Revisiting Cowan v Scargill

In Cowan v Scargill ¹ Megarry J famously held that trustees ought not to take social or ethical considerations into account when exercising investment powers, and that their sole concern should be financial return on the trust investments. This does not mean that trustees ought to take unreasonable risks in the pursuit of financial returns, ² but it does mean that non-financial factors, such as the ethical (or not) behaviour of the companies they are investing in, should be disregarded. Megarry J’s judgment has been the subject of much criticism of late, with some arguing that there is no authority or doctrinal basis for the decision. The Law Commission, in its report on Fiduciary Duties, has suggested that the decision could be disregarded: