Bonham v Fishwick (2007)
A claim for damages for breach of trust was struck out as the pleaded particulars of claim did not indicate any wilful and individual wrongdoing on the part of the trustees when they granted options to purchase shares that were the subject matter of the trust.
The applicant former trustees (F) applied to strike out a claim for damages for breach of trust by the respondent trustees (B). Whilst F had been the trustees of a settlement, by which shares in a company had been settled, they had charged a number of shares as security for advances made by a lender (P) to the settlement and at the same time had granted P an option to purchase the shares. F later entered into a further option agreement with P in order to persuade P to consent to a proposed sale of the company's business. The business was eventually sold to a third party purchaser. The loans were subsequently repaid to P together with an amount representing the value of his option rights under the second option. F subsequently retired as trustees and B eventually replaced them. B commenced unsuccessful proceedings against various parties including F and were ordered to pay the costs of the action. B commenced the instant proceedings on the basis that the option was invalid as it was a clog or fetter on the equity of redemption and that F had been aware of that fact because it was contained in counsel's opinion given to F in relation to previous proceedings. F contended that the claim should be struck out as it had no reasonable prospect of success because B had not pleaded grounds that entitled them to circumvent the defence under the trust deed, which provided that "no trustee shall be liable for any loss to the trust fund arising by reason of... except wilful and individual fraud or wrongdoing on the part of the trustee". F also contended that B's claim was an abuse of process as it should have been included in the earlier proceedings.
(1) The claim was struck out. The claim had proceeded on a misapprehension of the opinion of counsel. It was clear that the opinion was advising that the rule in Samuel v Jarrah Timber & Wood Paving Corp Ltd (1904) AC 323 no longer represented the current law and that that case would almost certainly be overruled when the House of Lords next had an opportunity to do so, Samuel considered. It followed that his advice was that, as the law stood at the time he wrote his opinion, the first option was not void but was enforceable. Further, there was no breach of trust by the grant of the second option, which was granted in pursuance of a wholly separate arrangement from that pursuant to which the first option was granted. Given that it must have been within F's discretion to cooperate with a sale of the business, provided that consideration was adequate, it could not have been a breach of trust for them to grant the second option to open the way for such a sale to take place that would provide them with the money to repay the indebtedness to P. It was not suggested that the terms of the sale, of which the grant of the second option for an indefinite period was a constituent part, was plainly disadvantageous to the beneficiaries. In the circumstances, the attack on the first and second option was misconceived. Once that was accepted, it was clear that the pleaded particulars of claim did not constitute sufficient particulars of "wilful and individual wrongdoing" on the part of F for the purpose of circumventing the defence under the trust deed. (2) There was no justification for failing to include the claim in the previous proceedings.
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30 Jul 2007
Siward Atkins QC