Scottish Court of Session Decisions

LORD PRESIDENT (Cooper).—The purpose of this petition for directions is to enable a body of trustees to ascertain the effect of an investment clause contained in the trust settlement, and in particular to instruct them whether they are entitled to realise some or all of the investments in which the estate was held at the date of death.

The truster died in March 1947, and the scheme of the will is a very simple one—a liferent to one person and the fee to be divided between two charities. All the affected interests are represented before us. The relevant clause dealing with investments falls into two parts. The first branch states that "it is my special direction to my trustees that they shall retain the marketable securities forming part of my estate at the time of my death," and the clause then proceeds to amplify that direction by conferring a power upon the trustees to continue to hold the investments "indefinitely, all as they in their sole discretion may choose to do and as though they were absolute beneficial owners thereof." I regard that as a discretionary power to the trustees, having the effect of divesting them in this matter of the responsibilities which trustees would normally incur in holding non-trustee investments. But then the clause proceeds as follows:—

"Subject to my express request that my trustees shall not sell any of my Stock Exchange investments until the same shall be capable of realising such prices as shall show a fair profit in the opinion of my trustees upon the respective prices at which I purchased them."

It is to be noted that this part of the clause is described as an "express request" in contradistinction to the language used in the opening part of the clause which is described as a "special direction." It is further to be noted that it is expressed as a qualification of the very wide discretionary power conferred by the opening part of the clause. I am therefore inclined to assign weight to the argument on construction maintained before us that the direction and request are not of an absolutely imperative or peremptory character. But it is not there that I rest my decision. Even if the direction were conceived in the most imperative terms, I do not think that such a direction in relation to Stock Exchange securities can ever absolutely relieve a body of trustees from their basic duty to preserve the trust estate for the benefit of the beneficiaries entitled to participate in it. In his book on the Law of Trusts the late Professor Mackenzie Stuart says this (at p. 275):

"The trustees may be directed to retain some or all of the investments of the truster although these are not ordinary trust investments. Peremptory instructions must be obeyed, but they are not absolutely binding. The fundamental condition of trust administration is the preservation of the estate, and if it is necessary for the safety of the trust to realise hazardous investments, the trustees are entitled, and probably obliged to do so, even though the truster has forbidden it."

I concur with that statement of the position, though I should like to reserve for further consideration, should necessity arise, the special factors (largely of a historical character) which affect the holding of heritage by trustees. But in a case of the kind before us the statement which I have quoted seems to me to be exactly in point. I do not think that it is legitimate for any truster to invoke our law of trusts and to confide an estate to the custody and control of a body of trustees and at the same time to attempt to prohibit these trustees from exercising the most characteristic function which falls to be discharged by every trustee,—the preservation of the trust estate.

I accordingly propose to your Lordships not that we should answer the question as put to us, because, as Mr Shaw was constrained to admit, its phraseology is open to criticism, but rather that we should find in answer to the question that the petitioners are not bound to continue to hold the investments in question after they are convinced that to do so would imperil the safety of the trust estate. I so move your Lordships.

LORD CARMONT .—I agree with the opinion that has been delivered by your Lordship in its entirety.

LORD RUSSELL .—I also am in entire agreement with the opinion which your Lordship has delivered and have nothing to add.