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WYMAN v. PATERSON, H.L. Junner, and the firm became Ferguson & Junner. Ferguson died in January, 1887, and Junner carried on in the name of Ferguson & Junner until his failure in January, 1888. By the beginning of 1887 all the trust property had been administered except the sum of about 4,000%., of which 3,7007. was outstanding on the bond debt of a Mr. Purves. debt was paid off by Purves in July, 1887, to Junner, who procured for him the discharge of the three surviving trustees, Messrs. Paterson, Gordon, and Lyon. The two latter died before the institution of this suit. The pursuers do not challenge the payment of the 3,7001. to Junner, nor that it properly came into his hands-the amount remained with Junner for immediate reinvestment when attainable. The then three surviving trustees, Paterson, Gordon, and Lyon, could not immediately meet, as some of them were absent; and as the vacation had either begun or was near at hand, the matter practically stood over until the following Martinmas, though in the interval applications were made to Junner to know if he had found an investment. He did get an investment for an amount of 800%., part of the 3,7007., and so apprised the trustees, but stated he was not able to get further investment. The pursuer in this case is beneficially interested in the trust estate, and she seeks to hold Paterson, the surviving trustee, and the representatives of the other two trustees, liable for the fraudulent appropriation by Junner of the resi due of the 3,7001.

The Lord Ordinary, who first heard the case, dismissed the pursuer's claim. On appeal to the Judges of the First Division the decision of the Lord Ordinary was affirmed. It is beyond dispute that the trustees exercised great care and diligence in the administration of the trust estate, which was a troublesome and protracted administration. In the year 1887 all was realised and divided except the sum of about 4,000l., of which the sum of 3,7001. paid off by Purves was a part. The trustees were obliged to hold the sum of 4,000l. to enable them to pay the amounts payable to the truster's widow. After the expiration of a period of over half a century since the execution of the

trust disposition, and nearly thirteen years since the alleged breach of trust occurred, your Lordships' House is engaged with a suit against Paterson, the sole surviving trustee of the ten appointed by the trust disposition.

The pursuer complains that the trustees did not keep within their own control the money paid off by Purves, as it is not disputed, but that Junner, the factor, properly received the amount so paid off. When then did a breach of duty arise? Two leading solicitors and agents, Messrs. Ritchie and Robson, were examined. They proved that the practice of the profession is to put the trust money when received on deposit receipt in the name of the firm for behoof of the trustees. They also proved that the firm of Ferguson & Junner, represented by Junner, was previous to and up to the crash in January, 1888, of good and sound character, and that nothing could be said against its financial position. Why then should Paterson, a shopkeeper, be held liable as for breach of trust because he did not depart from the usual custom that the money paid to the agent would be deposited in the name of the firm on behalf of the trustees pending investment? It must be remembered that the period of payment was at the end of the term and the commencement of the vacation, running on close up to the following Martinmas. It appears to me there was no breach of duty by the trustees or default on their part in leaving with the agent, Junner, for so short a period the amount received by him on their behalf.

The pursuers again complain that the trustees, upon seeing the receipt sent to them on December 20 or 21, should have observed it was only dated December 20, and should have had their suspicions roused, as that date was inconsistent with the statement made to them by Junner on December 19 that the money was deposited in the bank on deposit receipt. The respondent Paterson says he did not observe the date. I think that very likely. He had no suspicion. of Junner, and did not scan the receipt with a watchmaker's eye. I cannot hold that up to December 21 the trustees had done or omitted to do anything that an

WYMAN . PATERSON, H.L. ordinary prudent man would not have done or omitted to do. The trustees had repeatedly pressed Mr. Junner to try and procure an investment. They observed he had advertised for it in the newspapers. They had some proof he was active by the fact that he did get an investment for 8001. of the amount, and there was no doubt by any one of his honour and financial position.

But it is said the trustees, after December 21, were guilty of some breach of duty. Why so? On the 21st they requested Junner to put the money to their names in the bank. It was only left with him pending investment; he had failed to got it, and consequently it would be prudent to have the amount deposited in the bank in their own names, a reasonable time to procure an investment by Junner having elapsed. They did not propose to leave the money under the control of Junner indefinitely. The respondent Paterson called next day to see if the new deposit receipt requested by the trustees had been obtained by Junner, but Junner had met with a serious accident and could not be seen. The Lord Ordinary and the Judges of the First Division held on the evidence that Paterson did all that could be reasonably expected towards having the money placed in their names in the bank. It appears to me they would be held accountable for the accident to Junner if any other conclusion was arrived at. I am clearly of opinion that neither during the period between July and December 19, nor between that date and the date of Junner's failure, were the respondents guilty of any act which an ordinary prudent man would have avoided.

But suppose they were a little to blame, the respondent relies on the protection clause No. 6 of the trust disposition. The truster thereby declared that as the trust may last for a period of years he empowers the trustees to appoint a factor under them, and that the trustees shall not be liable for the intromissions of such factor, nor be liable for any agent who, in transacting the business of the trust, shall receive any part of the estate into his own hands. The trustees did employ an agent-namely, the firm directed by the

truster himself-and they so continued the firm as their agents which came to be represented by Mr. Junner. Did not Junner receive the 3,700l. in transacting the business of the trust? and does not the clause expressly declare that the trustees are not to be liable therefor?

It was argued, however, that their exemption from liability was excepted by the case of Seton v. Dawson,3 which it was said covered this case. But what are the facts of that case? Sums of money belonging to a trust estate were received by one of the trustees who had been directed by the others to realise, and without receiving any appointment as a factor. No meeting was held for eight years after the truster's death, by which time the acting trustee had become bankrupt, and a large sum was due by him to the trust estate, the trustees were held personally liable, and were not exempted from liability by the protecting clause, because their conduct amounted to crassa negligentia. They never looked after the estate for nine years, nor took any steps to ascertain what was doing with the estate that they had authorised their cotrustee to collect. So far from covering this case, Seton v. Dawson 3 is its antithesis. In this case there was no delay to make enquiries; they were made even during the vacation, and probably led to the investment of the 8001. The trustees did everything after December 21 that can be suggested, except that during the dangerous illness of a solicitor of the highest character they did not go to the bank, and, without having the slightest suspicion, practically convey to the bank that he was an untrustworthy person.

In the case of Knox v. Mackinnon 1 Lord Watson, in speaking of a similar protective clause, says: "I see no reason to doubt that a clause conceived in these or similar terms, will afford a considerable measure of protection to trustees who have bona fide abstained from closely superintending the administration of the trust, or who have committed mere errors of judgment whilst acting with a single eye to the benefit of the trust, and of the persons whom it concerns. But it is

settled in the law of Scotland that such a clause is ineffectual to protect a trustee

WYMAN v. PATERSON, H.L. against the consequences of culpa lata, or gross negligence." This judgment of Lord Watson of the general law is most apt in its application to this case, which in no respect can be placed higher than an error of judgment in following the invariable practice of leaving the money paid into the factor's hands with him for investment for a reasonable time, and in not giving notice to the bank after Junner's illness. In my opinion, on the facts of this case, a decision against the trustees would be a draconic decision, and would be an additional terror to any honest and solvent person acting as a trustee. In my opinion the judgments of the Courts of Scotland should be affirmed.

LORD SHAND.-I have also come to be of opinion that the judgments complained of should be reversed, and that the pursuers should succeed in the action; and I agree in thinking that in regard to questions such the case raises, there is no real distinction between the common law of Scotland and that of England.

If the trust deed did not contain the very wide clause of indemnity which has been founded on by the defenders, it seems to me that there is really no answer on the part of the trustees to the fact that they allowed the fund, which has been lost, to remain in the possession and under the uncontrolled charge of their law agent from July till the end of December, 1887, without requiring that it should be placed in their own names. It appears to me to be no sufficient reason that the money was during all this time waiting an investment, if indeed the law agent truly made efforts in the meantime to invest the money; and I agree that the alleged practice in Scotland, which is condemned by the learned Judges of the First Division-a practice which obviously subjects the trust funds to great and unnecessary risk-cannot relieve the trustees from legal responsibility for the loss of the fund which occurred in consequence of the fund being left entirely in the law agent's hands.

A strong argument was submitted by the respondent's counsel, founded on the clause of indemnity, and I confess that VOL. 69.-P.C.

for a time it occurred to me that the defenders might be relieved from responsibility by the wide terms of that clause. But I have on further consideration come to the conclusion that the indemnity does not extend so as to cover the acts here complained of. When the trustees, by their signature to the discharge of their security, armed their law agent with the power of himself receiving the amount in cash, and thus became themselves intromitters with that fund, I cannot regard it as a mere omission or neglect of management such as the indemnity clause would cover, that the trustees failed for about five months to make any enquiry as to the position of the money, or to take care that it had been placed in their own names. The argument, if good for a period of five months, would sanction omissions or neglect for a much longer period, and I cannot give such effect to the clause-the delay having been beyond even the term of Martinmas, which was upwards of four months after the money had gone into the law agent's hands, and a term at which, according to all ordinary practice, an investment should have been had. Again, I agree with your Lordships who think that the part of the clause which declares that the trustees shall not be liable "for any agent who in transacting the business of this trust shall receive any part of the said estate into his hands," while it might cover a short period-it might be for a few days or a very short time immediately before a term of Whitsunday or Martinmas, when investments on heritable security are usually madewould yet not cover such a time as here occurred, or even a longer period. Such neglect appears to me to be correctly characterised as of that great or gross nature known as culpa lata, to which Lord Watson and Lord Herschell both gave effect in their judgments in the cases of Knox v. Mackinnon and Rae v. Meek 2 in this House.

LORD DAVEY.-This appears to me a very plain case. The first duty of the trustees was to preserve the trust fund under their own control. Instead of doing so, they allowed it to remain under the sole control and in the sole disposition

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WYMAN . PATERSON, H.L.

of their law agent for five months. They took it for granted that the money would be placed on deposit, and made no enquiry whether it was so; and, indeed, it appears from Mr. Paterson's evidence that he did not even suppose that the deposit would be in the names of the trustees, as it ought to have been. The Lord Ordinary was of opinion that the trustees were quite entitled to entrust the money to their law agent and factor, pending an investment being found. Lords Adam and Kinnear were clearly of opinion that this was contrary to their duty, and that the reasons which were given for following such a practice were quite inadequate.

I entirely agree with the learned Judges in the Inner House in that opinion. The trustees might properly employ their law agent to receive the money from the mortgagees, but it was their duty to see that the money, when received, was immediately re-invested or placed on deposit in their own names and under their own control. Where I differ from the learned Judges is in thinking that the ineffectual attempts made by the trustees to recover the money from the law agent did not absolve them from the consequences of their previous neglect of duty. It is, in my opinion, a clear breach of trust and culpa lata on the part of the trustees thus to abandon the performance of their primary duty, and the loss that has ensued was the direct consequence of their doing so.

It was argued that the trustees are exempted from liability by the immunity clause to be found in the will. I think that this point in covered by the decision of the full Bench in Seton v. Dawson,3 which has more than once been referred to with approval in this House. I agree with the opinion expressed by the Lord Justice Clerk in that case, that where trustees give a joint receipt for trust money, though it is, in fact, received by the hand of an agent, it is the intromission of the trustees themselves. I also think that the immunity from liability for the intromissions of a factor or agent extends only to the acts of a factor or agent properly appointed and acting within the legitimate scope of his agency.

In the present case the law agent's duty was to receive the money and at once place it in safety under the control of the trustees, and they could not properly, and did not, in fact, authorise him to retain the money in his Own control. If trustees think fit to delegate their duties to their law agent in a matter in which they cannot properly authorise him to act for them, they are not, in my opinion, protected by a clause of immunity from liability for the intromissions of factors or agents.

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The learned counsel for the respondents relied on some words used by Lord Watson in Knox v. Mackinnon, but, if the whole passage in which these expressions occur is read, they do not appear to me to have any application to the present case. am rather surprised to find it stated in the evidence in this case that it is the practice of Scotch solicitors to place trust funds in their own names for "behoof of the trustees," instead of placing them in the names of the trustees themselves. am not aware that such a practice has ever been directly made the subject of judicial decision. If the case ever arises, it will have to be considered whether such a practice is consistent with the primary duties of trustees to retain the funds in safety under their own control. I agree that the order hereby appealed from should be reversed.

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WYMAN v. PATERSON, H.L. the duties of the trust they undertook resulted from a desire not to display an undue want of confidence in a firm which had been regarded as bearing a high professional reputation, and composed of men of great personal honour. But those considerations cannot control the principles affecting the liability of a trustee duly to discharge the obligations which he has taken upon himself arising out of his trust, and it is only by the application of those principles that the judgment of this House must be governed.

Now it seems clear that the duty of the trustees in this case was to receive the trust money into their own hands, or to place it in the hands of an agent properly selected and constituted for the purpose of taking charge of it, and to see to its safety by their own control to the same extent as if it were in their own hands. I quite agree with my noble and learned friend Lord Morris that no breach of duty would have been committed by the trustees allowing a solicitor to receive trust money on a security being paid off, and also that if a new security was in sight or could fairly be anticipated promptly to come into existence, the money might without breach of trust remain with the object of being so transferred in the hands of the solicitor, that solicitor being employed for a purpose that was not completed at the time when the money was in his hands; but the solicitor so employed in the matter of a trustee's security is not the proper custodian of the trust funds, except for the purposes I have mentioned.

On the whole case I have come to the conclusion, as a matter of fact, that this money was left without proper enquiry or supervision for an undue period of time in the hands of the solicitor under conditions which enabled him fraudulently to appropriate it to his own use. I do not refer to the facts of the case in detail, as they have been already stated by more than one of your Lordships; but referring to them generally, I express the opinion that the period from July, 1887, till December of that year, during which the money was allowed to remain in the solicitor's hands-a period of five months -was a period beyond that for which the money ought to have been allowed to

remain in the hands of a solicitor as such, and during that period the trustees appear to have regarded their solicitor as a banker and custodian of the money, and not to have treated him as a mere law agent. In that way, as it seems to me, a breach of trust has occurred in this case.

With respect to the indemnity clause, I concur entirely in the observations which have been made by my noble and learned friend Lord Davey. It seems to me that that clause was intended only to protect the trustees from the fault of an agent properly constituted for the purposes of the trust-for instance, if the money had been deposited by the trustees in a bank, and the banker had become insolvent or had appropriated the money, the banker being properly constituted as the holder or custodian of the money, the trustees would have been protected; but if the trustees neglect to appoint an agent at all, and leave the money in the hands of some mere clerk in their establishment, careless as to how the money is taken care of, that person could not be regarded as such an agent that the trustees could appeal to the indemnity clause for their protection.

In the same way I think here, when the trustees allowed money to remain in the hands of a solicitor without taking care as to the proper custody of it, the protection against the acts of an agent cannot apply in this case. Therefore, as I say, with reluctance I have come to the conclusion, with the majority of your Lordships, that the judgment of the Court below should be reversed.

Appeal allowed.

Agents-H. Percy Becher, agent for F. M. H. Young, Edinburgh, for appellant; A. & W. Beveridge, agents for G. M. Wood & Robertson, Edinburgh, for respondents.

[Reported by J. Eyre Thompson, Esq., Barrister-at-Law.