Wight & Anor v Olswang [2000] EWCA Civ 310 (7 December 2000)





Royal Courts of Justice

Strand, London, WC2A 2LL

Thursday 7th December, 2000





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(1) TIFFANY WIGHT (2) FELIX WIGHT Claimants/Appellants
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– – – – – – – – – – – – – – – – – – – – -(Transcript of the Handed Down Judgment of

Smith Bernal Reporting Limited, 190 Fleet Street

London EC4A 2AG

Tel No: 020 7421 4040, Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

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John Martin QC (instructed by Hecht & Co for the Appellants)

Mr Greenhill appeared to receive judgment.

Alan Steinfield QC (instructed by Barlow Lyde & Gilbert for the Respondent)

.Mr Knight appeared to receive judgment.
– – – – – – – – – – – – – – – – – – – – –Judgment

As Approved by the Court

Crown Copyright ©


1. This is an appeal from the order of Neuberger J made on 6 April 2000 under CPR Part 24. He summarily dismissed claims for breaches of trust on the ground that the claimants have no real prospect of succeeding against one of the trustees of the settlement (the Settlement) made by Mr Robin Wight on 20 December 1982 for the benefit of his children. The claimants are two of his children, Tiffany (now aged nearly 26) and Felix (now aged nearly 18). They were both minors at the dates of the alleged breaches.

2. The defendant, Mr Simon Olswang, is a solicitor in private practice. He was appointed a trustee of the Settlement on 23 January 1991. The claim originally made against his co-trustee, Mr Roger Peters, who is also a solicitor, but in a different firm, was withdrawn before the hearing. They had been appointed trustees by Mr Robin Wight in place of himself and his wife.

3. The appeal by the claimant beneficiaries is with the permission of the judge.

The Events

4. The following facts are alleged in the amended statement of claim and amplified in the contemporaneous letters referred to in the pleading. They are assumed to be true for the purposes of this appeal.

5. At the time of the appointment of Mr Olswang and Mr Peters as new trustees of the Settlement the principal assets in settlement were about 228,000 ordinary shares in a publicly quoted company, Aegis PLC. The claims against Mr Olswang arise out of (a) his refusal to consider a bid for all the shares in May 1991, when they could have been sold for 210p each, and (b) the non- implementation in September 1991, when the shares could have been sold for 215p each, of an agreement between the trustees to sell one half of the remaining shares. The bulk of the shares were subsequently sold between April 1992 and November 1996 at prices varying from 104p and 18p a share.

The May Offer

6. In February 1991 Mr Peters instructed stockbrokers, Capel-Cure Myers, to advise the trustees in connection with the shares. On 9 April 1991 the trustees sold 50,000 shares through the brokers for 230p a share.

7. The quoted price then fell. Mr Peters wrote to Mr Olswang on 25 April referring to his meeting with the brokers on the previous day, to the fact that the price of Aegis shares had fallen ” quite significantly since the sale of the first tranche of 50,000 shares was made” and to the fact that he was “reluctant to sell, merely for the purpose of diversification, when the shares have fallen back so much.” Mr Olswang replied on 26 April saying that he would not “participate in any decisions regarding these shares” while he was “in possession of price sensitive information.”

8. That was a reference to possible difficulties arising from sections 2 and 3 of the Companies Securities (Insider Dealing) Act 1985. On the day before his appointment as a trustee Mr Olswang had agreed with Mr Robin Wight that his firm should act as solicitor to Aegis.

9. On 7 May Mr Peters wrote to Mr Olswang informing him that he had been told by the brokers that the Aegis shares had risen by 25p and that they had a bid at 210p a share for 250,000 shares. In a note on 9 May Mr Olswang told Mr Peters that he was “still technically unable to deal.” The bid was not accepted and the shares were not sold.

10. On 24 June Mr Olswang informed Mr Peters that he had become free to comment on the sale of the remaining shares. By that time the shares had fallen to 180p a share. The price traded at between 180p and 220p between the end of June and mid-September 1991.

The September Resolution

11. A meeting of the trustees took place on 13 September 1991. According to the note of the meeting it was agreed that it would be wise to sell half of the balance of 178,000 shares, “despite the fact that the Aegis shares might increase in value”, “…as the trust was over-exposed by currently being invested solely in Aegis.” Mr Olswang said that he would like to speak to Mr Robin Wight about the proposed sale beforehand. It was agreed that, once that had been done, Mr Peters would give instructions to the brokers to sell half the holding and ask them for recommendations for the reinvestment of the proceeds.

12. At that date the market price was 198p a share. It increased to 212p on 20 September and to 215p on 25 September.

13. The sale of half of the remaining shares did not take place. The share price fell.

The Proceedings

The writ was issued on 23 March 1997 claiming damages for breach of duty.

The breaches of duty pleaded in the amended Statement of Claim can be summarised as follows:-

1. Mr Olswang was in breach of a fiduciary duty and/or breach of a duty to take reasonable care when considering whether to accept appointment as a trustee of the Settlement. He had not drawn the attention of Mr Wight to the risks posed by the 1985 Act of his being prevented or inhibited from performing his duties and exercising his powers as a trustee and, in particular, from participating in a decision whether or not to sell the shares as a result of the receipt by him of price sensitive information about the shares.

2. Mr Olswang had failed after his appointment to consider adequately or at all the risks posed by the 1985 Act, in particular the provisions of section 7 whereby a trustee is presumed to have acted with propriety for the purpose of the 1985 Act, if he acted on the advice of a person who appeared to him to be an appropriate person from whom to seek advice and did not appear to him to be prohibited by the Act from dealing in the relevant securities. He failed to consider whether he could safely participate in a decision whether or not to sell the shares by acting on the advice of the brokers.

3. If Mr Olswang had considered these matters properly he would either (a) have concluded that there was a real risk of his being prevented or inhibited from participating in a decision whether or not to sell the shares, in which case he would not have accepted the appointment or, if he had, he would have been replaced as a trustee or (b) have concluded that by reason of section 7 the trustees could act on the advice of the brokers, so that there was no reason for his being unable to perform his duties as a trustee. In either event the trustees would have considered the offer in May 1991, would have accepted it and would have sold all the remaining shares at 210p a share.

4. As it was, the bid was not accepted or even considered by Mr Olswang. The shares diminished in value rendering him liable to pay compensation in respect of the diminution in value i.e. the difference between the actual value of the trust fund and the value the trust fund would have had, if all the remaining shares had been sold on about 7 May for 210p a share and the proceeds invested .

5. Mr Olswang had also failed to take any or any sufficient steps to implement the resolution of the trustees on 13 September to sell half the remaining shares in the Settlement. As a result the value of the trust fund was less than it would have been had the decision been implemented.

The Judgment

14. The judge concluded that the claims would fail for two main reasons.

1. Breach of Trust Test

In order to succeed the claimants had to plead and prove that no reasonable trustee, exercising the ordinary prudence that he would exercise in managing his own affairs, could have done other than sell the shares in May 1991 and September 1991. Failure to observe that objective standard was not alleged in relation to the retention of the shares at those dates. So, even “assuming that there were breaches of trust on the part of Mr Olswang as alleged, in May and/or September 1991”, the claims for damages for failing to sell the shares at those dates could only succeed

“…if it could be shown that no person exercising the ordinary prudence involved in managing his own affairs…..could have retained the shares as at that time.”

The judge stated his preference for the following formulation of Mr Steinfeld QC on behalf of Mr Olswang-

“If this is the right approach, the instant claim could not succeed however the decision not to sell was arrived at or whatever the reason that the sale was not implemented, if the decision itself (namely not to sell the shares) was one which a trustee…could have reached. As it is not alleged that the decision to retain the shares in May 1991 or in September 1991 was one which a trustee in the position of Mr Olswang could acting in accordance with this test not have reached, the claim…must fail.”

It is clear from this passage and from a later passage in the judgment that the judge took the view that the relevant acts of the trustees were the decision not to sell the shares in May 1991 and the failure to implement the decision to sell half of the shares in September 1991.

2. Causation and the Interrelation of the two alleged breaches.

Any breach of duty by Mr Olswang in May 1991 was ” overtaken by events” and was “effectively abrogated by what happened in September 1991.” The direct cause of the damage suffered (i.e. the fall in the value of the shares in October 1991 and the subsequent sales at prices well below 210p a share) was the non-implementation of the September decision and not the failure to consider the offer in May.

The September events,” quite irrespective of whether [they] represented a breach of trust” provided a subsequent opportunity to the trustees to sell the shares at a higher price than that which was available in May. That opportunity was not taken. That failure to sell shares at 215p a share was causative of the claimants’ loss.

As for the fact that the September decision was to sell only half the shares, the claimants had not shown any reason why it would not have been possible for the trustees to sell all 178,000 shares in September.

The judge rejected, however, the contention that the claim in respect of the events in May 1991 should be dismissed at the summary stage on the basis that the trustees would not have decided to sell in any event. He thought that there was a real case for arguing that the trustees would have decided to sell in May 1991 “if Mr Olswang had put his mind to it.”

The Legal Position

15. I am unable to agree with the judge’s conclusion that the claimants have no real prospect of succeeding on their claims and that the claims should be summarily dismissed. I would allow this appeal by the claimants.

16. It is important to note that, in allowing this appeal, the court would not be deciding the action in favour of the claimants: it would only be deciding that the claims should not be finally determined now in favour of Mr Olswang, but should be tried with disclosure of documents, evidence and full argument on the evidence and the law.

In these circumstances I shall state my reasons briefly.

17. The judge proceeded on the basis that, even assuming breaches of trust by Mr Olswang, the claims against him were bound to fail (a) in the absence of pleading and proof that no reasonable trustee could have done other than sell the shares in May and September 1991; and (b) on the issue of causation.

18. I am not satisfied that this assessment of the claims is correct.

1. Breach of Trust Point

In the two critical passages of the judgment already cited the judge treated the “failing to sell the shares “, “the decision not to sell the shares” and “the decision to retain the shares” in May 1991 as the breach of trust. In so doing he inaccurately summarised the claims as formulated in the pleadings. It is not simply alleged that Mr Olswang should have sold the shares in May 1991 and was in breach of trust in not so doing. The retention of the shares was the consequence of the alleged breach of trust, rather than itself constituting the breach of trust. The essential thrust of the claim (though it is not so stated in these very words) is that the effect of Mr Olswang’s conduct was to put him in an untenable position for a trustee i.e. one in which his duty as a trustee to act in the interests of the beneficiaries under the Settlement, by considering the bid for the shares, conflicted with his personal interest in not risking the commission of a criminal offence under the 1985 Act; and that he did not do what he should have done in that situation. He simply refused to consider the bid. He should either have sought to rely on section 7 of the 1985 Act to avoid the commission of an offence or he should have taken the appropriate steps to enable the bid to be properly considered by another trustee in his place who would not be embarrassed by the conflict situation.

The judge’s treatment of the claim based on the September 1991 events is open to a similar criticism. He refers in his judgment to a ” decision to retain the shares ” in September 1991, as well as in May 1991. But the essence of the claim is that the trustees had in fact decided to sell the shares (presumably because it was in the interests of the beneficiaries to do so), and then failed to carry out that decision. The beneficiaries are at least entitled to an explanation as to why the decision to sell half the shares was not implemented and, in the absence of a satisfactory explanation, to invite the court to infer that there was a dereliction of duty amounting to a breach of trust.

In brief, the judge mistakenly treated the claims as based on a decision by the trustees not to sell shares or a decision to retain them. That was the basis on which he applied the “no reasonable trustee” test to the pleading and the proof of the claims against Mr Olswang . That test is not applicable to the main case which is actually pleaded, namely that Mr Olswang refused to consider a bid for the shares.

2. The Causation Point.

The judge’s approach to the issue of causation led him to conclude that the claims would in any event fail on that ground: he reasoned that, even if there were a breach of trust, it would have been possible to sell all (not just half of) the shares in September and that the loss to the beneficiaries was attributable to the fall in value in the shares after that, rather than to a prior breach of trust.

In my judgment it is premature to make any final decision on the issues of causation in advance of the evidence at the trial of this action. If the trial judge finds that there has been no breach of trust by Mr Olswang in May or September 1991, questions of causation will not arise. If he finds that there have been breaches of trust, it will be for the trial judge to decide, in the light of all the evidence, what would have happened if Mr Olswang had not refused to consider the bid in May 1991 or if he had implemented the resolution to sell half of the shares in September 1991. It will also be for him to determine, in connection with any breach of trust which is established, the effect, if any, on the issue of causation of the (lost) opportunity to sell the shares at a higher price in September 1991 and of the subsequent fall in price of the shares in October 1991. These are matters for investigation at trial and not for final decision on an application for a summary judgment.

19. I would accordingly allow this appeal and direct that the matter proceeds to trial in the normal way.


I agree.


I also agree.

ORDER: Appeal allowed. The respondent to pay the appellants’ costs in this court and of an incidental to the application for summary judgment below, such costs to be subject to detailed assessment if not agreed. The appellants’ costs to be assessed pursuant to paragraph 4 of the Community Legal Service Funding Order 2000.(Order does not form part of approved Judgment)


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