this upon 
 the ground that if the defendant required 
 them he could get them added under tlie 
 new rules. See m re Harrison (1891), 2 
 Ch. 349. 
 
 As a rule of pleading, it must be 
 remembered that in all cases in which 
 the party pleading relies on any wilful 
 default the particulars of it must be stated 
 in the pleading. See Order 19, Rule G.
 
 VI 
 
 I HAVE reserved as the main subject 
 of my last Lecture, a great novelty intro- 
 duced into tlie law of express trusts by 
 the Trustee Act of 1888, the 8th Section 
 of which still remains unrepealed. 
 
 By that section Statutes of Limitation 
 may be pleaded by Trustees subject to 
 certain exceptions which I will carefully 
 consider in a minute or two. 
 
 The principle of ])^'escription and limi- 
 tation of actions is a principle of some 
 antiquity in our law, and one which is to 
 be found in the codes and systems of both 
 eastern and western nations. 
 
 Our ow^n Statutes of Limitation have 
 been made the sul)ject of great praise.
 
 154 THE DUTIES AND LIABILITIES lect. 
 
 They have been called by eminent judges 
 Statutes of Repose and Acts of Peace ; in 
 these respects resembling the thirty -nine 
 articles of our religious faith as by law 
 established. 
 
 In my mind they are always associated 
 with an eloc_[uent passage in a speech 
 delivered in the House of Commons in 
 the year 1844 by a distinguished member 
 of our profession, Mr. T. B. Macaulay. 
 Speaking on the second reading of the 
 Dissenters Chapels Bill he reminded the 
 House that the principle of prescription 
 was to be found all the world over, and 
 said something like this — 
 
 "It is in every known part of the world, in 
 every civilised age ; it was familiar to the old 
 tribunals of Athens, it formed part of the Roman 
 jurisprudence, and was spread with the imperial 
 power over the whole of Europe. It was recognised 
 after the French Revolution, and when the code 
 Napoleon was formed that very pi-inciple of pre- 
 scription was not forgotten. We find it both in 
 the east and the west ; it is recognised by tribunals 
 beyond the Mississippi and in countries that had
 
 VI OF TRUSTEES 155 
 
 nevei' heard of Justinian and had no translation 
 of the Pandects. In all places we find it acknow- 
 ledged as a sacred principle of legislation. In 
 our own country we find it coiival with the 
 beginning of our laws. It is found in the first 
 of our statutes — it is close upon our great first 
 Forest Charter ; it is consecrated by successive 
 Acts of Parliament ; it is introduced into the 
 Statute of Merton ; it is found in the Statute 
 of Westminster ; and the principle only becomes 
 more stringent as it is carried out by a succession 
 of great legislators and statesmen down to our 
 own time. 
 
 " Now, how is it possible to believe that the 
 Barons Avhose seals are upon our Great Charter 
 would have perfectly agreed with the great Jurists 
 who framed the Code Napoleon with the most 
 learned English Lawyers of the nineteenth cen- 
 tury, and with the Pundits of the Benares unless 
 there had been some strong and clear reason 
 which necessarily led men of sense in every age 
 and country to the same conclusion. 
 
 Lord Macaulay, it is well known, was 
 very adverse to the republication of his 
 speeches. However, an unscrupulous 
 publisher relying upon the then state of 
 the law on such subjects published
 
 156 THE DUTIES AND LIABILITIES lect. 
 
 without the great orator's permission an 
 edition of his speeches both in Parliament 
 and out of it. This piracy was in its 
 turn pirated by the pirates of the United 
 States, where there was a great sale of 
 the volumes. In both the English and 
 the American edition, instead of the word 
 " Pundits of the Benares," there occur the 
 words " Pandects of the Benares." The 
 nonsense thus made of his rhetoric drove 
 Macaulay well-nigh distracted, and was 
 the main cause which induced him to see 
 through the press the authorised edition 
 of his speeches which certainly have 
 justly swelled his fame.^ 
 
 In ancient times the principle of 
 limitation had naturally most application 
 to the recovery of real estate, and as 
 defined by Lord Coke "is a certain time 
 
 ^ It is interesting to compare Mr. Vizetelli's 
 " pirate " Edition witli the orator's own corrected 
 Edition. Neither the one nor the other repro- 
 duces the speeches as actually delivered.
 
 VI OF TRUSTEES 157 
 
 prescriljed by statute within the which 
 the demandant in an action must prove 
 himself or some of his ancestors to be 
 seized." Lord Coke proceeds : "In 
 ancient times the limitation in a Writ 
 of Eight was from the time of Henry I. 
 After that by the Statute of Merton the 
 limitation was from the time of Henry H. , 
 and by the Statute of Westminster the 
 limitation was from the time of Richard 
 I." Subsequently a Statute of Henry 
 Vni. reduced the time to sixty years 
 next before the writ, but now the 
 Statutes of Limitation, which are still 
 numerous, begin with the well-known 
 statutes of James L, which, however, as to 
 real estate have been subsequently much 
 modified. 
 
 To go into detail on this subject would 
 be out of place, but I may just say that 
 as the law now stands actions of debt and 
 of account and so on, must be brought 
 within six years next after the cause 
 of such action and not after, and actions
 
 158 THE DUTIES AND LIABILITIES lect. 
 
 for the recovery of land must be brought 
 within twelve years next after the time at 
 which the right to bring such action shall 
 have first accrued. 
 
 The admiration felt and expressed for 
 Statutes of Limitation by common law 
 judges and Lord Macaulay has never 
 been so cordially expressed by the 
 authorities in equity ; for though the 
 Chancery judges have always been un- 
 willing to give encouragement to the 
 notion that there was of necessity any- 
 thing morally wrong in a defendant rely- 
 ing upon a Statute of Limitation, still 
 they were usually careful to point out 
 that the defence was the creature of 
 positive law and not therefore to be 
 extended to cases not strictly within the 
 enactment. See observations of Lord 
 Cran worth in Roddam v. Morley, 1 D. 
 G. and ^., 23. About one thing the 
 Chancery judges never allowed any 
 doubt, and that was that express trusts 
 were not within the statutes. The Lord
 
 VI OF TRUSTEES 159 
 
 Justice Turner, a most eminent master of 
 equity, in Ohee v. Bishop, 1 D. G. F. and 
 J., 137, said (in 1859) that it would be 
 most dangerous to hold that a demand 
 against the assets of a deceased Trustee 
 or personal representative in respect of a 
 breach of trust or misappropriation com- 
 mitted by him was barred at the expira- 
 tion of six years from his death. It will 
 be observed that the Lord Justice did not 
 strike the distinction between an honest 
 breach of trust and a dishonest one. 
 
 So recently as the Judicature Act of 
 1873, it was enacted by Section 25, sub- 
 Section 2, that no claim of a beneficiary 
 against his Trustee for any property 
 held on express trust or in respect 
 of any breach of such trust, should be 
 held to be barred by any Statute of 
 Limitation. 
 
 I have pointed out in a former Lecture 
 that the distinction must always be borne 
 in mind between the plea of the statute
 
 100 THE DUTIES AND LIABILITIES lecT. 
 
 and the equitable doctrine of laches or 
 stale demands. Before the Act of 1888, 
 a cestui que trust might be barred by the 
 application of the equitable doctrine of 
 laches or stale demands, but in the case 
 of an express trust it would have l^een 
 idle and ridiculous for a Trustee, or for 
 the representatives of a deceased Trustee, 
 to have pleaded in a Chancery suit the 
 Statutes of Limitations, or any of them. 
 
 Then all of a sudden, like a bolt from 
 the blue, came the Act of 1888. 
 
 This Act is an interesting example of 
 how, in this country, those laws are made, 
 which affect (far more than hotly-contested 
 constitutional changes) the habits and lia- 
 bilities of Her Majesty's liege subjects. 
 It is, I believe, quite true to say, that 
 democratically governed as we are alleged 
 to be, the laws which most nearly affect 
 us are never subjected to our review, 
 nor is our opinion (speaking of the people 
 generally) ever sought upon the subject.
 
 VI OF TRUSTEES 161 
 
 I have been told, though I cannot 
 vouch for the truth of the story, that 
 the genesis of the Act of 1888 was some- 
 thing like this : 
 
 A Chancery practitioner, who was also 
 a Member of Parliament, happening to 
 meet the Chancellor of the day, an emi- 
 nent common lawyer, remarked to him, 
 that it had sometimes struck the Chancery 
 practitioner, in the course of his practice, 
 as somewhat of a hardship that a Trus- 
 tee, or the representative of a deceased 
 Trustee, was not allowed to plead the 
 Statute of Limitations as a defence to an 
 honest breach of trust. The eminent 
 Chancellor expressed great surprise at 
 hearing that this was the actual state of 
 the law, and suggested to the practitioner 
 that he would do well to draft a bill for 
 its alteration. This was done, and the 
 bill became law, as such bills are apt to 
 do without much notice or discussion ; 
 and so in a moment the well-considered 
 
 M
 
 162 THE DUTIES AND LIABILITIES lect. 
 
 judgments and opinions of a long race of 
 eminent Chancery judges were contempt- 
 uously disregarded, and to the great and 
 wholly unexpected relief of Trustees 
 the Act of 1888 came upon the Statute 
 Book. 
 
 Turning now to Section 8, and reading 
 it, in the first instance, without the ex- 
 ceptions, it runs as follows :— 
 
 " In any action or other proceeding against a 
 Trustee or any person claiming througli him, the 
 following provisions shall apply : — 
 
 " (a) All rights and jn-ivileges conferred by any 
 Statute of Limitations shall be enjoyed in the like 
 manner and to the like extent as they would have 
 been enjoyed in such action or other proceeding 
 if the Trustee or person claiming through him 
 had not been a Trustee or person claiming through 
 him." 
 
 An eminent judge of the Chancery 
 Division once threw a distressing doubt 
 upon the value of this sub-section, going 
 so far as to say that he could not discover 
 in it any meaning at all. lie pointed
 
 VI OF TRUSTEES 163 
 
 out that as an action for breach of trust 
 could not possibly be brought against any- 
 body who was not a Trustee there were no 
 Statutes of Limitation which, under this 
 sub-section, a Trustee coukl enjoy. See 
 the observation of Lord Justice Fry in in 
 re Boivden, 45 Ch. Div., 448. 
 
 If this criticism is just, the common- 
 law Chancellor and Chancery practitioner, 
 in their first shot, at all events, only fired 
 a blank cartridge. However, there is a 
 sub-section (6), which is as follows : — 
 
 " If the action or other proceeding is brought to 
 recover money or other property and is one to 
 which no existing Statute of Limitations applies, 
 the Trustee or person claiming through him shall 
 be entitled to the benefit of and be at liberty to 
 plead the lapse of time as a bar to such action or 
 other proceeding in the like manner and to the 
 like extent as if the claim had been against him 
 in an action of debt for money had and received, 
 but so nevertheless that the statute shall run 
 against a married woman entitled in possession for 
 her sepai'ate use, whether with or without a 
 restraint upon anticipation, but shall not begin to 
 
 M 2
 
 164 THE DUTIES AND LIABILITIES lect. 
 
 run against any beneficiary unless and until the 
 interest of such beneficiary shall be an interest in 
 possession." 
 
 This is intelligible, and full effect has 
 been given to it by the judges, and it 
 now therefore may be taken as certain that 
 whenever what I have called an honest 
 breach of trust has been committed (for 
 we have yet to consider the exceptions), 
 the passage of six years will, as against 
 anybody who has been throughout that 
 period entitled in possession, bar the 
 remedy of the cestui que trust. 
 
 The exceptions must now be stated, 
 they are as follows : — 
 
 1. — Where the claim is founded upon 
 any fraud or fraudulent breach of 
 trust to which the Trustee was 
 party or privy, or 
 2. — Where the claim is to recover trust 
 property, or the proceeds thereof, 
 still retained by the Trustee, or 
 which has been
 
 VI OF TRUSTEES 165 
 
 3. — Previously received by the Trustee 
 and converted to his use. 
 
 These exceptions seem to explain 
 themselves. 
 
 Any fraud or fraudulent breaches of 
 trust are outside the statute, no one wishes 
 to protect rogues. If the Trustee still 
 has in his pocket trust funds, the fact 
 that they have been there a long time 
 cannot give him any right to retain them 
 against the person whose property they 
 really are. See and consider Thome v. 
 Heard (1894), 1 Chy., 599. And if the 
 Trustee has received the money and con- 
 verted it to his own use, here again the 
 fact that he has chosen to alter the char- 
 acter of the property cannot give him 
 any equity to retain it. 
 
 Upon this last exception I may refer 
 to the case of in re Gurney, Mason v. 
 Mercer (1893), 1 Ch., 590, merely for the 
 purpose of quoting the language of Mr. 
 Justice Romer. In that case two Trustees
 
 166 THE DLTIES AXl) LIABILITIES LECT. 
 
 had made, in the year 1878, an invest- 
 ment on mortgage said to be improper, 
 and the money advanced by the Trustees 
 to the mortgagor was paid to the mort- 
 gagor's account with the bank of which 
 one of the Trustees was a partner, and 
 w^as applied by the bank in reduction of 
 the mortgagor's debt to the bank. The 
 action was brought more than six years 
 after the date of the investment, but the 
 plaintiff sought to get out of the statute 
 by the argument that the Trustee, who 
 was a partner in the bank, had converted 
 the money to his own use. But Mr. 
 Justice Romer held that it would be a 
 perversion of the language used in the 
 section if he were to hold that such a 
 transaction as that, heing an honest 
 transaction, was to be treated as a con- 
 version to his use by the Trustee who 
 happened to be a partner in the bank, of 
 the money lent on mortgage. 
 
 One of the first cases under the statute
 
 VI OF TRUSTEES 167 
 
 was the case already referred to, of in re 
 Bowden, 45 Ch. Div., 444, which was an 
 action brought against a former Trustee 
 and the representatives of two deceased 
 Trustees, to comjDel them to make good 
 losses arisinii; from investments ne^li- 
 gently made on insufficient security more 
 than six years before the action. Lord 
 Justice Fry said that in his opinion the 
 defendant had a good defence under the 
 8th Section of the Act, Sub-section (b), 
 and added : "If this had been an action 
 for deljt, for money had and received, and 
 the debt had arisen more than six years 
 aero and no acknowledo-ment had taken 
 place in the meanwhile, the lapse of time 
 would have furnished a defence," And 
 he dismissed the action with costs. 
 
 Another case may be mentioned, for it 
 illustrates very well the utility of the 
 Act of 1888, and its wide-reaching effect. 
 I mean the case of Swain v. Bringeman 
 (1891), 3 CL, 233. In that case the
 
 168 THE DUTIES AND LIABILITIES lect. 
 
 Trustees of a fiirmer's will, instead of 
 realising the residuary personalty as they 
 were Ijound to do, allowed the testator's 
 widow to reside on the farm carried on 
 ])y the testator, and themselves carried 
 on the farm, maintaining the widow 
 and the children out of the profits until 
 the youngest child attained twenty-one, 
 when the residuary personalty and the 
 realty were sold. 
 
 The result of this course of conduct 
 was an alleged loss of £1,800, and tw^o of 
 the sons sought to make the surviving 
 executor and Trustee liable. 
 
 The argument for the plaintiif proceeded 
 on the view that accordino; to the true 
 construction of the will the interest of the 
 plaintiffs was for legacies charged upon 
 land, and that accordingly there was a 
 Statute of Limitations ap^Dlicable to such 
 an action, namely the Real Property 
 Limitation Act, 1874, Section 8, which 
 substitutes a period of twelve years for a
 
 VI OF TRUSTEES 169 
 
 period of twenty, which was necessary 
 under the former Statute 3 and 4, Will 
 IV., Cap. 27, Sec. 40. But Mr. Justice 
 Romer was of opinion that the action was 
 not one for a legacy but for relief in 
 respect of a breach of trust, and that as 
 more than six (though less than twelve) 
 years had elapsed since the loss occasioned 
 by the breach of trust had occurred. Sub- 
 section (b) of Section 8 of the Trustee Act 
 1888, applied, and that accordingly the 
 action could not be sustained. 
 
 Again in 1892 a case arose in which the 
 section was held to apply, in re Page 
 Jones V. Morgan (1893), 1 Ch., 304. In 
 that case an infant was entitled to the 
 residue of the estate of a testatrix which 
 was to be held by the Trustees of the will 
 in trust for him, and to be paid to him, on 
 his attaining twenty-one. The testatrix 
 died in May 1875. The infant attained 
 twenty-one in December 1880, and in May 
 1892 he took out a summons against the
 
 170 THE DUTIES AND LIABILITIES LECT. 
 
 two Trustees and executors, claiming an 
 order for tlie administration of the estate. 
 
 One of the defendants did not appear, 
 and the other deposed that he had 
 expended the whole residue during the 
 plaintiff's minority in maintaining and 
 educating him. He admitted that he had 
 never rendered any account to the plaintift', 
 but said that he had told him during his 
 minority how the fund had Ijeen applied. 
 The plaintift' did not allege that the 
 defendant had Ijeen party or privy to any 
 fraud, or fraudulent breach of trust, and 
 there was no evidence that the defendant 
 had converted any part of the trust fund to 
 his own use, or that he retained any part 
 of it. Mr. eTustice North held that the Act 
 applied, and he dismissed the summons. 
 
 I will only refer to one other case upon 
 this section — that of Somerset v. Earl 
 Poulett (1894), 1 Ch., 231— a case which 
 has been already referred to for another 
 purpose.
 
 VI OF TRUSTEES 171 
 
 But l^efore referring to tliis case, and in 
 order to make it intelligible, I must say a 
 word about how debts can be taken out of 
 the Statutes of Limitation by acknoivledg- 
 ment. 
 
 This law arose on the common law side 
 under the Statutes of Limitation ; for not- 
 withstanding the express words of those 
 statutes, the judges soon held that an 
 acknowledgment of a debt by the debtor 
 within six years of action took the case out 
 of the operation of the rule, and they 
 admitted (until prevented by statute) 
 parol evidence of such acknowledgment. 
 Lord Tenterden's Act 9, Geo. IV., Cap. 
 14, Sec. 1, required acknowledgments to 
 be in writing. This statute merely 
 altered the mode of proof, and left the 
 nature and effect of an acknowledgment 
 untouched. See Dai^hy and Bvsanquets 
 Statutes of Limitation, 2nd Ed., page 66. 
 
 The common law cases on the subject 
 are well worth reading as proofs of refine-
 
 172 THE DUTIES AND LIABILITIES lect. 
 
 ment and subtle distinction. Some 
 judges based the theory of acknowledg- 
 ment on a new promise to pay. Others 
 held that no more was required than an 
 admission of the existence of the debt 
 even though that admission were accom- 
 panied by a point blank refusal to pay, or 
 a claim to the Ijenefit of the statute. 
 This view was justified on the ground that 
 Statutes of Limitation were founded on a 
 presumption of payment arising from 
 lapse of time, and as an admission of 
 non-payment got rid of that presumption 
 the statute could not ajoply. However, 
 ever since Tanner v. Smart, 6 Barn and 
 Cress, 603 (a decision of Lord Tenterden's), 
 it has been settled law that upon a 
 general acknowledgment where nothing- 
 is said to prevent it, a general promise to 
 pay may, and ought to be, implied, but 
 where the party guards his acknow- 
 ledgment and . accompanies it with 
 an express statement to prevent any
 
 vr OF TRUSTEES 173 
 
 such implication no sucli promise can 
 be implied. 
 
 Now that Statutes of Limitation apply 
 to express trusts, the rules of law as to 
 acknowledgments become material, and 
 if a Trustee who had been guilty of 
 an honest breach of trust was ever ill- 
 advised enoug-h to admit in writino- his 
 obligation to make good the loss, he 
 would thereby deprive himself of the 
 benefit of the plea of the statute until a 
 fresh six years had run from the date of 
 the admission. 
 
 Returning now to Somerset v. Poulett. 
 In that case, in 1878, the Trustees of a 
 settlement committed an innocent breach 
 of trust by investing the trust money 
 upon mortgage of property of insufficient 
 value. The mortgagor paid the interest 
 on the money advanced direct to the 
 tenant for life until 1890. In 1892 the 
 tenant for life and remaindermen brought 
 an action against the Trustees to compel
 
 174 THE DUTIES AND LIABILITIES lect. 
 
 them to make oood the amount of the 
 
 o 
 
 investment. It was conceded that so far 
 as the infant plaintiffs were concerned, 
 the Trustees were liable to make good the 
 loss to the estate, but it was held by the 
 Court of Appeal affirming the decision of 
 Mr. Justice Kekewich, that the right of 
 action by the tenant for life against the 
 Trustees was barred after six years from 
 the time when the investment was made, 
 and that although the payment of interest 
 by the mortgagor direct to the tenant for 
 life amounted in law to a payment by 
 the mortgagor to the Trustees, and by 
 them to the tenant for life, such payment 
 ivas not an admission or acknoivledgment 
 ivhich ivoidd take the case out of the 
 statute. 
 
 This is a decision of great value to 
 Trustees ; for had it been held that pay- 
 ment of interest on an improper invest- 
 ment by the Trustees to the tenant for life, 
 and the taking of a receipt from liim, was
 
 VI OF TRUSTEES 175 
 
 an acknowledgment within the statute, 
 Trustees would very rarely in the case of 
 an improper investment have been ahle 
 to avail themselves of this defence, and, 
 as we have already seen, improper in- 
 vestments are amongst the most usual of 
 honest breaches of trust. The judges in 
 deciding in the way they did, relied upon 
 some common law authorities, one of 
 which, Morgan v. Rowlands, in L.E. 7 
 Q.B., page 493, should be read, as it con- 
 tains a valuable judgment of Blackburn, J, 
 
 It must always be remembered that 
 the time of limitation does not beffin to 
 run until the beneficiary's interest is one 
 in possession ; and therefore so long as 
 there is a tenant for life in existence the 
 statute can only run against him and 
 cannot begin to run against the persons 
 ultimately entitled until the tenant for 
 life is under the sod. 
 
 This is w^ll illustrated by the case just 
 referred to of Somerset v. PouJett.
 
 17G THE DUTIES AND LIABILITIES lect. 
 
 The Act, tliougli only applicable to 
 actions or otlier proceedings commenced 
 after the 1st of January, 1890, applies to 
 all existing trusts irrespective of their 
 date. 
 
 It is perhaps worth remarking that 
 ])y the Bankruptcy Act of 1883, the 
 liabilities for honest breaches of trust 
 were for the first time made provable in 
 bankruptcy, and that an order of dis- 
 charge releases the bankrupt from debts 
 so provable ; therefore bankruptcy is now 
 one way out of an honest breach of 
 trust. 
 
 Turning away from this subject alto- 
 gether, I wish to say a word upon what 
 is sometimes called the delegation of 
 trusts as distinguished from the employ- 
 ment of agents. 
 
 A Trustee cannot properly delegate his 
 trust. He is bound to give liis bene- 
 ficiaries the benefit of his mind upon 
 every matter as it comes up concerning
 
 VI OF TRUSTEES 177 
 
 the trust affairs. He does not properly 
 discliarge the duty which he has assumed 
 towards others if he allows a co-Trustee 
 to conduct the trust business without 
 reference to himself ; but as we have 
 already seen, particularly in our first 
 Lecture, Trustees are entitled to employ 
 agents to carry out trust transactions in 
 the same way as reasonable men are ac- 
 customed to employ agents to carry out 
 similar transactions in which they are 
 personally interested. 
 
 As we have already seen when such 
 agents have been employed, and when, 
 n consequence of such employment, loss 
 has arisen to the trust estate, the question 
 always is, whether the agents were en- 
 trusted with the trust property either for 
 a longer period than was necessary, or 
 further than they ought to have been 
 entrusted, having regard to the nature 
 of their employment. 
 
 I only go over this ground again in 
 
 N
 
 178 THE DUTIES AND LIABILITIES lect. 
 
 order to call attention to the I7tli Section 
 of the Trustee Act of 1893, the first Sub- 
 section of which got rid of some very 
 troublesome earlier law. That Sub-section 
 is as follows : — 
 
 " A Trustee may appoint a solicitor to be his 
 agent to receive and give a discharge for any 
 money or vahiable consideration or property 
 receivable by the Trustee under the trust by per- 
 mitting the solicitor to have the custody of 
 and to produce a deed containing any such 
 receipt as is referred to in Section 56 of the 
 Conveyancing and Law of Property Act, 1881, 
 and a Trustee shall not be chargeable with breach 
 of trust by reason only of his having made or con- 
 curied in making any such appointment ; and the 
 producing of any such deed by the solicitor shall 
 have the same validity and effect under the said 
 section as if the person appointing the solicitor 
 had not been a Trustee." 
 
 Prior to this enactment it had been 
 held by Chancery judges that it was no 
 part of the ordinary duty of a solicitor to 
 receive purchase-money belonging to his 
 client (the vendor), even though the
 
 VI OF TRUSTEES 179 
 
 solicitor had possession of the deed of 
 conveyance. As a matter of fact, as all 
 professional men knew, nothing was more 
 in accordance with the ordinary practice 
 than for the vendor's solicitor who at- 
 tended the completion of the purchase 
 with the deed in his hands signed by his 
 client to receive the purchase-money. 
 But questions of this kind are determined 
 not by practitioners, but by the judges. 
 It therefore became the practice for the 
 solicitor for the vendor to he specially 
 authorised in writing to receive the pur- 
 chase-money in those cases where the 
 vendor did not attend the completion. 
 
 By the 56th Section of the Convey- 
 ancing Act of 1881, purchase-money 
 could be safely paid to the solicitor who 
 actually produced the deed with a receipt 
 in it, or on it ; l^ut it was held sub- 
 sequently to that Act by the judges of 
 the Appeal Court that Trustees selling 
 were not within the section. See Bellamy
 
 180 THE DUTIES AND LIABILITIES LECT. 
 
 and Metroj)olita7i Board of Worki<,24: Cli. 
 Div., 387. But the sub-section 1 have 
 just quoted gets rid of that law and enables 
 persons buying from Trustees to pay the 
 purchase-money to the solicitor for the 
 Trustees, who produces the deed duly 
 executed by his clients and containing a 
 receipt for the purchase-money either in 
 the body of the deed or on the Imck 
 of it. 
 
 The other sub-sections of Section 17 
 must be studiously considered, and in 
 reading the whole statute care must 
 be taken to observe what sections are 
 made retrospective and what dates are 
 fixed in other sections for the commence- 
 ment of their operation. 
 
 I promised in an earlier lecture to 
 say a word on the subject of forgery. 
 
 Trustees have been held liable if they 
 pay trust funds to the wrong party, 
 though they have done so honestly, 
 relying upon the genuineness of docu-
 
 VI OF TRUSTEES 181 
 
 ments. Thus in Eaves v. Hickson, 30 
 Beav., 136, Trustees paid over the trust 
 fund to wrong persons, trusting to a 
 marriage certificate which turned out to 
 be a forgery and were made responsible 
 for so doing to the extent to which the 
 trust fund could not be recovered from 
 those who had wrongfully received it. 
 The Master of the Rolls said : — 
 
 " This is a very hard case on the Trustees, who 
 were deceived by the forgery of the date in the 
 marriage certificate, which had been altered in a 
 manner which deceived them and would have 
 deceived any one who was not looking out for 
 forgery or fraud. The question is, where a 
 forgery is committed and a person wi^ongf ully gets 
 trust money which cannot be recovered from him, 
 on whom is the loss to fall ] I am of opinion that 
 it falls on the person who paid the money. Here 
 the loss falls on the Trustees, and the persons to 
 whom the fund I'eally belongs are not to be de- 
 prived of it. The Trustee is bound to pay the 
 trust fund to the right person." 
 
 This still seems to be the law, and it 
 exposes Trustees to an unreasonable
 
 182 THK DUTIES AND LIABILITIES lect. 
 
 amount of peril. If the fraud practised 
 upon them is one which probably would 
 not have escaped detection by reasonably 
 prudent men in the conduct of their own 
 affairs, it seems hard and contrary to 
 the principle of in re Belchier and 
 Speight v. Gaunt that Trustees should 
 be made personally responsible for a 
 perfectly honest and not unreasonable 
 mistake. 
 
 In bringing these Lectures to a con- 
 clusion I will only observe that it is not 
 at all surprising to find that just when 
 the law of Trustees has been substantially 
 ameliorated and their liabilities greatly 
 reduced there should be a demand for the 
 abolition of private Trustees altogether ; 
 and for the appointment of official 
 Trustees to take upon themselves the 
 administration of the wills and settle- 
 ments of the country. This is the 
 ordinary course in human affairs. Re- 
 volutions succeed periods of partial
 
 VI OF TRUSTEES 183 
 
 reform. It is no part of my duty to 
 consider the wisdom or folly of so vast 
 a proposal, Imt this much may I think 
 be safely said, that so long as people are 
 to be found willing to assume the office 
 and undertake the liabilities of Trustees, 
 there is no prospect of the law I have 
 sought partially to expound becoming 
 obsolete. 
 
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