Trustee’s Renewed Lease also Within Trust
A landlord refused to renew a lease to a trustee for the benefit of a minor. The trustee then took a new lease for his own benefit. The new lease had not formed part of the original trust property; the minor could not have acquired the new lease from the landlord; and the trustee acted innocently, believing that he committed no breach of trust and that the new lease did not belong in equity to his cestui que trust.
Held: A trustee of a lease may not renew a lease for his own benefit but holds the renewed lease upon a constructive trust for the beneficiaries. The court forbade the trustee to take for himself a renewed term under a lease which he held for the benefit of an infant.
Lord Harcourt LC said: ‘though I do not say there is a fraud in this case, yet he should rather have let it run out, than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease: but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew to cestui que use.’ The benefit of the lease was assigned by decree to the infant and the trustee, subject to indemnity, made to account for profits.
King L said: ‘I very well see, if a trustee, on the refusal to renew, might have a lease to himself, few trust-estates will be renewed to cestuis que use.’
Lord Harcourt LC, King L
[1726] Sel Cas 1 King 61, [1726] EWHC Ch J31, [1726] EngR 954, (1726) 25 ER 223 (C), [1726] EWHC Ch J76
Bailii, Commonlii, Bailii
England and Wales
Cited by:
Cited – Crown Dilmun, Dilmun Investments Limited v Nicholas Sutton, Fulham River Projects Limited ChD 23-Jan-2004
There was a contract for the sale of Craven Cottage football stadium, conditional upon the grant of non-onerous planning permissions. It was claimed that the contract had been obtained by the defendant employee in breach of his fiduciary duties to . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Cited – Warman International Ltd v Dwyer 1995
(High Court of Australia) A fiduciary diverted a business in breach of his fiduciary duty.
Held: ‘The outcome in cases of this kind will depend upon a number of factors. They include the nature of the property, the relevant powers and . .
Cited – FHR European Ventures Llp and Others v Cedar Capital Partners Llc SC 16-Jul-2014
Approprietary remedy against Fraudulent Agent
The Court was asked whether a bribe or secret commission received by an agent is held by the agent on trust for his principal, or whether the principal merely has a claim for equitable compensation in a sum equal to the value of the bribe or . .
Cited – Halton International Inc Another v Guernroy Ltd CA 27-Jun-2006
The parties had been involved in investing in an airline to secure its future, but it was now said that one party had broken the shareholders’ or voting agreement in not allowing further investments on a pari passu basis. The defendants argued that . .
Lists of cited by and citing cases may be incomplete.
Trusts, Equity
Leading Case
Updated: 10 November 2021; Ref: scu.192209
