## Facts

- The case concerned the management of the Nestle family trust by National Westminster Bank as trustee over a period of 60 years.
- Claimants, beneficiaries of the trust, argued the trustee failed to achieve optimal investment returns by maintaining an unduly cautious investment approach.
- The trust was established to provide long-term financial security for the beneficiaries, necessitating investment growth over time.
- National Westminster Bank primarily invested trust assets in fixed-income securities, allocating little to equities.
- The investment approach was arguably sensible in the trust’s early years but became more conservative over time, potentially limiting asset growth.
- The court examined how the trustee balanced risk and reward, considered the asset mix, and assessed the adequacy of the investment plan in response to changing market conditions.

## Issues

1. Whether National Westminster Bank, as trustee, failed in its duty of care by not achieving the best possible investment returns for the trust.
2. What standard of care, skill, and diligence was required from the trustee in managing trust assets, particularly given its professional status.
3. Whether honest mistakes or cautious investment approaches amount to a breach of trustee duty when judged in hindsight.
4. The extent to which trustees are responsible for losses or suboptimal outcomes caused by market changes or reasonable decisions.

## Decision

- The Court of Appeal held that National Westminster Bank had not failed in its duty of care as trustee.
- The bank’s conservative investment plan, while perhaps excessively cautious, was not unreasonable given the trust’s circumstances and objectives.
- Trustees are expected to act with the care, skill, and diligence of a prudent investor, but are not guarantors of the best possible results.
- The trustee’s honest errors or prudent but imperfect decisions do not automatically amount to a breach of duty, especially when acting within the trust’s powers and with attention to beneficiaries’ interests.
- The judgment emphasized that trustee conduct should not be judged solely with the benefit of hindsight.

## Legal Principles

- Trustees must exercise their powers with care, skill, and attention, giving due regard to the purposes of the trust and the needs of beneficiaries.
- Professional trustees may be held to a higher standard reflecting their specialist knowledge and experience.
- Trustees are permitted a reasonable degree of discretion in investment strategy, provided decisions are honest, reasonable, and consistent with the terms of the trust.
- Trustees are not liable for losses or underperformance resulting from honest mistakes or changes in the market, so long as their actions meet the requisite standard of care.
- Performance evaluation should consider the context of the time, not merely in retrospect.

## Conclusion

Nestle v National Westminster Bank Plc established that trustees must act with prudence, care, and skill, particularly when investing trust assets over the long term. The decision affirms that trustees are not strictly liable for investment outcomes, provided they operate honestly, reasonably, and within the scope of their authority, and it continues to guide the assessment of trustee responsibility in English trust law.


Nestle v National Westminster Bank Plc [1993] 1 WLR 1260 (CA)