Speight v Gaunt (1883)

Transfer of Property · Duties of a Trustee

Facts.

A trustee, needing to invest trust money, employed a broker in the ordinary way of business and handed the money to him for that purpose. The broker misappropriated it, and the beneficiaries sought to make the trustee personally liable for the loss.

Issue.

To what standard of care is a trustee held, and is he liable for a loss caused by an agent he employed in the usual course of business?

Held.

The House of Lords held that a trustee must conduct the business of the trust with the same care that an ordinary prudent man of business would use in managing his own affairs. Having employed the broker in the regular course and acted as a prudent person would, the trustee was not liable for the broker’s fraud.

Why it matters.

It is the classic source of the prudent-person standard now enacted in s.15 of the Indian Trusts Act — a trustee who acts with ordinary prudence is not an insurer against every loss.

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