Keech v Sandford
Citations: (1726) 25 ER 223.
The settlor declared a trust of his estate for an infant (the claimant). The estate included a lease over the profits of Romford Market in London. The trustee applied on behalf of the infant to renew the lease shortly before it expired. The settlor refused to grant the infant a new lease, but offered a lease directly to the trustee. The trustee accepted. When the claimant became an adult, he sued the trustee for the profit obtained from the lease.
- Was the trustee required to disgorge the profits he obtained from the lease?
The High Court held for the claimant. The trustee ought to have let the lease run out rather than take it for himself. By taking the lease, the trustee breached his duty to the beneficiary. Consequently, the trustee was required to account for the result of the breach – the profits from the lease.
This Case is Authority For…
This case demonstrates that a trustee can be required to account for unauthorised profits even if the beneficiary has not suffered any loss. After all, if the trustee had refused the lease, the beneficiary would have had no right to the profits after the lease expired.
This is also an early example of a case on conflict of interest. Trustees hold a fiduciary duty of loyalty to their beneficiaries, and this requires them to avoid putting themselves into a position where they might have a conflict of interest.