Andrew Frank Pitman Hubbard & Anor v Robert William Pitman Hubbard & Anor

In the taking of a trust account, accounting parties must establish that payments made from trust funds were proper discharges. Beneficiaries may challenge entries concerning distributions where their objections made their position clear, even if the issue was not separately identified for trial. Payments to third parties are not properly treated as distributions merely because they were connected with development activities or secured against trust property. The court must distinguish distributions to beneficiaries from trust expenditure and must apply findings of fact about the nature of the underlying transactions.

This was a consequential hearing following a trial of an account between beneficiaries and trustees. The court had previously rejected objections concerning alleged investments by Mr and Mrs Chart and Mr and Mrs Jull, and had found that the funds were not loans to the trust and that the relevant interests related to the shares of the first defendant and, possibly, the second defendant.

The second defendant argued that repayments of £845,727 and £374,088 should be treated as proper distributions from the trust fund. She submitted that the claimants had not properly challenged those payments and relied on a charge and a release relating to trust property. The central issues were whether the claimants had preserved their objections and whether the payments were properly chargeable against the fund available for distribution.

1. The claimants succeeded on the consequential issue. The alleged distributions to Mr and Mrs Chart and Mr and Mrs Jull were not proper discharges from trust funds and were not to be deducted when calculating the claimants’ entitlement.
2. The purpose of taking a trust account is to identify the trust assets, what has been done with them, their current composition and distributions made: Ball v Ball [2021] EWHC 1020 (Ch). The accounting parties bore the burden of establishing that payments claimed as trust expenses, but made to persons other than beneficiaries, were proper.
3. The claimants’ objections to the balance sheet and distributions schedule made their position sufficiently clear. The defendants’ responses did not advance a positive case establishing the propriety of the payments. The fact that distributions were not the principal focus of the account did not prevent the court from resolving the issue at the consequential stage.
4. The earlier findings showed that the Chart and Jull funds were not loans to the trust, were not trust income and related to development interests of the first defendant and possibly the second defendant. Repayments to them were therefore not trust expenditure or proper distributions from the trust fund.
5. The pre-existing charge relied on by the second defendant did not make the trust property subject to a charge affecting the claimants’ shares. It related only to the first and second defendants’ interests. The release given by the Julls also did not establish that their payment was a proper trust distribution.

The judgment determined consequential issues arising from the court’s earlier judgment following the trial of the trust account. No appellate history was stated.