Henchley & Ors v Thompson

A beneficiary’s entitlement to an account does not compel the court to order one. An account in common form is an equitable remedy granted in the court’s discretion, although the discretion to refuse it is exercised sparingly.

The obligation is enforceable independently of wrongdoing. It is therefore not an action for breach of trust within section 21(3) of the Limitation Act 1980, and no limitation period under that Act applies. Trustees must retain sufficient records to explain their stewardship. Dividing record-keeping responsibilities does not absolve any trustee. Trust accounts need no prescribed form, but must enable beneficiaries to understand how assets, income, disposals and distributions have been managed.

The beneficiaries of two family settlements sought an account in common form from a former actual or de facto trustee. They relied on his obligation to account rather than alleging breach of trust or wilful default.

The defendant maintained that he had disclosed all available information, that records had been lost, and that delay, limitation and laches made further accounting inequitable or pointless. The principal asset of the N E Henchley Trust remained identifiable. The assets of the W C C Henchley Trust, known as the Childrens’ Trust, had substantially diminished, and its purported winding up had not been explained.

The court had to decide whether an account was mandatory, whether the claim was time-barred, and how its equitable discretion should be exercised for each trust.

1. The claim succeeded in part. The court refused an account for the N E Henchley Trust but ordered an account concerning the Childrens’ Trust.

2. A trustee’s duty to account is part of the irreducible core of the trust relationship. A de facto trustee owes the same duties as an appointed trustee. Nevertheless, the duty and an entitlement to a court order are distinct. An account in common form is discretionary, although the court will ordinarily order one where no adequate account has been given and will refuse one only sparingly.

3. An account in common form enforces an existing obligation and does not depend on wrongdoing. Section 23 of the Limitation Act 1980 directs attention to the claim forming the basis of the duty. Because this claim was not an action to recover trust property or for breach of trust, section 21(3) supplied no limitation period. Possible future breach-of-trust claims did not make the requested account pointless, particularly because their nature was unknown and section 21(1) might apply.

4. Trustees must keep and retain records sufficient to explain their stewardship. They may allocate record-keeping to one trustee, but remain collectively responsible to beneficiaries. Trust accounts require no prescribed form. They must, however, enable beneficiaries to understand the trust’s assets, income, disposals and distributions and to assess whether the assets and their management conform to the trust instrument. The financial statements produced for 1990 and 1991 did not meet that standard.

5. The circumstances of the N E Henchley Trust were exceptional. Its principal property had been preserved, the remaining historic portfolio was modest, and there was no realistic prospect that the defendant could explain its disposal after so long. The court therefore declined an account despite finding the request proper and reasonable.

6. The position of the Childrens’ Trust was materially different. On the assumed basis that the younger claimants held unvested future interests, compelling reasons were required to refuse an account. The defendant had not exhausted reasonable enquiries, could not rely on delegating records to another trustee, and had not explained the rapid erosion, lending or purported winding up of the trust. He was therefore required to provide available figures, a narrative account where figures were unavailable, and an explanation of his efforts to obtain information.

not stated in the judgment.