Scott v Scott

The court may remove a trustee where continuation in office would obstruct the proper execution of the trust or prejudice the welfare of the beneficiaries. Hostility between trustees is not, by itself, sufficient. It is relevant where the hostility has hindered, or may hinder, administration. The court should consider the nature of the trustee’s functions, the seriousness of any misconduct, and the settlor’s choice of trustee. A trustee should not be removed for every mistake, neglect or inaccuracy. On the facts, the hostility of one trustee had materially impaired administration, while the other remained capable of properly performing the trust’s relatively simple functions.

The claimant and defendant were brothers and co-trustees of the E A Scott 1991 Children’s Settlement. Each sought the removal of the other and the appointment of Simon Jackson QC as trustee. The dispute concerned the administration of trust land, historic expenditure, accounts, alleged fiduciary breaches, a land agreement and a digger. The central issues were whether either trustee should be removed, whether the claimant had breached the land agreement, and whether the defendant was liable in conversion.

1. The court had jurisdiction to remove a trustee under Trustee Act 1925, section 41, and under its inherent jurisdiction. The governing consideration was the proper execution of the trusts and the welfare of the beneficiaries, applying the principles in Letterstedt v Broers (1884) 9 App Cas 371, as summarised and applied in The Thomas and Agnes Carvel Foundation v Carvel [2007] EWHC 1314 (Ch) and Kershaw v Micklethwaite [2010] EWHC 506 (Ch).

2. Hostility or friction is not of itself sufficient to justify removal. It becomes relevant where it obstructs, or has the potential to obstruct, administration. The court should consider the simplicity or complexity of the trustee’s functions, the settlor’s choice, and whether the alleged breaches justify substantial criticism. Not every mistake, neglect or inaccuracy warrants removal.

3. Martin was not removed. Although relations between the brothers were hostile, the complaints against him were stale, substantially unsupported or unreasonable. The trust’s functions were presently simple, and there was no sufficient basis for concluding that Martin could not administer the trust properly.

4. Andrew was removed as trustee. His hostility had adversely affected administration, most clearly through his refusal to finalise the trust accounts on the irrational basis that a partnership existed. His conduct and unfounded allegations also affected the welfare of the beneficiaries.

5. There was no partnership between the brothers and Simon. Andrew’s refusal to file the accounts was therefore a breach of trust, and he was required to indemnify the trust for penalties caused by late filing.

6. Andrew was in breach of the Land Agreement. Specific performance was ordered for construction of the dry stone wall. Damages were considered adequate for the separate telephone and water supplies, with an inquiry as to damages if not agreed.

7. Martin was not liable for breach of fiduciary duty in repaying £7,000 owed to him by the trust. Liability in conversion was established in relation to the digger, and damages were assessed at £1,200 with interest at 6% from delivery.

8. The court was willing in principle to appoint Simon, subject to his continued willingness, and invited further submissions on the possible appointment of an independent professional trustee.