Summary

Plaintiff beneficiaries under a will claimed the trustees of the will had acted in breach of trust causing substantial losses to the estate. Trustees claiming that their actions were covered by an exemption clause in the will.

Facts

The plaintiffs were the wife and two children of John Bogg ('the testator') who died on 1 January 1989. The testator also had two children by a previous marriage. By his will, dated 30 September 1988, the testator appointed the first and fourth defendants, Mr Raper and Mr Groves respectively, to be his executors and trustees. Mr Raper was a solicitor in the second defendant firm until 1991 and thereafter with the third defendant firm. Mr Groves was a partner in the fifth defendant firm of accountants until 1990 and thereafter with the sixth defendant firm. The testator settled his residuary estate on trusts for the benefit of the plaintiffs and his two other children. Mr Raper and Mr Groves were also trustees of a discretionary settlement, dated 7 January 1986, in favour of all the testator's children. The testator's estate was calculated at over #8m the major part of which, some #6m, was the testator's controlling interest in a company, Hekla Holdings Ltd ('Hekla'). Shortly after the testator's death Mr Raper was appointed a director of Hekla. By 1990 the shares in Hekla had become worthless and the value of five of the six other shareholdings in private companies held by the estate at the time of the testator's death had been reduced to nothing. The total value of all six holdings amounted to just over #1m. The plaintiffs alleged that no indication of any problems was given to them until November 1990 and that they had not been given any proper explanation of the causes of these losses. The plaintiffs claimed that Mr Raper's and Mr Groves' failure to take appropriate action constituted a breach of their duties as executors of the estate. The plaintiffs alleged that Mr Raper and Mr Groves failed to exercise proper control over Hekla's business resulting in large losses. In September 1996 the second to sixth defendants applied, under RSC O.18 r.19, to strike out the statement of claim on the basis that the plaintiffs' claims were bound to fail because they fell within the terms of trustee exemption clauses in the settlement and will respectively. The district judge allowed the principal claim, in respect of Hekla, to stand since it was not clearly covered by the exemption clause in the will; however he struck out the claims for breach of trust in relation to the settlement. The Vice-Chancellor allowed the third to sixth defendants' appeal against the district judge's refusal to strike out the statement of claim and held that it was plain and obvious that all the allegations pleaded in the plaintiffs' amended statement of claim fell within the terms of the exemption clauses in the settlement and will respectively. The plaintiffs appealed. The plaintiffs did not pursue their claim for breach of trust in relation to the settlement following the case of Armitage v Nurse & Ors (1997). The clause upon which the defendants relied provided "in the professed execution of the trusts ... no trustees ... shall be liable for any loss to the trust premises arising by reason of any improper investment made in good faith or for the negligence or fraud of any agent employed by him or by any other trustee hereof, although the employment of such agent was not strictly necessary or expedient, or by reason of any mistake or omission made in good faith by any trustee hereof or by reason of any other matter or thing except wilful or individual fraud or wrongdoing on the part of the trustee who is sought to be made liable".

Held

(1) The clause should be restrictively construed and anything which was not clearly within it should be treated as falling outside it; Armitage v Nurse (supra). The words 'omission made in good faith' covered negligent omissions. The words did not cover inadvertent omissions which could found a claim against a trustee in the absence of negligence of due diligence on his part. It followed that all the allegations pleaded in the amended statement of claim fell within the final limb of the Clause: 'wilful or individual fraud or wrongdoing'. (2) In order to make sense of 'wilful or individual fraud or wrongdoing' the word 'or' should be read as 'and'; White v Supple (1842) 2 Dr & War 471, Re Llewellyn's settlement (1921) 2 Ch.281, Re Hayden (1931) 2 Ch.333. (3) The plaintiffs' argument that Mr Raper and the firms of solicitors vicariously liable for his wrongdoing were not entitled to rely on the exemption clause in the will because Mr Raper had acted for the testator in the drawing up of his will and it was to be inferred that in breach of his duty to the testator he failed to explain the effect of the exemption clause to him was fallacious. Clause 12 did not confer a benefit on the persons responsible for advising the testator on the contents of the will nor on the executors and trustees. There was no conflict of interest between those advising the testator and the testator himself. Furthermore it was not the law that a solicitor was not allowed to take a benefit under a will which he had himself procured as long as he could prove the righteousness of the transaction. The relative amount of the benefit was critical; Barry v Butlin (1838) 2 Moo PCC 480. It was not suspicious that a solicitor drafting a will for a client should include an exemption clause no wider than many similar clauses found in the precedent books.

Appeal dismissed.