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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Gregson v HAE Trustees Ltd & Ors [2008] EWHC 1006 (Ch) (08 May 2008) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2008/1006.html Cite as: [2009] Bus LR 1640, [2008] EWHC 1006 (Ch)

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IN THE HlGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand. London, WC2A 2LL
		8/5/2008

Mr. Robert Miles QC:

Introduction

1. By a deed of settlement of 17 June 1960 ("the Settlement") between Henry Cohen ("the settlor") and the first defendant ("HAE"), the settlor created a discretionary trust the objects of which included the issue of the settlor's grandparents.
2. The settlor and his two brothers, Alfred and Edwin, had previously acquired and built up a furniture business then known as Courts Bros (Furnishers) Limited, which later became Courts plc ("Courts"). By the early 1960s Courts was already a valuable company.
3. HAE was incorporated on 30 May 1960 to act as an executor or administrator of estates or as a trustee. It took its name from the first initials of the three brothers, Henry, Alfred and Edwin. Over the years it was appointed as trustee of a number of Cohen family trusts and settlements including the Settlement.
4. The original directors of HAE were Henry, Alfred and Edwin Cohen. Later others were appointed as directors, mostly members of the Cohen family. The second to fifth defendants are sued as former directors of HAE (the fourth defendant representing a former director of HAE).
5. Substantially the whole of the property of the trust, at all material times, consisted of shares in Courts which the settlor transferred to HAE shortly after the Settlement was created (together with various accretions which have since arisen on scrip or bonus issues) ("the Courts shares"). It is common ground that none of the Courts shares represented later purchases by HAE. HAE has retained the Courts shares since they were settled.
6. The claimant, who is a member of the Cohen family, is a beneficiary of the Settlement under an appointment made in 1991. Her share is 25.733% of the trust fund.
7. On 30 November 2004 Courts went into administration. The company was and is insolvent with an estimated deficiency for members of £70,000,000. The Courts shares (and, with them, the property of the trust) became worthless.
8. The claimant alleges that HAE was in breach of duty in failing to review the need to diversify the assets of the Settlement and that had it done so, and taken appropriate professional advice, it would have diversified and avoided the losses it has suffered.
9. HAE has no assets and therefore, although a party to this action, it has played no part. The real targets are the directors of HAE, the second to fifth defendants. The claimant seeks to claim against them not on the basis of a directly owed fiduciary or tortious duty but by alleging that they are liable to HAE for breach of their duty of care to HAE and that such claims of HAE are trust property of the Settlement. Since HAE will not and cannot be expected to sue, the claimant claims to be able to sue as a beneficiary of the Settlement. Claims of this kind, based on the idea that a corporate trustee's claims against its directors are held on trust for the trusts it administers, have become known as "dog leg claims".
10. The second to third defendants and the fifth defendant have issued applications to strike out or for summary judgment. They say, first, that the dog leg claim lacks reasonable grounds or has no real prospect of success, and, secondly, that HAE did not owe any duty to review diversification of the trust funds because, under the Settlement, the Courts shares were to be held in their original form until HAE decided in its discretion to convert them into money for future investment, and that until that happened there was no duty to consider diversification.
11. The parties are agreed that the evidence relevant to these two issues is complete, in the sense that nothing further of relevance will emerge between now and the end of a trial, and all sides urged me to decide both of these points one way or the other rather than simply deciding whether the claim was arguable.
12. The first defendant's absence has already been explained. The fourth defendant, as personal representative of one of the former directors, pleads plene administravit and agrees to submit to the determination of the Court of the factual and legal issues in the claim. Her absence does not therefore prevent me from deciding the issues raised one way or other.
13. The claimant was represented by Mr. Le Poidevin, the second and third defendants by Mr. Newey QC and Mr. Mumford, and the fifth defendant by Mr Steinfeld QC. Mr. Newey took the lead for the defendants on the log leg point, and Mr. Steinfeld led on the trustee's duty point. I am grateful to them all for their clear and succinct arguments.

Further factual background

14. The remaining facts relevant to the two points for decision can be stated quite shortly.
15. The Settlement included the following terms:

"1(b) "the Trust Fund" means the said sum of £100 and any further money or property that may at any time or times hereafter be paid or transferred to or otherwise vested in the Trustees by or at the instance of the settlor without any other direction or declaration of trust and the property for the time being representing the same respectively.

2. The Trustees shall hold the Trust Fund as to so much thereof as shall consist of money upon trust to retain the same [or] any part thereof uninvested for so long as the Trustees may think fit or at any time or times in the discretion of the Trustees to invest the same or any part thereof in any manner hereinafter authorised and as to property other than money upon trust to allow the same or any part thereof to remain in its actual condition or state of investment for so long as the Trustees may think fit or at any time or times in the discretion of the Trustees to sell call in and convert into money the same or any part thereof.

8. Money subject to the trusts hereof may be invested in the purchase or other acquisition of any property of whatsoever nature and wheresoever situate and whether or not subject to encumbrances or involving liability of any kind (including the lending or deposit of money with or without any personal or other security and upon any terms and conditions whatsoever) to the intent that the Trustees shall have the same full free and unrestricted powers of investment and of changing investments as if they were absolutely entitled to the Trust Fund beneficially."

16. Turning to HAE, it was incorporated as a company limited by guarantee and not having a share capital. Its objects were to act as executor of wills and other testamentary dispositions, as administrator of the estates of deceased persons, and as trustee of trusts. By clauses 4 and 5 of the Memorandum of Association the affairs of the company were to be conducted with a view to avoiding the acquisition of any profit or gain and no part of the income, property or assets of the company were to be transferred whether by way of dividend, bonus or otherwise to any member of the company.
17. By clause 37 of the Articles of Association the company in general meeting had power to appoint any member of the company to be a director and by clause 38 the board had the power to appoint any member of the company to fill a casual vacancy or as an addition to the board so that any such director would hold office until the next following annual general meeting and would then be eligible for re-election.
18. By clause 30 of the Articles the first directors were Henry, Alfred and Edwin Cohen.
19. Soon after its incorporation on 30 May 1960, HAE became the trustee of a number of Cohen family trusts. On 8 June 1960 it became trustee of the AS Cohen Trust and the EN Cohen Trust; on 17 June 1960, of the ES Cohen Trust and of the Settlement; on 4 February 1963, of the EG Cohen Trust; on 8 March 1963, of the PC Cohen Trust; and on 23 August 1967, of the BJR Cohen Trust. In the 1990s HAE was also appointed trustee of ten trusts of life insurance policies in respect of various members of the wider Cohen family.
20. From time to time HAE incurred liabilities to outside creditors including its solicitors and accountants and was liable to pay tax.
21. I should also say what is not in issue on these applications. The defendants say that they did in fact consider the question of diversification of the Courts shares from time to time and had good grounds for concluding that the shares should be retained. They say it was always the wish of the Cohen family, including the claimant and the other appointees of the Settlement, that Courts should remain substantially a family owned and managed company. They rely on letters of wishes by which the settlor stated in 1988 that the shares should not be sold except in the case of a takeover. They point out that the holdings of the various family members in Courts, which together comprised a majority holding, continued until late 2004, and that diversification would have risked eliminating the family's controlling holding. They also refer to the terms of shareholders agreements affecting the shares, to potential tax liabilities from a sale of the shares and to the possibility of a disposal of Courts or its business during 2004, all of which they say were good reasons not to diversify. They also allege that the claimant, with full knowledge, consented to and concurred in the retention by HAE of the Courts shares. It is common ground that I cannot deal with these issues on the present applications, and that the application is restricted to the two narrow points I have already identified. However, this brief survey shows that if this case is to continue there will be a reasonably substantial trial.

The dog leg claim

22. The claim is pleaded as follows in the particulars of claim (changed to adopt the definitions used in this judgment):

"30 Each of the Relevant Directors owed a duty of care, diligence and skill to HAE during the period of his or her holding office and in particular a duty to take all reasonable steps to ensure that HAE did not cause loss to the assets subject to the trusts thereof and was not in breach of its duties as trustee of the Settlement.

31 None of the Relevant Directors took any or any adequate steps so to ensure ... [the steps it is said that Directors should have taken are then set out including reviewing from time to time investments of the Settlement and considering whether they should be varied, whether to dispose of the Courts shares, and taking proper advice as to the way in which its powers of investment should be exercised].

32 The breaches hereinbefore mentioned on the part of HAE of its duties were the consequence of a failure of the Relevant Directors to take any such steps.

33 HAE has in the premises suffered loss, being the loss to the assets subject to the trusts of the Settlement and its liability to the claimant and the other beneficiaries of the Settlement to compensate them for breach of trust, and is entitled to claim damages or other compensation from the Relevant Directors for that loss.

34 That claim is held by HAE on trust for the beneficiaries of the Settlement, and of any appointment made thereunder, and subject to the trusts thereof, by reason of the position of HAE as trustee of the Settlement and hence a person under a duty to act in relation to the Settlement for the benefit of its beneficiaries and not for its personal benefit."

23. The breaches alleged against HAE are, in summary, breaches of its alleged duties to consider diversification of the assets and take appropriate professional advice, and follow that advice.
24. The defendants argue that this claim fails as a matter of law. They say that, applying intelligible and established legal rules, there is no basis for saying that the claims of HAE against its directors for breach of their duty of care are held on trust for the beneficiaries of the Settlement. HAE is a company. As a company it is required by law to have directors (see, in its current form, section 154(1) of the Companies Act 2006). On being appointed as directors they came under a number of duties to HAE including the duty of care which is now to be found in section 174 of the Companies Act 2006. The duties arising under that section, which codifies the existing law, are owed to the company. When the first directors assumed that office they owed duties to HAE but could not have owed duties to the beneficiaries of the Settlement, which did not exist at that stage. So how is it said those duties later became part of the trust property of the Settlement? There was no declaration of trust to that effect and there is no other established legal mechanism by which the duties could have become trust property. Equally, when new directors were appointed after the establishment of the Settlement, how did they come to owe duties held upon trust for the Settlement? Their duties were again duties only to HAE and it was for HAE to determine whether or not to enforce those duties. The defendants also criticise the formulation of the duty advanced by the claimant which is expressed in terms of avoiding loss to the assets the subjects of the trust. They say that the duties owed by directors are to avoid (avoidable) losses to their own companies and that, while performance of those duties may in many cases correspond with the performance of the company's obligations to third parties, it is confusion of thought to say that the duty itself extends beyond the avoidance of losses to the company.
25. Mr. Le Poidevin argues that where a company acts as a trustee the duties of the trustee company are to avoid losses to the trust, that the company's actions can only take place through the directors, that the directors in performing their duties to the company are necessarily performing the company's duties to avoid losses to the trust and that, because of the proprietary nature of the interests of the trust in the trust assets, the relevant obligations of the directors in and about the performance of those duties form part of the trust property itself. He seeks to draw a close analogy with those who advise trustees, such as solicitors, valuers or estate agents. Where a contract is entered into with an adviser, the benefit of the contract is trust property and therefore the fruits of any claim under the contract are also trust property. A director of a trustee company may be at least as intimately involved in the administration of the trust as an outside adviser, and he says that, by analogy, claims against directors are also held upon trust. There is no need for a declaration of trust of such claims because the trust arises, he says, by operation of law.
26. Before addressing these arguments I should say something about the relevant authorities.
27. The earliest is the decision of the Court of Appeal in Bath v. Standard Land Co. Ltd. [1911] 1 Ch 618. It concerned an account between the owner of an estate and a company which acted as manager of the estate. One of the issues on the taking of the account was whether the directors of a company acting as a trustee owe direct fiduciary duties to the beneficiaries of the trust. The majority held that they do not. Cozens-Hardy MR said, at p.65:

"Directors stand in a fiduciary relation to the company, but not to a stranger with whom the company is dealing. It is of course true that a company acts through its directors. But that does not involve the proposition that if a breach of trust is committed by a company acting through its board a beneficiary can maintain any action against the directors in respect of such breach of trust. Of course I except the case where trust property can be followed into the hands of a director or of any stranger with notice. No such point arises here."

At p.67, he said:

"I base my decision upon the broad principle that directors stand in a fiduciary position only to the company, not to creditors of the company, not even to individual shareholders of the company, still less to strangers dealing with the company. This principle applies equally whether the relation between the company and the stranger is one purely of contract, such as principal and agent, or as one of trustee and cestui que trust. To speak of the directors as the "brains" of the company or the "hands" of the company is only to use words which have no definite meaning in this connection."

At p.642, Buckley LJ said:

"This conclusion has rested upon the proposition that the directors stand in a fiduciary position towards Mr. Bath. In my opinion this is erroneous. A fiduciary relation can only arise either contractually or by implication of law. The contract between Mr. Bath and the corporation is one to which the directors are not parties. No one could contend that a director is in any way liable upon or in respect of the contract of the corporation. Between Mr. Bath and the directors there exists no privity of contract. Then does there arise as between those parties any fiduciary relation by implication of law? I think not."

At p.644, he said:

"A director is not personally liable for the breach of trust or breach of duty of the company towards a person contracting with the company."

28. Bath v. Standard Land Co. has stood for almost 100 years. Mr. Le Poidevin does not and cannot seek to challenge the decision. He says, however, that the dog leg claim is concerned with enforcement of directors' duties to their company, and does not require a direct duty. I return to this point below.
29. The next relevant authority, and the first to consider the dog leg claim, is the decision of the Court of Appeal of Victoria in Young v. Murphy [1996] 1 VR 279. A trustee company, BPTC, was replaced as trustee of a number of investment trusts. The new trustees brought proceedings against more or less everybody who had been involved in the administration of the trust. The targets included the former trustee, BPTC, which was by then in liquidation, the former trustee's directors, the parent company of BPTC on the basis that it was vicariously liable for the directors' wrongs and was a shadow director, the partners of the solicitor who was a director of BPTC alleging that they were jointly liable with the solicitor for his actions as director, and the trust's auditors, alleging breach of a duty of care and breach of duty. For good measure, in a separate action the new trustees sued the former trustee's professional indemnity insurers. A number of preliminary questions were argued concerning the new trustee's standing to sue. The claims against the directors were put in two ways: first, it was said that they had knowingly participated in the breaches of duty by the trustee essentially under the second limb of Barnes v. Addy (1874) LR 9 Ch. App 244; and, secondly, there was a dog leg claim. The Court of Appeal accepted that the new trustee had standing in relation to the knowing assistance claims, but rejected the dog leg claim. Phillips J. (with whom the other members of the Court agreed) examined the dog leg claim in detail. At p. 302, in a passage worth setting out at some length, he said:

"The business activity of BPTC as trustee of these trusts was itself the framework within which the directors came to perform the duties which they owed to the company by virtue of their office as director; but the duties which were owed are none the less general duties and are not owed to the company in some specific role or character, or at least they are not owed to the company in some specific role or character when the duties are alleged to have arisen only in virtue of the office which is held. In this, such duties may be contrasted with some specific contractual obligation undertaken by a third party to the company and undertaken to the company when acting in some particular capacity. Thus a valuer may contract with an individual who is in fact acting as executor of an estate; or he may contract with a company which is in fact acting as trustee of a trading trust. In such cases, the benefit of the contractual obligation may well be held by the executor or by the trustee for and on behalf of the deceased's estate or the trust, as the case may; but no sufficient basis is made here for any such conclusion in relation to the directors' duties which arose simply by virtue of the office.

It follows that if there be a breach by the directors of the duties which they did owe to the company, being the former trustee BPTC, and if the company was thereby damnified, BPTC might have a right of action against the directors for breach of their duties. In so far as those duties were founded in the common law, there might be a right of damages and, if they be fiduciary duties, there might be a right to equitable compensation. Either way, it is the company in which the right of action is vested. The plaintiffs now claim to have succeeded to that right of action by virtue of their appointment as new trustees, but by what right can that be so? The right of action held by the former trustee cannot be shown to have been trust property; there is no basis upon which to conclude that it was. Unlike the valuer whom I have used for illustration, the directors cannot be said on the pleading in this case to have owed their duties to the company only in relation to some particular trust or trusts; nor were those duties imposed upon them in relation to some particular item or items of trust property as such. Rather the existence of both the trusts and the trust property was but the context in which the duties fell to be discharged by those who owed duties to the company generally as its officers. There is no basis then, for supposing that the right of action was trust property in the hands of BPTC or for supposing that the right of action passed to the new trustees, upon their appointment as such.

On that basis, it follows that any right of action against the former directors for breaches of duties said to have been owed to BPTC remains with that company. That company is now in liquidation and so it is a matter for the liquidator whether to pursue the directors for those alleged breaches of duty. Whether he could be persuaded to bring such proceedings (perhaps, if indemnified as to costs) is a matter which does not fall for decision. But the benefit of such proceedings will belong to the creditors generally, in the liquidation, consistently with my view that the directors owe their duty to BPTC and not to BPTC in a particular capacity. It is, I think, misleading to suggest that the duties were owed to BPTC "personally", because that may be mistaken to mean that those who are beneficiaries under the trusts have no concern with the pursuit of the directors. That is not so because, in so far as BPTC may now be called upon to recompense the beneficiaries (through the new trustees) the loss to the trust property, thus far those beneficiaries may well be interested in the former trustee's pursuing its directors for breaches of their duties. It is important that the plaintiffs do not allege in this portion of the pleading that the directors owed any duties to the beneficiaries; the only duties relied upon are those said to be owed by the directors to BPTC, the former trustee."

30. The Court also dealt with the claim against the auditors of the trusts. It held that the new trustees had an arguable claim against them. At p.291, Brooking J. said:

"A contract was held in trust by the former trustee if it was made in the course of administering the trust. A contract made by a trustee because he is administering the trust is not necessarily made in the course of the administration. It may be made for private purposes as trustee as opposed to being made in the management of the trust estate. Elaboration on the distinction is unnecessary, since in the present case the contracts were beyond question made in the course of administering the trust."

At p.317, Phillips J. said:

"Brooking J. has dealt in detail with the claims against the auditors and I agree with what his Honour has written. In making the contract with Priestley & Morris to be auditors of the trusts, BPTC was clearly acting in the administration of the trusts and for the purposes of the trusts. It follows then that the benefit of the contract was itself trust property, with the result that any right of action arising thereunder was trust property too. Further, that is so whether the respondents rest their claim in contract or in tort; for in either case the circumstances giving rise to the duty are such that the cause of action is trust property so that the proceeds of any such action would be property belonging to the beneficiaries and would not be property of BPTC available for its creditors generally."

31. I should next refer to a passage from Royal Brunei Airlines Sdn. Bhd v. Philip Tan Kok Ming [1995] 2 AC 378 at 391, where Lord Nicholls said:

"It is against this background that the question of negligence is to be addressed. This question, it should be remembered, is directed at whether an honest third party who receives no trust property should be liable if he procures or assists in a breach of trust of which he would have become aware had he exercised due diligence. Should he be liable to the beneficiaries for the loss they suffer from the breach of trust?

The majority of persons falling into this category will be the hosts of people who act for trustees in various ways: as advisers, consultants, bankers and agents of many kinds. This category also includes officers and employees of companies in respect of the application of company funds. All these people will be accountable to the trustees for their conduct. For the most part they will owe the trustees a duty to exercise reasonable skill and care. When that is so, the rights flowing from that duty form part of the trust property. As such they can be enforced by the beneficiaries in a suitable case if the trustees are unable or unwilling to do so. That being so, it is difficult to identify a compelling reason why, in addition to the duty of skill and care vis-a-vis the trustees which the third parties have accepted, or which the law has imposed upon them, third parties should also owe a duty of care directly to the beneficiaries. They have undertaken work for the trustees. They must carry out that work properly. If they fail to do so they will be liable to make good the loss suffered by the trustees in consequence. This will include, where appropriate, the loss suffered by the trustees, being exposed to claims for breach of trust."

32. Mr. Le Poidevin relies on the sentence "[t]his category also includes officers and employees of companies in respect of the application of company funds". He argues that the sentence only makes sense if Lord Nicholls was referring to trust companies and that, if that is right, he was assimilating the position of officers or employees of such companies to advisers, consultants, bankers and agents. He says that the rest of the passage shows that claims against those people are trust property enforceable, if the trustees are unable or unwilling to act, at the suit of the beneficiaries.
33. I reject this analysis. In my view, there is no basis for taking Lord Nicholls to have endorsed the dog leg claim. When referring to companies he did not confine his remarks to trust companies or corporations but referred to companies generally, and, as Mr. Newey points out, he spoke of the application of company funds rather than trust funds. The sentence is, in its context, not easy to follow. Mr. Le Poidevin described it at one point as mysterious. It appears almost a parenthetical afterthought. But if it is to be fitted into the passage, it is more likely that Lord Nicholls was referring to a case where company funds are entrusted by the directors to other officers or employees who then misapply it: the company is, on that example, in a position of the beneficiary and is entitled to bring proceedings to recover the money.
34. In any case, the passage concerned a different issue, namely, whether the law should impose direct liability on trust advisers to beneficiaries for negligence, and Lord Nicholls concluded that there was no need for such a duty because the remedies available to beneficiaries were sufficient. He dealt with the example of trustees employing advisers or bankers or agents and pointed out that engagements entered into by trustees in the administration of the trust are trust property. This is the same conclusion as was reached in Young v. Murphy about the trust auditors.
35. Most significantly for present purposes, Tan itself concerned a company which acted as the trustee of the receipts and sales of passenger and cargo transportation. The decision in the case was, of course, that the director could only be liable as an accessory to the trustee's breach if he was shown to be dishonest. If Lord Nicholls had thought that the duties of the defendant, as a director of the trustee, were held on trust for the claimant there would have been no need to establish dishonesty. Negligence would have done.
36. For these reasons, in my judgment, the passage at p.391 cannot be read as providing any support for the dog leg claim. Indeed, in my view, the reasoning in Tan tells against the existence of the dog leg claim as, on the facts, such a claim would have allowed the claimant to establish liability without the need to show dishonesty.
37. The next authority is HR & Ors v. JAPT & Ors [1997] OPLR 123. The plaintiffs were the present trustees and a beneficiary of a company pension scheme. The defendants included the former corporate trustee of the scheme and a solicitor who had been both director of the former corporate trustee and managing director of the principal company of the scheme. The plaintiffs alleged various acts of mismanagement which had led to a loss to the scheme of several millions of pounds. The director sought to strike out the pleadings under 0.18 r.19 of the RSC on the basis that they disclosed no cause of action. The plaintiffs argued their case against the director on five grounds: (a) a direct fiduciary duty; (b) a direct tortious duty; (c) accessory liability; (d) a dog leg claim; and (e) piercing the corporate veil. Lindsay J. held that claims (a) and (b) were not available in law and that (e) was hopeless on the facts, but that claims (c) and (d) were at least arguable. In the event he allowed claims (a) to (d) to go forward to trial on the basis that they arose out of the same facts.
38. As regards the dog leg claim, Lindsay J. considered the passage from Tan which I have cited above, and also considered Young v. Murphy. He concluded that it might be possible to distinguish Young v. Murphy on the basis that, in the case before him, the former corporate trustee had never had had any business but the conduct of the one trust, and had no assets in its charge but the assets of that trust, so that its directors were as such concerned only in the administration of one trust, and that there was no general body of creditors. Lindsay J. also relied on the analogy with an adviser to a corporate trustee and raised the question why a director of a corporate trustee should be less vulnerable to a dog leg claim than some extraneous stranger such as a solicitor or banker whose involvement in the trust might be more spasmodic and whose knowledge of the trusts less extensive than that of a director. He concluded that he was not prepared to describe the plaintiffs' dog leg claim as unarguable.
39. I shall return to HR v. JAPT later in this judgment. The Guernsey Court of Appeal considered it in Rowe and Rich v. Cross (1998/99) ITELR 34. At p. 357 the Court observed, mordantly, of the dog leg claim:

"Such claim is not pleaded in the instant case and we need say no more about it than that, if it is to become a binding principle of law it still has some progress to make."

40. Finally, in Alhamrani v. Alhamrani [2007] JRC 026, the Royal Court of Jersey considered the arguability of a dog leg claim against directors. The point arose under an application for leave to amend pleadings to introduce the claim. Commissioner Page refused the application. In paragraphs 33-34 he said this:

"33. Mr. Taylor conceded, as he had to, that if the pleaded dog leg claim is valid in the present case it will apply equally to any director of any corporate trustee company whose negligence results in loss to the trust fund and consequential liability on the part of the company, irrespective of the state of that company's business, the possibility of such liability being satisfied from its own resources or those of its insurers, or any other circumstance.

34. But the notion that the right to performance of the standard statutory duties owed by a director to his company (as it is put in the first party's pleading) or the duty of a director not to cause loss to his company or the company's cause of action arising from breach of any such duty (as it is put elsewhere) is, in the ordinary way to be regarded in law as the "asset" or "property" of the trust of which the company is trustee, seems to me to have a degree of artificiality and awkwardness about it that is not easy to accommodate - at least in circumstances which are not such that the imperatives of justice leave no other alternative. Other considerations apart, it would introduce subtleties of inter relationship between trust and company law that can only lead to uncertainties of a kind that principals, insurers and advisers, as well as the law itself, could do without. And the mere fact that a director may have had particular responsibility for the affairs of the particular trust cannot, in my view, be sufficient to displace a fundamental nature of a director's statutory duties to his company or justify any equivalence with the sort of exceptional circumstances that existed in HR v. JAPT: certainly not in a case such as the present where there is no suggestion that the responsibilities of directors were confined exclusively to the trusts in question."

41. It is interesting to note from that decision that Jersey had previously had legislation (Article 56 of the Trusts (Jersey) Law 1984) which made the directors of corporate trustee guarantors of the damages awarded by the Court against the corporate trustee for breach of trust. That provision was repealed in 2006.
42. So far as the researches of counsel have been able to discover, the only textbook which notices the possibility of the dog leg claim is Lewin on Trusts (of which Mr. Le Poidevin is one of the editors) and it does so in pretty lukewarm terms.
43. I now turn to deal with the arguments of the parties in greater detail, bearing in mind these authorities.
44. I take as my starting point the general rule that a director of a trustee company does not owe a fiduciary duty to the beneficiary of the trust. Almost a century ago the Court of Appeal in Bath v. Standard Land Co. had to choose which branch the law should follow on this question. It has since then been settled law. The claimant does not challenge this principle. Nor does the claimant allege that there is a basis for a tortious duty of care owed by the directors directly to the trust or its beneficiaries.
45. Mr. Le Poidevin submitted that the lack of a direct duty was irrelevant, because his argument was about the indirect enforcement of the duty owed to the company rather than about the existence of a direct duty. He said that the company itself holds the claim on trust as part of the trust property and that therefore the lack of a direct duty does not matter. I accept that there is, at least in theory, a structural difference between a direct fiduciary or tortious duty and the indirect route involved in the dog leg claim. But the real difference between the two seems to me to be approaching vanishing point. The duty advanced by the claimant is a duty to avoid losses to the Settlement, and has to be: the directors may well have owed entirely separate and different duties to the company, so, to be even arguable, the duty has to be limited to correspond with the specific losses to the trust. But, stated in that way, the duty is for practical purposes a duty owed by the directors (through the medium of a claim by the company held on trust for the beneficiaries) in identical terms to those that would arise under a direct duty.
46. The dog leg claim, if valid, would, for all practical purposes, circumvent the clear and established principle that no direct duty is owed by the directors to the beneficiaries. The refusal of the law to accept that directors of a trustee company owe a direct duty to safeguard the assets of a trust of which it is trustee is, I consider, a powerful reason to doubt that directors may be liable to the beneficiaries of the trust by the indirect, dog leg, route now proposed.
47. That is the beginning. The next consideration is whether the claimant is able to offer any intelligible legal mechanism whereby the rights of a company against its directors are said to be held on trust for the beneficiaries of the Settlement. Mr. Le Poidevin argued by analogy with the case of trust advisers. He said that a claim against the directors of a trustee company, who may have greater involvement in the affairs of the trust than an outside adviser, was, if anything, more justified than that against the adviser.
48. Mr. Newey argued that the legal analysis under the two heads is quite different. Where advisers are appointed by trustees in the administration of the trust, the contract, like any other chose in action, becomes part of the trust property, as does any claim for breach of the contract. The same could be said of a duty arising in tort under the principles in Hedley Byrne v. Heller 1964 [AC] 465. Young v. Murphy and Tan show that the contract itself becomes trust property and, in appropriate circumstances, the beneficiaries are able to sue for breach of a contract. Where new trustees are appointed in place of the former trustees, by section 40 of the Trustee Act 1925 the benefit of the contract vests automatically in the new trustees without the need for any further assignment. This is a straightforward application of established principle.
49. Mr. Newey argued that the position of the director of a trustee company is quite different. The director is not appointed by the trustee in the course of the administration of the trusts. The directors are appointed by the relevant organs of the company (the general meeting or the board) to hold office as directors of the company. The duties they owe are now set out in statute (although, so far as the duty of care is concerned, statute codifies the existing law). The directors are able to ascertain the extent and source of their duties under company law. There is no sense in which the directors of a trustee company are engaged by the trustees of the trust. Therefore, there is no established or recognisable legal mechanism by which it could be said that their duties become part of the trust estate.
50. Mr. Le Poidevin sought to meet this point by submitting that the reason why claims against an adviser are part of the trust property is because the trustee has engaged the adviser under his duty to protect the trust assets. He says that the director of a trustee company, in the performance of his duties, is obliged to protect the trust assets and that, therefore, the duties he owes become part of the trust property. In my judgment, this argument breaks down at two stages. First, as Phillips and Brooking JJ. stated in Young v. Murphy, the contract with the adviser is trust property because the engagement is made in the course of administering the trust and for the purposes of the trust. In that regard a contract for services is akin to an investment made by the trustees under their administrative power of investment: the benefit of the contract, like an investment, is property of the trust. Second, as already discussed, it makes no sense to say that the trustee company appoints the directors, whether in the administration of the trusts or, indeed, were it relevant, as part of the discharge of its duties to protect the trust property. It may be that in performing their duties the directors of the trustee company are engaged in acts of administration of the trust, but it does not follow, in my judgment, that the directors have been appointed by the trustees, whether under their administrative powers or pursuant to their duties.
51. Mr. Le Poidevin also relied on the example of the trustee company having its own in-house solicitor. He argued that if the rights of a trustee against an outside solicitor appointed in the course of administration of the trusts are held as part of the trust property, the same should be true of the employment of an in-house solicitor. But, in my view, this example merely begs the question at issue. I can see no reason why the relationship between the company, the in-house solicitor and the trust should not be determined according to established principles of law. The trustee may be liable to the trust for breaches of trust giving rise to losses. As a company, the trustee may be allowed to seek to be indemnified by its own employee if he or she was negligent. It seems to me that this argument conflates the fact that similar functions may be undertaken by outside advisers as by directors or employees with the legal question whether the rights of the company against those directors or employees are or are not held on trust.
52. Mr. Le Poidevin also sought to meet the problem of explaining the mechanism by which the dog leg claim arises by submitting it arises by "operation of law". But resort to that formula simply restates the question: is there any reason why the law should operate by imposing the trust? There are, of course, a number of established instances where equity imposes trusts to prevent injustice or unconscionable outcomes, or to give effect to the intentions of the parties. But here, it does not seem to me that the denial of the dog leg claim gives rise to an unjust or unconscionable outcome. As Phillips J pointed out in Young v. Murphy the beneficiary may sue the trustee company and, if it is insolvent, procure a liquidator of the company to pursue the directors. The beneficiary is in the same position as any creditor of any company. Nor, to my mind, is this a case where the trust can be said to arise from the intentions of the parties. All you can say of the intentions of the parties here is that a trustee company was set up which had directors and which later became the trustee of the trusts. You cannot spell out an intention that the duties of the directors to the trustee company would become trust property of the Settlement.
53. Mr. Le Poidevin also sought to justify the imposition of the dog leg trust by arguing that where a trustee company undertakes a trust it has a duty to protect the assets of the trust; and that where a director acts for the trustee company in performance of the trust he therefore has a like duty to protect those assets. The argument that the dog leg claim is justified because the directors are the natural persons who actually perform the trust is, in essence, the same line of reasoning as was rejected by Cozens-Hardy MR in the passage I had already cited from Bath v. Standard Land Co. in which he said that "[t]o speak of the directors as the "brains" of the company or the "hands" of the company is only to use words which have no definite meaning in this connection. It is in my judgment no more convincing as the basis of an indirect duty than of a direct one".
54. I also think that the argument also seeks to prove too much. In one sense the directors are always the natural persons with ultimate responsibility for the conduct of a company's business. But it cannot be suggested in any general way that a company's claims against its directors are held for those dealing with the company. To take an extreme (but not improbable) case, suppose a company is set up to perform only one contract. It could well be said that (at least part of) the duty of the directors is to perform the contractual obligations of the company, and therefore to avoid losses to the counterparty. But nobody would suggest that those duties are trust property for the counterparty. I see no difference in principle between that case and the dog leg claim asserted here.
55. Mr. Le Poidevin also relied on the proprietary nature of the trust and said that this made a difference. But that seems to me merely descriptive of the trust relationship and it adds nothing to the analysis.
56. Accordingly, I agree with the defendants' submission that the claimant has failed to advance any intelligible legal mechanism for the creation or imposition of the supposed dog leg trust.
57. The next thing to consider is the scope of the duty alleged to arise. As already stated, the directors of a trustee company will have duties under company law which have nothing to do with the administration of the trusts administered by the company. These include the requirements about the preparation of accounts and returns. If the company is a large one there may be duties concerning the publication of other information to shareholders, and duties arising in relation to take over bids. Again, where, as in this case, the corporate trustee is the trustee of a number of different trusts the directors are likely to be engaged in decisions about each of them in the performance of their duties to the company. So, plainly, the dog leg claim cannot relate to all of the duties of the directors. Mr. Le Poidevin seeks to meet this point by saying that the relevant duty which is held by the corporate trustee as trust property is only a duty to take reasonable care to avoid losses to the particular trust fund in question: so the duties of directors need to be divided up, first, as to subject matter and, second, as between trusts administered by the trustee company.
58. In my judgment, the scope of a director's duty of care is that set out in the Companies Act 2006 (codifying the common law) to exercise reasonable care, skill and diligence in the performance of his functions for the company. The claimant's formulation, to my mind, confuses the legal duties of directors, with the performance by the directors of their functions in practice. A director of a trustee company is, of course, likely as part of the performance of his duties to his company to be involved in decisions about the administration of trusts held by the company. That is the nature of the business in which he, with others, is engaged. However, the fact that the performance of the director's functions relates to the trusts administered by the company does not mean that the duties of the director can be defined as the avoidance of loss to the trust funds.
59. A further problem with the dog leg claim (as Commissioner Page pointed out in Alhamrani) is that it appears to cut across established principles of company and employment law. For instance, the members of a company may by ordinary resolution ratify or sanction what would otherwise be a breach of the duty of care of the directors. It appears to me that, were the dog leg claim to be recognised, it would no longer be possible for the members of a trustee company to do this. Again, if the dog leg claim were to succeed it would follow that the cause of action and its fruits would not form part of the estate of an insolvent trustee company. On this point, I agree with Phillips J in Young v. Murphy that the claims of an insolvent trustee company against its directors for breach of their duty of care form part of the insolvent estate.
60. If the dog leg claim were available against the directors of a trustee company, I see no reason why it should stop with them. It seems to me that the basis of the argument (that a natural person within the trustee company actually undertakes the administration of the trust) entails that it would extend to the employees and other officers of the company who happen to be involved in the affairs of the trust. In many cases it is more likely that employees rather than directors of the trustee company will have day to day responsibility for the conduct of trusts administered by the company. But if the claim were available against an employee it seems to me that more potential tensions with established principles would arise. Would the company be able to settle a claim against the employee for negligence without the consent of the beneficiaries of the trust? Would the company even be able to terminate the services of the employee under his contract of employment without the consent of the beneficiaries?
61. The defendants also pointed out another possible anomaly with the dog leg claim. Take a case where the trustee is replaced and the new trustee sues the old trustee for breach of trust in circumstances where the old trustee is able to show that its own directors were in breach of their duties owed to the old trustee company. The new trustee successfully sues the old trustee and recovers from it. If the old trustee were then to sue its own directors, any recoveries would, on the basis of the dog leg claim, stand to be paid to the new trustee. The defendants contrast the position with that of an adviser appointed by the old trustee. In that case, the new trustee would sue the old trustee for the loss to the trust fund and the old trustee would be able to pursue the adviser for a contribution (on the footing that, by virtue of section 40 of the Trustee Act 1925, the adviser is now liable to the new trustee). I am not sure that such a clear distinction can be drawn. It is possible that the law would, by one technique or another, fashion a means to avoid double recovery by the new trustee. However, as Mr. Newey submitted, the fact that these difficulties even arise is further ground for scepticism about the validity of the dog leg claim.
62. I also agree with his general observation that the application of established principles of company law to the director's duties does not give rise to such difficulties; on the example just given the new trustee would sue the old trustee which in turn would seek to recover from its own directors the amount of its loss being the compensation and costs it had to pay to the new trustee.
63. It also seems to me that if the dog leg claim is to be accepted in the present case it must apply to more or less all corporate trustees, however many trusts they may administer. Some corporate trustees administer thousands of separate trusts. The companies in question are trading businesses and the directors no doubt have all sorts of responsibilities relating to such matters as employment of employees, issues arising out of their buildings, relations with shareholders, preparation of accounts and returns, the list goes on and on.
64. The authorities tell heavily against the dog leg claim, at least on the facts of this case. The full discussion of the point in Young v. Murphy is to my mind persuasive, and I agree with the reasoning of Phillips J. in the passage I have already cited. I also find the reasoning of Commissioner Page in Alhamrani persuasive.
65. In this wreckage, Mr. Le Poidevin clings to the plank of HR v. JAPT. But that was a very different case from the present one. In the present case, HAE was the trustee of a number of family trusts and it had outside creditors. Nor was it set up for the purpose of acting as trustee of the Settlement, as it was already the trustee of two family trusts before it became trustee of the Settlement. When the claim was first pleaded it was advanced as the pendant of HR v. JAPT. The claimant alleged that HAE acted as trustee of no trust other than the Settlement and that it has and had no creditors other than the claimant. These allegations had to be withdrawn in the light of the evidence showing that neither point was correct.
66. Lindsay J. did not, of course, say that in HR v. JAPT that the reasoning in Young v. Murphy was wrong. Rather, he concluded that he was not convinced that it would not be possible to distinguish the case on the facts. By contrast, I do not see any relevant distinction between the present case and Young v. Murphy, the reasoning of which, as I have said, I find persuasive.
67. Lindsay J. also relied on the passage from the speech of Lord Nicholls in Tan which I have quoted above as providing some support for the dog leg claim. For the reasons I have given, I do not think that that passage supports a dog leg claim against a director of a trustee company. If anything, I think the decision in Tan points away from recognition of the dog leg claim. Lindsay J. also raised the point that it was difficult to see why a director of a company should not be liable where someone who might have had less involvement with the affairs of the trust such as a solicitor or surveyor would be liable to the trust. I have addressed this point in some detail above. In my judgment, on analysis, it provides no support for the dog leg claim.
68. Accepting, as he had to, that this was not a case, like HR v. JAPT. of a single-trustee company, Mr. Le Poidevin said that there were two features of the present case which still justified the dog leg claim, first, that HAE's only function was acting as a trustee (albeit of several trusts), and, secondly, that under its constitution it was not allowed to make a profit from its activities. I do not think that either feature justifies the imposition or implication of a trust. The first feature has been addressed earlier in this judgment, where I have explained why, generally, the fact that a company acts as a trustee does not justify the imposition of a dog leg trust, and I do think the reasoning is affected one way or other by the fact that the company may have no other business. Moreover, this feature, it appears, arose in Young v. Murphy where, on convincing grounds, the claim was dismissed. It would also apply to a great many trust companies, including some which administer thousands of trusts. If this feature justified the dog leg claim in the present case I find it hard to see why it would not apply generally. The second feature does not to my mind add anything significant. If the dog leg argument is a good one it would apply whether or not the trustee company was constituted to make profits.
69. I conclude that the dog leg claim has no real prospect of success and that there are no reasonable grounds for asserting it. The claim against the director defendants must therefore be struck out.

HAE's duties as trustee

70. The second issue is whether HAE, as trustee, fell under a duty to review the diversification of the Trust Fund. In view of my decision about the dog leg issue this does not strictly arise for decision, but, as the point was fully argued and the parties asked me to rule on it, I will do so.
71. As already stated, the foundation of the claim against HAE is that the Trust Fund is worthless because HAE decided to keep the whole of the Trust Fund in the form of the Courts shares. The claimant alleges that HAE failed or failed properly to review diversification of the Trust Fund. It is said that HAE was under a duty to do this under section 4(2) of the Trustee Act 2000 ("the 2000 Act"). The claimant also says that HAE was obliged in performing this duty to take appropriate professional advice (see section 5(3)) and that had it taken such advice and acted on it, HAE would have decided to diversify.
72. The defendants deny that HAE was under any duty to review or consider the diversification of the Courts shares. They say that though they were part of the Trust Fund, the shares were not part of the "investments of the trust" under section 4(2) of the 2000 Act; rather, they were simply retained under cl.2 of the Settlement. Since HAE has not decided to convert the shares into money none of the investment duties under the 2000 Act apply to the shares. And there is no separate attack on HAE's discretionary decision not to convert the Court Shares into money.
73. As the argument progressed, counsel agreed that it could be refined down to a short question about the interpretation and application of section 4(2) of the 2000 Act. Section 4 is in the following terms:

"4 Standard investment criteria

(1) In exercising any power of investment, whether arising under this Part or otherwise, a trustee must have regard to the standard investment criteria.

(2) A trustee must from time to time review the investments of the trust and consider whether, having regard to the standard investment criteria, they should be varied.

(3) The standard investment criteria, in relation to a trust, are -

(a) the suitability to the trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind, and

(b) the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust."

74. The question of interpretation is whether, in the circumstances, the Courts shares formed part of "the investments of the trust" for the purposes of section 4(2).
75. I should mention that there was a brief period of a few months covered by the claim before the 2000 Act came into force. However, it is common ground between the parties that the issue I have to decide is the interpretation of section 4(2) because the 2000 Act merely codified the existing law in the material respects.
76. Section 4 has, of course, to be read together with other parts of the 2000 Act. Section 3(1) provides that subject to the provisions of this Part "a trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust". Section 1 imposes a duty of care which applies when a trustee is exercising his statutory or other powers of investment or carrying out his duties under the Act, including under sections 4 and 5.
77. Section 5 provides (as material):

"(2) When reviewing the investments of the trust, a trustee must (unless the exception applies) obtain and consider proper advice about whether, having regard to the standard investment criteria, the investments should be varied.

(3) The exception is that a trustee need not obtain such advice if he reasonably concludes that in the circumstances it is unnecessary or inappropriate to do so."

78. Returning to section 4, it will be seen that it imposes two separate duties. First, it requires the trustee in exercising a power of investment to have regard to the standard investment criteria and, secondly, from time to time to review the investments of the trust and consider whether, having regard to the standard investment criteria, they should be varied.
79. Mr. Steinfeld made some general comments about section 4. . He said, uncontroversially, that it was concerned with powers or duties of investment. He then submitted that the phrase "in exercising any power of investment" in section 4(1) connoted buying and selling investments, and that, read in its context, the duty in section 4(2) arises also in relation to the exercise of a power or duty of investment. While I agree that section 4 is concerned with investment duties and powers, I do not see why section 4(2) is to be read as being limited by or controlled by the words in section 4(1). In my judgment, the duty in section 4(2) is a separate and independent duty, and it is not restricted to exercises of the power of investment. This is the natural reading, and it is supported by the words in parentheses in para 1 of Schedule 1 of the Act where the contrast is drawn between duties relating to the exercise of powers of investment and those relating to the review of investments. The same contrast is also mirrored in the contrast between sections 5(1) and 5(2).
80. Mr. Steinfeld's next submission was that the words "the investments of the trust" in section 4(2) were deliberately narrower than, say "the assets of the trust" or "the trust fund". The investments of the trust were those assets in which the trustees had at some point invested, and since the HAE had never invested in the Courts shares, they fell outside the section. This, he submitted, made perfect sense because the settlor had directed HAE to retain the Shares in their existing state until such time has they considered it appropriate to convert them. Indeed the very reason for setting up the Settlement was to settle shares in the family company for the benefit of the wider members of the family, and this was reflected in the settlor's letters of wishes. He said that not only was there no need for HAE to consider diversification; it would actually have been inimical to' HAE's primary duty of retention under cl.2 of the Settlement to require them to do so. On this basis, Mr Steinfeld argued, until HAE had decided to convert or sell the Courts shares, they were not available for investment and none of the duties in section 4 could apply to them.
81. I disagree with these submissions, for a number of reasons. First, the assertion that the Courts shares are not "investments of the trust" is, as a matter of ordinary language, a very odd one. The Courts shares were valuable securities, and such securities are a paradigm of an investment. HAE held them for 44 years between 1960 and 2004 when Courts collapsed. As Mr Le Poidevin observed, if someone had asked HAE during that time what the investments of the trust were, they would have been very surprised to be told "we have no investments, but we do have a large holding of shares in Courts, the furniture company". It seems to me that on its natural reading "the investments of the trust" comprise any asset of the trust which happens to be invested, whether it was in that state when originally settled or it came into that state of investment later. It is an "investment", and since it is owned by the trust it is an "investment of the trust".
82. I also note that cl.2 of the Settlement refers to the trust property in its original form being retained "in its actual condition or state of investment". This makes the idea that the Courts shares were not "investments of the trust" for the purposes of section 4(2) still less promising.
83. Second, as we are repeatedly reminded, when interpreting a statute context is all important. The relevant context in which the phrase "investments of the trust" appears is the imposition of the statutory duty of review in section 4(2). I see no good reason why the section 4(2) duty of review should not apply equally to an investment which is settled on a trustee and to one bought by a trustee in the exercise of his powers of investment. The purpose of the statutory duty is self-evident. It is plainly imposed on trustees for the protection of beneficiaries of trusts and, viewed from their perspective, the position is the same whether the investment was part of an original settlement or was acquired later. The statutory purpose is therefore achieved by applying the duty to all property of the trust held as an investment, and there is nothing in the statutory wording to suggest that the duty is to be limited to after acquired investments.
84. Third, to my mind, there is little in the linguistic point that "the investments of the trust" may be narrower than, say, "the assets of the trust" or "the trust property". In my view, if there was any legislative intention to confine the scope of section 4(2) at all (which I rather doubt), it is because some of the assets of the trust or trust property may be in the form of cash rather than in a state of investment. But if, as here, materially all the trust property is invested in securities, indeed one security, there is no material difference between "the investments of the trust" and "the trust property".
85. Fourth, I reject the suggestion that cl.2 of the Settlement forestalls or ousts the application of the section 4(2) duty. I disagree with Mr. Steinfeld's submission that the effect of cl.2 was that the Courts shares were not available for investment because HAE had not exercised its discretion to convert them. Cl.2 directs HAE to retain the property in its original state until HAE decides, in the exercise of its discretion, to convert it into money. That means that the whole of the Trust Fund of the Settlement is available for investment, subject to HAE deciding to do so. To argue that until the decision to convert the original Trust Property into money is actually taken that property is not available for investment is to my mind, formalistic and unreal. HAE had a complete discretion whether to keep the shares or convert or sell and investing the proceeds. It they decided to sell some of the shares to buy something else, technically they would first be exercising their power to convert the shares into money and then invest it, but in substance it is all part of one decision to change the investments of the trust. This reality is reflected in the fact that in his skeleton argument and at times during the argument, Mr. Steinfeld referred to cl.2 as "a power to retain". Whether it is better viewed as a power to retain, or a direction to retain coupled with a power to convert or sell is to my mind irrelevant in this context. The reality is that the trustee could at any time decide to change the trust property in its original state of investment into another state of investment and, therefore, the original trust property, the holding of Courts shares, was always available for investment. Indeed, as I have already indicated, I think they were investments of the trust from the moment they were settled on HAE.
86. In this regard, earlier legislation described the property to which the statutory power of investment applied in the widest terms. Section 1 of the Trustee Act 1925 gave a trustee power to "invest any trust funds in his hands, whether at the time in a state of investment or not, in manner following ...". Section 1 of the Trustee Investment Act 1961 gave a trustee power to "invest any property in his hands, whether at the time in a state of investment or not,...". These show that the statutory powers of investment apply to the "trust funds" or "property" in the hands of trustees. Nobody has suggested that the statutory power of investment under section 3 of the 2000 Act is narrower in its reach than the earlier legislation. This consideration, to my mind, supports the conclusion that the entire trust fund was at all times "available for investment", to use Mr. Steinfeld's phrase.
87. Fifth, the imposition of the duty to review diversification of the trust investments under section 4(3) of the 2000 Act is not, in my view, inconsistent with, or inimical to, the existence of the direction contained in cl.2 of the Settlement, or, indeed, the notion that this was a trust of shares in a family company, or the settlor's letters of wishes, or any other indications that the settlor wished HAE, if possible, to retain the Courts shares. I reach this view for several reasons.
88. In the first place, the settlor did not, as he could have done, insist that the Courts shares never be sold. He gave the Trustees a power to sell them and, as already explained, this meant that they were always "available for investment".
89. The second reason is that section 4(3)(b), which deals with diversification, contains the qualification "in so far as is appropriate to the circumstances of the trust". This important qualification is echoed also in section 5(3), where the exception to the need to obtain advice refers to "all the circumstances". In my view, the nature and purposes of the Settlement, the existence of cl.2, the letters of wishes, and, indeed such matters as the shareholdings of other members of the family or family trusts in Courts, are all "circumstances of the trust" for the purposes of section 4(3)(b) capable of qualifying the appropriateness of diversification. Hence, all the arguments that the settlor intended HAE to hold the Courts shares and reflected this in cl.2 of the Settlement come into play in the exercise of the section 4(3) duty. This approach appears to me to be far more consonant with the statutory purpose of requiring trustees to review the trust investments and to consider diversification than the argument that these factors serve to oust the duty altogether.
90. The third reason is that the section 4(3) duty is a duty to review and consider diversification of the investments of the trust, it is not a duty to diversify. In my view, it is not inimical to or inconsistent with the terms or purposes of the Settlement to require HAE to review the diversification of the investments of the trust from time to time, where the circumstances relevant to their review might well justify deciding to retain the entire block of Courts shares.
91. In the result, in my judgment, the Courts shares were and are investments of the trust for the purposes of section 4(2) of the 2000 Act.

Conclusion

92. Because of my decision about the dog leg claim, the claims against the director defendants must be struck out.