Brudenell-Bruce v Moore & ors [2014] EWHC 3679 (Ch)

Analysis

The claimant, Mr Brudenell-Bruce Earl of Cardigan brought a claim for breach of trust against two trustees of the Savernake Estate Trust (Mr Moore and Mr Cotton) of which he is a beneficiary. He also challenged the trustees’ remuneration and sought their removal as trustees.

The estate consists of numerous properties including a mansion, Tottenham House with an adjacent stable block. The estate is held on trust for sale and within a partnership with 49% of the partnership belonging to Lord Cardigan absolutely and 51% held by the trustees of the Children’s Trust, the beneficiaries being Lord Cardigan’s two children – Lady Brudenell-Bruce and Viscount Savernake. On attaining the age of 40 Viscount Savernake becomes absolutely entitled to the Children’s Trust.

Prior to 3 November 2008 Lord Cardigan was a trustee of both the Children’s Trust and the Estate Trust. After litigation Lord Cardigan retired and Mr Cotton (an accountant and professional trustee) because a trustee of both trusts and Mr Moore (a long standing friend of Lord Cardigan and a barristers’ clerk) became a trustee of the estate. Mr Ford continued as a trustee of the children’s trust.

Lord Cardigan persuaded Mr Cotton to become a trustee on the basis he would have nothing to do apart from receiving a monthly report from him telling him what was going on and the Lord Cardigan would carry on the day-to-day management of the estate.

Lord Cardigan divorced in 2009 and his ex-wife received one of the estate properties outright, a lump sum of £875,000 and maintenance of £45,000 per annum.

Lord Cardigan made many persistent demands for cash from the trustees. By March 2011 the trust owed over £1m to the bank and the bank required asset sales. The trustee sold paintings after litigation as Lord Cardigan claimed the paintings were not held by the trustees but were part of the lease of his property. By the time of this court hearing the estate’s borrowings were £1.8m and interest charges were £18,000 per month.

In 2007 the trustees signed a 150 year lease of Tottenham House and stables for it to be turned into a luxury hotel by a company (GCIH). The rent after the sixth year of the lease was £450,000 plus a percentage of revenue. GCIH struggled to raise finance to pay for the development and soon fell into rent arrears and failed to insure the property. In June 2011 the trustees forfeited GCIH’s lease after GCIH missed numerous deadlines and made many broken promises as to when the development would start.

In August 2013 the trustees entered into a conditional contract for the sale of Tottenham House and on 31 March 2014 a court order was made authorising the trustees to complete the sale. The trustees started to consider whether the trust should be wound up once Tottenham House is sold.

There were continual disputes between the trustees and Lord Cardigan – in relation to electricity bills, criminal damage, the use of the estate for filming and his divorce.

Lord Cardigan alleged that the trustees failed to protect the stable block, failed to repair and relet Sturmy House, allowed a tenant to live rent free in a property and failed to generate an income from both herbage and shooting. He wanted Mr Moore to repay his remuneration and that the trustees should both be removed.

Lord Cardigan claimed that the trustees should have taken steps to prevent the already poor condition of the stables deteriorating further. This would have involved tarpaulins and plastic sheets to cover the roof at a cost of more than £200,000. He alleged that the additional costs of repairs due to nothing being done to be between £2m and £2.6m (the floors and the roof having collapsed). He argued that the loss should be measured by reference to the cost of reinstatement rather than diminution in value.

The trustees learnt in January 2011 that there had been a serious flood at Sturmy House on the estate. It took more than four weeks for the trustees to arrange for dehumidifiers to dry out the property because windows had to be repaired and the tenant had left the property in a mess. The trustees decided to undertake refurbishment as well as repair the damage. The insurance would only pay 12 months of loss of rent but at the time of the trial the work had still to be completed and the property had not been relet. The trustees had earmarked Sturmy House for Viscount Savernake. Lord Cardigan claimed that the property should have been relet within 12 months of the flood.

Since the 1960s Lord Brudenell-Bruce (the half-brother of Lord Cardigan’s father) has occupied a property (Little Lye Hill Cottage) on the estate without paying a market rent. In 2003 Lord Cardigan granted him a five year tenancy at a peppercorn rent but with him paying half of the repairs and insurance. Mr Moore felt that the failure of previous trustees to collect rent could have created a tenancy at will. Lord Cardigan complained the trustees had never attempted to generate an income from the property.

Lord Cardigan whilst a trustee entered into a herbage agreement without any herbage fee being paid and this practise has carried on. Lord Cardigan did not mention herbage until his letter of 1 October 2013. Since Mr Moore made his statement on 30 September 2013 he did not deal with this topic. He was also not asked about herbage rights during his oral evidence.

Lord Cardigan also alleged that the trustees had failed to exercise reasonable care to generate income from shooting and that they had allowed Mr Tilley, the gamekeeper, to retain money from shooting. As with the herbage agreement Mr Moore made his statement prior to Lord Cardigan raising this issue and he was not asked about it in cross-examination.

Mr Moore had raised invoices for Mr Cotton to approve and been paid £117,954 as both trustees believed that he was entitled to charge. Mr Moore conceded that he was not entitled to charge for his services as a lay trustee but asked that the payments be authorised retrospectively. Mr Moore had emailed Lord Cardigan to say that he would charge 50% of Mr Cotton’s fee as Lord Cardigan regarded him as being 50% responsible for the horrors happening.

Mr Moore also argued that the enormous amount of administrative work had not been part of the job description and his position had involved a huge amount of work.

Lord Cardigan wanted Mr Cotton to repay to the estate ‘such monies as the Court deems unreasonable remuneration’. Mr Cotton proposed that this issue should be adjourned to a Chancery Master for determination.

Given that Lord Cardigan had a 49% interest in the trust it was argued that any recovery from the trustees should be capped at 49% of the total loss.

Viscount Savernake strongly opposed the removal of Mr Moore and Mr Cotton as trustees and felt that they acted vigilantly to prevent wrongful acts by his father.

Mr Ford preferred both other trustees to continue to prevent expense and delay. He felt that if there was to be any change in trustees that it should be after the sale of Tottenham House.

Held (ordering the removal of Mr Moore as a trustee and finding the trustees responsible for loss of rent of both properties):

1. 1) It has not been proved that putting tarpaulins and plastic sheet over the stable block would have prevented the deterioration in the building. The dry and wet rots that have been present in the buildings for many years would have caused the collapses in any event.
2. 2) No one is going to return the stables to their original use. It was sensible for the trustees to conclude that any purchaser would completely redevelop or rebuild the structure and minor works were not going to be enough to save the stables.
3. 3) The trustees had negotiated a favourable lease with GCIH and therefore it was reasonable not to rush to forfeit the lease.
4. 4) Given the lack of money within the trust the trustees were justified in focusing on finding a purchaser rather than repairing the stables.
5. 5) Even if I concluded that the trustees had breached their duty in relation to the stables I would have concluded that no loss had been established. It is not appropriate to assess damage by reference to the cost of reinstatement. It is not apparent that reinstatement work would increase the sale price of Tottenham House at all.
6. 6) By May 2012 the financial pressure on the trust had been eased because of a loan. Prior to that date due to lack of funds and the painting litigation, the trustees cannot be criticised for failing to repair Sturmy House. After June 2012 there was enough money to repair it to allow it to be re-let. The costs involved were not so great as to justify further delay. The fact that the property was earmarked for Viscount Savernake does not affect the position.
7. 7) By April 2013 Sturmy House would have been let and therefore the estate has lost some £50,000 as a result of the trustees’ failure to re-let it. Although Mr Moore was much more closely involved than Mr Cotton in the repairs they must both bear legal responsibility for the lost rent.
8. 8) Lord Cardigan has acquiesced in Lord Brudenell-Bruce living rent free up to October 2013 as it was at that point he amended his particulars of claim. He had also sanctioned such occupation when he was a trustee.
9. 9) The trustees perception that Lord Brudenell-Bruce might have a legal claim is not sufficient justification for failing to receive legal advice on the point nor write to Lord Brudenell-Bruce to ask him to pay rent or vacate the property.
10. 10) By December 2013 the trustees should have told Lord Brudenell-Bruce to pay market rent and if he would not then to take steps to evict him. The trustees have lost 11 months rent – a loss of £14,225.
11. 11) Mr Moore needed to be asked about herbage and the shooting rights in cross-examination. In closing submissions I raised that Mr Moore had not been asked questions on these issues and no one suggested that he should be recalled. I cannot proceed on the basis that the expert evidence alone establishes Lord Cardigan’s case. It is also relevant that Mr Moore was not legally represented.
12. 12) Mr Moore did not tell Lord Cardigan that he had changed his mind about taking a salary prior to rendering his invoices. The email conversation about charging could have fairly been taken as a joke by Lord Cardigan.
13. 13) Mr Moore has no particular qualifications or expertise of importance to the estate and is seeking payment for time spent generally rather than on a specific project.
14. 14) The estate has been, and remains, short of money. It would seem that Mr Moore would have undertaken just as much work as trustee even if he had not thought that he could be paid.
15. 15) Mr Moore’s remuneration is not authorised. If it had been his hourly rate of £150 per hour was too high and an hourly rate of £25 would have been more appropriate.
16. 16) Mr Cotton’s remuneration should be adjourned to a Chancery Master for determination. Mr Cotton has a pre-existing right to be remunerated for services provided to or on behalf of the Trust. Given that the painting litigation did not involve a claim for breach of trust against the trustees there is no objection in principle to Mr Cotton charging for time spent on the paintings dispute.
17. 17) No relevant trusts have come to an end and no one has become the sole owner of the estate. Therefore the payments that the trustees must make should not be calculated by reference to Lord Cardigan’s 49% interest in the trust.
18. 18) Mr Moore is removed as a trustee immediately after the sale of Tottenham House. The fact that a trustee has failed in his duties will not invariably mean that he should be removed. However, there is a very serious estrangement between Lord Cardigan and Mr Moore. Mr Moore has initiated complaints or provided evidence in support of some 17 criminal accusations against Lord Cardigan.
19. 19) It does not make sense to remove Mr Moore while the existing contract for the sale of Tottenham House is proceeding to completion as it would create needless disruption.
20. 20) I am conscious that both Viscount Savernake and Mr Ford would prefer Mr Moore to remain as a trustee.
21. 21) Important decisions need to be taken and it is not in the interest of the beneficiaries as a whole for Mr Moore to be involved in them. There would not be a sufficient appearance of fairness if he remains as a trustee.
22. 22) Mr Moore should be replaced, unless the parties agree on a suitable alternative, by one or other of the solicitors whom Lord Cardigan has put forward.
23. 23) Mr Cotton should continue as a trustee. He has considerable experience in trust matters. He was not very involved in Sturmy House and his approach to Lord Brudenell-Bruce was understandable.
24. 24) Lord Cardigan has himself said that he has no personal animosity to Mr Cotton. Viscount Savernake and Mr Ford are keen for him remain as a trustee.
25. 25) Keeping Mr Cotton as a trustee provides continuity and saves expense.

Judgment NEWEY J: [1] This case concerns an estate (the estate) at Savernake Forest in Wiltshire that the family of the claimant, the Earl of Cardigan, has owned since soon after the Norman Conquest. The estate is the subject of a trust established by a conveyance dated 29 September 1951 (the trust) of which Lord …

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