FRANCIS GEORGE ARTHUR ROMER YOUNGHUSBAND GEORGE OSWALD YOUNGHUSBAND ANN MARGARET MADELEINE BROADBENT (Married Woman) and ANTHONY ARTHUR DAVID YOUNGHUSBAND v Plaintiffs [1963] EWCA Civ 5

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL.

From Mr JUSTICE WILBERFORCE.

[1963] EWCA Civ 5

Case No Case No. 1958. P. No. 2540.

Venue Royal Courts of Justice,

Between

FRANCIS GEORGE ARTHUR ROMER YOUNGHUSBAND GEORGE OSWALD YOUNGHUSBAND ANN MARGARET MADELEINE BROADBENT (Married Woman) and ANTHONY ARTHUR DAVID YOUNGHUSBAND

Plaintiffs

COUTTS AND COMPANYDefendants

Before

Lord Justice Willmer

Lord Justice Harman

Lord Justice Upjohn

Mr WILLIAM A. BAGNALL, Q.C., and Mr STEWART L. NEWCOMBE (Instructed by Messrs Bird & Bird) appeared on behalf of the Appellants (Plaintiffs).

Sir EDWARD MILNER HOLLAND, Q.C., and Mr R. COZENS-HARDY H0RNE (instructed by Messrs Charles Russell & Co.) appeared on behalf of the Respondents (Defendants).

Date 29 May 1963

LORD JUSTICE WILIMER :

The

[1]Judgment which I am about to read is the Judgment of the Court, which deals with and resolves all the points which have been argued except one, and in relation to that one there is, unhappily, a disagreement between the members of the Court, and on that one point we will deliver separate Judgments when I have read the Judgment of the Court. This is indeed a sorry story, and one which reflects no credit at all on any of the parties to it. When Miss Pauling, the plaintiffs' mother (and we shall refer to her throughout as "the mother") married their father (to whom we shall refer as "the Commander) she was a young lady of considerable fortune. She was marrying a naval officer who had almost no fortune at all, and by the wisdom, no doubt, of her parents, it was decided to vest her fortune in trustees of the trusts of a marriage settlement. The whole object of this transaction was to prevent the use (or rather misuse) of the lady's capital for the very purposes for which in fact it had been very largely frittered away, that is, in the ordinary living expenses of the family. Apart from a power to raise £10,000 out of the settlement (which had been exercised long before the history of this action starts) it was intended that the mother should have nothing more than the income during her life, and she was restrained from anticipating that. In June of the year 1948 the trust funds were intact, and amounted to over £70,000. By June 1954 the Bank had raised and paid away over £29,000 from the capital of these funds in purported exercise of a power of advancement, and there was nothing whatever left to show for it. How had this melancholy event happened? It was in part due to a misunderstanding of a power of advancement contained in the settlement, which was in rather unusual form, and later on to its plain misuse, but also was largely due to the charm of manner and powers of persuasion of the Commander. The learned trial Judge has found the Bank liable to replace nearly £15,000 as having been expended in breach of trust for which they can be compelled to account. Both parties appeal. The relevant transactions over this period of six years are many, and involve each of the four children of the marriage. Different questions arise in respect of most of these transactions, and accordingly we propose in this Judgment first to set out the basic facts, then to state our view of the legal questions that have been argued before us, and finally to deal seriatim with the facts of each advance and to apply the law accordingly. The plaintiffs, the children of the Commander and the mother, are:(1) A son, Francis, born on the 15th October, 1920;

(2) A son, George, born on the 11th October, 1925;

(3) A daughter, Ann (now Mrs Broadbent) born on the 24th March, 1928;

(4) A son, Anthony, born on the 15th June, 1930. As already stated, the marriage settlement was of funds supplied entirely by the mother. The defendants, Coutts & Company (to whom we shall refer as ''the Bank") have all along been the sole trustees. Apart from the special power to raise £10,000 for the mother's use which we have already mentioned, the settlement followed the usual lines of such an instrument. The mother had the income of the trust fund for life without power of anticipation and after her death her husband was to have an annuity of £500 a year. Provision was also made for the mother to have power to appoint a life interest in half of the trust fund to any surviving husband. Subject thereto, the trust fund was to be held in trust for the children or remoter issue of the mother, whether by the intended or any future marriage, in such shares as the mother might appoint, and in default of appointment the children were to take in equal shares on attaining the age of twenty-one, or being female marrying under that age. Clause 11 of the settlement, under which the Bank purported to act in making the advances complained of, provided as follows:

"It shall be lawful for the trustees at any time or times after the death of the wife or In her lifetime with her consent in writing to raise any part or parts not exceeding in the whole one-half of the then expectant or presumptive or vested share of any child or more remote issue of the wife in the said trust premises under the trusts hereinbefore contained and to pay the same to him or her for his or her own absolute use or to pay or apply the same for his or her advancement or otherwise for his or her benefit in such manner as the trustees shall think fit ..."

. By clause 14 power was conferred on the trustees during the life of the mother, and with her consent in writing, to lay out a sum not exceeding £10,000 in the purchase of a house as a residence for the wife, and in its decoration, repair or improvement, provided that such house was situated in England, Wales, Scotland or Ireland. Lastly, provision was made for the Bank to act as bankers in respect of the trust funds without being liable to account for profits, and to be remunerated for their services in accordance with their published scale of fees. Messrs Charles Russell & Co. were nominated as solicitors to the trust with permission to the Bank to consult its own solicitors in any case in which it should think fit. These were Messrs Parrer & Co, It should at this stage be stated that at all material times the mother had an account with the Bank. The Commander did not have any separate bank account with the Bank, but he was authorised to draw on the mother's account, and it appears that it was he who largely controlled it. During most of the time with which we are concerned this account was substantially overdrawn. In addition to the funds subject to the settlement, the mother also enjoyed a small life interest under the will of her deceased father. There were also certain shares standing in the joint names of the Commander and his mother. Apart from these small additional sources of income, the family were wholly dependent on the income derived from the marriage settlement. The evidence shows that the family were quite unable to adapt themselves to the changed conditions of life after the last war, and expected to continue on the scale of life suitable between the wars, with the result that the available income was always overspent so that the Commander was always hard up for money. Now as to the questions of law involved in this appeal. First as to the true meaning and intent of the power in clause 11. This power has been accepted as containing two limbs, first a power with the consent of the mother in her lifetime to raise any part or parts not exceeding in the whole one-half of the expectant, presumptive or vested share of any child, and to pay the same to him or her for his or her absolute use, and, secondly, the more usual power to pay or apply the same for his or her advancement or otherwise for his or her benefit in such manner as the Bank might think fit. It was argued that the power contained in the first limb was wider than that in the second, although it was conceded on both sides that in both cases the power was fiduciary. Having regard to the very wide interpretation given to the statutory power (which approximates to the second limb in Pauling's Settlement) by their Lordships' House in re Pilkington (1962 volume 3 Weekly Law Reports, page 1051) we cannot see that the ambit of the first limb of the power substantially differs from that of the second limb. But, as all the advances were made in purported exercise of the first limb, we must examine the argument upon it. Being a fiduciary power, it seems to us quite clear that the power can be exercised only if it is for the benefit of the child or remoter issue to be advanced or, as was said during argument, it is thought to be "a good thing'' for the advanced person to have a share of capital before his or her due time. That this must be so, we think, follows from a consideration of the fact that the parties to a settlement intend the normal trusts to take effect, and that a power of advancement be exercised only if there is some good reason for it. That good reason must be beneficial to the person to be advanced it cannot be exercised capriciously or with some other benefit in view. The trustees, before exercising the power, have to weigh on the one side the benefit to the proposed advancee, and on the other hand the rights of those who are or may hereafter become interested under the trusts of the settlement. We reject Sir Milner Holland's argument on behalf of the Bank to the effect that an advancement can be made under the first limb which is not for the benefit of the advanced person. Furthermore, it is clear that the power under the first limb may be exercised, if the circumstances warrant it, either by making an out and out payment to the person to be advanced, or for a particular purpose specified by the trustees. Thus in argument an example was given that when George was called to the Bar, the trustees might have quite properly advanced to him a sum of capital quite generally for his living expenses to support him while starting to practice provided they thought that this was a reasonable thing to do, and that he was a type of person who could reasonably be trusted to make proper use of the money. On the other hand, if the trustees make the advance for a particular purpose which they state, they can quite properly pay it over to the advancee if they reasonably think they can trust him or her to carry out the prescribed purpose. What they cannot do is to prescribe a particular purpose, and then raise and pay the money over to the advancee leaving him or her entirely free, legally and morally, to apply it for that purpose or to spend it in any way he or she chooses, without any responsibility upon the trustees even to inquire as to its application. Failure to appreciate this was one of the root causes of the trouble, for in the first opinion of counsel in 1948 (to which we shall refer later) he advised that the trustees could make an advancement out and out for the purpose of a purchase of a house in the Isle of Man, but he said this purchase "depends on a voluntary act by the children, and they should, I think, be separately advised on this point. So far as the trustees are concerned, they will be paying the money to the children for their own absolute use". This, we think, was the wrong approach. At that time both Francis and George were studying at university, and it was not suggested that they required any sum for their maintenance there; the only possible justification for advancing the very substantial sum of £5,000 to each of the two boys, one of them twenty-seven and the other just twenty-two, who had no other possible proper use for this money, was to invest it in a house in the Isle of Man as the settlement powers were insufficient, and the advancement could be justified only for that purpose. This error was perpetuated later by the childrens' solicitor, who got into the habit of advising them that, although purported advancements were, for example, for the repair of a house or for the purchase of furniture, they were sums which the children could "blue", for example, on a horse. This was wrong and misleading advice. If money was advanced for an express purpose by the Bank, the advanced person was under a duty to carry that purpose out, and he could not properly apply it to another. We are not concerned with the question whether in such circumstances the Bank could recover money so misapplied, but this much is plain, that if such misapplication came to their notice, they could not safely make further advances for particular purposes without making sure that the money was in fact applied to that purpose, since the advancee would have shown him or herself quite irresponsible. It would be their duty to proceed on future occasions on behalf of the particular child under the second limb of the power. The first question, therefore, that arises in relation to each of the advances, which we shall consider seriatim, is whether there was a proper exercise of the power under either limb. No question arises as to the consent of the mother, for that was given in every case. If the advance were proper in any particular case, the question of the children's consent, although adult, would not arise; for as has been made quite clear in re Pilkington (supra) as there is no express provision in clause 11 requiring the adult beneficiaries' consent to the advance being made for his or her benefit, it would not be necessary to obtain that consent, though no doubt any trustee intending to advance an adult beneficiary would normally do so only with his consent, and probably only at his request. But, if any advance were an improper exercise of the power in clause 11 (and they all were in the learned Judge's view) what is the position? Prima facie , having improperly exercised the power, the Bank would be guilty of a breach of trust and must replace the money misapplied. Now Mr Bagnall, for the plaintiffs, has made it clear that in this action each beneficiary is suing to recover only the advances purported to have been made to him or her, or for his or her benefit. This is not a case where any beneficiary is seeking to compel the trustees to replace trust funds wrongly applied, or paid away to some other beneficiary. Had that been the case, different considerations would, no doubt, have applied. But in the circumstances of this case it is clear to us that if the Bank can establish a valid request or consent by the advanced beneficiary to the advance in question, that is a good defence on the part of the Bank to the beneficiary's claim, even though it be plain that the advance was made in breach of trust. But (and this is really the second question) this consent or request, Mr Bagnall submitted, must be the spontaneous act of the child; and it has been alleged in the pleadings that in the circumstances of this case each of the children at the time of the respective advances to them must be presumed to have been under the undue influence of their parents as they had but recently attained full age ; therefore, he says, their requests and consents cannot be relied upon by the Bank. The doctrine of undue influence, much discussed before us, merely arises out of the fact that, while equity approves of gifts by a father to a child, and therefore invented the doctrine of presumption of advancement, so on the other hand it dislikes and distrusts gifts by a child to a parent, and therefore invented the presumption of undue influence. Both these presumptions merely mean, in our opinion, that in the absence of evidence, or if the evidence on each side be evenly balanced, in the first case equity will presume that the parent who puts property in a child's name intends to make a gift or give a benefit to the child, while on the other hand money or property passing from the child to the parent cannot be retained by the latter because it is assumed that so unnatural a transaction would have been brought about by undue use of the natural influence that a parent has over a child, and of the filial obedience which a child owes to his parent. Both presumptions may be rebutted; each is in truth a convenient device in aid of decisions on facts often lost in obscurity, whether owing to the lapse of time or the death of the parties. Where the presumption of undue influence exists, a gift by a child cannot be retained by a parent unless he or she can show first that the gift was the spontaneous act of the child; secondly, that the child knew what his rights were; and thirdly it is desirable, though not essential, that a child should have independent, and if possible professional advice, before making a gift. "The court", said Lord Justice Cotton in A Hoard v. Skinner (1887 volume 36 Chancery Division, page 145, at page 171) "sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor's will". The whole question is fully discussed in the leading case of Hugenin v. Baseley (volume 14 Vesey, page 273) and the notes to that case in White and Tudor, Eighth Edition, volume 1, at pages 259-302. The result is well stated by Mr Justice Parwell in Powell v. Powell (1900 volume 1 Chancery Division, at page 246):

"A man of mature age and experience can make a gift to his father or mother because he stands free of all over-riding influence except such as may spring from what I may call filial piety; but a young person (male or female) just of age requires the intervention of an independent mind and will, acting on his or her behalf and interest solely, in order to put him or her on an equality with the maturer donor who is capable of taking care of himself"

. The question of the duration of the presumption has also been much discussed. Lord Cranworth considered that it should be taken as a period of a year after the child attained twenty-one; see Smith v. Kay (volume 7 House of Lords Cases, page 750 at page 772) but this has not been received with approval. In our judgment the question is one of fact and degree. One begins with a strong presumption In the case of a child just twenty-one living at home, and this will grow less and loss as the child goes out in the world and leaves the shelter of his home. Nevertheless, the presumption normally lasts only a " short" time after the child has attained twenty-one ; see Lancashire Loans Limited v. Black (1934 volume 1 King's Bench Division, page 380, per Lord Justice Greer at page 419) and it seems impossible and undesirable to define it further. A married daughter with a separate establishment of her own may be emancipated directly she attains twenty-one, whereas a spinster who has never left home might be able to rely on the presumption for a longer period. We reject, however, Mr Bagnall's submission that this presumption continues indefinitely until it is proved that the undue influence has ceased to exist. That is to confuse a case of actual undue influence with the presumption. On the other hand, it may be difficult for a spinster daughter living at home to prove a case of actual undue influence for many years after she has attained the age of twenty-one. In the present case it is important to remember that only the presumption is relied on; no actual undue influence is alleged. Then Sir Milner argued that trustees who have obtained no benefit from payments induced by undue influence could not be hold liable, and that the only person who could be sued would be the parent presumed to have exercised the undue influence, or any person (short of a bona fide purchaser for value) who received the benefit of the payments. On the other hand, Mr Bagnall argued that the Bank were in the position of volunteers, and therefore could not escape the consequences of dealing in breach of trust with a beneficiary presumed to have been actuated by the undue influence of a third party; they wore at risk just as any other volunteer who takes the property acquired in breach of trust. In the circumstances of this case, we do not think it necessary to express a concluded opinion upon this matter except to say that we reject Sir Milner Holland's argument that the Bank cannot be made liable unless they received some benefit from the breach of trust. It seems to us in principle that a trustee dealing in breach of trust with a beneficiary who has just attained the age of twenty-one years must realise the danger that such beneficiary may be acting under the influence of a parent. We do not see how a trustee can possibly escape the consequences of that knowledge. Some support for this view is to be found in King v. King (volume 1 De Gex & Jones's Reports, page 663) a case of a suspected fraud on a power. Without expressing a final opinion, we think that the true view may be that a trustee carrying out a transaction in breach of trust may be liable if he know, or ought to have known, that the beneficiary was acting under the undue influence of another, or may be presumed to have done so, but will not be liable if it cannot be established that he so knew, or ought to have known. That is sufficient for the purposes of the present case, for, of course, the Bank knew very exactly the ages of each of the children, and they knew further that as each child attained twenty-one, that child received advances from the Bank which went straight into the banking account of the mother. Indeed, in Ann's case plans were made to effect this unhappy result even before the child attained twenty-one. Accordingly, it seems to us clear that if it can be established that the presumption exists in any given case, the Bank are fixed with notice of it and cannot rely on any consents given under such influence. The Bank also rely for relief from the consequences of any breach of trust upon section 61 of the Trustee Act 1925. At this stage all we propose to say is that it would be a misconstruction of the section to say that it does not apply to professional trustees, but, as was pointed out in the Judicial Committee of the Privy Council in National Trustees Company of Australasia Limited v. General Finance Company of Australia Limited (1905 Appeal Cases, page 373 at page 381) "Without saying that the remedial provisions of the section should never be applied to a trustee in the position of the appellants, their Lordships think it is a circumstance to be taken into account". Where a banker undertakes to act as a paid trustee of a settlement created by a customer, and so deliberately places itself in a position where its duty as trustee conflicts with its interest as a banker, we think that the court should be very slow to relieve such a trustee under the provisions of the section. We propose to deal with the bank's plea of the Limitation Act 1939 and the pleas of laches, acquiescence and delay when we have considered the detailed transactions. It only remains to state that the question of law upon which this case was reported in the court below, re Pau l i ng's Settlement Trusts (1962 volume 1 Weekly Law Reports, page 86) has not been argued before us, and many of the cases there cited have not been cited to us. Mr Bagnall, however, accepts as accurate the proposition which is contained in the paragraph in the middle of page 108 of the report. We express no opinion on it. We now deal with the impugned transactions seriatim. Up to 1947 the family lived in a large country house in Gloucestershire purchased with marriage settlement funds under the power contained in clause 14 already mentioned. When it became necessary, owing to financial stringency, to sell this house, the Commander conceived the idea of purchasing a house in the Isle of Man, one of his principal objects being to reduce his tax liability. It was then discovered that the purchase of a house in the Isle of Man was not authorised by the terms of the marriage settlement, and this led to the Commander taking advice from Messrs Charles Russell & Co., who in turn sought counsel's opinion. Counsel confirmed the view that there was no power under clause 14 of the settlement to purchase a house in the Isle of Man, but he advised that the desired object could possibly be achieved in a different way by invoking the power of advancement to the children of the marriage under clause 11. By this time the two eldest children, Francis and George, were over twenty-one, and counsel advised that if they were agreeable advances could be made to them of sums sufficient to enable a house to be bought, which they could then settle voluntarily on their mother for life with remainder to themselves. Counsel emphasised, however, that this could be done only by a voluntary act on the part of the children, and he recommended that they should be separately advised. We have already criticised counsel's approach to clause 11. Francis and George proved to be agreeable to the course suggested, but both disclaimed any desire to be separately advised. Accordingly, on the 10th January 1948 the mother requested the Bank in writing to raise up to £10,000 from capital, and pay the same as might be directed by her two sons, Francis and George. Francis and George joined in signing a memorandum dated the 12th January 1948, the material part of which was in the following terms:

"We, the undersigned, Francis George Younghusband and George Oswald Younghusband, hereby authorise and request you to apply such sums as may be made available for our advancement under Mrs Younghusband's request to you dated 10th January 1948 in purchasing a property in the Isle of Man, which it is our intention to settle in accordance with the suggestion contained in the opinion of counsel dated the 12th December 1947 in a settlement in which you are to be the trustees''. In due course the Commander found a house called "

Oakhill Lodge" in the Isle of Man, which was duly purchased at auction on the 4th August 1948 for £8,450 and became the family home for the next seven years. The Commander could not boar to see such a valuable asset as a house on which spending money could be raised disappearing into a settlement on the mother and her two children. At an early stage, long before the house was purchased, the Bank, on the Commander's instructions, had told Charles Russell & Co. that It was not intended to settle any of the money to be advanced; yet this change of plan, strangely enough, brought forth no protest, or even comment, from Bank or solicitors. But worse was to follow. On the 22nd October 1948 the Bank wore writing to Francis about completion of the purchase in the joint names of "you and your brother". Yet on the 26th October they wrote this to the Isle of Man solicitors acting for them in connection with the conveyances "Commander and Mrs Younghusband's marriage settlement. We are favoured with your letter of the 23rd of this month, reference ADK/MT, add in reply beg to say that Oakhill is being purchased with money being taken out of the above-mentioned trust and placed at the disposal of the two eldest sons of Commander and Mrs Younghusband for their advancement under the powers given to us by the settlement. You will appreciate, therefore, that the house will not have to be convoyed to us. It is on the instructions of the two sons that the remittance of £7,605 is to be made to you to enable you to complete the purchase, but Commander Younghusband has told us this morning that it is their wish that the conveyance should be in favour of himself and Mrs Younghusband" . Not one word of protest was raised by the Bank at this complete reversal of the scheme envisaged by counsel. They quite calmly applied the money raised for the benefit of the sons in the purchase of a house for the Commander and the mother. They never obtained the consent of the sons to this, and the evidence was that the sons never did consent. The subsequent history of the house was that shortly afterwards it was mortgaged by the Commander for £5,000, which sum, was apparently spent as income. When financial disaster overtook the Commander in 1955 (as a result of which he was made bankrupt in the Isle of Man) the house was sold for loss than the amount of the mortgage, so that in the event Francis and George lost the whole of their £8,450. Making all due allowance for the fact that the Bank may have misunderstood the effect of clause 11, it does not explain their complete laxity in permitting this transaction to go forward. Even at this early stage they wholly failed to exercise any powers or duties as trustees, and thought only of themselves as bankers to the Commander and the mother. We doubt whether the original advance, if counsel's advice had been carried out, would have been a proper exercise of the power, but no harm could come of it for the new settlement would replace the old, and the position would be safeguarded. But having regard to the way in which the transaction was in fact carried out, they have no defence to the claim to replace this sum, and it is not surprising that the contrary was hardly argued. Any relief under section 61 is out of the question. This sorry tale of the house does not even end there. On the same day on which the deposit was paid is found the first payment made direct into the mother's account, then heavily overdrawn. This was a sum of £1,000. The payment arose out of advice given on the 10th June 1948 by the Bank's solicitors to the effect that it would be proper, in addition to advancing money on the house (upon the footing, of course, that it would be settled on the sons) to advance a sum for the purpose of furnishing it. The first mention of amount emanated from the Commander, who fixed it arbitrarily at £1,000, a sum to which he obtained his sons' assent on the 18th August. The trustees accepted this without inquiry, no doubt upon the footing that the house would be conveyed to the sons and their consent was given only on that footing. That assumption was still valid on the 13th September 1948 when the sum was credited to the mother's account. The learned Judge found that, this being so, there had been a valid consent, and the Bank was excused. We do not accept this. This payment was bound up with the question of the house itself. Once the Bank realised there was to be no settlement, it was the duty of the Bank to reconsider the whole project. Then, when the Bank realised that the house was not going to belong to the boys, but to their parents, the impropriety of purchasing furniture with the boys' money became obvious. Yet they took no steps to remedy the situation. The Bank never even took any steps to see whether any furniture was in fact purchased, and none (or almost none) in fact was. All that happened was that the mother's overdraft was reduced by £1,000, The Bank was in a delicate position. Their interest as bankers conflicted with their duties as trustees, as they had indeed shown themselves well aware in their letter earlier in the same year. The Bank acted in plain breach of their duty most unreasonably, and no question of relief under section 61 of the Trustee Act 1925 can arise. The appeal is allowed so far as this advance is concerned. Long before the purchase of the house was completed the Commander (inspired apparently by the reasoning of counsel's opinion) conceived the idea that the powers of advancement conferred by clause 11 of the settlement could be used for the purpose of raising further sums up to one-half of each child's presumptive share in the capital of the trust fund, which sums could then be used for paying off Mrs Younghusband's overdraft, and for living expenses. It was calculated that each child's presumptive share, allowing for a reserve to meet death duties in the event of Mrs Younghusband dying within five years, would be about £14,000. The Commander therefore embarked upon a plan for raising approximately £7,000 to be advanced nominally to each child on attaining the age of twenty-one. With this object in view, the Commander early in 1948 suggested to the Bank that further sums be advanced to Francis and George up to a total of approximately £14,000 with the objects of paying off (a) a loan of £2,600 which the Bank, as trustees of another settlement (by a Mrs Hodson) had advanced to the mother, and (b) the overdraft on the mother's account, which then stood at about £3,000. The Hodson loan was secured by the mother's life interest under her father's will and by four policies on her life to a total value of £3,000, the surrender value of which was then about £650. The Commander's first letter on the subject is characteristic and discloses the whole schemes "(2) W.R.T. yr. RSC27 of 21/1 for which many thanks. Would you be kind enough, in that case, to get a memo, signed by our two sons along the lines of the proposed draft attached herewith? Otherwise, as I pointed out in my 17/1, a house we may want to buy might well get sold before we could pay a deposit. We would, of course, get legal advice here before signing a contract. To satisfy a vendor that we were entitled to sign one, I suppose we would need a statement from you that the £10,000 was available? (3) As this money can be advanced to our sons unconditionally (which I hadn't realised) wouldn't it be advantageous for all concerned to advance them the full amount possible (£7,000 each, I think you said in a previous letter) and use the balance not needed for the house to pay off first the Hodson loan of (I think) £3,000, and second, as much as possible of our overdraft of £3,000 ? From investments yielding about 3 per cent we are now paying 5 per cent on the loans plus, in the first case, 3 per cent life insurance, (4) If you agree, would you please send memos, to effect this to my wife and sons for their signatures ? If you cannot do so without further legal advice, it might be as well to await our arrival before asking for it so that we can make sure that we narrow the question as much as possible to avoid unnecessary charges". This letter led to another lamentable and indeed inexplicable transaction. The Bank did not at first view these suggestions with much sympathy, and expressed doubt as to whether this would be a proper exercise of their power under clause 11 of the settlement. They took advice from Messrs Charles Russell & Co., whose advice was no more encouraging. The Commander, however, was importunate and apparently very persuasive. He dropped for the time being the suggestion of making advances to Francis and George to enable them to pay off the mother's overdraft, but he continued to press his suggestion for raising money to pay off the Hodson loan. In due course Messrs Charles Russell & Co. advised that, subject to the Bank being prepared to exercise their discretion, this might be a proper exercise of the power conferred by clause 11 provided that Francis and George received an adequate quid pro quo . What was envisaged was (a) that the four life policies should be assigned absolutely to Francis and George ; (b) that the mother should execute a covenant to maintain the premiums on the policies; and (c) that the mother should also execute a covenant to pay a fair rate of interest on the money advanced. This would result in Francis and George receiving £3,000 on the death of the mother in return for the £2,600 advanced, as well as having an immediately income from the payment of the interest. Messrs Charles Russell & Co. further recommended that Francis and George should be separately advised. In pursuance of this, Mr Burrell of Messrs Farrer & Co. was instructed on their behalf. He interviewed Francis and George, explained the suggested arrangement to them, and satisfied himself that they wished it to be carried out. He advised, however, that in addition to the other requirements, the mother should execute a codicil to her will giving a legacy to Francis and George of such an amount as would cover the death duties payable on the policies in the event of her dying within five years. The scheme as advised by Charles Russell & Co. might at a pinch be justified as an exercise of the power under clause 11, though we cannot understand how a charge on the mother's life interest under her other settlement was omitted, but as carried out the transaction was disastrously different. The necessary assignment was drafted by Messrs Charles Russell & Co. and was in due course executed by the mother, who also made a codicil to her will. Whether or not due to an oversight, the assignment as drafted and executed contained no express covenant on the part of the mother either to maintain the premiums on the policies or to pay any interest to Francis and George on the amount advanced. Mr Burrell, however, approved the draft on behalf of the boys without ever consulting them. Accordingly, in due course, at the request of the mother, and with the consent of Francl3 and George, a sum of £2,600 was raised and paid over to the mother, who applied it for paying off the Hodson loan. It is important to observe that although legal advice was taken in connection with this transaction, and although Francis and George were separately advised, the transaction as actually carried out differed materially and to the disadvantage of Francis and George from that which had been advised and explained to them. All the sons got in return for the expenditure of £2,600 extracted from their expectancies and paid to the Bank in release of their mother's debt were policies with a surrender value of £650, and probably an implied covenant to keep up payment of the premiums. The payment of this sum was a clear breach of trust. In this case the sons did have separate advice, but what they approved was the proposed, not the actual, transaction, of which latter they never knew, and to which they never consented. How their solicitor came to approve the assignment, we cannot understand. He completely failed in his duty to his clients. The boys never saw it, and though expressed to be parties, never executed it; this was, no doubt, unnecessary. Yet Mr Burrell wrote this letter to the Bank; "Dear Sirs, Commander and Mrs Younghusband's marriage settlement. We enclose a copy of the letter which Mr Fletcher, of Messrs Charles Russell & Co., has written to Mr Burrell. We have now satisfied ourselves that, so far as the sons are concerned, this matter is in a satisfactory state, and therefore we should be obliged if you would complete it with Mr Fletcher when he makes an appointment to do so. We are, dear sirs, Yours faithfully, Farrer & Co." A less satisfactory state could hardly be imagined. Charles Russell & Co. equally failed in their duty to the Bank to see that the transaction was carried out in accordance with the advice they had given. As carried out, the transaction plainly could not be justified as an exercise of the power under clause 11, and, of course, the Bank cannot hide behind the negligence of their own advisers for whose neglect they must, as between them and their beneficiaries, assume full responsibility. The payment being, therefore, a plain breach of trust, the fact that the boys were badly advised is no defence for the Bank. The Bank must show that the boys consented to the breach of trust; this on the evidence they cannot do. The members of the court differ, however, upon the question whether the Bank should be relieved under section 61 of the Trustee Act, and if so to what extent. On this point alone, therefore, separate Judgments will be delivered. LORD JUSTICE UPJOHN. Later in 1948 the Commander returned to the suggestion of raising another £2,000 so as to bring the total advanced to Francis and George up to approximately £14,000. The Bank was not at first prepared to make this further advance, and in this it was supported by the advice of Messrs Charles Russell & Go. The Commander, however, continued to press his request, and alleged that the money was needed to pay for improvements to the recently purchased house in the Isle of Man. At the request of the Bank, he promised to submit accounts in respect of the improvements, showing what had been or had to be paid, but in fact this was never done. Eventually, at an interview which took place in April 1949, when the Commander was on a visit to London, he prevailed upon the Bank to let him have a form for Francis and George to sign, or at least instructions as to what they should say in order to justify the proposed advance of £2,000. He is recorded as having informed the Bank that Francis and George would sign whatever was necessary. This remark is highly relevant to the question (which we shall consider later) as to the extent to which Francis and George at this date could be said to be emancipated from parental influence. The upshot was that on or about the 29th April 1949 Francis and George signed a document drafted by the Bank in the following terms with reference to the further sum of not exceeding £2,000 which you are raising in accordance with the terms of the above-mentioned settlement for payment to us in equal shares by way of advancement, we hereby authorise and request you to place the money when raised to the account in your hooks of Mrs R, Violet Younghusband. We fully appreciate that the money in question has been or is being used for the purpose of making improvements to the property in the Isle of Man "belonging to Mrs Younghusband" , As a result, £2,000 was raised and on the 13th May 1949 paid into the mother's account. It will be seen that in this case there was no pretence that the money raised was being used for the benefit of Francis and George. Furthermore, it will be observed that this was not a request "by the sons to make an advance, but a consent to a transaction already decided upon by the Bank. The document emanates from the Bank and was forwarded to the father by them with a view to him procuring the signatures. Its object was to protect the Bank against what we cannot help thinking they knew very well to be a breach of trust. The sons had no separate advice. Nevertheless, they were of age, and competent to make their parents a present if they really wished, and the only question is whether the document we have just read was procured by the presumed undue influence of the father. We have already discussed the law on this matter, and the real question is whether on the facts the presumption applies to this case. If it does, the Bank has made no attempt to rebut it. It seems to us that the whole picture must be looked at, and it is from the documents that a fairly clear view can be had. It does not appear that the mother, the source of the money, was more than a cypher willing to sign whatever her husband put before her. He controlled the family fortune by his right to draw on the family banking account, and he assumed throughout that what he says will go. As we have already said, he was the originator of all the transactions complained of here. His method was to cajole the Bank into going as far as they thought they dared, and then to prepare what he called "chits" (or sometimes got them prepared by the Bank) and send them to his wife or the child or children concerned for signature. So far this looks like a typical case where undue influence ought to be presumed, but the Judge, who saw the witnesses, was chary of acting upon the presumption. The impression he got was of a united family determined to extract from the Bank by hook or by crook the money necessary to continue its extravagant way of life. On this view of it, the passage we have quoted about the sons being willing to sign anything bears a less sinister aspect. At the time of this advance the son George was twenty-three years old. He had done his military service, and was up at Cambridge. The Judge thought him an exceptionally able young man, well acquainted with his rights, and able to take care of himself. He had no separate advice about this £2,000 advance, but he had been advised about the Hodson loan transaction, and in the course of receiving the explanations then offered he must have realised what the power was which the trustees were purporting to exercise. Indeed, the fatal opinion of counsel advising on the possibility of using clause 11 to purchase a house in the Isle of Man was, on the evidence, familiar not only to George, but to Ann. The Judge held that he was emancipated from parental control, and well enough acquainted with his position to make his consent to this advance binding upon him, and this court cannot reverse that finding, depending, as it does, so much upon the demeanour of the witness. The case of the other son, Francis, is quite different. He was at this time twenty-eight years old, and was apparently living for the most part with his grandmother, so that he was removed from immediate parental control. On the other hand, we now know that he was a schizophrenic. This diagnosis had been made in 1940 when he found one day of life in the Air Force altogether too much for him, and was repeated by a doctor who saw him in 1951. He was not called by either side, it being agreed that his memory was not at all to be trusted. Consent to this, as to other transactions in which he was involved, was written out and sent to him by his father. There is no letter from him anywhere in the correspondence. No representative of the Bank ever saw him. He was obviously left purposely in the background. On the other hand, he was capable of teaching in a boys' school, which he did for two years towards the end of the war, and was accepted for entry to Edinburgh University after the war, where also he continued for two years as a student. Further, when he went with his brother to be advised over the Hodson loans the partner in Farrer & Co. who saw him thought him capable of understanding the transaction. Moreover, it has never been alleged that he was at any material time incapacitated from contracting or conducting business affairs by reason of his mental health, though we cannot think that if the Bank had known of his history of ill health, they would have acted on the consents he returned signed to his father. But the Bank did not know the facts. We have considered anxiously whether, before making an advance, they should have made some inquiry into his circumstances. It Is alleged in the particulars of the statement of claim (paragraph 10) that the law presumes undue influence to exist between a person suffering from mental Ill-health and the person with whom he resides but in the end Mr Bagnall rightly abandoned this plea, for there is no such presumption though actual undue influence may not be difficult to prove. The presumption exists only as to the medical adviser. On the whole, we do not feel able to say that the presumption of undue influence must be held to exist between Francis and his parents having regard to his age and his absence from home, and we conclude that the Bank were not bound to make inquiries as to his state of mind or fitness as an object of the power they were affecting to exercise. Accordingly, though this was the plainest breach of trust, we agree with the learned Judge that the Bank have a good defence, for they obtained consents from the two children concerned, and they were emancipated. The completion of this transaction exhausted the amount which could be raised for the purpose of advancement to Francis and George. The next victim on the list was the daughter Ann. Even before she attained twenty-one in March 1949, her father was looking about for ways of spending her money, and broaching the subject to the Bank. He very soon seems to have concluded that, having acquired a country residence at the expense of his sons, it would now be a good plan to get a town house at the expense of his daughter. It is indeed fortunate for her that the proposed house, which was in Chelsea, was put into her name, probably to preserve the fiction that the parents were living in the Isle of Man. The Commander's campaign began in February of 1949, and the proposal for a Chelsea house which he found first emerged on the 14th March, his daughter being still an infant. The trustees had taken the advice of their solicitors as to their power of advancement, and had received the Delphic advice that it was not "qualified in any way". The solicitors added that the young lady should be separately advised. The Bank seems to have accepted without any qualms the Commander's proposal that the daughter's money should be used to buy the Chelsea house of his choice as a residence for the family. Why the Bank should entertain this proposal passes our comprehension. The girl was in her first year at Oxford, and there was no reason at all why her expectant share should be spent in buying a house and furnishing it for her family's use. A family in these comparatively straightened circumstances had no justification for having two houses. This project, in our judgment, was clearly an improper use of the power made in order to suit the father, and without any proper regard to the benefit of the daughter. Having regard to her age, it is clear that the presumption of undue influence applies to this transaction. She, however, was anxious to embark on this speculation. The house apparently was in a semi-ruinous condition, and was not a purchase on which trustees could properly have laid out trust money. They had power to buy a house out of capital, but this expedient was never even considered, again for fiscal reasons. As we have said, Ann was luckier than her brothers, for the purchase was to be in her name, and she received separate advice by a solicitor who saw to it that the conveyance to her was properly concluded. A member of his firm also gave her excellent advice against the transaction which she chose to ignore. As a result, sums amounting in the whole to £4,789 were applied in the purchase and repair and decoration of this house. Luckily for the Bank, property in Chelsea of whatever sort has appreciated very much in value. When Ann married in the year 1952 the house became in truth hers, and she has since disposed of it to advantage and recognises that, having had the money once, she cannot claim it again. This sum, however, did not exhaust her expectant share of £7,000, and under her father's influence a further sum of £3,260 was advanced to the father or the mother nominally for the further improvement and furnishing of the Chelsea house, but in fact spent on the Isle of Man house, or used to support her mother's overdraft. This sum Ann claims from the Bank in the action. It is not at all easy to follow the sequence of events on this point. It seems plain enough that the Bank, after refusing to entertain the purchase of the Chelsea house, were talked into it by the Commander. In March they informed the father and Ann that they would not entertain the matter, but in the same month (and in spite of advice from their own solicitors against it) they changed their mind and agreed to pay for the price of the house and up to £1,000 for repairs. The first mention of furniture, apart from decorations, comes in a memorandum of the 21st March of an interview with the Commander which shows that he asked for an additional £1,000 to cover furniture. It does not appear when this was assented to, but apparently it was, for in September a sum of £660 was credited to Ann against money she paid to her father pretendedly for the purchase of furniture. In November a sum of £400 was credited to her mother for the same purpose, in the 14th January 1950 another £400, and in March £600 more. In May a further £200 was paid to the mother's account, and finally £1,000 on the 21st August. In the intervals between these payments the Bank made a few ineffectual protests and asked to see bills, but never insisted, and it is evident that they exercised no discretion at all as to the amount needed for furniture first stated to be £1,000, and gradually increased to reach £3,260. There is no doubt that Ann asked for each of these sums to be advanced, and it is clear that on each such occasion that Ann requested these advances she did so in writing, and represented that they were required for furniture etc., well knowing in fact that only about £500 was expended on the purchase of furniture from start to finish. The rest went in the family living expenses through the mother's account. Of course, Ann appreciated that these representations were untrue; "silly lies", as she said in the witness-box. The Judge refused to give relief to Ann in these respects. He carefully set out the details of the payments. We think it is to be inferred that he did not believe that Ann was so innocent as she pretended in the witness-box, saying that she always regarded the money as her mother's. Nevertheless, the Judge was clearly of opinion that a presumption of undue influence applied in Ann's case because he stated it was essential that she should have independent advice upon the transaction. Independent advice she did have on the purchase of the house, but none upon the expenditure on furniture, which was quite a separate matter, and this the Judge overlooked. The Judge says that the Bank acted on the faith of untrue statements by Ann, and refused Ann relief on this ground. We cannot agree with this. If the Judge meant no more than that the Bank required some document signed by Ann stating that the money was required for furniture, we agree with him, but we do not think that the Bank can have really acted on a sincere belief in the truth of the representations; their supine conduct shows that they really could have no more than a pious hope which they did not dare to test by pressing to see receipts for the purchase of this vast quantity of furniture, that most of it was being invested in furniture. A moment's study of the mother's account at this time would have shown that even this was improbable. They merely wanted some document which, as they thought, would give legal justification for making the payments. Further, it seems to us that these very untrue statements must be treated as issuing out of the presumed undue influence of her father made, as they were, either to the Bank in his presence, or by arrangement with him. Finally, we do not consider that these statements, if true, would, as the Judge held, have justified the advances, though furniture bought and taken by Ann and retained by her might have afforded some defence to the breach of trust. The Bank at this stage ought to have had their eyes wide open to the situation and insisted on calling a halt to this reckless expenditure apparently for furniture. Ann by her counsel concedes that she must give credit for £300 of furniture actually purchased. Subject to that, we feel constrained to come to the conclusion that, without separate advice, the Bank cannot rely on the assent of this young girl to gifts direct into her mother's and father's pockets, and we hold the Bank liable in respect of advances numbered 8, 12, 17, 18, half of 20 and 22 as set out in the statement of claim, and pro tanto allow the appeal accordingly. Having behaved unreasonably, the Bank cannot rely on section 61. Ann's portion had now been fully used, but there remained one chicken to be plucked, a younger brother, Anthony, then a young man serving with The Blues in Germany. He attained twenty-one on the 15th June 1951, and three days after that event there is recorded an interview with the father, the terms of which are too important to omit. "Date 18th June 1951. Interview with Commander Younghusband. They want £2,000 to be raised for the youngest son. Mr Burrell is to write to the boy explaining that the money will be his to do as he likes with, and when that has been done and we receive Mrs Younghusband's formal request we are to raise the money and get the boy's directions for its disposal " . As the Judge said, the process had become streamlined. So long as Mr Burrell could write a letter telling the boy the money was his, all else would be automatic. This is exactly what happened. Mr Burrell wrote a most perfunctory letter to the young man in Germany which he agreed in the witness-box could not constitute proper separate advice, and in fairness to him was not intended to be more than a pipe opener to a lawyer's relationship with a potential client, and between the 11th July 1951 and the 7th February 1952 £6,500 was paid straight into the mother's account. There is one payment which is characteristic. The father had succeeded to the tune of £1,000 in raising the wind by a charge on Ann's house, and half the first payment to Anthony was used to repay the Bank this amount, thus robbing Anthony to pay Ann. There was not even a pretence in any instance of any countervailing benefit to Anthony except as mentioned later. We do not feel any doubt that the Bank is liable on these payments, as the Judge held. Relief under section 61 is out of the question. The story does not end there. In 1953 and 1954 the Bank revalued the assets in the trust. Accordingly, when the father in June 1952 "called to inquire whether he could borrow a few hundred pounds", the Bank (whose words these are) after looking into the figures, without any inquiry whatever as to the purpose except that the father was in what he called "an awful hole", cheerfully agreed to advance to him a further £1,200, and suggested that it should be taken out of the shares of Francis, George and Ann in shares designed to make their advances equal. Fortunately for him, Anthony escaped this raid. Between September 1953 and June 1954 the advances specified in the statement of claim under numbers 28 to 35 inclusive were made direct to the father or mother; they aggregated the grand total of £5,350. Nobody pretends that these were not breaches of trust, but they were assented to by each of the three children. We have already concluded that Francis and George must be taken to be emancipated by this time, and so, we hold, was Ann. She had been married in 1952 and was living in her Chelsea house with her husband. In these circumstances, the learned Judge rightly held that these sums were not recoverable. The Bank refused to make any further advances, not because of the slightest doubts as to the grave impropriety of their conduct over the last six years, but because they thought that if they parted with anything more, they might not be protected against a possible claim for estate duty if the mother should die within five years of any particular advance. The Bank pleads the Limitation Act 1939, and as to this we wholly agree with what the learned Judge said and need not repeat it. So too as to the defence of laches. As to acquiescence, we think that this must be looked at rather broadly. We were, of course, pressed with the leading case of Allcard v. Skinner (volume 36 Chancery Division, page 1415), but in that case the plaintiff had had her rights fully explained to her by a brother, who was a barrister, and by her solicitor, and yet she took no steps until five or six years later. Even that gave rise to a difference of opinion in a very strong Court of Appeal. In this case it would be wrong, we feel, to place any disability upon the beneficiaries because it so happened that George was a member of the Bar, and had been in well-known chambers. He had not been in Chancery chambers where it may be said that these things are better understood? but the real truth of the matter is that a party cannot be held to have acquiesced unless he knew, or ought to have known, what his rights were. On the facts of this case we cannot criticise any of the plaintiffs for failing to appreciate their rights until another learned junior, whom they consulted on a far fetched and futile scheme of George's for avoiding estate duty on his mother's death, advised that the advances might be improper. That was in the year 1954, and thereupon the family, headed, of course, by George, took immediate steps to explore this matter. This is a most complicated action, and many matters had to be explored before an action for breach of trust could properly be mounted. The writ was issued in 1958, and we do not think it right to hold that the plaintiffs were debarred by acquiescence from bringing an action which otherwise, to the extent we have indicated, is justified. We have already dealt with the impact of section 61 in general and in detail as we have gone through the various impugned transactions, and on that we need say nothing further. That leaves only one matter for our consideration, for the learned Judge held that in regard to Anthony he ought to direct an account whereby Anthony would have to give credit for certain payments which he received from his mother's account. Anthony had an account with the Bank, and through the kindness of his parents received the benefit of an arrangement made long before the payments in question whereby, whenever he was overdrawn, his account should be replenished up to £40. If he overdrew to a greater extent than that, he did not receive this benefit but he was wise enough, as we look at his account, never to do so. Furthermore, he had received for some time a trivial allowance, for an officer in The Blues, of £25 a quarter from his parents. It was argued (and the learned Judge agreed in principle) that as his account wa3 being replenished in these ways from his parent's account, he should, instead of being able to claim that the whole amount of £6,500 should be replaced to the trust, bring into account the amount of money which had been transferred to his own personal account. The question is whether the learned Judge was right in accepting that view. Acting on two authorities, Raby v. Ridehalgh (volume 7, De Gex, Macnaghten & Gordon's Reports, page 104) and Chillingworth v. Chambers (1896 volume 1 Chancery Division, page 685), he apparently discerned some principle which he thought entitled him to direct an inquiry whereby Anthony would have to account for the sums which he had received through his mother's account in this way. Before us counsel for the defendants rightly did not attempt to argue that those two cases supported the Judge's view of the law. We do not doubt that if in fact money were paid by direction of the son to his mother's account, or (and it matters not, as we think) to the son's account, and then overnight to the mother's account, upon an understanding that some part of it was to be used to discharge the son's indebtedness to others, he must accept the position that the part so used must be treated as a payment to him. However, the facts fall far short of that in this case, and it was never sought to justify these payments upon any such ground. All that was argued was that as the son had in fact received, albeit indirectly, the benefit of certain of these payments, he should to that extent account for them. This seems to us not to present any equitable principle of defence in the mouth of a defaulting trustee. In order to escape, the Bank would really have to establish that payment to the mother's account was pro tanto a payment to Anthony. The truth of the matter is that Anthony, under the presumed undue influence of the Commander, was paying very large sums to his mother's account which went to the general family living expenses, some of which he, in a general way, enjoyed as a member of the family, and some of which he enjoyed in a more particular way because it founds its way into his account under arrangements which had nothing to do with the advances. We cannot see how that circumstance entitles a defaulting trustee to any account even if, which we doubt, it would be possible to frame any inquiry which it would be possible to answer. On this point we allow the appeal and discharge the order for an account. We summarise our conclusions on the whole matter thus: (1) As to the claim in respect of the money expended on the purchase of the house in the Isle of Man we agree with the learned Judge, and we dismiss the cross-appeal on this. (2) As to the sum of £1,000 purported to be expended upon furniture for that house, we disagree with the learned Judge, and we allow the appeal to that extent. This sum must be replaced by the Bank. (3) As to the £2,600 loan to repay the Hodson settlement, we allow the appeal to this extent, that that sum must be replaced by the Bank but the majority of the court feels that section 61 of the Trustee Act 1925 should relieve the Bank, but only to the extent of the surrender value in 1948 of the policies transferred to Francis and George. (4) With regard to the £2,000 raised for the alleged purpose of purchasing furniture in the Isle of Man, we agree with the learned Judge and dismiss the appeal. (5) As to Ann, we think that, notwithstanding her disregard of the truth, the Bank must replace the advances of £3,260 made to her, subject to giving credit for the sum of £300 which was in fact actually expended upon furniture. The appeal is allowed pr o tanto . (6) We agree with the learned Judge that the Bank must replace the sum of £6,500 advanced to Anthony, but we disagree with the learned Judge that he should have to account for any sums received by her through his mother's account, and we allow the appeal accordingly and dismiss the cross-appeal. (7) As to the final series of advances aggregating £5,350, we agree with the learned Judge and dismiss the appeal. The appeal will be restored to the list for argument as to the exact form of order and as to costs on a mutually convenient day when counsel have had an opportunity of considering this Judgment in detail. LORD JUSTICE WILLMER : The Judgment I am now about to read is my own Judgment on the outstanding point. I have the misfortune to differ from my brethren as to the degree of relief which ought to be accorded to the Bank under section 61 of the Trustee Act 1925 in respect of their breach of trust regarding what has been described as the Hodson loan transaction. All of us are agreed that in the very special circumstances of this case the Bank should be accorded some relief notwithstanding the fact that they were professional trustees paid for their services. But whereas my brethren think that the Bank should be relieved only in part, I take the view that if relief is to be accorded at all, it should be accorded in full. I can see no logical reason for stopping short of relief in full. The special circumstance which, in the view of all of us, entitles the Bank to relief is the fact that the solicitor specially appointed by the Bank to give separate advice to, and protect the interests of, Francis and George, failed to ensure that the transaction was carried out in the way which had been advised by Messrs Charles Russell & Co. and agreed to by the boys themselves. The Bank, though clearly in breach of trust, were quite innocent in the matter. They were not the cause of any part of the loss which resulted. Accordingly if, as I think, they are entitled to relief under section 61, they should, in my view, be relieved in full. I venture to criticise the order proposed by my brethren in relation to this transaction on the ground that, although purporting to grant relief under section 61, it does not in fact result in any relief at all. For even without section 61, I do not see how the Bank could have been made liable for more than the amount of the loss actually sustained through the transaction being carried out as it was. Francis and George in fact received the life policies, the surrender value of which was said to be £650 in 1948. They retained the policies until 1953, by which time they had no doubt increased considerably in value since the payment of premiums was in fact maintained by the mother. The boys then quite voluntarily gave the policies back to their mother, apparently for the purpose of enabling the Commander to raise more money by charging them again. In so far as the boys gave away a tangible asset of value, their loss was due to their own voluntary act, and not to the Bank's original broach of trust. Quite apart from section 61, therefore, I should have thought that in any case the Bank could not have been made liable for the whole of the £2,600, but that credit ought to be given for the surrender value of the policies in 1953. On the same principle, it has been rightly conceded on behalf of Ann that, in so far as she has herself retained the moneys advanced to her, she cannot claim to recover them again. If, therefore, as we all agree, relief under section 61 should be accorded, this should, in my view, result in giving the Bank some relief beyond that to which they would in any event have been entitled. For my part, I would relieve the Bank entirely in respect of this £2,600. LORD JUSTICE UPJOHN : Lord justice Harman is not able to be here this morning, and asks me to say that he concurs in the Judgment which I am about to deliver. This Judgment deals only with the question of the liability of the Bank in relation to the Hodson trust. Lord Justice Willmer has expressed the view that, apart altogether from any relief under section 61 of the Trustee Act 1925, the Bank could not be made liable for more than the amount of the loss actually sustained through the transaction being carried out as it was; and as Francis and George received the life policies, he has held that they must give credit for at least the surrender value of the policies at the date of the transaction. I regret that I am unable to share this view. The transaction as carried out was a complete breach of trust, and entirely unauthorised by clause 11. Therefore the Bank must replace to the trust funds the £2,600 misapplied. Test it in this way. Suppose that Francis and George had still the policies, could the Bank, on being ordered to replace £2,600 to the trust, claim that they were only bound to do so on having replaced to them the policies, or at any rate at least upon receiving credit for the 1948 surrender value of the policies ? It is, in my judgment, not the law that the plaintiff, rightly suing for breach of trust, must account for every benefit he may have incidentally received. What right have the Bank to claim some set-off from the plain consequences of their breach of trust ? I can see no possible equity which entitles the Bank to do so. In fairness to the Bank, let it be said that their counsel never argued that they had any right (apart from section 61} to claim any such credit. On the other hand, of course, as the Judgment of the court has pointed out, it cannot be doubted that a beneficiary who has consented to a transaction in breach of trust must be prepared to accept the consequences and give credit for the money or property that he has received. That principle, in my judgment, cannot be applied to the case of the Hodson trust for the very simple reason that, as the Judgment of the court has declared, Francis and George never consented to the transaction as it was in fact carried out, and indeed they were wholly ignorant of it. Therefore, the principle that they must accept the consequences of a breach of trust to which they have consented has no application at all, in my judgment, to these circumstances. The boys received the policies, as they thought, as part of a larger transaction which would give them security and a profit on their mother's death. Through the failure of the legal advisers of the boys and of the Bank, this transaction was not carried out at all, and it gave them nothing except the policies. For my part, in those circumstances, I entirely fail to understand why Francis and George have to give credit for any property which has passed to them under a transaction of which they never knew, and never gave their consent. In law the Bank made them a present of the policies. Lord Justice Willmer has drawn a parallel between this transaction and the transaction in which Ann conceded that she must give credit for the moneys advanced to her of which she retained the benefit. With all respect, I do not follow this. Ann conceded rightly that she must give credit for the moneys in fact applied for her benefit for the reason that, as she requested money to be applied in the purchase of a house and decorations etc., she must account for the moneys so applied in accordance with her request. That was in accordance with the general principle I have just stated, that he or she who has consented to a transaction in breach of trust must give credit for the benefit he or she has received. There is no parallel in the Hodson settlement where there was no such consent, nor any application of money at the boys' request as the transaction turned out. Accordingly, for my part I am quite unable to accept the view that Lord Justice Willmer has expressed that, apart altogether from section 61, Francis and George would have to account in some measure for the policies which were in fact transferred into their names. In my judgment, therefore, the only question that arises is whether the Bank should be relieved from the consequences of their breach of trust under section 61 of the Trustee Act to any, and if so, what extent. This, I think, is a very difficult question. The Judgment of the court has already pointed out that the Bank were personally innocent, but they were ill-advised by their own solicitors; but the Bank must accept responsibility for such negligence, and section 61 cannot possibly be invoked to relieve them from its consequences without more. The circumstance that seems to me to make the application of the section possible is that the Bank received the letter quoted in the Judgment of the court written by Mr Burrell on behalf of Francis and George saying that the matter was in a satisfactory state. Thereafter it would have been quite unreasonable for the Bank to take any further step to assure themselves that the transaction had been properly carried out, and they were lulled into a false sense of security. Section 61 is purely discretionary, and its application necessarily depends on the particular facts of each case. I think, in the circumstances of this case, that I am prepared to hold that the Bank acted honestly (that is not in dispute) and reasonably and ought fairly to be excused to the extent of the surrender value of the policies transferred to the boys at the date of the transaction, about £650, but no doubt the exact figure can be ascertained. I do not see how the Bank can properly be relieved to any greater extent. The fact that the mother paid the premiums for a few years, so enhancing the value of the policies, is (so far as the Bank is concerned) as irrelevant as the fact that, as was to be expected, in due course the boys gave the policies back to their mother, and so, of course, to the Commander, thereby losing all benefit from them. LORD JUSTICE WILLMER : Mr Bagnall and Mr Home, you have heard that we propose to give you time to consider what we have said before you come and discuss the appropriate form of order. Perhaps you will communicate with the court through the usual channels when you are ready to do so. Mr BAGNALL: I am obliged to your Lordship. LORD JUSTICE WILLMER : I should add that when you are ready, it will be necessary to reconstitute the court, so we will appreciate It If you can give as long notice as possible. Mr BAGNALL: I am grateful to your Lordships for dealing with the matter in that way. I do not know whether your Lordship had it in mind that my learned friend and I, or perhaps our learned juniors, should attempt to agree some minute of order, or whether you think that we should merely study the Judgment and discuss the matter. LORD JUSTICE UPJOHN : If you can agree, so much the better . Mr BAGNALL: I apprehend there would be no difficulty in agreeing a form of order to give effect to the Judgment; but it may well be, of course, that agreement and harmony will disappear on the question of costs. LORD JUSTICE UPJOHN : I think that may be safely anticipated! Mr BAGNALL: But it would perhaps be helpful to everyone if some document were before the court. LORD JUSTICE WILLMER : Yes, I think it would be most helpful. If you will put your heads together and perhaps reach some measure of agreement, so much the better. Mr BAGNALL: That will leave the question of costs to be argued, and any further relief for which anyone may be minded to ask. LORD JUSTICE UPJOHN : Copies of the main Judgment are available, but my supplemental Judgment is not yet available, but it will be if you apply for it tomorrow or the day after. Mr BAGNALLs Speaking rather at the moment without fully considering it, my Lord, it may very well be possible to include in the minute of order the part your Lordships have dealt with separately without actually seeing the Judgment. It is quite a short point. LORD JUSTICE UPJOHN : Yes, probably. The view of the majority of the court, of course, is in the main Judgment. Mr BAGNALL: If your Lordship pleases. LORD JUSTICE WILIMER : The Judgment which I am about to read is the Judgment of the Court, which deals with and resolves all the points which have been argued except one, and in relation to that one there is, unhappily, a disagreement between the members of the Court, and on that one point we will deliver separate Judgments when I have read the Judgment of the Court. This is indeed a sorry story, and one which reflects no credit at all on any of the parties to it. When Miss Pauling, the plaintiffs' mother (and we shall refer to her throughout as "the mother") married their father (to whom we shall refer as "the Commander) she was a young lady of considerable fortune. She was marrying a naval officer who had almost no fortune at all, and by the wisdom, no doubt, of her parents, it was decided to vest her fortune in trustees of the trusts of a marriage settlement. The whole object of this transaction was to prevent the use (or rather misuse) of the lady's capital for the very purposes for which in fact it had been very largely frittered away, that is, in the ordinary living expenses of the family. Apart from a power to raise £10,000 out of the settlement (which had been exercised long before the history of this action starts) it was intended that the mother should have nothing more than the income during her life, and she was restrained from anticipating that.

[2]In June of the year 1948 the trust funds were intact, and amounted to over £70,000. By June 1954 the Bank had raised and paid away over £29,000 from the capital of these funds in purported exercise of a power of advancement, and there was nothing whatever left to show for it. How had this melancholy event happened? It was in part due to a misunderstanding of a power of advancement contained in the settlement, which was in rather unusual form, and later on to its plain misuse, but also was largely due to the charm of manner and powers of persuasion of the Commander. The learned trial Judge has found the Bank liable to replace nearly £15,000 as having been expended in breach of trust for which they can be compelled to account. Both parties appeal.

[3]The relevant transactions over this period of six years are many, and involve each of the four children of the marriage. Different questions arise in respect of most of these transactions, and accordingly we propose in this Judgment first to set out the basic facts, then to state our view of the legal questions that have been argued before us, and finally to deal seriatim with the facts of each advance and to apply the law accordingly.

[4]The plaintiffs, the children of the Commander and the mother, are:(1) A son, Francis, born on the 15th October, 1920;

(2) A son, George, born on the 11th October, 1925;

(3) A daughter, Ann (now Mrs Broadbent) born on the 24th March, 1928;

(4) A son, Anthony, born on the 15th June, 1930.

[5]As already stated, the marriage settlement was of funds supplied entirely by the mother. The defendants, Coutts & Company (to whom we shall refer as ''the Bank") have all along been the sole trustees. Apart from the special power to raise £10,000 for the mother's use which we have already mentioned, the settlement followed the usual lines of such an instrument. The mother had the income of the trust fund for life without power of anticipation and after her death her husband was to have an annuity of £500 a year. Provision was also made for the mother to have power to appoint a life interest in half of the trust fund to any surviving husband. Subject thereto, the trust fund was to be held in trust for the children or remoter issue of the mother, whether by the intended or any future marriage, in such shares as the mother might appoint, and in default of appointment the children were to take in equal shares on attaining the age of twenty-one, or being female marrying under that age. Clause 11 of the settlement, under which the Bank purported to act in making the advances complained of, provided as follows: "It shall be lawful for the trustees at any time or times after the death of the wife or In her lifetime with her consent in writing to raise any part or parts not exceeding in the whole one-half of the then expectant or presumptive or vested share of any child or more remote issue of the wife in the said trust premises under the trusts hereinbefore contained and to pay the same to him or her for his or her own absolute use or to pay or apply the same for his or her advancement or otherwise for his or her benefit in such manner as the trustees shall think fit ...".

[6]By clause 14 power was conferred on the trustees during the life of the mother, and with her consent in writing, to lay out a sum not exceeding £10,000 in the purchase of a house as a residence for the wife, and in its decoration, repair or improvement, provided that such house was situated in England, Wales, Scotland or Ireland. Lastly, provision was made for the Bank to act as bankers in respect of the trust funds without being liable to account for profits, and to be remunerated for their services in accordance with their published scale of fees. Messrs Charles Russell & Co. were nominated as solicitors to the trust with permission to the Bank to consult its own solicitors in any case in which it should think fit. These were Messrs Parrer & Co,

[7]It should at this stage be stated that at all material times the mother had an account with the Bank. The Commander did not have any separate bank account with the Bank, but he was authorised to draw on the mother's account, and it appears that it was he who largely controlled it. During most of the time with which we are concerned this account was substantially overdrawn.

[8]In addition to the funds subject to the settlement, the mother also enjoyed a small life interest under the will of her deceased father. There were also certain shares standing in the joint names of the Commander and his mother. Apart from these small additional sources of income, the family were wholly dependent on the income derived from the marriage settlement. The evidence shows that the family were quite unable to adapt themselves to the changed conditions of life after the last war, and expected to continue on the scale of life suitable between the wars, with the result that the available income was always overspent so that the Commander was always hard up for money.

[9]Now as to the questions of law involved in this appeal. First as to the true meaning and intent of the power in clause 11. This power has been accepted as containing two limbs, first a power with the consent of the mother in her lifetime to raise any part or parts not exceeding in the whole one-half of the expectant, presumptive or vested share of any child, and to pay the same to him or her for his or her absolute use, and, secondly, the more usual power to pay or apply the same for his or her advancement or otherwise for his or her benefit in such manner as the Bank might think fit. It was argued that the power contained in the first limb was wider than that in the second, although it was conceded on both sides that in both cases the power was fiduciary.

[10]Having regard to the very wide interpretation given to the statutory power (which approximates to the second limb in Pauling's Settlement) by their Lordships' House in re Pilkington (1962 volume 3 Weekly Law Reports, page 1051) we cannot see that the ambit of the first limb of the power substantially differs from that of the second limb. But, as all the advances were made in purported exercise of the first limb, we must examine the argument upon it. Being a fiduciary power, it seems to us quite clear that the power can be exercised only if it is for the benefit of the child or remoter issue to be advanced or, as was said during argument, it is thought to be "a good thing'' for the advanced person to have a share of capital before his or her due time. That this must be so, we think, follows from a consideration of the fact that the parties to a settlement intend the normal trusts to take effect, and that a power of advancement be exercised only if there is some good reason for it. That good reason must be beneficial to the person to be advanced it cannot be exercised capriciously or with some other benefit in view. The trustees, before exercising the power, have to weigh on the one side the benefit to the proposed advancee, and on the other hand the rights of those who are or may hereafter become interested under the trusts of the settlement. We reject Sir Milner Holland's argument on behalf of the Bank to the effect that an advancement can be made under the first limb which is not for the benefit of the advanced person. Furthermore, it is clear that the power under the first limb may be exercised, if the circumstances warrant it, either by making an out and out payment to the person to be advanced, or for a particular purpose specified by the trustees. Thus in argument an example was given that when George was called to the Bar, the trustees might have quite properly advanced to him a sum of capital quite generally for his living expenses to support him while starting to practice provided they thought that this was a reasonable thing to do, and that he was a type of person who could reasonably be trusted to make proper use of the money. On the other hand, if the trustees make the advance for a particular purpose which they state, they can quite properly pay it over to the advancee if they reasonably think they can trust him or her to carry out the prescribed purpose. What they cannot do is to prescribe a particular purpose, and then raise and pay the money over to the advancee leaving him or her entirely free, legally and morally, to apply it for that purpose or to spend it in any way he or she chooses, without any responsibility upon the trustees even to inquire as to its application.

[11]Failure to appreciate this was one of the root causes of the trouble, for in the first opinion of counsel in 1948 (to which we shall refer later) he advised that the trustees could make an advancement out and out for the purpose of a purchase of a house in the Isle of Man, but he said this purchase "depends on a voluntary act by the children, and they should, I think, be separately advised on this point. So far as the trustees are concerned, they will be paying the money to the children for their own absolute use". This, we think, was the wrong approach. At that time both Francis and George were studying at university, and it was not suggested that they required any sum for their maintenance there; the only possible justification for advancing the very substantial sum of £5,000 to each of the two boys, one of them twenty-seven and the other just twenty-two, who had no other possible proper use for this money, was to invest it in a house in the Isle of Man as the settlement powers were insufficient, and the advancement could be justified only for that purpose. This error was perpetuated later by the childrens' solicitor, who got into the habit of advising them that, although purported advancements were, for example, for the repair of a house or for the purchase of furniture, they were sums which the children could "blue", for example, on a horse.

[12]This was wrong and misleading advice. If money was advanced for an express purpose by the Bank, the advanced person was under a duty to carry that purpose out, and he could not properly apply it to another. We are not concerned with the question whether in such circumstances the Bank could recover money so misapplied, but this much is plain, that if such misapplication came to their notice, they could not safely make further advances for particular purposes without making sure that the money was in fact applied to that purpose, since the advancee would have shown him or herself quite irresponsible. It would be their duty to proceed on future occasions on behalf of the particular child under the second limb of the power.

[13]The first question, therefore, that arises in relation to each of the advances, which we shall consider seriatim, is whether there was a proper exercise of the power under either limb. No question arises as to the consent of the mother, for that was given in every case. If the advance were proper in any particular case, the question of the children's consent, although adult, would not arise; for as has been made quite clear in re Pilkington (supra) as there is no express provision in clause 11 requiring the adult beneficiaries' consent to the advance being made for his or her benefit, it would not be necessary to obtain that consent, though no doubt any trustee intending to advance an adult beneficiary would normally do so only with his consent, and probably only at his request. But, if any advance were an improper exercise of the power in clause 11 (and they all were in the learned Judge's view) what is the position? Prima facie , having improperly exercised the power, the Bank would be guilty of a breach of trust and must replace the money misapplied.

[14]Now Mr Bagnall, for the plaintiffs, has made it clear that in this action each beneficiary is suing to recover only the advances purported to have been made to him or her, or for his or her benefit. This is not a case where any beneficiary is seeking to compel the trustees to replace trust funds wrongly applied, or paid away to some other beneficiary. Had that been the case, different considerations would, no doubt, have applied. But in the circumstances of this case it is clear to us that if the Bank can establish a valid request or consent by the advanced beneficiary to the advance in question, that is a good defence on the part of the Bank to the beneficiary's claim, even though it be plain that the advance was made in breach of trust. But (and this is really the second question) this consent or request, Mr Bagnall submitted, must be the spontaneous act of the child; and it has been alleged in the pleadings that in the circumstances of this case each of the children at the time of the respective advances to them must be presumed to have been under the undue influence of their parents as they had but recently attained full age ; therefore, he says, their requests and consents cannot be relied upon by the Bank.

[15]The doctrine of undue influence, much discussed before us, merely arises out of the fact that, while equity approves of gifts by a father to a child, and therefore invented the doctrine of presumption of advancement, so on the other hand it dislikes and distrusts gifts by a child to a parent, and therefore invented the presumption of undue influence. Both these presumptions merely mean, in our opinion, that in the absence of evidence, or if the evidence on each side be evenly balanced, in the first case equity will presume that the parent who puts property in a child's name intends to make a gift or give a benefit to the child, while on the other hand money or property passing from the child to the parent cannot be retained by the latter because it is assumed that so unnatural a transaction would have been brought about by undue use of the natural influence that a parent has over a child, and of the filial obedience which a child owes to his parent. Both presumptions may be rebutted; each is in truth a convenient device in aid of decisions on facts often lost in obscurity, whether owing to the lapse of time or the death of the parties.

[16]Where the presumption of undue influence exists, a gift by a child cannot be retained by a parent unless he or she can show first that the gift was the spontaneous act of the child; secondly, that the child knew what his rights were; and thirdly it is desirable, though not essential, that a child should have independent, and if possible professional advice, before making a gift. "The court", said Lord Justice Cotton in A Hoard v. Skinner (1887 volume 36 Chancery Division, page 145, at page 171) "sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor's will". The whole question is fully discussed in the leading case of Hugenin v. Baseley (volume 14 Vesey, page 273) and the notes to that case in White and Tudor, Eighth Edition, volume 1, at pages 259-302. The result is well stated by Mr Justice Parwell in Powell v. Powell (1900 volume 1 Chancery Division, at page 246): "A man of mature age and experience can make a gift to his father or mother because he stands free of all over-riding influence except such as may spring from what I may call filial piety; but a young person (male or female) just of age requires the intervention of an independent mind and will, acting on his or her behalf and interest solely, in order to put him or her on an equality with the maturer donor who is capable of taking care of himself".

[17]The question of the duration of the presumption has also been much discussed. Lord Cranworth considered that it should be taken as a period of a year after the child attained twenty-one; see Smith v. Kay (volume 7 House of Lords Cases, page 750 at page 772) but this has not been received with approval. In our judgment the question is one of fact and degree. One begins with a strong presumption In the case of a child just twenty-one living at home, and this will grow less and loss as the child goes out in the world and leaves the shelter of his home. Nevertheless, the presumption normally lasts only a " short" time after the child has attained twenty-one ; see Lancashire Loans Limited v. Black (1934 volume 1 King's Bench Division, page 380, per Lord Justice Greer at page 419) and it seems impossible and undesirable to define it further. A married daughter with a separate establishment of her own may be emancipated directly she attains twenty-one, whereas a spinster who has never left home might be able to rely on the presumption for a longer period. We reject, however, Mr Bagnall's submission that this presumption continues indefinitely until it is proved that the undue influence has ceased to exist. That is to confuse a case of actual undue influence with the presumption. On the other hand, it may be difficult for a spinster daughter living at home to prove a case of actual undue influence for many years after she has attained the age of twenty-one. In the present case it is important to remember that only the presumption is relied on; no actual undue influence is alleged.

[18]Then Sir Milner argued that trustees who have obtained no benefit from payments induced by undue influence could not be hold liable, and that the only person who could be sued would be the parent presumed to have exercised the undue influence, or any person (short of a bona fide purchaser for value) who received the benefit of the payments. On the other hand, Mr Bagnall argued that the Bank were in the position of volunteers, and therefore could not escape the consequences of dealing in breach of trust with a beneficiary presumed to have been actuated by the undue influence of a third party; they wore at risk just as any other volunteer who takes the property acquired in breach of trust.

[19]In the circumstances of this case, we do not think it necessary to express a concluded opinion upon this matter except to say that we reject Sir Milner Holland's argument that the Bank cannot be made liable unless they received some benefit from the breach of trust. It seems to us in principle that a trustee dealing in breach of trust with a beneficiary who has just attained the age of twenty-one years must realise the danger that such beneficiary may be acting under the influence of a parent. We do not see how a trustee can possibly escape the consequences of that knowledge. Some support for this view is to be found in King v. King (volume 1 De Gex & Jones's Reports, page 663) a case of a suspected fraud on a power.

[20]Without expressing a final opinion, we think that the true view may be that a trustee carrying out a transaction in breach of trust may be liable if he know, or ought to have known, that the beneficiary was acting under the undue influence of another, or may be presumed to have done so, but will not be liable if it cannot be established that he so knew, or ought to have known.

[21]That is sufficient for the purposes of the present case, for, of course, the Bank knew very exactly the ages of each of the children, and they knew further that as each child attained twenty-one, that child received advances from the Bank which went straight into the banking account of the mother. Indeed, in Ann's case plans were made to effect this unhappy result even before the child attained twenty-one. Accordingly, it seems to us clear that if it can be established that the presumption exists in any given case, the Bank are fixed with notice of it and cannot rely on any consents given under such influence.

[22]The Bank also rely for relief from the consequences of any breach of trust upon section 61 of the Trustee Act 1925. At this stage all we propose to say is that it would be a misconstruction of the section to say that it does not apply to professional trustees, but, as was pointed out in the Judicial Committee of the Privy Council in National Trustees Company of Australasia Limited v. General Finance Company of Australia Limited (1905 Appeal Cases, page 373 at page 381) "Without saying that the remedial provisions of the section should never be applied to a trustee in the position of the appellants, their Lordships think it is a circumstance to be taken into account". Where a banker undertakes to act as a paid trustee of a settlement created by a customer, and so deliberately places itself in a position where its duty as trustee conflicts with its interest as a banker, we think that the court should be very slow to relieve such a trustee under the provisions of the section.

[23]We propose to deal with the bank's plea of the Limitation Act 1939 and the pleas of laches, acquiescence and delay when we have considered the detailed transactions. It only remains to state that the question of law upon which this case was reported in the court below, re Pau l i ng's Settlement Trusts (1962 volume 1 Weekly Law Reports, page 86) has not been argued before us, and many of the cases there cited have not been cited to us. Mr Bagnall, however, accepts as accurate the proposition which is contained in the paragraph in the middle of page 108 of the report. We express no opinion on it.

[24]We now deal with the impugned transactions seriatim. Up to 1947 the family lived in a large country house in Gloucestershire purchased with marriage settlement funds under the power contained in clause 14 already mentioned. When it became necessary, owing to financial stringency, to sell this house, the Commander conceived the idea of purchasing a house in the Isle of Man, one of his principal objects being to reduce his tax liability. It was then discovered that the purchase of a house in the Isle of Man was not authorised by the terms of the marriage settlement, and this led to the Commander taking advice from Messrs Charles Russell & Co., who in turn sought counsel's opinion. Counsel confirmed the view that there was no power under clause 14 of the settlement to purchase a house in the Isle of Man, but he advised that the desired object could possibly be achieved in a different way by invoking the power of advancement to the children of the marriage under clause 11.

[25]By this time the two eldest children, Francis and George, were over twenty-one, and counsel advised that if they were agreeable advances could be made to them of sums sufficient to enable a house to be bought, which they could then settle voluntarily on their mother for life with remainder to themselves. Counsel emphasised, however, that this could be done only by a voluntary act on the part of the children, and he recommended that they should be separately advised. We have already criticised counsel's approach to clause 11. Francis and George proved to be agreeable to the course suggested, but both disclaimed any desire to be separately advised. Accordingly, on the 10th January 1948 the mother requested the Bank in writing to raise up to £10,000 from capital, and pay the same as might be directed by her two sons, Francis and George. Francis and George joined in signing a memorandum dated the 12th January 1948, the material part of which was in the following terms: "We, the undersigned, Francis George Younghusband and George Oswald Younghusband, hereby authorise and request you to apply such sums as may be made available for our advancement under Mrs Younghusband's request to you dated 10th January 1948 in purchasing a property in the Isle of Man, which it is our intention to settle in accordance with the suggestion contained in the opinion of counsel dated the 12th December 1947 in a settlement in which you are to be the trustees''.

[26]In due course the Commander found a house called "Oakhill Lodge" in the Isle of Man, which was duly purchased at auction on the 4th August 1948 for £8,450 and became the family home for the next seven years.

[27]The Commander could not boar to see such a valuable asset as a house on which spending money could be raised disappearing into a settlement on the mother and her two children. At an early stage, long before the house was purchased, the Bank, on the Commander's instructions, had told Charles Russell & Co. that It was not intended to settle any of the money to be advanced; yet this change of plan, strangely enough, brought forth no protest, or even comment, from Bank or solicitors. But worse was to follow. On the 22nd October 1948 the Bank wore writing to Francis about completion of the purchase in the joint names of "you and your brother". Yet on the 26th October they wrote this to the Isle of Man solicitors acting for them in connection with the conveyances "Commander and Mrs Younghusband's marriage settlement. We are favoured with your letter of the 23rd of this month, reference ADK/MT, add in reply beg to say that Oakhill is being purchased with money being taken out of the above-mentioned trust and placed at the disposal of the two eldest sons of Commander and Mrs Younghusband for their advancement under the powers given to us by the settlement. You will appreciate, therefore, that the house will not have to be convoyed to us. It is on the instructions of the two sons that the remittance of £7,605 is to be made to you to enable you to complete the purchase, but Commander Younghusband has told us this morning that it is their wish that the conveyance should be in favour of himself and Mrs Younghusband" . Not one word of protest was raised by the Bank at this complete reversal of the scheme envisaged by counsel. They quite calmly applied the money raised for the benefit of the sons in the purchase of a house for the Commander and the mother. They never obtained the consent of the sons to this, and the evidence was that the sons never did consent.

[28]The subsequent history of the house was that shortly afterwards it was mortgaged by the Commander for £5,000, which sum, was apparently spent as income. When financial disaster overtook the Commander in 1955 (as a result of which he was made bankrupt in the Isle of Man) the house was sold for loss than the amount of the mortgage, so that in the event Francis and George lost the whole of their £8,450.

[29]Making all due allowance for the fact that the Bank may have misunderstood the effect of clause 11, it does not explain their complete laxity in permitting this transaction to go forward. Even at this early stage they wholly failed to exercise any powers or duties as trustees, and thought only of themselves as bankers to the Commander and the mother. We doubt whether the original advance, if counsel's advice had been carried out, would have been a proper exercise of the power, but no harm could come of it for the new settlement would replace the old, and the position would be safeguarded. But having regard to the way in which the transaction was in fact carried out, they have no defence to the claim to replace this sum, and it is not surprising that the contrary was hardly argued. Any relief under section 61 is out of the question.

[30]This sorry tale of the house does not even end there. On the same day on which the deposit was paid is found the first payment made direct into the mother's account, then heavily overdrawn. This was a sum of £1,000. The payment arose out of advice given on the 10th June 1948 by the Bank's solicitors to the effect that it would be proper, in addition to advancing money on the house (upon the footing, of course, that it would be settled on the sons) to advance a sum for the purpose of furnishing it. The first mention of amount emanated from the Commander, who fixed it arbitrarily at £1,000, a sum to which he obtained his sons' assent on the 18th August. The trustees accepted this without inquiry, no doubt upon the footing that the house would be conveyed to the sons and their consent was given only on that footing. That assumption was still valid on the 13th September 1948 when the sum was credited to the mother's account. The learned Judge found that, this being so, there had been a valid consent, and the Bank was excused.

[31]We do not accept this. This payment was bound up with the question of the house itself. Once the Bank realised there was to be no settlement, it was the duty of the Bank to reconsider the whole project. Then, when the Bank realised that the house was not going to belong to the boys, but to their parents, the impropriety of purchasing furniture with the boys' money became obvious. Yet they took no steps to remedy the situation. The Bank never even took any steps to see whether any furniture was in fact purchased, and none (or almost none) in fact was. All that happened was that the mother's overdraft was reduced by £1,000, The Bank was in a delicate position. Their interest as bankers conflicted with their duties as trustees, as they had indeed shown themselves well aware in their letter earlier in the same year. The Bank acted in plain breach of their duty most unreasonably, and no question of relief under section 61 of the Trustee Act 1925 can arise. The appeal is allowed so far as this advance is concerned.

[32]Long before the purchase of the house was completed the Commander (inspired apparently by the reasoning of counsel's opinion) conceived the idea that the powers of advancement conferred by clause 11 of the settlement could be used for the purpose of raising further sums up to one-half of each child's presumptive share in the capital of the trust fund, which sums could then be used for paying off Mrs Younghusband's overdraft, and for living expenses. It was calculated that each child's presumptive share, allowing for a reserve to meet death duties in the event of Mrs Younghusband dying within five years, would be about £14,000. The Commander therefore embarked upon a plan for raising approximately £7,000 to be advanced nominally to each child on attaining the age of twenty-one. With this object in view, the Commander early in 1948 suggested to the Bank that further sums be advanced to Francis and George up to a total of approximately £14,000 with the objects of paying off(a) a loan of £2,600 which the Bank, as trustees of another settlement (by a Mrs Hodson) had advanced to the mother, and

(b) the overdraft on the mother's account, which then stood at about £3,000. The Hodson loan was secured by the mother's life interest under her father's will and by four policies on her life to a total value of £3,000, the surrender value of which was then about £650.

[33]The Commander's first letter on the subject is characteristic and discloses the whole schemes "(2) W.R.T. yr. RSC27 of 21/1 for which many thanks. Would you be kind enough, in that case, to get a memo, signed by our two sons along the lines of the proposed draft attached herewith? Otherwise, as I pointed out in my 17/1, a house we may want to buy might well get sold before we could pay a deposit. We would, of course, get legal advice here before signing a contract. To satisfy a vendor that we were entitled to sign one, I suppose we would need a statement from you that the £10,000 was available? (3) As this money can be advanced to our sons unconditionally (which I hadn't realised) wouldn't it be advantageous for all concerned to advance them the full amount possible (£7,000 each, I think you said in a previous letter) and use the balance not needed for the house to pay off first the Hodson loan of (I think) £3,000, and second, as much as possible of our overdraft of £3,000 ?

[34]From investments yielding about 3 per cent we are now paying 5 per cent on the loans plus, in the first case, 3 per cent life insurance, (4) If you agree, would you please send memos, to effect this to my wife and sons for their signatures ? If you cannot do so without further legal advice, it might be as well to await our arrival before asking for it so that we can make sure that we narrow the question as much as possible to avoid unnecessary charges".

[35]This letter led to another lamentable and indeed inexplicable transaction. The Bank did not at first view these suggestions with much sympathy, and expressed doubt as to whether this would be a proper exercise of their power under clause 11 of the settlement. They took advice from Messrs Charles Russell & Co., whose advice was no more encouraging. The Commander, however, was importunate and apparently very persuasive. He dropped for the time being the suggestion of making advances to Francis and George to enable them to pay off the mother's overdraft, but he continued to press his suggestion for raising money to pay off the Hodson loan.

[36]In due course Messrs Charles Russell & Co. advised that, subject to the Bank being prepared to exercise their discretion, this might be a proper exercise of the power conferred by clause 11 provided that Francis and George received an adequate quid pro quo . What was envisaged was(a) that the four life policies should be assigned absolutely to Francis and George ;

(b) that the mother should execute a covenant to maintain the premiums on the policies; and

(c) that the mother should also execute a covenant to pay a fair rate of interest on the money advanced. This would result in Francis and George receiving £3,000 on the death of the mother in return for the £2,600 advanced, as well as having an immediately income from the payment of the interest. Messrs Charles Russell & Co. further recommended that Francis and George should be separately advised.

[37]In pursuance of this, Mr Burrell of Messrs Farrer & Co. was instructed on their behalf. He interviewed Francis and George, explained the suggested arrangement to them, and satisfied himself that they wished it to be carried out. He advised, however, that in addition to the other requirements, the mother should execute a codicil to her will giving a legacy to Francis and George of such an amount as would cover the death duties payable on the policies in the event of her dying within five years.

[38]The scheme as advised by Charles Russell & Co. might at a pinch be justified as an exercise of the power under clause 11, though we cannot understand how a charge on the mother's life interest under her other settlement was omitted, but as carried out the transaction was disastrously different.

[39]The necessary assignment was drafted by Messrs Charles Russell & Co. and was in due course executed by the mother, who also made a codicil to her will. Whether or not due to an oversight, the assignment as drafted and executed contained no express covenant on the part of the mother either to maintain the premiums on the policies or to pay any interest to Francis and George on the amount advanced. Mr Burrell, however, approved the draft on behalf of the boys without ever consulting them. Accordingly, in due course, at the request of the mother, and with the consent of Francl3 and George, a sum of £2,600 was raised and paid over to the mother, who applied it for paying off the Hodson loan. It is important to observe that although legal advice was taken in connection with this transaction, and although Francis and George were separately advised, the transaction as actually carried out differed materially and to the disadvantage of Francis and George from that which had been advised and explained to them. All the sons got in return for the expenditure of £2,600 extracted from their expectancies and paid to the Bank in release of their mother's debt were policies with a surrender value of £650, and probably an implied covenant to keep up payment of the premiums.

[40]The payment of this sum was a clear breach of trust. In this case the sons did have separate advice, but what they approved was the proposed, not the actual, transaction, of which latter they never knew, and to which they never consented. How their solicitor came to approve the assignment, we cannot understand. He completely failed in his duty to his clients. The boys never saw it, and though expressed to be parties, never executed it; this was, no doubt, unnecessary. Yet Mr Burrell wrote this letter to the Bank; "Dear Sirs, Commander and Mrs Younghusband's marriage settlement. We enclose a copy of the letter which Mr Fletcher, of Messrs Charles Russell & Co., has written to Mr Burrell. We have now satisfied ourselves that, so far as the sons are concerned, this matter is in a satisfactory state, and therefore we should be obliged if you would complete it with Mr Fletcher when he makes an appointment to do so. We are, dear sirs, Yours faithfully, Farrer & Co."

[41]A less satisfactory state could hardly be imagined.

[42]Charles Russell & Co. equally failed in their duty to the Bank to see that the transaction was carried out in accordance with the advice they had given. As carried out, the transaction plainly could not be justified as an exercise of the power under clause 11, and, of course, the Bank cannot hide behind the negligence of their own advisers for whose neglect they must, as between them and their beneficiaries, assume full responsibility.

[43]The payment being, therefore, a plain breach of trust, the fact that the boys were badly advised is no defence for the Bank. The Bank must show that the boys consented to the breach of trust; this on the evidence they cannot do.

[44]The members of the court differ, however, upon the question whether the Bank should be relieved under section 61 of the Trustee Act, and if so to what extent. On this point alone, therefore, separate Judgments will be delivered.

[45]LORD JUSTICE UPJOHN. Later in 1948 the Commander returned to the suggestion of raising another £2,000 so as to bring the total advanced to Francis and George up to approximately £14,000. The Bank was not at first prepared to make this further advance, and in this it was supported by the advice of Messrs Charles Russell & Go. The Commander, however, continued to press his request, and alleged that the money was needed to pay for improvements to the recently purchased house in the Isle of Man. At the request of the Bank, he promised to submit accounts in respect of the improvements, showing what had been or had to be paid, but in fact this was never done. Eventually, at an interview which took place in April 1949, when the Commander was on a visit to London, he prevailed upon the Bank to let him have a form for Francis and George to sign, or at least instructions as to what they should say in order to justify the proposed advance of £2,000. He is recorded as having informed the Bank that Francis and George would sign whatever was necessary. This remark is highly relevant to the question (which we shall consider later) as to the extent to which Francis and George at this date could be said to be emancipated from parental influence. The upshot was that on or about the 29th April 1949 Francis and George signed a document drafted by the Bank in the following terms with reference to the further sum of not exceeding £2,000 which you are raising in accordance with the terms of the above-mentioned settlement for payment to us in equal shares by way of advancement, we hereby authorise and request you to place the money when raised to the account in your hooks of Mrs R, Violet Younghusband. We fully appreciate that the money in question has been or is being used for the purpose of making improvements to the property in the Isle of Man "belonging to Mrs Younghusband" , As a result, £2,000 was raised and on the 13th May 1949 paid into the mother's account. It will be seen that in this case there was no pretence that the money raised was being used for the benefit of Francis and George.

[46]Furthermore, it will be observed that this was not a request "by the sons to make an advance, but a consent to a transaction already decided upon by the Bank. The document emanates from the Bank and was forwarded to the father by them with a view to him procuring the signatures. Its object was to protect the Bank against what we cannot help thinking they knew very well to be a breach of trust. The sons had no separate advice. Nevertheless, they were of age, and competent to make their parents a present if they really wished, and the only question is whether the document we have just read was procured by the presumed undue influence of the father. We have already discussed the law on this matter, and the real question is whether on the facts the presumption applies to this case. If it does, the Bank has made no attempt to rebut it.

[47]It seems to us that the whole picture must be looked at, and it is from the documents that a fairly clear view can be had. It does not appear that the mother, the source of the money, was more than a cypher willing to sign whatever her husband put before her. He controlled the family fortune by his right to draw on the family banking account, and he assumed throughout that what he says will go. As we have already said, he was the originator of all the transactions complained of here. His method was to cajole the Bank into going as far as they thought they dared, and then to prepare what he called "chits" (or sometimes got them prepared by the Bank) and send them to his wife or the child or children concerned for signature. So far this looks like a typical case where undue influence ought to be presumed, but the Judge, who saw the witnesses, was chary of acting upon the presumption. The impression he got was of a united family determined to extract from the Bank by hook or by crook the money necessary to continue its extravagant way of life. On this view of it, the passage we have quoted about the sons being willing to sign anything bears a less sinister aspect.

[48]At the time of this advance the son George was twenty-three years old. He had done his military service, and was up at Cambridge. The Judge thought him an exceptionally able young man, well acquainted with his rights, and able to take care of himself. He had no separate advice about this £2,000 advance, but he had been advised about the Hodson loan transaction, and in the course of receiving the explanations then offered he must have realised what the power was which the trustees were purporting to exercise. Indeed, the fatal opinion of counsel advising on the possibility of using clause 11 to purchase a house in the Isle of Man was, on the evidence, familiar not only to George, but to Ann. The Judge held that he was emancipated from parental control, and well enough acquainted with his position to make his consent to this advance binding upon him, and this court cannot reverse that finding, depending, as it does, so much upon the demeanour of the witness.

[49]The case of the other son, Francis, is quite different. He was at this time twenty-eight years old, and was apparently living for the most part with his grandmother, so that he was removed from immediate parental control. On the other hand, we now know that he was a schizophrenic. This diagnosis had been made in 1940 when he found one day of life in the Air Force altogether too much for him, and was repeated by a doctor who saw him in 1951. He was not called by either side, it being agreed that his memory was not at all to be trusted. Consent to this, as to other transactions in which he was involved, was written out and sent to him by his father. There is no letter from him anywhere in the correspondence. No representative of the Bank ever saw him. He was obviously left purposely in the background.

[50]On the other hand, he was capable of teaching in a boys' school, which he did for two years towards the end of the war, and was accepted for entry to Edinburgh University after the war, where also he continued for two years as a student. Further, when he went with his brother to be advised over the Hodson loans the partner in Farrer & Co. who saw him thought him capable of understanding the transaction. Moreover, it has never been alleged that he was at any material time incapacitated from contracting or conducting business affairs by reason of his mental health, though we cannot think that if the Bank had known of his history of ill health, they would have acted on the consents he returned signed to his father. But the Bank did not know the facts. We have considered anxiously whether, before making an advance, they should have made some inquiry into his circumstances. It Is alleged in the particulars of the statement of claim (paragraph 10) that the law presumes undue influence to exist between a person suffering from mental Ill-health and the person with whom he resides but in the end Mr Bagnall rightly abandoned this plea, for there is no such presumption though actual undue influence may not be difficult to prove. The presumption exists only as to the medical adviser. On the whole, we do not feel able to say that the presumption of undue influence must be held to exist between Francis and his parents having regard to his age and his absence from home, and we conclude that the Bank were not bound to make inquiries as to his state of mind or fitness as an object of the power they were affecting to exercise.

[51]Accordingly, though this was the plainest breach of trust, we agree with the learned Judge that the Bank have a good defence, for they obtained consents from the two children concerned, and they were emancipated.

[52]The completion of this transaction exhausted the amount which could be raised for the purpose of advancement to Francis and George. The next victim on the list was the daughter Ann. Even before she attained twenty-one in March 1949, her father was looking about for ways of spending her money, and broaching the subject to the Bank. He very soon seems to have concluded that, having acquired a country residence at the expense of his sons, it would now be a good plan to get a town house at the expense of his daughter. It is indeed fortunate for her that the proposed house, which was in Chelsea, was put into her name, probably to preserve the fiction that the parents were living in the Isle of Man.

[53]The Commander's campaign began in February of 1949, and the proposal for a Chelsea house which he found first emerged on the 14th March, his daughter being still an infant. The trustees had taken the advice of their solicitors as to their power of advancement, and had received the Delphic advice that it was not "qualified in any way". The solicitors added that the young lady should be separately advised. The Bank seems to have accepted without any qualms the Commander's proposal that the daughter's money should be used to buy the Chelsea house of his choice as a residence for the family. Why the Bank should entertain this proposal passes our comprehension. The girl was in her first year at Oxford, and there was no reason at all why her expectant share should be spent in buying a house and furnishing it for her family's use. A family in these comparatively straightened circumstances had no justification for having two houses. This project, in our judgment, was clearly an improper use of the power made in order to suit the father, and without any proper regard to the benefit of the daughter. Having regard to her age, it is clear that the presumption of undue influence applies to this transaction. She, however, was anxious to embark on this speculation. The house apparently was in a semi-ruinous condition, and was not a purchase on which trustees could properly have laid out trust money. They had power to buy a house out of capital, but this expedient was never even considered, again for fiscal reasons.

[54]As we have said, Ann was luckier than her brothers, for the purchase was to be in her name, and she received separate advice by a solicitor who saw to it that the conveyance to her was properly concluded. A member of his firm also gave her excellent advice against the transaction which she chose to ignore. As a result, sums amounting in the whole to £4,789 were applied in the purchase and repair and decoration of this house. Luckily for the Bank, property in Chelsea of whatever sort has appreciated very much in value. When Ann married in the year 1952 the house became in truth hers, and she has since disposed of it to advantage and recognises that, having had the money once, she cannot claim it again.

[55]This sum, however, did not exhaust her expectant share of £7,000, and under her father's influence a further sum of £3,260 was advanced to the father or the mother nominally for the further improvement and furnishing of the Chelsea house, but in fact spent on the Isle of Man house, or used to support her mother's overdraft. This sum Ann claims from the Bank in the action.

[56]It is not at all easy to follow the sequence of events on this point. It seems plain enough that the Bank, after refusing to entertain the purchase of the Chelsea house, were talked into it by the Commander. In March they informed the father and Ann that they would not entertain the matter, but in the same month (and in spite of advice from their own solicitors against it) they changed their mind and agreed to pay for the price of the house and up to £1,000 for repairs. The first mention of furniture, apart from decorations, comes in a memorandum of the 21st March of an interview with the Commander which shows that he asked for an additional £1,000 to cover furniture. It does not appear when this was assented to, but apparently it was, for in September a sum of £660 was credited to Ann against money she paid to her father pretendedly for the purchase of furniture. In November a sum of £400 was credited to her mother for the same purpose, in the 14th January 1950 another £400, and in March £600 more. In May a further £200 was paid to the mother's account, and finally £1,000 on the 21st August. In the intervals between these payments the Bank made a few ineffectual protests and asked to see bills, but never insisted, and it is evident that they exercised no discretion at all as to the amount needed for furniture first stated to be £1,000, and gradually increased to reach £3,260.

[57]There is no doubt that Ann asked for each of these sums to be advanced, and it is clear that on each such occasion that Ann requested these advances she did so in writing, and represented that they were required for furniture etc., well knowing in fact that only about £500 was expended on the purchase of furniture from start to finish. The rest went in the family living expenses through the mother's account. Of course, Ann appreciated that these representations were untrue; "silly lies", as she said in the witness-box. The Judge refused to give relief to Ann in these respects. He carefully set out the details of the payments. We think it is to be inferred that he did not believe that Ann was so innocent as she pretended in the witness-box, saying that she always regarded the money as her mother's. Nevertheless, the Judge was clearly of opinion that a presumption of undue influence applied in Ann's case because he stated it was essential that she should have independent advice upon the transaction. Independent advice she did have on the purchase of the house, but none upon the expenditure on furniture, which was quite a separate matter, and this the Judge overlooked. The Judge says that the Bank acted on the faith of untrue statements by Ann, and refused Ann relief on this ground. We cannot agree with this. If the Judge meant no more than that the Bank required some document signed by Ann stating that the money was required for furniture, we agree with him, but we do not think that the Bank can have really acted on a sincere belief in the truth of the representations; their supine conduct shows that they really could have no more than a pious hope which they did not dare to test by pressing to see receipts for the purchase of this vast quantity of furniture, that most of it was being invested in furniture. A moment's study of the mother's account at this time would have shown that even this was improbable. They merely wanted some document which, as they thought, would give legal justification for making the payments.

[58]Further, it seems to us that these very untrue statements must be treated as issuing out of the presumed undue influence of her father made, as they were, either to the Bank in his presence, or by arrangement with him. Finally, we do not consider that these statements, if true, would, as the Judge held, have justified the advances, though furniture bought and taken by Ann and retained by her might have afforded some defence to the breach of trust. The Bank at this stage ought to have had their eyes wide open to the situation and insisted on calling a halt to this reckless expenditure apparently for furniture.

[59]Ann by her counsel concedes that she must give credit for £300 of furniture actually purchased. Subject to that, we feel constrained to come to the conclusion that, without separate advice, the Bank cannot rely on the assent of this young girl to gifts direct into her mother's and father's pockets, and we hold the Bank liable in respect of advances numbered 8, 12, 17, 18, half of 20 and 22 as set out in the statement of claim, and pro tanto allow the appeal accordingly. Having behaved unreasonably, the Bank cannot rely on section 61.

[60]Ann's portion had now been fully used, but there remained one chicken to be plucked, a younger brother, Anthony, then a young man serving with The Blues in Germany. He attained twenty-one on the 15th June 1951, and three days after that event there is recorded an interview with the father, the terms of which are too important to omit. "Date 18th June 1951. Interview with Commander Younghusband. They want £2,000 to be raised for the youngest son. Mr Burrell is to write to the boy explaining that the money will be his to do as he likes with, and when that has been done and we receive Mrs Younghusband's formal request we are to raise the money and get the boy's directions for its disposal " .

[61]As the Judge said, the process had become streamlined. So long as Mr Burrell could write a letter telling the boy the money was his, all else would be automatic. This is exactly what happened. Mr Burrell wrote a most perfunctory letter to the young man in Germany which he agreed in the witness-box could not constitute proper separate advice, and in fairness to him was not intended to be more than a pipe opener to a lawyer's relationship with a potential client, and between the 11th July 1951 and the 7th February 1952 £6,500 was paid straight into the mother's account. There is one payment which is characteristic. The father had succeeded to the tune of £1,000 in raising the wind by a charge on Ann's house, and half the first payment to Anthony was used to repay the Bank this amount, thus robbing Anthony to pay Ann. There was not even a pretence in any instance of any countervailing benefit to Anthony except as mentioned later. We do not feel any doubt that the Bank is liable on these payments, as the Judge held. Relief under section 61 is out of the question.

[62]The story does not end there. In 1953 and 1954 the Bank revalued the assets in the trust. Accordingly, when the father in June 1952 "called to inquire whether he could borrow a few hundred pounds", the Bank (whose words these are) after looking into the figures, without any inquiry whatever as to the purpose except that the father was in what he called "an awful hole", cheerfully agreed to advance to him a further £1,200, and suggested that it should be taken out of the shares of Francis, George and Ann in shares designed to make their advances equal. Fortunately for him, Anthony escaped this raid. Between September 1953 and June 1954 the advances specified in the statement of claim under numbers 28 to 35 inclusive were made direct to the father or mother; they aggregated the grand total of £5,350. Nobody pretends that these were not breaches of trust, but they were assented to by each of the three children. We have already concluded that Francis and George must be taken to be emancipated by this time, and so, we hold, was Ann. She had been married in 1952 and was living in her Chelsea house with her husband. In these circumstances, the learned Judge rightly held that these sums were not recoverable. The Bank refused to make any further advances, not because of the slightest doubts as to the grave impropriety of their conduct over the last six years, but because they thought that if they parted with anything more, they might not be protected against a possible claim for estate duty if the mother should die within five years of any particular advance.

[63]The Bank pleads the Limitation Act 1939, and as to this we wholly agree with what the learned Judge said and need not repeat it. So too as to the defence of laches. As to acquiescence, we think that this must be looked at rather broadly. We were, of course, pressed with the leading case of Allcard v. Skinner (volume 36 Chancery Division, page 1415), but in that case the plaintiff had had her rights fully explained to her by a brother, who was a barrister, and by her solicitor, and yet she took no steps until five or six years later. Even that gave rise to a difference of opinion in a very strong Court of Appeal.

[64]In this case it would be wrong, we feel, to place any disability upon the beneficiaries because it so happened that George was a member of the Bar, and had been in well-known chambers. He had not been in Chancery chambers where it may be said that these things are better understood? but the real truth of the matter is that a party cannot be held to have acquiesced unless he knew, or ought to have known, what his rights were. On the facts of this case we cannot criticise any of the plaintiffs for failing to appreciate their rights until another learned junior, whom they consulted on a far fetched and futile scheme of George's for avoiding estate duty on his mother's death, advised that the advances might be improper. That was in the year 1954, and thereupon the family, headed, of course, by George, took immediate steps to explore this matter. This is a most complicated action, and many matters had to be explored before an action for breach of trust could properly be mounted. The writ was issued in 1958, and we do not think it right to hold that the plaintiffs were debarred by acquiescence from bringing an action which otherwise, to the extent we have indicated, is justified.

[65]We have already dealt with the impact of section 61 in general and in detail as we have gone through the various impugned transactions, and on that we need say nothing further. That leaves only one matter for our consideration, for the learned Judge held that in regard to Anthony he ought to direct an account whereby Anthony would have to give credit for certain payments which he received from his mother's account. Anthony had an account with the Bank, and through the kindness of his parents received the benefit of an arrangement made long before the payments in question whereby, whenever he was overdrawn, his account should be replenished up to £40. If he overdrew to a greater extent than that, he did not receive this benefit but he was wise enough, as we look at his account, never to do so. Furthermore, he had received for some time a trivial allowance, for an officer in The Blues, of £25 a quarter from his parents. It was argued (and the learned Judge agreed in principle) that as his account wa3 being replenished in these ways from his parent's account, he should, instead of being able to claim that the whole amount of £6,500 should be replaced to the trust, bring into account the amount of money which had been transferred to his own personal account. The question is whether the learned Judge was right in accepting that view.

[66]Acting on two authorities, Raby v. Ridehalgh (volume 7, De Gex, Macnaghten & Gordon's Reports, page 104) and Chillingworth v. Chambers (1896 volume 1 Chancery Division, page 685), he apparently discerned some principle which he thought entitled him to direct an inquiry whereby Anthony would have to account for the sums which he had received through his mother's account in this way. Before us counsel for the defendants rightly did not attempt to argue that those two cases supported the Judge's view of the law. We do not doubt that if in fact money were paid by direction of the son to his mother's account, or (and it matters not, as we think) to the son's account, and then overnight to the mother's account, upon an understanding that some part of it was to be used to discharge the son's indebtedness to others, he must accept the position that the part so used must be treated as a payment to him. However, the facts fall far short of that in this case, and it was never sought to justify these payments upon any such ground. All that was argued was that as the son had in fact received, albeit indirectly, the benefit of certain of these payments, he should to that extent account for them.

[67]This seems to us not to present any equitable principle of defence in the mouth of a defaulting trustee. In order to escape, the Bank would really have to establish that payment to the mother's account was pro tanto a payment to Anthony. The truth of the matter is that Anthony, under the presumed undue influence of the Commander, was paying very large sums to his mother's account which went to the general family living expenses, some of which he, in a general way, enjoyed as a member of the family, and some of which he enjoyed in a more particular way because it founds its way into his account under arrangements which had nothing to do with the advances. We cannot see how that circumstance entitles a defaulting trustee to any account even if, which we doubt, it would be possible to frame any inquiry which it would be possible to answer.

[68]On this point we allow the appeal and discharge the order for an account.

[69]We summarise our conclusions on the whole matter thus:(1) As to the claim in respect of the money expended on the purchase of the house in the Isle of Man we agree with the learned Judge, and we dismiss the cross-appeal on this.

(2) As to the sum of £1,000 purported to be expended upon furniture for that house, we disagree with the learned Judge, and we allow the appeal to that extent. This sum must be replaced by the Bank.

(3) As to the £2,600 loan to repay the Hodson settlement, we allow the appeal to this extent, that that sum must be replaced by the Bank but the majority of the court feels that section 61 of the Trustee Act 1925 should relieve the Bank, but only to the extent of the surrender value in 1948 of the policies transferred to Francis and George.

(4) With regard to the £2,000 raised for the alleged purpose of purchasing furniture in the Isle of Man, we agree with the learned Judge and dismiss the appeal.

(5) As to Ann, we think that, notwithstanding her disregard of the truth, the Bank must replace the advances of £3,260 made to her, subject to giving credit for the sum of £300 which was in fact actually expended upon furniture. The appeal is allowed pr o tanto .

(6) We agree with the learned Judge that the Bank must replace the sum of £6,500 advanced to Anthony, but we disagree with the learned Judge that he should have to account for any sums received by her through his mother's account, and we allow the appeal accordingly and dismiss the cross-appeal.

(7) As to the final series of advances aggregating £5,350, we agree with the learned Judge and dismiss the appeal.

[70]The appeal will be restored to the list for argument as to the exact form of order and as to costs on a mutually convenient day when counsel have had an opportunity of considering this Judgment in detail.

LORD JUSTICE WILLMER : The Judgment I am now about to read is my own Judgment on the outstanding point.

[72]I have the misfortune to differ from my brethren as to the degree of relief which ought to be accorded to the Bank under section 61 of the Trustee Act 1925 in respect of their breach of trust regarding what has been described as the Hodson loan transaction. All of us are agreed that in the very special circumstances of this case the Bank should be accorded some relief notwithstanding the fact that they were professional trustees paid for their services. But whereas my brethren think that the Bank should be relieved only in part, I take the view that if relief is to be accorded at all, it should be accorded in full.

[73]I can see no logical reason for stopping short of relief in full. The special circumstance which, in the view of all of us, entitles the Bank to relief is the fact that the solicitor specially appointed by the Bank to give separate advice to, and protect the interests of, Francis and George, failed to ensure that the transaction was carried out in the way which had been advised by Messrs Charles Russell & Co. and agreed to by the boys themselves. The Bank, though clearly in breach of trust, were quite innocent in the matter. They were not the cause of any part of the loss which resulted. Accordingly if, as I think, they are entitled to relief under section 61, they should, in my view, be relieved in full.

[74]I venture to criticise the order proposed by my brethren in relation to this transaction on the ground that, although purporting to grant relief under section 61, it does not in fact result in any relief at all. For even without section 61, I do not see how the Bank could have been made liable for more than the amount of the loss actually sustained through the transaction being carried out as it was. Francis and George in fact received the life policies, the surrender value of which was said to be £650 in 1948. They retained the policies until 1953, by which time they had no doubt increased considerably in value since the payment of premiums was in fact maintained by the mother. The boys then quite voluntarily gave the policies back to their mother, apparently for the purpose of enabling the Commander to raise more money by charging them again. In so far as the boys gave away a tangible asset of value, their loss was due to their own voluntary act, and not to the Bank's original broach of trust. Quite apart from section 61, therefore, I should have thought that in any case the Bank could not have been made liable for the whole of the £2,600, but that credit ought to be given for the surrender value of the policies in 1953.

[75]On the same principle, it has been rightly conceded on behalf of Ann that, in so far as she has herself retained the moneys advanced to her, she cannot claim to recover them again.

[76]If, therefore, as we all agree, relief under section 61 should be accorded, this should, in my view, result in giving the Bank some relief beyond that to which they would in any event have been entitled. For my part, I would relieve the Bank entirely in respect of this £2,600.

LORD JUSTICE UPJOHN : Lord justice Harman is not able to be here this morning, and asks me to say that he concurs in the Judgment which I am about to deliver.

[78]This Judgment deals only with the question of the liability of the Bank in relation to the Hodson trust.

[79]Lord Justice Willmer has expressed the view that, apart altogether from any relief under section 61 of the Trustee Act 1925, the Bank could not be made liable for more than the amount of the loss actually sustained through the transaction being carried out as it was; and as Francis and George received the life policies, he has held that they must give credit for at least the surrender value of the policies at the date of the transaction. I regret that I am unable to share this view.

[80]The transaction as carried out was a complete breach of trust, and entirely unauthorised by clause 11. Therefore the Bank must replace to the trust funds the £2,600 misapplied.

[81]Test it in this way. Suppose that Francis and George had still the policies, could the Bank, on being ordered to replace £2,600 to the trust, claim that they were only bound to do so on having replaced to them the policies, or at any rate at least upon receiving credit for the 1948 surrender value of the policies ? It is, in my judgment, not the law that the plaintiff, rightly suing for breach of trust, must account for every benefit he may have incidentally received. What right have the Bank to claim some set-off from the plain consequences of their breach of trust ? I can see no possible equity which entitles the Bank to do so. In fairness to the Bank, let it be said that their counsel never argued that they had any right (apart from section 61} to claim any such credit.

[82]On the other hand, of course, as the Judgment of the court has pointed out, it cannot be doubted that a beneficiary who has consented to a transaction in breach of trust must be prepared to accept the consequences and give credit for the money or property that he has received. That principle, in my judgment, cannot be applied to the case of the Hodson trust for the very simple reason that, as the Judgment of the court has declared, Francis and George never consented to the transaction as it was in fact carried out, and indeed they were wholly ignorant of it. Therefore, the principle that they must accept the consequences of a breach of trust to which they have consented has no application at all, in my judgment, to these circumstances. The boys received the policies, as they thought, as part of a larger transaction which would give them security and a profit on their mother's death. Through the failure of the legal advisers of the boys and of the Bank, this transaction was not carried out at all, and it gave them nothing except the policies. For my part, in those circumstances, I entirely fail to understand why Francis and George have to give credit for any property which has passed to them under a transaction of which they never knew, and never gave their consent. In law the Bank made them a present of the policies.

[83]Lord Justice Willmer has drawn a parallel between this transaction and the transaction in which Ann conceded that she must give credit for the moneys advanced to her of which she retained the benefit. With all respect, I do not follow this. Ann conceded rightly that she must give credit for the moneys in fact applied for her benefit for the reason that, as she requested money to be applied in the purchase of a house and decorations etc., she must account for the moneys so applied in accordance with her request. That was in accordance with the general principle I have just stated, that he or she who has consented to a transaction in breach of trust must give credit for the benefit he or she has received. There is no parallel in the Hodson settlement where there was no such consent, nor any application of money at the boys' request as the transaction turned out.

[84]Accordingly, for my part I am quite unable to accept the view that Lord Justice Willmer has expressed that, apart altogether from section 61, Francis and George would have to account in some measure for the policies which were in fact transferred into their names. In my judgment, therefore, the only question that arises is whether the Bank should be relieved from the consequences of their breach of trust under section 61 of the Trustee Act to any, and if so, what extent. This, I think, is a very difficult question. The Judgment of the court has already pointed out that the Bank were personally innocent, but they were ill-advised by their own solicitors; but the Bank must accept responsibility for such negligence, and section 61 cannot possibly be invoked to relieve them from its consequences without more. The circumstance that seems to me to make the application of the section possible is that the Bank received the letter quoted in the Judgment of the court written by Mr Burrell on behalf of Francis and George saying that the matter was in a satisfactory state. Thereafter it would have been quite unreasonable for the Bank to take any further step to assure themselves that the transaction had been properly carried out, and they were lulled into a false sense of security. Section 61 is purely discretionary, and its application necessarily depends on the particular facts of each case. I think, in the circumstances of this case, that I am prepared to hold that the Bank acted honestly (that is not in dispute) and reasonably and ought fairly to be excused to the extent of the surrender value of the policies transferred to the boys at the date of the transaction, about £650, but no doubt the exact figure can be ascertained. I do not see how the Bank can properly be relieved to any greater extent. The fact that the mother paid the premiums for a few years, so enhancing the value of the policies, is (so far as the Bank is concerned) as irrelevant as the fact that, as was to be expected, in due course the boys gave the policies back to their mother, and so, of course, to the Commander, thereby losing all benefit from them.

LORD JUSTICE WILLMER : Mr Bagnall and Mr Home, you have heard that we propose to give you time to consider what we have said before you come and discuss the appropriate form of order. Perhaps you will communicate with the court through the usual channels when you are ready to do so.

[86]Mr BAGNALL: I am obliged to your Lordship.

LORD JUSTICE WILLMER : I should add that when you are ready, it will be necessary to reconstitute the court, so we will appreciate It If you can give as long notice as possible.

[88]Mr BAGNALL: I am grateful to your Lordships for dealing with the matter in that way. I do not know whether your Lordship had it in mind that my learned friend and I, or perhaps our learned juniors, should attempt to agree some minute of order, or whether you think that we should merely study the Judgment and discuss the matter.

LORD JUSTICE UPJOHN : If you can agree, so much the better .

[90]Mr BAGNALL: I apprehend there would be no difficulty in agreeing a form of order to give effect to the Judgment; but it may well be, of course, that agreement and harmony will disappear on the question of costs.

LORD JUSTICE UPJOHN : I think that may be safely anticipated!

[92]Mr BAGNALL: But it would perhaps be helpful to everyone if some document were before the court.

LORD JUSTICE WILLMER : Yes, I think it would be most helpful. If you will put your heads together and perhaps reach some measure of agreement, so much the better.

[94]Mr BAGNALL: That will leave the question of costs to be argued, and any further relief for which anyone may be minded to ask.

LORD JUSTICE UPJOHN : Copies of the main Judgment are available, but my supplemental Judgment is not yet available, but it will be if you apply for it tomorrow or the day after.

[96]Mr BAGNALLs Speaking rather at the moment without fully considering it, my Lord, it may very well be possible to include in the minute of order the part your Lordships have dealt with separately without actually seeing the Judgment. It is quite a short point.

LORD JUSTICE UPJOHN : Yes, probably. The view of the majority of the court, of course, is in the main Judgment.

[98]Mr BAGNALL: If your Lordship pleases.

Cited in 11 later judgments

and 2 more of the most senior