Austin v Austin [1906] HCA 5

bourne. BL HIGH COURT OF AUSTRALIA.) AUSTIN AND OTHERS 5 : APPELLANTS; PLarntirrs, AND AUSTIN AND OTHERS , . RESPONDENTS. DEFENDANTS, '

H.C. o A. Trustee - Breach of trust - Negligence - Duty of one of two executors - Custoly of 1906. documents of title - Mortyage deed left in hands of solicitor - Solicitor one pane executors - Mortgage not registered - Recerpt of mortgage money by solicitor.

arth It is the duty of a trustee, in managing the trust affairs, to take tho ple Precautions which an ordinary man of business would take in managing

Executors omitted to register a mortgage given to their testator during his lifetime, They also left documents, which in the absence of registration ope ated as an equitable mortgage only, in the possession of a firm of solicitorsactiog for the estate by express authority of the will, and of which one of them was®

en personal liability under the mortgage. 'The solicitor executor d the mortgage money when due, and mis-applied it.

d, hsving regard to the terms of the will and the circumstances of the that the first-named executor had not been proved guilty of any negli- nce or breach of trust for which he could be held responsible.

De m of Supreme Court (Austin v. Austin, (1905) V.L.R., 564; 27 .L.T,, 43), affirmed, but on different grounds.

tio was brought by Stanley Austin, John Kenny and Bishop, the trustees in Victoria of the will of James Austin, sed, against Albert Austin, A. H. Bullivant and H. E. Bulli- nt, executors of W. H. Bullivant, deceased, alleging that the W. H. Bullivant, who had been one of the executors and of the will of the said James Austin, had as such executor e been guilty of certain breaches of trust.

s J., before whom the action was heard, gave judgment the defendants: Austin v. Austin (1).

KC. and Starke, for the appellants. At the time Bullivant executor he knew, or ought to have known, that the ge from Ware's executors was unregistered, and it was his

, and, secondly, to preserve the trust estate. In carrying e latter duty he must take such care as a prudent and man would take in looking after business of his own of a As soon as Bullivant became executor he should have Steps to find out the state of the trust property, including, the securities, and to get it into the joint control of and his co-executor: Underhill on Trusts, 5th ed., p. 154;

V.LR., 564; 27 A.L.T., (3) Sir. Ch, Rep., 513. ; (4) 1 Ir. Rep. Eq., 9. 1Ch. D., 686, at p. 691. (5) 19 Saale 409.

'being also, as trustee of another estate, one of the mortgagors, who H. C. or A.

Paterson (1). The clause in the will authorizing the of Grey did no more than authorize the employment of do professional work and charge for it. The faet that one of the solicitors to the estate made it more necess Bullivant to get this mortgage into the joint control of and Grey. The further facts that Grey was one of the m and that his firm were solicitors to Ware's estate, negligence on Bullivant's part to allow Grey to act assoli¢ Austin's estate in connection with the matter: Waring y. i (2); Fry v. Tapson (3). The allowing Grey to retain po: of the mortgage is as bad as allowing him to get p after it had been in the joint possession of Bullivant a In the latter case Bullivant would have been liable for dealings with the mortgage: Candler v. Tillett (4); Gasquoine; Gasquoine v. Gasquoine (5); In ve Stevens; Stevens (6); Lowe v. Shields (7); Field vy. Field (8); In Pothonier; Dent v. De Pothonier (9); In re Sisson's Settle Jones vy. Trappes (10). Bullivant is not protected indemnity given by the will: Lewin on Trusts, 11th ed., Nor is he protected by the Trusts Act 1896, as the breach was a continuing one. [They also referred to Hopgood vy. P (11); Williams on Executors, 10th ed., p. 1463; Clough v. (12); In re Timmis; Nixon v. Smith (13); Charlton v. Durham (14); Styles v. Guy (15); Williams v. Higgins (16 y. Wilders (17); National Trustees Co. of Australasia,

Isaacs A.-G., and Weigail, for the respondents. Grey personal interest in the mortgage, and therefore was not a whom Bullivant ought not to have employed in reference Knowledge that the mortgage needed registration is not | imputed to Bullivant. He was justified in believing tha

(1) (1900) A.C., 271. (10) (1903) 1 Ch., 262. (2) 3 Ir. Ch. Rep., 331. (11) LR. 11 Eq., 74. (3) 28 Ch. D., 268. (12) 3 My. & Cr., 490, at p. 49 (4) 22 Reav., 257, at p. 263. (13) (1902) 1 Ch., 176. (5) (1894) 1 Ch., 470. (14) L.R. 4Ch., 433. (6) (1898) 1 Ch., 162, at p. 171. (15) 1 Mae. & G., 422, at p. 431 (7) (1902) 1 LR', 320. (16) W.N. (1868), 49.

(8) (1894) 1 Ch., 425. (17) LR. 12 Eq,, 373. *9) (1900) 2 Ch.} 529, (18) (1905) A.C., 373.

tions that Bullivant was not negligent in omitting to th mortgage registered, and it is consistent with the facts in knew all the facts and believed that the mortgage sperly registered. The proper assumption is that every- it Grey believed it was properly registered. It was a onable thing for Bullivant to employ a solicitor to do legal k, and to believe that Grey had properly done that work. oany liability arising out of the fact that Grey was one of rtgagors, no loss arose from that fact. The mortgage y was repaid to Taylor, Buckland & Gates and repayment was lawful. So that the employment of the solicitors proper. See Lewin on Trusts, 11th ed., p. 771 (n), citing y. Harrison (1); Shepherd v. Harris (2); Oxley v. Scarth ); Inve Whiteley; Whiteley v. Learoyd (4); Learoyd v. Whiteley In ve Smith; Henderson-Roe v. Hitchins (6); In re Brier, Bvison (7). Having appointed a proper agent, Bullivant, properly conclude that the mortgage was properly regis- Alternatively, it ought to be assumed that the mortgage roperly left unregistered. See also Speight v. Gaunt (8); ev. Pringle (9); Ex parte Belchier (10); Jobson v. Palmer The Trusts Act 1896, which was in force when the acts ed of were done, protects Bullivant. The will of Austin ed the employment of Taylor, Buckland & Gates to act citors to the estate, and, having been employed, that firm is properly entrusted with the registration of the mortgage. illivant had never any reason to distrust Grey until the mis- ation was found out. As to the Trusts Act 1896, see and v. Ibbotson (12).

ey also referred to Phillips v. Munnings (13); Trustee Act 93(56 & 57 Vict. c. 53); In re Grindey (14) ; Trusts Act 1901.]

(8) 9 App. Cas., 1, at p. 29. (9) 8 Cl. & F., 264, at p. 286. (10) 1 Amb., 218. (11) (1893) 1.Ch., 71. (12) 28 V.L.R., 688; 24 A.L.T., 132. (13) 2 My. &Cr., 309. (14) (1898) 2 Ch., 593.

quirements had been complied with. It is consistent with H. C. or A.

H.C. or A. if there was no duty owing by Bullivant to have

registered, there was a duty to take proper care of tered document by getting it into the joint control of Grey. That document was a security, and the mortg accessory to it. Without the document Grey could nt obtained the mortgage money, so that the result of Bulli getting the document into his control was that the mon obtained by Grey and was lost to the estate, and for vant is responsible. If the loss might have been preve Bullivant doing his duty, he is liable. A reasonable and man would never leave an unregistered mortgage in the ba his co-owner. The proximate cause of the loss was the ne Bullivant to protect the security. It ought not to be ass that Grey collected the mortgage debt under his power a two executors. It was collected by Taylor, Buckland &| that is, by Grey with the aid of the document which was left in his control. It was wrong to employ a solicitor to document or to collect that money in respect of it, When col it was a breach of trust on Bullivant's part to leave it hands of Taylor, Buckland & Gates, or of Grey. Bulliva or ought to have known, that it was paid. It was his duty to collected it on 4th August, 1897, and that must be imputed t knowledge. He could let it stand out only if it could not lected without sacrifice, and those circumstances did not The money was lost by leaving it outstanding, and for Bullivant is liable. An equitable mortgage is not an inve authorized by the will, and it was therefore not proper to this money on equitable mortgage. [He also referred to Case; In re North Australian Territory Co. (1); Inve} Andrews v. Weall (2); Lord Shipbrook y. Lord Hinchinbro In ve Stuart; Smith v. Stuart (4); In re Turner; Ba Ivimey (5); London General Omnibus Co. Ltd. v. Lavell

The judgment of the Court was read by GrirFiTH C.J. This is a suit by the present represe James Austin, who died in March, 1896, against the e

(1) (1892) 1 Ch., 322, at p. 341. (4) (1897) 2 Ch., 583. (2) 42 Ch. D., 674. (5) (1897) 1 Ch., 536. (3) 11 Ves., 252, (6) (1901) 1 Ch., 135, at p. 42

f the original executors and trustees under Austin's will, to -a sum of £7,000 alleged to have been lost through the

n November, 1889, Austin, who had been a resident of Victoria, resided in England, executed a power of attorney by 'he appointed Bullivant, who was his son-in-law, and one Grey, a member of a firm of solicitors who carried on tice at Geelong under the name of Taylor, Buckland & and who had for some time been Austin's solicitors, to be ttomeys and agents, with large powers of disposition over 's lands in Victoria and full authority to deal with any ing to him. The power of attorney included an authority uecept or join inaccepting any mortgage . . . orsecurity

_ over any real or personal estate that may for any purpose ecuted to me." Acting under this power, Bullivant in 1893 neurrence with Grey agreed to advance a sum of £7,000 to ecutors of one Ware on the security of land subject to the of Land Act. Grey and one C. E. Gates, another of his firm, were two of Ware's executors, the third being annon. At this time both Grey and his firm enjoyed a itation, and they continued to do so until the year 1899, ey, who was then the sole surviving member of the firm,

1893, and the remaining £2,000 in the following July. executors, including Grey, accordingly executed a mortgage plicate in favour of Austin in the form prescribed by the

5th April took these documents, duly signed by him, to

Buckland & Gates, and gave that firm a cheque for the

The mortgage, which contained a stipulation that Ware's

s should not be personally liable on the covenants, was

er registered, but remained in the custody of Taylor, Buckland ; who in fact always acted as solicitors for Ware's

oo) and conducted their financial business, as well as es . 7

V. H. Bullivant, who died in January, 1901, and who was H. ©. or A.

for Bullivant in his capacity of Austin's attorney, The £2,000 to be advanced in July was in fact paid by Bulli Grey on behalf of Ware's executors, but Grey misap and the estate never received the benefit of it. Taylor, & Gates, however, regularly accounted to Bullivant interest on the whole sum of £7,000, which was p February and August of each year. The prineipal was terms of the mortgage repayable on 4th August, 1897. not appear whether Bullivant formally reported to A making of this loan, or whether any arrangement between Bullivant and Ware's executors that the mortga not be registered, or whether Austin ever received any in on that subject. The complaint now made against Bulli not relate to his conduct as attorney in making the ad) in failing to see to the registration of the mortgage as such at although the propriety of his conduct in the latter respec incidentally in question, as will be afterwards seen. In theal of any evidence on the point we think that the proper to be drawn, if either fact is material, is that Bullivant info Austin that he had advanced the £7,000 to Ware's ext $ that Austin knew that Grey and Gates were two of executors.

Austin by his will appointed two gentlemen, pra partnership as solicitors, as his English executors and ti and appointed Bullivant and Grey as his Australian executo trustees. The trusts of the will as to the Australian est "that my Australian Trustees shall as soon as conveniently' after the sale and conversion of my personal estate in A or elsewhere out of Great Britain either remit the net pr such sale and conversion and also such part of my person in Australia or elsewhere as shall consist of money to my Trustees or shall account for the same to them as direct." The will, however, contained the followin, "T authorize and empower the acting executors or é the time being of this my will both in Great Britain and A and so that the powers next hereinafter contained may b cised by such respective acting executors or executor with re to the property in respect of which they . . - are .

g executors or executor . . . to accept any security for my debts owing to me or my estate and to ch times for the payment of any such debts

ith or without taking security for the same as to them shall seem reasonable." The will also contained the

we that any trustee (whether English or Australian) of 'Will may in the conduct of the trust business instead of

t of money And I expressly declare that the said Bath and Stanley Austin " (the English executors) " who in co-partnership as solicitors at Glastonbury aforesaid by themselves or by their firm act as solicitors or attorneys n relation to my estate or my executors or executor or ees or trustee for the time being whether English or Aus-

rly act as solicitor or attorney for or in relation to my 4a or my executors or executor or trustees or trustee for the be whether English or Australian and that the said rd Bath Stanley Austin and Joseph Henry Grey shall

done by them respectively as such solicitors or attorneys acts which an executor or trustee could have done per- y) and shall be entitled to receive the usual commission on and interest received by them respectively in the same as if they respectively had not been appointed executors e was granted to Bullivant and Grey in 1896. At this mortgage from Ware's executors, which being unregis- erated only as an equitable charge upon the land comprised it, was still in the custody of Taylor, Buckland & Gates, of th firm at that time Grey and Gates were the only members.

registration. Shortly before the time appointed for rep

Grey that the £7,000 should remain outstanding on security. This arrangement, in which Grey seems to ha fessed to act as representing Ware's executors, was in without the concurrence of his co-exeeutors; for on 30th Se a cheque for £5,164, representing the £5,000 and inter drawn upon their bank, was received by Grey, either acti executor of Austin or as solicitor for himself and Bulliy joint executors, and placed to the credit of his firm in their It does not appear what became of the mortgage security, misappropriated the money thus received, but his firm paid represented to have been received from Ware's ext Bullivant on the full sum of £7,000 up to February, 18 credited him in their accounts with interest up to the Grey's absconding. Bullivant being dead, this action was against his executors. The breaches of duty alleged a as executor and trustee are - ({1) That he negligently p Grey or his firm to have the sole custody and control | mortgage security; (2) That he negligently omitted to see t repayment of the £7,000 on and after 4th August, 1897; (3)' he negligently omitted to inquire or make any provisio safety of that sum on and after the same date; (4) negligently authorized or allowed the firm of Taylor, B & Gates to act on behalf of the Australian exeeut trustees of Austin's will in the matter of the repayment.

The learned Judge from whose decision this appeal is bi gave judgment for the defendants. We have unfortunat had the advantage of his considered opinion on the que law raised on the facts, for, according to the report of hi (1), he considered himself bound to follow a rule whic supposed to have been laid down by this Court in Ma Colonial Bank of Australasia (2), although he thought inconsistent with principle and authority. The passage to by the learned Judge is as follows: - "If the rule is put in form that he (the drawer of a cheque) must use reasonable ¢

git) (1900) VLR, 964; 27 ALT, (2) 1 C.L.B., 632, at p. 660. 43.

forgery, the question arises what is meant by reasonable isually in considering whether a thing is reasonable or all the circumstances must be taken into consideration. In .y what would be reasonable care in an illiterate farmer t not be reasonable care in a skilled accountant. A rule 'ich would make the question depend upon the capacity or ation of the drawer of the cheque can hardly form part of the ntile law." It is sufficient to say that in this passage this did not purport to lay down any rule or principle of law. a proposition which is no more than a truism for the of showing the fallacy of an argument which had been .d to them in that case, and which they rejected. The

e reasonable care in the performance of an act requiring skill is obviously quite a different question from that of mable prudence required by law from persons in a position. The learned Judge however went on to add, , some expressions of opinion as to the merits of the case.

e rule to be applied in cases like the present is clearly settled. ight v. Gaunt (1), Lord Biackburn thus expressed it: horities cited by the late Master of the Rolls I think show asa general rule a trustee sufficiently discharges his duty es in managing trust affairs all those precautions which nary prudent man of business would take in managing affairs of his own." We proceed to apply this rule to f the present case. The first point that arises is whether

tor that the security was in an unsafe condition, and must. responsible for not doing what an ordinary prudent man would have done to make it safe by registration. But said that there was a want of ordinary prudence in not the mortgage registered? We think not. No evidence d to show that a loan on sufficient security by way of ble mortgage was imprudent as between Austin and his

• attorney, even if the former did not know of the non-re Nor, so far as we can use our knowledge of Australian could such a proposition have been established by evide it then imprudent to leave the deeds and equitable mortg, the possession of the solicitors for the trust after Austin's ¢ We will first consider the matter apart from the cireumstar those solicitors were also, in their capacity of Ware's ex joint mortgagors. It is common knowledge that in A trustees do in fact habitually leave securities in the hands ol solicitors, and we do not know of any authority to show thn may not prudently be done in the case of equitable mo Ordinarily an equitable mortgage will not be discharged mortgagor without a return of the security and ana " ment from the mortgagee, but the mere custody of a secur not afford any evidence of authority in the custodian to the debt. It was attempted to draw an analogy between able mortgages and what are called "bearer" securities, bu analogy fails for the reason just given, the possession of a security being sufficient proof of authority to receive th evidenced by it. Does then the circumstance that both m

of the firm of Taylor, Buckland & Gates were at this time ty Ware's executors, and consequently nominally mort, although not personally bound by the covenants in the mort alter the case? In the first place the employment of that fi

Solicitors for Austin's executors was expressly authorized b

will, and in our opinion their employment as such solicitor

justified the leaving of the security in their hands. C

assumption, however, that it did not, then, if, by reason

security being improperly left in their hands, it had been

Austin's estate, and the debt had become irrecoverable from

estate, Austin's executors would have been liable to make it

But this did not happen: the debt was paid by Ware's

whether the security had originally been good or bad, or W

proper care had or had not been taken of the securities.

respect the case in the events that happened does not diff

negligence in not getting in such a debt with proper d

of the want of security, no claim can be made against the for their technical breach of trust from which no loss

jllows from the foregoing considerations that the plaintiffs' the present case must be based, not upon the negligent of the securities, but upon Bullivant's permitting the | to come into the hands of Grey or of Taylor, Buckland & Tt was pressed upon us that he and his firm could not ived the money if they had not been in possession of the But this is not by any means certain. Grey as one 's executors had authority to receive and give a dis- for the £5,000, and the independent executor Shannon sht well have been contented to pay him and take his receipt, ing the return of the deeds to follow at convenience. There

rell as for Austin's executors, and that Grey transacted the and financial business of the former, that nothing was said it the custody of the security, and that, if Shannon took any part in the matter, he contented himself with taking y's receipt, assuming that the deeds would thereafter be held It does not appear whether the receipt, which

name of Taylor, Buckland & Gates. If anything turns his point we think the onus is on the plaintiffs to establish actual fact. Assuming, however, that Grey could not have ed payment of the debt if he had not had possession of the ty, the question to be considered is: Ought Bullivant to taken steps to prevent him from receiving payment? As or Grey had authority to receive the debt and give a

In making such an appointment he was, of bound to use due care, but Grey was a person specially

it has once been paid, since no loss has occurred by H. ©. or A.

H.C. oF A. designated by the testator as a fit person to be appoii

We cannot see any reason for holding that Bullivant of any negligence in not communicating personally with h or that he was bound to warn Shannon not to pay

except to himself. If Bullivant had known in August, 18} the £5,000 had been received by Grey, he would, no doubt

knowledge, he would be in no better position. But Grey both one of the nominal mortgagors and a co-executor, had tol that it was desired that the repayment should be defi Bullivant had assented to giving time. Having regard { course of dealing in Austin's lifetime and afterwards, we ¢ see any reason why he should have disbelieved Grey, or h communicated with Shannon to ask if what Grey said was tr He was therefore justified in agreeing to give time to W: executors for payment of the debt, and since interest on the { sum of £7,000 continued to be paid or credited to executors' account, he had no reason to suspect that the prin had been paid. The case, therefore, is simply one in whieh ( of two co-executors has received a debt due to the estate witl the knowlege of the other, and under such circumstances as | justify that other in not enforcing payment and not inquiri whether the debt has been paid or not. Under such circum: no negligence can be imputed to him.

If, however, the £5,000 ought to be taken to have been by Taylor, Buckland & Gates as solicitors for Austin's executo and not by Grey as one of the executors, then we think tha appointment of that firm to receive the money would have justified by the terms of the will, and that a general authori the firm to receive all debts due to the estate may be inferr from the course of business as disclosed by the evidence.

If Grey and Gates had been actual and not merely no debtors to Austin, or if the employment of Taylor, Gates as solicitors for the Australian executors had not expressly authorized by the will, very different conside would arise. But under all the circumstances we are unable point to anything left undone by Bullivant which an 0

nan of business would have done in managing similar H. ©. or A.

ledge of the receipt of the £5,000 by Grey in August, Acsriy to be imputed to Bullivant, the defendants would be d to discharge themselves of their liability by showing that 'which could then have been taken by Bullivant to the money from Grey would have been ineffectual : vv. Fuller (1).

as regards the £2,000, the plaintiffs' case rests on a basis, namely, negligence in not ascertaining as executor sum had not, in Austin's lifetime, reached the hands of

B. L. [HIGH COURT OF AUSTRALIA.] PLAINTIFF ; f AND MMONWEALTH : e " . DEFENDANT.

ion, secs. 52, 84 - Commonrealth Public Service Act 1902 (No. 5 of H.C. or A. , secs. 2, 51, 60, 78, 80 - Public Service Act 1900 (Victoria) (No. 1721), 1906. 3, 4, 8, 16, 19, 20 - Public Service - Officer in transferred department = - -

19 of the Public Service Act 1900 (Victoria) was a merely temporary eee ee 28,

to fix the status of the officers therein referred to when they should red with their departments to the Commonwealth.