INVESTMENTS. ten years prior to the date of investment. Ib. s. 1 (n). It appears to be clear that trustees cannot safely make investments of these classes without having evidence as to payment of dividends or as to the amount of the rates (z). Where the statutory power of investment is relied upon, it is expedient either to state expressly what evidence the trustees may act upon, or to remove these restrictions so as to render it unnecessary to obtain the evidence in question. It is, however, the practice not to rely on the statutory powers, but for the reasons following to insert an express power of investment. First, the range of investment usually given in a settlement is larger than that given by law; secondly, it is desirable (in those cases at least in which the greater economy obtained by brevity is not of primary importance) to state clearly in the settlement itself, for the information of the trustees, what they are to be at liberty to do; for it generally happens that one at least of the trustees is a man competent to read the investment clause, so that, if the clause is inserted, it will not always be necessary to seek professional advice when an investment has to be changed. Moreover, the statutory powers are involved in some complexity by the provisions above referred to. 325 It is quite impossible to lay down any precise rule as to Express what is a fair range of investments. It must be remembered power of investthat the safest investments generally give the lowest rate of ment. interest and that the poorer the family is the more important it is, on the one hand to render the trust funds absolutely safe, and on the other hand to obtain a large income from the settlement funds. A fair range includes Government funds or securities of the United Kingdom, or India, or any colony; any securities the interest whereon is guaranteed by Parliament; stocks of the Banks of England or Ireland or of the Metropolitan Board of Works, or London County (z) See these questions discussed in 34 Sol. J. 4, in an article on the repealed Act of 1889. As to the meaning of "each preceding year," Duties of trustees lending money on mortgage. Council; real or leasehold securities in England, Wales, or Ireland (some practitioners except Ireland); debentures, debenture stock, preference or guaranteed stock of any railway in the United Kingdom or India, and ordinary stock or shares of any railway company in India the interest on the capital whereof is guaranteed by the Government of India; charges created under the Improvement of Land Act, 1864, and mortgage debentures issued under the Mortgage Debenture Act, 1865 (28 & 29 Vict. c. 78); the bonds or securities of any public body or local authority in the United Kingdom; and, if the parties are connected with Ireland, land debentures issued pursuant to the Land Debentures (Ireland) Act, 1865 (28 & 29 Vict. c. 101), as amended by the Landed Estates Court Act, 1866 (29 & 30 Vict. c. 99). A solicitor acting for trustees will be careful to see that no investments are authorised under which they might incur any personal liability; such, for instance, as shares in a limited company not fully paid-up, or in an unlimited company, in which case, as they would be the owners on the register, they would be liable to calls, &c. A trustee making an investment must select only investments authorised by statute or by the express provisions of the instrument creating the trust; and in making the selection he must use the same care and caution which an ordinary man of business, regardful of the pecuniary interests in the future of those having claims upon him, would exercise in the management of his own property (see Speight v. Gaunt, 22 Ch. D. 727, 9 App. Cas. 1; Learoyd v. Whiteley, 12 App. Cas. 727); and therefore he should have the title of any land proposed as a mortgage security properly investigated and a valuation of it made (Smethurst v. Hastings, 30 Ch. D. 490) (a). In (a) But a trustee lending on mortgage of leaseholds may dispense with the production or investigation of the lessor's title, Trustee Act, 1893, s. 8 (2), replacing Trustee Act, 1888, s. 4 (2); and he may be justified in accepting a shorter title than that to DUTIES OF TRUSTEES LENDING MONEY ON MORTGAGE. cases not falling within the Trustee Act, 1893, he should not, as a general rule, lend more than two-thirds of the actual value of freehold land, or more than half the actual value of freehold houses (Stickney v. Sewell, 1 My. & C. 8; Re Olive, 34 Ch. D. 70), or of leaseholds (Macleod v. Annesley, 16 Beav. 600; Vickery v. Evans, 33 Beav. 376, and the cases there cited; Lewin on Trusts, Cap. XIV., p. 363 et seq.). It is generally prudent, though not absolutely necessary, that the valuation should be made by a surveyor acquainted with the district where the land is situate (Budge v. Gummow, L. R. 7 Ch. 719; Fry v. Tapson, 28 Ch. D. 268); and the valuation should not be one made on behalf of the intending mortgagor. "It is a matter of constant observation," says Lord Romilly, M.R. (in Ingle v. Partridge (No. 2), 34 Beav. 412), "that nothing is more uncertain than a valuation; and the Court has constantly had occasion 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 property. They are so great that it is very difficult for the Court to come to a satisfactory conclusion on the subject; and it sometimes leads to most singular results. In one case, to which I have often referred, a plaintiff was compelled to compromise his suit, in consequence of his valuer mistaking the side for which he was employed. Valuations are mere matters of opinion, on which a person cannot be indicted for perjury. A man 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" (b). With respect to the valuation of the property offered as a security to trustees, and as to the amount which may be properly lent, regard must be had to the provisions of s. 8. of the Trustee Act, 1893 (replacing the similar provisions of s. 4 of the Trustee Act, 1888). These are to the effect which a purchaser is entitled in the absence of special contract, ib. 8. 8 (3). (b) As to the liability of a valuer, see Le Lievre v. Gould (1893), 1 Q. B. 491. 327 Real securities. that a trustee is not to be chargeable with breach of trust "by reason only of the proportion borne by the amount of the loan to the value of the property," provided (1) that in making the loan the trustee acted upon a report as to the value "made by a person whom he reasonably believed to be an able practical surveyor or valuer, instructed and employed independently of any owner of the property, whether such surveyor or valuer carried on business in the locality where the property is situate or elsewhere”; (2) that the amount of the loan does not exceed two-thirds of the value of the property as stated in the report; and (3) "that the loan was made under the advice of such surveyor or valuer expressed in the report." (See on this section, Re Somerset (1894), 1 Ch. 231.) It must be particularly borne in mind that the valuer should be chosen, employed, and paid by the trustee, and be altogether independent of the mortgagor; and that the advice that the loan be made should be expressed in the valuer's report, which should state what amount may be advanced. When the power does not authorise an investment on leaseholds, eo nomine, but is merely a power to invest in "real securities," ordinary leaseholds are not within the power. The general opinion of conveyancers was that chattel interests in land, such as long terms of years, not burdened by rent or covenants, were within a power to invest in real securities (2 Dav. Prec., part 2, 460; 3 Dav. Prec. 37; Re Chennell, 8 Ch. D. 492); but this opinion was disapproved (Re Boyd's Settled Estates, 14 Ch. D. 626; Re Leigh, 35 W. R. 121). The question is now set at rest by a provision (expressly made retrospective) in the Trustee Act, 1893, s. 5 (1) (replacing s. 9 of the Trustee Act, 1888), that "a trustee having power to invest in real securities, unless expressly forbidden by the instrument creating the trust, may invest on mortgage of property held for an unexpired term of not less than two hundred years, and not subject to a reservation of rent greater than a shilling a year, or to any right of redemption, or TRUSTEES LENDING ON CONTRIBUTORY MORTGAGE. to any condition for re-entry, except for non-payment of rent." sum. 329 It is improper for trustees, unless they are expressly Trustees lending authorised, to join with others in a contributory mortgage, trustso as to mix up the trust fund with the rights of strangers moneys as part of an (Webb v. Jonas, 39 Ch. D. 660); nor should they take a aggregate joint mortgage in the name of a common trustee (ante, p. 156). The attention of the reader is called to this, as the practice is by no means uncommon. It will be observed that, in the latter case, the breach of trust consists in the fact that the trustees do not advance the money on the real security they advance it to another person as the common trustee, and have not the land itself as a security, for the common trustee can get paid off and discharge the land. Trustees who lend money on mortgage, lend it as if it belonged to them absolutely, and in the mortgage deed it is stated to belong to them on a joint account (ante, p. 154). Transfer of mortgage on appointment of a new If a new trustee is appointed, there is a transfer of the mortgage in the usual manner, founded on a recital that the mortgage money and interest have become the property of the continuing and new trustees (naming them). Doubts trustee. have been suggested whether a future purchaser would not be entitled to know how the new trustees became entitled. But the better opinion is, that the statement by the continuing trustees (who have become the owners of the mortgage debt) as to the change of ownership confers an equitable title, to which they are bound to add the legal estate. Whatever may be the theoretical doubts as to the validity of such a transfer, it is universally adopted in practice. (See form in 2 K. & E. 223.) (B). Sometimes it is thought desirable to enable the trustees to invest the trust funds in the purchase of land. The propriety of the insertion of this clause, which, with the accompanying powers, is rather long, must depend on the circumstances of the particular case. If the sum put into settlement is large, such a clause should always be Power to invest in purchase of land. |