[1]Mr Spearman: claim “significantly greater” than loss
Three solicitors at a Hertfordshire-based law firm who acted as professional executors are not liable for breach of trust after beneficiaries claimed they had lost almost £1.5m on investments, the High Court has ruled.
Richard Spearman QC, sitting as a deputy High Court judge, said that not only was the amount claimed was “significantly greater” than the true loss, but he was also not persuaded that the trustees had broken the rules on leaving choice of investments to an agent.
Mr Spearman said Richard Tee, consultant at Stanley Tee & Co, did not delegate all investment decision-making to the financial advisers and the advisers “did not effectively act as a discretionary investment manager”.
Mr Spearman said he did 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”, trustees were required “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)”.
The judge said he was not satisfied that the claim of impermissible delegation was made out, but if he was wrong he had jurisdiction to relieve the defendants from personal liability under section 61 of the Trustee Act 1925.
The court heard in Daniel and others v Tee and others [2016] EWHC 1538 (Ch) [2] that Glyn and Amy Daniel claimed £1,476,000 for breach of trust in connection with the investment of their trust funds between 2000 and 2002.
The defendants were three solicitors at Stanley Tee & Co, now Stanley Tee LLP trading at Tees Law, based in Bishop’s Stortford, Hertfordshire, and with four other offices.
Along with Mr Tee, the defendants were the firm’s senior partner, David Redfern, and Paul Osborne, who retired from Stanley Tee last year after spending all this working life there.
The judge said Mr Redfern and Mr Osborne were appointed executors of chicken farmer Jack Daniel’s estate, and trustees of the trust set up for his children.
Mr Tee, former head of the firm’s private client department, was appointed as trustee after the alleged loss on investments, but Mr Spearman said “was involved in the investment of the trust funds from an early stage to an extent which he accepts meant that he effectively took on the role of trustee”.
Mr Spearman said that, following the sale of Mr Daniel’s farming business for over £3m, a trust was set up by Mr Tee, relying on investment advice between 2000 and 2002 from Taylor Young Investment Management.
The deputy judge said Taylor Young had previously been chosen as investment advisers “not only in 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 argued that the trustees failed to invest in a “properly diversified portfolio” at a time of stock market volatility in the IT and tech sectors. Their expert on financial investments argued that no more than 30% of the trust funds should have been invested in UK equities, as opposed to, at one point, 100%.
The claimants also argued that the solicitors should not have delegated their investment powers to Taylor Young, without considering whether investments made on behalf of the trust were suitable or the portfolio appropriately diversified.
However, the defendants denied that they were in breach of any of their obligations as trustees or that there had been any “impermissible delegation”.
Mr Spearman said he could “readily understand the claimants’ disappointment and concern about the losses which were occasioned in 2000 and 2001” and accepted a number of the criticisms made by experts called by both sides.
He said the solicitors “should have devised a realistic investment strategy at the outset, they should have conducted periodic reviews which specifically considered whether their investment strategy was still appropriate for the trust’s attitude to risk, and in focusing on equities to the exclusion of other forms of investment and in holding the assets of the trust in cash – in each case to the extent that they did and for as long as they did – they adopted an approach which was less balanced and diversified than I consider many trustees would have thought appropriate”.
However, the deputy judge said the claim was “based over a relatively short period of time”, whereas the trustees were investing for a longer period, and that investing in shares had produced good results over time and they relied on professional advice “which they did not follow unthinkingly”.
He concluded that while the claimants had established “some breaches of duty”, particularly during the early stages, they had failed to prove they had suffered a loss as a result of those breaches.
Having decided that the further claim of impermissible delegation was not made out, Mr Spearman ruled that the claim failed and there must be judgment for the defendants.