Re Speight. Speight v Gaunt

Nov. 26. EARL OF SELBORNE L.C.: —

My Lords, the principles of equity, with respect to the duties and responsibilities of trustees, and the distinction between those losses of trust funds for which they are, and those for which they are not, liable, are so well settled, and are of such great general importance, that the present case, in which two Courts have differed as to their application, has naturally been considered by your Lordships with some anxiety.

In the early case of Ex parte Belchier^F13, before Lord Hardwicke, it was determined that trustees are not bound personally to transact such business connected with 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 mercantile agents; and that when, according to the usual and regular course of such business, moneys receivable or 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 other misconduct or default on the part of the trustees, a loss takes place through any fraud or neglect of the agents employed, the trustees are not liable to make good such loss. That authority has ever since been followed; and, in conformity with it, the statute 22 & 23 Vict. c. 35, s. 31, enacts, that every instrument creating a trust shall be deemed to contain a clause exonerating the trustees from liability “for any banker, broker, or other person, with whom any trust moneys or securities may be deposited.”

Neither the statute, however, nor the doctrine of Ex parte Belchier^F14, authorizes a trustee to delegate, at his own mere will and pleasure, the execution of his trust, and the care and custody of the trust moneys, to strangers, in any case in which (to use Lord Hardwicke's words) there is no “moral necessity from the usage of mankind,” for the employment of such an agency. The cases of Rowland v. Witherden^F15, Floyer v. Bostock^F16, and many others, shew, that trustees, bound to invest trust moneys in authorized securities, are primâ facie answerable for the proper care and custody of such trust moneys, until they are actually so invested; and will not be exonerated from liability if, in the meantime, they leave them in other hands, though the hands of professional advisers or agents, to whose assistance, for many purposes connected with the trust, they may properly have recourse.

The present question is, whether the respondent, Mr. Gaunt, has been rightly exonerated, by the Court of Appeal, from liability for a sum of £15,275 trust money under the will of John Speight (who died in 1877), of which the respondent was trustee, and which he paid on the 24th of February, 1881, to a broker at Bradford, named Richard Ernest Cooke, for the purpose of a then intended investment? The burden of justifying this payment rests upon the respondent.

The facts which I consider material are these:—

In February, 1881, the respondent had in his hands, for investment, under Mr. Speight's will, that sum of £15,275, and he decided upon investing it in securities of three municipal corporations, those of Leeds, Huddersfield, and Halifax; dividing it between them as equally as he could.

The residence of the testator, and of his widow and children, who were the cestuis que trust under his will, was at Bradford. The respondent was a woollen spinner and cloth manufacturer residing at Stanningley, about half way between Leeds and Bradford, and having a place of business in each of those towns, which he was in the habit of visiting from time to time, usually on market days.

The will of the testator authorized the investment of his trust funds in the securities of municipal corporations; and the corporations of Leeds, Huddersfield, and Halifax were in undoubted credit. The respondent knew, generally, that municipal corporations, of the class to which these belonged, were in the habit of borrowing money; and he believed that securities of these particular...