Learoyd v Whiteley
is an English trusts law case, concerning the duty of care owed by a trustee when exercising the power of investment.
Facts
Elizabeth Whiteley and her children sued the executors of Benjamin Whiteley's will. The will contained a power to invest the fund in certain investments, including “real securities in England or Wales.” £5,000 of the trust money had been lost. £3,000 was invested in a mortgage at 5% return in the freehold of a ten-acre brick field near Pontefract, “with the engine-house, sheds, brick and pipe kilns, and buildings thereon, and all fixtures and fittings thereon.” £2,000 was invested on mortgages at 5% in four small freehold houses, including a shop, in Salford, Lancashire. The brickfield owners went bankrupt in October 1884 and the owner of the four houses filed for petition for liquidation. There was insufficient money to pay the trust fund.Judgments
Chancery Court
held in the Chancery Court that the brickfield investment was unauthorised, and the trustees were responsible for its failure. The trustees failed to exercise sufficient caution, but they had done so in the case of the houses. The trustees appealed.Court of Appeal
The Court of Appeal upheld Bacon VC's decision, that the trustees were liable for repayment of the £3,000 invested in the brickfield. They held that a trustee must exercise the standard of care of an ordinary prudent businessman, applying any special knowledge he may have. Cotton LJ stated,Lindley LJ followed.
Lopes LJ concurred.
House of Lords
affirmed the Court of Appeal. Lord Watson held that in administering and managing trust property,John [FitzGerald, Baron FitzGerald|Lord Fitzgerald] concurred.