Nocton v Lord Ashburton [1914] AC 932

Facts

  • The case involved Nocton, a plaintiff who alleged that Lord Ashburton, acting as a solicitor and fiduciary, misrepresented the value of certain securities.
  • The alleged misrepresentation caused financial loss to Nocton.
  • The dispute centered on whether equitable compensation could be awarded for negligent misrepresentation by a fiduciary in the absence of fraudulent intent.
  • The legal context featured a division between common law courts (damages for torts or contract breaches) and equity courts (remedies for breaches of trust or fiduciary duty).

Issues

  1. Whether equitable compensation could be awarded for negligent misrepresentation by a fiduciary without proof of fraud or deceit.
  2. Whether misfeasance by a trustee includes negligent conduct, not just intentional wrongdoing.
  3. How equitable compensation differs from common law damages regarding the basis and measure of recovery.
  4. What standards trustees and fiduciaries must meet to avoid liability for breach of duty.

Decision

  • The House of Lords held that equitable compensation may be awarded against a trustee or fiduciary for breach of duty, even absent fraudulent intent.
  • The judgment confirmed that misfeasance includes both intentional wrongdoing and negligent conduct by fiduciaries falling below the required standard of care.
  • The court recognized the distinct role of equitable compensation, which restores beneficiaries to the position they would have been in had the fiduciary duty been properly fulfilled.
  • The breach must cause the loss, but proof of fraud or deceit is not required for equitable compensation.

Legal Principles

  • Equitable compensation is available for breach of fiduciary duty without the need to prove fraud or deceit; breach and causation suffice.
  • Trustee misfeasance includes negligence or failure to meet the standard of care, not exclusively intentional misconduct.
  • The remedy of equitable compensation differs from common law damages: the former responds to breach of trust or fiduciary duty, aiming to restore the claimant to the position had duty been fulfilled, whereas the latter addresses tort or contract breaches.
  • Fiduciaries and trustees are held to a higher standard of conduct because their roles involve a significant level of trust and confidence.
  • The causation requirement mandates that the loss must be a direct and foreseeable result of the breach.

Conclusion

Nocton v Lord Ashburton [1914] AC 932 established that equitable compensation can be awarded for breach of fiduciary duty—even in cases of mere negligence and without proof of fraud—clarifying the responsibilities and potential liabilities of trustees and fiduciaries, and defining the modern approach to equitable remedies for misfeasance.

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