Cotton & anr v Earl of Cardigan & ors [2014] EWCA Civ 1312








The claimants were the present trustees of the Savernake Estate, the principal asset of which was a grade I listed house known as Tottenham House together with a dilapidated grade II listed stable block (together Tottenham House). Unoccupied since the 1990s and decaying fast, it was proposed to sell Tottenham House not least because of the need to repay significant borrowing from the bank. There was no dispute as to the trustees’ decision to sell; what was disputed was the process by which that sale should be achieved. The beneficiaries of the trust were the first defendant (Lord Cardigan), who opposed the sale, and a settlement created on 27 May 1987, whose trustees supported the sale. Knight Frank had valued Tottenham House and its surrounding land at £5m and, on the trustees’ instructions, GVA Grimley Ltd (GVA) invited bids from four interested parties following a strictly limited and confidential selective initial marketing. Mr A put forward the highest bid, which was a cash offer, at £11m. GVA wrote a detailed report recommending a two-stage marketing process and acceptance of Mr A’s offer. The trustees then circulated a briefing note to the beneficiaries, explaining the advice received from Knight Frank and GVA, and concluding that they had decided it was in the best interests of the beneficiaries to sell Tottenham House. As this was a momentous decision, the trustees added that they had been advised to seek the authority of the court. Subsequently, Mr A increased his offer and on 19 August 2013 the trustees entered into an agreement to sell Tottenham House to his nominee company for £11.25m conditional on the approval of the court. They then issued proceedings seeking an order that the trustees be authorised to enter into the sale to Mr A (approval action). Nicholas Lavender QC decided on 23 December 2013 to adjourn the approval action to be heard with the trial of an earlier action begun by Lord Cardigan seeking the removal of the trustees (removal action). However, he stated that he would have ordered that the trustees be authorised to complete the sale, were it not for Lord Cardigan’s claims in the removal action, and ordered that the court hearing should only reconsider whether the trustees should be authorised to complete the sale. The expected trial of the removal action was in fact delayed and the trustees applied effectively to lift the stay on the approval of the sale. Rose J granted the application on 31 March 2014 and varied the previous order to the effect that the court authorised the trustees to complete the sale to Mr A. Lord Cardigan appealed, contending that the order had been wrong to upset the direction that the approval action be heard alongside the removal action. In the event, this contention was overtaken by the fact that the removal action was tried before Newey J between 3-21 July 2014. He refused to consider the approval action as it was the subject of a pending appeal and reserved judgment on the issues in the removal action. This rendered nugatory the previous direction that the approval action be heard alongside the removal action and it was instead contended on behalf of Lord Cardigan that the main question on appeal was whether both judges below were correct, in effect, to approve the sale.

Held (dismissing the appeals)

The proper approach to an application for approval of a momentous decision made by trustees was well established. First, the trustees were obliged to make full and frank disclosure to the court. Secondly, the trustees had to discharge the burden of proof. Thirdly, if there were any doubts, the court should withhold its approval. Fourthly, the court should adopt a cautious approach. On the question of disclosure, the trustees had to put the court in possession of all relevant facts so that it could be satisfied their decision was proper and for the benefit of the beneficiaries and, moreover, that the exercise of their discretion was untainted by any collateral purpose. It was an evidential exercise and, in a proper case, the court might require the trustees to produce more evidence. While not being inquisitorial, it was part of the inherent jurisdiction of the court to supervise trustees. However, the court should be unwilling to countenance the refusal to approve a proper, and momentous, transaction on some technical ground based upon an incidental failure to produce adequate material to the court. On the facts of this case, while there had been unauthorised payments to one of the trustees which, no doubt, ought properly to have been repaid pending the determination of the counterclaim in the removal action, this was only one factor that ought to be taken into account in determining the need for the intended sale and it was, as a matter of fact, taken into account. As to the central question whether the judges were right to approve the intended sale, the submissions made on behalf of Lord Cardigan, while powerfully made and attractively presented, were in truth a chimera that the court would be ill advised to heed. A clear distinction had to be drawn between the duties of the trustees to the beneficiaries and the duties of the experts to the trustees. On the facts of the case, the trustees could not be criticised for accepting and following the expert advice which they had received – in particular the trustees were not obliged to second guess the professional views of the experts that they had instructed to market the property and to obtain the best price available in the circumstances. Moreover, caution cut both ways. While the court would not approve the trustees’ decision without a proper evidential basis for doing so, equally the court should not deprive a trustee of approval without good reason. On the facts of this case, none of the other points raised in the notice of appeal were sufficient to impugn the judges’ decision to approve the intended sale. Accordingly, the judges were right to conclude that the trustees had shown that their decision to enter into and complete the intended sale of Tottenham House to Mr A was one which reasonable trustees could properly take in the interests of the beneficiaries and, moreover, they had shown that in acting on the expert advice they had received, they would fulfil their duties to their beneficiaries.

JUDGMENT LORD JUSTICE VOS: [1] Everyone now agrees that Tottenham House, Savernake, Wiltshire (Tottenham House) which is the principal asset of the Savernake Estate, must be sold. It has been unoccupied since the 1990s, is decaying fast, and is on English Heritage’s ‘at risk’ register. It comprises two huge properties: the grade 1 listed house …
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