Barnsley & Ors v Noble (Rev1)

An exoneration clause in a will may relieve a lay trustee or executor from personal liability for loss caused by breach of the self-dealing rule, even where a separate clause authorising self-dealing has not been satisfied. It does not remove a beneficiary’s right to rescind the transaction. Professed execution is judged objectively: the trustee must act as trustee or executor, but need not have a particular power in mind. Wilful wrongdoing means conscious and wilful misconduct, including a knowing or deliberate breach or reckless indifference to breach. An intentional act that happens to be wrongful is insufficient.

Michael Noble’s will appointed Philip Noble, his widow Gillian and John Barnsley as executors. During a demerger of the Noble Organisation’s business and property interests, claims were brought against Philip for breach of fiduciary duties, including breach of the self-dealing rule and failure to disclose information concerning VAT repayment claims. The High Court dismissed the claims and held that an exoneration clause in the will protected Philip from liability for equitable compensation. The appeal concerned whether that clause applied to self-dealing breaches, whether Philip had acted in the professed execution of the will’s trusts and powers, and whether his conduct amounted to wilful and individual fraud or wrongdoing.

1. Appeal dismissed. The Court of Appeal unanimously upheld the High Court’s conclusion that the exoneration clause protected Philip against the claims for equitable compensation.
2. The clause authorising self-dealing and the exoneration clause addressed different matters. The former permitted self-dealing if its conditions were met. If those conditions were not met, the transaction remained liable to rescission and the trustee might be liable for breach of duty. The exoneration clause nevertheless addressed the separate question of personal liability for loss to the trust and, subject to its own exclusions, applied generally to that liability. It did not bar rescission.
3. The opening words referring to the professed execution of the trusts and powers concerned the objective capacity in which the trustee acted. An executor need only deal, or purport to deal, with the estate as executor. It was unnecessary for the executor to have a particular power in mind. The court followed the reasoning in Walker v Stones [2001] QB 902.
4. Wilful and individual fraud or wrongdoing required conscious and wilful misconduct. This included a knowing and deliberate breach of duty or reckless indifference to whether the conduct was a breach. The word wilful qualified the wrongdoing, not merely the physical act or omission. The court relied on the reasoning in Armitage v Nurse [1998] Ch 241, Lewis v Great Western Railway Co. (1877) 3 QBD 195, Spread Trustee Co. Ltd v Hutcheson [2011] UKPC 13; [2012] 2 AC 194, and Bonham v Fishwick [2007] EWHC 1859 (Ch) and its appeal, Bonham v Fenner [2008] EWCA Civ 373.
5. On the findings, Philip had not deliberately withheld information knowing that he ought to disclose it, and had not consciously acted in a way he knew to be wrong. His conduct therefore did not fall within the exclusion for wilful wrongdoing. The exoneration clause provided a complete defence to the equitable compensation claims.

1. Court of Appeal (Civil Division): In [2016] EWCA Civ 799, the appeal on the construction and effect of the exoneration clause was dismissed.
2. High Court of Justice (Chancery Division): His Honour Judge Nugee dismissed the claims and held that the exoneration clause protected Philip from liability for equitable compensation.