Two beneficiaries of a will trust recently took legal action against professional trustees on the grounds that they allegedly made poor investment decisions, which led to losses within the trust.
Following Jack Daniel’s death in 1999, a trust worth £3.5 million was set up for his children, then aged 13 and 16. The trustees were Daniel’s solicitors, who had no personal expertise in managing investments and relied on the advice of an independent financial adviser (IFA) between 2000 and 2002. Based on the advice they were given, the trustees invested around 80% of the trust funds in equities related to the technology sector. The funds underperformed and suffered heavy losses in 2000 and 2001.
The beneficiaries later sought compensation of more than £1.4 million for breach of trust, alleging the trustees had failed to implement an appropriate investment strategy and relied on poor advice and recommendations that were costly to follow. The trustees denied the claims and maintained they acted reasonably and honestly.
The court concluded that although certain breaches of duty may have occurred, the trustees had acted to the best of their abilities and followed advice they believed to be reliable. The beneficiaries were unable to prove the breaches resulted in losses that would otherwise not have occurred, meaning their claim for compensation was rejected.
Paula Steele, managing partner at John Lamb Financial Planning, says: “This case emphasises the difficulty of taking legal action against trustees for breach of trust when they have sought professional advice. However, it’s important to note the judge’s criticism of the trustees, calling their approach to trust investments less balanced and diversified than many trustees would have thought appropriate.”