S 14(3) of the Trustee Act 1949:-

“The trustees shall not be bound to obtain any report as to the value of the land or other property to be comprised in such charge, or any advice as to the making of the loan, and shall not be liable for any loss which may be incurred by reason only of the security being insufficient at the date of the charge.”

Explain the above section with the relevant authorities.


Generally, the trusteee is under a duty to invest the trust funds in investments authorised for the purpose, specifically as authorised by the trust instrument, by legislation or by the court.

Lord Watson explained in Learoyd v Whiteley that the law requires of a trustee of no higher degree of diligence in the execution of his office than a man of ordinary prudence would exercise in the management of his own affairs. A trustee must be fair to the income beneficiaries as well as those entitled to the corpus. He must be honest and prudent for the benefit of other person for whom he is morally bound to provide as illustrated in the case of Re Whiteley. However, it remains the case that investments which yield a high rate of income because the capital is wasting away shall be avoided.

Section 4 to section 15 of the Trustee Act 1949 has stated the power of trustee to do invesments. Section 7 provides for statutory investment. Where trustees are consitutted under any written law such trustees are only bound by the section if the Minister so directs. Section 12 deals with loans and investments by trustees which are not chargeable as breaches of trust. A trustee lending money on the security of any property on which he can lend is not to be charged with breached of trust if it can be shown that in making the loan the trustee was acting upon a report as to the value of the property made by a person whom he reasonable believed to be an able practical surveyor or valuer instructed and employed independenyly of any owner of the property whether such surveyor or valuer carried on business in the locality where the property is situated.

The case of Cowan v Scargill has suggested as a matter of policy, it may demand a higher standard from professional trustees including the corporations to seek for the advice from proffesional bodies before the invest or buy any property. Proper advice is the advice of a person who is reasonably believed by the trustees to be qualified to give it by this ability in and practical experience of financial and other matters relating to the proposed investment. The trustee must consider the advice and then make their own decision. They must not repose blind faith in the adviser. The advice seek by the trustee must be in the form of writing to consitute a valid evidence.

Section 14 deals with supplementary power of investment. This is mainly about the purchase of property and the loans to be paid. Even where the instrument did authorise the investment in land, we saw in the case of Re Pwer that the purchase of a house for the occupation of beneficiary was not an investment. Trustee who acquire land under this provision have all the powers of an absolute owner in relation to the land for the purpose of exercising their functiions as trustee. Even section 14 has provided a blanket for trustee to escape liabilities for the loss incured from the investment, the trustee must act honestly and reasonably in order to be protected under the law. The test of unreasonableness in a test used by the court to prove trustee have mala fide against the trust property in order to held a trustee liable for the loss.

The duty of care is imposed on a trsutee as a prudent man of business as seen in the case of Speight v Gaunt. The duty of care applies to trustees in the exercise of statutory or epress powers of investment including the seek for proper advice and acquire land as seen in the case of In Anker-Petersen. The trustee must act prudent and honestly as seen in the case of Re Whiteley. The trustee have the discretionary power but must be exercised reasonably as seen in Re Harari’s Settlement Trust.

In conclusion, once it was proven that the trustee is acted bona fide, they are not liable for and loss incurred from the invesement.