16 BEAV. 77. KNOTT V.

COTTEE 705

[77] KNOTT v. COTTEE. March 12, 15, 1852.

[S. C. 16 Jur. 752. See In re Salmon, 1889, 42 Ch. D. 357. Followed, except as to
rate of interest, In re Barclay [1899], 1 Ch. 674.]
Rule as to charging executors and trustees with interest on balances, and at what
rate and whether with annual rests.
An executor and trustee who was directed to invest in Government Stocks of Great
Britain, or upon real security, and accumulate the surplus, after maintaining infants,
invested the estate in the foreign funds. It was held that the investment was
improper, and he was charged with four per cent, with annual rests.
In 1846 an executor invested part of the assets in Exchequer bills; they were
ordered into Court and sold in the same year at a loss. In 1848 it was declared
by the decree that the investment was improper, but at that time the price of
Exchequer bills had risen, so that there would have been then no loss if they had
been retained. Held, that the executor ought to be charged with the amount
improperly invested, and credited with the produce of the Exchequer bills in 1846.
Costs of an administration suit given to an executor, though charged with the
consequences of an improper investment.
The testator bequeathed his personal estate to Cottee and two others, upon trust
to invest the produce in " the public or Government stocks or funds of Great Britain,
or upon real security in England or' Wales," and to hold, upon certain trusts during
the life of his widow, and afterwards upon trusts in favour of his infant children and
their families.
And he directed that, after the death of his wife, the trustees should apply the
income towards the maintenance and education of his children during their minority,
" and," he proceeded, " shall accumulate the surplus annual income of each such child,
until he or she shall attain the age of twenty-one years, and invest the same, from
time to time, in the names of my trustees," &c.
The testator died in January 1844, and his wife in November in the same year.
The executor Cottee invested part of the testator's personal estate in Russian,
Belgian, Dutch and other foreign stocks and bonds, and upon Exchequer bills. One
of these transactions was as follows:—In 1845 and 1846 he invested £4063, part of
the testator's estate, in [78] £3900 Exchequer bills, and in July 1846 he was ordered
to deposit them with the Accountant-General, to the credit of the cause, and under a
subsequent order in November 1846 they were sold for £3955, and at a loss, and
the produce invested in the £3 per cents.; but if they had been sold at the date of
the decree (March 1848), and invested, there would have been no loss, but on the
contrary.
By the decree made in March 1848 the Court declared that the investment of the
R. IV.—23
706 KNOTT V. COTTEE 16 BEAV. 79.

personal estate in Exchequer bills, Eussian bonds, Belgian, Dutch and other foreign
stocks and bonds was an improper investment; and in taking the accounts, the Master
was to have regard to that declaration.
The cause now came before the Court upon exceptions and for further directions.
Mr. Lloyd and Mr. Selwyn, for the Plaintiffs (two of the testator's children) con-
tended that the executor, having neglected to obey the express directions for accumula-
tion, was chargeable with interest on his balance at «£5 per cent., with annual rests;
Raphael v. Boehm (11 Ves. 92, and 13 Ves. 590); Stacpoole v. Stacpoole (4 Dow. 209);
Williams v. Powell (15 Beav. 461); and see Jones v. Foxall (3. 388); or that he ought
to be charged, at the option of the Plaintiffs, with the stock and accumulations which
would have been produced if the investments had been made in consols.
Secondly. That the executor ought to have credit for the money produced by the
Exchequer bills, as on the 1st of December 1846, when they were actually sold.
[79] Thirdly. That he ought not to have any costs of suit.
Mr. Campbell and Mr. Bagshawe, contrh,, for Cottee, argued that the direction to
accumulate applied only to the surplus income, and that the executor was chargeable
with £4 per cent, only on balances in hand, but not with annual rests. That the
Plaintiffs had no right to make the Defendant account as for stock investments,
Robinsm v. Robinson (1 De G. M. & G. 247).
Secondly. That the executor having been charged with the £4063 invested in
Exchequer bills in 1845 and 1846, was entitled to have the benefit of the Exchequer
bills which had been withdrawn from his control and sold in 1846, before the invalidity
of the transaction had been declared. That therefore the Exchequer bills ought to
be treated as sold in March 1848, when it was declared that the investment was
improper, by which means the executor would be relieved from all loss.
Thirdly. That as this was a mere administration suit, the Defendant, the executor,
was entitled to his costs, Tebbs v. Carpenter (1 Mad. 290).
THE MASTER OF THE ROLLS [Sir John Romilly]. Here is an executor who had
a direct and positive trust to perform, which was to invest the money upon Govern-
ment stocks or funds, or upon real securities, and accumulate at compound interest
all the balances, after maintaining the children. He has made certain investments,
which the Court has declared to be improper. The case must either be treated as
if these investments had not been made, or had been made for [80] his own benefit
out of his own monies, and that he had at the same time retained monies of the
testator in his hands. I think, therefore, that there must be a reference back, to
ascertain what balances the executor retained from time to time, it being clear that
he has retained some balances.
The next question is, at what rate of interest ought he to be charged 1 The usual
course is to charge an executor with four per cent, where he has simply retained
balances; but where he has acted improperly, or has employed the trust money in
trade for his own benefit, or has been guilty of other acts of misconduct, the Court
visits him with interest at five per cent. In this case there does not appear to me to
have been any such misconduct as to make him answerable at five per cent. It
appears simply a case in which an executor has retained monies, which he has not
properly invested. I am therefore of opinion that he ought to be charged with
interest at four per cent, and with annual rests; for there is an express trust for
accumulation, of which he was aware when he retained the trust monies.
I cannot concur in the argument that the Court must charge him as if the money
had been invested in consols. If that were so, the Court must charge him the other
way where the funds have fallen, which it never does. There was a conflict of
decision as to how a trustee was to be charged, where the investment might either
be made in the funds or on real security. The decisions of Lord Langdale and Sir
John Leach were opposed.(l) The case, however, of Robinson v. Robinson has settled
[81] the rule, and I have adopted it in a former case. I stated my reasons for
doing so.
As to the mode of charging the executor in respect of the Exchequer bills, I treat
(1) Marsh v. Hunter, 6 Madd. 295; Watts v. Girdlestone, 6 Beav. 188; Ames v.
Parkinson, 7 Beav. 379; Ouseley v. Anstruther, 10 Beav. 456.
16 BEAV. 82. 707

the laying out in Exchequer bills in this way :—The persons interested were entitled
to ear-mark them, as being bought with the testator's assets, in the same manner as
if the executor had bought a house with the trust funds; and though they do not
recognize the investment, they had a right to make it available for what was due;
and though part of the property of the executor, it was specifically applicable to the
payment. When the Exchequer bills were sold and produced £3955, the Court must
consider the produce as a sum of money refunded by the executor to the testator's
estate on that day; and on taking the account, the Master must give credit for this
amount as on the day on which the Exchequer bills were sold.
As to the costs, I think there is not sufficient in this case to induce me to
apportion them. I am disposed to give the executor all the costs, except those of his
exceptions, which have failed, reserving the costs of the reference back, which has
become necessary by reason of the retainer of balances in his hands. I am always
disinclined to make refined distinctions in the apportionment of costs, on account of
the expense of apportionment.
I must give the executor his costs as between solicitor and client up to the present
time, except those of his exceptions, which he will have to pay.