In re Duke of Norfolk’s Settlement Trusts (Perth (Earl) v Fitzalan-Howard)

The court has an inherent jurisdiction, founded on securing the competent administration of trusts, to authorise trustees’ remuneration. That jurisdiction extends to increasing remuneration fixed by the trust instrument, including for future services.

The jurisdiction must be exercised cautiously. The court must protect beneficiaries against excessive claims while considering whether an increase would promote sound administration. Relevant matters include the trust’s nature, the trustee’s experience and skill, the proposed charges compared with those of available alternatives, and all other circumstances. A trustee’s remuneration is neither contractual nor, for this purpose, a beneficial interest governed by the restriction on varying beneficial interests.

A 1958 settlement appointed individual trustees and a trust corporation. It fixed the corporation’s remuneration by reference to its scale of fees then in force. Subsequent additions to the trust fund and a substantial redevelopment created work greatly exceeding what had reasonably been contemplated. The corporation incurred a continuing financial loss under the original scale.

Walton J authorised additional remuneration for exceptional work already performed. He held, however, that the court lacked inherent jurisdiction to increase generally the corporation’s future remuneration fixed by the settlement. The trustees appealed only against that conclusion.

The Court of Appeal was asked to decide jurisdiction, not whether an increase should actually be granted. The central question was whether the court’s inherent jurisdiction permitted it to authorise future remuneration exceeding the rate specified by the trust instrument.

1. Appeal allowed unanimously. Fox LJ delivered the leading judgment. Brightman LJ agreed and gave additional reasons. Cumming-Bruce LJ agreed with both judgments and the proposed order. The court declared that its inherent jurisdiction extended to authorising remuneration above the rate fixed by the settlement.

2. Per Fox LJ, the inherent jurisdiction to authorise trustees’ remuneration was established by the older and modern authorities. It was available when a trustee was appointed and could also support remuneration after the trustee had accepted office. There was no principled distinction between first authorising remuneration and increasing remuneration already provided by the trust instrument.

3. The jurisdiction rested on the court’s responsibility to secure the competent administration of trust property. The asserted contractual analysis was artificial. A remuneration clause derives from the settlor’s power to direct the administration of the property, while remuneration ordered by the court derives from its jurisdiction. The implied-contract reasoning associated with Re Salmen was rejected, particularly because that case concerned an insolvent estate.

4. A right to remuneration may be treated as a beneficial interest for particular purposes, including creditors, taxation and section 15 of the Wills Act 1837. It did not follow that increasing remuneration was governed by the restriction in Chapman v Chapman, (1954) AC 429, upon varying beneficial interests as such. Authorising remuneration was an administrative act analogous to appointing or removing a trustee.

5. The jurisdiction must be exercised cautiously because trusteeship is ordinarily gratuitous. The beneficiaries must be protected against trustees’ claims. The court must nevertheless consider the importance of competent administration. It may increase remuneration where that would serve the beneficiaries’ interests, having regard to the trust’s nature, the trustee’s experience and skill, the proposed charges compared with those of other available trustees, and all the circumstances.

6. Brightman LJ added that denying jurisdiction would produce the anomalous result that the court could remunerate a replacement trustee but could not authorise the incumbent to charge the same amount. A trustee could seek discharge and replacement under the Trustee Act 1925, which further weakened the suggested contractual objection.

7. The question under section 57 of the Trustee Act 1925 was left undecided. The matter was remitted to the Chancery Division so that the trustees could apply on such further evidence as they considered appropriate.

1. Court of Appeal: The appeal was allowed unanimously. The court declared that the inherent jurisdiction permitted an increase in the trust corporation’s future remuneration and remitted the matter to the Chancery Division.

2. High Court, Chancery Division: Walton J authorised additional remuneration for exceptional past work but held that the court lacked inherent jurisdiction to increase generally the future remuneration fixed by the settlement.