Aristocracy and the burden of constructive trusteeship, are brought to bear when the misinterpretation of an appointed solicitor allows for the sale of valuables designated a place within the family trust. 

By the actions of a family re-settlement drafted in 1923 by Viscount Mandeville (the future tenth Duke of Manchester), for the purposes of himself and each successive Duke, it was stated under clause 14 that the existing trustees to the estate were required, upon death of the ninth Duke of Manchester, to compile an inventory of goods deemed inheritable by the Viscount, prior to including them into the settlement, while paragraph B further expressed they should be held:

“Upon trust after the death of the present Duke or (if and so far as may be found practicable and convenient) during his lifetime to select and make an inventory or inventories of such of the chattels hereby assigned as the trustees in their absolute discretion may consider suitable for inclusion in the settlement hereby made (which selected chattels are hereinafter called ‘the selected chattels’) and to hold the residue (if any) of the said assigned chattels in trust for Viscount Mandeville absolutely.”

After the ninth Duke’s passing, the trustees handed the Viscount a number of items with the intention that he would look to sell them; yet, he failed to compile a list of valuables for retention into the settlement for future Dukes.

When the tenth Duke died in 1977, those items remaining came into possession by his widow, the Dowager Duchess of Manchester, whereupon in 1979, the eleventh Duke of Manchester issued a writ for breach of trust by the surviving trustees of the 1923 settlement, on grounds of having delivered the property to the deceased in the knowledge of their duties under clause 14 of the 1923 settlement.

And so, by virtue of his having sold them, the tenth Duke was also held accountable as a constructive trustee, and liable for payment of the proceeds to the value of those items sold, as was his widow. It was also argued that failure to compile the list resulted in all items of value falling within the scope of the settlement, and that both repossession of those items and recompense for any property sold was due.

Heard over a lengthy ten-day hearing, judge Megarry V-C took pains to explore the definition of constructive trustees, along with the term ‘notice’, as had been claimed by the eleventh Duke.

When the chain of communication was examined, it became apparent that during the lifetime of the tenth Duke, his solicitor had written to him to explain his obligations, but in way that failed to fully embrace the limitations of the settlement, as illustrated below:

“I had a long conversation with Nicholl on Thursday last, and the trustees have agreed that the heirlooms should be released, except the pictures. Under the resettlement executed by you on 20 December 1923 there is a clause by which the trustees can in their discretion release a large quantity of heirlooms and make a new list of such articles as are to remain as heirlooms. The amount obtained for the sale of any articles will be your personal property and the proceeds of sale will not have to be considered as capital trust money.”

From this it was easily construed that the lack of legal knowledge on the part of the tenth Duke would have left him reliant upon the professional expertise of his solicitor, who on this occasion had neglected to mention that the trustees were under a lawful obligation to draft a comprehensive list prior to any passing of estate property.

This meant that prima facie, the deceased was by extension, a constructive trustee by imputation.

However, his ignorance of the facts raised strong argument for his exemption, with particular regard to the five principles of ‘knowing’ as set down by Gibson J in Baden, Delvaux and Lecuit v Société General pour Favoriser le Développement du Commerce et de l’Industrie en France SA; which included actual knowledge, wilfully shutting one’s eyes to the obvious, wilfully and recklessly failing to make honest and reasonable enquiries as to the facts, reasonable and honest knowledge of circumstances indicative of the facts and, honest and reasonable knowledge of circumstances as to cause inquiry.

While the claimants preferred to impute the knowledge of clause 14 upon the Duke, it was clear by the evidence presented, that the deceased was largely ignorant to his legal requirements, and instead wholly dependent on the instructions of his acting solicitor.

It was also noted that sections 199 and 205 (1)(xxi) of the Law of Property Act 1925 specifically exempts beneficiaries under trust from the powers of constructive notice; which left the court little recourse other than to hold that in this instance, the tenth Duke of Manchester was not liable as a constructive trustee, and therefore no action against him could be sustained, while the court reminded the parties that:

“In determining whether a constructive trust has been created, the fundamental question is whether the conscience of the recipient is bound in such a way as to justify equity in imposing a trust on him.”

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