Brudenell-Bruce and another v Moore and others

Property – Trust – Removal of trustee – Claimant beneficiary of trust bringing proceedings against trustees concerning administration of deceased’s estate – Whether appropriate to remove first and second trustees – Whether claimant being entitled to compensation for failure to generate income from property on estate – Claim allowed in part The claimant’s family had historically owned an estate at Severnake Forest in Wiltshire. The estate was the subject of a trust established in 1951 of which the claimant was a beneficiary. The estate included a number of houses including Sturmy House, which was vacant, and a cottage occupied by C, a half-brother of the claimant, for a peppercorn rent. In October 2007, Sturmy House had been let to a tenant. A year later, the first defendant was appointed as a trustee of the estate at the claimant’s invitation, although he did not have qualifications of particular relevance to the estate. The first defendant stated that he did not intend to take a salary. In late 2010, the tenant appeared to vacate Sturmy House and a few months later, it was discovered that a pipe had burst, causing considerable damage to the property. Relationships between the parties subsequently broke down and the claimant brought proceedings against the defendant trustees, challenging the remuneration that the first and second defendants had received as the present trustees and alleging a variety of other breaches of duty by them. He also sought an order for the removal of the first and second defendants as trustees of the estate. He argued, in particular, that the trustees could and should have ensured that Sturmy House was ready for re-letting within, at most, 12 months of the discovery of the burst pipe, and that their failure to do so had lost the estate money in rental income. Furthermore, the trustees had failed to generate income from the cottage and, since C was not a beneficiary under the trust, the trustees had not been entitled to allow him to live there rent-free. Held: The claim was allowed in part. (1) It was incumbent on trustees to exercise their administrative powers in the interests of the trust’s beneficiaries. Trustees might also be obliged to seek to generate income from land comprised in the trust. Since the property comprised in the trust consisted of or included land, the trust was a trust of land within the meaning of section 1(1)(a) of the Trusts of Land and Appointment of Trustees Act 1996 so that the trustees had “in relation to the land subject to the trust all the powers of an absolute owner”. By virtue of section 6(9) of the 1996 Act, the duty of care under section 1 of the Trustee Act 2000 applied when trustees exercised the powers conferred by section 6 which required a trustee to exercise reasonable care and skill. That duty applied to trustees when exercising the powers conferred by section 6. It was not intended to operate in relation to a decision as to whether a power should be exercised: Cowan v Scargill [1985] Ch 270 and Byrnes v Kendle [2011] HCA 26, (2011) 243 CLR 253 considered. If trustees of land were not subject to the statutory duty of care in relation to, say, a decision as to whether or not to make a repair (as opposed to the manner in which a repair was made), the duty of care recognised at common law would be applicable. That required a trustee to exercise the same standard of diligence and care as an ordinary prudent man of business would exercise in the management of his own affairs. In the present case, it had not been suggested that there was a difference of significance between the statutory and common law duties of care. The fact that a trustee could have prevented a loss did not necessarily mean that he was liable for it: Speight v Gaunt (1883) 22 Ch D 727 and Bartlett v Barclays Bank Trust Co Ltd [1980] Ch 515 and Nestle v National Westminster Bank plc [1993] 1 WLR 1260 considered. (2) On the evidence, the failure to repair Sturmy House in good time had resulted in the loss of 18 months’ rent. The estate had lost £50,000 as a result of the trustees’ failure to do so. Although the first defendant had been far more closely involved in matters relating to Sturmy House than the second defendant, both defendants had to bear responsibility for the lost rent. Further, the claimant was entitled in law to say that it had been incumbent on the trustees to ask C to pay a market rent for the cottage or, if he could or would not agree to do so, to take steps to evict him. It could be plausibly maintained that the trustees had lost 11 months’ rent and a loss of £14,225 had been suffered. (3) Although the first defendant had not taken or sought any money improperly, it was not appropriate to authorise the payment of any remuneration to him. The office of a lay trustee was usually gratuitous and, before his appointment, he had stated that he would not take a salary. Moreover, the jurisdiction to award remuneration should only be exercised sparingly and in exceptional circumstances. The first defendant did not have qualifications or expertise of importance to the estate and he was seeking to be paid for time spent on the estate’s general affairs rather than a specific project. It would also have been apparent that the role would involve more work than the claimant originally suggested. The estate had been, and remained, short of money. It appeared that the first defendant would have undertaken just as much work if he had thought that he would not get paid. Whilst acknowledging the amount of time that the first defendant had devoted to the estate and that he had put up with much unpleasantness from the claimant, the first defendant had to repay to the trust the sums he had received in respect of remuneration. However, there was no objection in principle to the second defendant charging for time spent on a particular dispute: Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2007] NSWSC 55 and [2012] EWHC 1024 (Ch) considered; Foster v Spencer [1996] 2 All ER 672 distinguished. (4) When deciding whether to remove a trustee, the court’s main guide had to be the welfare of the beneficiaries. Proof of actual misconduct could potentially warrant his removal but breach of duty would not necessarily dictate removal. Conversely, a trustee could be removed without having committed any breach of duty. A breakdown in relations between the trustee and a beneficiary had to be taken into account. In the present case, the breakdown in the relationship of the first defendant and the claimant pointed to removal as a trustee, even though the claimant had been largely responsible for that breakdown. The position regarding the second defendant was different in that he had considerable expertise and experience in trust matters and his relationship with the claimant was not so bad. Accordingly, the second defendant should remain as a trustee: Letterstedt v Broers (1884) 9 App Cas 371, Re Wrightson [1908] Ch 703, Kershaw v Micklethwaite [2010] EWHC 506 (Ch), and National Westminster Bank plc v Lucas [2014] EWHC 653 (Ch) considered. Gilead Cooper QC and James Weale (instructed by Berwin Leighton Paisner LLP) appeared for the claimants; The first defendant appeared in person; Clare Stanley and Jack Watson (instructed by Clyde & Co LLP) appeared for the second defendant; The third defendant did not appear and was not represented. Eileen O’Grady, barrister Click here to read the transcript: Brudenell-Bruce and another v Moore and others