Midland Bank Trustee (Jersey) Ltd v Federated Pension Services Ltd

• Jurisdiction: Jersey
• Court: Court of Appeal
• Judge: Le Quesne, Southwell and Beloff, JJ.A.:
• Judgment Date: 21 December 1995
• Date: 21 December 1995

COURT OF APPEAL

Le Quesne, Southwell and Beloff, JJ.A.:

J.A. Clyde-Smith for the appellants;

A.R. Binnington for the respondent.

Cases cited:

(1) Bartlett v. Barclays Bank Trust Co. Ltd., [1980] Ch. 515; [1980] 1 All E.R. 139; (1979), 124 Sol. Jo. 85, dicta of Brightman, J. applied.

(2) Canada S.S. Lines v. R., [1952] A.C. 192 ([1952] UKPC 15); [1952] 1 All E.R. 305; [1952] 1 Lloyd's Rep. 1; [1952] 1 T.L.R. 261; (1952), 96 Sol. Jo. 72.

(3) Carruthers v. Carruthers, [1896] A.C. 659, considered.

(4) Chapman, In re, Cocks v. Chapman, [1896] 2 Ch. 763; [1895-9] All E.R. Rep. 1104; (1896), 75 L.T. 196; 12 T.L.R. 625; 65 L.J. Ch. 892; 45 W.R. 67; 40 Sol. Jo. 715.

(5) City Equitable Fire Ins. Co. Ltd., In re, [1925] Ch. 407; [1924] All E.R. Rep. 485; [1925] B. & C.R. 109; 133 L.T. 520; 40 T.L.R. 853; 94 L.J. Ch. 445, considered.

(6) Clarke v. Clarke's Trustees, 1925 S.C. 693; 1925 S.N. 93; 1925 S.L.T. 498, dictum of Lord Clyde, Lord President considered.

(7) Cowper v. Studer, [1951] 2 D.L.R. 81.

(8) Elliott v. Turner (1843), 13 Sim. 477; 60 E.R. 185.

(9) Godfray v. Godfray (1865), 3 Moo. P.C.C.N.S. 316; 16 E.R. 120, considered.

(10) Kingston (City) v. Drennan (1897), 27 S.C.R. 46.

(11) Knox v. MacKinnon (1888), 13 App. Cas. 753, dicta of Lords Watson and Macnaghten considered.

(12) Leeds City Brewery Ltd., In re, Leeds City Brewery Ltd. v. Platts, [1925] Ch. 532; (1923), 94 L.J. Ch. 502, considered.

(13) Lewis v. Great W. Ry. Co. (1877), 3 Q.B.D. 195; 37 L.T. 774; 47 L.J.Q.B. 131; 26 W.R. 255, not followed.

(14) London (Mayor) and Tubbs' Contract, In re, [1894] 2 Ch. 524; (1894), 70 L.T. 719; 63 L.J. Ch. 580; 7 R. 265; sub nom. In re Tubbs and London Corp., 10 T.L.R. 481; sub nom. Re Tubbs' Contract, 38 Sol. Jo. 476.

(15) McCulloch v. Murray, [1942] S.C.R. 141; [1942] 2 D.L.R. 179.

(16) Malabry Invs. Ltd., Re 1982 J.J. 117, considered.

(17) Munton, In re, Munton v. West, [1927] 1 Ch. 262; (1926), 136 L.T. 661; 96 L.J. Ch. 151.

(18) Osmond v. McColl-Frontenac Oil Co. Ltd., [1939] 2 W.W.R. 387; [1939] 3 D.L.R. 260; (1939), 47 Man. L.R. 176, not followed.

(19) Pass v. Dundas (1880), 43 L.T. 665, considered.

(20) Paul v. Dauphin, [1941] 1 W.W.R. 43; [1941] 1 D.L.R 775; (1940), 49 Man. L.R. 95; affirmed, [1941] 2 W.W.R. 224; [1941] 3 D.L.R. 756; (1941), 49 Man. L.R. 95.

(21) Plewa v. Chief Adjudication Officer, [1995] 1 A.C. 249; [1994] 3 All E.R. 323.

(22) Poche, Re (1984), 6 D.L.R. (4th) 40, considered.

(23) Rae v. Meek (1889), 14 App. Cas. 558, considered.

(24) Robertson v. Howden (No. 2) (1892), 10 N.Z.L.R. 609, considered.

(25) Scardina v. La Roche, [1950] 2 W.W.R. 1057; [1951] 1 D.L.R. 117.

(26) Seton v. Dawson (1841), 4 Dunl. (Ct. of Sess.) 310; 2 Sc. R.R. (2nd Series) 625, considered.

(27) Smith v. South Wales Switchgear Co. Ltd., [1978] 1 W.L.R. 165; [1978] 1 All E.R. 18; (1977), 8 BLR 1; 122 Sol. Jo. 61, considered.

(28) Social Security Secy. v. Tunnicliffe, [1991] 2 All E.R. 712; (1990), 4 Admin. L.R. 57, dictum of Staughton, L.J. followed.

(29) Thurgood v. Baskerville, [1992] 5 W.W.R. 193; (1992), 100 Sask. R. 214; 46 E.T.R. 28, dicta of Cameron, J.A. considered.

(30) Tor Line AB v. Alltrans Group of Canada Ltd., [1984] 1 W.L.R. 48; [1984] 1 All E.R. 103; [1984] 1 Lloyd's Rep. 123; (1983), 128 Sol. Jo. 18, considered.

(31) Vickery, In re, Vickery v. Stephens, [1931] 1 Ch. 572; [1931] All E.R. Rep. 562; (1931), 144 L.T. 562; 47 T.L.R. 242; 100 L.J. Ch. 138, considered.

(32) West v. Lazard Bros. & Co. (Jersey) Ltd., 1993 JLR 165, not followed.

(33) Wilkins v. Hogg (1861), 5 L.T. 467; 31 L.J. Ch. 41; 8 Jur. N.S. 25; 10 W.R. 47, considered.

(34) Wyman or Ferguson v. Paterson, [1900] A.C. 271; (1900), 82 L.T. 473; 16 T.L.R. 270; 69 L.J.P.C. 32, considered.

(35) Young and Harston's Contract, In re (1885), 31 Ch. D. 168; 53 L.T. 837; 50 J.P. Jo. 245; 34 W.R. 84, followed.

Additional cases cited by counsel:

Att. Gen. v. Devonshire Hotel Ltd., 1987-88 JLR 577.

Burt v. States, 1994 JLR 245.

Denney v. Hodge, 1973 J.J. 2429.

Finance & Econ. Cttee. v. Bastion Offshore Trust Co. Ltd., 1994 JLR 370.

Galloway or Hunter v. Hanley, 1955 S.C. 200.

Johnstone v. Bloomsbury Health Auth., [1991] 2 All E.R. 293.

Martin v. City of Edinburgh D.C., [1989] Pensions L.R. 9.

Norfolk (Duke)'s Settlement Trusts, In re, [1982] Ch. 61.

Legislation construed:

Royal Court (Jersey) Law 1948, art. 13: The relevant terms of this article are set out at page 394, lines 38-43.

Trusts (Jersey) Law 1984, art. 1(1): The relevant terms of this paragraph are set out at page 369, lines 4-9.

art. 1(5): The relevant terms of this paragraph are set out at page 369, lines 9-11.

art. 8A(3), as added by the Trusts (Amendment) (Jersey) Law 1989, art. 1: The relevant terms of this paragraph are set out at page 370, lines 40-45.

art. 10(2): The relevant terms of this paragraph are set out at page 369, lines 13-19.

art. 17(1): The relevant terms of this paragraph are set out at page 369, lines 21-27.

art. 20(2): The relevant terms of this paragraph are set out at page 369, lines 28-30.

art. 26(A1), as added by the Trusts (Amendment) (Jersey) Law 1989, art. 5: The relevant terms of this paragraph are set out at page 370, lines 2-4.

art. 26(9): The relevant terms of this paragraph are set out at page 269, lines 40-45.

art. 26(9), as amended by the Trusts (Amendment) (Jersey) Law 1989, art. 5: The relevant terms of this paragraph are set out at page 370, lines 5-8.

art. 30: The relevant terms of this article are set out at page 370, lines 9-24.

art. 30, as amended by the Trusts (Amendment) (Jersey) Law 1989, art. 7: The relevant terms of this article are set out at page 370, lines 27-37.

Texts cited:

Chitty on Contracts, 27th ed., vol. 1, para. 14-009, at 641; para. 14-011, at 642-644 (1994).

Ham, Trustee's Liability, 9(1) Trust Law International, 21 (1995).

Jones, Delegation by Trustees: a Reappraisal, 22 Modern Law Review, 381 (1959).

Law Commission, Fiduciary Duties & Regulatory Rules (Law Com. No. 124).

Matthews, The Efficacy of Trustee Exemption Clauses in English Law, The Conveyancer & Property Lawyer, 42 (1989).

Matthews & Sowden, The Jersey Law of Trusts, 3rd ed., Chapter 2 (1993).

Report of the Commissioners appointed to inquire into the Civil, Municipal and Ecclesiastical Laws of the Island of Jersey, together with Minutes of Evidence (Command Papers, First Series, No. 2761), Report, at xxv (1861).

Stannard, Wilful default, The Conveyancer & Property Lawyer, 345 (1979).

Trustsliabilities of trusteesexclusion of trustee's liabilityexclusion clause to be restrictively construed, particularly if trustee is professional trustee companytrustee to show case falls within ambit of clausedoubts and unclear expression resolved against trustee

Trustsliabilities of trusteesexclusion of trustee's liability"knowingly and wilfully"trustee liable for breach of trust "knowingly and wilfully committed" if deliberately commits act, amounting to breach of trust, with knowledge of financial consequencesirrelevant that no knowledge that act is breach

Trustsliabilities of trusteesexclusion of trustee's liabilitytrust deed may validly grant less exemption to trustee than permitted by Trusts (Jersey) Law 1984, art. 26(9) (before amendment) but not morealthough art. 26(9) "subject to the terms of the trust," trust cannot override trustee's statutory liability under art. 26(1)

Trustsliabilities of trusteesexclusion of trustee's liabilityexclusion of trustee's liability for breach of trust "knowingly and wilfully committed" not contrary to public policy or repugnant to concept of trust and may validly be included in trust deed

Trustsliabilities of trusteesexclusion of trustee's liabilityno exclusion of retired trustee's possible liability for earlier breach of trust beyond exclusion possible whilst still trusteeretaining benefit of exclusion clause, "if any," envisages possibility that no benefit in circumstances

Trustsliabilities of trusteesexclusion of trustee's liabilitygross negligenceserious or flagrant degree of negligence beyond ordinary negligenceintentional or reckless behaviour irrelevant

The appellants brought an action against the respondent for an alleged breach of trust.

The respondent company was the trustee of a pension scheme operated for the benefit of certain employees of the States of Jersey. The trust deed, which came into effect in 1972, included a clause which purported to exclude the trustee's liability, inter alia, for anything except a breach of trust "knowingly and wilfully committed." On discovering that the pension fund was not invested as profitably as it might be, representatives of the States and the respondent decided to place the fund with a new fund manager ("Hambros") for investment on the Stock Exchange. The respondent mistakenly believed that it could not transfer the fund to Hambros without completion by the States of a "customer agreement" in accordance with the English Financial Services Act 1986; in fact it could simply have transferred the sum without any such formality under the discretion to invest given by the terms of the trust itself. On the date fixed for the transfer of the fund to Hambros (in 1988), no customer agreement had been concluded with the States and, without taking any legal advice, the respondent placed the sum in a deposit account rather than transferring it to Hambros. The deposit proved to be less profitable to the fund than investing it would have been.

The respondent subsequently discovered and admitted its error and two months after the proper transfer date transferred the sum to Hambros. A new trustee, the first appellant, was then appointed and an agreement between it and the respondent expressly stated that the respondent would retain the benefit, "if any," of the exculpation clause in the trust deed in relation to its actions as trustee, even though it had now retired.

The...