Cardigan v Moore & anr [2012] EWHC 1024 (Ch)

Analysis

At the end of the 1940s, the Savernake Estate, which was the subject of these proceedings, was held by a company owned by the 7th and 8th Marquesses of Ailesbury. Between 1949 and 1951 the company was replaced by a partnership. There was a conveyance executed in 1951 by which the estate was conveyed to the Marquesses on trust for sale as part of their partnership. The partnership property also included the family collection of paintings and other chattels. By 1963, there was an agreement that the partnership would be carried on by the 8th Marquess, who had a 51% share, and the trustees for the claimant, who had a 49% share, in the estate. The claimant was the present Earl of Cardigan. In 1987 the share held for the earl was appointed to him absolutely and the 8th Marquess assigned assets, including his 51% share in the estate, to the earl’s children, Viscount Savernake and Lady Catherine. There was an agreement made in 1987 that the partnership would be carried on by the earl on the one hand and the trustees for the children. In 1994 the earl became a trustee of the children’s trust. By a lease executed in 1999, Savernake Lodge (a property on the estate) was demised to the earl for a term of 20 years at peppercorn rent. At the time the earl lived there with his wife and the two children. In 2007, the earl was replaced as a trustee and in 2008 the assets of the trust were vested in the present trustees.

The present trustees of the settlement wished to sell paintings to put themselves in funds. The earl denied they had the right to do so on the basis that the paintings were owned by the partnership and not the trust and also that the paintings were part of the demise of Savernake Lodge. The trustees disagreed and argued, in any event, that the lease was liable to be set aside on the basis of the self-dealing rule.

 Held: that the trustees had the right to sell the paintings and to set aside the lease

1. 1. The paintings were said by the recitals to the deed executed in 2008 to be property of the trustees. The earl was a party to that deed. He was therefore estopped from denying that the trustee had rights to the paintings, Greer v Kettle [1938] AC 156 applied. In any event, the deed served to transfer title to the paintings to the trustees.
2. 2. The lease did not extend to the paintings. The paintings were secured either by large heavy-duty hooks drilled into the walls, or from steel hooks hammered into the wall. One room was upholstered in a manner to suit one particular painting. The earl was entitled to use of all the furniture, fixtures and fittings on the premises. The paintings, however, were none of these things.
3. 3. The trustees were entitled to set aside the lease on the basis that the earl’s entering into the lease contravened the self-dealing rule. The rule applied because it could not be said that the earl was inevitably in a position of conflict, rather the conflict arose when the earl became trustee of the 1987 Trust, which was something that the earl had chosen to do and was not an inevitable consequence of the trust structure, Sargeant v National Westminster Bank plc (1990) 61 P & CR 518 distinguished. It could not be said that the rule was not breached because the beneficiaries i.e. the earl in his personal capacity and the trustees of the 1987 Trust (the earl and another trustee), had consented to it, Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862 distinguished. The self-dealing rule was in point in this case and ought to be applied, Edge v Pensions Ombudsman [2000] Ch 602 and Holder v Holder [1968] Ch 353 distinguished.
4. 4. In any event the earl and his co-trustee of the 1987 Trust had not considered properly the best interests of the beneficiaries of the 1987 Trust when they entered into the lease in favour of the earl, with the result that it was voidable, Pitt v Holt [2010] WTLR 269 applied.
5. 5. The trustees were not prevented from applying to set aside the lease by laches or acquiescence. The earl was partly responsible for the failure to bring the claim earlier because he had been a trustee until November 2008. Furthermore he had not suffered any detriment, relying on the lease.

JUDGMENT MR JUSTICE NEWEY: Introduction [1] The Savernake Forest Estate (‘the estate’) in Wiltshire has been owned by the family of the claimant, the Earl of Cardigan, for the best part of a thousand years. I gather that the estate was originally granted to an ancestor of the earl shortly after the Norman Conquest. Over …

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