James Martin Kekwick v Christopher Alan Kekwick & Anor.

The court determined a series of preliminary issues in proceedings concerning the administration and distribution of the proceeds of sale of the family home held on trust. Applying the Limitation Act 1980, in particular section 21(3) and the definitions in section 38(1), the judge held that none of the procedural steps taken to date qualified as an "action" by the beneficiary in respect of alleged breaches of trust and therefore time continued to run; breaches more than six years before a properly brought action are time-barred. An application to re-amend the claim form to add breach of trust claims was refused because the relation-back rule in section 35(1) would have deprived the trustees of an arguable limitation defence.

The court declined to order an assessment of the trustees' legal costs as disproportionate and unlikely to be productive. On the merits of two defences relied on by the trustees, the court held that a 2009 letter from the beneficiary did not relieve the trustees of their duties but that the 2011 opinion of senior counsel provided a defence to complaints that the trustees had failed to invest, because it had advised only risk-free handling of the fund and the trustees had followed that advice. Finally, the court found the trustees were not in breach of their duty to distribute or to make interim payments because the beneficiary had repeatedly failed to provide satisfactory proof of identity and address; distribution could not safely be made without that evidence.

Background and procedural posture

The claimant, the sole beneficiary on his mother's death, sought directions under CPR 64(2)(a), a payment on account from the trust fund, disclosure and alternatively a prospective costs order. The trustees counterclaimed for an account. Master Kaye ordered five preliminary issues to be determined, including which objections were time-barred under the Limitation Act 1980, whether the claimant's challenge to legal costs should be assessed, whether two documents (a 2009 letter and a 2011 counsel opinion) provided a defence to alleged failures to invest, and whether the trustees were in breach for failing to pay or advance trust monies or to maintain and present the property for sale.

Key facts

• The sole trust asset, the family home, was sold in 2008 and the net proceeds held as the trust fund.
• The beneficiary lived apart from his mother from 2002, communications with him were intermittent and his identity and address were not established to the trustees' satisfaction.
• Trustees delayed distribution pending resolution of inheritance tax and satisfactory identification; attempts were made to obtain a discharge or indemnity from the beneficiary which he would not give.
• The beneficiary issued proceedings in April 2020 and later served a Notice of Objections; he refused to be cross-examined and the judge gave his unsworn evidence no weight.

Issues determined and reasoning

1. Limitation (Issue 1): The judge analysed "action" and "proceeding" under the Limitation Act 1980, adopting the established technical meanings. The original claim form, the trustees' counterclaim for an account and practice-direction written notices did not amount to an "action" brought by the beneficiary in respect of breaches of trust within section 21(3). The Notice of Objections likewise did not constitute commencement of an action for breach of trust. Accordingly time continued to run and breaches more than six years before a properly brought action are time-barred. The claimant's application to re-amend the claim form was refused because allowing amendment would, by section 35(1), relate back and defeat an arguable limitation defence.
2. Costs assessment (Issue 2): The court considered the material disclosed and the claimant's failure to comply with directions to particularise his challenge. The court concluded an assessment would be costly, disproportionate and unlikely to be productive, and refused to refer the costs for assessment.
3. Defences to failure to invest (Issue 3): The 2009 Non-Action Letter was not, on its proper objective construction, a direction to do nothing; it required the trustees to obtain the beneficiary's express authority before acting and so did not relieve them of investment duties. The 2011 counsel opinion advised trustees to "sit tight" as to estate administration and cautioned against investing in assets which might fall in value; the trustees had followed that advice by holding funds in an interest-bearing account and accounting for interest. The judge held the 2011 opinion therefore provided a defence to allegations of failure to invest.
4. Failure to distribute (Issue 4): The trustees were not in breach by refusing to distribute or to make advances because they had a fundamental duty to satisfy themselves of the identity and address of the beneficiary before making payments; the beneficiary had repeatedly failed to provide satisfactory evidence and had not complied with conditions for an interim payment. In those circumstances distribution could not safely be made and retention of the fund was justified.

Other matters

The judge refused to rely on the claimant's unsworn evidence where he declined cross-examination. Directions were given for further steps and a further hearing was ordered to progress the substantive matters and outstanding costs issues.

The court determined the preliminary issues. It held that no action had been brought by the beneficiary in respect of alleged breaches of trust for the purposes of section 21(3) of the Limitation Act 1980 so time continued to run and pre-claim breaches older than six years are time-barred; the claimant's application to re-amend the claim form was refused because it would unfairly deprive the trustees of an arguable limitation defence under section 35(1). The court refused to order an assessment of the trustees' legal costs as disproportionate. The 2009 letter did not relieve the trustees of their duties, but the 2011 counsel opinion provided a defence to complaints about failure to invest, and the trustees were not in breach for failing to distribute or advance sums because the beneficiary had failed to provide satisfactory proof of identity and address.