The Royal National Lifeboat Institution and Others v John G A Headley and Another
| Jurisdiction | England & Wales |
| Judge | Master Matthews |
| Judgment Date | 28 July 2016 |
| Neutral Citation | [2016] EWHC 1948 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2016-000249 |
| Date | 28 July 2016 |
[2016] EWHC 1948 (Ch)
Master Matthews
Case No: HC-2016-000249
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mathew Roper (instructed by Wilsons Solicitors LLP) for the Claimants
The Defendants did not appear and were not represented
Hearing dates: 4 July 2016
Judgment Approved
Introduction
This is my judgment on an application made by claim form under Part 8 of the CPR by the five claimants, who are all charities. They claim as five of the ten (charitable) remaindermen under the trusts of the will dated 10 August 1993 of Evelyn Irene Farmer, who died on 12 January 1996. Their interests are absolute in remainder expectant on the dropping of two lives, those of the son and daughter in law of the testatrix. The son is now dead. The daughter in law is, so far as is known, still alive. The claimants' interests have accordingly not yet fallen into possession.
The named defendants to the claim are the two executors of the will, who were solicitors in the firm of Headleys. They obtained probate on 1 March 1996, at which time the net estate did not exceed £145,000. They subsequently fully administered the estate. Some accounts were provided to some of the remaindermen in 2007. Thereafter, there was correspondence between the solicitors for the remaindermen and the executors, seeking further and better information. This was not however provided. Unfortunately, however, by the time the claim was issued, on 2 February 2016, and unknown to the Claimants, the First Defendant had already died, on 11 November 2015. Accordingly, by virtue of CPR r 19.8(3)(b), the claim as against the First Defendant must be treated as a claim against his estate.
The claim as sought in the claim form is one for an order under CPR Part 64, that the Defendants
"provide the claimants with proper particulars and accounts of (i) the property comprising the trust estate and (ii) the income, expenditure and distributions of the trust, in each case for the period since 1 October 2007,"
as well as costs and other appropriate relief. It is supported by a witness statement of Alice Rose Vale, a solicitor in Wilsons Solicitors LLP ("Wilsons"), the firm acting for the Claimants. This statement is unchallenged. No evidence has been filed by or on behalf of the surviving trustee, the Second Defendant. Indeed, despite the fact that the Second Defendant is a solicitor, and letters have been written to his firm, Headleys, quite extraordinarily there has not even been an acknowledgment of service on his behalf.
Background
The evidence shows that on 10 December 2007 Headleys wrote on behalf of the Defendants (the trustees) to the Claimants enclosing an interim account for 2007 up to September that year. They said they would revert with information on the investment portfolio when they had received a response from the trustees' financial adviser. However, no further information has ever been provided, despite requests.
Wilsons were instructed in February 2014, and they wrote to Headleys on 18 March 2014 and 17 April 2014, without any response. Ms Vale contacted the Second Defendant by telephone, who said he would forward the requested information to her within about two weeks. A letter in June 2014 from Headleys explained that the accountant needed further information before completing the accounts. Wilsons wrote again in August, but merely received a holding letter to say that the Second Defendant was on holiday.
In March 2015 Wilsons sent a letter of claim to Headleys. There was no response. Wilsons wrote again in May 2015. There was again no reply. Ms Vale once more telephoned the Second Defendant, who explained that there was a problem with the accounts but that they would be sent within a fortnight. In June 2015 Ms Vale left numerous messages with Headleys for the Second Defendant to call her. Finally he called to say that he had received the accounts and had dictated a letter to her, which should arrive within a couple of days. No letter arrived. Ms Vale telephoned again in July and August, but without success. In November 2015 she wrote to Headleys enclosing draft proceedings, and threatening to issue proceedings if there was no response. There was none. As already stated, the claim form was finally issued on 2 February 2016.
The First Defendant
The claimants only became aware of the death of the First Defendant after the proceedings had been issued and served. Certificates of service show that on 8 th February 2016 the proceedings were posted out to both defendants, the First Defendant at his home and the Second at the offices of Headleys. Having heard nothing from the First Defendant, Wilsons wrote again to him at his home address on 18 April 2016, enclosing a notice of hearing of the claim. The First Defendant's widow, Mrs Headley, telephoned Wilsons to explain that her husband had died the previous November, and that all previous correspondence had gone to Headleys. She confirmed this in a letter to Wilsons dated 2 May 2016, which also enclosed a certified copy of the First Defendant's death certificate.
On 24 June 2016 Wilsons issued an application for the First Defendant's name to be removed from the proceedings and for consequential amendments to the claim form, and costs. It was supported by a second witness statement of Ms Vale, also dated 24 June 2016.
At the hearing of both the application and the claim, on 4 July 2016, Mathew Roper of counsel appeared for the Claimants. The Second Defendant was neither present nor represented. The Claimants applied for an order that the name of the First Defendant be removed from the proceedings. The Claimants argued that, the First Defendant being survived by his co-trustee, the obligation to provide trust information devolved upon that co-trustee, the Second Defendant. In any event all the trust documentation and other information appeared to be in the Second Defendant's hands. There was therefore no need for the First Defendant's estate to be a party. I accepted this argument, and made the order sought accordingly.
The substantive claim
On the substantive issue, the Claimants argued that it was the duty of trustees to be ready with their accounts. Prima facie beneficiaries had the right to production of accounts. The Claimants referred to what Millett LJ said in Armitage v Nurse [1998] Ch 241, 261, CA:
"Every beneficiary is entitled to see the trust accounts, whether his interest is in possession or not."
There is some danger of misunderstanding here. When the books and cases talk about beneficiaries' "entitlement to accounts" or to trustees being "ready with their accounts" they are not generally referring to annual financial statements such as limited companies and others carrying on business (and indeed some large trusts) commonly produce in the form of balance sheets and profit and loss accounts, usually through accountants, and – in the case of limited companies – file at Companies House. Instead they are referring to the very notion of accounting itself. Trustees must be ready to account to their beneficiaries for what they have done with the trust assets. This may be done with formal financial statements, or with less formal documents, or indeed none at all. It is no answer for trustees to say that formal financial statements have not yet been produced by the trustees' accountants.
What Millett LJ meant in Armitage v Nurse was that every beneficiary, whether in possession or in reversion, was entitled to an accounting, and to see the documents which justified this. And this is obviously right. But his statement has to be seen in the context of that case. There, there was an argument about limitation, and in particular about the construction of s 21(3) of the Trustee Act 1925. Under this provision a right of action was not treated for limitation purposes as having accrued to a beneficiary with a future interest until that interest had fallen into possession.
The argument put forward was that the policy behind s 21(3) was explained by the rule that a reversionary beneficiary was not entitled to any accounting until his interest fell into possession, so the beneficiary would not know whether he had a claim or not before his interest fell into possession. Millett LJ denied that that was the explanation for the provision, because every beneficiary was entitled to an accounting and to see the documents in support of it. But what Millett LJ did not deal with – as it did not arise in that case – was what kind of accounting, and in relation to what, different classes of beneficiary were entitled to. That is the question in this case.
The right to an accounting, and to see trust documents as part of it, is an aspect of the court's inherent jurisdiction to supervise and if appropriate intervene in the administration of a trust: see Schmidt v Rosewood Trust Ltd [2003] 2 AC 709, PC. The Claimants relied on this case for the proposition that, save in exceptional circumstances, trust accounts and other documents must be disclosed to all beneficiaries on demand, because the Court's jurisdiction would be so exercised. Again, I do not think that it necessarily follows that all such documents must be disclosed to all beneficiaries. It must depend on what is needed in the circumstances for the beneficiaries to appreciate, verify and if need be vindicate their own rights against the trustees in respect of the administration of the trust. That will vary according to the facts of the case.
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