Brudenell -Bruce v Moore & Ors

Trustees must exercise administrative powers in the interests of the beneficiaries and must exercise reasonable care and skill when carrying out discretionary functions. The duty of care governs the manner in which a power is exercised, while the initial decision whether to exercise a discretion remains for the trustees. A trustee’s breach does not automatically require removal. The court’s primary concern is the welfare of the beneficiaries and the proper execution of the trust. Equitable compensation for negligent administration is ordinarily assessed by reference to the diminution in value caused by the default, rather than disproportionate reinstatement costs. A lay trustee’s remuneration may be authorised retrospectively, but only sparingly and where necessary for the good administration of the trust.

The claimant, a beneficiary of a family trust holding the Savernake Estate, challenged the conduct and remuneration of the defendant trustees. He alleged failures to protect and exploit trust property, including the Stable Block, Sturmy House, Little Lye Hill Cottage, grazing rights and shooting rights. He also sought repayment of remuneration and removal of the trustees.

The court found breaches concerning the failure to repair and re-let Sturmy House and the failure, after a reasonable period, to seek rent or possession in respect of Little Lye Hill Cottage. It rejected the other breach allegations, declined to authorise remuneration paid to the lay trustee, adjourned the professional trustee’s remuneration issues to a Master, and considered whether either trustee should be removed.

1. Trustees’ duties. Trustees must exercise their administrative powers in the interests of the beneficiaries. The duty of care applies to the manner in which a discretionary power is exercised, rather than to the prior decision whether to exercise it. An honest and reasonably competent trustee is not liable for every error of judgment.
2. Stable Block. The trustees acted reasonably in delaying forfeiture of the tenant’s lease while funding and redevelopment remained possible. The evidence did not establish that temporary weather-proofing would have prevented the principal damage or materially increased the value of the property. No breach was proved.
3. Sturmy House. The trustees were not at fault while the trust lacked funds and the insurance and painting disputes remained active. Once the trust’s finances improved in June 2012, they should have completed sufficient repairs to permit re-letting. The resulting loss was assessed at approximately £50,000.
4. Little Lye Hill Cottage. The claimant had acquiesced in the family member’s occupation until October 2013. After a reasonable period following notice of the changed position, the trustees should have sought a market rent or possession. Loss was assessed at £14,225.
5. Compensation. The relevant remedy was equitable compensation for failure to exercise skill and care. The court applied by analogy the reasonableness principle governing reinstatement costs in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 and related authorities. Reinstatement would not have been reasonable or economically justified. Compensation was not capped by the claimant’s 49% interest because the trusts remained subsisting and no beneficiary was absolutely entitled.
6. Remuneration. Although the court had jurisdiction to authorise retrospective remuneration, the exceptional circumstances required for a lay trustee were absent. The lay trustee had said he would not take a salary, lacked relevant specialist qualifications, and would have undertaken the work regardless. He was ordered to repay the sums received. The professional trustee’s remuneration was adjourned to a Master.
7. Removal. The welfare of the beneficiaries and proper administration of the trust governed removal. The lay trustee’s breaches, remuneration issue and irretrievable personal breakdown justified removal, but only after completion of the sale of Tottenham House. The professional trustee’s expertise, more limited personal conflict and the beneficiaries’ wishes justified his retention.

The claim therefore succeeded in part. The trustees were ordered to pay £64,225 compensation, the lay trustee was ordered to repay his remuneration, and he was to be removed after completion of the Tottenham House sale.