AB v CD & ors [2019] WTLR 1083

WTLR Issue: Winter 2019 #177

AB

V

(1) CD

(2) EF

(3) GD

(4) HD

(5) ID

(6) JD

(7) KD

(8) LM

(9) NM

Analysis

AB was a professional trustee of two discretionary trusts created by the late parents of D1, a Will Trust for the benefit of their issue, and a Grandchildren ‘s Trust for the benefit of their grandchildren (i.e. the four children of D1 and D3, and the two children of D1 ‘s late sister). D1, D2 and D3 were between them the other trustees of the trusts.

Three of the children of D1 and D3 had already received shares of the Grandchildren ‘s Trust, but the other three grandchildren had not. Another trust fund, comprising the proceeds of sale of a property intended by the settlors for D1, had been paid into the Will Trust for reasons of administrative convenience.

D1, D2 and D3 originally intended to exclude the children of D1 ‘s late sister from benefit (for essentially personal or family reasons). Seeking to exclude them for personal reasons in conflict with the purposes of the trusts would have been in breach of the trustees ‘ fiduciary duties to act in good faith, to take only relevant matters into account, to act impartially and not to act for an ulterior purpose: Re Hay ‘s Settlement applied. AB could not have simply retired lest this facilitate a breach of trust by the continuing trustees, and his offer to retire in favour of a professional was not taken up.

AB therefore sought directions for the winding up of the grandchildren ‘s trust and a discretionary fund within the Will Trust, and in particular whether to override a letter of wishes in order to achieve a more equal distribution of the funds between the two sides of the family. During the course of proceedings it was agreed to distribute the funds equally between the six grandchildren.

AB argued that the Court should intervene to break the deadlock by directing the trustees how to exercise their discretion, according to AB ‘s proposal. The other trustees would not agree to surrender their discretion to the Court unless the Court were otherwise

Held, in the first judgment, adjourning the matter to a further hearing if needed:

  1. 1) Although AB ‘s proposal appeared more appropriate than the other trustees‘, it would be wrong in principle for the Court to impose AB ‘s proposal on the trustees, as there may be a range of possible solutions. The trustees should attempt to reach a compromise solution, in default of which the Court would consider the matter further.

Following circulation of the draft judgment, the trustees reconsidered the exercise of their discretion but failed to reach agreement. AB contended that his proposal was the minimum necessary to be fair to the children of D1 ‘s late sister. The defendant-trustees would not agree to this. The children of D1 ‘s late sister were represented at a further hearing and made alternative proposals.

Held, in the second judgment:

  1. 1) The authorities allowed the Court to intervene to direct the exercise of trustees ‘ discretion in special circumstances, Klug v Klug [1918] 2 Ch 67 applied. The Court should so intervene in this instance because: it would allow the trusts to be wound up to minimise professional fees and costs; it would prevent further legal costs being incurred in further litigation; D1 was likely to be intransigent; the defendant-trustees had refused to surrender their discretion to the Court voluntarily; of the cost and delay of finding a replacement professional trustee.
  2. 2) Having regard to the earlier distributions in favour of D1 and his family, and the incidence of costs, in order to achieve a near to fairness between the two branches of the family as was now practicable in the light of the original letter of wishes, the Court would direct that all the liquid funds be appointed to the children of D1‘s late sister.
[2019] EWHC 2323 (CH) JUDGMENT [1] The claimant is the trustee of two trusts, namely the Will Trust and the Grandchildren’s Trust. These were established by the first defendant’s parents and the grandchildren in question are the fourth to ninth defendants. The fourth to seventh defendants are the first defendant’s children; the eighth and ninth …
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Counsel Details

Richard Wilson QC (Serle Court, 6 New Square, Lincoln‘s Inn, London WC2A 3QS, Tel: 020 7242 6105 Email clerks@serlecourt.co.uk) instructed by Bryan Cave Leighton Paisner LLP (Adelaide Hosue, London Bridge, London EC4R 9HA, Tel: 020 3400 1000) for the Claimant.

Emily Campbell (Wilberforce Chambers, 8 New Square, Lincoln‘s Inn, London, WC2A 3QP, Tel: 020 7306 0102 Email: chambers@wilberforce.co.uk) instructed by Kuit Steinart Levy LLP (Blackfriars House, Parsonage, Manchester M3 2JA, Tel: 0161 832 3434 Email: info@kuits.com) for the 1st, 2nd and 3rd Defendants.

Judith Bryant (Wilberforce Chambers, 8 New Square, Lincoln‘s Inn, London, WC2A 3QP, Tel: 020 7306 0102 Email: chambers@wilberforce.co.uk) instructed by BDB Pitmans LLP (50 Broadway, London SW1H 0BL, Tel: 034 5222 9222 Email: enquiries@bdbpitmans.com) for the 8th and 9th defendants.

The 4th, 5th, 6th, and 7th Defendants did not appear and were not represented.

Cases Referenced