Breach of contract, negligence and breach of fiduciary duty prove central to a solicitor’s misgivings when for atypical reasons a lender sought recovery of their loss through equitable principles after other options failed.
In the late 1980s the respondents entered into a mortgage arrangement with a couple looking to secure a second property for £73,000, however due to market instability the respondents expressed that the £59,000 loaned was subject to the mortgagors paying the balance of the property from existing capital in order to reduce the risk of default, after which the acting appellant solicitor knowingly agreed to undertake the conveyance and provide a full report as contained in their contract.
Prior to completion of the purchase the mortgagors took out a small charge against their existing property for £3,350 in order to raise the funds needed to secure the mortgage, and aware that the debt would be later secured against the new house, and yet the appellant continued with the purchase without reporting the change in financial circumstances to the respondents.
Following a successful transaction the mortgagors honoured only a handful of repayments before lapsing into default, whereupon the new house was sold as part of the repossession process, however the property crash had diminished the property’s value short of satisfying the debt by £6,000, thus the respondents sought equitable damages from the solicitor on grounds of breach of fiduciary duty through non-disclosure of the loan terms.
In this instance the court ruled in favour of the respondents and awarded damages to the effect of £59,000, less the funds raised from the sale, whereupon the appellant challenged the judgment in the Court of Appeal, who upheld the appeal on grounds that appellant’s oversight did not constitute a breach of fiduciary duty to either the mortgagees or the respondents, as the appellants had been consciously acting in good faith toward both parries throughout the disposition, therefore any lapse of skill or appreciation was accidental and not premeditated as required under the rules of equity, while the Court also reminded the parties that:
“[I]f a fiduciary is properly acting for two principals with potentially conflicting interests he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other…”
In what was to become an overly protracted and yet hotly debated case, the question of trust instrument validity and the limiting scope of trust powers, fell upon the English courts to answer, when what appeared at the time was judicial wisdom, later proved a confused doctrine that polluted similar cases in the years following its declaration.
Having become the director of a highly successful M&E company first established in 1927, and as a man of inherent providence, the deceased had taken it upon himself to draft a trust deed in 1941, that would allow his current and former employees to benefit from financial gifts on a potentially recurring basis, while in addition to this their immediate relatives were also to enjoy similar windfalls, as was contained in clause 9(a) of the trust, which read that:
“The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit and any such grant may at their discretion be made by payment to the beneficiary or to any institution or person to be applied for his or her benefit and in the latter case the trustees shall be under no obligation to see the application of the money…”
However upon his death in 1960, the appointed executors notified the trustees that the trust was void for uncertainty, as it would be almost impossible to distinguish one employee from another, never mind any relatives known to exist at the time of his passing, which was a position adopted in light of the company’s growth from 110 to 1,300 employees during the preceding years.
Commencing by way of an originating summons in 1967, the trustees argued that clause 9(a) merely represented a power to distribute funds to a class of beneficiaries, while the executors held that the use of the word ‘shall’ created instead, a mandatory trust that once unable to be fully executed, would nullify itself and thus fall within the residual estate.
In the first instance, the Court of Chancery examined the construction of the deed, and found that due to discretionary nature of clause 9(a), the trust conferred a power upon the trustees, and not an immutable instruction that once unfulfilled, rendered the trust void for uncertainty; a statement upon which the executors challenged the findings in the Court of Appeal.
Here, the court referred to In re Gestetner Settlement, in which Harman J had held that when ascertaining the exactness of a trust deed beneficiary class:
“[T]he trustees must worry their heads to survey the world from China to Peru…”
Which was to suggest an immense undertaking for trustees, unless it could be proven that the deed conferred a mere power, in which case, reasonable certainty of the beneficiary class ought then be shown. In light of this precedent, the court subsequently held that as before, the context of clause 9(a) was such that the trustees were afforded discretionary powers, and so held that:
“[C]lause 9 of the deed may properly be construed as the judge did, by holding that it creates a power and not a trust…”
At which point the executors along with the deceased’s widow, pursued their argument before the House of Lords on grounds that clause 9(a) represented a mandatory trust, and that as such, the ruling in the recent Inland Revenue Commissioners v Broadway Cottages directed the decision of the court when it held that:
“[A] trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment…”
Which it was argued, was now impossible due to the vast number of both former and existing employees, causal employees and extended family members; a contention that left the House allowing the appeal by way of reference back to the Chancery Court for greater clarification, while also holding that in their opinion:
“[T]he trust is valid if it can be said with certainty that any given individual is or is not a member of the class.”
Once again in 1972, the court reviewed the position on the wording, and thereby meaning of trusts and powers, along with the validity of the trust in relation to s.164 of the Law of Property Act 1925, which stipulated that:
“1. No person may by any instrument or otherwise settle or dispose of any property in such manner that the income thereof shall…be wholly or partially accumulated for any longer period than one of the following…(a)the life of the grantor or settlor; or (b) a term of twenty one years from the death of the grantor, settlor or testator…”
And so with a thoughtful, albeit exhaustible, examination of the deed, the court held that a discretionary trust did exist, and that despite the 31 years since its execution, such an instrument was valid when called into purpose, which echoed the sentiment of the House when the court further held that the trust was valid on the principle that there were sufficient company records to show, and thereby establish, who was reasonably eligible for the benefit of the funds when distributed by the trustees, upon which the executors challenged the judgment before the Court of Appeal one final time.
Here, the executors argued that unless an individual could not be proven as falling outside the scope of the trust, the trust must fail, while the court reasoned that while operating within the bounds of practicality, the trustees had shown that they were equipped to trace staff records back to the inception of the company, and thereby allocate the majority of employees and their immediate relatives, whereupon the court conclusively dismissed the appeal, while simply holding that:
“[A] trust for selection will not fail simply because the whole range of objects cannot be ascertained.”
Interference with the performance of a contract, and assistance in a breach of trust, lie central to a matter involving two solicitors and a property developer, whose triangulated relationship resulted in financial abuses and ethical ignorance by those expected to conduct themselves with nothing less than self-discipline and professionalism.
Having owned and operated a number of business ventures, the respondent had ventured to obtain a business loan for the purposes of acquiring further properties, however at the time of inquiry his bank was unable to commit to lending the money, therefore he made contact with the plaintiffs, so as to borrow the sum of £1m, to which the plaintiffs requested that the loan agreement be underwritten by a qualified solicitor.
Upon consultation with the appellant his request was denied, and so with time against him he approached another law practice, whose second partner had a business history with the defendant, and through which the partner had become liable to the defendant to the sum of £1.5m.
In order to repay the debt owed, the partner then agreed to become principle debtor to the loan by way of its underwriting, while keeping the truth of their arrangement from the plaintiffs, and so when signing the loan agreement, they were now legally subject to its terms, in which sections 1 and 2 read:
“1. The loan moneys will be retained by us until such time as they are applied in the acquisition of property on behalf of our client.
2. The loan moneys will be utilised solely for the acquisition of property on behalf of our client and for no other purpose.”
While s. 4 further read that:
“We confirm that this undertaking is given by us in the course of our business as solicitors and in the context of an underlying transaction on behalf of our clients which is part of our usual business as solicitors.”
However once the money had been loaned, the partner contacted the appellant, and asked that he retain the funds in a client account until such time that the plaintiff required it. While both solicitors were aware that such a transfer was tantamount to a breach of s.1, the money was nonetheless accepted and then released by the appellant to the respondent with no proof that any of the money was being used for the purchase of properties, as per s. 2 of the agreement.
At the point of initial litigation, the plaintiffs sued for recovery of the funds following non-payment by the now dissolved partner on grounds of breach of trust, and for dishonest assistance on the part of the appellant when holding the money and paying it to the respondent upon his request, despite knowledge of the initial breach prior to his receipt of the funds from the partner.
While in the first instance the Court of the Queen’s Bench dismissed the claim on grounds that the appellant had merely acted recklessly in the course of his duties, the Court of Appeal reversed the judgment on grounds that the appellant had knowingly received money destined not for the purchase of property, and thereby in breach of s.2, and that he had wilfully closed his eyes to the facts when agreeing to both hold and transfer the funds to the respondent.
Upon appeal to the House of Lords, the appellant argued that his involvement in the matter was certainly naive and remiss but in no way unlawful, and so the House agreed to examine the details of the case for the purposes of clarity.
Turning first to Royal Brunei Airlines Sdn Bhd v Tan, the House noted that the Court of Appeal had explained how:
“A fraudulent and dishonest design is not confined to personal gain. It is sufficient if the stranger knowingly assists in the use of trust property in a way which is not permitted by the trust.”
And that in its simplest form:
“[A] trust is a relationship which exists when one person holds property on behalf of another. If, for his own purposes, a third party deliberately interferes in that relationship by assisting the trustee in depriving the beneficiary of the property held for him by the trustee, the beneficiary should be able to look for recompense to the third party as well as the trustee.”
Thus in its conclusion, the court had held that:
“[D]ishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation.”
And so it was clear that when the appellant acquiesced to the instructions of the partner, he had, whether intentionally or not, become complicit in the misuse of what was held to be trust property of the plaintiffs, while the House also also referred to Gilbert v Gonard in which the Court of Chancery had also held that:
“[I]f one person makes a payment to another for a certain purpose, and that person takes the money knowing that it is for that purpose, he must apply it to the purpose for which it was given. He may decline to take it if he likes; but if he chooses to accept the money tendered for a particular purpose, it is his duty, and there is a legal obligation on him, to apply it for that purpose.”
Although the House drew the distinction that unlike civil courts, equity relies less upon the mens rea of a man and more on his behaviour, and while the appeal was founded upon a breach of trust and dishonest assistance, there was insufficient evidence to suggest certainty as to the mind of the appellant when carrying out his part of the agreement. However, the House did conclusively note that under the circumstances there was ample grounds for a liability under wrongful interference with a contract and for assisting in a breach of trust, therefore the court of appeal judgment was upheld and reversed in part, while the House held that:
“[E]quity looks to a man’s conduct, not to his state of mind.”
“Where a third party with knowledge of a contract has dealings with the contract breaker which the third party knows will amount to a breach of contract and damage results, he commits an actionable interference with the contract…”
While the strictness of fiduciary duties within a corporate entity are prime examples of greed overshadowing obligation, this particular case demonstrates the need for contextual adjudication when examining the seemingly selfish actions of those shouldering such burdens.
Having been appointed managing director of a company designed to pursue mining opportunities within the Australasian continents in 1958, the respondent was later sued for breach of duty when obtaining coal and iron ore mining licences from the Tasmanian government by way of his position.
In the first instance, the Equity Division of the Supreme Court of New South Wales found in favour of the appellants, although legal recourse was unavailable due to its commencement beyond the statute of limitations, and so upon appeal to the Privy Council, the council was compelled to review the findings of the supreme court, while dissecting the sizeable case material used.
Here the council found that although the respondent had been serving as a director at the time negotiations had begun, it was also evident that a severe loss of capital over the preceding years had resulted in the respondent placing the company in ‘stasis’ whilst seeking alternative funding to carry out the work should they eventually receive the licences.
In addition to this, it had been made expressly clear by the board of shareholders following the receipt of the licences in 1961, that they no longer had any financial interest in the company, and that the appellant was free to pursue the benefits arising from the mining of the land available.
However in March 1962, the appellants had also sold their existing interest in the company to a third party for the sum of £2500, and so despite any claim of breach, they had by all accounts financially, contractually and orally divorced themselves from the company and those still remaining, and so when establishing the fiduciary parameters required for such a case, the council turned to Boardman v Phipps, in which Cohen LJ had held that:
“[I]t does not necessarily follow that because an agent acquired information and opportunity while acting in a fiduciary capacity he is accountable to his principals for any profit that comes his way as the result of the use he makes of that information and opportunity.”
And so basing their judgment on the strength of Boardman the council noted that not only had the respondentbeen transparent in his dealings with the Tasmanian government and the appellants, but that the appellants themselves had unequivocally shown their disinterest both in the value of the company and the actions of the respondent prior to their departure; and so with little hesitation the council dismissed the appeal while holding that:
“[A] limit has to be set to the liability to account of one who is in a special relationship with another whose interests he is bound to protect.”
In a case embroiling both arms-length and personal agreements, the unavoidable overlapping of contract and equity are held to extensive scrutiny in a suit between corporations and individuals across two jurisdictions.
After an American surgical staple manufacturer entrusted their foreign sales to a New York salesman, the man whose reputation historically rested upon a handshake eventually used his informal approach to business to establish an overseas corporation, under which he manufactured his own version of the patented staples and promoted them to an Australian market via the prolific brand name used by his new business partners.
Upon discovery his underhand scheme, the now respondents sued for damages in the New South Wales Supreme Court under § 2-306(2) of the Uniform Commercial Code, which read that:
“A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.”
While contesting that any sales accrued during the years accounted for were now held upon constructive trust for the respondents.
In the first instance, the court found that a fiduciary relationship had become evident when the respondents had entrusted their product in the appellant, therefore showing a unique vulnerability to his actions when working overseas, while under challenge before the Court of Appeal, the court supported the principle of a constructive trust and thus held accordingly.
Presented to the High Court of Australia, the question of trust relationships and contractual breach became central to the issue in hand, and so the court quickly noted that the contract rested upon verbal agreements and subsequent exchanges of correspondence, yet no legally binding agreements had been entered into; and so when examining the question of validity the court referred to Oscar Chess Ltd v Williams, in which the English Court of Appeal illustrated that a representation made during contractual negotiations could also be construed as a binding warranty, and so held that:
“The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.”
However the court also noted that in order for any implication of a warranty to sustain judicial scrutiny it must be:
Reasonable and equitable
Necessary so as to show that the contract would be useless without it
So obvious to the bargain that it needs no expression
Capable of clear expression if called upon
Wholly supportive of the contract
And so moving on to the concept of fiduciary obligations arising from the heart of the working relationship, the court noted that in Reading v The King the English Court of Appeal held how:
“[A]‘fiduciary relation’ exists (a) whenever the plaintiff entrusts to the defendant property, including intangible property as, for instance, confidential information, and relies on the defendant to deal with such property for the benefit of the plaintiff or for purposes authorized by him, and not otherwise….and (b) whenever the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit, and relies on the defendant to procure for the plaintiff the best terms available….”
Yet in vol. 25 of the University of Toronto Law Journal (1975) it also reads that in commercial dealings:
“[A] mere sub-contractor is not a fiduciary. Although his work may be described loosely as work which is to be carried out in the interests of the head contractor, the sub-contractor cannot in any meaningful sense be said to exercise a power or discretion which places the head contractor in a position of vulnerability.”
Therefore with little to warrant the existence of either a trust/trustee relationship or the presence of fiduciary duty with which to underline the machiavellian behaviour of the appellant, the court remitted the case back to the New South Wales Supreme Court with a view to an assessment of damages in favour of the respondents.
While English common law requires the perfecting of a gift through written documentation, the circumstances of that prerequisite can be somewhat altered when the moment calls. On this occasion, a testatrix was ultimately able to complete an oral debt release through the appointment of her debtor as an executor.
In 1866 the deceased was cohabiting with her son in-law when due to her sizeable wealth, she entered into an agreement whereby a significant amount of rent was paid on a quarterly basis, after which the defendant borrowed £1100, on the proviso that she deducted £100 per quarter until the balance owed was clear.
After only two payments, the deceased relinquished the debt, and explained that no further deductions were necessary. This evidence was supported both by his wife and from handwritten notes left on the cheque counterfoils used before her demise.
Upon her passing, the beneficiary to her will contested that the £900 unpaid, was now owed under law, as the cessation of the loan had not been committed to any form of written notice aside from the cheque stubs, which were deemed insubstantial as proof.
Relying upon the essence of equity, the court examined the context in which her wishes had been executed, and knowing the oral and notary testimony were insufficient to stand as perfect, her appointment of the defendant as executor to her will, was evidence enough, and that while:
“The law requires nothing more than this, that in a case where the thing which is the subject of donation is transferable or releasable at law, the legal transfer or release shall take place. The gift is not perfect until what has been generally called a change of the property at law has taken place.”
Thus the court held that the deceased, having made no express acknowledgement of a debt within her will, was proof enough that the gift was perfect, and that its absence created in the defendant, an absolute right to title of the £900, therefore no challenge could be made, equitably or otherwise. The court further noted that her further payments of full rent for a period of four years after the money had been loaned, showed again that she considered the sum paid in full, and so sought no recovery in death, as she might in life.
Specific performance and cessation of contract on grounds of mistake, are both viable arguments for either continuation of contractual obligations, or the cessation of a transaction for reasons non-detrimental to both contractees. However, both approaches rely upon the honesty and accountability of at least one party should the courts take a view to upholding either of them.
In this instance, a Gujarati widower entered into an agreement to convey a determinate plot of land for an agreed sum, yet immediately after signing the disposition, she tore up the document and refused to continue with the transaction on grounds that she had been misled as to (i) the size of the plot, and (ii) the identity of the individual to whom the purchaser was planning to sell it to.
During initial litigation in the Supreme Court of Kenya, her argument for the fraudulent misrepresentation was based upon her limited grasp of the English language, and so she had elected a representative to be present with her at the time of signing. However, it was also argued that no mention had been given of the size of the plot, which in the first instance was alleged to be half an acre, and not the two acres contained within the conveyance, a fact discovered only after the signing.
When cross-examined, the respondent was proven to have falsified the statement, and thus her witness was accused of perjury, whereas contrastingly, the appellant contested that during preliminary talks, the proposed plot was described as two acres, and not the half-acre suggested.
The contract itself was signed in the presence of a third party, however the respondent also relied upon the contention that at no point during an earlier meeting did anybody translate the contents of the contract, despite the appellant claiming that not only did he explain it, but that the respondent’s cousin had also clarified its contents to her.
It was likewise argued by the appellant that the respondent tore up the contract, not because of the plot variation, but upon the knowledge that the land was to be resold to an individual she disliked, however this was also proven to be untrue after lengthy cross-examination and questioning of oral evidence.
Upon summation, the trial judge awarded in favour of the appellant, despite reservations around the integrity of both parties, and so when presented to the Court of Appeal of East Africa, the Court took issue with the reliability of the appellant’s statements and proceeded to reexamine the facts, before reaching the same conclusion as the lower court.
Take finally to the House of Lords, it was noted that vol. 2 of ‘Williams on Vendor and Purchaser’ clearly illustrated that:
“[A]s a rule, either party to a contract to sell land is entitled to sue in equity for specific performance of the agreement. This right is, in general, founded on a breach of the contract, but not in the same manner as the right to sue at law. The court has no jurisdiction to award damages at law except in case of a breach of the contract; while the equitable jurisdiction to order an agreement to be specifically performed is not limited to the cases in which at law damages could be recoverable.”
Which translated that when contracting parties hold a good account of themselves throughout their dealings, equity would provide sufficient weight as to instigate specific performance; yet on this occasion, neither party had been anywhere near as truthful as a court would rightfully expect, and so on this principle it was impossible to uphold the appeal, nor enforce the equitable rights of the appellant, or those forwarded by the respondent, thus the appeal was dismissed while the House held that:
“In equity all that is required is to show circumstances which will justify the intervention by a court of equity.”
Profiting from a fiduciary position, while not expressly forbidden, is a feature that requires careful consideration by both trustees and beneficiaries, and so in this matter the billing of fees for legal services proved both offensive and damaging for the party accused.
In 1895, the Governor of the Yorkshire College took issue with the vice-chairman after discovering that he had for a period of fourteen years, been providing legal function as a solicitor whilst holding a position based upon a voluntary footing. Incensed at this opportunistic behaviour, the now appellant wrote a lengthy letter to the respondent, accusing him of breaching his fiduciary duty to the institution her served, while stressing that he had:
“[U]sed religious, educational and philanthropic schemes as a hypocritical cover for the purpose of serving his own ends.”
The respondent argued that the terms of the memorandum of association had provided him with rights to both charge and profit from his work, a contention that remained largely unproven at the point of litigation. In the first hearing, the judge underemphasised the importance of the accusation levelled, instead focussing on the libellous tone used in the letter, which at the time, was circulated amongst three hundred other college governors.
Having convinced the jury that the respondent was justified in his collection of payment for legal services, the judge again placed greater weight upon the damaging effects of the written statements, after which the jury returned a verdict in favour of the respondent, and with damages set at a lofty 600l.
Upon appeal, the appellant was left facing a similar outcome after the Court agreed that the libel charges remained as effective as they would have should the respondent have been proved wrong, thus prompting a final plea before the House of Lords.
Here, the roots of the matter were revisited, along with Order XXXIX r.6 of the Rules of the Supreme Court 1883, which explained how:
“[A] new trial shall not be granted on the ground of misdirection or of the improper admission or rejection of evidence,…unless in the opinion of the Court to which the application is made some substantial wrong or miscarriage has been thereby occasioned in the trial…”
It was thus uniformly agreed by the House that from the outset, the nature of the action had been grossly overlooked in favour of aspersions, and that the trial judge had clearly failed to acknowledge the gravity of a fiduciary breach, which if proven correct, went some way to justifying the claims made by the appellant at the start. It was for this reason that the House held that there had been a clear miscarriage of justice, and that in failing to recognise this, the Court of Appeal had conversely erred in judgment.
In light of these collective mishaps, the House duly reversed the Court of Appeal’s decision, directed a re-trial under the Supreme Court Rules, and ordered repayment of all courts costs and damages to the appellant.
The essence of fiduciary duties run counter to the arms-length relationships navigated by contracting parties, and so on this occasion, the relinquishing of trustee duties by a regulated bank proved a reversal of fortune for an innocent employee.
While operating his construction company, the sole owner established a Profit Sharing 401(k) Plan for the benefit of his numerous employees. Almost six years later, the company filed for bankruptcy under Ch. 7 of the Bankruptcy Code, after which one of its employees requested payment for the money he had invested during the life of the plan.
With an estimated $14,000 owed, the employer agreed to settle the matter with a payment of $21,000 to cover court fees incurred while pursuing the debt on grounds of a fiduciary breach. Unfortunately, the employer paid only $18,500, after which he escaped jurisdiction and was never seen again. This left the employee with no option other than to claim the remaining $3,000 from the now appellant bank, who in accordance with the terms of the plan, was an acting trustee under the Employee Retirement Income Security Act of 1974 (ERISA).
At the point of litigation, it became clear that while serving as a trustee, the bank was under duty to inform where possible, all plan beneficiaries of its decision to rescind its appointment, as expressed under art. 15.6 of the plan, which allowed the bank to resign by written notice, after which any outstanding funds would be transferred to a successor trustee; however should one not be available, the administrator of the plan would automatically occupy that position.
Unbeknown to the employee, the bank had been struggling to communicate with the employer for a number of months, and after resigning as trustees with the knowledge that the trustee-administrator relationship had broken down, and that the company was now also in financial trouble, the bank had handed $53,000 of plan funds to the employer without notifying the beneficiaries of their decision. It was at this point that the employer converted the assets for his own personal use, sometime before part-settling with the employee and disappearing.
When heard in the district court, the judge awarded in favour of the claimant employee, whereupon the bank appealed to the court of appeals, who investigated further, the nature of the plan and associated case precedents. Here it was agreed that under § 106 of the Restatement (Second) of Trusts, a trustee was able to resign in accordance with a trust with express permission of the beneficiaries or consent of the court, yet at no point had the bank alerted the employee(s) of either the decision to resign, or the uncertain future of the employer.
It was also noted that under s. 11.4 of the plan, that the bank could be could liable:
“[T]o the extent it is judicially determined that the Trustee/Custodian has failed to exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims.”
While the bank argued that under such circumstances, legal remedy would be sustainable only as a class action involving all the beneficiaries, the court held that in Varity Corp. v. Howe, individual remedy was viable under ERISA § 502(a)(3), which provides that equitable relief is granted to individuals in order to “redress any act or practice which violates any provision of this title”. The court also noted that § 173 of the Restatement (Second) of Trusts provides that:
“[The Trustee] is under a duty to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection in dealing with a third person.”
It was for these salient reasons that the appeal court supported the district court ruling and awarded in favour of the employee for the remaining balance of the plan monies, while adding that had the bank been in a position to hand over money of its own to the employer, things may have taken quite a different turn, especially when considering the vulnerability of the beneficiaries.