* CHAPTER XIX.

DUTIES OF TRUSTEES FOR PURCHASE.

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A TRUST for purchase is not so frequent as a trust for sale, and yet occurs often enough to merit a separate consideration.

1. Trustees liable for consequences of breach of duty.— The general rule is that trustees for purchase, like all other trustees, are bound to discharge the duty prescribed, and failing to do so are answerable for the consequences; as, if a specific fund be bequeathed to trustees upon trust to lay out on a purchase, and they neglect to call in the fund and lay it out, they are liable to compensate the cestuis que trust for the consequences (a).

2. May enter into a previous contract. It is almost unnecessary to premise, that trustees for purchase are not confined to the mere act of paying the purchase-money and taking a conveyance, but may in the ordinary course of business, enter into a previous written contract as a preliminary to the pur

chase.

3. Must see to value. A material point to which trustees of this kind have to advert is the intrinsic value of the estate proposed to be bought, and, to arrive at a sound conclusion on this head, they must employ a valuer of their own (b), and must not rely upon any valuation made on behalf of the vendor; "nothing," said Lord Romilly, "is more uncertain than a valuation, and the Court has constantly to observe upon the great discrepancy between valuations made by those persons who want to enhance, and by those persons who want to depreciate the value of the property. A man

(a) Craven v. Craddock, W. N. 1868, p. 229.

[(b) In Fry v. Tapson, 28 Ch. D. 268; it was held that the appointment of the valuer could not be left

to the trustees' solicitor, but that the trustees were bound to exercise their own judgment as to the selection of a valuer.]

bona fide forms his opinion, but he looks at the case in a totally different way, when he knows on whose behalf he is acting;" and in reference to the case of a loan by trustees on mortgage (but which is not on principle distinguishable from a sale) he added, "a trustee cannot with propriety lend trust money on mortgage upon a valuation made by or on behalf of the mortgagor. If he does so, and the valuer has bonâ fide valued the property at double its value, the [*500] trustee must take the consequences: he ought to have employed a valuer on his own behalf to see to

it" (a).

4. There must be a good title. Another question of importance is that of title. Every direction or authority to lay out trust money upon a purchase of real estate, carries with it the tacit condition that there shall be a good title. Whether, therefore, the trustees are proposing to purchase by private contract or by auction, they must take care not to bind themselves by any agreement which shall preclude them from requiring a good marketable title. If the intended contract or conditions of sale contain anything of a special character, the trustees should lay them before their counsel for his opinion, whether the stipulations are consistent with their trust (b). Formerly a good marketable title was one traced back for a period of sixty years, but by 37 & 38 Vict. c. 78, s. 1, à forty years' title has now been substituted.

The 2d sec

[5. Conditions incorporated in the contract. tion of the same Act as to contracts for sale made after the 31st December 1874, and the 3d section of The Conveyancing and Law of Property Act, 1881 (c) as to contracts for sale made after the 31st December 1881, incorporate in such contracts various conditions and stipulations (d) unless the same are expressly excluded, and by the 3d section of the

(a) Ingle v. Partridge, 34 Beav. 412-414; [but see Re Godfrey, 23 Ch. D. 483, where trustees were held not liable though they had not made an independent valuation, and in all cases the true test seems to be whether the trustees have acted as prudent men would in dealing with their own prop

erty; and see Re Pearson, 51 L. T. N. S. 692.]

(b) See Eastern Counties Railway Company v. Hawkes, 5 H. L. Cas. 363.

[(c) 44 & 45 Vict. c. 41.]

[(d) For these conditions and stipulations see ante, p. 438-440.]

former Act and the 66th section of the latter Act trustees who are purchasers are authorised to buy without excluding the application of the Acts, and the 66th section of the latter Act expressly exonerates trustees and their solicitors from all liability for so doing, but nothing in that Act is to be taken to imply that the adoption in connection with or application to any contract or transaction of any further or other provisions, stipulations, or words is improper.

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6. Official searches. Sect. 2 of The Conveyancing Act, 1882 (e) provides for an official search being made on the request of a purchaser for entries of judgments, Crown debts, and similar matters, and provides that when a solicitor acting for trustees obtains an office copy certificate of the result of the search under the section, the trustees shall not be answerable for any loss that may arise from error in the certificate. 7. Yorkshire Register. As to lands situate in Yorkshire, "The Yorkshire Registries Act, 1884," (f) provides for an official search of the register being made at [*501] the request of any person, and further exempts any trustee, executor, or other person in a fiduciary position who has obtained a certificate of the result of an official search or a certified copy of any document enrolled in the register, or of any entry in the register from any loss, damage, or injury that may arise from any error in such certificate or copy. And where a deed or will has been enrolled at full length, the comparison of an abstract with the copy so enrolled is to be a sufficient discharge of the duty to compare the abstract with the original document.]

8. Deposit. As a deposit is almost invariably required upon a sale by auction, and not uncommonly by private contract, it is conceived that trustees would be justified upon signing the contract in paying a deposit in part discharge de bene esse of the purchase-money. But generally the character of trustee is pleaded as an excuse for not paying a deposit, and is allowed.

Where the money

9. Where purchase-money is in Court.is in Court the trustee must enter into a conditional contract,

[(e) 45 & 40 Vict. c. 39.]

[(f) 47 & 48 Vict. c. 54, ss. 20, 23.]

that is, "subject to the approbation of the Court," and then apply by petition or summons at chambers for the Court's sanction, and the practice is to direct an inquiry whether the proposed purchase is fit and proper, and if so, whether a good title can be made. "As long," said Sir G. Jessel, “as an estate is under the administration of the Court, the Court does not allow a purchase or mortgage or any other investment to be made, without seeing to its safety. The Court has to protect the property for all claimants, and a reference is made to ascertain the propriety of the investment, that is to say, its propriety in all respects" (a). And the practice is not to inquire whether a good title can be made subject to the conditions, but whether a good title can be made absolutely, and if in the course of investigation an objection to the title arises, it is brought under the attention of the judge, who then exercises his discretion (the whole title being before him), whether the objection can be waived with reasonable safety (b). "Much too great laxity," observed V. C. Wood, "has been gaining ground amongst the advisers of those who have to manage trust property, and there is a disposition to rest satisfied with imperfect titles. I cannot approve of such a practice, and cannot permit trustees to take a defective title, even though it may be in accordance with the contract" (c).

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10. How purchase will affect the interest of cestuis que trust. Trustees for purchase have to look not only [*502] to the adequacy of the value and the goodness of the title, but also to the effect which the purchase will have upon the relative interests of the cestuis que trust. Purchase of houses. Thus where the property is directed by the settlement to be held in trust for a person for life with remainders over, a trustee might no doubt purchase an estate with a suitable house upon it, but (without saying that he could not legally do so) he ought not to purchase a house merely.

(a) Bethell v. Abraham, 17 L. R. Eq. 27.

(b) Ex parte The Governors of Christ's Hospital, 2 H. & M. 166.

This is a property of a

(c) Ex parte The Governors of Christ's Hospital, 2 H. & M. 168.

wasting nature, and the tenant for life could not be compelled to preserve it against natural decay. A power to invest on Government Annuities would not justify the purchase of Long Annuities, and there is a similar difference between land and houses, the former being worth about thirty years purchase, and the latter much less, so that the tenant for life would be benefited at the expense of the remainderman (a).

11. Ground rents. Even a purchase of ground rents of houses, though coming under the description in the trust deed of "hereditaments," is not free from objection, for the object would of course be to procure for the tenant for life a higher income, but this would be at the cost of the remainderman in point of security. Should the houses be burnt down, and should the lessee have neglected to insure or the insurance monies not be forthcoming, the trustee might have nothing to show for the purchase but a worthless site, and then the remainderman might seek to hold him responsible as for a fraudulent execution of his trust in equity, though the purchase was within the words of the trust according to the letter (b). However, it has been held that the purchase of freehold ground rents reserved upon building leases for ninety-nine years is justifiable under a power to purchase "hereditaments in fee-simple in possession" (c).

12. A timbered estate. Again, if a sum be given to be laid out in the purchase of an estate to be settled on a person for life without impeachment of waste, with remainders over, trustees should not purchase a wood estate, as the tenant for life, on being put into possession, could by a fall of the timber possess himself of a great part of the capital or corpus of the fund (d); and, on the contrary, if the tenant for life were impeachable for waste, he would lose the fruit of so much as was the value of the timber (e). But trustees may purchase an estate where the timber forms no over

(a) See Moore v. Walter, 8 L. T. N. S. 448.

(b) See Read v. Shaw, Sugd. Powers, Append. 953; and see Ib. p. 864, 8th ed.; and Middleton v. Pryor, Amb. 393.

(c) Re Peyton's Settlement, 7 L. R. Eq. 463.

(d) See the subject discussed in Burges v. Lamb, 16 Ves. 174.

[(e) But see now 45 & 46 Vict. c. 38, s. 35, under which a tenant for life