Factual and Procedural Background
The Claimants are beneficiaries of two trusts established by the late Settlor dated 1 September 1960 and 12 September 1960. The Settlor died in 1972. The Claimants seek a court order directing the Defendant to provide a full account of his dealings with the assets of these two trusts, either as a properly appointed trustee or as a de facto trustee. The Defendant’s status as trustee or de facto trustee is disputed. The trusts are referred to as The Henchley Trust and The Childrens' Trust.
The Henchley Trust was created for the benefit of the Settlor’s second wife during her lifetime and thereafter for the Settlor's children. Its principal asset was initially a property that was sold and replaced by other properties, with the current property occupied by the Settlor’s second wife. There was a modest share portfolio at one time, but its disposition is unclear. The Defendant was purportedly appointed as a trustee by a deed in 1972, which was later challenged as invalid, and he described himself as a "purported trustee" thereafter. Title to the main property remained in the Defendant’s name until 2011. A deed of confirmation in 2013 reassigned interests among beneficiaries.
The Childrens' Trust was created by the Settlor, with assets divided into two parts: one half for two children outright at age 21, and the other half providing income for three children for life, then for their descendants. The trust period is 25 years after the death of "Prince Edward," though the identity of this individual is uncertain. The Settlor’s will made no provision for his children, as they were provided for under this trust, which included shares in family businesses.
The Defendant was apparently appointed trustee of The Childrens' Trust after the Settlor’s death and acted as such until at least the early 1990s. Other trustees were validly appointed for both trusts and have since died. The Defendant also served as a director of the family companies related to the trust assets. There is dispute over the extent of the Defendant’s involvement and record-keeping.
The Defendant is elderly and has a notable business and philanthropic background. The Claimants contend that the Defendant must provide an account of his trusteeship regardless of any wrongdoing. The Defendant argues he has already provided an account to the extent possible, that further accounts are impossible, and that claims for substantive relief are statute barred or barred by laches. The Defendant also contends it would be inequitable to order further accounts due to delay, prior receipt of accounts, and purported winding up of the trusts.
The hearing was conducted on a Part 8 claim without cross-examination, and the evidence emerged in a piecemeal and somewhat unsatisfactory manner. Both parties submitted witness statements, and there were disputes over the completeness and tone of the evidence.
Legal Issues Presented
- Does the court have discretion whether to order an account where a beneficiary has established that a trustee has a duty to account?
- Does the doctrine of laches apply to the obligation to account?
- Is the claim for an account statute barred in this case?
- Are any underlying claims for breach of trust statute barred?
- How should the court exercise its discretion in deciding whether to order an account?
Arguments of the Parties
Claimants' Arguments
- The Defendant was either an actual or de facto trustee of both trusts.
- They are entitled to an order for an account as of right, regardless of any wrongdoing or suspicion thereof.
- An account is distinct from conventional business accounts and is a fundamental trustee obligation.
- There has been no release of the Defendant from the obligation to account.
Defendant's Arguments
- He has already provided an account of his dealings with the trusts.
- It is impossible to provide further or detailed accounts.
- Any substantive claims are statute barred or defeated by laches.
- It would be inequitable to order an account due to delay, prior receipt of accounts, settlement agreements, apparent winding up of trusts, and conduct of the Claimants.
- He disputes being a trustee of one or both trusts and denies wrongdoing.
- Records were kept by a designated administrator and are now lost or destroyed.
- The trusts’ management was chaotic, and the Defendant’s involvement was limited.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Dubai Aluminium v Salaam [2003] 2 AC 366 |
Terminology preference for "de facto trustee" over "trustee de son tort". |
Used to clarify terminology regarding the Defendant's role. |
| Soar v Ashwell [1893] 2 QB 390 |
De facto trustee is subject to the same duties as an actual trustee. |
Confirmed that Defendant, if de facto trustee, owed trustee duties. |
| Armitage v Nurse [1998] Ch 241 |
Duty to account is an irreducible core obligation of trustees. |
Reaffirmed the fundamental nature of the duty to account. |
| Libertarian Investments Limited v TA Hall [Hong Kong Court of Final Appeal] |
Order for an account is discretionary, even if beneficiary is entitled as of right. |
Supported the court’s view that discretion exists in ordering accounts. |
| Campbell v Gillespie [1900] 1 Ch 225 |
Discretion to decline order for account to prevent oppression or "blackmail". |
Used to illustrate limits on ordering accounts where unfair to trustee. |
| Attorney General v Cocke [1988] 1 Ch 414 |
Narrow construction of "breach of trust" for limitation purposes. |
Supported conclusion that claims for accounts in common form are not statute barred. |
| Re Pauling's Settlement Trusts [1962] 1 WLR 86 |
Laches doctrine does not apply if limitation period applies. |
Considered in relation to delay and laches arguments. |
| Re Loftus deceased [2007] 1 WLR 591 |
Discussed laches and limitation in trust claims. |
Referenced regarding laches and delay in trust claims. |
| Royal National Lifeboat Institution and others v John Hedley [2016] EWHC 1948 (Ch) |
Clarification of the nature of trustee accounts and beneficiaries' entitlement. |
Guided the court’s understanding of the form and purpose of trust accounts. |
Court's Reasoning and Analysis
The court acknowledged that the Defendant, whether as a properly appointed or de facto trustee, owed the Claimants a duty to account. The duty to account is fundamental and irreducible, but the court holds discretion whether to make an order for an account. This discretion is exercised sparingly and primarily to prevent unfairness to trustees, such as where records are destroyed or delay causes oppression.
The court rejected the Claimants' submission that the duty to account creates an absolute entitlement to an order for an account where no release has been given. Instead, it accepted the more nuanced position that the court will ordinarily order an account but may decline in limited circumstances.
Limitation periods under the Limitation Act 1980 were considered. The court held that claims for an account in common form are not subject to statutory limitation periods applicable to claims for breach of trust, as the obligation to account is administrative and supervisory rather than a claim for breach. Laches may be relevant but is unlikely to be decisive without more.
The court found that the Defendant’s argument that substantive claims are statute barred or that laches applies did not prevent the making of an order for an account, as the Claimants sought only information, not substantive relief.
Regarding the Henchley Trust, the court found that the principal asset, a property, remains preserved and that the share portfolio was modest and likely exhausted. No accounts had ever been produced, which was a failure by the trustees, but the court exercised discretion to decline an order for an account due to the limited value and the Defendant’s inability to provide further information.
In relation to The Childrens' Trust, the court found the situation more complex and contentious. The trust appeared to have been active until the early 1990s, with documented tax liabilities, loans to related companies and individuals, and a substantial erosion of assets. The Defendant’s explanations were unsatisfactory and incomplete. The court found that the Defendant had not fulfilled his duty to account adequately, and his refusal to assist was unhelpful.
The court noted the chaotic management of The Childrens' Trust, the Defendant’s active involvement, and the importance of the interests of future beneficiaries whose interests had not vested. The court found compelling reasons to exercise its discretion in favour of ordering an account for The Childrens' Trust.
The court emphasized that the Defendant must provide a narrative account explaining the trustees’ dealings and the efforts made to obtain information, acknowledging that a full detailed account may not be possible given the passage of time and loss of records.
Holding and Implications
The court’s decision was as follows:
DISPOSED OF in part.
The court declined to order an account in respect of The Henchley Trust due to the limited assets and the Defendant’s inability to provide further information. However, the court ordered the Defendant to provide an account in common form relating to The Childrens' Trust. This account is to include a narrative explanation and an account of efforts made to obtain information, recognizing the challenges posed by the passage of time and lost records.
The direct effect is that the Defendant must provide further information and accounting regarding The Childrens' Trust, enabling beneficiaries, including future beneficiaries, to understand the management and disposition of trust assets. No new legal precedent was established; rather, the court applied established principles regarding trustees’ duties, discretion in ordering accounts, and limitation.