Nestle v National Westminster Bank plc
Encyclopedia
Nestle v National Westminster Bank plc [1993] 1 WLR 1260 is an English trusts law
case concerning the duty of care when a trustee is making an investment.
died in 1922 and named his widow, two sons and wives and one grandchild as the beneficiaries. The wife got the family home as a life interest and a tax free annuity
. The two sons got annuities between age 21 and 25 and life interests in half the trust with a power to appoint income to their wives and Georgina, the grandchild, got the remainder. In 1922 there was £53,963 and in 1986 when Georgina became entitled, there was £269,203. She claimed that had the fund been invested properly there would have been £1.8m. The trust company had failed to conduct periodic reviews of investments. They invested in tax-exempt gilts
because the sons were domiciled abroad, meaning exemption from inheritance tax.
He emphasised that ‘trustees’ performance must not be judged with hindsight: 'after the event even a fool is wise, as a poet said nearly 3,000 years ago…' and accepted evidence that equities were regarded as risky before 1959. ‘It was only in 1959 that [they became more popular].’
Dillon LJ and Leggatt LJ concurred.
English trusts law
English trusts law is the original and foundational law of trusts in the world, and a unique contribution of English law to the legal system. Trusts are part of the law of property, and arise where one person gives assets English trusts law is the original and foundational law of trusts in the...
case concerning the duty of care when a trustee is making an investment.
Facts
A testatorTestator
A testator is a person who has written and executed a last will and testament that is in effect at the time of his/her death. It is any "person who makes a will."-Related terms:...
died in 1922 and named his widow, two sons and wives and one grandchild as the beneficiaries. The wife got the family home as a life interest and a tax free annuity
Life annuity
A life annuity is a financial contract in the form of an insurance product according to which a seller — typically a financial institution such as a life insurance company — makes a series of future payments to a buyer in exchange for the immediate payment of a lump sum or a series...
. The two sons got annuities between age 21 and 25 and life interests in half the trust with a power to appoint income to their wives and Georgina, the grandchild, got the remainder. In 1922 there was £53,963 and in 1986 when Georgina became entitled, there was £269,203. She claimed that had the fund been invested properly there would have been £1.8m. The trust company had failed to conduct periodic reviews of investments. They invested in tax-exempt gilts
Gilts
Gilts are bonds issued by certain national governments. The term is of British origin, and originally referred to the debt securities issued by the Bank of England, which had a gilt edge. Hence, they are called gilt-edged securities, or gilts for short. The term is also sometimes used in Ireland...
because the sons were domiciled abroad, meaning exemption from inheritance tax.
High Court
Hoffmann J held that there was no breach of the duty of care. He pointed out that,Court of Appeal
Staughton LJ held there was no breach of trust. Despite this the trust company fell ‘woefully short of maintaining the real value of the fund, let alone matching the average increase in price of ordinary shares’. The company had not acted ‘conscientiously, fairly and carefully’ and there was ‘not much for the bank to be proud of in its administration of the… trust’.He emphasised that ‘trustees’ performance must not be judged with hindsight: 'after the event even a fool is wise, as a poet said nearly 3,000 years ago…' and accepted evidence that equities were regarded as risky before 1959. ‘It was only in 1959 that [they became more popular].’
Dillon LJ and Leggatt LJ concurred.