Sinclair & Anor v Sinclair

A trustee claiming reimbursement for expenditure bears the burden of proving that it was properly incurred for trust purposes. Missing vouchers do not automatically require disallowance; the court assesses all relevant evidence on the balance of probabilities.

A trustee in occupation of trust property may in principle acquire an interest through proprietary estoppel, but the beneficiaries’ knowledge, consent and acquiescence are especially important where the trustee has acted in breach of the self-dealing rule. A beneficiary’s acquiescence may also affect liability for occupation rent. A trustee’s honest and reasonable conduct does not engage Trustee Act 1925, section 61, where the claim is to account for retained benefits rather than damages for breach of trust.

The claimants, current trustees and beneficiaries of trusts arising under Arthur Sinclair’s will, sought an account from their brother Brian, who had administered the trusts after Arthur’s death. They challenged credits in Brian’s favour, claimed possession and sale of the Yard, and sought an occupation rent. Brian counterclaimed reimbursement and asserted a proprietary interest in the Yard based on proprietary estoppel or constructive trust.

The court determined the accounting issues, the proprietary claim, the effect of delay, occupation rent and the proposed statutory relief. Submissions on whether, and when, possession should be ordered for sale were reserved.

1. Accounting and proof. Brian bore the burden of proving that expenditure charged to the trusts was properly incurred for trust purposes. The absence of vouchers was not conclusive. The correct question was whether, considering all the circumstances, he had proved the expenditure on the balance of probabilities. The court accepted the contemporaneous accounts, the accountant’s evidence and corroborating documents, and allowed the disputed credits.
2. Yard and proprietary estoppel. The usual elements of proprietary estoppel were assurance, reasonable reliance and detriment. A trustee could in principle acquire an interest against beneficiaries, including in a family situation. However, Brian had occupied the Yard for his own and the trust’s purposes while acting in breach of the self-dealing rule. The beneficiaries knew of his occupation but did not know its terms, the expenditure incurred or their legal rights, and had not consented. His proprietary claim therefore failed.
3. Laches and sale. Delay did not bar a claim for possession of trust property. It could, however, be relevant under sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996 when deciding whether and when to order a sale. Submissions on possession and sale were adjourned.
4. Occupation rent. Emily, the life tenant and trustee, had acquiesced in Brian’s occupation during her lifetime. Brian was therefore liable to pay the trustees a notional rent only from Emily’s death. The rent was to be calculated by reference to the unimproved value of the Yard, with simple interest only.
5. Other accounting issues. Payments made by Brian for Emily’s mortgages could be charged only against income arising during her lifetime, not capital. Section 61 of the Trustee Act 1925 did not apply because the claim was based on liability to account for retained benefits, rather than a claim for breach of trust.