| Learoyd v Whiteley | |
| Court: | House of Lords |
| Date Decided: | 1 August 1887 |
| Citations: | [1887] UKHL 1, (1887) 12 AC 727 |
| Prior Actions: | (1886) LR 33 Ch D 347 |
| Opinions: | Lord Halsbury LC, Lord Watson, Lord FitzGerald |
Learoyd v Whiteley. 1887 . UKHL . 1. is an English trusts law case, concerning the duty of care owed by a trustee when exercising the power of investment.
Elizabeth Whiteley and her children sued the executors of Benjamin Whiteley's will (of 19 March 1874). The will contained a power to invest the fund on certain investments, including “real securities in England or Wales.” £5000 of the trust money had been lost. £3000 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.” £2000 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.
Bacon VC 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.
The Court of Appeal upheld Bacon VC's decision, that the trustees were liable for repayment of the £3000 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.
Lord Halsbury LC affirmed the Court of Appeal. Lord Watson held that in administering and managing trust property (distinguished from the investment sphere),
Lord Fitzgerald concurred.