United Kingdom House of Lords Decisions

Lord Chancellor—I cannot help saying that I feel somewhat surprised at the persistent argument that has been placed before your Lordships in this case in spite of the, to my mind, perfectly clear rule of equity which cannot be departed from, and upon which, for the first time I believe, we are asked to place a different construction. Arguments have been addressed to your Lordships as if this were a question between two persons perfectly independent of each other, each man having a right to make the best bargain he can for himself. Undoubtedly that was the view taken by the defender here, for he frankly says so—“I do not see that fairness has anything to do with it; if a man sells at his own valuation and another man buys it has nothing to do with fairness.” He had no conception of the duty he himself owed as trustee to the person with whom he was dealing as beneficiary and cestui que trust.

The result to my mind is manifest. The defender acted in pursuance of what his own belief was that he had no such duty at all, and that if he had secret information in his possession of what the value was he might by concealing that information obtain £300 or £400 more than if the person with whom he was dealing had been acquainted with the value which had been placed by a skilled valuer upon this property. Certainly it is to my mind an absolute novelty to hear it gravely argued that such a transaction as that can stand. I think every learned judge who has dealt with this question has always said that a court will regard with great suspicion such a transaction, and will call upon the trustee to show that he has given full information, that he has kept back nothing, and that he has given an adequate price. Both these things fail here. The trustee did not give an adequate price. We know now that the price was too little in any view of it. He certainly did not communicate the information he possessed; and when I say that, it is not for those who are impeaching this transaction to prove negatively—it is for the trustee to prove affirmatively that the information was given.

To my mind it is perfectly manifest that the information was not given, and I say so for two reasons. In the first place, when the defender is challenged in cross-examination to show that he did give it, he never suggests that he did or that he had taken any means to do it, or that he had taken care that the information should reach his brother. On the contrary, he says if they wanted to find out let them go to their own agents and not come to me. That is the line he takes. Therefore, I assume from his own statement that he could not prove that the knowledge was imparted to his brother. There is another reason, applying one's common sense to it. Seeing the view that he took of his rights and of his own position, namely, that he was perfectly independent, that he was transacting business with a person to whom he owed no obligation at all, am I to suppose that he went out of his way to do what no ordinary person dealing with another would do—to show him something which would enhance the value of the property he was buying? That is not the ordinary course of mankind. Although these were brothers they do not seem to have been on particularly good terms with each other, and he himself repudiates the idea that he was giving anything out of the way to his brother. He says if he does not know let him ask his own agents. Under these circumstances it seems to me that it is burning daylight to say that this transaction cannot stand. It is perfectly obvious to my mind that it must be set aside.

The only further observation I wish to make is that I am a little surprised to find that Lord Young in his judgment uses two phrases and never gives any exposition of the sense in which he uses them. He says—“There is no legal objection to a trustee under a settlement purchasing the interest of a beneficiary so long as the trustee acts uprightly and fairly;” and later on he says—“The transaction will be held to be legal if it is proved that the trustee has acted fairly and honestly;” then the transaction will stand. That is quite true; but the whole question is, upon what facts does his Lordship rely to justify the use of those adverbs, “uprightly,” “fairly,” and “honestly?” To my mind it was neither honestly, fairly, nor uprightly done, and the transaction must be set aside.

I therefore move your Lordships to dismiss the appeal with costs.

Lord Ashbourne—I entirely concurr. I think it is impossible to conceive a clearer case. It was the absolute and obvious duty of the defender in this case, if he thought he could maintain the transaction upon which he had entered, to have present to his mind the distinct duty which he owed to his brother. In his evidence he says:—“I do not see that fairness has anything to do with it.” I think that governs his entire conduct. He was thinking of the best kind of bargain he might obtain for himself. In common with all your Lordships who have taken part in this hearing, I am of opinion that that is not dealing fairly; that keeping back and non-disclosure, non-bringing forward of Binnie's valuation, is a circumstance that cannot be explained and cannot be got over, and makes the case an overwhelming one for affirming the decision of the Court below.

Page: 385↓