Page & Ors v West & Ors

Under Trusts of Land and Appointment of Trustees Act 1996, the court may relieve trustees from a beneficiary’s consent requirement where the statutory factors, the trust’s purposes and the beneficiaries’ interests make that course necessary. A veto created by compromise remains important and should be removed only exceptionally. The court may confer borrowing and mortgaging powers under section 57 of the Trustee Act 1925 where the transaction concerns the management or administration of trust property. Interest on borrowing used to pay accrued income liabilities will ordinarily fall on income, although a fair proportion may be charged to capital. A power to sell without consent may be qualified so that sale below full market value or without overage requires the veto-holder’s written consent.

The trustees of a family trust applied for directions and powers concerning a property held for life-income beneficiaries and grandchildren. The trust instrument required the trustees to obtain Geoffrey West’s consent, or after his death Rosemary West’s consent, before selling the land. Capital expenditure and estate liabilities had been met from income, creating substantial arrears owed to income beneficiaries. The trustees sought power to borrow and mortgage the land, directions on the incidence of borrowing interest, and permission to sell without the veto.

The central issues were whether the court had jurisdiction to confer borrowing powers, how interest should be allocated between income and capital, and whether the statutory factors justified removing or qualifying the veto.

1. The court held that borrowing to fund past or future capital expenditure of the trust was sufficiently connected with the management and administration of trust property to fall within section 57(1) of the Trustee Act 1925. The court therefore empowered the trustees to borrow and mortgage the land, subject to terms to be settled.

2. In determining the application under sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996, the court considered the intentions of the trust’s creators, the trust’s purposes, and the circumstances and wishes of adult beneficiaries entitled to possession. The trust’s purposes were principally to provide income for the widow and children and capital for the grandchildren. They did not give Geoffrey or Rosemary a general preference over the other beneficiaries.

3. The veto protected the retention of the land and the income-producing asset, but did not guarantee that Geoffrey’s income would remain unaffected by capital expenditure or the costs of preserving the trust. Removing the veto was exceptional, particularly as no specific sale was proposed, but necessary because the trust’s purposes had been frustrated for a long period and continued disagreement threatened further litigation and commercial difficulty. The trustees were accordingly permitted to sell without consent.

4. The ordinary rule was that interest on third-party borrowing should be charged to income. Interest on borrowing used to discharge sums owed to income beneficiaries was likewise chargeable to income, except that one-tenth was to be charged to capital, reflecting the history of capital expenditure funded from income and Geoffrey’s understanding when the trust was created.

5. The power of sale was qualified. Without Geoffrey’s written consent, or Rosemary’s after his death, the trustees could not sell other than for full market value without overage.