Sheffield v Sheffield & Ors [2013] EWHC 3927 (Ch)

[2013] EWHC 3927 (Ch)Case No HC12A02556 AND HC12FO1390
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue The Rolls Building, Fetter LaneDate 13/12/2013
London EC4A 1NL
Before
HIS HONOUR JUDGE PELLING QCSITTING AS A JUDGE OF THE HIGH COURT
Between
JOHN DAVID SHEFFIELDClaimantJOHN JULIAN LIONEL GEORGE SHEFFIELD1 st DefendantsLIONEL JULIAN SHEFFIELDDefendantSIMON ROBERT ALEXANDER SHEFFIELDDefendantJOHN JULIAN LIONEL GEORGE SHEFFIELD2 nd DefendantJOHN JULIAN LIONEL GEORGE SHEFFIELD3 rd DefendantsFERGUS HUGH STIRLING GRAHAMDefendantNICOLA ELIZABETH ANNE GRAHAMDefendantJOHN FRANK RATCLIFFEDefendantSIMON ROBERT ALEXANDER SHEFFIELDDefendant
Mr Christopher Pymont QC (instructed by Trowers & Hamlins) for ClaimantMr Eason Rajah QC (instructed by Farrer & Co) for Sheffield and Graham DefendantsMs Constance McDonnell (instructed by Neale Turk) for Mr RatcliffeHearing Hearing dates: 18-22, 25 and 27 November 2013
JudgmentHH Judge Pelling QC:

Introduction

[1]This is the trial of a claim by which the Claimant in his capacity as a beneficiary of a family trust seeks various accounts and payments of(a) a quarter of certain trust income received by the trust which he maintains should have been but was not paid to him;(b) a quarter of the income which he maintains the trustees ought to have obtained but failed to obtain from the exploitation of the trust assets and(c) restitution or compensation for benefits received or conferred by the trustees on others without his consent.[2]The trial took place between 18-22, and 25-26 November 2013. I heard oral factual evidence from the Claimant, Mr Simon Sheffield (“Simon”) (a brother of the Claimant), Mr Fergus Graham (“Fergus”) (the Claimant’s brother in law), Mr Julian Sheffield (“Julian”) (the father of the Claimant, Simon and Mrs Nicola Graham), Mr Philip Denee (“Mr Denee”), Mrs Nicola Graham (“Nicola”) (the Claimant’s sister), Mr John Ratcliffe (“Mr Ratcliffe”) and Mr Nicholas Watson (“Mr Watson”) (a valuer who advised the trustees at the time concerning what is referred to below as the 10.2 acre issue), and expert evidence from Mr William Sleeman (“Mr Sleeman”) (the expert valuer called by the Claimant in relation to the 10.2 acre issue), Mr David Steel (“Mr Steel”) (the expert called by the Claimant in relation to Sporting Rights Issue referred to below) and Mr Charles Huntington-Whiteley (“Mr. Huntington-Whiteley”) (the expert called by the Defendants in relation to the Shooting Rights issue).

Background

[3]Much of the relevant background is not in dispute. There is a significant amount of family history set out in the witness statements, the documentation that is included within the trial bundles and in the written openings. Much of it relates to the life and times of Mr John Vincent Sheffield (“JVS”). It is material to the present dispute only because it is argued by the Claimant to support his contention that JVS was motivated for much of his life to preserve assets from the effects of what he described in one document to which I will have to refer in more detail later in this judgment as “ruinous taxation”. In particular this material focuses on his experience following the death of his father in 1946 when death duties resulted in the loss of much of the family wealth. The family history that matters for present purposes is as set out below. I find however that JVS was left mentally scarred by the experience that followed the death of his father and was motivated first to rebuild capital and then to minimise the effect of taxation on what had been accumulated so that it could be passed to successive generations. This is very clearly demonstrated by the series of handwritten letters he sent to the Claimant and by the correspondence with and attendance notes kept by Lawrence Graham, which I refer to in more detail below. Lawrence Graham acted as JVS’s solicitors for much of the time that is relevant to this claim.[4]In 1936, JVS married Anne Margaret Sheffield (“AMS”). They had four children, of which the eldest is Julian. Shortly after his father died, JVS embarked on what proved to be a successful business career. He founded a company that proved a commercial success. In 1968, JVS became Chairman of a company with which there was an indirect family connection (Portals Limited which was later renamed Portals Plc) that manufactured bank note paper. That company was the ultimate owner of an estate in Hampshire called the Laverstoke Estate that was vested in a subsidiary called Laverstoke Estates Limited (subsequently renamed Portal Estates Limited). On becoming Chairman of Portals Limited, JVS became entitled to occupy a property on the estate called Laverstoke House as a benefit of his office. JVS and his family occupied that property until 1978, when he retired as Chairman of Portals Limited. Julian became Chairman in his place and moved to Laverstoke House where he lived with his family until his retirement.[5]By a conveyance dated 31 December 1968 JVS and AMS purchased from Laverstoke Estates Limited 1009.959 acres of land situated at Laverstoke and Whitchurch in Hampshire (“Laverstoke”). By Clause 2 of the conveyance, JVS and AMS declared that they held Laverstoke on trust as tenants in common as to one quarter for JVS and as to three quarters for AMS (“the 1968 Settlement”). At that stage they thus each held an interest in possession in the land the subject of the trust. Laverstoke included two farms called respectively Manor Farm and New Barn Farm. It also included a number of residential properties in not very good condition and the right to take all game on Laverstoke as well as a right to take game over adjoining land retained by the vendor (“the Shooting Rights”).[6]On 8 February 1969, AMS died. By her will her share of Laverstoke was to be held on trust for the purpose of paying the income to JVS during his life and thereafter for Julian absolutely (“the AMS Will Trust”). From that point on until the events to which I refer below, JVS was the income beneficiary of the AMS Will Trust but of course continued to have a beneficial interest in possession in 25% of Laverstoke by operation of the 1968 Settlement. From AMS’s death until 7 May 1974, JVS was sole trustee of the 1968 Settlement and was until 21 October 1998 joint trustee with Julian of the AMS Will Trust. On 7 May 1974 Julian became a joint trustee with JVS of the 1968 Settlement.[7]In 1971, JVS married France Crosthwaite (“France”). Following JVS’s retirement as Chairman of Portals Limited, JVS and France moved into a property at Laverstoke known as New Barn House (which he had extensively modernised and refurbished) where he continued to live with France until she died and thereafter until his death on 9 May 2008. It is common ground that legal title to New Barn House was vested in the trustees of the 1968 Settlement and that it was part of the property the subject of that trust.[8]Laverstoke consists primarily of farming land and income in fact generated by the estate during the period I am concerned with consisted of salary and profits generated by agricultural activity carried on initially by two successive farming partnerships, and rent payable under various agricultural and agricultural business leases. Which source generated most income varied over time. I describe these arrangements below in more detail and in their chronological context.[9]By a Deed dated 20 May 1976, a partnership for farming the farmable land at Laverstoke was constituted between JVS, Mr Richard Frearson and his son Mr Charles Frearson (“the first farming partnership”). The first farming partnership was for a period of 15 years from 29 September 1975 and was terminable by the Frearsons after 10 years and by JVS after 12 years. JVS was entitled to a salary of £9,000 and an 8% share of the profits and the Frearsons a salary of £6,000 and 92% of the profits. JVS was permitted to dispose of his interest in the first farming partnership by testamentary disposition by operation of the express provisions of the Deed constituting the first farming partnership.[10]The land to be farmed by the first farming partnership (866.7 acres of Laverstoke) was let by the trustees of the 1968 Settlement to a nominee, Mr Monier-Williams (a partner in Lawrence Graham, the solicitors who at that stage acted for the trustees and JVS) at a rent of £1,000 per year and then sub-let by Mr Monier-Williams to the first farming partnership. The primary purpose of this structure at its inception was to prevent rights being acquired by the farming partnership under the Agricultural Holdings Act. The effect of this structure was that the only income that the trustees of the 1968 Settlement were entitled to was the rent payable under the lease to Mr. Monier-Williams and the only income that was available to be distributed to the beneficiaries of the 1968 Settlement was the rent net of trust expenses.[11]As will be apparent from this description, JVS’s income from Laverstoke consisted of salary and profit share paid to him in his capacity as a partner in the first farming partnership and the rent paid for the land farmed by that partnership net of trust expenses which JVS received as to three quarters by reason of his income life interest under the AMS Will Trust and as to one quarter by reason of his status as a beneficiary under the 1968 Settlement.[12]It is likely that the rent receivable by the trustees from Mr. Monier-Williams was wholly or substantially expended on meeting trust administration expenses – see the attendance note prepared by Mr Monier-Williams of an attendance on JVS on 14 December 1978, which records JVS as saying that the rent received was insufficient to cover the cost of repairs and that he was in consequence seeking advice as to whether the rent could be increased. However, there are no trust accounts or accounting material available that enables any firm conclusion to be drawn on this point. This was irregular because trust accounts should have been maintained by or on behalf of the trustees. No practical utility would have been served by such accounts however given that in practice the only person interested in the income was JVS, the income was low and most if not all of it was consumed by trust expenses. The absence of trust accounts makes it impossible to be sure of the position but I think it probable that most if not all the rent was consumed by trust expenses.[13]From at least the early 1970s discussions had taken place between JVS and Lawrence Graham concerning how tax arising on his death could be minimised. The background against which these discussions took place included that on his retirement as chairman of Portals Limited, JVS would be dependent on the income derived from Laverstoke because he did not have any pension entitlement. Julian’s evidence (which I accept on this point) was that JVS did not enjoy good health and at this stage anticipated predeceasing France. In consequence, JVS was also anxious to ensure that France would be able to continue to occupy New Barn House and receive his income after his death. These objectives were achieved initially by a will by which he left his interest in the farm partnership to France and his quarter interest in Laverstoke to Julian on condition that he permitted France to live at New Barn House rent-free for so long as she wished.[14]In 1982, JVS was advised that it would be more tax efficient to dispose of his beneficial quarter share in Laverstoke during his lifetime because the Capital Transfer Tax (“CTT”) rates applicable to lifetimegifts were lower than those that applied to testamentary dispositions, and to “generation jump” to a grandchild. This advice was ultimately accepted and the Claimant was selected as the beneficiary. This appears to have resulted from a discussion or discussions between JVS and Julian. JVS’s will had provided for the ¼ share to be left to Julian but on 22 March 1982, JVS executed a codicil making the Claimant the beneficiary of his interest under the 1968 Settlement in place of Julian. This structure achieved all the objectives that were dependent on generation jumping but not that of CTT saving by utilising lifetime rates. In order that advantage could be taken of the lower CTT rates applicable to lifetime transfers whilst at the same time protecting France’s interests these testamentary arrangements were superseded by a series of interrelated transactions (collectively “the 1983 Scheme”), the formal elements of which are said to consist of(a) a Declaration of Trust and(b) a Deed of Covenant. Slightly before these documents were executed, a Deed of Accession was drawn up by which the Claimant became a partner in the first farming partnership albeit that his profit share was nominal.[15]The Deed of Accession formed no part of the 1983 Scheme to the extent that the scheme was concerned with CTT savings. It is dated 30 September 1983. By it the Claimant became a partner in the first farming partnership and became entitled to a share of 0.01% of the profits while JVS’s profit share was reduced from 8% to 7.99%. It is not entirely clear why it was thought necessary for the Claimant to become a partner. It was not necessary in order to preserve JVS’s income position following completion of the Deed of Trust and Deed of Covenant because that depended on the first farming partnership, which in turn farmed the land held by the trustees of the 1968 Settlement pursuant to an under-lease from Mr. Monier-Williams that antedated the Declaration of Trust or the Deed of Covenant, which in consequence had no impact on those arrangements. It was suggested on behalf of the Defendants in the course of the closing submissions that the Deed of Accession was devised in order to prevent France (assuming that JVS predeceased her and thus that she had inherited his interest in the first farming partnership) from withdrawing a notice determining the first farming partnership that had been served by this stage and which was due to take effect in 1987. Following execution of the Deed of Accession, any withdrawal of the notice would require the consent of the Claimant. If this was the plan there is no documentation that suggests that this was ever explained to the Claimant.[16]The Declaration of Trust is dated 24 October 1983 (“the 1983 Declaration”). By the 1983 Declaration, JVS declared that he held his beneficial interest in Laverstoke under the 1968 Settlement (including, critically, “…the net income until sale …”) on trust for the Claimant. Since the trustees of the 1968 settlement held that share on trust for JVS, it follows that unless the 1983 Declaration is construed as an assignment by JVS of his equitable interest, JVS became a sub-trustee for the Claimant. From the date when the 1983 Declaration took effect JVS ceased to have any beneficial interest in that part of the 1968 Settlement.[17]There is a dispute about the true effect of the 1983 Declaration. The Claimant maintains that the 1983 Declaration should be held to be an assignment but if it is a Declaration of Trust then its effect is that the sub-trustee (JVS) ceased to have any role to play and that all the duties owed by the trustees for the time being of the 1968 Settlement to JVS as ¼ beneficiary were thereafter owed to the Claimant directly. The Defendants deny that the 1983 Declaration is an assignment or should be construed as such and deny that the effect of JVS becoming a sub-trustee of his beneficial interest is as alleged by the Claimant, and maintain that the duties of the trustees for the time being of the 1968 Settlement were owed to, and exclusively to, JVS as trustee of 25% of the trust and to the trustees of the AMS Will Trust as to the balance. This enables the Defendants to maintain that any claim that the Claimant may have in respect of a failure by the trustees for the time being to pay to the Claimant 25% of the trust income is confined to a claim against JVS’s estate since the trustees obtained a good receipt from JVS for the trust funds paid to him. This is a discrete issue of law, which I consider further below.[18]The Deed of Covenant is also dated 24 October 1983 and expressed to be supplemental to the 1983 Declaration (“the Covenant”). By it the Claimant covenanted “ … not to do any act or join with any other person in doing any act which is intended to terminate or interrupt the occupation by [France] of the property known as New Barn House Laverstoke aforesaid provided that [JVS] in all respects shall be deemed to hold the benefit of the foregoing covenant as trustee for [France] …”[19]On the Defendants’ case the 1983 Scheme was subject to an informal antecedent “Arrangement”. As pleaded in paragraph 13 of the Defence, the Arrangement is alleged to have been an agreement by which it was agreed between the Claimant and JVS that JVS would “gift” his ¼ beneficial interest under the 1968 Settlement to the Claimant “… but that JVS would continue to keep all the income attributable to the gifted interest while he was alive and that he and his wife would continue to occupy New barn House … and generally JVS would continue to act in relation to JVS’s quarter share as if JVS was still the owner.” (“the Arrangement”). The Claimant hotly denies the existence of the Arrangement. Indeed, it is the main issue of fact that I have to resolve in this trial. This issue is important because it is the basis on which the Defendants deny that the Claimant became entitled to ¼ of the income and capital receipts of the 1968 Settlement at any stage prior to the death of JVS and also the basis on which they deny that it is open to the Claimant to complain about trust administration decisions taken during the lifetime of JVS. If what is alleged by the Defendants is correct the Arrangement would render the 1983 Declaration a sham in its classical sense – see Snook v. London & West Riding Investment Limited [1967] 2 QB 786 per Diplock LJ (as he then was) at 802C-F – because the declaration that the income was held on trust for the Claimant would be false by reason of the antecedent Arrangement and because JVS would be entitled to continue to conduct himself as if he was the beneficial owner rather than a trustee. Whilst not resiling in any sense from the way the case was pleaded, in their closing submissions the Defendants advanced a secondary case based on an understanding (arrived at either shortly before or contemporaneously with the execution of the formal documents that constituted the 1983 Scheme) that JVS would continue to enjoy the trust income notwithstanding the terms of the 1983 Declaration. I remind myself that (as was accepted by Mr Rajah QC in the course of his closing submissions) the evidential burden rests with the Defendants to prove the existence of the Arrangement.[20]The next major development was the creation of a new farming partnership, which was constituted by a Deed dated 27 May 1987 to which JVS, the Claimant and Laverstoke Estates Limited were parties (“the second farming partnership”). The second farming partnership was treated as having commenced on 29 September 1986, was for a term of 10 years and thereafter from year to year subject to a right of termination available to JVS and Laverstoke Estates Limited that permitted either to terminate the partnership at the end of the 5th and 10th years. The lease to Mr. Monier-Williams was brought to an end and with it the under lease to the first farming partnership. There was no formal lease in favour of the second farming partnership as had been the case with the first farming partnership and thus no rent payable by the second farming partnership to the trustees of the 1968 Settlement. The Deed constituting the second farming partnership provided that a salary was payable to JVS of £35,000 and to Laverstoke Estates Limited of £50,000 and the profits were to be divided as to 95% to Laverstoke Estates Limited and as to 5% to JVS and the claimant, to be shared as agreed between them. It is common ground that JVS received the whole of the 5% profit share at all times. Aside from the Arrangement, the second farming partnership structure prejudiced the interests of the Claimant because he was beneficially interested in 25% of the income derived from trust assets and those assets (the farming land at Laverstoke) was being provided to the partnership without charge. The Claimant could not complain had the original lease and sublease structure continued because that predated the 1983 Declaration. However, as soon as that was brought to an end (absent the Arrangement) the Claimant’s rights as beneficiary of the income attributable to the 25% interest in Laverstoke were engaged. This appears simply to have been overlooked by JVS and those advising him and Julian as to the appropriate structure.[21]The Claimant’s case is that by asking him to enter into the second farming partnership without disclosing the rights that he was thereby forgoing (25% of the net income that ought to have been obtained by the trustees of the 1968 Settlement from the second farming partnership, the trustees at the time (Julian and JVS) alternatively JVS as trustee under the 1983 Declaration acted in breach of trust or duty by favouring JVS over the Claimant. The relevant trustees deny that to be so primarily by reference to the “Arrangement”. The Defendants rely on the Claimant’s signature of the deed constituting the second farming partnership as consistent with the existence of the Arrangement. The Claimant maintains that he did not read the document at the time he signed it, did not receive a copy and was ignorant of its terms. Critically he maintains that he signed it in ignorance of his true entitlement under the 1983 Declaration.[22]The final major formal development took place in 1995 when Portals Plc was acquired by a competitor and Portals Estates Limited (formerly Laverstoke Estates limited) terminated the second farming partnership. Prior to that event Mr Denee, a director of Portals Estates limited, had managed the land farmed by the second farming partnership. Negotiations commenced between Mr Denee and JVS with a view to Mr Denee continuing to farm the farming land at Laverstoke from the date of termination of the second farming partnership. These negotiations concluded on 19 October 1995, when the trustees of the 1968 Settlement granted a farming business tenancy (“FBT”) to Mr Denee. The FBT entered into in 1995 (“the first FBT”) was replaced in 2005 by another FBT between the same parties (“the second FBT”). It is due to expire by effluxion of time in 2015. The detailed provisions of the second FBT were in all material respects the same as those in the first FBT.[23]The rent payable under the FBTs was in fact paid to JVS until his death. But for the Arrangement it is common ground (if the Claimant is correct concerning the effect of the 1983 Declaration) that the rent should have been paid to the trustees of the 1968 Settlement and paid out (net of estate and administration expenses) as to ¾ to the trustees of the AMS Will Trust for onward distribution to JVS in accordance with the terms of that trust and as to ¼ to the Claimant or (if the Defendants are correct concerning the effect of the 1983 Declaration) to JVS who on receipt held the sums so received for the Claimant as trustee under the 1983 Declaration.

Issues

[24]Aside from the issues I have so far summarised concerning the distribution of the income and capital receipts of the 1968 Settlement, the Claimant alleges that the trustees of the 1968 Settlement at various stages acted in breach of trust by failing to exploit the income earning potential of the trust assets either by selling properties at below market price or letting out properties for below market rent or allowing estate properties to be occupied by family members rent free or failing to exploit assets such as the shooting rights or failing to repair trust assets. A wide variety of different alleged breaches of trust of this sort have been pleaded but the issues that I have been asked to resolve at this stage have become more limited.[25]In summary those issues are as follows: i) The Claimant claims one quarter of the rent payable under the Lease between the trustees of the 1968 Settlement and Mr Monier-Williams. Aside from the general defences to which I refer further below, the Defendants contend that to order an account would be grossly disproportionate and thus a wrong exercise of discretion because the sums involved are small (the Claimant’s maximum entitlement would be £250 per annum for about 3 years between the date of the 1983 Declaration (9 September 1983) and the commencement of the second farming partnership on 29 September 1986) and it is inferentially highly likely that the whole of the rent was consumed in meeting trust expenses; ii) The Claimant seeks an account and payment over of ¼ of the sums found due on the taking of an account of all sums received by JVS under the second farming partnership. Aside from the general defences relied on, the issue between the parties concerns the effect of the Claimant’s signature of the Deed constituting the second farming partnership. The Defendants maintain that provides a full and complete answer to this claim. The Claimant maintains that he signed the document in ignorance of his right to receive ¼ of the income under the terms of the 1983 Declaration and thus cannot be held to have released an equitable duty or concurred and acquiesced in what would otherwise be a breach of trust; iii) It is alleged by the Claimant that the second FBT was let at an undervalue and that there should be an account or inquiry into the loss suffered and payment over of ¼ of any sum found to have been lost to the 1968 Settlement as a result; iv) It is alleged that the trustees for the time being have acted in breach of trust by failing to exploit the commercial opportunities represented by the shooting rights over Laverstoke. The Claimant maintains that a significant income could have been obtained from this source. The Defendants rely on the general defences but in addition deny that they were under a duty to commercially exploit the shooting rights having regard to the purpose of which Laverstoke was acquired, deny that it was in the best interests of the 1968 Settlement to exploit those rights commercially, maintain that such a course was contrary to the wishes of JVS and then Julian as beneficiaries of 75% of the 1968 Settlement; v) The Claimant seeks an account in relation to rent that could have been but was not earned from the lease of 93-95 New Barn Cottages being property forming part of the 1968 Settlement and for compensation following a sale of these properties for what the Claimant maintains was an undervalue. Aside from the general defences relied on, the Defendants maintain that they sold at a price in excess of the highest valuation arrived at by two independent valuers and thus there was no breach of trust and this is so notwithstanding that the properties were sold to France’s son; vi) There is a claim made by reference to the occupation by JVS of New Barn House, New Barn Bungalow and 93 New Barn Cottage. Aside from the general defences relied on, the Defendants maintain that Laverstoke had been purchased with the intention of providing a home for him and his family, that as a beneficiary he was entitled to occupy trust property and having regard to the purpose for which the property was acquired it would have been unreasonable for the trustees to charge him an occupation rent; vii) The final alleged breach that is relied on at this stage concerns the sale in 2010 by the trustees of the 1968 Settlement and the trustees of the AMS Will Trust of Freefolk House and some land to a third party purchaser. The property sold included 10.2 acres of land belonging to the 1968 Settlement and 46 acres of land that was part of the AMS Will Trust. The Claimant maintains that in fixing the value and apportionment of the price received, the trustees of the 1968 Settlement failed to take sufficient account of the Marriage Value attributable to the joinder of the 10.2 acres of 1968 Settlement land to the other land being sold. Marriage value is the amount by which the value of the property sold exceeds the separate value of the parcels of land constituting the unified holding. The Claimant maintains that since Simon (who was a trustee of the 1968 Settlement at the time) was one of the persons who were to receive part of the proceeds of sale there was a conflict and thus the trustees must be able to show that the land sold was properly valued and accounted for if a claim based on breach of trust is to be avoided. The Defendants maintain that independent valuation evidence was obtained from Mr Watson, that they acted in accordance with his advice and thus there was no breach of trust. In any event the trustees maintain that are entitled to rely on the statutory defence contained in s.61 of the Trustees Act 1925.[26]In addition there was an issue between the parties concerning the transfer to Julian of some estate property called the Spring Pond properties. This issue has now largely been resolved by agreement or concession. To the extent that it is necessary to do so, I refer to that issue later in this Judgment.[27]Aside from reliance being placed on the Arrangement, the Defendants maintain that the Claimant is estopped from claiming his strict rights under the 1983 Declaration or that his claims are statute barred or are not maintainable by operation of the doctrine of Laches. Finally the Defendants place reliance on s.61 Trustee Act 1925. It is these defences that I have referred to above as being the general defences relied on by the Defendants. Mr. Ratcliffe is separately represented because he was a trustee for only a short period, was appointed as a result of his role as the solicitor then advising the trustees and acted gratuitously throughout. He relies on the same defences as the family defendants. If the point concerning the sub-trust is resolved in favour of the trustees then it would appear he drops out of the picture.

Organisation of this Judgment

[28]I consider the following issues in the following[29]If the Claimant succeeds in relation to the existence and effect of the Arrangement then it is appropriate next to consider the discrete point taken by the Defendants concerning the effect in law of JVS declaring that he holds his beneficial interest under the 1968 Settlement on trust for the Claimant. It is necessary to consider that point at this stage because if the Defendants are correct in the submissions they make then it will confine the Defendants against whom a claim for breach of trust by non payment of income to the Claimant can be made to JVS’s executors. It may have other effects as well.[30]Finally I consider whether the Claimant has established any of the breaches of trust on which he relies and whether and if so to what extent the general defences relied on by the Defendants preclude the Claimant from succeeding. Although these defences are pleaded and were argued in a very general way, in my judgment it is necessary at least in part to consider their applicability to each alleged breach of trust. The existence of the Arrangement and its effect if found proved Existence

The existence of the Arrangement and its effect if found proved

[31]At the outset there are some findings that I have been asked by the Defendants to make concerning the personal characteristics of the Claimant. In essence the point that is made is that the Claimant has suffered from psychological ill health from the mid 1990s, which has led him to become estranged from his mother and father in the mid 1990s and from JVS in the early 2000s. The Defendants’ case is that the Claimant is a different person from the person that he was when the 1983 scheme was put in place.[32]The Claimant acknowledges that in the mid 1990s his psychological health was in decline - see Paragraph 46 – 47 of his witness statement. In paragraph 49 of his statement he asserts that his psychological difficulties were “ … rooted in my relationships / contact with my parents …” and admits (and I find) that he became estranged from his mother in 1996 and his father in 1997. The level of estrangement is starkly illustrated by the contents of the letter at C2/279 from the Institute of Family Therapy. I find that prior to 1996 the Claimant had a normal and loving relationship with his parents. There is some intensely personal correspondence that supports this conclusion – see the copies in the trial bundle at E/9/766, 768 and 787. It is not necessary for me to quote from this correspondence. I accept Julian’s evidence that down to this point the Claimant was and was considered by his parents and grandfather to be a responsible intelligent and capable individual. I accept that from 1996-7 the relationship between the Claimant and his parents had broken down completely and that was particularly so between the Claimant and his father. The closest the material before me comes to explaining the breakdown is a letter written by the Claimant to JVS at the end of June 2004 (E9/764). It is not necessary that I dwell on the detail in that letter beyond saying that in it the Claimant identifies what he considers to be the root cause of breakdown in his psychological health and that he considers his father to be ultimately responsible for that cause. Whether this is objectively correct or not was not explored in the course of the trial and I am unable to and do not make any findings on that question.[33]The evidence concerning the Claimant’s relationship with JVS is less clear. I conclude however that the relationship was a normal and loving grandparent and grandchild relationship until between very late 1999 and early 2000 when the relationship cooled. Simon’s evidence suggests that until then the relationship between the Claimant and JVS was stronger than the Claimant suggested was the case – see T2/71- 73. The letters that he was sent by JVS in 1997 that appear in Bundle C1/151-273 are reflective of the relationship that I find the Claimant had with JVS until very late 1999 – early 2000. The Claimant’s own oral evidence (T2/26-27) is reflective of this as well. I conclude that this relationship started to decay from the end of 1999 as a by-product of the collapse in relations between the Claimant and his parents – see the letter from the Claimant to JVS at C1/277. It did not recover.[34]As I have said, I was asked by the family Defendants to make findings on these issues. I have done so. It is important to stress however that Mr Rajah did not make express submissions to the effect that this breakdown and consequent hostility ought to lead to the conclusion that the Claimant has fabricated his case. Rather his point is that the Claimant appears to have limited recollection of the events with which I am concerned and to be predisposed to assume the worst of his father in particular. Given the very difficult family situation that the Claimant and family Defendants found and find themselves in, Mr. Rajah submitted that I should test the rival contentions of the parties against the surrounding contemporaneous documentation and the background facts. I agree that this approach is one that ought to be adopted. It was the basis on which all counsel made submissions.[35]Two other general points need to be made at this stage – first, as I have said already, it was accepted by Mr Rajah (correctly) that the evidential burden rests on the Defendants to establish the existence of the Arrangement and secondly it was submitted that I should be particularly circumspect about accepting the Claimant’s case in relation to the issue I am now considering when the proceedings were commenced after JVS’s death and where no evidence written or oral is available from him – see In Re Garnett, Gandy v. Macaulay (1885) 31 Ch.D 1. I accept that these factors all lead to the conclusion that the rival contentions of the parties have to be tested against the contents of the contemporaneous documentation and the background facts as known to the parties.[36]I now turn to the question whether there was an Arrangement between the Claimant and JVS as pleaded. The Defendants’ case is that there was an Arrangement to the effect pleaded or at any rate an understanding that the Claimant would not receive any income during JVS’s lifetime that was reached between the Claimant and JVS prior to the execution of the 1983 Scheme documentation. The way in which the Arrangement has been formulated has varied over time (a point Mr. Pymont QC relies on as in itself undermining its true existence) but the allegation I have to determine is that which has been pleaded.[37]The Claimant’s case is that there was no such understanding. The Claimant says his father told him sometime shortly before he signed the 1983 Declaration and Covenant that he was to receive no or no significant income as a result of JVS’s gift to him. He maintains that the effect of the 1983 Declaration was not explained to him either by the trustees or anyone else prior to him signing them and that in those circumstances he accepted what he says he was told by his father and did not read the contents of the 1983 Declaration.[38]This has always been his case. The allegation was first made in correspondence by the solicitors then acting for the trustees by a letter to the Claimant dated 12 October 2006. It is true to say that John did not respond specifically to this point in his reply dated 20 October 2006, though the solicitors’ letter is ambiguous as to whether a response was required or expected. However, the trustees’ solicitors repeated the point more emphatically, and in terms that demanded a response, in a letter to the Claimant dated 6 November 2006 by which he was specifically asked to say whether he agreed. He responded by a letter dated 20 November 2006 in which in the clearest terms he made clear his disagreement with what was then being alleged. It is also worth noting that the allegation then being made on behalf of the trustees (“… that all income arising from the trust was to be continued to be paid to your grandfather during his lifetime and that this was part of the arrangement between yourself and your grandfather…”) was different from what is now pleaded to be the Arrangement.[39]It is these rival contentions that I have to test against the background known to the parties, and the contents of the contemporaneous documentation.[40]One of the background facts heavily relied on by the Defendants is that JVS needed the income from Laverstoke to live on from the date of his retirement as Chairman of Portals Limited. As Julian put it in his evidence “…my father was dependent, particularly later in life to a very large extent for the income from the estate to enable him to live”. It is not suggested that the Claimant was aware of this fact on or before or even shortly after 24 October 1983. Nonetheless it is suggested by the Defendants that this factor makes it more likely that JVS would have proposed something such as the Arrangement. I agree that is at least a possibility, although I consider it becomes significantly less likely if JVS had received assurances that his income was safe as a result of the structure that had been devised for in that event there would be no need for an Arrangement such as that pleaded by the Defendants in this case.[41]JVS’s need for the estate income was something that Julian says was known to him – see Paragraph 9.4 of his witness statement – and it was known to Mr Monier-Williams, the partner at Lawrence Graham who designed the 1983 Scheme. This last point is established by at least two attendance notes that are in Lawrence Graham’s files. In an attendance note dated 26 July 1973 of a meeting between Mr Monier-Williams, JVS and Julian, JVS is recorded as saying “… when [JVS] retire[s] the income from the land would be very important and this must be borne in mind in any arrangement …”. This point was returned to at a meeting on 6 April 1983 attended by JVS and Julian with Mr Monier-Williams which records:
“[JVS] enquired whether the gift to grandson John would affect his right to income from the partnership. We explained that the gift was of the underlying asset; that [JVS] would continue to be a member of the partnership and a tenant of the land and would still be entitled to his salary from the partnership. The partnership will continue to pay rental income of £1,000 per annum to the landlords with the late Mrs Sheffield’s will trustees continuing to take their three quarter share. Presumably the remaining quarter share would be payable to grandson John (?) (although the rental income was probably used in the payment of expenses anyway) The partnership will determine as things now stand in September 1987. [JVS] and [Julian] are both keen for the partnership to continue after this date for a period of say 2 years with a view to being renewed every 2 years for a further 2 years. In this way [JVS]’s widow will be assured of a continued income for sometime after his death”
The points that emerge from this note are: i) By this date (April 1983) the decision had been taken to benefit the Claimant; ii) JVS was concerned to preserve his income from the estate until his death and for a period afterwards for the benefit of France; iii) The basis on which it was contemplated that JVS’s entitlement to the income was and would be preserved was by using the first farming partnership as the vehicle by which he was to receive it. This structure eliminated any problem arising from a declaration of trust in respect the entitlement to a ¼ share in the income of the 1968 Settlement; and iv) All parties contemplated that when what became the 1983 scheme was carried into effect, the Claimant would become entitled to ¼ of the rent payable by the partnership to Mr Monier-Williams and by Mr Monier-Williams to the 1968 Settlement trustees net of any expenses that had to be met by the 1968 Settlement trustees.[42]On the basis of this material I accept that(a) JVS was anxious to preserve the income stream from Laverstoke for himself for his life and for his wife for at least a period after his death and(b) I accept Julian’s evidence that Julian was aware of this from an early stage. His evidence on this issue is corroborated by at least the two attendance notes I have so far referred to.[43]In my judgment on the balance of probabilities the contents of 6 April 1983 attendance note negatives the notion that the Arrangement had been arrived at or was even contemplated at that stage by either by JVS or Julian. The point referred to in Paragraph 41 (iv) above is a significant one. There is no mention of any contrary understanding being considered by anyone at the meeting. Whilst I accept that this could be because JVS and Julian were too shrewd to tell their lawyers about something that might undermine the effectiveness of the Scheme for tax saving purposes, I think it much more likely that they would have sought advice as to any difficulties any subsidiary arrangement might pose and then decide between themselves how to proceed in the light of the advice given. Had any such advice been sought it is highly likely that it would have been noted in an attendance note. The solicitors involved were experienced in work of this sort who as far as I can see prepared attendance notes relating to all significant matters. In my judgment the probability is that it was not mentioned. This was so because no one contemplated the gift of the income as a problem because substantially all of the income came to JVS in his capacity as a partner in the first farming partnership. The rent received by the trustees was of technical interest only. The sum involved was nominal even in 1983 and the probability was that trust expenses would consume most if not all of the rent. The way in which JVS’s need for income was and was to be delivered was using the farming partnership structure.[44]It was submitted on behalf of the Defendants that this analysis was flawed because notice had been served to determine the first farming partnership by this stage. Such a notice had been served. It is expressly referred to in the attendance note for the 6 April 1983 meeting. However it was not contemplated that there would thereafter be no farming partnership. Indeed Julian accepted as much in the course of his cross-examination – see T3/225/24-226/14. On the contrary what was contemplated was that the partnership would continue but on different terms. As the note says, “[JVS] and [Julian] are both keen for the partnership to continue after this date for a period of say 2 years with a view to being renewed every 2 years for a further 2 years.” Why this revised arrangement was required is not explained. It seems likely however that the reasoning was to do with the potential conflict as JVS saw it between France’s interests and Julian’s interests after his death. These concerns are set out in some detail in the attendance note of a meeting between Mr Monier-Williams and JVS that took place on 2 February 1982 [C1/23].[45]The one thing that is entirely clear from the attendance note of the 6 April 1983 meeting is that the advice given and accepted was that JVS’s income requirements would be catered for by a farming partnership structure that would protect his income qua partner even though he had declared himself to hold the ¼ share on trust for the Claimant. Thus I conclude that it has not been established that the alleged Arrangement had been put in place as at that date. Given the advice given and apparently accepted, a significant change either in the advice being given or the circumstances within the family would be required to alter this position. There is nothing to suggest that it was contemplated by anyone at this time that there would have to be a change in the letting arrangements for the land farmed by the old or replacement partnership. Had it been considered I am sure that the advice would have been that the Claimant would have to concur in any replacement lease because such advice would have been entirely consistent with the advice given throughout this period by Lawrence Graham. In fact that issue was not mentioned by anyone at that stage.[46]The issue that vexed both JVS and his solicitors thereafter down to the end of June 1983 was not anything to do with income but devising a structure that would compel the Claimant to permit France to continue living at New Barn House after JVS’s death. Although various possibilities were considered, ultimately the solution adopted was to require the Claimant to sign the Deed of Covenant. The income issue was returned to tangentially in a letter to JVS from his solicitors dated 15 July 1983 with the caption “Gift of part of the Laverstoke Estate”. In that letter, Mr Monier-Williams says:
“I have a draft Deed of Accession whereby grandson John is brought into New Barn Farm’s Partnership … I have provided for grandson John to receive a nominal share of profits (0/01%) which will technically come out of your present 8% entitlement. After the gift he will automatically become entitled to one quarter of the rent paid by the partnership for the tenancy (the current rent being £1,000 per annum). … I have completed the preparation of a Deed of Gift of your quarter share in the Laverstoke estate to grandson John and I am just putting the final touches to the covenant which he is to make in favour of your wife regarding her occupation of New Barn House. I assume that either Julian or you has discussed with John the intention to make this gift so that when I write to him it will not come out of the blue. …”
[47]As is apparent from this letter JVS was being advised that the Claimant would be entitled to ¼ of the rent payable to the trustees as a result of the gift that was contemplated and would be receiving a nominal amount of JVS’s share of the partnership profits. This advice is entirely consistent with the discussions recorded in the attendance note of the meeting on 6 April 1983 and would have been read by JVS against the advice given then that JVS’s income stream was secure notwithstanding the gift because the income came to JVS in his capacity as a partner in the first farming partnership and would continue to come to him via that route even though the current partnership was to be replaced with a new partnership from 1987. It was well understood at that stage by JVS and Julian that under the structure that was proposed the Claimant would be entitled to a quarter of the estate income – that much was accepted by Julian in the course of his evidence at T2/230/11-22. It was not regarded as significant for the reasons Julian gave in this part of his oral evidence – “…a quarter of a thousand pounds after expenses comes to a very small amount …” and because it was not envisaged that the existence of a partnership leasing the land to be farmed as part of the structure would change.[48]The next relevant communication is a letter dated 5 August 1983 from Mr Monier-Williams to JVS. It enclosed a copy of the Deed of Covenant for signature by the Claimant and a letter addressed to the Claimant from Mr Monier-Williams. This last mentioned letter (also dated 5 August 1983) states:
“Your grandfather, [JVS], will, I expect, have told you of his intention to transfer to you his share in the Laverstoke Estate and also his proposal that you should become a partner in the farming partnership. Part of the estate in respect of which your Grandfather will give you an interest is New Barn House which as you know is occupied by your grandfather and Mrs Sheffield. He is anxious to safeguard the right of Mrs Sheffield to continue to live in the house in the event of his death, and the least complicated way of doing this is to ask you to enter into a covenant with your grandfather that you will not do anything to terminate or interrupt Mrs Sheffield’s occupation of the property. The effect of this covenant will be that for so long as Mrs Sheffield wishes to live in the house, you will not be able to take any steps, or join with anyone, e.g. your partners in taking any steps to terminate her occupation. … Your signature of this covenant will be part of the whole transaction under which you receive an interest in the Estate and, if you agree with what is proposed, I should be grateful if you will sign the Covenant where your initials are pencilled in the presence of a witness and then arrange for it to be returned to me. The covenant should be left undated, since it will not be dated until the Declaration of Trust under which your [grand] father transfers the property to you is itself signed.”
[49]The evidence as to when and by whom John was told about the intended gift and its effect is not satisfactory though this is the result of the passage of time and simple loss of memory on the part of both Julian and the Claimant. The Claimant maintains that Mr Monier-William’s letter to him was not given to him – see Paragraph 29.7 of his statement. He says in Paragraphs 18-19 of his statement that around the time he signed the 1983 Declaration he had a conversation with Julian in which he was told by Julian that he was to receive his grandfather’s quarter share of Laverstoke but that “ … I would not see any benefit from this gift until my grandfather passed on, which I accepted was true”. Julian’s evidence contained in Paragraph 10.2 of his witness statement is that he now has no recollection of when or how John was told but considers it certain that he would have been told by JVS before 5th August 1983. This changed in the course of his oral evidence. Whether John received the letter is not of central importance. The Defendants do not rely on this letter as showing that the Claimant ought to have known that the 1983 Declaration passed income to the Claimant – see T3/232/18-23. Julian was asked whether he thought Mr Monier-William’s letter was passed to the Claimant. Julian’s answer to the question “do you think that [JVS] might have given it to you to go and talk to [the Claimant] about” was that he did not remember but he would have thought not – see T3/233/7-9.[50]The tenor of the material that I have so far considered satisfies me that the driving force behind the estate planning that was the sole reason for the 1983 Scheme was JVS and that he was personally involved in every aspect of the detail assisted by Julian as and when JVS considered assistance was required. There is no evidence that suggests that the Claimant was actively involved in any aspect of what was going on. He did not have any direct meetings with Lawrence Graham during this period and any communication with him by that firm was via JVS. The Claimant was at this time a second year undergraduate at Bristol University.[51]The Claimant signed the Covenant as I have said. The signature by the typed name of JVS (E/1/72) on the Covenant is in fact that of the Claimant, JVS having signed by the Claimant’s typed name. The witness to the Claimant’s signature is a Mr Fraser who gives as his address an address in Bath. He was the Claimant’s maternal Great Uncle. The Claimant says that his mother used to visit Mr Fraser regularly and when this coincided with a university term she got the Claimant to accompany her – see Paragraph 21 of his witness statement. The Claimant surmises that his mother must have brought the Covenant with her on one of these visits and got the Claimant to sign it then although he has no recollection of whether that is so or not. Although this is surmise as I have said I consider that on balance it is likely to be correct.[52]The attendance note dated 5 September 1983 shows that JVS had been away and was only then getting to grips with the various letters that had been sent to him by Mr Monier-Williams. The letter of 9 September 1983 is the one under cover of which Mr Monier-Williams sent the 1983 Declaration for signature by both the Claimant and JVS. The letter makes clear that at that stage the Deed of Covenant had not been received back duly signed. There is no further letter to the Claimant. Mr Fraser witnessed the Claimant’s signature on the 1983 Declaration. I consider it almost certain that the Claimant signed the 1983 Declaration and the Deed of Covenant at the same time and at the same place.[53]Although Julian says in his statement that John would certainly have been told about the gift prior to 5 August 1983, I think that is unlikely given this run of correspondence. I consider it likely that a discussion took place sometime after the letter of 9 September 1983. I say that because in that letter instructions are sought concerning the terms on which the Claimant was to join the first farming partnership. It is noteworthy that no one suggested that the Claimant should seek independent advice about this step even though the correspondence at this stage is principally concerned with the level of liability that the Claimant might incur as a partner in the event that the partnership became loss making. It is noteworthy too that the Deed of Accession was dated 30 September 1983 and was clearly signed by the Claimant on a different occasion from that when he signed the 1983 Declaration and the Covenant. I think it likely that a discussion took place between the Claimant and either JVS or his father during September 1983 when he was introduced to the Scheme. I consider it probable that Mr Monier-Williams’ letter of 5 August was never supplied to the Claimant. I say this because the Claimant says it was not, Julian thinks it unlikely that he would have been asked to pass it on and there is no reference to it anywhere else in any of the documentation and most particularly in the handwritten letter to the Claimant from JVS dated 26 November 1983 to which I refer further below.[54]The next issue is with whom the conversation with the Claimant took place. The Claimant’s case is as I have explained – that there was one conversation between him and his father in which he was told that JVS had decided to pass his ¼ share of the estate to the Claimant but that he would not see any benefit from it until after JVS’s death. He recalls then signing the Deed of Accession and thereafter the 1983 Declaration and Covenant.[55]I have already referred to Julian’s witness statement in which he says that he has no recollection of when or how the Claimant was introduced to what was planned but that he considers he would have been told by JVS. When Julian was cross examined about this conversation his evidence changed significantly from that which he gives in his witness statement. He said (T3/235/12 -236/2) “Q. So far as reported by John, it goes on:
"My father then told me that he had decided that I should receive my grandfather's quarter share. My father went on to make clear that I would not see any benefit from this gift until my grandfather passed on, which I accepted was true."
Do you recall that kind of conversation with John? A. Absolutely. Q. Is that an accurate description of the conversation that took place? A. Yes. You must remember that it was a very important decision by my father and by me, because my father said that I could have it, but I agreed with my father that for estate duty planning purposes it might be sensible for my son, John, to have it. So it was not just something that occurred out of theblue and we did not take seriously. It was a very important decision. Q. And that included the comment about the income position? A. That was equally important for reasons that you have read and everybody else has read who have read the papers, that my father was dependent, particularly late on life, to a very large extent for the income from the estate to enable him to live.” Thus there is now agreement between Julian and the Claimant as to what was said as between them. It follows that what Julian told the Claimant was technically inaccurate and was or ought to have been known to him to be technically inaccurate because he had been present when Mr. Monier-Williams had advised him and JVS that the effect of the gift would be to entitle the Claimant to ¼ of the net income of the 1968 Settlement. I accept however that Julian would have considered this to be a distinction without a difference because the income was so low and expenses consumed or probably consumed all of it. Nonetheless the description given was technically inaccurate, and was known or ought to have been known to him to be inaccurate. Q. Is that an accurate description of the conversation that took place?

Q. And that included the comment about the income position?

[56]The difference that remains concerns the occurrence of a conversation between the Claimant and JVS. As to this the Claimant is convinced that there was no such conversation and Julian is convinced that there was though he does not suggest that he was present when the conversation took place. He does not say that he was told by JVS of any such conversation. There is one and only one contemporaneous document that suggests that Julian’s recollection on this issue should be preferred over that of the Claimant. It is a hand written letter from JVS to the Claimant dated 26 November 1983 – that is a little more than a month after the date of the 1983 Declaration and the Covenant. This is a significant letter for a number of reasons. It is a key element of the Defendants’ case, described by the family Defendants’ current solicitors following its disclosure as “… a bombshell to our clients”. It was on the basis of the contents of this letter that the family Defendants’ solicitors said in the same letter “ now that the true position has come out, we are at a loss to see what remains in your client’s claim for any income up to the date of his grandfather’s death”.[57]The 26 November letter is in the following terms:
“Dear John, This is to confirm our discussion on my handing over to you the ¼ share of our farm here. The use of this house for France is dealt with in my will, but I would like her to have the use of the bungalow opposite which I built a year or two ago. Furthermore she might require one of the New Barn Cottages for a “daily” as we are somewhat isolated here. My main desire is that she will be treated by you as if I was still alive, & I am most anxious that she is not made to feel unwelcome here in any way whatsoever. At the moment all the rates, maintenance expenses of the properties are covered by the farm partnership, but deducted from the salary paid in lieu of rent. I would like this arrangement to continue if possible. I am afraid that you will not get much tangible benefit from this gift until I expire, but it should mean that our estate here can survive in one piece for the next generation. I know that you will be kind and considerate to France for my sake so that she can enjoy the rest of her life here. I realize that circumstances may arise, such as ill health, crippling taxation, or unforeseen calamities & you will have to use your own best judgement if & when this happens. I am writing a similar letter to your father who will own the ¾ share of the farm. So it will be a joint effort when the time comes. This brings you my devoted affection with the certain knowledge that you will be as good a son to him as he has been to me. Grandpa”

[Emphasis supplied]

The words that the family Defendants fasten on are those that I have underlined as demonstrating very clearly the existence of the Arrangement and the reference in the first line to “our discussion” as establishing that contrary to the Claimant’s case there was a discussion between him and JVS at or about the time when the 1983 Declaration and the Covenant were signed and the 1983 Scheme took effect. [Emphasis supplied][58]Whilst I do not consider that the Claimant was seeking to mislead me when he says that he did not have a conversation with JVS prior to the signature of the 1983 Declaration and the Covenant, I conclude that he is mistaken about that. I say that for the following reasons. First, I think it is inherently unlikely that JVS would not inform the Claimant of the gift he was making and instead simply leave it to Julian to supply the necessary information to the Claimant. The Claimant’s relationship with JVS at this time was the entirely normal one that I have referred to at the outset of this part of this judgment. In those circumstances it is inherently unlikely that JVS would not have discussed the gift with the Claimant.[59]Secondly, the overwhelming impression I obtain from the Laurence Graham correspondence and attendance notes is that it was JVS who was the driving force behind the 1983 Scheme and it was he who was providing the instructions and who involved Julian as and when he considered it necessary to do so. I have no doubt at all that JVS consulted Julian before deciding which grandchild to benefit but I am equally sure that he would want to have had a discussion about the gift with the Claimant as the recipient.[60]Thirdly, in my judgment the opening line of the 26 November letter provides plain corroboration of the occurrence of such a discussion. It is true to say that there is at least one obvious error in the letter (the reference to the use of New Barn House by France after JVS’s death being dealt with by his will) but I do not think that leads to the conclusion that the reference to the discussion in the first sentence should be rejected as erroneous. A mis-recollection of the technical details of the Scheme is one thing. Recollection of a discussion between a grandfather and his grandson relating to a significant gift is another.[61]Whilst I accept that the letter supports the conclusion that a discussion took place between the Claimant and JVS about the gift (which for the reasons I have given I consider probably took place in the last 2 -3 weeks of September 1983), I do not accept that the letter (which in the end was the only document that the Defendants’ witnesses relied on as supporting the existence of the Arrangement) supports the conclusion that JVS and the Claimant made the Arrangement either in the course of the conversation referred to in that letter or otherwise. My reasons for reaching that conclusion are as follows.[62]Firstly the letter must be read in its context. The Defendants maintain that context to be JVS’s need for the income and the impending termination of the first farming partnership. That is part of the context but not the most material part for present purposes. The most material part of the relevant context is not that the first farming partnership was due to come to an end in 1987 but that all parties contemplated that it would be replaced by another partnership but with different terms as to duration, renewal and possibly profit share. It was not contemplated at that stage that the Monier-Williams leasing structure would be altered. So far as the income position is concerned, that had been considered and advice given that JVS’s income position was protected by the partnership structure and would therefore be unaffected by the 1983 Declaration. No one contemplated that this essential structure would change. That had been the case from not later than 6 April 1983. There was nothing known to JVS that would have led him to think that the gift would have any material effect on his income position because ceasing to use the farming partnership and lease structure was simply not contemplated by anyone at that time. The documentation set out above shows that JVS and Julian were well aware that the 1983 Declaration carried with it the right to receive 25% of the estate’s income but neither was troubled by that fact because the rent payable to the trustees was so low, and was likely to be consumed by trust expenses in any event. There was a telling exchange between Mr Pymont and Julian at T3/292/2-4 that confirms this to be so. It was as follows:
“Q. So you did not take any advice yourself about the terms of the declaration of trust when it was made. You just assumed that it would work in your father's favour. A. Yes. We took legal advice and that was the advice we got. I was not very old and my father was very much the senior partner, if I can put it that way.”
Julian’s point that he was not very old was misconceived – he was over 40 at the time and was as he admitted a senior manager in an industrial company – and in any event is immaterial to the point now under consideration. The real point that emerges from this exchange is that at all times down to the execution of the 1983 Declaration, both JVS and Julian considered that JVS’s income position had been secured by the structure that had been devised.[63]Secondly, the primary focus of the 26 November letter was not income but provision for France. This was an issue that had been of serious concern to JVS for many months prior to October 1983 as is apparent from the correspondence and attendance notes on Lawrence Graham’s file dated between 6 April and the end of September 1983. JVS was wrong to say that France’s occupation of New Barn House was regulated by his will because as between him and the Claimant it was regulated by the Deed of Covenant, though it had been regulated by his will and the codicil in favour of the Claimant that had applied down to the execution of the 1983 Scheme documentation. That demonstrates (as does some later correspondence) that he had an imperfect grip on the technical details of the 1983 Scheme. However that is not material for present purposes. What the letter was concerned to do was to express JVS’s wish that on his death not merely would France continue to occupy New Barn House unmolested by the Claimant and his father but that the Claimant would concur in France having the use of two additional properties mentioned in the letter.[64]Thirdly, there is nothing in the letter that supports the suggestion that in the discussion that is referred to any agreement arrangement or understanding had been arrived at. Had that been the purpose or outcome of the discussion then it is almost inevitable that JVS would have mentioned his wishes concerning the two additional properties that he wished to be made available for France’s use after his death and it would not have been necessary for him to express his wishes in the letter. To the contrary the letter would have set out the understanding reached. Thus the letter on balance negatives the suggestion that any sort of agreement understanding or arrangement was reached between JVS and the Claimant as pleaded by the Defendants.[65]Fourthly, the only words in the letter that are relied on as being allegedly supportive of the Defendants’ case are “… I am afraid that you will not get much tangible benefit from this gift until I expire, but it should mean that our estate here can survive in one piece for the next generation. …” These words are not suggestive of an agreement arrangement or understanding having been arrived at during the discussion between the Claimant and JVS referred to in the first line of the letter. They simply summarise the effect of the 1983 Scheme documentation as that effect was understood by JVS at that time. The words that have been used are entirely consistent with the 1983 Scheme taking effect in accordance with its terms. Laurence Graham had advised repeatedly in the period between April and October 1983 that the gift would carry an entitlement to the income but that the income was confined to a quarter of the rent payable to the trustees net of any trust expenses that had to be discharged out of that rent. JVS’s comment is entirely consistent with that being his understanding. It is also consistent too with the effect of the Deed of Accession. It does not support the suggestion that the pleaded Arrangement had been entered into. Had such an agreement or understanding been reached, JVS would have recorded the agreement or understanding and its effect in the letter. He does not because no such agreement arrangement or understanding was arrived at. He was simply summarising in everyday language the effect of the gift.[66]Aside from the material I have so far considered the only other material relied on as supporting the existence of the pleaded Arrangement is a conversation that Nicola says she had with JVS in 1989 or 1990 and a conversation that Simon says he had with JVS in either 2006 or 2007. In my judgment neither assists on the issue I am now considering.[67]I accept that Nicola had the conversation that she refers to on or about the time she says it occurred. I accept therefore that JVS told her in about 1989-1990 that he had given his interest under the 1968 Settlement to the Claimant but that he was to keep all the income until he died. That is not an assertion of an agreement arrangement or understanding between him and the Claimant that qualified the effect of the 1983 Declaration but is an assertion as to JVS’s understanding of the effect of the 1983 Scheme. JVS appears to have had a belief that he had a life interest in the income notwithstanding the very clear advice that had been given to him in April 1983. The terms of the November letter to the Claimant referred to above suggest that JVS had an imperfect grasp of the technical details of the 1983 Scheme. His concern had been to preserve his income and his understanding (based on the advice that he was given) is that is what had been achieved. He had apparently informed a firm of valuers in September 1984 that he had kept a life interest. That is technically incorrect as Laurence Graham pointed out when the point was repeated to them but JVS had been advised as I have explained JVS’s belief was that such was the practical effect of the Scheme. As far as I can see no one suggested that was no longer correct at any stage until 2005 when the Claimant first made a claim. The assumption made by JVS (whether misplaced or not) was that the position remained unaltered from 1983 when the 1983 Declaration took effect. The conversation is not in any sense consistent with what is now alleged namely that there was an antecedent understanding reached between the Claimant and JVS that qualified the legal effect of the 1983 scheme. It is consistent with JVS understanding that such was the effect of the Scheme.[68]Similar considerations apply to the conversation between Simon and JVS. According to Paragraph 8.10 of his witness statement, Simon was told by JVS that “… the eminent lawyer Mr Monier-Williams had structured the gift in such a way that although John would be gifted the one quarter share, he (my grandfather) would have all the income arising on that share until his death”. I accept that there was a conversation between Simon and JVS broadly to the effect he describes at or about the time he says it occurred. This does not assist the Defendants however. Nothing in this summary suggests the existence of the Arrangement that is now alleged to qualify the legal effect of the 1983 Declaration. What JVS is reported to have said is consistent with the advice that he received at the time. The 1983 Scheme was structured so that JVS received all the income because all the income (aside from the rent receivable by the trustees) came to JVS in his capacity as a partner in the first farming partnership. The rent was considered immaterial for the reasons that I have mentioned.[69]I turn next to the assertion by the Claimant that he did not read and did not keep copies of the documents that he signed in 1983. I accept the Defendants’ description of the Claimant as being a well-organised individual. It is not really disputed. Nonetheless, I accept his evidence that he did not read the material at the time he signed the documents or keep copies for the following reasons.[70]First, I have found that the Claimant’s father told the Claimant that he would not get any benefit from the gift until after his grandfather’s death. The Claimant said he accepted what his father told him at face value. I see no reason for rejecting his evidence that he accepted what he was told at face value. Their relationship was at that stage an entirely normal one and the Claimant was as I have said already then aged 20, and a second year undergraduate with no experience of the business world or of managing large family held estates. I have also found that his grandfather told him that he would not get much tangible benefit from the gift until after he had died. This information was not materially different from that which had been supplied to him by his father although in fact it was technically more accurate. The information supplied to the Claimant by his father and JVS was supplied to the Claimant before he signed any of the documents. He had not been party to any of the discussions with Lawrence Graham and no contact had taken place between that firm and the Claimant.[71]Secondly the Claimant was not told that the documents did anything other than carry into effect a scheme that he had been told would only benefit him materially after his grandfather’s death. That being so he would not have perceived the gift or the documents by which it was being carried into effect as conferring on him any immediate entitlements. In those circumstances, whilst a mature man of business would probably have read the documents before he signed them, it is unrealistic to suppose that a second year undergraduate in the position of the Claimant would have done so when as far as he was aware the only effect of the documents was to carry into effect a gift as part of an intra family scheme which would only be of material benefit to him on an unknown date in the future.[72]Thirdly, the circumstances in which he came to sign the documents are not suggestive of him being encouraged to read the documents in any detail. I have already described those circumstances earlier in this judgment.[73]Finally, when the Claimant first had to assert an interest in the trust property (in answer to a claim against him by the trustees of the 1968 Settlement for possession of Cowlease Cottage, a cottage which formed part of the 1968 Settlement assets that was occupied by him rent free by licence from the trustees) he did so by reference to the letter from JVS to him dated 26 November 1983 (which he had kept) and not by reference to the 1983 declaration. Had he read and understood that document, I think it likely that his statement of case in the possession proceedings dated 24 August 2004 would have said so. In fact all it says is that “… in 1983, JV Sheffield transferred his quarter share over to myself, see letter dated 26.11.83 enclosed in JDS.1”. Had he kept a copy then I think he would have referred to it expressly. There was no reason for him not to do so.[74]As to copies, there is nothing in the material that suggests copies were made available to him. He signed the Deed of Accession at his parents’ home and the 1983 Declaration and Deed of Covenant in the course of a visit with his mother to Mr Fraser and there is no evidence that he had the capacity to make, or was supplied with copies before or at the time he was asked to sign them. In my judgment the most significant point that shows he did not keep copies of any of this documentation is the Claimant’s response to the possession proceedings referred to above. It is highly unlikely that he would have kept the letter from JVS dated 26 November 1983 but not kept copies of the 1983 Scheme documentation had copies been supplied to him or made by him. It also relevant to note that on 10 December 2004, the solicitors acting for the Claimant in the possession proceedings requested a copy of the 1983 Declaration from the solicitors acting for the trustees. There was no reason for the Claimant to suppress the existence of a copy in his possession at that stage. The first call for an account was made by a letter from the Claimant’s then solicitors dated 16 February 2005.[75]Some reliance is placed by the Defendants on the signature by the Claimant of various documents after his signature of the 1983 Declaration. I refer to most of them later in this judgment when considering the Defendants’ case as to acquiescence and laches. I set out my reasons in that section of the judgment for thinking that this material is not supportive of the Defendants’ case on those issues and I consider that for similar reasons it is not supportive of their case that there was an antecedent Arrangement as pleaded either.[76]Since these proceedings were commenced, the Defendants have not deviated from the essential theme that there was an antecedent agreement arrangement or understanding between the Claimant and JVS whereby JVS would give the Claimant his 25% interest in the estate provided that JVS could keep all the income. Their pleaded case is to that effect because at Paragraph 15 it is pleaded that the 1983 documentation was signed “… in accordance with the Arrangement …” In the course of his oral evidence Julian described the arrangement as “… a contract between my father and myself and John …” For the reasons I have given, I hold that the Defendants have not proved the existence of the Arrangement that they have pleaded.

Effect

[77]It follows from this conclusion that each of the documents that the Claimant signed in the autumn of 1983 – the Deed of Accession, the 1983 Declaration and the Deed of Covenant each took effect in accordance with their terms. The only document that remains generally significant is the 1983 Declaration. The Deed of Covenant is relied on by the Defendants in relation to one particular point which I refer to later in this judgment. It follows that so much of the Defendants case on estoppel, acquiescence and laches as depends upon the existence of the Arrangement must fail.

The Effect in law of the 1983 Declaration

[78]The issue that arises is significant because if the Defendants are correct in their submissions concerning the effect of the 1983 Declaration then the Claimant’s claims for an account of income actually received (which has been advanced by the Claimant primarily against each set of trustees for an account of income actually received during their period in office) for the period down to the date of the death of JVS can only be advanced against JVS’s estate. This is so because it is common ground that the 1968 Settlement trustees paid all the trust income received by them to JVS during his life. The Defendants’ case is that the effect in law of the 1983 Declaration was to constitute JVS an intermediate or sub-trustee and that their duty was to account either to the Claimant or (at their choice) to JVS for the income the subject of the 1983 Declaration and if they accounted to JVS it was his duty (subject to the Arrangement) to account for it to the Claimant. The outcome of this issue is of limited practical importance so far as the Claimant is concerned because it is not suggested that JVS’s estate is not good for such sums as the Claimant is entitled to recover. It is however of some importance to the other family Defendants.[79]In 2006, the then trustees sought advice from experienced specialist counsel as to the effect of the 1983 Declaration, principally for the purpose of deciding whether a proposal that the Claimant’s interest in the 1968 Settlement could be purchased by JVS or Julian otherwise than with his consent. The issue I am now considering is one that was considered by counsel at that stage. Counsel advised the trustees that the effect of the 1983 Declaration was:
“… to assign to [the Claimant] [JVS’s] entire beneficial interest in [Laverstoke] and [the Claimant] became the beneficiary in respect of that share in his place. It is not therefore correct in my view to say that the Trustees hold [Laverstoke] as to one quarter for [JVS] who in turn holds that share on trust for [the Claimant]. The Trustees have since 24 October 1983 simply held [Laverstoke] on trust as to one quarter for [the Claimant] direct. Where the holder of a beneficial interest under a trust declares a bare trust of that interest by way of sub-trust the trustees of the head trust hold directly on trust for the beneficiary under the sub-trust … as Upjohn J put it in Grey v. IRC [1958] Ch. 375 at 382, where a donor declares himself a trustee of an equitable interest for a donee the legal effect is that the trustees become trustees for the donee and the donor disappears from the picture. It follows that in my opinion the Trustees should since 24 October 1983 have paid one quarter of the income directly to [the Claimant] and should not have paid it to [JVS] at all. ”
The Claimant asserts first that the 1983 Declaration is to be construed as if it was an assignment but secondly, if that is wrong, he adopts the analysis set out above, which he submits is supported by earlier authority including Burgess v. White (1759) 1 Eden 177 1 Blackstone 123, Grainge v. Wilberforce 5 TLR 436 and In re Lashmar [1891] 1 Ch 258. The Defendants contend that the 1983 Declaration is plainly a declaration of trust and that the Claimant’s secondary position has become untenable in light of the decision of the Court of Appeal in Nelson v. Greening & Sykes (Builders) Limited [2007] EWCA Civ 1358 [2008] 1 EGLR 59, which was, of course, decided after counsel had provided his opinion.[80]The Defendants submit that an equitable interest in the hands of a trustee can be disposed of by the beneficiary in favour of a third party in one of but only in one of four ways(a) assignment,(b) a direction to the trustees to hold the property on trust for the third party(c) entering into a contract to assign with the third party or(d) declaring himself to be a trustee of the interest in favour of the third party – see Timpson’s Executors v. Yerbury [1936] 1 KB 645 per Romer LJ at 664. I agree with that submission. I also agree that by executing the 1983 Declaration JVS chose the fourth of these options. Although the Claimant asserts that the 1983 Declaration should be construed as if it was an assignment of an equitable interest I regard that as clearly mistaken. The Declaration was professionally drawn by very experienced trust lawyers as part of a carefully planned CTT tax saving scheme. Had it been intended to assign, the solicitors concerned could and would have drafted an assignment. They did not do so. Both in form and substance the 1983 Declaration was a declaration by JVS that he was trustee of the interest for the benefit of the Claimant.[81]The Defendants then rely on a statement of principle by Turner LJ in the earlier Court of Appeal case of Milroy v. Lord (1862) 4 D F & J 264 at 274 (cited by Romer LJ in Timpson’s Executors v. Yerbury (ante) at 664-5) that “… if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes …” The modes being considered in that case were assignment and declaration of trust. It was submitted that the approach adopted by Upjohn J in Grey v. IRC contradicts this principle because it involves the court giving effect to mode (d) by treating it as if it were mode (a), which is precisely what Turner LJ suggested could not be done. There is significant force in this point.[82]The Defendants submit that this issue was put beyond doubt by the decision of the Court of Appeal in Nelson v. Greening & Sykes (Builders) Limited (ante) where it was held that Grey v. IRC (ante) did not establish that an intermediate trustee ceased to be a trustee as a matter of law but only that in the case of a trust and sub-trust of personal property the trustees may decide, as a matter of practicality that it is more convenient to deal directly with the beneficiary of the sub-trust – see Lawrence Collins LJ at [57]. The Claimant submits however that this decision was reached per incuriamBurgess v. White, Grainge v. Wilberforce and in Re Lashmar (ante). In my judgment this submission is mistaken because there is nothing in these authorities that is necessarily inconsistent with the conclusion of the Court of Appeal in Nelson.[83]In Lashmar M was B’s will trustee. B was entitled under the will of A to real property that was made subject to a life interest. Legal title in that property vested in P as A’s will trustee. B left his estate in trust for his wife for life with remainder to his son. B and both his wife and son died before the end of the life interest in the property left by A. Thereafter the last person entitled to a life interest in A’s property died leaving that property vested in P. M sought the transfer of that property to himself for his personal benefit. P opposed that claim. The Court concluded that because M was a bare trustee without duties to perform and, having nothing to do with the property he sought to recover from P, he was not able to maintain a claim against P. That is different from the situation where trustees under a head trust pay trust monies to a sub-trustee who is a bare trustee for a beneficiary. The authorities relied on by the Defendants show that head trustees are entitled to adopt that course but do not have to. If the head trustees chose to deal with the beneficiary of the sub-trust it would not be open to a sub-trustee to prevent that course (or force the head trustees to deal with the sub trustee) if the sub trustee was a bare trustee of the sort the court was concerned with in Lashmar.[84]Grainge is a first instance decision that was concerned with a different question from that which arises in this case. That case was concerned with what Chitty J called “… the principle that where A was trustee for B who was trustee for C, A held in trust for C and must convey as C directed …”. This case would appear to be concerned with whether it was necessary to join B into a transaction by which A was to transfer property to C. The Court held that there was no such need. This authority is therefore concerned with a different issue from that which arises in this case. It does not touch on the point decided by the Court of Appeal in Nelson namely whether (adopting the A,B and C terminology adopted by Chitty J) A is obliged to deal with C or can deal with B. Grainge appears consistent with the conclusion drawn in Nelson because it decides that A has no obligation to deal with B and can deal with C direct. This is what the earlier case of Head v. Lord Teynham (1783) 1 Cox 57 was concerned with - see the head note to the report as to the effect of that case. It was this case that Chitty J followed in Grainge. In my judgment therefore this case does not assist on the issue I am considering either.[85]I was not taken through the report of Burgess v. White by counsel for the Claimant. It is very lengthy, the facts are very complex and the terminology is that which is to be expected of a complex 18th century land and trust dispute. However to use the A B and C terminology used in the previous paragraph, the case appears to be authority for saying that B cannot sue A for the trust property that B would thereby hold on bare trust for C. That proposition is consistent with conclusion reached by the Court of appeal in Nelson which is authority for the proposition that trustees may choose whether to deal with the sub-trustee or not.[86]It follows from this that whilst the trustees of the 1968 Settlement could have paid the Claimant rather than JVS if otherwise the Claimant was entitled to payment, they were not obliged to do so. In fact the trustees of the 1968 settlement paid JVS as they were entitled to do. If 25% of the sums received by JVS after the 1983 Declaration were sums that he should have accounted to the Claimant for, then the failure to pay was a breach of trust on his part not on the part of the trustees for the time being of the 1968 Settlement.[87]It was in order to meet this point that the Claimant commenced a second set of proceedings bearing the number HC12F03190 which was said to be a derivative claim brought by the Claimant as beneficiary of the sub trust against the trustees for the time being of the 1968 Settlement. In his opening submissions, Mr Rajah QC submitted that this claim was fundamentally flawed for the reasons identified in the Defence filed by the family Defendants to that claim. No submissions were made by Mr Pymont QC to contradict this in his written submissions or oral closing submissions. In those circumstances, I am disposed to think that the derivative proceedings ought to be dismissed on that basis. However, before taking that step I will hear further from the parties at the hand down of this judgment and if necessary deliver a further judgment dealing conclusively with that issue.[88]It is not entirely clear from the parties’ submissions what effect this conclusion will have on the claims other than those based on the non-payment of income received. I will hear further submissions on that issue as well.

Alleged Breaches of Trust - Income

[89]It is next necessary to consider each of the alleged breaches of trust and the effect on each of the various general defences relied on. I approach the issues in this way because the Defendants dispute in relation to at least some of the alleged breaches that they were breaches even if there was no Arrangement that qualified the terms of the 1983 Declaration.

(c) 2005 Farming Business Lease

[90]All the material that I have referred to above demonstrates very clearly that JVS and Julian were well aware that the Claimant was entitled to receive 25% of the rent received by the 1968 Settlement trustees under the lease with Mr Monier-Williams after deduction of any trust expenses. If there was any net sum left after meeting expenses, the failure to account to the Claimant for that sum would be a plain breach of trust. The Defendants rely on the general defences of estoppel, limitation, acquiescence and laches, and s. 61 of the Trustees Act 1925. In addition the Defendants submit that the sums due are so small on any footing that I ought to exercise my discretion to refuse an account in relation to this element in any event.[91]It is common ground that all the rent that was due to the trustees of the 1968 Settlement under the 1995 and 2005 FBLs was paid to JVS. It is accepted by the Defendants that the Claimant was entitled to 25% of the net income obtained under those leases subject to the general defences relied on of estoppel, limitation, acquiescence and laches, and s. 61 of the Trustees Act 1925.

Estoppel

[92]The estoppel relied on is proprietary estoppel. The estoppel defence is pleaded in Paragraphs 37 -38 of the Defence. Paragraph 37 is in these terms:
“37 …[the Claimant] is estopped from claiming his strict legal rights under the 1983 declaration because of his knowledge of what was intended. In particular: a. John knew at the time of the gift that in making the gift JVS did not intend John to receive any benefit from the [trust property] during JVS’s lifetime; b. By agreeing to accept the gift without demur or caveat, [the Claimant] encouraged JVS to believe that [the Claimant] would not claim any benefit from the [trust property] during JVS’s lifetime c. In reliance upon the above JVS made the 1983 declaration and has used and occupied the land without accounting to John …”
I do not see how this defence can be maintained in the light of the findings I have made concerning the Arrangement. There was no agreement to the effect alleged. He was told that the effect of the 1983 Scheme was that he would get no or not much tangible benefit from the gift until after the death of JVS, but the Claimant did not know that the effect of the 1983 Declaration was to entitle him to 25% of the trust income until after he received a copy of the 1983 Declaration in or about late December 2004. He first made a claim in February 2005. What happened thereafter is set out below in the section concerned with laches and acquiescence. a. John knew at the time of the gift that in making the gift JVS did not intend John to receive any benefit from the [trust property] during JVS’s lifetime; b. By agreeing to accept the gift without demur or caveat, [the Claimant] encouraged JVS to believe that [the Claimant] would not claim any benefit from the [trust property] during JVS’s lifetime c. In reliance upon the above JVS made the 1983 declaration and has used and occupied the land without accounting to John …”[93]The alternative way in which the estoppel claim is put is in Paragraph 38 of the Defence, which is in these terms:
“… by his conduct between 1983 and 2005 (including in particular the matters set out in paragraph 15 above) [the Claimant] has encouraged JVS and the family defendants to believe that he had no claim to any income interest in [the trust property] during JVS’s lifetime and that he agreed to JVS acting in respect of the gifted interest as if he were still the owner and John is estopped from now asserting otherwise.”
Paragraph 15 refers at subparagraphs (a) to (c) to the signing by the Claimant of the Deed of Accession, the 1983 Declaration, and the deed of Covenant. This assertion depends on the Defendants succeeding in their allegation that there was an antecedent agreement or understanding to the effect pleaded in paragraph 13 of the Defence. There was no such agreement or understanding. The only understanding that John had of the effect of the gift and the documents he was signing is that he was to receive the 25% interest in the 1968 Settlement trust property on the death of JVS but either no or no tangible benefits before then. There was nothing within the documents he signed at that stage that disentitled him from receiving trust income and there was no agreement or understanding that he would not receive such income notwithstanding the terms of the 1983 Declaration. He accepted at face value what he was told by his father and grandfather would be the effect of the gift. He did not know that the documents that he was being invited to sign had a different effect.[94]Paragraph 15(d)-(h) of the Defence alleges that the Claimant “allowed” JVS to occupy New Barn House and outbuildings rent free, “allowed” JVS to retain the rent between 1983 – 1986, signed the second farming partnership deed, “allowed” JVS to receive the income and profits of the second farming partnership and in 1995 participated in the dissolution of the second farming partnership, the letting of the trust property thereafter under the farming business tenancies and that the Claimant thereafter “allowed” JVS to receive all the rent from the farms. The concept of allowing presupposes that the person doing the allowing knows that he or she can prevent what he or she is alleged to have allowed. The Claimant did not acquire such knowledge at any stage down to the coming into effect of the 1983 Declaration. For the reasons explained hereafter when considering laches and acquiescence, he did not acquire such knowledge at any time down to December 2004 when the solicitors then acting for him were supplied with a copy of the 1983 Declaration.[95]Before an estoppel of the sort relied on can succeed, it must be shown that it would be unconscionable for the allegedly estopped party to be permitted to rely on his strict legal rights – see Gillett v. Holt [2001] 1 Ch 210 approving Taylors Fashions Limited v. Liverpool Victoria Trustees Company Limited [1982]1 QB133 per Oliver J at 151-2 where he said that proprietary estoppel arose where “… in particular individual circumstances it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly he allowed or encouraged another to assume to his detriment … [s]o regarded knowledge of the true position by the party alleged to be estopped becomes merely one of the relevant factors – it may even be a determining factor in certain cases – in the overall enquiry.”[96]I do not see how it would be unconscionable to allow the Claimant to assert his strict legal right to receive the trust income I am now concerned with when(a) he did not know he had any entitlement to it or (in the case of the rent payable under the Monier-Williams lease) that it was being received(b) JVS and Julian both knew JVS was not entitled to it because they had been advised that such was the case by Lawrence Graham as I have described(c) JVS did not advise the Claimant that he was entitled to receive 25% of the net income of the 1968 Settlement even after he became the Claimant’s trustee and(d) there was no agreement or understanding between JVS and the Claimant that the Claimant was not to receive what he was otherwise entitled to receive. In my judgment no estoppel can arise in those circumstances.[97]Some reliance was placed by Mr Rajah on the phrase “… knowingly or unknowingly …” in Oliver J’s formation. I consider this was mistaken for the reasons identified by Mr Pymont – that is because in context this was a reference to the knowledge of the person allegedly estopped of the mistaken belief of the person alleging estoppel. This is so because that was the focus of the debate in Taylors Fashions Limited v. Liverpool Victoria Trustees Company Limited (ante) which in turn had been conducted by reference to what was called the fourth probandum derived from Fry J’s summary of the applicable principles in Willmott v. Barber 15 Ch.D 96 at 105-6. Thus the phrase “ … knowingly or unknowingly …” was addressing the applicability of that probandum not the point concerning the knowledge of the person allegedly estopped of his own legal rights. I accept however that the approach adopted by Fry J is now regarded as unduly restrictive and that estoppel is approached by asking an overarching question namely whether it is unconscionable for the allegedly estopped party to be permitted to rely on his strict legal rights. Answering that question may and probably will involve considering each of the issues identified by Fry J but that is a different point. My conclusion is that unconscionability is not made out in this case for the reasons I set out in the previous paragraph of this judgment.

Trustee Act 1925

[98]In those circumstances, s.61 of the Trustee Act 1925 cannot assist either. It could not be said that JVS acted reasonably in the circumstances or that he ought fairly to be excused. Limitation[99]It was accepted by the Defendants that the wrongful receipt by JVS of the income attributable to his interest under the 1968 Settlement received after execution of the 1983 Declaration was not statute barred by operation of s.21(1)(b) of the Limitation Act 1980. This much is common ground. However, the executors contend that this claim is barred by laches and acquiescence.

Laches and Acquiescence

[100]It was common ground between the parties that the applicable principle was that stated by Sir Barnes Peacock delivering the opinion of the Privy Council in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, 239-240 :
“Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because a party has by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of those cases lapse of time and delay are most material. But in every case, if an argument against relief, which would otherwise be just, is founded on mere delay … the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which may affect either party and cause a balance of justice or injustice in taking one course or the other, so far as relates to the remedy”
The effect of this was summarised in modern times by Moore-Bick LJ in P&O Nedlloyd BV v. Arab Metals Co and others [2007] 1 WLR 2288 at 2312H as meaning that “…… the question for the court in each case is simply whether, having regard to the delay, its extent, the reasons for it and its consequences, it would be inequitable to grant the claimant the relief he seeks”.[101]It is convenient that I review all the evidence relied on by all the Defendants on this issue at this stage because essentially the same point and the same material is relied on wherever laches and acquiescence is relied upon. The key point is whether, as the Claimant contends, he was not aware of the terms of the 1983 Declaration until December 2004, or whether, as the Defendants contend, it is to be inferred that the Claimant knew of and well understood its terms much earlier than that. I have already set out my reasons for concluding that the Claimant was not informed and was not aware of his entitlement to income at any time prior to the 1983 declaration taking effect and for concluding that the Claimant did not keep a copy of the 1983 Declaration when he signed it. The point I am now considering is different – that is a contention by the Defendants in support of their Laches defence that the Claimant became well aware of his rights from a much earlier date than 2004.[102]The relevant right being considered for present purposes is of course the Claimant’s entitlement to receive 25% of the net income of the 1968 Settlement from the date of the 1983 Declaration. A particular submission made by Mr Rajah illustrates the importance of this point. It was submitted that knowledge was to be inferred from the fact the Claimant was able to plead in a Statement of Case filed by him in possession proceedings commenced against him by the trustees in relation to his occupation of Cowlease Cottage (a property that formed part of the 1968 Settlement assets) that he was a beneficiary entitled to 25% of the 1968 Settlement before he had sight of the 1983 Declaration. That was a bad point in relation to the issue I am now considering because the issue is not whether the Claimant knew he had been given a 25% interest in the 1968 Settlement trust property (it is common ground that he has always known that) but whether he knew that he had an entitlement to receive the income from that property. It is that knowledge or his lack of it that is relevant to the question I am now considering. It is manifest from Paragraphs 8-11 of the Statement of Case that his knowledge was confined to knowing that he “owned” one quarter of Laverstoke. The first time that the effect of the 1983 declaration as it affected income was mentioned in the possession proceedings was in the Amended Particulars of Claim which is dated 24 November 2004. It was this that led to the request for sight of the 1983 Declaration and to the disclosure of a copy by the trustees’ solicitors to the solicitors then acting for the Claimant in the possession proceedings.[103]Some reliance is placed by the Defendants on various documents that the Claimant signed after signing the 1983 Scheme documentation. The Defendants rely on the fact that the Claimant signed a CTT Declaration dated 3 January 1984. The Claimant’s personal circumstances at that time are set out earlier in this judgment. There is no material that suggests that the Claimant’s state of knowledge at this date was any different from his state of knowledge when he signed the Deed of Accession on 30 September 1983 and the 1983 Declaration on 24 October 1983. Box 3 refers to the whole of a ¼ share being transferred by JVS to the Claimant but there is nothing within this document that refers to income during the life of JVS or which otherwise contradicts what the Claimant was told by his father and JVS. It is perfectly true to say that this document refers to a copy of the Declaration being attached but this document was prepared by professionals and there is no material that enables me to conclude that the 1983 Declaration was available to the Claimant at the time he was asked to sign this document.[104]The Defendants rely on the fact the Claimant signed a form that reported his interest in the first farming partnership to HMRC. That is not helpful in demonstrating that he knew of the terms of the 1983 Declaration as it applied to income prior to the death of JVS. Some reliance is placed on the Claimant’s activity concerning the second farming partnership. It is said that he must have signed various documents relating to the first farming partnership in order that it could be brought to an end as well as signing the deed constituting the second farming partnership. The key point however that is the Claimant was not aware of his entitlement under the 1983 Declaration. The Claimant was not aware of his entitlement to any part of the estate income at this time. He had not been told of and he did not know he had any such entitlement.[105]It would appear that a will was drawn up by Lawrence Graham for the Claimant. The files produced do not contain any documentation concerning how the will came to be prepared or its contents. Before embarking on this task the partner concerned first approached Julian. Whatever happened thereafter, a will was drawn and signed by the Claimant because it was returned to Lawrence Graham and acknowledged by them by a letter dated 12 February 1985. There is no evidence however that there were any detailed discussions concerning the Claimant’s entitlement to income at that time. The Claimant said the effect of the will was to leave his estate to one of his brothers. This is not inherently improbable – the AMS will shows that even quite extensive property holdings can be dealt with in this manner. If it was as simple as that it would not be necessary for there to be any detailed discussion concerning the Claimant’s entitlement to income under the 1983 declaration. The Claimant maintains that most of what appeared in the will was passed to the solicitors via his father. During this period of course the structure was exactly as it had been when the 1983 Scheme documents were signed. Thus the assumption of Lawrence Graham is likely to have been that there was no income once expenses had been considered. Thus even if there had been a discussion between the Claimant and the solicitors who drew up the will concerning assets, it is unlikely that the income position would have been discussed. What had to be disposed under the will was the Claimant’s interest under the 1983 Declaration, together with his other property.[106]For those reasons I conclude that the Claimant did not acquire knowledge of his entitlement to income by operation of the 1983 Declaration at any time down to the date when a copy was sent to his solicitors as I have described and there was nothing in his conduct during this period that makes it inequitable for him to assert his claim to recover the income that should have been paid over to him. What happened thereafter requires closer analysis.[107]The Claimant first made a claim for an account by a letter dated 16 February 2005. That letter was acknowledged but not answered substantively. On 6 December 2005, the Claimant personally wrote to his father seeking a response. That letter too went unanswered. That letter sought amongst other things the accounts for the 1968 Settlement. In fact no such accounts had been kept. At this date JVS was still alive. Had Julian considered that the Claimant had no entitlement by reason of the antecedent Arrangement now relied on, I would have expected that to have been asserted albeit in tactful language given the family relationships involved and even though the relationship between father and son had broken down some years previously. There was no such assertion. The Instructions to Counsel to advise that led to the Opinion I refer to above when considering the effect of the 1983 Declaration were delivered on 1 February 2006 and the Opinion was received by no later than 13 February 2006. There is no mention of any arrangement or understanding in the Instructions.[108]The conduct of the trustees of the 1968 settlement thereafter suggests that they accepted that the income would have to be divided between the Claimant and the trustees of the AMS Will Trust in the proportion of 25% to 75% - see the minutes of the meeting of the trustees dated 6 April 2006. On 20 June 2006 Simon and Mr Ratcliffe as trustees of the 1968 Settlement agreed that Simon would visit “John Sheffield” to discuss the basis on which the income of the Trust should be distributed. It is unclear on the face of the minute whether this is a reference to JVS or the Claimant. Although Simon was unclear whether the conversation which he had with JVS that I have referred to earlier when considering the existence of the Arrangement took place in 2006 or 2007, I am inclined to think that it took place in 2006 and that it took place following the meeting on 20 June. A meeting took place on 8August 2006 between Julian and Mr Ratcliffe. Notes were kept by Julian of that meeting. Paragraph 5 records that Mr Ratcliffe was “… to write to [the Claimant] to make a date to meet him when the amount of money that [the Claimant] is owed has been worked out”. I think it probable that the discussion between JVS and Simon took place before the meeting on 8 August. I say this because what was agreed would only make sense if what had been agreed on 20 June had been carried into effect. The action proposed at the 8 August 2006 is consistent with(a) the discussion between JVS and Simon being to the effect Simon sets out in his evidence and(b) it being understood that what was said by JVS did not accord with what was apparent on the face of the 1983 declaration. None of this is consistent with any of Julian, Simon or Mr Ratcliffe thinking that there was an Arrangement such as is alleged by the Defendants whether before or after Simon’s conversation with JVS.[109]On 25 August 2006, the Claimant wrote again concerning his claim, this time to Mr Ratcliffe’s firm. That letter included what the Claimant called “… a call for an account of the income from the trust Property from 1983 to date as per my solicitors letter of 16 February 2005 …” On 5 September 2006, Mr Ratcliffe’s firm said that the points raised by the Claimant were to be discussed at a trustees’ meeting due to take place on 5 October 2006. On 8 September 2006, Mr Ratcliffe wrote to Lawrence Graham on behalf of JVS saying that he “… has asked for copies of the trust accounts going back to 1983…”. The accounts sought were for the AMS Will Trust.[110]The minutes of that 5 October trustees’ meeting record that(a) Julian was to visit Lawrence Graham into order to establish the income and expenditure of the two trusts (that is the 1968 settlement and the AMS Will Trust) going back 5 years,(b) accountants were to produce a balance between the two trusts and(c) “cash owed to be paid off”. On 12 October 2006, Mr Ratcliffe’s firm wrote to the Claimant stating that the Trustees “… would like to discuss the question of income with you. They had been led to believe that as part of your arrangements with your grandfather, all income from the trust was payable to him during his lifetime”. This is as far as I can see the first contemporaneous mention of the existence of an arrangement of any sort. I consider the true meaning and effect of this letter at the end of the next paragraph of this judgment.[111]The Accountants who were instructed following the 5 October meeting prepared a note of a meeting between the accountant concerned and Mr Ratcliffe that is dated 19 October 2006. That note records that the Claimant “… has had no income paid to him from 1983 even though he is obviously entitled to one quarter of the income of the assets …”. Mr Ratcliffe said in his evidence that this was the view of the accountant not his view. I think he is mistaken about that because the view being expressed was a view as to the Claimant’s entitlement as a matter of law. Whether the Claimant was entitled to receive income as a matter of principle was not an issue for the accountant but the lawyer advising the trustees. The accountant was being instructed only because what is recorded reflected the views of the trustees at the time as to the true position. Thus I think it more likely that either the accountant was recording what Mr Ratcliffe had said or what he understood the position to be from the conversation that he had with Mr Ratcliffe. The one thing that is apparent from this note is that it was not being asserted that there was no entitlement to the income by reason of the existence of an antecedent Arrangement between the Claimant and JVS. Thus either there is a clear conflict between what the accountant was apparently being told on 19 October and what Mr Ratcliffe had asserted in his letter to the Claimant dated 12 October, or the 12 October letter was not intended to be the assertion of a defence based on the existence of the Arrangement but an explanation as to why no steps had been taken to respond to the Claimant earlier. I consider the latter to be the more likely explanation.[112]The letter from Mr Ratcliffe to the Claimant of 12 October was responded to by the Claimant on 20 October 2006. He said a discussion was not appropriate because he had not been given an account of the trust income. He did not address the question of an arrangement. Although some reliance was placed on that failure by the Defendants, in my judgment that is misplaced. The Claimant is not a lawyer. The letter he was responding to had suggested a meeting not that his claim was being rejected because of the alleged existence of an alleged arrangement.[113]Mr Ratcliffe’s firm returned to this issue in a letter of 6 November 2006 when they said:
“The Trustees were advised by your grandfather that all income arising from the Trusts was to be continued to be paid to your Grandfather during his lifetime and that this was part of the arrangement between yourself and your grandfather. Do you not agree with this?”
This is the first time when it was unambiguously asserted that no income was payable to the Claimant as the result of an arrangement made by him with his grandfather. The Claimant responded to this question by a letter dated 20 November 2006, in which he responded:
“No I do not agree that “all income arising from the trust was to be continued to be paid to” my “grandfather during his lifetime” and no I do not agree “that this was part of the arrangement between” myself and my grandfather.”
That letter was acknowledged by Mr Ratcliffe’s firm by a letter dated 22 November 2006.[114]Mr Ratcliffe’s firm was replaced by Farrers shortly thereafter and by 1 February 2007 that firm had advised that the Claimant was entitled to receive 25% of the rent paid by Mr Denee from the inception of the FBT. This advice was communicated to the Claimant by Simon by a letter dated 7 February 2007. Time passed with correspondence that I need not describe in detail beyond saying that the Claimant was insisting on the production of 1968 Settlement trust accounts which were not forthcoming. No attempt was made by the trustees to assert that any entitlement to income had been lost as the result of an arrangement between JVS and the Claimant at this time. There is nothing in the material I have seen that suggests this notion featured in the thinking of the trustees or their advisors during this period.[115]The next step of significance was a letter dated 25 May 2007 from Farrers to the Claimant. That letter advised the Claimant to seek independent legal advice and set out a calculation of what was considered to be the sum due to the Claimant since 29 September 1995, when the FBT incepted. The net amount that was calculated to be due was £166,980.29. This sum was not an offer in settlement but was the sum that Farrers had advised the trustees was the sum that should be paid over to the Claimant by way of income. It was a sum that was acknowledged to be due to the Claimant. It took no account of any income prior to the inception of the FBT because no trust income had been received prior to that date so far as was known to Farrers. By 11 April 2008 the sums held for the Claimant by Farrers had increased to £311,608 odd. At no stage down to this date had Farrers asserted a defence based on the alleged existence of the Arrangement. JVS died on 9 May 2008. The Claimant wrote to Farrers on 26 June 2009 responding to various letters from 2007 and 2008. The Defendants rely on this delay. It should be noted however that at this time Farrers had conceded the principle that the Claimant was entitled to 25% of the 1968 Settlement’s net income without qualification. Farrers responded to the Claimant’s June 2009 letter on 11 September 2009. There was no material alteration of position by Farrers or the Defendants. The same position was maintained by Farrers in a letter dated 25 May 2010.[116]This claim was commenced in late November 2010. Particulars of Claim followed in March 2011. The Arrangement defence first surfaced again in a letter from Farrrers dated 13 May 2011 that was written after the Particulars of Claim has been served but before the Defence was served. This letter followed disclosure of a copy of the 26 November letter to the Claimant from JVS. The Defence in which the Arrangement is pleaded is dated 15 June 2012.[117]Against that factual background, I now turn to the basis on which the Defendants maintain that it would be inequitable for the Claimant to be able to advance his claims. The Defendants’ case in laches in summary is that JVS died before the commencement of these proceedings and that it is inequitable that he should be permitted to proceed with his claims because the Defendants have been deprived of the opportunity of obtaining a statement from JVS. In my judgment this assertion is misplaced. Simon was able to discuss the question of entitlement to income with JVS in 2006. Had anything said by JVS at that time suggested that a defence was available then the Defendants could and should have taken a statement from him. There is nothing in the material that suggests that JVS did not have as full a recollection of the matters in dispute then as he would have had some years earlier. The information supplied by JVS in 2006 did not support the suggestion that there was an Arrangement to the effect alleged. That point ceased to be relied upon and did not surface again until after the proceedings were commenced. There was nothing available to the Claimant that suggested that this point was being relied upon by the Defendants between the date when he had denied its existence (November 2006) and May 2011.[118]There are other points relied on but in my judgment they do not enable the Defendants to demonstrate that it would be inequitable to permit the Claimant to proceed with his claims. The suggestion that if the claim had been started nearer to 2005 than to 2010 might have enabled something not now known about to have been deployed in order to defend the claim is mere surmise. Nothing was suggested by JVS in the course of his conversation with Simon other than his belief that the 1983 Scheme had been structured in such a way as to entitle him to receive the income. There is no evidence that at that stage JVS did not have the mental capacity to supply information that was sought from him. It is said that it is unfair and unreasonable that the Defendant should be required to account now for net income actually received by JVS. That point might have had some substance if it could be said for example that JVS’s estate had been distributed and what was retained was insufficient to meet the claims. However that emphatically is not what was suggested. Mr Rajah was at pains to point out to me that no one suggested the estate was not good for the claims that were being made. The fact that the income had been received and spent by JVS is not to the point once the existence of the Arrangement is rejected. The suggestion that it is impossible to have a fair account ignores the fact that the reason that is so is because the trustees from time to time did not keep accurate accounts or at least records of income and expenditure contrary to the well established duty of trustees.[119]The Claimant did not know of his rights until late 2004, he asserted his claim in early 2005. He did not receive a substantive response from the solicitors then acting for the Defendants until 12 October 2006. By 20 November 2006, it was clear to the solicitors then advising the trustees and to the trustees that the Claimant did not accept there was an arrangement such as had been suggested. The internal material does not suggest that is what the Defendants thought either. Had it been the case that the Defendants thought that they were being placed in an impossible position I would expect that thought to have appeared in at least some of the minutes of meetings of the trustees or of trustees with external advisors. There is no such suggestion. Had it been the case that the trustees were conceding because they thought there was an Arrangement but could not prove it, again I would have expected that idea to appear in the minutes of the meetings of trustees. There is no such suggestion. All of the correspondence from November 2006 to May 2011 suggests unequivocally that the principle of the Claimant’s entitlement to the income after the coming into effect of the 1983 Declaration had been conceded. That position was maintained until the death of JVS and thereafter. In those circumstances, I am not satisfied that it has become inequitable for the Claimant to be permitted to maintain his claims.

Acquiescence

[120]The Defendants did not advance any detailed submissions under this head at any rate in relation to the heads of claim I am now considering. However, I accept Mr Pymont’s submission that before a beneficiary can be said to have assented to, concurred or acquiesced in, or released, a breach of trust, the beneficiary must have had full knowledge of the facts and know what he was doing and the legal effect of what he was doing, though he need not know that what he is assenting to or concurring or acquiescing in or releasing is would be or was a breach of trust – see Underhill, Law of Trusts and Trustees, 18th Ed., Article 95.1passim and In Re Garnett, Gandy v. Macaulay (ante), where a Deed of Release was set aside 20 years after the event and after the death of the trustee released “ … because it was executed under a mistake and without full knowledge of the facts by those who signed it …” – see the Master of the Rolls at p.12. As Cotton LJ put it at 16: “… the trustee ought not to be allowed … to shield herself from accounting for trust money in her hands simply by putting forward a document which has been signed and sealed without any knowledge of the real facts without any communication of their rights, though the release in its terms would bar the parties from insisting upon them.”.[121]In light of the findings that I have made, acquiescence is unsustainable as an answer to the claim for an account of income received because the Claimant was in ignorance of his rights to income arising from the 1983 Declaration until late 2004 when a copy of the 1983 Declaration was sent to the solicitors then acting for him. He asserted his claim sufficiently promptly thereafter.

Discretion to Order an Account

[122]One specific issue that I have to consider in relation to the income that arose from the lease to Mr Monier-Williams is whether it is proportionate and a proper exercise of discretion to direct an account of this income. The Defendants oppose a direction that there be an account taken of this income (even if otherwise the taking of such an account would be appropriate) on the basis that the sums involved are so small and the records so sparse that I should exercise my discretion by refusing an account. In support of that contention the Defendants rely on assertions that(a) it is highly likely that the rent was consumed by expenses(b) the gross rent receivable was hardly more than nominal(c) the maximum entitlement that the Claimant could expect to recover is £750 (3 years x (¼ x £1000)) although to that will have to be added interest.[123]No authorities were cited to me that impact on what the Defendants submit to be a discretion whether or not to order an account in these circumstances. That being so, I prefer to leave this issue over for further argument following the hand down of this judgment.

The Second Farming Partnership

[124]The position adopted by the Defendants is that whether this is formulated as a claim for 25% of the income obtained by JVS in his capacity as a partner or whether it is formulated as a claim for breach of trust by failing to obtain a market rent it is unsustainable because the Claimant signed the deed constituting the second farming partnership and thus is bound by its terms.[125]I accept the submission made on behalf of the Claimant that this argument must fail on the facts as I have found them to be. It was a breach of trust on the part of JVS as sub-trustee to enter into an arrangement whereby the second farming partnership was permitted to farm Laverstoke without paying rent for the land it farmed without first obtaining the informed consent of the Claimant as beneficiary under the sub-trust. The Claimant cannot be said to have become disentitled from advancing that claim by reason of his execution of the deed constituting the second farming partnership unless it could be said that by so doing he was assenting to, or concurring or acquiescing in that breach of trust. That is not the case for the reasons already given.[126]Whether the proper basis for the account is 25% of the income received by JVS from the second farming partnership or of the market rent that ought to have been obtained by the trustees of the 1968 Settlement is not something that was argued before me. It is relevant only to the terms in which the account is to be directed. There is to be a further hearing at which the terms of the order setting out the precise terms of the accounts and enquiries will be settled. I will hear further argument on this issue at that hearing.

The FBTs

[127]There is as I understand it no dispute that the Claimant is entitled to 25% of the net income of the 1968 Settlement from the date when the first FBT was entered into other than by reference to the general defences that I have considered and rejected above. It is this income that Farrers attempted to calculate and pay over to the Claimant as referred to above.

Alleged Breaches of Trust – Unrealised Income

[128]I have addressed all the general defences in the preceding section of this judgment. Precisely the same points apply to the various breaches of trust claims that I now turn to save and except for limitation, where different issues may arise and the statutory defence under s.61 of the Trustee Act 1925. Thus I indicate at this stage that for the reasons already given I do not consider that any of the general defences relied on provide a defence to such of the breaches that I refer to hereafter as I find have been proved. I consider the alleged breaches of trust first and then the application of the limitation and s.61 defence to such breaches as I find established.

The 2005 FBL – Alleged let at an Undervalue

[129]This is not an allegation that has been pleaded in the form it is now advanced. As pleaded in Paragraph 39 of the Particulars of Claim, it was alleged that the market value of the land was £90 per acre by reason of the advent of the Single Payment Scheme not the £64.63 per acre that the land was let for. However that is not the allegation now advanced. It is entirely clear that proper independent advice was taken concerning the rental value of the land being let before it was let and that the land was let at the level that it was advised was appropriate.[130]The allegation that is now made is that a notice of termination should have been served terminating the 1995 FBL prior to September 2004. Not merely is that allegation not pleaded, but it was not possible to terminate the 1995 FBL by a notice served before September 2004 in order to enable the trustees to occupy from 30 April 2005. The 1995 FBL could only be terminated by notice expiring on the last day of the term (28 September 2005) or on the “Break Clause Date” (29 September 2001). It is not suggested that advantage should have been taken of the break clause for this purpose. In my judgment no breach of trust has been established.

Shooting Rights

[131]The way in which this claim was put in Mr Pymont’s written opening submissions was that the Claimant was entitled to 25% of the income that was or should have been obtained from the shooting rights available to the trustees and he was also entitled to an account of the benefits the trustees enjoyed from these rights personally.[132]As pleaded it is alleged that between 1983 and 1995, a commercial shoot exploited the shooting rights over the land the subject of the 1968 Settlement and an additional 1000 acres over which the shooting rights had been obtained. This is not correct. Between 1983 and 1995 the costs of the shoot were met by Portals Limited and since then have been met by a syndicate of family and friends. No part of the costs of the shoot has been met from trust income. No income has been derived from exploitation of the shooting. Portals did not pay for shooting over Laverstoke and the shoot that it ran was loss making – see Julian’s statement at Paragraph 17.2. Had any income been obtained from the exploitation of the shooting rights then of course it should have to be accounted for but as I say there is no evidence at all that any such income has been obtained.[133]The alternative way it is put on the pleadings (at paragraphs 66 and 67 of the Particulars of Claim) is that JVS’s estate and, after the death of JVS, Julian are obliged to account for the non-income benefit they each respectively received from the exercise by them of the shooting rights. The further alternative in which this claim is put is that by making a decision to allow first JVS and then Julian to have “exclusive enjoyment” of the shooting rights, the trustees acted in breach of trust because the Claimant received no benefit to compensate him for that use. It is this last mentioned issue that was the subject of most of the evidence and argument. It was this issue that was referred to in paragraph 15 (e) of Mr Pymont’s opening submissions as a claim for compensation for breach of trust measured by the “… income which should have been obtained from the shooting rights available to the trustees …”. The alternative way it is put in Paragraph 15(e) is by reference to the “… benefits the trustees have enjoyed from these rights personally”.[134]I refer to the second of these two points first. There is no evidence that any of those who have enjoyed the shooting on the estate have obtained a tangible benefit from the exercise of the shooting rights. If and to the extent that the Claimant gives evidence to the contrary I reject it and prefer that of Julian. As I have said already there is no evidence that the shooting has been operated on any basis save that of an expenses sharing exercise. Julian says in terms that the syndicate is designed to break even but any shortfall is covered by him personally – see Paragraph 17.3 of his statement. In any event Julian says (and there is no evidence to contradict this) that he has not shot at Laverstoke for some 15 years other than to fill the odd gap – by which I think he means filling in for a syndicate member who for some reason is unable to shoot on a particular day.[135]The alternative way in which it is put is more significant however. According to Julian – see Paragraph 17.3 of his witness statement – the syndicate that took over the shooting was formed with the permission of JVS and thereafter conducted the shooting. This was as I have said on a non income earning basis so far as the 1968 settlement was concerned. The difficulty is that by this stage JVS held his ¼ share in Laverstoke on trust for the Claimant. Had there been the Arrangement then it would have been open to JVS to give such consent because he would have been entitled to the income. However there was no such arrangement and JVS did not consult the Claimant about this issue. There is no evidence that any consideration was given to whether the shooting rights could be exploited commercially.[136]As I indicated at the outset of this Judgment, expert evidence was given by two experts concerning the value to attributed to the shooting rights. The purpose of that expert evidence was as Mr Steel put it in his report “… to give an expert opinion as to whether the shooting rights were capable of being commercially exploited …”. It is only if this threshold question is answered affirmatively that the Claimant can succeed because otherwise there would be no basis for criticising the decision of the trustees’ decisions concerning exploitation of the shooting rights.[137]There was a significant amount of agreement between the experts. They were agreed that the shooting rights were capable of commercial exploitation. That being so, commercial exploitation was an option available to the trustees that it would appear was simply never considered by them. The experts were also agreed that such exploitation would best be achieved by letting the rights to a third party.[138]The main difference between the experts is as to the value to be attributed to those rights. Mr Huntington-Whiteley considers that the total value by way of gross rent is £8,250 and Mr Steel considers that it would be £16,350 or slightly less at respectively £6,500 and £11,350 is the shooting excluded stalking rights. Aside from the rental valuation point, the other issue is the point from which commercial exploitation could first have begun. Mr Steel considers that the rights could have been exploited commercially from 1983 but Mr Huntington-Whiteley considers that such exploitation would have been possible only from the commencement of the first FBL. There was also an issue between them as to whether shooting rights included stalking rights.[139]In relation to stalking rights I prefer the approach adopted by Mr Steel. Stalking is a separate exercise from game bird shooting. It is fairly obvious that stalking cannot safely be carried on when game shooting is taking place. However such activity can take place when game bird shooting is not taking place – the seasons for the two activities are different and stalking can and does take place at different times and on different days from game bird shooting. Whilst some management is required, it is not difficult.[140]In relation to the commencement of letting for commercial game bird shooting, I prefer the evidence of Mr Huntington-Whiteley over that of Mr Steel. Mr Steel does not suggest that the points made by Mr Huntington-Whiteley as to why shooting prior to the commencement of the first FBL - as to which see paragraphs 3.13-3.14, 3.21-3.22 and 4.13 of his report - are wrong but rather than they could have been overcome with the cooperation of the agricultural occupiers. However there is no evidence that such cooperation would have been forthcoming. Cooperation with a shoot that is operated privately by connected parties is one thing. Cooperation with a commercial operator attempting to make a profit from shooting rights is another, particularly given the damage that overstocking with game birds can cause and the reduction in productive land that would result from planting of game crops.[141]So far as gross rents are concerned I prefer the evidence of Mr Huntington-Whiteley over that of Mr Steel. Mr Huntington-Whiteley made a carefully calculated attempt to arrive at a rent figure taking account of the different types of land available for shooting at Laverstoke – see Paragraph 4.31 – 4.36 of his report. His report identified the rental values currently being achieved. Importantly he also identified a cross check method that it was appropriate to use based on the number of birds with which the shoot concerned could be stocked. This is highly material because the revenues that a commercial shoot operator is able to obtain from a shoot depend critically on the number of birds available and the percentage of those that are shot each year – see Paragraph 4.22 of Mr Huntington-Whiteley’s report. Mr Huntington-Whiteley’s method of approaching the issue gave me confidence that careful thought had been given to the correct value to be attributed to the shooting rights. This is to be compared and contrasted with the approach adopted by Mr Steel who at Paragraph 62 of his report gives a round sum figure without any attempt being made to relate that figure to rents being obtained from other shoots in the area, or otherwise carry out an evaluation of the sort adopted by Mr Huntington-Whiteley.[142]There were errors made by both experts concerning the acreage available for shooting that became apparent by the time the agreed statement came to be prepared – see Paragraphs 3.13-3.17. However what has been agreed by the experts suggests that Mr Huntington-Whiteley’s initial approach to acreage, whilst not perfect as is apparent from Paragraphs 3.16-3.17 of the joint report, was the more accurate of the two. The adjustments necessary to take account of the under estimate by Mr Huntington-Whiteley of the woodland and woodland strip available resulted in a minor adjustment to the rental values that he adopted from £6,910 which he had rounded to £7,000 to about £7060. This was not material in my judgment particularly when the cross check he advocated was applied. It certainly did not result in a figure anywhere close to that adopted by Mr Steel.[143]It was argued on behalf of the Defendants that the disruption that would be caused by permitting a commercial operator to exercise the shooting rights was not justified by the limited return that could be obtained. Given that I prefer the evidence of Mr Huntington-Whiteley on the rent achievable issue, it is certainly the case that the returns would be small. However in my judgment the key point is that no consideration was given to these issues when the decision to set up the syndicate was taken by Julian and JVS. Had it been and had a decision been taken to that effect on the basis of professional advice then this point would have had some substance. However, no such steps were taken.[144]The evidence available to me is not enough to enable any calculation of the loss recoverable to be made. Not merely would allowance have to be made against this income for the direct costs that the estate would incur – principally insurance and agents fees – but there would have to be consideration as to the applicable rent for each year that compensation is claimed for. This is something that will have to be considered at an enquiry or on the taking of the account.

Limitation

[145]The Defendants’ case is that all breach of trust claims as against JVS (which must I think include the claim I am now considering) are statute barred by operation of s.21(3) of the Limitation Act 1980. However that provision is subject to s.32(1)(b) of the Limitation Act 1980, which provides that where in the case of any action for which a period of limitation is prescribed , any fact relevant to a claimant’s right of action is “… deliberately concealed …” from him by the Defendant then the period of limitation shall not begin to run until the claimant has discovered the concealment or “… could with reasonable diligence have discovered it”.[146]In my judgment there can be no real doubt that the true effect of the 1983 Declaration was deliberately concealed from the Claimant. The advice given by Lawrence Graham at the time the 1983 scheme was devised and carried into effect could not have been clearer. JVS could only have proceeded lawfully thereafter as he did if there had been the Arrangement but in fact there was none. JVS informed the Claimant that he would get nothing much that was tangible until after JVS’s death. Julian told the Claimant he would get nothing until after JVS’s death. No one explained to the Claimant what the effect of the gift was. At no stage after the execution of the 1983 declaration was the Claimant consulted about any aspect of the management of the 1968 Settlement. The impression given is that JVS proceeded thereafter as if nothing had changed. Even when new solicitors were acting for JVS and he was warned as to the position this was ignored. By a letter dated 21 July 1995, Wilsons (who were then acting for JVS in relation to the grant for the first FBT) said:
“I am also delighted to learn that Martin Gower does not believe that there should be any problem in you retaining all the rent from the tenancy provided your grandson agrees to this proposal”
It is not suggested that any attempt was made to obtain the Claimant’s agreement to this course.[147]In my judgment it is clear that the approach adopted by JVS from the outset was to obtain the maximum tax saving advantages of the 1983 scheme by entering into the 1983 declaration whilst at the same time resolving to continue to deal with the assets as if there had been no such declaration. Father and son informed the Claimant that little or no benefit would accrue to the Claimant during JVS’s lifetime and that was accepted at face value by the Claimant. The failure to inform the Claimant as to the true position was deliberate concealment. I have no doubt at all that JVS would regard the ends as justifying the means but of course they do not and cannot. The reality is that the information that was withheld from the Claimant was information that it was JVS’s duty to disclose (because JVS was the Claimant’s trustee) or was information that JVS ought to have disclosed in the ordinary course of his relationship with the Claimant applying the test identified in cases such as Williams v. Fanshaw Porter & Hazelhurst [2004] EWCA Civ 157 [2004] 1 WLR 3185. The difference between the advice that was given by Lawrence Graham and others on the one hand and the information that was supplied by JVS to the Claimant could not be starker.[148]That being so, time could not start to run against the Claimant in respect of the breach I am now considering until December 2004 when a copy of the 1983 declaration was supplied to the Claimant’s solicitors, unless he “… could with reasonable diligence have discovered it”. The Defendants’ submission on this point was that the Claimant could always have discovered the true position because(a) he has always known that JVS had given him the ¼ interest in Laverstoke and(b) he could have asked JVS, Lawrence Graham or Peat Marwick (his own and the family’s accountants) what the true position was. I reject that submission for the following reasons. The Claimant accepted what he was told about the effect of the gift at the outset and had no reason to doubt what he had been told by JVS at any stage thereafter. In particular the one document that he kept that touched on the gift was the November 1983 letter from JVS. That letter said simply that the Claimant was to receive no tangible benefit until after JVS died. As I have found the Claimant accepted at face value what he had been told by his father and his grandfather. He accepted what he was told. In those circumstances to hold that the effect of s.32(1)(b) was avoided because the Claimant did not ask about what he did not know would deprive the section of much of its practical utility. In those circumstances, time started to run against the Claimant on receipt by his solicitors of a copy of the 1983 Declaration in December 2004.

S. 61 Trustee Act 1925

[149]The requirements of this provision are not made out for the reasons set out above.

Occupation by JVS of New Barn House and associated property from 1980 to his death

[150]The facts relating to this asserted breach of trust are not in dispute. The properties concerned were all property forming part of the 1968 Settlement. It is property that was occupied by JVS from the date when he retired as Chairman of Portals down to the date of his death. As I have said France predeceased him so the Covenant never became relevant. It is still relied on by the Defendants though as an answer to this claim. The Claimant was of course aware that JVS lived at the property and even if he was not aware of the contents of the deed of Covenant, he was certainly aware of his grandfather’s wishes in relation to the occupation of these properties by France from the letter that he was sent by his grandfather, the substance of which I set out earlier in this judgment. The point which is made on behalf of the Claimant is that he was not aware that he had a life interest in the income of the estate and thus was not aware that he was prejudiced by these arrangements. This point is not answered by saying that the Claimant was aware that JVS occupied the properties. The Defendants’ submission as set out in Paragraph 64 of the Defendants’ closing submissions is that:
“On any view JVS was a 75% income beneficiary of Laverstoke which had been purchased with the intention of providing a home for him as well as successive generations. His occupation is not a breach of trust nor would it have been reasonable for him to have been charged an occupation rent.”
[151]Different considerations apply before and after the coming into effect of Trusts of Land and Appointment of Trustees Act 1996, (“TOLATA”) which occurred on 1st January 1997. It must be borne in mind that the 1968 Settlement was a trust of sale with an express power to postpone sale. In 1980 when he commenced living in the properties I am now considering, JVS was both a trustee and a beneficiary entitled to ¼ of the property comprised in the trust and the beneficiary of a life interest in the income of ¾ of the property comprised in the trust by operation of the AMS Will Trust. Between the date when the 1983 Declaration took effect and 1st January 1997, JVS was a trustee of the 1968 Settlement, a beneficiary with a life interest in the income of ¾ of the property subject to the 1968 Settlement and the trustee for the Claimant of the ¼ interest in the property subject to the 1968 Settlement. Thus during this period his only beneficial interest was in ¾ of the income of the estate. From 1st January 1997, his interests remained unchanged.[152]No detailed submissions were made by either of the parties concerning the position as it was prior to 1st January 1997.Since it is accepted that an occupation rent will have to be accounted for irrespective of whether JVS had a right of occupation or not the point is an academic one and I do not consider it further in this judgment. I explain this further in paragraph 156 below.[153]After 1st January 1997, the position as to occupation was changed. S.12(1) of TOLATA provides that a beneficiary who is beneficially entitled to an interest in possession in land subject to a trust of land as defined by s.1(1)(a) is entitled by reason of his interest to occupy the land at any time if at that time:
“ … (a) the purposes of the trust include the making of the land available for his occupation (or for the occupation of beneficiaries of a class of which he is a member or of beneficiaries in general), or (b) the land is held by the trustees so as to be so available.”
[154]The question whether someone who has declared himself to be a sub-trustee has a right of occupation appears to be controversial. There is at least one unreported decision – Creasey and Holmes v. Sole and others [2013] EWHC 1410 (Ch) (Morgan J) - in which it has been held that such a sub-trustee does not have such a right. However this point is academic because it is accepted that the estate of JVS will have to account for an occupation charge in any event. I explain why in Paragraph 156 below. None of the parties ask me to determine this point in these circumstances.[155]In any event, whilst the primary purpose of the trust for sale was to convert the property into a form where each of those beneficially interested could enjoy their rights equally the secondary purpose of this trust was on the evidence entirely clear – It was as described by JVS in a note that he prepared in 2005, the relevant part of which reads:
“My late wife Anne and I bought [Laverstoke] in 1966 with the idea of creating an estate with a house to follow that we could manage enhance and enjoy during our lifetimes. And after us, it was our fervent wish that our son Julian and his heirs would continue to own and look after the estate for future generations.”
The concept of enjoyment in the context of an estate with houses plainly includes the provision of a home for JVS and AMS. Unfortunately AMS died before the plan could come to fruition but there is nothing in the material I have seen that suggested the central notion that lay behind the acquisition was changed by the death of AMS. The notion that the properties be occupied by JVS and his immediate family as his home necessarily involved excluding the Claimant from occupation of those properties. The reality is however that this issue was never given any consideration by the trustees at any stage. The material that I referred to earlier in this judgment makes it abundantly clear that appropriate advice was given as to the effect of the 1983 Declaration but as far as I can see no consideration was given as to how that might affect the occupation by JVS of the properties after the 1983 Declaration took effect.[156]It was common grounds that even if common law and s.12(1)(a) of TOLATA entitled JVS to occupy by reason of his life interest in the income of ¾ of the trust property, on the basis of the findings that I have made, that did not entitle him to occupy trust property to the exclusion of a co-beneficiary (the Claimant) who had an interest in possession in land subject to a trust of land (the 1968 Settlement) without compensating the other beneficiary by payment of an occupation charge representing 25% of the occupation rent otherwise payable.[157]In his closing submissions, Mr Pymont says that credit will be given by the Claimant for his occupation of Cowlease Cottage between 1996 and 2003. It is tempting to say in these circumstances that nothing ought to be recoverable during that period because 75% of the occupation rent value of Cowlease Cottage will probably exceed 25% of the occupation rent value of the New Barn properties occupied during this period by JVS. However the sort of valuation evidence necessary to come to a view on this is not available to me.[158]There is a subsidiary issue concerning whether and if so for what period Cowlease Cottage was uninhabitable. This is relevant as I understand it only to the period for which credit should be given by the Claimant in respect of his right to occupy the cottage. There are a number of issues that would require exploration before there can be a final determination of the issue. Those include the degree to which if at all the Claimant was under a duty to maintain the property while he was in occupation of it; whether rent was received for the property at any stage prior to 1996 and if so whether any of the rent so received was paid over to JVS and whether (as is alleged by the Defendants) any claim for dilapidations following the compromise of the county court litigation in 2005 must be made in proceedings by reference to the terms of the lease rather than the Claimant’s status as a beneficiary. These issues have not been explored in sufficient detail to enable me to reach final conclusions on them.[159]The only finding of fact that I can make on the material that was deployed at trial concerns whether the property was uninhabitable by the autumn of 2003 as a result of the fracture of a waste pipe than ran from the upstairs bathroom internally downwards through the dining room and then to the external drainage. This issue has not been properly addressed in the evidence before me and there are a number of other factual issues that might impact on any conclusion reached concerning habitability. My provisional view is that if there has to be trial of these issues it will require a much more detailed consideration than has been possible in this trial, possibly with the assistance of expert evidence. It is not sensible that I should attempt to resolve habitability by reference to one allegation when it is clear that a number of others will have to be considered in due course as well and when it is likely that the question of habitability will depend upon the findings made when all allegations have been considered.

Limitation

[160]The only other issue that remains in relation to JVS’s occupation of trust property concerns limitation. The defendants submit that all the breach of trust claims against JVS (other than those relating to the receipt of income) are statute barred. In relation to the claim I am now considering, Mr Pymont submits that where a trustee has had the benefit of rent free occupation of trust property he is treated for limitation purposes as having received an occupation rent applying Re Howlett [1949] Ch 767 at 778 where Dankwerts J said:

Limitation

“…a trustee who remains in occupation of trust property for his own purposes … cannot be heard to say that he has not received any rents or profits in respect of the property. Having received … rents and profits, because he is chargeable with an occupation rent, he cannot discharge himself unless he can show he has paid moneys away …”
It is submitted that it follows that no part of the claim for 25% of what would otherwise be the proper occupation rent can be barred any more than the claim to recover rents and profits actually received after 24 October 1983.[161]Mr Rajah submits that this is mistaken because Re Howlett (ante) was a case where the trustee in occupation was a bare trustee and therefore was in occupation as against his beneficiary. In support of this proposition Mr Rajah relied on a short statement by Nourse J in Re Rowhook Mission Hall, Horsham [1985]1 Ch 62 at 74 where Nourse J is recorded as having said that Re Howlett was authority only for the proposition “… indisputable in itself, that time cannot run in favour of a trustee who is in possession of the trust property as against the beneficiary”.[162]I am unable to accept Mr Rajah’s submission. Re Rowhook Mission Hall, Horsham (ante) was concerned with a claim by a statutory revertee for an account of profits against the paper title holders of the property concerned (who held the property as trustees) from the dates when the statutory reversion took effect. The key point in that decision is Nourse J’s conclusion that the trustees were not trustees for the revertee. As Nourse J said in the lines of his judgment that follow immediately on those cited by Mr Rajah, the proposition being advanced in that case (that time could not have run in favour of the trustees against the revertee) “… founders on the false premise that the trustees were trustees for the revertee”. In my judgment that is the critical difference. The notion that JVS’s occupation of the properties was not an appropriation for the exclusive use of himself and France before her death is absurd and contrary to the evidence. Even if he was entitled to occupy trust property as an income beneficiary of the 75% portion, he held the 25% interest in Laverstoke as trustee for the Claimant and thus was not on any view entitled to occupy to the exclusion of the Claimant and thus was liable to pay an occupation rent equivalent to 25% of the occupation rent otherwise properly payable for the property but adjusted to take account of 25% of the maintenance costs of the buildings that would otherwise been a trust expense. The principles that apply to such an occupation rent are those identified by Dankwerts J in Re Howlett (ante) and thus I conclude that no part of this claim is statute barred.[163]Even if this is wrong limitation does not provide an answer for the reasons already given earlier concerning the applicability of s.32(1)(b) of the Limitation Act 1980. Alleged Breaches of Trust – Sales At Undervalue 93-95 New Barn Cottages

Alleged Breaches of Trust – Sales At Undervalue

[164]The allegations pleaded in relation to these estate properties are at Paragraph 95-96 of the Particulars of Claim and are for an account of rental income received. There is no evidence that rent was ever received from use of the properties. In any event there is no entitlement to a quarter of the rent only to a quarter of the trust income net of expenses. There is no claim pleaded based on a failure to obtain a market rent for the property. The main complaint appears to be that the property was sold for £650,000 to JVS’s step son and his wife. The allegation is not that there was a breach of trust by selling the property but that it was sold at an undervalue. In my judgment this claim is manifestly unsustainable.[165]The sole complaint made by the Claimant is that the property was not exposed to the market prior to sale. However a valuation was obtained by the trustees from Braden Chartered surveyors on behalf of the trustees. The express purpose of the valuation was to enable the trustees to know the market value of the properties – see report, Page 2, Paragraph 1.0. The valuation that Mr Denee FRICS came up with was £600,000 – see report, page 5, Paragraph 9. The property was offered for sale on behalf of the trustees at £650,000. Contracts were exchanged in July 2006 and completed in August 2006. The property was valued on the instructions of the trustees by Savills at £615,000 as at 5th April 2006 – see the report dated 28 March 2007, Paragraph 11 .3 on Page 8.[166]The agent to whom the Claimant turned (Knight Frank) advised the Claimant that they would advise marketing the property at an asking price of £650,000. This agent was not called to give evidence before me. It is clear from his letter to the Claimant that this was the top of that firm’s range and it is also clear that they did not have the benefit of the detailed inspection afforded to the surveyors who advised the trustees. The key point however is that a sale to the purchasers was affected at the asking price recommended by Knight Frank. No breach of trust has been established by the Claimant under this head.

Spring Pond Properties

[167]A significant amount of time at trial was taken up with this issue down to the point at which Julian in effect conceded the point. In light of the fact that there is no real issue between the parties now about this it is not necessary that I say much about it.[168]The Spring Pond properties are properties which form part of the land that is subject to the 1968 Settlement. In 1988 they were derelict. Following an agreement reached with JVS but not with the Claimant, Julian applied for planning permission in relation to the properties and then spent a sum estimated at close of £1 million on renovating the properties and converting them into a single residence for Julian, his wife and the mother of the Claimant. In Paragraph 191 of the Opening Submissions filed by Mr Rajah, it was said that notwithstanding that the Defendants were entitled to rely on the Arrangement defence as pleaded in Paragraph 13 of the Defence of the Family Defendants:
“…Julian has made clear that he will accept that the Spring Pond properties are trust property but says that they should be transferred to him, with Julian effectively buying out [the Claimant’s] 25% share at the current market value of the Spring Pond properties less a deduction to reflect Julian’s expenditure on the renovations and maintenance … Equitable accounting principles should apply …”
The response to this is to be found in Mr Pymont’s written closing submissions where he says that the Claimant”… does not reject this approach in principle …”.[169]Currently the legal title in the properties is vested in Julian and his wife though each has now executed declarations that the properties are held on trust for the trustees of the AMS Will Trust. That is of course not in any sense satisfactory because the property should be held on trust for the trustees of the 1968 Settlement or, perhaps on trust for the beneficiaries of the 1968 Settlement in the proportions there set out. As matters currently rest the Claimant has been deprived of 25% of the capital value of these properties. That ought not to be permitted to continue. Clearly the accounting necessary in order to achieve what is now the wish of all the relevant parties will take some time to resolve and I am concerned to ensure that the interests of the Claimant are adequately protected in the interim. I will hear the parties at the hand down of this judgment as to how that is best to be achieved. The clearest way of doing that would be to set aside the transfer to Julian and his wife. An alternative may be declarations of trust that in effect recreate the position as it would have been had the property remained part of the 1968 Settlement.[170]It appears to be common ground that Julian must pay the current market value of the properties. It would appear to be uncontroversial that Julian must pay an occupation rent for the period of his actual occupation. Against that credit must be given for the lesser of either the cost of improvements carried out to the properties that have had the effect of increasing the capital value of the property or the difference in value between the property in its improved and unimproved condition – see Lewin on Trusts 18th Ed., Para. 20-105. The detailed terms on which the Account and any enquiry will be undertaken will be settled at a further hearing in February. The incidence of and rates and periods relevant to any interest issues that arise will be determined then.

The 10.2 Acres Issue

[171]I regard this issue as entirely unarguable by the Claimant. Given the length of this judgment I will set out my reasons for coming to this conclusion as succinctly as the material permits. In 2010, the trustees for the time being of the 1968 trust and trustees for the time being of the AMS Will trust sold a trust property called Freefolk House and 10.2 acres of land that was trust property that belonged in part to the 1968 Settlement and in part to the AMS Will Trust (which applied to assets other than Laverstoke). Mr Nicholas Watson a chartered surveyor was appointed to value the land before it was sold and also to advise on the correct apportionment between the two trusts. Thus the trustees acted on the advice of an independent and apparently competent valuer in doing what they did.[172]Mr Watson was called to give evidence and was cross examined with great skill by Mr Pymont. The result of this cross examination was that Mr Pymont submits that Mr Watson’s approach to valuation and apportionment was fundamentally flawed because his valuation was carried out on the market value basis identified in the RICS publication entitled Valuation Standards. The point made by Mr Pymont is that the assumptions that the valuer is required to make when carrying out a valuation on a market value basis did not include any synergistic or marriage value attributable to the sale of the two properties together. Mr Pymont urges me to reject his evidence that he took this into account because the relevant RICS standards require that assumptions be identified expressly in the body of a valuation report and no relevant assumption was identified.[173]I am not satisfied that a breach of trust has been demonstrated or can be demonstrated on these facts. Here the trustees obtained an arms length valuation from an apparently competent valuer. The sale was not to a trustee. Even if I am wrong in concluding that no breach of trust has been demonstrated, this is manifestly the sort of issue that ought to attract the application of s.61 of the Trustee Act 1925. The issues that arise on the application of this provision are whether the trustees can be said to have acted honestly and reasonably and ought fairly to be excused. No issue arises concerning honesty. I consider it obvious that a prudent man of business would have disposed of trust property by way of private sale following valuation advice obtained from an apparently competent professional valuer. Thus I conclude that the trustees acted honestly and reasonably and ought fairly to be excused.

Conclusion

[174]In the result, I conclude that the Claimant is entitled to succeed against the estate of JVS in relation to: i) his claim to be entitled to 25% of the net income of the trust derived from farming activity from 24 October 1983 until the death of JVS subject to the point reserved concerning whether it is a proper exercise of discretion to direct an account of the sums due under the 1975 lease; ii) His claim for breach of trust against JVS by failing to exploit the commercial opportunities represented by the shooting rights from the date of inception of the first FBT iii) JVS’s occupation of New Barn House subject to the legal points reserved and referred to in Paragraphs 155 and 156 of this draft judgment; and iv) For all appropriate relief in relation to the Spring Pond properties where in practice the only issue that remains to be resolved is how the interest of the Claimant are to be protected down to the time when the sale to Julian can be completed.[175]I will hear all parties at the proposed handdown date for this judgment as to all consequential matters. I urge all parties to consider whether it would be possible even at this very late stage to resolve what remains of this dispute by facilitative mediation or negotiation rather than further litigation at what is bound to be very substantial cost to the parties.

order

i) The existence of the Arrangement and its effect if found proved; ii) The effect in law of the 1983 Declaration; iii) The Alleged breaches of Trust; and in relation thereto the applicability of the general defences relied on: a) Estoppel; b) Limitation; c) Laches and acquiescence; and d) S.61 Trustee Act 1925. I consider the existence and effect if proved of the Arrangement first because if the defendants succeed in proving the existence of the Arrangement and that it has the effect pleaded then its effect will be to modify the 1983 Scheme so as to prevent the payment of trust income to JVS from being a breach of trust and would preclude the Claimant from seeking damages for breach of trust on the basis that income could have been but was not obtained during JVS’s lifetime.

Cited in 1 later judgment