Sheffield v Sheffield & Ors

A beneficiary who receives an equitable interest under a declaration of trust is entitled to the income arising from that interest unless the beneficiary has knowingly agreed otherwise. Trustees cannot rely on estoppel, acquiescence or laches where the beneficiary was not informed of the relevant rights and promptly claims after discovering them. A trustee who permits trust land to be used by a co-beneficiary to the exclusion of another must account for an appropriate occupation rent. Trustees may be liable for failing to consider commercially available exploitation of trust assets, including shooting rights. Reliance on independent professional valuation may justify relief under Trustee Act 1925, section 61, where the trustees acted honestly and reasonably.

The claimant was a beneficiary of a family settlement holding the Laverstoke Estate. In 1983 his grandfather declared that his quarter beneficial interest was held on trust for the claimant. The claimant alleged that the trustees thereafter failed to account for income, permitted trust assets to be used without proper compensation, failed to exploit shooting rights commercially, and transferred or sold trust property improperly.

The defendants alleged an informal arrangement under which the grandfather could retain the income during his lifetime. They also relied on estoppel, limitation, laches, acquiescence and section 61 of the Trustee Act 1925. The central issues were the effect of the 1983 declaration, whether the alleged arrangement existed, and whether the pleaded breaches and defences were established.

1. The alleged arrangement. The defendants bore the evidential burden of proving an agreement or understanding that the claimant would receive no trust income during his grandfather’s lifetime. The contemporaneous legal advice and documents showed that the claimant was intended to receive a quarter of the net trust rent. The later letter from the grandfather confirmed a discussion about the gift but did not prove any arrangement qualifying the declaration. The alleged arrangement was not established.
2. Effect of the declaration. The 1983 declaration was a declaration by the grandfather that he held his equitable interest as trustee for the claimant, not an assignment. Applying Timpson’s Executors v Yerbury [1936] 1 KB 645 and Nelson v Greening & Sykes (Builders) Ltd [2007] EWCA Civ 1358; [2008] 1 EGLR 59, the head trustees could pay the income either to the intermediate trustee or directly to the claimant. Their payments to the grandfather were therefore not themselves breaches, but the grandfather was liable to account as sub-trustee.
3. Income and defences. The claimant was entitled to 25% of net income received under the farming arrangements. Entering the second farming partnership deed did not amount to informed consent to a breach of trust. The claimant lacked knowledge of his entitlement until 2004. Estoppel, acquiescence and laches were therefore unavailable. The deliberate concealment provisions of section 32(1)(b) of the Limitation Act 1980 postponed limitation.
4. Unrealised income and occupation. The trustees breached trust by failing to consider commercial exploitation of shooting rights which the expert evidence showed could have been let. The grandfather’s occupation of trust properties required an account of 25% of the appropriate occupation rent, subject to further accounting issues.
5. Other property. No breach was established concerning the 2005 farming tenancy, the sale of New Barn Cottages or the Freefolk House sale. The Spring Pond properties remained trust property, and consequential accounting and protective orders were reserved.

First-instance judgment. No appellate history was stated in the judgment.