ABSTRACT
It was affirmed in Nestlé v National Westminster Bank plc (1988) that the claimant is required to prove a causal link between the loss suffered and the breach of trust. However, it was further held that there is a defence for the trustee where the trustee can demonstrate that there was a good reason for the sale or misapplication of the trust property. Therefore, where a trustee breached the precise terms of a trust by investing in property outwith the investment powers contained in the trust deed, in circumstances where the trustee is able to demonstrate that the technical breach of trust protected the beneficiaries from losses which they would otherwise have suffered, it will be open to that trustee to maintain that the breach of trust is therefore not actionable. At one level it would be necessary for the beneficiary to demonstrate loss in any event. It is submitted that, on the authority of Nestlé, even if a small loss had been suffered a trustee capable of demonstrating that the investment strategy was adopted for the long-term benefit of the beneficiaries and to guard against future risk, would be able to demonstrate that that should constitute a good defence to an action for compensation for breach of trust arising out of such a loss. Evidently, the trustee would be required to prove that the adopted course of action was indeed well-founded and further that any loss was reasonable to achieve that alternative goal.
