The claimant and the first to third defendants were the executors and trustees of the estate of Dame Zaha Hadid deceased, who died in 2016. The claimant and the first to third defendants had had great difficulty working together in the administration of the deceased’s estate. The claimant brought proceedings under s50 of the Administration of Estates Act 1985 for the removal of the first to third defendants and they counterclaimed seeking equivalent relief against him. By the time of the hearing an agreement had been reached between the claimant and defendant trustees. All four trustees issued an application for the court’s approval of their agreement as involving a momentous decision and (before that application was determined) a second application, seeking a blessing of more limited scope. The third to sixth defendants were joined for the purposes of the trustees’ blessing applications as representatives of certain classes of beneficiary. The seventh defendant was a charitable foundation (the Foundation).
Pursuant to the agreement put before the court for its approval, an employee benefit trust (EBT) was to be created in the exercise of the will trustees’ powers of appointment under the deceased’s will. The EBT was to own the company continuing the deceased’s architectural practice for the benefit of the claimant and other current and future employees of the business. Other companies owned by the estate were to be distributed to the Foundation. The value of the assets to be distributed to the EBT and the Foundation was around £72m. The evidence filed by the claimant and the defendant trustees indicated that substantial issues remained between them and that, other than those expressly subject to the agreement reached, the disputes between them remained toxic.
Held, that the court would not approve the agreement reached:
This was an unusual application for the court’s approval of a momentous decision as it arose out of disagreements between the trustees. The court was concerned as to the tone and content of the evidence adduced, on which the claimant and defendant trustees continued to rely in levelling mutual criticisms of a serious kind. The court gave five reasons for refusing to give its approval. First, the defendant trustees on their own evidence did not accept that the claimant was able to manage conflicts between his position as trustee and as a beneficiary of the estate when making decisions. Secondly, the two trustee parties continued to accuse each other of acting in a non-fiduciary manner and so each properly could not invite the court to conclude that the other had reached agreement properly. Thirdly, while the trustees originally sought the approval of the entire agreement reached, they subsequently sought approval of certain parts only. The reasons for this material change in approach were not explained to the court. The personal interest of the trustees in their further agreement that the substantial costs of the removal application be paid from the estate (which the court was ultimately not asked to approve) was apparent. Fourthly, the evidence of the decision-making process resulting in the agreement was unsatisfactory. It emphasised the strong disagreements between the trustees and that the agreement appeared much closer to the compromise of a dispute than to the fruit of proper and direct engagement between fiduciaries. Fifthly, the trustees did not require the court’s approval in order to put the agreement into effect and, if by doing so they ran the risk of a claim by a beneficiary, that was a risk of their own creation. On the evidence before it, the court was not satisfied that the trustees’ agreement was the result of a proper decision-making process untainted by conflicts of interest, rather than a compromise of a dispute between two hostile camps. The applications for approval were therefore dismissed.JUDGMENT CHIEF MASTER MARSH:  On 31 March 2016, Dame Zaha Hadid died at the age of 65. She was and remains an architect of world renown. It is now over four and a half years since her death and, sadly, due to major differences between her executors and trustees, the administration of her estate …