Recent trusts and
estates cases and what
they mean for the
practitioner
Mark Baxter and
Edward Hewitt
STEP London Central
14 June 2017
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Estates case update
Mark Baxter
14 June 2017
www.5sblaw.co.uk
14 June 2017
Estates Case Update
Randall v Randall [2017] Ch 77
Consent Order in divorce proceedings, 12.05.06:
“I
AND UPON the petitioner undertaking to the Court and agreeing
1)
To pay such lump sum or sums as may be necessary to give effect to the
following agreement between the Petitioner and the Respondent, namely, that
in the event that the Petitioner receives hereafter any property and/or monies
from her mother by way of inter vivos gifts and/or inheritance, the Petitioner
shall retain the first £100,000.00 of the sum of any such gifts and/or inheritance
and the balance shall be divided equally between the Petitioner and the
Respondent and…
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14 June 2017
Estates Case Update
The inevitable happens…
•
“20.10.09”: D’s mother executes new Will limiting D’s inheritance to
£100,000 (residue divided between grandchildren instead)
•
C issues claim challenging validity of “20.10.09” Will and seeking
revocation of grant, and relies on rights under Consent Order to
establish standing
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14 June 2017
Estates Case Update
CPR, r.57.7(1)
“The claim form must contain a statement of the nature of the
interest of the claimant and of each defendant in the estate.”
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14 June 2017
Estates Case Update
CPR, PD57.4
“In giving case management directions in a probate claim the court will give
consideration to the questions
(1) whether any person who may be affected by the claim and who is not
joined as a party should be joined as a party or given notice of the claim,
whether under rule 19.8A or otherwise; and
(2) whether to make a representation order under rule 19.6 or rule 19.7.”
”
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14 June 2017
Estates Case Update
Authorities
•
Menzies v Pulbrook & Kerr (1841) 2 Curt 846
– Two creditors of the Deceased opposed a grant of probate
– Creditor entitled only to ensure a grant to someone (no right himself,
although may be appointed at court’s discretion)
– Allowing creditors to dispute validity of Will “would create infinite trouble,
expense, and delay to executors”
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14 June 2017
Estates Case Update
Authorities
•
Dixon & Dickinson v Allinson & Allinson (1864) Tr & Sw 572
– D & D were appointed executors of both W & H
– W died leaving Will & codicil in H’s favour, then H soon after
– A & A entered caveats in W’s estate
– H’s creditor EEB brought an administration action against D & D in H’s
estate
– D & D propounded W’s Will & codicil and given permission to join EEB’s
liquidator as a person interested in the Will & codicil being upheld
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14 June 2017
Estates Case Update
Authorities
•
In the Goods of Timothy White (1893) LR Ir 31 Ch
–
Deceased’s son obtained letters of administration but suppressed Will in mother’s
favour
–
Mother fell on hard times, borrowed, and could not repay
–
Her creditor discovered the suppressed Will, which (if admitted) would mean she could
repay him
–
Creditor granted permission to bring claim for revocation of grant
–
“A creditor of a person who has an interest under a will has a sufficient interest to entitle
him to be made a party. Dixon v Atkinson is a distinct authority to this effect.”
–
in 13th & 14th eds Tristram & Coote, but not 15th ed (1915) or since
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14 June 2017
Estates Case Update
Authorities
•
Rao v Latchamma AIR 1926 Madras 1193
–
Widow of Deceased’s late brother opposed application for grant of probate
–
Will disposed of ‘joint family’ property to which Deceased had survived on death of
brother
–
Under Hindu inheritance law, widow was entitled to maintenance out of the income of
that property
–
Question was whether widow had ‘interest in estate’
–
“If a person is likely to suffer by the grant of the probate of a forged Will or an invalid Will
he has sufficient evidence to enter a caveat.”
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14 June 2017
Estates Case Update
Authorities
•
Green v Briscoe [2005] EWHC 809 (Ch)
– 1975 Act claim not an “interest in the estate”
•
O’Brien v Seagrave [2007] EWHC 788 (Ch)
– 1975 Act claim is an “interest in the estate”
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14 June 2017
Estates Case Update
My submissions
•
Menzies: creditor of estate cannot challenge right of executor to administer estate because no right
to administration himself
•
Dixon: concerned joinder as D, not standing as C, and was only because B dead and PRs already
Cs
•
White: Menzies not cited and misstated Dixon as authority for proposition creditor of beneficiary
may bring probate claim
•
O’Brien v Seagrave: Green v Briscoe not cited, only considered 1975 Act claimants, but
reconcilable because they are Bs
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14 June 2017
Estates Case Update
Randall v Randall [12]: Menzies
“Menzies has stood the test of time and continues to be referred to
in Williams, Mortimer, & Sunnucks… It is clear authority for the
proposition that the creditor of an estate does not have a sufficient
‘interest’ in the estate to allow him to challenge the validity of a will.”
Lord Dyson MR
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14 June 2017
Estates Case Update
Randall v Randall [15]: Dixon
“I do not accept that the basis for this decision was that the liquidators
were the only persons who could be joined to represent the husband’s
interest… The essential point was that the creditors were allowed to be
joined because, by reason of being creditors of the husband, they had an
interest in the estate… There is no suggestion the Court thought it material
that the liquidators were seeking to be joined to the claim rather than to
bring the claim in the first place.”
Lord Dyson MR
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Estates Case Update
Randall v Randall [16, 22]: White
“The court said… that there was no doubt of the jurisdiction of the court to
grant [an application for permission to issue a citation to recall a grant] ‘in
the case of a creditor who has an interest’ in the issuing of such a
citation… The interest of the creditor of the beneficiary is to ensure that the
beneficiary receives what is due to him or her…”
Lord Dyson MR
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14 June 2017
Estates Case Update
Randall v Randall [24]: O’Brien v Seagrave
“There is no decided case which is inconsistent with a broad construction
of the meaning of ‘interest’. …He adopted a broad construction of ‘interest’.
I would adopt his reasoning and hold that, unless there is binding
authority… which requires us to adopt a narrow interpretation of ‘interest’ in
CPR 57.7 or there are cogent arguments for doing so, justice requires that
it should extend to a person such as [the Claimant].”
Lord Dyson MR
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Estates Case Update
Randall v Randall [27]: CPR
“Whether a Will is invalid is, of course, determined in accordance with rules
of substantive law. But the question of who has sufficient interest to be
permitted to bring a probate claim to prove that a will is invalid is prima
facie a procedural matter… In short, whether a person had a good claim is
a question of substantive law. Whether he has the right to bring his claim
before a court is a question of procedure.”
Lord Dyson MR
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Estates Case Update
Randall v Randall [27]: Judgment
“[The Claimant] has a real interest in challenging the will… I
conclude that he has a sufficient ‘interest’ in the will to bring his
claim.”
Lord Dyson MR
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Estates Case Update
Randall v Randall [37]: Judgment
“It appears to me to be highly unjust that if… a will had been forged
in an attempt to defeat an order made in divorce proceedings, the
party affected could not challenge the validity of the will in probate
proceedings.”
McCombe LJ
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14 June 2017
Estates Case Update
Randall v Randall [45]: Judgment
“Justice in the general sense requires [the Claimant] to be able to
bring his probate claim.”
King LJ
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14 June 2017
Estates Case Update
New normal
•
Any creditor of any potential beneficiary may bring probate claim (default
not necessary)
•
If only “real interest” in challenge required, might category of potential
claimants be even wider?
–
(Divorcing) spouse of potential beneficiary?
–
Child of potential beneficiary?
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14 June 2017
Estates Case Update
Consequences
•
Creditors etc of potential beneficiaries should be joined / given notice under PD57.4
•
But not necessary parties to a compromise under s.49 Administration of Justice Act 1985:
–
Requires only consent of every “relevant beneficiary”, i.e. a person who under any such
will (or intestacy) is beneficially interested in the deceased's estate
•
Mediation?
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14 June 2017
Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
Pauline survived by (second) husband Lennie, daughter Luanne, stepdaughter Laurel, & step-granddaughter Francesca
•
Estate £16.8 million, of which over £16.1 million shares in family hotel
business
•
Also £7-8 million matrimonial home in trust
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Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
£150,000 and income of £75,000 to Lennie
•
Everything else to daughter
•
Daughter also became absolutely entitled to matrimonial home under
trust
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14 June 2017
Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
Lennie died 8 months later
•
Whole estate between Laurel & Francesca
•
Estate little over £300,000, including legacy from Pauline
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14 June 2017
Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
Original claims against Pauline’s estate:
– By Laurel, as child of family and/or dependant
– By Francesca, as dependant
•
Problems:
– Evidence of poor relationship between Laurel and Pauline
– All money given by Lennie (although from Pauline)
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14 June 2017
Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
Attempted amendment / preliminary issue:
– Claim by Lennie’s estate as surviving spouse (i.e. not limited to
maintenance / divorce cross-check)
– Would swell Lennie’s estate to be received by Laurel & Francesca
equally
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14 June 2017
Estates Case Update
Roberts v Fresco [2017] EWHC 283 (Ch)
•
Effect of death on 1975 Act claim:
– Whytte v Ticehurst [1986] Fam 64: PRs may not continue claim after
death of surviving spouse
– Re Bramwell [1988] 2 FLR 263: a claim by the PRs of a surviving
spouse discloses no cause of action
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14 June 2017
Estates Case Update
Law Reform (Misc. Provisions) Act 1934
“Subject to the provisions of this section, on the death of any
person after the commencement of this Act all causes of action
subsisting against or vested in him shall survive against, or, as the
case may be, for the benefit of, his estate.”
Section 1(1)
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14 June 2017
Estates Case Update
Letang v Cooper [1965] 1 QB 232
“a cause of action is simply a factual situation the existence of
which entitles one person to obtain from the court a remedy against
another person”
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Estates Case Update
Matrimonial cases
“there is no right to maintenance, or to costs, or to secured
provision or the like, until the court makes an order directing it.
There is, therefore, no cause of action for such matters until an
order is made.”
Sugden v Sugden [1965] 1 QB 232
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14 June 2017
Estates Case Update
Matrimonial cases
•
Barder v Barder [1988] AC 20 (HL), per Lord Brandon
i.
Nature of further proceedings sought to be taken;
ii. True construction of relevant stautory provision;
iii. Applicability of 1934 Act, s.1(1).
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Estates Case Update
Matrimonial cases
•
Janan Harb v King Fahd Bin Abdul Aziz (No.2) [2005] EWCA Civ 1324
– Approved Barder & cases relied upon therein
– Relevant sections make implicit reference to a subsisting marriage and
a living respondent so limited to application made during joint lives
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Estates Case Update
Judgment
•
On true construction of 1975 Act, potential claim is not cause of action
– No cause of action until ‘value judgment’ or ‘qualitative decision’ under
s.3 that has been failed to make reasonable financial provision
– Several s.3 factors assume living applicant at date of hearing, so s.3
exercise impossible if dead
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14 June 2017
Estates Case Update
Ilott v Blue Cross & others [2017] 2 WLR 979
•
Adult daughter
•
Long estrangement
•
Just about managing to live subsistence lifestyle with significant assistance
from state
•
Estate £486,000 (all to charity)
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14 June 2017
Estates Case Update
Range of awards
•
District Judge Million: £50,000
•
Eleanor King J: nothing
•
Court of Appeal: £143,000 plus option to draw on further £20,000
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Estates Case Update
Points to take away
•
Provision of housing by way of maintenance should be provided by life
interest not capital sum
•
Claimants who had no real expectation of benefit from estate likely find
claims difficult
•
Defendants do not need to establish a needs defence: testamentary
freedom establishes them as beneficiaries, and is for Claimant to justify
departure
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Estates Case Update
Provision of housing by way of maintenance
“The concept of maintenance is no doubt broad, but… it must
import provision to meet the everyday expenses of living…. If
housing is provided by way of maintenance, it is likely more often to
be provided by such a life interest rather than by a capital sum.”
Lord Hughes
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Estates Case Update
Expectation of benefit
“Mrs Ilott… had made her life entirely separately from her mother, and
lacked any expectation of benefit from her estate. Because of these
consequences, the estrangement was one of the two dominant factors in
this case…. The Court of Appeal indeed offered the view… that Mrs Ilott's
lack of expectation of any benefit from the estate was likewise of little
weight…. Those observations should be treated with caution.”
Lord Hughes
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Estates Case Update
Testamentary freedom & rights of beneficiaries
“these charities were the chosen beneficiaries of the deceased. They did
not have to justify a claim on the basis of need under the 1975 Act, as Mrs
Ilott necessarily had to do…. it cannot be ignored that an award under the
Act is at the expense of those whom the testator intended to benefit.”
Lord Hughes
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40
Trusts case update
Edward Hewitt
14 June 2017
www.5sblaw.co.uk
14 June 2017
Trusts case update
• Blades v Isaac [2016] EWHC 601 (Ch)
trustee’s costs, right to estate accounts of B of
discretionary trust of residue & status of legal
advice obtained by trustee
• Pettigrew v Edwards [2017] EWHC 8 (Ch)
availability of Beddoe relief
• Henchley v Thompson [2017] EWHC 225 (Ch)
duty to account & nature of ‘accounts’
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14 June 2017
Trusts case update
Blades v Isaac [2016] EWHC 601 (Ch)
• Valerie Lee died in 2013 in a road traffic accident
• Survived by 2 daughters: Mrs Blades and Mrs
Binder
• History of animosity within the family
• Will: Mr Isaac (solicitor), accountant &
stockbroker executors; whole estate (c.£900k)
on discretionary trust; Bs: Mrs Blades; her
husband; her 3 children; dec’s cleaner; power to
add
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Trusts case update
• Letter of wishes: dec’s relationship with Mrs
Binder improved; give her 5% of estate
• Accountant and stockbroker renounced
• Mr Isaac obtained probate; fellow partner made
trustee of discretionary trust
• Tees indicated accounts “confidential document
between the trustees and executors and will not
be distributed to the beneficiaries”
• Late 2014/early 2015: distributions to Mrs
Blades, her children and Mrs Binder (added)
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14 June 2017
Trusts case update
• May 2015: tees wrote to Mrs Blades proposing
to make final distribution of £200,486.12
provided she signed indemnity
• Mrs Blades instructed solicitors, who wrote to
tees asking for information incl. accounts
• Tees refused, said they’d seek opinion from
counsel, then said counsel supported their
view
• Mrs Blades asked to see copy of opinion;
refused
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14 June 2017
Trusts case update
• Sep 2015: Mrs Blades issued proceedings
seeking account
• Nov 2015: directions hearing before Master
Matthews; tees argued had to add Mrs Binder
because in substance Part 64 application by
tees; Mrs Blades argues hostile claim; Master
held no need to add Mrs Binder
• Jan 2016: tees wrote saying they’d changed
counsel, new counsel had advised to disclose
accounts, which they enclosed
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14 June 2017
Trusts case update
• Dispute about costs: Mrs Blades: tees should
pay personally and not recover from fund;
tees: all parties’ costs out of the fund
• Master Matthews: all parties’ costs out of the
fund
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14 June 2017
Trusts case update
Trustees’ costs
• Starting point: s.51 SCA 1981: court’s
discretion
• CPR 44.2: court’s discretion; general rule is
loser pays winner’s costs
• Where tees invovled: CPR 46.3 & para.1
46PD also relevant
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14 June 2017
Trusts case update
CPR 46.3 (1) This rule applies where –
(a) a person is or has been a party to any proceedings in
the capacity of trustee or personal representative; and
(b) rule 44.5 does not apply.[costs payable under contract]
(2) The general rule is that that person is entitled to be
paid the costs of those proceedings, insofar as they are
not recovered from or paid by any other person, out of the
relevant trust fund or estate.
(3) Where that person is entitled to be paid any of those
costs out of the fund or estate, those costs will be
assessed on the indemnity basis.
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Trusts case update
Para.1 46PD
1.1 A trustee or personal representative is entitled to an indemnity out of the
relevant trust fund or estate for costs properly incurred. Whether costs were
properly incurred depends on all the circumstances of the case including whet
the trustee or personal representative (‘the trustee’) –
(a) obtained directions from the court before bringing or defending the
proceedings;
(b) acted in the interests of the fund or estate or in substance for a benefit othe
than that of the estate, including the trustee's own; and
(c) acted in some way unreasonably in bringing or defending, or in the conduc
of, the proceedings.
1.2 The trustee is not to be taken to have acted for a benefit other than that of
fund by reason only that the trustee has defended a claim in which relief is
sought against the trustee personally.
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14 June 2017
Trusts case update
Master Matthews: consider costs in 2 stages:
1. Inter partes basis
2. tees’ right to an indemnity
Re 1: “important distinction” between “(i) cases of
claims of breach of trust by trustees causing loss to
the trust fund, and (ii) cases of claims that the
trustees are in breach of some other duty, not itself
causing loss to the trust fund”
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14 June 2017
Trusts case update
“this is a case where the trustees have at most
committed a breach of their duty to account to the
beneficiaries by providing appropriate information. It is
not the case of a breach of trust claim where loss has
been caused to the trust fund, or trust assets have been
converted to personal use.”
Master Matthews
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14 June 2017
Trusts case update
Appropriate to depart from general costs-follow-theevent rule because:
1. “trustees did what they thought was right, took
specialist chancery counsel's advice when
challenged, relied on it, and finally, when that was
challenged too, said that they would seek the
court's directions […] were properly keeping the
matter under review, and doing the right thing at
each stage thereafter”
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Trusts case update
2. “given that the trustees' solicitors had finally (but
rightly) suggested applying to the court for directions
if the parties could not agree, it was over hasty of the
Claimant's solicitors simply to issue proceedings”
So: all parties’ costs out of the estate “as if it were a
case of Buckton (2)”: “I accept of course, that the
effect of such an order is that the costs come out of
assets in which the Claimant and her family have the
greatest interest, but that cannot be helped. The trust
fund is not the alter ego of the Claimant”
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Trusts case update
Re 2 (tees’ indemnity):
“where a beneficiary successfully sues the trustee,
that trustee will have no indemnity for any costs
ordered to be paid to the beneficiary where the
claim was for a breach of trust causing loss to the
trust fund. On the other hand, there is no good
reason for withholding the indemnity merely
because the trustee has been found to be in breach
of some other duty not causing loss to the trust
fund”
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14 June 2017
Trusts case update
“Standing back and looking at the matter in the round, whilst I think
that the initial error made by the trustees was unfortunate, and
compounded by the opinion of counsel first instructed, it was made in
the context of an unusual variation on the ‘normal’ trustee disclosure
problem, and a difficult family relationship, and nothing that they did
thereafter could be stigmatised as misconduct, or done otherwise than
with the intention of acting in the best interests of the beneficiaries. In
those circumstances I do not consider that it would be fair to deprive
them of their indemnity under paragraph 1 of PD 46. In so
considering, I have taken into account the effect on the Claimant of
allowing the defendants the indemnity out of the trust fund, as stated
above.”
Master Matthews
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56
14 June 2017
Trusts case update
Right to estate accounts of B of discretionary
trust of residue
Because whole estate left on discretionary trust,
what rights (if any) did Mrs Blades have to estate
(as opposed to trust) accounts?
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14 June 2017
Trusts case update
“the structure created by the testatrix had two quite separate levels.
At the first level, the testatrix by her will left assets to be
administered by her personal representative, who after the
administration was complete would pass them to the legatees, as
trustees, to be held on discretionary trusts for the objects (the
beneficiaries), including the Claimant. The legatees could hold the
personal representative to account, and seek for example an
inventory of the assets of the estate under s 25 [AEA] 1925,
including details of the costs charged to the estate by Tanners,
acting for the personal representative.”
Master Matthews
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14 June 2017
Trusts case update
“At the second level, the Claimant could hold the
trustees to account, for what the trustees had received
and for what they had done with it: see Schmidt v
Rosewood Trust […]
But what she could not claim to be was a legatee of the estate,
and therefore directly to enjoy the information rights of a
legatee.”
Master Matthews
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14 June 2017
Trusts case update
“[…] the rights of the trustees as legatees to information about the
estate (whatever they were) were properly part of the trust estate in
which she was interested as a trust beneficiary. If need be, therefore,
she could claim as against the trustees that they as trustees should
exercise those rights, or, if they could not or unreasonably would not
do so, claim to exercise them herself, though in that case on behalf of
the trust: Parker-Tweeddale v Dunbar Bank [1991] Ch 12. Since the
same person was both personal representative and one of the two
trustees, it is clear that that trustee at least could not hold himself to
account, and, since the other was his partner in the law firm that had
acted for him (as personal representative) and for both trustees, it is
hard to see how that trustee could do so effectively either. It is a
classic case for a derivative claim.”
Master Matthews
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14 June 2017
Trusts case update
“An alternative argument would be that, since the trustees had an
obligation to check to see that the correct assets had been paid over
to them by the personal representative, and to get in any assets not
so paid over, and the Claimant as an object of the discretionary trust
created by the will had standing to complain of a breach of trust by
the trustees (eg an unauthorised transfer to a non-beneficiary), she
equally should have standing to challenge the trustees, both over a
failure to check that the correct amount of assets had been paid over
to the trustees by the personal representative, and also (if the facts
justified it) over a failure to get in the assets that had not been so
paid over, as to complain about, say, possible overcharging by the
personal representative's lawyers”
Master Matthews
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14 June 2017
Trusts case update
Status of advice received by trustees
“The opinion had been obtained by the defendants as trustees, for
the benefit of the trust rather than for their benefit personally, and
therefore it was proper for them to pay for it from trust funds. But
the corollary of this was that it was a trust document, and
therefore in the same category as other trust documents, that is,
available to the beneficiaries if the court so considered. In relation
to such documents, there can be no legal professional privilege as
between trustee and beneficiary.”
Master Matthews
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14 June 2017
Trusts case update
Pettigrew v Edwards [2017] EWHC 8 (Ch)
• Veronica Edwards died in 2003
• Estate on trust for 4th husband, Mr Edwards,
for life, remainder (subject to minor gifts) to
two sons (Pettigrews)
• Sons also appointed executors and trustees,
together with solicitor
• Estate c.£520k, incl. £100k promissory note
from Mr Edwards re repayment of a loan
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14 June 2017
Trusts case update
• Tees sought security for loan from Mr Edwards;
none forthcoming
• Tees learned Mr Edwards was proposing to
remarry, sell his property and move to France
• Asked again for security and threatened to stop
paying income and apply towards loan
• Mr Edwards argued loan statute barred and
unenforceable
• Tees stopped paying income
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14 June 2017
Trusts case update
• Mr Edwards issued proceedings arguing breach
of trust and seeking payment of income
• Tees applied for Beddoe relief seeking
permission to defend Mr Edwards’ claim and
counterclaim for repayment of loan
• Sought order for indemnity from trust re costs
and prospectivecosts order
• Held: both denied
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14 June 2017
Trusts case update
“all Beddoe cases are notoriously fact-sensitive and hence
discretionary [...], this one is unusually so”
“[t]he purpose of a Beddoe order application is to provide
assurance to trustees and others who hold funds for the
benefit of others that they are applying such funds correctly in
prosecuting or defending legal proceedings (or in not doing
so). To understand this it is necessary to have regard to the
rules relating to the incidence of costs of litigation, as applied
to trustees and persons in similar fiduciary positions.”
Master Matthews
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After referring to the 3 Alsop Wilkinson v Neary categories of
trusts litigation (viz. friendly trust disputes, third party disputes
and beneficiaries disputes):
“However, there are sometimes cases (otherwise falling within
one or more of the above three categories of case) where the
dispute is in substance between persons each claiming the
beneficial interest in the fund, and the trustees have no
substantive role to play. In such a case the trustees’ duty will
be to remain neutral, and whatever small costs they expend in
that capacity will be properly incurred. No Beddoe order is
therefore needed.”
Master Matthews
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Mr Edwards relied on Re Evans [1986] 1 WLR 101:
• as 2 sons sui iuris adults and beneficiaries in
remainder, can decide themselves whether to
resist claim (and take costs risk)
• would be unjust to grant tees Beddoe relief: if
claim against Mr Edwards fails, unsuccessful
tees would be insulated from normal costs risk
and Mr Edwards would have to fund their costs
(at least in part: reduction in the trust capital
would reduce his income)
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“in my judgment the Re Evans principle is a response to
the request by the trustees for certainty as to their role in
litigation. Where the litigation is in substance between
sui iuris adults there is simply no need for the trustees to
take a substantive role. So they do not need a Beddoe
order. Agreement between the beneficiaries and the
trustees on this point is not needed. Of course because
assets in the trust fund are concerned, the trustees still
have, and must play, a nominal one in the litigation.”
Master Matthews
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Henchley v Thompson [2017] EWHC 225 (Ch)
• 1960: Mr Henchley creates 2 trusts: Henchley
Trust & Children’s Trust
• Dies in 1972
• Married twice: 2 children with first wife, 4 with
second; several grandchildren
• Henchley Trust: for second wife (Nancy) for
life, remainder to children
• Children’s Trust: ½ for 2 sons at 21; ½ for 3
daughters for life, then income payable to
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their children and children’s children pending
dissolution of trust 25 years after death of
“Prince Edward” (?)
• Mr Thompson married one of settlor’s daughters
• Purportedly appointed tee of Henchley Trust in
1972; in Oct 1998 solicitors advised
appointment invalid, so retired as “purported”
tee
• Also acted as tee of Children’s Trust 1972-early
1990s
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• Settlor’s children and grandchildren brought
proceedings seeking an account from Mr
Thompson, either as tee or de facto tee
• Mr Thompson opposed the application arguing
he had already provided an account and had
no further information, that a breach of trust
claim against him would be barred by
limitation/laches, and that it would be
inequitable to order him to produce an account
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“The absolute minimum that a trustee must do if there is
to be a trust is that he must (1) at least hold and
safeguard the trust property, (2) provide information to
the beneficiaries concerning the terms of the trust, so
that they are in a position to check that the trusts are
being carried out, and (3) keep accurate and reliable
accounts and records of his custodianship to prove that
the trusts are observed.”
Chief Master Marsh (citing Thomas & Hudson, The Law of Trusts)
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“Accountability of the trustees to the beneficiaries is one
of the fundamental defining features of the trust; the
trustee cannot be allowed to treat the trust property as
his own; he cannot be relieved of his duty to explain his
custodianship; and the beneficiary cannot be deprived of
the information he needs to check on, and possibly the
trustees’ performance.”
Chief Master Marsh (citing Thomas & Hudson, The Law of Trusts)
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Counsel for Bs submitted that once duty to
account established, 2 questions:
(1) Has there been an account?
(2) If not, has there been a release by Bs from
obligation to provide an account?
If ‘no’ to both, court obliged to order an account.
Chief Master Marsh: wrong: court always has a
discretion
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No limitation period applies to B’s claim for account
“Subject to the court’s discretion, the order is essentially
administrative in nature, and arises from the court’s
supervisory jurisdiction over trusts. I do not consider that
the draftsman of the Limitation Act contemplated such a
claim being treated as a breach of trust.”
Chief Master Marsh
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Nature of ‘accounts’
“There is some danger of misunderstanding here. When the
books and cases talk about beneficiaries “entitlements to
accounts” or to trustees being “ready with their accounts”
they are not generally referring to annual financial
statements such as limited companies and others carrying
on business (and indeed some large trusts) commonly
produced in the form of balance sheets and profit and loss
accounts, usually through accountants, and – in the case of
limited companies – filed at Companies House.”
Chief Master Marsh citing Master Matthews in RNLI v Hedley [2016] EWHC 1948 (Ch)
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“Instead they are referring to the very notion of
accounting itself. Trustees must be ready to account to
their beneficiaries for what they have done with the trust
assets. This may be done with formal financial
statements, or with less formal documents, or indeed
none at all. It is no answer for trustees to say that formal
financial statements have not yet been produced by the
trustees’ accountants.”
Chief Master Marsh citing Master Matthews in RNLI v Hedley [2016] EWHC 1948 (Ch)
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“Although trust accounts, like business accounts, deal
with assets, liabilities, income and expenditure, the
information to be supplied to beneficiaries need not be in
any particular form. [...]
[Trust accounts] are different to trading accounts for a
business entity. In the case of the latter, the accounts, in
accordance with accounting conventions, provide a
balance sheet which gives a snap shot as to the asset
position on a date and a trading report covering a period.
Chief Master Marsh
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“Trust accounts, particularly where there are beneficiaries
with interests which have not vested, must be able to show
from period to period (the frequency of accounts is not fixed)
how the trust assets have been dealt with, including what
distributions and disposals have taken place. A beneficiary
reading trust accounts must be in a position to assess
whether the trust assets conform with the trust instrument,
that the class of assets held is appropriate for the trust. The
style of the accounts, and the level of detail provided will
necessarily vary.”
Chief Master Marsh
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“The duty to account must also be seen alongside an
obligation to keep and to retain records. Although it is
perfectly acceptable for trustees, amongst themselves, to
divide responsibilities such that one of the trustees is
designated to be the record keeper, that does not absolve
the trustees collectively from their duties to the beneficiaries.
It is no answer in this case for [D] to say that he left record
keeping to Doris Watson and he can, therefore, be absolved
from providing an account because no documents have been
retained.”
Chief Master Marsh
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• Circumstances “sufficiently exceptional” not to
order account re Henchley Trust
• But account ordered re Children’s Trust:
“I have in mind that [D] will provide, where
figures are not available, a narrative account
of the trustees’ dealings with the assets of The
Children’s Trust and an explanation of the
efforts he has made to obtain information”
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Thank you,
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