THE WOES OF TRUSTEES. "N EVER be a Trustee," was the
advice given by a very distinguished and experienced member of the legal profession to every friend who sought his counsel on matters of business. And without doubt, every man who has been un- fortunate enough to become a trustee—and who is there among the upper and middle classes that has reached thirty and not put his name to a marriage-settlement, or become trustee under a will ?—will echo this advice as the height of worldly wisdom. A trustee in legal phraseology is a person "entrusted with property for the benefit of another." The decorum of language in which this definition is conveyed cannot, however, alter the fact that a trustee is a person who endures all the worries and disagreeables of wealth without any of its enjoy- ments. While the cestui gut trust is sleeping comfortably, how often does the trustee, unless he has the good fortune to be absolutely unable, through natural dullness of in- telligence, to realise the horror of his position, lie awake thinking of the possible breaches of trust he may have committed, may be committing, or may be going to com- mit! The fact that the trustee shares his barren posses- sion of the good things of the world with one or two other persons is only an aggravation of his miseries. A man feels tolerably safe about himself, but the fear that he may be drawn by some other person into an illegal act with far- reaching pecuniary consequences, is no light matter. His co-trustees may, in fact, be as much in dread of committing breaches of trust as himself ; but they are nevertheless an un- comfortable factor on which he cannot count with certainty. Worst of all, however, is the worry that arises from the beneficiaries under the trust. These persons, in nine eases out of ten, are inclined to take a totally different view of the law of trusts from that held in our Courts. In the most light-hearted way in the world, they apply to their trustees to lend them money on completely illusory security, or to sell out of Consols and reinvest in South African gold-mines. When the trustee answers that he is forbidden to do so by the terms of the settlement, they reply that if he will only consent to this very small personal trouble, they will be able to doable their income. Surely he will not be so disobliging as to deprive them of such a benefit for no reason except a caprice of his own ! If, again, the beneficiaries under the trust are poor, and are relations of the trustee, the appeal is often couched in the most moving terms. Perhaps worried beyond endurance, the trustee at last gives way, and consents to the breach of trust. All goes well for a time ; but after twenty years have elapsed, the breach of trust results in the loss of trust- property. Then too frequently the miserable trustee finds that the cestui que trust who has beguiled him into acting contrary to the terms of the settlement, instead of corning forward to bear the loss, compels him to make good the money. The present writer has heard of a case in which two trustees, neither of them rich men, were compelled by their cestui que trust to pay back between them a sum of £6,000 which had been lost in an investment made, doubtless., contrary to the terms of the settlement, but solely in consequence of the im- portunate appeals and moving pleas of poverty of this same beneficiary.
A Bill just introduced into the House of Lords by Lord Herschell will, it is hoped, do something to remove some of the worries and grievances of this most long-suffering class. This Bill, which is entitled "an Act to amend the law relating to the duties and liability of trustees," is, as the memorandum states, intended "to facilitate the transaction of business by trustees, and to afford them protection in some cases where, under the present law, they may innocently incur liability." The fourth is the first important section which will, if the Bill becomes law, give relief to trustees. It provides that trustees shall be protected from liability to make good a loss of trust-funds "where they invest them on mortgage, the amount lent not exceeding two-thirds of the value of the security." It will be remembered that up till now the rule has been that trustees ought not to advance more than half of the value on house-property. The depreciation of the value of land has, however, shown this distinction to be soinewhat absurd, while the difficulties in the way of obtaining good investments have made it desirable to take away any unnecessary restriction upon lending money on house-property ; for the fact that trustees cannot advance two-thirds of the value, in practice precludes them from holding this form of security. At first sight it may seem as if this were not a wise relaxation, since houses are liable to be depreciated from moral and physical causes of a kind unknown to land. For instance, the change of fashion in regard to residence in a particular quarter of a town, or the establishment of some unpleasant industry therein, may enormously affect house-property, while land is quite un- affected by similar evils. As an answer to this objection, it may be pointed out that Insurance Companies, which are amongst the most prudent investors, freely lend two-thirds of the value of house-property. Subsection 4 of the same Section sets purchasing trustees free from the obligation to insist upon a full title for forty years. This provision, it may be remarked, only follows the ordinary custom of auction-sales, which is now almost always to restrict the production of title to a shorter date. Thus, to leave the law as it is, is to expose trustees to an unfair risk, or else to forbid them to buy at auctions. Section 5 is intended to protect trustees from the effect of the decision in the case of "Fry v. Tapson," where it was decided that trustees who had employed a London surveyor to value a house in Liverpool prior to an advance on mortgage, were liable for the surveyor's mistake, because the agent employed was acting out of the ordinary scope of his business. If Lord Herschell's Bill passes, trustees will henceforth be protected from liability, even though they employ a surveyor from a distance, provided that it shall appear to the Court that such surveyor was in other respects well qualified to perform the duty undertaken by him." The next provision of the Bill—Section 6— authorises trustees to employ and pay an agent to carry on the business of the trust. The reason given for this change may be quoted from the memorandum,—" As the law at present prevents a trustee from being paid for his own services, it appears only reasonable that he should be at liberty to employ some one else to transact business for him on ordinary business terms." How many trustees will appreciate the advantages of this clause ! A busy man—a banker, or a doctor, or a journalist—becomes a trustee. He has no time to look into such matters for himself. The most he can do is to sign the papers put before him. To protect himself from endless dangers and troubles, he has, therefore, to put the whole matter into the hands of his solicitor, and say to him,—' Tell me exactly what I can do safely.' In complicated trusts, where the recipients of the fund are many and inclined to want alterations, this business may easily cost some ten or fifteen pounds a year, a tax which even rich men bear with a sense of worry, and which poor men often find an intolerable burden on their patience. Another worry of trustees is taken away by Section 7, which clears up the doubts whether trustees can insist on having trust-property insured at the expense of the tenants for life. These doubts have often given rise to those interminable series of letters which are the terror of trustees. Henceforth the trustee will be able to insist on insuring, and will not be haunted by the notion that his trust- property is going to be converted by fire into a heap of worth- less ashes. The last important section of the Bill is perhaps the greatest piece of relief of all. As the law stood before 1883, a trustee could never be clear from claims in respect to old breaches of trust. The Bankruptcy Act of 1883, however, enacted that "a discharge under the Bankruptcy Act should release a trustee from liabilities for any breach of trust, except in case of a fraudulent breach of trust to which the trustee was knowingly a party." Lord Herschell's Bill proposes to give a trustee "the same protection as every one else has against State claims." This section will certainly do a great deal to relieve a trustee from those unknown terrors which sometimes haunt him as to the things "which he used to do before he understood what being a trustee really meant."
Perhaps the strongest feeling which occurs to any person cognisant of the law in reviewing such legislative enactments as those of which Lord Herschell's Bill is the latest specimen, is to ask what will become of the liability of trustees if the tendency to relieve them is to go on. The notion of putting money into strict trust was once that of tying it up in such a way that under almost no possibility could the capital sum lost to the use of the beneficiaries. Now, however, there are plenty of ways in which the absolute responsibility of the trustee is relaxed. We may perhaps be allowed to wonder whether the end may not be that the relaxation of the liability of trustees will be carried to such a pitch, that it will be found impossible to create an absolutely secure trust. Will thee not then be an outcry for some new means of securing capital sums from the possible follies of the recipients of the in- terest produced by such sums ? If there is, it may occur to people that the best plan would be an official trustee. It is easy enough to sketch such an arrangement. All persons who liked might be allowed to pay money into the custody of the Chancery Division of the High Court, and to deposit along with such money a deed setting forth the terms under which they desired it to be ad- ministered. A man who wished to make a settlement on his daughter at marriage, might thus pay into Court the sum which he wished to settle on her, enrolling at the same time a deed declaring the uses of the trust in the event of her death, with or without issue, and providing for the usual contingencies con- templated in a marriage-settlement. Perhaps, however, before that day arrives, yet another legislative current will have taken hold of the ship of State, and all laws may then be tending to the abolition of restricted ownership. All tenants for life will be declared owners in fee, and a more perfect Statute of Uses will be applied to all trusts, real and personal, under which it will be impossible to make any devolution of property but to a person absolutely and without restriction. Such an arrange- ment sounds incredible to our ears ; but, after all, it is the logical outcome of a great many of the free-exchange doctrines in regard to private property. A real disciple of Cobden could hardly approve of anything in the nature of a remainder.
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