Fitzgibbon, Esq. v. Scanlan, Esq.

Factual and Procedural Background

In 1773 the Settlor married the Settlor's Wife. As part of their marriage articles, the Settlor covenanted to settle several leasehold lands in The County and appointed two trustees—Co-Trustee and Trustee—to secure a jointure for his wife and portions for future children. The articles required the trustees to apply rental income to an annuity of £200 per year and ultimately to pay £2,000 in portions for younger children.

After the Settlor failed to meet these financial obligations, the Trustee (the sole surviving trustee) took possession of the lands in 1776. One of those holdings—Duckstown—was held on a 31-year lease that expired in 1780. When the lease was publicly advertised for renewal by The Lessor, the Trustee obtained a new lease in his own name and for his own benefit.

The Settlor died in 1793. His eldest son died without issue in 1795, leaving the younger son (the Respondent) and two daughters as survivors. In 1799 the Respondent and his sisters filed a bill in Chancery against the Trustee's personal representative (the Appellant) and certain tenants, seeking (1) to set aside allegedly improper leases and (2) to have the renewed Duckstown lease treated as trust property available to satisfy the £2,000 portions.

On 20 June 1806, Judge Ponsonby decreed that the renewed Duckstown lease was held in trust for the beneficiaries and ordered the Appellant to account for mesne profits. A rehearing on 2 February 1807 affirmed the decree, adding that the Respondent must indemnify the Appellant against covenants in the renewed lease and awarding the Appellant costs of the rehearing. The Appellant appealed these determinations to the House of Lords.

Legal Issues Presented

1. Whether the renewed Duckstown lease, taken by the Trustee in 1780, was held in trust for the beneficiaries under the 1773 marriage settlement.
2. Whether the account of mesne profits should extend back to 25 March 1780 or be limited to the date when the Respondent obtained letters of administration (18 May 1803).
3. Whether the beneficiaries’ delay in asserting their rights barred them from relief under the doctrine of laches.
4. Whether the Chancery orders concerning costs should be varied in favour of the Appellant.

Arguments of the Parties

Appellant's Arguments

• The 1773 settlement did not make the Trustee a trustee of the Duckstown lands; upon expiry of the original lease, he was free to become tenant in his own right, especially since the renewal was publicly advertised.
• If the renewed lease were nevertheless deemed trust property, any account of mesne profits should start no earlier than 18 May 1803, when the Respondent first had standing as administrator.
• The beneficiaries’ long acquiescence (nearly twenty years) should bar their claim to the lease and to profits.
• The Appellant, as personal representative of the Trustee, should not bear costs because he acted to protect the next-of-kin and required the Court’s guidance; at minimum, he should not pay costs relating to matters in which he had no stake.

Respondent's Arguments

• The 1773 articles expressly required that any renewal of the settled leases, including Duckstown, remain subject to the same trusts; the Trustee therefore held the renewed lease for the beneficiaries.
• Under settled equitable doctrine, a trustee who uses his position to obtain a renewal of a lease cannot exclude the beneficiaries from that benefit, even if the lessor would not have renewed directly to them; equity will impose a constructive trust.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

Judge Eldon, delivering the principal opinion, noted two independent grounds for holding the renewed lease on trust:

• Express Covenant: Under the marriage articles, the Trustee entered into possession solely to apply rents toward the annuity and children’s portions. Any surplus therefore belonged beneficially to the Settlor and his issue. The Trustee's continued possession after satisfying those obligations was necessarily in a fiduciary capacity.
• Constructive Trust Principle: Equity invariably prevents a trustee who holds a lease for beneficiaries from obtaining a renewal for personal gain; even where the lessor would have refused to renew for the beneficiaries directly, the trustee must nevertheless hold the new lease for them.

Applying these principles, the House concluded that the Trustee remained a fiduciary in respect of Duckstown and that the renewed lease was impressed with a trust for the beneficiaries. However, the Court acknowledged that the Appellant should be accountable only for the profits actually received and directed that appropriate directions be framed to settle that accounting.

On costs, Judge Eldon observed that although costs alone are not ordinarily grounds for appeal, they may be adjusted when other matters are before the House. Because parts of the litigation concerned matters in which the Appellant had no interest, the House determined he should be relieved of those particular costs.

Judge Redesdale expressly concurred in every aspect of the analysis and outcome.

Holding and Implications

HELD: The decree of the Court of Chancery was AFFIRMED, subject to variations limiting the accounting to profits actually received and relieving the Appellant from costs associated with issues in which he had no involvement.

Implications: The decision reinforces the stringent equitable rule that a trustee who renews a lease originally held in trust cannot appropriate the new interest for personal benefit. The House of Lords confirmed that this rule applies even where it is doubtful the lessor would have renewed in favour of the beneficiaries. While the judgment adjusted the scope of accounting and costs, it set no new precedent; rather, it reaffirmed existing fiduciary principles and clarified that cost orders may be revisited on appeal when substantive issues are also under review.