Cotton & Anor v Brudenell-Bruce, Earl of Cardigan & Ors

Factual and Procedural Background

The principal asset of the Savernake Estate, Tottenham House, a large and historically significant property in Wiltshire, has been unoccupied and deteriorating since the 1990s. The trustees of the trust established in 1951 (referred to as "the trustees") sought court approval to sell Tottenham House to an existing buyer under a conditional contract for £11.25 million. The beneficiaries include the first defendant, Lord Cardigan, who opposes the sale, and the 1987 settlement beneficiaries, supported by their trustees, who back the sale.

Two judgments are under appeal. Initially, a deputy High Court judge adjourned the trustees' application for approval of the sale to be heard alongside a removal action brought by Lord Cardigan seeking the trustees' removal on grounds of unfitness. The deputy judge indicated he would have authorized the sale but for the removal action. Subsequently, Rose J lifted the stay and authorized the trustees to complete the sale. The removal action was later tried before Newey J, who reserved judgment and declined to consider the sale approval due to the pending appeal.

The central dispute concerns whether the court should approve the proposed sale and the process by which the sale was conducted, including the adequacy of marketing and valuation. The trustees contend the sale price is fair and reflects expert advice, while Lord Cardigan argues it is inadequate due to limited marketing. The approval action was brought under Part 8 of the CPR without disclosure or oral evidence, contrasting with the usual Part 7 procedure for challenging trustee decisions after the event.

Legal Issues Presented

1. Whether the court should approve the trustees' decision to sell Tottenham House under the intended sale contract.
2. Whether the trustees made full and frank disclosure to the court in seeking approval.
3. Whether the trustees acted reasonably in relying on expert valuations and a limited marketing process instead of a full open market campaign.
4. Whether Rose J had jurisdiction to approve the sale following the adjournment and in light of the removal action.
5. Whether any material change in circumstances justified lifting the stay and approving the sale.
6. Whether alternative financing or asset sales could have avoided the necessity of selling Tottenham House.

Arguments of the Parties

Appellant's Arguments (Lord Cardigan)

• The trustees failed to make full and frank disclosure, particularly regarding unauthorized payments to one trustee and the limited information about marketing and valuation instructions.
• The sale price is inadequate due to an ineffective and restricted marketing exercise that did not test the open international market.
• The trustees relied on valuations that included caveats about the absence of open market exposure, which should have prompted further investigation or marketing.
• The approval by Rose J was procedurally improper, effectively constituting an unauthorized appeal of the deputy judge’s decision.
• The financial difficulties and delay in the removal trial did not justify immediate approval of the sale.
• Other sources of finance or asset sales should have been pursued instead of selling Tottenham House.
• There is suspicion that the intended buyer was favored from the outset and that the marketing process was a fait accompli, possibly involving undisclosed connections.

Respondents' Arguments (Trustees and 1987 Trustees)

• The trustees acted prudently and in the beneficiaries' best interests, relying on expert advice from Knight Frank and GVA.
• The limited, targeted marketing strategy was appropriate given the dilapidated condition of the property and the narrow market for such assets.
• The sale price exceeded expert valuations and was unconditional, providing certainty and speed, which was important given the trust's financial position.
• The trustees made sufficient disclosure and bore the burden of proof; no evidence of wrongdoing or conflict of interest was shown.
• Rose J's approval was justified due to changed circumstances, including financial deterioration and delay in the removal trial.
• The court should not second-guess professional advice or impose insurmountable hurdles on trustees seeking to act responsibly.
• There was no evidence supporting allegations of impropriety or favoritism regarding the intended buyer.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the trustees’ conduct and the evidence related to the sale of Tottenham House. It recognized the trustees’ burden to provide full and frank disclosure and to satisfy the court that their decision was reasonable, properly informed, and free from conflict. Although there was an admitted unauthorized payment to one trustee, this was deemed relevant but not determinative, and the financial necessity of the sale remained uncontested.

The court considered expert valuations and marketing strategies. Knight Frank’s valuations included caveats about the absence of an open market campaign, but GVA’s marketing advice advocated a targeted, confidential approach aimed at securing a premium price quickly and at low cost, which the court found reasonable in light of the property’s dilapidated state and the trust’s financial pressures.

The court rejected the appellant’s contention that the trustees should have conducted a full open international marketing campaign, emphasizing the trustees’ entitlement to rely on professional advice and that the limited marketing was a sensible commercial strategy. The lack of detailed disclosure about the bidders’ origins and selection was acknowledged but found not to undermine the trustees’ case absent evidence of wrongdoing.

The court distinguished between the trustees’ duties to beneficiaries and the duties of professional advisers, noting that any negligence by agents did not vitiate the trustees’ decision if taken on proper advice. The court also addressed procedural concerns, recognizing the limitations of Part 8 approval proceedings but finding the evidence sufficient for approval without further fact-finding or cross-examination.

Regarding procedural jurisdiction, Rose J’s decision to lift the stay and approve the sale was justified by changed circumstances, including delay in the removal trial and the trust’s worsening financial position. The court found no impropriety in her decision, rejecting the argument that she had effectively heard an unauthorized appeal.

Overall, the court found that the trustees had demonstrated that their decision to sell was one that reasonable trustees could properly take in the interests of the beneficiaries, having acted on competent professional advice and with due caution.

Holding and Implications

The court DISMISSED THE APPEALS and upheld the decisions of Mr Lavender and Rose J approving the trustees' decision to sell Tottenham House under the intended sale contract.

The direct effect of this decision is to authorize the trustees to complete the sale to the existing buyer, enabling the trust to address its financial difficulties and avoid further deterioration of the property. No new precedent was established; rather, the court reaffirmed established principles governing trustee approvals, emphasizing the importance of professional advice, evidential sufficiency, and judicial caution balanced against practical realities faced by trustees.