Gregson v HAE Trustees Ltd (2008)
The claims that a trust company had against its directors for various breaches of duty could not, in the circumstances, be transposed to the beneficiary under that trust to pursue in her own right so her claim was struck out.
The first applicant company (H) and second to fifth applicant trust directors (D) applied to strike out the claims of the respondent trust beneficiary (G). H had been incorporated as a company limited by guarantee. Its objects were to act as the executor of wills and other testamentary dispositions, as administrator of the estates of deceased persons and as trustee of trusts. Soon after its incorporation, H became the trustee of a number of G's family trusts. The whole of the property of the trust consisted of shares in a very lucrative furniture business. The settlor of the trust transferred those shares to H shortly after the settlement was created. Later, the furniture company became insolvent, with a significant financial deficit. Consequently, the shares in the company, and with them the property of the trust, became worthless. G submitted that (1) D were liable to H in their capacity as directors for breach of their fiduciary duty and that such claims as H would have against D constituted trust property and, consequently, G was entitled as a beneficiary under the settlement to launch a personal claim against D directly; (2) H was in breach of its duty to G in failing to review the need to diversify the assets of the settlement, and had it done so and taken appropriate professional advice the assets would have been diversified and the trust losses averted.
(1) G was attempting to circumvent the clear and established principle that no direct duty was owed by directors of a company to its beneficiaries. Against the backdrop of G's submissions there existed a significant body of established authority that expressly refused to entertain or impose so direct a duty against a trust director, Young v Murphy Unreported 0, Alhamrani v Alhamrani Unreported 0, HR v JAPT Unreported March 19, 1997 Ch D and Bath v Standard Land Co (1911) 1 Ch 618 CA considered. In any event, the denial of G's claim would not give rise to an unjust or unconscionable outcome: G would still be entitled to pursue the directors indirectly, notwithstanding the company's liquidation, by procuring a liquidator to pursue her interests on behalf of H. Accordingly, G had failed to advance any proper legal mechanism for the creation or imposition of her supposed direct claim against D and her claim would be struck out. (2) Diversification of trust assets was not, as was advanced by G, a requirement of the disposition of the trust: it was merely a power conferred upon H to employ should appropriate circumstances present themselves. In any event, in the context of the failure of G's direct claim against D her claim against H, in this respect, was also bound to fail.