Keech v Sandford

Factual and Procedural Background

A person held a lease of the profits of a market and devised his estate to a trustee in trust for an infant beneficiary. Before the lease term expired, the trustee sought renewal of the lease from the lessor for the infant's benefit. The lessor refused to renew, reasoning that since the lease concerned only profits of a market, there could be no distress and the infant could not enforce the covenant. Subsequently, the trustee obtained a new lease made to himself. The infant brought a bill seeking assignment of the lease to the infant and an account of profits, based on the principle that any lease renewed by a trustee or executor must be for the benefit of the cestui que use.

Legal Issues Presented

1. Whether a trustee who obtains a lease renewal in his own name, after refusal to renew to the beneficiary, must hold the lease on trust for the beneficiary.
2. Whether the trustee is obliged to assign the lease to the infant beneficiary and account for profits derived from the lease.

Arguments of the Parties

Appellant's Arguments

• The trustee argued that the lessor’s refusal to renew the lease to the infant justified the trustee taking the lease in his own name.
• It was contended that the refusal was valid because the lease related only to profits of a market, where no distress could be made, and the infant could not enforce the covenant personally.

Appellee's Arguments

• The infant's representatives maintained the established principle that any lease renewed by a trustee or executor must be for the benefit of the cestui que use.
• They argued that the trustee should not benefit personally from the lease renewal, even if the lessor refused to renew directly to the infant.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Lord Chancellor reasoned that the lease renewal obtained by the trustee must be held on trust for the infant beneficiary. He emphasized the importance of strictly adhering to the principle that trustees cannot personally benefit from trust property, especially in situations where the trustee obtains a lease renewal after refusal to renew to the beneficiary. Although no fraud was found, the court viewed it as improper for the trustee to take the lease to himself rather than allowing the lease to run out. The court recognized that relaxing this rule could lead to trustees routinely benefiting personally at the expense of beneficiaries, which would undermine trust law principles. Therefore, the court decreed that the lease should be assigned to the infant, that the trustee be indemnified against any covenants in the lease, and that the trustee provide an account of profits earned since the renewal.

Holding and Implications

The court's final decision was to order the trustee to assign the lease to the infant beneficiary and to account for any profits derived from the lease since its renewal. The trustee was also to be indemnified against covenants contained in the lease. This ruling reaffirmed the strict fiduciary duty of trustees not to profit personally from trust property and underscored the protection of beneficiaries' interests even when a lessor refuses to renew a lease directly to them. No new precedent was established beyond reinforcing existing trust law principles.