AB v CD & Ors

The court may intervene in the exercise of trustees’ dispositive powers in special circumstances. The relevant circumstances are not confined to approval of discrete or simple proposals. Intervention may be justified where trustees reach an enduring impasse, the trust should be wound up, substantial costs are accruing, or delay and replacement of trustees would be disproportionate. The court may then exercise the power itself, adopting the solution that best addresses the trust’s purposes and the disparity produced by earlier appointments. Trustees ordinarily receive an indemnity from the trust for properly incurred costs, but costs may be allocated between different trust funds where charging them to one fund would operate unfairly.

The claimant trustee sought directions concerning the exercise of a power of appointment over discretionary trust assets. The trust had been established for the family’s descendants, but earlier appointments had substantially favoured one branch of the family. The trustees remained unable to agree a common approach despite an earlier draft judgment and further proposals.

The court therefore considered whether it should take control of the power, how the remaining liquid assets should be distributed, and how the costs of the proceedings should be borne. The central issues were whether the circumstances justified intervention and what distribution would fairly address the disparity without disturbing historic appointments.

1. Intervention. The court held that there was ample authority for intervention in special circumstances, including Gumbhant v PC [2012] EWHC 050 and Klug and Klug [1918] 2 Ch 67. Those authorities did not confine intervention to approval of discrete and simple proposals. The categories of special circumstances were not closed.
2. Intervention was justified by the trustees’ continuing impasse, the common objective of winding up the trust, the substantial and continuing costs of litigation, the history of the matter, and the refusal of the trustees to surrender their discretion. Finding another professional trustee would cause further cost and delay and carried a risk of renewed deadlock. The court should therefore exercise the power itself.
3. The remaining liquid funds, including the M Fund, were to be appointed to the eighth and ninth defendants. Equality between all grandchildren would not be appropriate because earlier appointments had already created substantial benefits for the first defendant’s children, while the eighth and ninth defendants had received no comparable distribution. The historic appointments were not revoked.
4. Costs. Trustees were generally entitled to an indemnity from the trust for costs properly incurred in seeking the court’s guidance, applying Buckton v Buckton [1907] 2 Ch 406. The circumstances did not justify depriving the trustees of their costs. The claimant’s costs were to be paid from liquid funds and the defending trustees’ costs from the distributed fund, rather than allowing the proceedings’ costs to reduce the eighth and ninth defendants’ distribution disproportionately.

The judgment followed an earlier judgment in the same proceedings, which had not yet been formally handed down. The court treated the present judgment as supplementary and directed that it be read with the earlier judgment.