Solicitor found not liable for £1.5m claim over Trust investment losses

Three solicitors have been found not liable over a breach of trusts which saw the claimant seek £1,476,076.

The claimants, the late children of chicken farmer Jack Raymond Daniel made the claim for breach of trust in connection with the investment of Trust funds (initially set up with funds from two property sales) in the period 2000 to 2002.

Clause 4 of the will stated: “My trustees shall hold my Residuary Estate upon trust for my children GLYN THOMAS DANIEL and AMY LOUISE DANIEL in equal shares if they both shall survive me and shall attain or shall have attained the age of twenty five years but if one only of them shall survive me then for such survivor absolutely but if either of them shall die (whether in my lifetime or after my death) before attaining a vested interest in my Residuary Estate but shall leave a child or children alive at or born after my death who shall attain or shall have attained the age of twenty five years then such child or children shall take absolutely and if more than one then in equal shares the share in (or the whole of) my Residuary Estate (as the case may be) which his her or their parent would have taken had such parent lived to attain a vested interest therein.”

Between 2000 and 2002 the defendants, a James Richard Tee, David Ian Redfern and Paul Frederick Osborne of Stanley Tee & Co (now Stanley Tee LLP) relied on investment advice from Taylor Young Investment Management Ltdm which they had previously chosen as investment advisers for other trusts they were trustees of, respect of other trusts of which they (and, in the main, Mr Tee) were trustees but also, in the case of Mr Redfern and Mr Tee, in respect of their personal pensions.

The Claimants don’t allege that the Defendants were at fault in choosing Taylor Young as advisers for the Trust. However they do believe the defendents were at fault for failing to take appropriate care to formulate and then implement a suitable investment strategy, and to review the investments made as time went on. They also believe them to be at fault for relying on Taylor Young’s advice and recommendations which it turned out was both poor and costly to follow.

The claimants expert witness, Grahame Goodyer stated that had the portfolio followed a particular mix of investments they may have been worth around £3,463,384 as at the end of March 2002, after allowing for tax liabilities and charges, whereas in fact they were worth £2,438,592.

That loss of £1,024,792 was then projected to become a loss of £1,408.328 when the loss of growth on that sum of £1,024,792 is carried forward to 31 January 2016.

Presiding, Richard Spearman QC said: “Overall, I consider that it is likely that the sum claimed by the Claimants is significantly greater than their true loss.

“On proper analysis, the substance of the present case is that the Defendants are alleged to have acted in breach of the equitable duty of skill and care, and any impermissible delegation which occurred is an aspect of that breach. The trustees did not embark on any aspect of their dealings with the assets of the Trust in the knowledge that either any transaction(s) or the means that they chose or permitted with regard to carrying out any transaction(s) was or were unauthorised. On the contrary, they adopted an approach which they believed to be permissible and in the best interests of the Trust. In substance, it seems to me that they treated their appointment as trustees as having been made in their capacity as partners in Stanley Tee, and that they regarded the involvement of a fellow partner who was better qualified to deal with investment decisions as unobjectionable in principle, sensible in practice, and the best way of discharging their duties. Some cases of unauthorised transactions may involve betrayals of trust and confidence, or lack of good faith, or disloyalty, or conflicts of interest. That is not true of any impermissible delegation which may have occurred in the present case, which would seem to me to be essentially a matter of form rather than substance.

“I am not persuaded that what occurred in the present case contravened the prohibitions on delegating fiduciary discretions, or on leaving the choice of investments to an agent, which are referred to in the legal materials on which [the claimants]. In particular, I do not consider that, especially in light of the potential complexity of investment choices in the 21st century, and the number of decisions which are likely to need to be made over a period of several years, the applicable legal principles required the trustees not only to exercise supervision and control over the strategy and pattern of investments (which I consider that they did) but also personally to make or to be involved in making each individual investment decision that was made over time (which it is plain that they did not do). Nor am I persuaded that what occurred in the present case involved the trustees authorising Mr Tee (and still less Taylor Young) to exercise their asset management functions with the meaning of section 15 of the Trustee Act 2000.

“For all these reasons, this claim fails and there must be judgment for the Defendants.”

The full case of Daniel & Ors v Tee & Ors [2016] EWHC 1538 (Ch) (01 July 2016) is here.

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