Scott v Scott [2012] EWHC 2397 (Ch)

Analysis

The claimant (Andrew) and the defendant (Martin) were brothers. They were the trustees of a trust created in 1991 by their mother (Elizabeth Scott). Andrew, Martin and Simon Jackson QC (a long standing friend of Elizabeth Scott) were the principal beneficiaries of the trust. There were other discretionary beneficiaries. Andrew had carried out the day to day administration of the trust since 2006.

The trust had formerly comprised a farm of 60 acres and a nursing home. Significant distributions were made. Andrew carried out significant works to a property known as the Barn, which was transferred to him in August 2001. At about the same time, Elizabeth Scott transferred a property known as the Farmhouse to Martin. A dispute had arisen between Andrew and Martin. Andrew was unhappy that his mother had treated him less favourably than Martin. Andrew was convicted of criminal damage following a violent attack on the Farmhouse in April/May 2003. Elizabeth Scott died in January 2005. A meeting took place in October 2006, at which it was agreed that further parts of the farm would be transferred to Andrew and Martin. At the date of trial, only 17 acres of agricultural land (with significant hope value) remained in the trust.

Andrew sought the removal of Martin as a trustee and Martin counterclaimed for the removal of Andrew as a trustee. Both sought the appointment of Simon Jackson QC as a trustee. Andrew made numerous allegations against Martin, including the following breaches of fiduciary duty:

1. (a) failure by Martin to acknowledge that Andrew, Martin and Simon Jackson QC were trading in partnership, thereby rendering it impossible for Andrew to file annual trust accounts for 2008, 2009 and 2010;
2. (b) failure by Martin to account for his expenditure in 2001/2002;
3. (c) unilateral withdrawal by Martin in 2004 of £7,000 from the trust;
4. (d) failure by Martin to consult over the costs of the boundary survey required as a consequence of the agreement to divide the land made in October 2006; and
5. (e) erection by Martin on his own land of stables that were larger than Andrew had been led to believe they would be and their use for commercial purposes.

Martin counterclaimed in respect of Andrew’s failure to file annual trust accounts, failure to honour specific agreements made in October 2006 and the conversion of a digger owned by Martin.

Held (removing Andrew as a trustee and making directions)

1. (1) As to the complaints made by Andrew of Martin:
2. (a) a partnership was contemplated in 1992 but it never came into existence (paras [43]-[48]);
3. (b) a full response to the query over the 2002 expenditure had been sent on 20 October 2003 and no further query was raised at the time; in such circumstances the allegation that the explanation was inadequate is rejected (paras [81]-[83]);
4. (c) the result of the 2002 expenditure was that Martin was asubstantial creditor of the trust and there was no breach of fiduciary duty arising from Martin repaying himself £7,000; Andrew having accepted the repayment at the time (paras [85], [91]-[92]);
5. (d) it was agreed in October 2006 that an accurate boundary survey was required and no comment had been made about the surveyors’ fees at the time; there is no evidence that any other surveyor would have carried out a compliant survey for less (paras [107]-[113]); and
6. (e) It is not in dispute that the stables are on Martin’s own land and Martin’s use of his own land is not a trust matter (para [119]).
7. (2) As to the complaints made by Martin of Andrew:
8. (a) Andrew’s refusal to file accounts is unreasonable and irrational and was and is a breach of trust (paras [122]-[124]);
9. (b) there had been a plain breach of contract by Andrew in respect of the October 2006 agreement and an enquiry into damages will be directed if these cannot be agreed (paras [125]-[129]); and
10. (c) Martin’s evidence that he had not consented to Andrew’s use of the digger was to be preferred and liability in conversion is established with damages assessed in the sum of £1,200 with interest at 6% from the date the digger was delivered (paras [133]-[134]).
11. (3) The court has jurisdiction to remove a trustee and appoint a new one where it is found inexpedient, difficult or impractical to do so without the assistance of the court and/or under the inherent jursidiction of the court. Not every breach of trust will justify removal. The guiding principle to the jurisdiction is the welfare of the beneficiaries (paras [135]-[138]).
12. (4) There is no doubt that there is hostility and friction between Martin and Andrew. Each of Andrew’s complaints is very stale and was not pursued at the time. A number of them are unreasonable. It is relevant that Martin was selected by the settlor and no substantial legitimate criticism can be levelled at him. The removal of Martin as trustee will not be ordered (paras [139]-[144]).
13. (5) Andrew’s hostility towards Martin has had and continues to have a deleterious effect on the trust. His hosility is affecting the welfare of the beneficiaries. The removal of Andrew will be ordered (para [45]).
14. (6) Simon Jackson QC will be appointed trustee if he is willing to act having read the judgment (para [146]). Further submissions will be heard on the appointment of an additional independent professional trustee (para [147]).

JUDGMENT Introduction [1] This is an unfortunate dispute between two brothers Andrew Scott (Andrew) and Martin Scott (Martin). It concerns a trust created in 1991 by their mother – Elizabeth Scott. Andrew and Martin are currently the sole trustees of the trust. Together with Simon Jackson QC (Simon) they are the principal beneficiaries under the …

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