¹ See Keech v Sandford (1726) Sel. Cas. Ch 61.

² Maugham, F.H., “Excusable Breaches of Trust” (1898) 14 L.Q.R. 159 Google Scholar, at 160.

³ This treatment, as Lord Lindley acknowledged, “shocked one's sense of humanity and of fairness” (Perrins v Bellamy [1899] 1 Ch. 797, 800).

⁴ See Re Brogden (1888) LR 38 Ch. D. 546.

⁵ Per Kekewich J. in Re Tollemache [1903] 1 Ch. 457, 466.

⁶ This Act is a consolidating piece of legislation. Hence, s. 61 embodies the same policy and attacks the same mischief as its forerunner.

⁷ For example, the Trustee Relief Acts 1847 and 1849 (payment into court); the Law of Property and Trustees Relief Amendment Act 1859 (indemnity clauses); the Conveyancing and Law of Property Act 1881 (retirement, appointment and vesting); and the Trustee Acts 1888 and 1893 (limitation periods and investment guidance).

⁸ Including an executor: Trustee Act 1925, s. 68(17).

⁹ See e.g. Airbus Operations Limited v Withey [2014] EWHC 1126 (QB) (an employee) and Re Lands Allotment [1894] 1 Ch. 616 (a company director).

¹⁰ Equivalent provisions include Charities Act 2011, s. 191(1) (which affords the Charity Commission a discretion to grant relief to trustees and others) & Companies Act 2006, s. 1157 (which offers the court the ability to grant relief to officers of a company).

¹¹ Partial relief is not the norm, but can be afforded when appropriate: see Iles v Iles [2012] EWHC 919 (Ch).

¹² Maugham, “Excusable Breaches of Trust”, p. 159.

¹³ Stebbings, C., The Private Trustee in Victorian England (Cambridge 2002), 189 Google Scholar.

¹⁴ Lowry, J. and Edmunds, R., “Excuses” in Birks, P. and Pretto-Sakmann, A. (eds.), Breach of Trust (Oxford 2002), 269 Google Scholar.

¹⁵ Moffat's Trusts Law Text and Materials, 6th ed. (Cambridge 2002), 595 Google Scholar.

¹⁶ Insurance is primarily targeted at the professional trustee market. As regards legal work undertaken by solicitors in private practice, professional indemnity insurance is compulsory (see the Solicitors Regulation Authority, Insurance Rules (2013)).

¹⁷ In Adams v Bridge [2009] Pens.L.R. 153, s. 61 assumed relevance only following a finding that the exclusion clause was ineffective by because of the Pensions Act 1995, s. 33.

¹⁸ AIB Group (UK) plc v Mark Redler & Co. Solicitors [2014] UKSC 58; see Millett, P., “Equity's Place in the Law of Commerce” (1998) 114 L.Q.R. 214 Google Scholar.

¹⁹ Pursuant to the Solicitors Regulation Authority, Code of Conduct (2011) a solicitor cannot exclude liability to his client, but may in writing limit such liability to a prescribed financial level.

²⁰ AIB Group (UK) plc [2014] UKSC 58, at [69].

²¹ As Maugham, “Excusable Breaches of Trust”, p. 160, noted: “The question, in short, is not one of law, but of social ethics, in which the law necessarily plays a part.”

²² Labrouche v Frey [2016] EWHC 268; Agouman v Leigh Day [2016] EWHC 1324 (QB).

²³ The Judicial Trustees Act 1896 did not, however, proffer a definition.

²⁴ See National Trustee Co. of Australasia v General Finance Co. Ltd. [1905] A.C. 373; Re Pauling's Settlement [1964] Ch. 303.

²⁵ He explained in AIB Group (UK) plc [2014] UKSC 58, at [67], that: “A traditional trust will typically govern the ownership-management of property for a group of potential beneficiaries over a lengthy number of years”.

²⁶ Per Lord Toulson in AIB Group (UK) plc [2014] UKSC 58, at [34].

²⁷ Ibid., at para. [71]. The Supreme Court was preoccupied with the rules relating to equitable compensation. The operation of s. 61 was only of peripheral concern.

²⁸ Strikingly demonstrated by the Supreme Court in Patel v Mirza [2016] 3 W.L.R. 399 where the traditional wisdom, as regards disallowing a claim on the basis of illegality, was overturned.

²⁹ Stebbings, The Private Trustee, p. 7.

³⁰ See generally Cornish, W., Anderson, J.S., Cocks, R., Lobban, M., Polden, P., Smith, K., The Oxford History of the Laws of England 1820–1914 vol. XI Private Law (Oxford 2010), 232–68Google Scholar.

³¹ See The Times, 18 March 1895, p. 9, which asserted that “a super-human standard of perfection has been exacted; and a trustee who is not a miracle of circumspection and prudence is in peril if he happen to have to do with quarrelsome and litigious beneficiaries”.

³² Stebbings, C., “Trustees, Tribunals and Taxes: Creativity in Victorian Law” (2007) (70)2 Amicus Curiae 3 Google Scholar.

³³ Manson, E., “Remuneration of Trustees and Executors” (1903) 5(1) Journal of the Society of Comparative Legislation, 185 Google Scholar.

³⁴ Leonards, Lord St., A Handy Book of Property Law, 2nd ed. (Edinburgh 1858), 161 Google Scholar.

³⁵ Evans, R. Watson, “The Trustee Act 1888” (1890) 6 L.Q.R. 50, 52 Google Scholar.

³⁶ As R. Watson Evans, ibid., at p. 62, noted: “a man of ordinary intelligence does not, by becoming a trustee, change his entire intellectual being and become a paragon of wisdom and prudence”.

³⁷ Polden, P., “The Public Trustee – England 1906–1986: The Failure of an Experiment” (1989) 10 J.L.H. 228, 230 Google Scholar.

³⁸ Learoyd v Whiteley (1886) LR 33 Ch. D. 347, 355.

³⁹ HL Deb. vol. 145 col. 1563 (11 June 1857).

⁴⁰ Select Committee on Trusts Administration, House of Commons Parliamentary Papers (1895) (248), p. iii.

⁴¹ Turner v Corney (1841) 49 Eng.Rep. 677; see further Duff, P.W. and Whiteside, H.E., “ Delegata Potestas Non Potest Delegari: A Maxim of American Constitutional Law” (1929) 14 Cornell L.Rev. 168 Google Scholar.

⁴² The Law Commission, The Law of Trusts: Delegation by Individual Trustees (1994) Law Com. 220, at [2.1].

⁴³ Delegation had long been permitted in cases of legal or moral necessity: Ex parte Belchier (1754) Amb. 218.

⁴⁴ Re Airey [1897] 1 Ch. 164.

⁴⁵ Speight v Gaunt [1883] UKHL 1 (employment of a broker as selected by the beneficiary). It did not matter that the agent was also a trustee: Home v Pringle (1841) 8 Cl. and Fin. 264.

⁴⁶ Re Brier [1884] 26 Ch. D. 238.

⁴⁷ Carruthers v Carruthers [1896] A.C. 659. As Cozens-Hardy M.R. explained in Re Allsop [1914] 1 Ch. 1, 11: “A trustee who employs an agent must, according to the ordinary rules of law, be responsible for the acts of the agent”.

⁴⁸ Re Stuart [1897] 2 Ch. 583.

⁴⁹ Trustee Act 1925, s. 23(1); see further Jones, G.H., “Delegation by Trustees: A Reappraisal” (1959) 22 M.L.R. 381 CrossRefGoogle Scholar.

⁵⁰ Trustee Act 1925, s. 25.

⁵¹ Under the Trustee Act 1925, s. 23(1), the trustee was now liable only for want of reasonable care in appointing and supervising the agent.

⁵² See Stebbings, C., “The Rule in Cradock v Piper ” (1998) 19 J.L.H. 189 Google Scholar. By the end of the Victorian period, at least 80% of large estates in England were in the hands of solicitor-trustees: see HC Deb. vol. 148 col. 687 (30 June 1905).

⁵³ Lawton v Elwes (1887) 34 Ch. D 675.

⁵⁴ As Stebbings, “The Rule in Cradock v Piper”, p. 195, explains: “the two characters of trustee and solicitor would remain distinct, and there could be no conflict between duty and interest. If no conflict existed, there would be no reason for prohibiting remuneration for professional work done”.

⁵⁵ Lord St. Leonards, HL Deb. vol. 145 col. 1552 (11 June 1857).

⁵⁶ Robb, G., White-Collar Crime in Modern England: Financial Fraud and Business Morality 1845–1929 (Cambridge 2002), 93 Google Scholar.

⁵⁷ HL Deb. vol. 145 col. 1559 (11 June 1857); see also The Times, 18 March 1895, p. 9.

⁵⁸ See HC Deb. vol. 133 cols. 355, 356 (18 April 1904).

⁵⁹ For example, the Larceny Act 1901 which imposed criminal sanctions for fraudulent breaches of trust.

⁶⁰ Public Trustee Bills of 1887, 1889, 1890, 1891 and 1894 all fell by the parliamentary wayside.

⁶¹ See Sir Howard Vincent, The Times, 28 March 1891, p. 4.

⁶² See The Spectator, 1 April 1905, p. 8.

⁶³ See Watson Evans, “The Trustee Act 1888”, p. 51.

⁶⁴ See generally Polden, “The Public Trustee”.

⁶⁵ Ibid., at p. 231. Maugham, “Excusable Breaches of Trust”, p. 161, shared the perception that, “no position known to the law is treated so unkindly as that of a trustee”.

⁶⁶ House of Commons Parliamentary Papers (1895) (248), iv.

⁶⁷ Turner v Hancock (1882) 20 Ch. D. 303, 305.

⁶⁸ The same recruitment objective was, some 116 years later, to underscore the enactment of the Charities Act 2011, s. 192: see Charity Commission: Power of the Commission to relieve trustees, auditors etc from liability for breach of trust or duty (O.G. 98, August 2013).

⁶⁹ The Times, 18 March 1895, p. 9.

⁷⁰ Possibilities mooted included a statutory right to remuneration, the creation of commercial trust companies, the creation of an official trustee and entrusting the court with the discretion to sanction departures from the terms of a trust when expedient and advantageous for the beneficiaries.

⁷¹ Appraised by Maugham, “Excusable Breaches of Trust”, p. 160, as, “a new class of quasi-legal conundrum”.

⁷² Per Stirling J. in Re Stuart [1897] 2 Ch. 583, 590.

⁷³ Sheridan, L.A., “Excusable Breaches of Trust” [1955] 19 Conv. 420, 422 Google Scholar.

⁷⁴ Underhill, A., The Law Relating to Trusts and Trustees, 7th ed. (London 1912), x Google Scholar.

⁷⁵ See Sheridan “Excusable Breaches of Trust”, pp. 426–29.

⁷⁶ The Law Commission Consultation Paper, Trustees’ Powers and Duties (1997) Law Com. 146, at [3.5].

⁷⁷ Lord St. Leonard, HL Deb. vol. 145 col. 1552 (11 June 1857) estimated that this was true of nine-tenths of breaches of trust.

⁷⁸ Law Reform Commission for Ireland, “Trust Law: General Proposals” (L.R.C. 92–2008), at [4.44].

⁷⁹ Perrins v Bellamy [1898] 2 Ch. 521, 526, 527. He added (at 527): “A large body of law is dealt with in a few words, which are apparently intended to introduce large alterations.”

⁸⁰ Re Lord de Clifford's Estate [1900] 2 Ch. 707, 712, 713, respectively.

⁸¹ Maugham, “Excusable Breaches of Trust”, p. 159.

⁸² Briggs L.J. in Santander UK plc v R A Legal Solicitors [2014] EWCA Civ 183, at [34], commented that “this old-fashioned description of the nature of the section 61 jurisdiction should be abandoned. In this context mercy lies not in the free gift of the court. It comes at a price”.

⁸³ Re Lord de Clifford's Estate [1900] 2 Ch. 707, 713.

⁸⁴ See Palmer [1911] 1 Ch. 758.

⁸⁵ Re Allsop [1914] 1 Ch. 1.

⁸⁶ See Re Kirbys Coaches Ltd. [1991] B.C.C. 130.

⁸⁷ Re Pawson's Settlement [1917] 1 Ch. 541. It may, of course, be necessary to order an adjournment if the defence is raised during the trial.

⁸⁸ Re Smith (1902) 86 L.T. 401.

⁸⁹ Re Tollemache [1903] 1 Ch 457, 466. The legislature did exactly this with the enactment of the Companies Act 2006, s. 1157.

⁹⁰ Hence, the trustee is spared, “the grotesque task of proving that he is in breach of trust in order to qualify for relief” (Sheridan, “Excusable Breaches of Trust”, p. 425).

⁹¹ Re Grindey [1898] 2 Ch. 593, 598.

⁹² Marsden v Regan [1954] 1 W.L.R. 423; see also Barnsley v Noble [2016] EWCA Civ 799.

⁹³ As Rigby L.J. put it in Perrins [1899] 1 Ch. 797, 802: “The question is, what is to happen when they have in fact committed a breach of trust?”

⁹⁴ As occurred in Palmer v Emerson [1911] 1 Ch. 758 and Re Houghton [1904] 1 Ch. 622.

⁹⁵ Re Rosenthal [1972] 1 W.L.R. 1273; Younger v Saner [2002] EWCA Civ 1077.

⁹⁶ Purrunsing v A'Court & Co. [2016] 4 W.L.R. 81.

⁹⁷ P&P Property Limited v Owen White and Catlin LLP [2016] EWHC 2276 (Ch).

⁹⁸ See the Law Commission Report, Fiduciary Duties and Regulatory Rules (1995) Law Com. 236, at [15.17].

⁹⁹ Tito v Waddell (No 2) [1977] Ch. 106, 248.

¹⁰⁰ He was, instead, considering whether a claim was statute barred under the Limitation Act 1939.

¹⁰¹ In Re Clark (1920) 150 L.T.J. 94, relief was granted to a trustee who took a lease of trust property at undervalued rent.

¹⁰² Coleman Taymar Ltd. v Oakes [2001] 2 B.C.L.C. 749, at [82]. This was, however, a decision concerning the equivalent provision in the Companies Act.

¹⁰³ As the Chancellor Sir Terence Etherton observed in Santander UK [2014] EWCA Civ 183, at [109]: “section 61 must be interpreted consistently with equity's high expectation of a trustee discharging fiduciary obligations.”

¹⁰⁴ Guinness plc v Saunders [1990] 2 A.C. 663.

¹⁰⁵ Sinclair v Sinclair [2009] EWHC 926 (Ch).

¹⁰⁶ See Boardman v Phipps [1967] 2 A.C. 46.

¹⁰⁷ Williams v Central Bank of Nigeria [2014] A.C. 1189 (SC); see also Millett L.J. in Paragon Finance v DB Thackerar [1999] 1 All E.R. 400. This distinction clearly has resonance in non-limitation cases: see Dubai Aluminium Co. Ltd. v Salaam [2003] 2 A.C. 366.

¹⁰⁸ Paragon Finance [1999] 1 All E.R. 400, 412; see also C. Mitchell, “Dishonest Assistance, Knowing Receipt, and the Law of Limitation” [2008] Conv. 226.

¹⁰⁹ The Law Commission Report, Fiduciary Duties and Regulatory Rules (1995) Law Com. 236, at [15.7], clearly proceeded on this basis.

¹¹⁰ Mara v Browne [1896] 1 Ch. 199.

¹¹¹ Perrins [1898] 2 Ch. 521, 529.

¹¹² Re Stuart [1897] 2 Ch. 583.

¹¹³ Perrins [1898] 2 Ch. 521.

¹¹⁴ Re Tollemache [1903] 1 Ch. 457.

¹¹⁵ Perrins [1898] 2 Ch. 521, 528, 529.

¹¹⁶ By way of an alternative, the Scottish Law Commission, Breach of Trust (2003) Discussion Paper No. 123, at [6.9], proposed instead that “the court should be empowered to sanction a transaction that was a breach provided it was as beneficial to the trust as an arms-length transaction”.

¹¹⁷ Accordingly, as in Re Evans [1999] 2 All E.R. 777, a trustee might avoid seeking directions due to the fear of cost and yet be granted relief.

¹¹⁸ See Re Grindey [1898] 2 Ch. 593.

¹¹⁹ Sheridan, “Excusable Breaches of Trust”, p. 422.

¹²⁰ Re Turner [1897] 1 Ch. 536.

¹²¹ See the Chancellor in Nationwide Building Society v Davisons Solicitors [2012] EWCA Civ 1626, at [48].

¹²² Per Briggs L.J. in Santander UK [2014] EWCA Civ 183, at [23].

¹²³ See P.S. Davies, “Section 61 of the Trustee Act 1925: Deus Ex Machina?” [2015] Conv. 379, 380.

¹²⁴ As Sheridan wryly observed, “That must be obvious even to dishonest trustees, for they do not bother to apply” (“Excusable Breaches of Trust”, pp. 422, 423).

¹²⁵ Re Second East Dulwich 745th Starr Bowkett Building Society (1899) 68 L.J. Ch. 196. Surprisingly, this seemingly unassailable proposition was doubted by Nelson J. in Bairstow v Queens Moat Houses plc [2000] B.C.C. 10.

¹²⁶ Maugham, “Excusable Breaches of Trust”, p. 163. Hence, a dishonest assistant to a breach of trust cannot claim statutory protection.

¹²⁷ Re Stuart [1897] 2 Ch. 583.

¹²⁸ Labrouche [2016] EWHC 268; Various Claimants v Giambrone and Law (A Firm) [2015] EWHC 3315 (QB).

¹²⁹ Dishonesty is more frequently pleaded in the context of relief claimed under the Companies Act 2006, s. 1157: see Vivendi S.A. v Richards [2013] EWHC 3006 (Ch).

¹³⁰ Perrins [1898] 2 Ch. 521, 527, 528.

¹³¹ It gives rise to questions that are, “impossible to answer fully” (Maugham, “Excusable Breaches of Trust”, p. 163).

¹³² In Royal Brunei Airlines v Tan [1995] 2 A.C. 378, 389, Lord Nicholls explained that, “Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual”.

¹³³ See Knox J. in Re Produce Marketing Consortium Ltd. [1989] 3 All E.R. 1, 6.

¹³⁴ See Bairstow v Queens Moat House plc [2001] EWCA Civ 712.

¹³⁵ Sheridan, “Excusable Breaches of Trust”, p. 423.

¹³⁶ The trustees were honest in Davis v Hutchings [1907] 1 Ch. 356 because, as Kekewich J. put it (at 364), “They intended to do what was right, and in the right manner”.

¹³⁷ Re Grindey [1898] 2 Ch. 593.

¹³⁸ Re Second East Dulwich 745th Starr Bowkett Building Society (1899) 68 L.J. Ch. 196, 197.

¹³⁹ For example, an offence under the Water Resources Act 1991, the Environmental Protection Act 1990 and the Health and Safety at Work etc Act 1974.

¹⁴⁰ As Judge Reid noted in Coleman Taymar Ltd. [2001] 2 B.C.L.C. 749, at [83]: “Any reasonableness test must by its very nature be objective”.

¹⁴¹ See Millett L.J. in Armitage v Nurse [1998] Ch. 241, 251.

¹⁴² See Barnsley [2016] EWCA Civ 799.

¹⁴³ A solicitor's conduct did not amount to dishonesty in Various Claimants [2015] EWHC 3315 (QB) even though it was classified by Foskett J. (at [34]) as being, “unreasonable conduct at the high end of the spectrum of unreasonable professional conduct …”.

¹⁴⁴ Royal Brunei Airlines [1995] 2 A.C. 378, 390.

¹⁴⁵ LSC Finance Limited v Abensons Law Limited [2015] EWHC 1163 (Ch).

¹⁴⁶ Per Millett J. in Agip (Africa) Ltd. v Jackson [1990] Ch. 265, 294.

¹⁴⁷ Per Popplewell J. in Madoff Securities International Limited v Raven [2013] EWHC 3147 (Comm) at [356].

¹⁴⁸ This is particularly so when the allegation is against a solicitor-trustee: Clydesdale Bank plc v Workman [2016] EWCA Civ 73.

¹⁴⁹ As Millett L.J. noted in Armitage v Nurse [1998] Ch. 241, at 251: “A trustee who acts with the intention of benefitting persons who are not the objects of the trust is not the less dishonest because he does not intend to benefit himself ”.

¹⁵⁰ There must be a strong case to grant relief in such circumstances: see Towers v Premier Waste Management Ltd. [2011] EWCA Civ 923.

¹⁵¹ Royal Brunei Airlines [1995] 2 A.C. 378. A motive for dishonesty needs to be demonstrated as regards a solicitor-trustee: Clydesdale Bank plc [2016] EWCA Civ 73.

¹⁵² Adams [2009] Pens.L.R. 153.

¹⁵³ Daniel v Tee [2016] 4 W.L.R. 115.

¹⁵⁴ See Labrouche [2016] EWHC 268.

¹⁵⁵ See Daniel [2016] 4 W.L.R. 115.

¹⁵⁶ As Briggs L.J. acknowledged in Santander UK plc [2014] EWCA Civ 183, at [30]: “It is well-established that the standard is likely to be higher for a paid than for an unpaid trustee”.

¹⁵⁷ Palin, D., “The Trustee's Duty of Skill and Care” [1973] 37 Conv. 48, 49 Google Scholar.

¹⁵⁸ See Purrunsing [2016] 4 W.L.R. 81.

¹⁵⁹ Various Claimants [2015] EWHC 3315 (QB).

¹⁶⁰ Per Rimer L.J. in Lloyds TSB Bank plc v Markandan & Uddin [2012] 2 All E.R. 884, at [60], [61].

¹⁶¹ DB UK Bank Ltd. v Edmunds & Co. [2014] P.N.L.R. 12.

¹⁶² Santander UK plc [2014] EWCA Civ 183. If not, the evidence is likely to be regarded as unreliable: Ikbal v Sterling Law [2013] EWHC 3291 (Ch).

¹⁶³ See Santander UK plc [2014] EWCA Civ 183, at [112].

¹⁶⁴ See Briggs L.J. in ibid., at para. [97], who spoke of “Looking at the matter in the round”.

¹⁶⁵ Per Byrne J. in Turner v Turner [1897] 1 Ch. 536, 542.

¹⁶⁶ Re Grindey [1898] 2 Ch. 593; c/f Companies Act 2006, s. 1157, which explicitly allows negligence and reasonableness to coexist. As occurred in Bairstow v Queens Moat Houses plc [2000] B.C.C. 1025, the danger lies with conflating the two quite different provisions.

¹⁶⁷ Williams v Byron [1901] 18 T.L.R. 172, 176.

¹⁶⁸ The Mortgage Business plc v Conifer & Pines Solicitors [2009] EWHC 1808 (Comm), at [27].

¹⁶⁹ Daniel [2016] 4 W.L.R. 115, at [184].

¹⁷⁰ Deputy Judge Nicholas Davidson commented in Ikbal [2013] EWHC 3291 (Ch), at [223], that “the section does not predicate that the trustee must necessarily have complied with best practice in all respects”.

¹⁷¹ The Scottish Law Commission, Breach of Trust (2003) Discussion Paper No. 123, at [6.9], commented that “Trustees who have not taken all reasonable steps have been careless and are undeserving of judicial relief”.

¹⁷² Kemp v Sims [2008] EWHC 2579 (Ch).

¹⁷³ Re Windsor Steam Coal Company (1901) Ltd. [1929] 1 Ch. 151.

¹⁷⁴ In both Re Grindey [1898] 2 Ch. 593 and Re Allsop [1914] 1 Ch. 1, the peculiar and obscure drafting of a will was a factor that was taken on board. Relief was afforded because the breach was caused by a reasonable misconstruction of the terms of the trust.

¹⁷⁵ An example provided by Cozens-Hardy M.R. in Re Allsop [1914] 1 Ch. 1, 13, related to legal advice and directions. He felt that, in a large estate, it may be only reasonable that counsel of the first rank be consulted or an application made for the direction of the Court, “whereas it would not be reasonable to insist upon all this where the estate is small”.

¹⁷⁶ In Re Brookes [1914] 1 Ch. 558, the trustee did not act reasonably or fairly in awarding to one family of beneficiaries effectively the entire estate, leaving the other family with a security of no value whatsoever.

¹⁷⁷ Younger [2002] EWCA Civ 1077.

¹⁷⁸ The greater the degree of harm caused, the less likely it is that relief will follow: Daniel [2016] 4 W.L.R. 115. An absence of loss will, however, weigh heavily in the trustee's favour: Madoff Securities International Limited [2013] EWHC 3147 (Comm).

¹⁷⁹ In Clarke v Clarke's Trustees [1925] S.L.T. 498, relief was granted where the substantial profits made by the trustee for the beneficiaries for over 16 years stood in contrast to the comparatively trifling loss arising from a technical breach of trust.

¹⁸⁰ Re Kay [1897] 2 Ch. 518.

¹⁸¹ In Madoff Securities International Limited [2013] EWHC 3147 (Comm), the degree of fault was venial.

¹⁸² In Chapman v Browne [1902] 1 Ch. 785, the trustee was not exonerated as he had acted unreasonably in not seeking appropriate investment advice.

¹⁸³ Cherney v Neuman [2011] EWHC 2156 (Ch).

¹⁸⁴ Re Dive [1909] 1 Ch. 328.

¹⁸⁵ Marsden [1954] 1 W.L.R. 423.

¹⁸⁶ Davis [1907] 1 Ch. 356.

¹⁸⁷ As Judge Pelling explained in Purrunsing [2016] 4 W.L.R. 81, at [38]: “It follows that if the trustee fails to prove that his unreasonable conduct played no material part in occasioning the loss then the trustee fails at the threshold stage”.

¹⁸⁸ See Rippon v Port of London Authority [1940] 1 K.B. 858, where two parties were unequally blameworthy even though they were both strictly liable for a breach of statutory duty.

¹⁸⁹ Ikbal [2013] EWHC 3291 (Ch).

¹⁹⁰ This is a legitimate consideration for the court to take on board in exercising its discretion: see Judge Pelling in Purrunsing [2016] 4 W.L.R. 81, at [38].

¹⁹¹ See Farwell J. in Lord De Clifford's Estate [1900] 2 Ch. 707, 713.

¹⁹² See Davis [1907] 1 Ch. 356, where the honest and reasonable employment of a solicitor, who turned out to be crooked, deprived the trustee of relief because it would be otherwise unfair on the beneficiaries.

¹⁹³ National Trustees Company of Australasia [1905] A.C. 373 (PC), 381.

¹⁹⁴ Maugham, “Excusable Breaches of Trust”, p. 165.

¹⁹⁵ Davis [1907] 1 Ch. 356.

¹⁹⁶ Bairstow [2000] B.C.C. 1025.

¹⁹⁷ The degree of culpability is a pertinent factor: Bairstow v Queens Moat Houses plc, ibid.

¹⁹⁸ Re In a Flap Envelope Co. Ltd. [2003] B.C.C. 487.

¹⁹⁹ Re Clark (1920) 150 L.T. Jo. 94.

²⁰⁰ Re Turner [1897] 1 Ch. 536; Head v Gould [1898] 2 Ch. 250.

²⁰¹ See Martin v Triggs Turner Bartons [2010] P.N.L.R. 3.

²⁰² See Chapman [1902] 1 Ch. 785.

²⁰³ In National Trustees Company of Australasia [1905] A.C. 373, for example, the trustees failed to take legal steps to recover the money paid to the wrong persons and, moreover, offered no explanation for this omission.

²⁰⁴ Bergliter v Cohen [2006] EWHC 123 (Ch). This is, however, not a hard and fast rule: see Labrouche [2016] EWHC 268.

²⁰⁵ Labrouche [2016] EWHC 268.

²⁰⁶ In Re Kay [1897] 2 Ch. 518, a trustee who wrongly paid out legatees was deemed worthy of relief because, “It would be monstrous to allow the family to go to the workhouse when he has every reason to believe that the testator has left ample means for their support” (521, 522, per Romer J.).

²⁰⁷ See Re D'Jan of London Ltd. [1994] 1 B.C.L.C. 561.

²⁰⁸ Bergliter [2006] EWHC 123 (Ch). There it was unfair that the loss should fall on the legatees rather than the professional executors of the estate.

²⁰⁹ National Trustee Co. of Australasia [1905] A.C. 373.

²¹⁰ As Henderson J. acknowledged in Cherney [2011] EWHC 2156 (Ch), at [321], it would not be fair to excuse the firm for the breach of trust, “in view of their status as skilled professionals acting in the course of their professional business for reward”.

²¹¹ National Trustee Co. of Australasia [1905] A.C. 373 at 381. He added (at 381) that “it is a circumstance to be taken into account, and they [their Lordships] do not find here any fair excuse for the breach of trust, or any reason why the respondents, who have committed no fault, should lose their money to relieve the appellants, who have done a wrong”.

²¹² Martin [2010] P.N.L.R. 3, at [113].

²¹³ The Law Commission, Trustee Exemption Clauses (1999) Consultation Paper No. 171, at [4.12] and [4.29], respectively.

²¹⁴ There is some indirect support for this sentiment to be found in the Committee on the Modernization of the Trustee Act Report, A Modern Trustee Act for British Columbia (2004) B.C.L.I. Report No. 33. The authors advocated that their equivalent of s. 61 be retained, with the trade-off that the court should have the power to render an exclusion clause ineffective in relation to the breach of trust.

²¹⁵ See the totemic decisions in AIB Group (UK) plc [2014] UKSC 58; Paragon Finance [1999] 1 All E.R. 400; and Target Holdings Ltd. v Redferns [1996] A.C. 421.

²¹⁶ AIB Group (UK) plc [2014] UKSC 58, at [33].

²¹⁷ Per Lord Toulson in ibid., at [70]. This echoes the view of Lord Browne-Wilkinson in Target Holdings Ltd. [1996] A.C. 421, 436.

²¹⁸ The Annual Fraud Indicator Report 2016 estimates the loss to the financial services sector at some £1.3 billion per year. The Solicitors Regulation Authority in its News Release of December 7, 2016 warned that email hacks of conveyancing transactions have become a major cybercrime in the legal sector, with £7 m of client losses reported in the previous year.

²¹⁹ Practice Note on Mortgage Fraud (updated July 2014), at [1.2]; see also Practice Note on Property and Registration Fraud (11/10/2010), which spotlights vulnerable owners and vulnerable transactions. This guidance is echoed within the Council of Mortgage Lenders’ Handbook for England and Wales.

²²⁰ Various Claimants [2015] EWHC 3315 (QB).

²²¹ Schubert Murphy v Law Society [2015] P.N.L.R. 15.

²²² LSC Finance Limited [2015] EWHC 1163 (Ch).

²²³ Purrunsing [2016] 4 W.L.R. 81.

²²⁴ Aldermore Bank plc v Rana [2016] 1 W.L.R. 2209. Of course, in such a case indemnity insurance would be invalidated on the basis of the policy's “dishonesty exclusion”: see Rahim v Arch Insurance Co. (Europe) Ltd. [2016] EWHC 2967 (Comm).

²²⁵ For example, a breach of warranty of authority. In P&P Property Limited [2016] EWHC 2276 (Ch), however, it was made clear that the warranty given by an agent is not normally an unqualified obligation. The basic representation is only that the agent has authority to act for a client. It does not warrant the true identity of that client.

²²⁶ Henderson v Merrett [1995] 2 A.C. 145; Godiva Mortgages Ltd. v Khan [2012] EWHC 1757 (Ch).

²²⁷ See Minkin v Lansberg [2015] EWCA Civ 1152.

²²⁸ Cf. Luffeorm Ltd. v Kitsons LLP [2015] P.N.L.R. 30, where the retainer went beyond mere conveyancing and encompassed a duty to advise on the commercial risks of the transaction.

²²⁹ In conjunction also with the Law Society's Conveyancing Protocol, Code for Completion by Post and Practice Note on Mortgage Fraud.

²³⁰ See Mortgage Express Ltd. v Bowerman and Partners [1996] 2 All E.R. 836; Goldsmith Williams Solicitors v E.Surv Limited [2015] EWCA Civ 1147.

²³¹ See further Jolowicz, J.A., “Contract and Tort – Solicitors – Professional Negligence Is a Tort” [1979] C.L.J. 54 CrossRefGoogle Scholar.

²³² See Birmingham Midshires Mortgage Services Ltd. v George Ide Phillips [1997] C.L.Y. 3831.

²³³ Clarke Boyce v Mouat [1994] 1 A.C. 428 (PC).

²³⁴ Carradine Properties v DJ Freeman & Co. [1999] Lloyd's Rep. P.N. 483. Hence, an experienced client (such as a mortgage lender) should have a narrower view of the retainer than an inexperienced client.

²³⁵ R Thew Ltd. v Reeves (No 2) [1982] 2 Q.B. 1283.

²³⁶ Platform Funding Ltd. v Bank of Scotland plc [2008] EWCA Civ 930; Midland Bank plc v Cox McQueen [1999] P.N.L.R. 593.

²³⁷ Bristol and West Building Society v Mothew [1997] 2 W.L.R. 436.

²³⁸ The “what if” approach: Nationwide Building Society v Balmore Radmore [1999] Lloyd's Rep. P.N. 241.

²³⁹ Godiva Mortgages Ltd. [2012] EWHC 1757 (Ch).

²⁴⁰ This would be under the provisions of the Law Reform (Contributory Negligence) Act 1945. In both contract and tort, however, the claimant is under an obligation to mitigate its loss: Thai Airways International Public Company Ltd. v KI Holdings Co. Ltd. [2015] EWHC 1250 (Comm).

²⁴¹ See Birmingham Midshires Mortgage Services Ltd. [1997] C.L.Y. 3831. There the lender's award was reduced by 60% because it failed to fully investigate the borrower's financial position and failed to follow up information it had received.

²⁴² DB UK Bank Ltd. [2014] P.N.L.R. 12.

²⁴³ See AIB Group (UK) plc [2014] UKSC 58, which was a remortgage case where, in breach of trust, the solicitor paid the monies away without full redemption of a prior mortgage.

²⁴⁴ Target Holdings Ltd. [1996] A.C. 421; Lloyds TSB Bank plc [2012] 2 All E.R. 884.

²⁴⁵ Judge Pelling in Purrunsing [2016] 4 W.L.R. 81, at [41], explained that “Whether the … solicitor owes a duty of care in tort … has nothing to do with whether he becomes a trustee of purchase money held by him pending completion”.

²⁴⁶ AIB Group (UK) plc [2014] UKSC 58. The Supreme Court emphasised, however, that the recoverable loss must still be shown to be a direct consequence of the breach of trust.

²⁴⁷ Various Claimants [2015] EWHC 3315 (QB).

²⁴⁸ AIB Group (UK) plc [2014] UKSC 58.

²⁴⁹ Nationwide Building Society [2012] EWCA Civ 1626, at [40].

²⁵⁰ Knight and Keay v Haynes Duffell Kentish & Co. [2003] EWCA Civ 223.

²⁵¹ See Novoship (UK) Ltd. v Nikitin [2015] 2 W.L.R. 526, where the dishonest assistant (as constructive trustee) was held liable to account for profits even though the claimant had suffered no loss.

²⁵² In Nationwide Building Society [2012] EWCA Civ 1626, for example, Sir Andrew Morritt took the view that, as the solicitor/trustee had acted both honestly and reasonably, he could see no ground on which the firm should be denied relief from all liability.

²⁵³ Lloyds TSB Bank plc [2012] 2 All E.R. 884.

²⁵⁴ As Rimer L.J. explained in ibid., at [39]: “It is this exchange of money and documents that is normally referred to as completion”.

²⁵⁵ Per Rimer L.J. ibid., at [60].

²⁵⁶ Nationwide Building Society [2012] EWCA Civ 1626.

²⁵⁷ Ikbal [2013] EWHC 3291 (Ch).

²⁵⁸ Ibid., at para. [140].

²⁵⁹ Per Briggs L.J. in Santander UK plc [2014] EWCA Civ 183, at [25].

²⁶⁰ See Briggs L.J. ibid., at [103].

²⁶¹ Santander UK plc [2014] EWCA Civ 183.

²⁶² Ibid., at para. [24]. He added at para. [25] that “it is also too restrictive to apply a ‘but for’ test”. The Chancellor agreed, explaining at para. [110] that s. 61 “is not a statutory gloss intended to introduce familiar causation concepts”.

²⁶³ Purrunsing [2016] 4 W.L.R. 81.

²⁶⁴ Absent an express undertaking, in the wake of the revamped and reworded Postal Code (2011 version) the seller's solicitor will no longer be in breach of trust when paying away the monies to the bogus vendor: P&P Property Limited [2016] EWHC 2276 (Ch).

²⁶⁵ Ibid.

²⁶⁶ Schubert Murphy [2015] P.N.L.R. 15, at [23].

²⁶⁷ It is not to be overlooked that, as the Scottish Law Commission, Breach of Trust (2003) Discussion Paper No. 123, at [3.41], explained: “Professional trustees are appointed on the basis that they can provide a better standard of service than ordinary untrained people. They hold themselves out as specialists in the areas in question”.

²⁶⁸ See Law Commission, Trustee Exemption Clauses (1999) Consultation Paper No. 171.

²⁶⁹ The possibility was rejected, albeit without elaboration, by the Law Reform Commission for Ireland (Trust Law: General Proposals (L.R.C. 92, 2008), at [4.46]).

²⁷⁰ See Law Commission, Trustee Exemption Clauses (1999) Consultation Paper No. 171, at [4.63].

²⁷¹ Lowry and Edmunds, “Excuses”, p. 271, share this doubt as to whether relief plays any valuable role in respect of a professional trustee of a commercial trust.

²⁷² A futility that Lord Browne-Wilkinson warned against in Target Holdings Ltd. [1996] A.C. 421, 436.

²⁷³ Maugham, “Excusable Breaches of Trust”, p. 163.