This decision contains a useful summary of breach of trust cases where issues arise about the scope of the duties of professional trustees – in this case solicitors – where independent advisers are used (in this instance relating to investment advice).
The testator, Jack Raymond Daniel, died in 1999, appointing in his will two partners in a firm of solicitors as the executors and trustees of a will trust for minor beneficiaries (The Jack R Daniel Will Trust). The value of the estate was over £3 million. Shortly after his death, a colleague of the trustees contacted investment advisers for recommendations for a "growth portfolio"- which at that time meant a fund comprising around 80% equities. The trustees invested heavily in the technology sector and the fund performed badly between 2000 and 2002, following the dot.com bubble burst in 2001. The management of the fund was moved from 2002 onwards.
This claim was brought by the beneficiaries some years later, long after they had both reached 25. The beneficiaries sought damages in the sum of £1,467,076 - the amount they claimed had been lost due to bad investment advice - alleging that the trustees had committed several breaches, including:
- failing to take appropriate care to invest in a properly diversified investment portfolio;
- wrongly relying on the advice and recommendations of the investment advisers;
- unlawfully delegating their asset management roles; and
- failing to fulfil their duty of 'acting prudently'.
The trustees denied breach of trust. They claimed to have acted honestly and reasonably in their reliance on investment advice, such that the court ought to relieve them of personal liability for any such breach pursuant to s.61 of the Trustee Act 1925, which gives courts a discretionary power to relieve a trustee of liability in such circumstances.
The court held that in opting for a high-risk investment for trust funds, the trustees had made a decision which no trustee complying with the duty to act prudently (Nestle v National Westminster Bank Plc  1 W.L.R. 1260) could reasonably have made. However, significant emphasis was placed by the court on the fact that the claimants had failed to prove that the alleged breaches resulted in them suffering any loss.
It was held that the trustees were right in that, even if they had been found to be liable for breach of trust, s.61 would have applied since they had acted in reliance on what they reasonably believed to be competent professional advice and to the best of their abilities. Another factor the court took into account was that the percentage of the total value of the assets which was held in equities never actually reached the headline figure of 80%, and the beneficiaries could not show they had suffered loss as a result of the alleged breaches.
Overall it appears to be a very practical decision focusing on whether the claimants could prove they had suffered loss rather than on the breach of trustee duties. Whilst the degree of harm is a factor taken into account with all applications of s.61, in this case it appears to have been almost the sole consideration. This decision will give professional trustees some reassurance, and serves to confirm the significant legal protection afforded to trustees provided they can show that they sought appropriate advice.
Despite being professional trustees, they had no expertise in managing investments and were entitled to rely upon the advice of other professionals and, even though they were held to have failed to devise a realistic investment strategy or complied with their duty to act prudently regarding investments, the trustees escaped liability.