Turner v Kleinwort Benson (Trustees) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Hart,MR. JUSTICE HART |
| Judgment Date | 28 July 2005 |
| Neutral Citation | [2005] EWHC 2442 (Ch) |
| Court | Chancery Division |
| Date | 28 July 2005 |
[2005] EWHC 2442 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MR. JUSTICE HART
MISS S. PROUDMAN, Q.C. (instructed by Messrs. Farrers) for the Claimant.
MR. C. TIDMARSH, Q.C. (instructed by Messrs. Withers LLP) for the Defendant.
Approved Judgment
The claimants are beneficiaries under a settlement made on 21 March,1974. The defendant is one of the original trustees of that settlement, having acted as trustee with Mr. Andrew Salveson until November 1988, and thereafter as sole trustee until 23 April, 2002 when an additional trustee, Mr. Roger Turner, was appointed.
The dispute which these proceedings are designed to resolve concerns the level of remuneration charged by the defendant throughout the period of the trust. Its ability to charge depends upon Clause 12A of the settlement. That provides as follows:
"The company [the defendant] shall be entitled (in addition to reimbursement of its proper expenses) to remuneration in accordance with its published terms from time to time in force and may retain for its own use and benefit any share of commission receivable by it on any purchase or sale of investments."
The defendant's published terms have varied over the years, but have always provided for scale fees to be charged for trust management, based on percentages of the market value of trust assets. From December 1978 onwards the table of fees in the published terms has contained a note. That has been in two forms. In all cases the note has to be read in the full context of the relevant terms. The terms as published in December 1978 were in the following form:
"Kleinwort Benson (Trustees) Ltd.
Standard Fees for Acting as Executor and/or trustee of a will or as trustee of a settlement.
Initial fees.
A capital charge on Gross Value as follows:
(a) Wills (b) Settlements
On first �50,000 �4 per cent �2 per cent
On next �50,000 �2 per cent �1 per cent
On balance over �100,000 �1 per cent 50p per cent
This fee is intended to cover all administration involved in
(a) WILLS �obtaining Probate and dealing with the Estate in accordance with the provisions of the Will
(b) SETTLEMENTS �Preliminary negotiations, documentation and collection of assets.
Fees varying from this scale can be negotiated in advance to meet differing circumstances.
MANAGEMENT FEES
(1) An annual fee of �1 per �100 based on the market value (actual or estimated) of the assets held at the commencement of each trust year with the exception that no such fee will be charged during the first year of the administration of an estate. This fee will normally be calculated and charged in arrear and will take account of any substantial additions or distributions during the year. Such fee will usually be charged against Income but may be charged against Capital or apportioned between Income and Capital if considered appropriate.
(2) A fee not exceeding 50p per �100 on the amount involved in a purchase, sale, acquisition, conversion, collection, transfer, redemption, exchange or realisation of any investment or other asset, including the advance of money by way of mortgage or otherwise.
(3) A charge commensurate with the work involved may also be made for the preparation of tax computations, valuations of assets, trust accounts, involvement in litigation and for any other special transactions or services rendered, including attendances outside the Company's office.
DISTRIBUTION FEE
A fee not exceeding �2 per cent will be payable on the gross amount or value of any distribution or disbursement of capital from settlements and will trust. All fees quoted are exclusive of the VAT.
NOTE
The Company carefully monitors the time and level of expertise involved in the administration of each Trust and Estate, and where appropriate will, at its discretion, moderate the scale fees accordingly."
The form of that note was then changed in January 1980 so that it then read:
"The company monitors the time and levels of expertise involved in the administration of each Trust and Estate and where appropriate does, at its discretion, apply appropriate concessions to the scale fees."
As from June 1987 the form of the published terms was different in that the body of the published terms referred, by an asterisk, to the note. I will read out the full form as it then appeared:
"Fees for Acting as Trustee or Personal Representative.
INITIAL FEE
Trustee
An appropriate fee, depending upon the circumstances, to cover the preliminary negotiations, documentation, and collection of the assets.
Personal representative.
A Charge on the Gross Value of the Estate as follows:
On first �250,000 �3 percent
On next �250,000 �2 percent
On balance over �500,000 �1.5 percent.
The fee is intended to cover all the administration involved in obtaining the Grant and dealing with the Estate in accordance with the provisions of the Will or the relevant intestacy rules (See Note*)
MANAGEMENT FEES
1. A fee not exceeding �1.50 per cent per annum charged by half yearly instalments, in arrears, based on the market value (actual or estimated) of the assets held at the commencement of each six monthly period (See Note*). No such fee will be charged during the first year of the administration of an Estate.
This fee normally will be charged against income, but may be charged against capital or apportioned between income and capital if considered appropriate;
2. Investment advice is normally provided by Kleinwort Grieveson Investment Management in accordance with its then current scale of charges and commissions, subject in appropriate cases to agreed reductions. Such charges are usually debited to capital;
3. A charge may also be made for any special work involved in the preparation of tax computations, valuation of assets, accounts, litigation and for any unusual transactions or services rendered, including attendances outside the Company's office.
DISTRIBUTION FEE
A fee commensurate with the responsibility and work involved will be payable in respect of any distribution of capital from a Trust and upon the Company ceasing to be a trustee.
All fees quoted are exclusive of VAT.
Note.* The Company monitors the time and levels of expertise involved in the administration of each Trust or Estate and where appropriate does, at its discretion, apply appropriate concessions to the scale fees."
Further changes were made in June 1993, but it is unnecessary to refer to them in detail, save to observe that in para. 1, under Management Fees, a new sentence appears as a second sentence:
"A proportion of the standard fee is charged for periods of less than six months."
The issue between the parties, as identified by the claim form, is:
"�whether upon the true construction of Clause 12A of the settlement and of the published terms of the defendant (a) the defendant has, since December 1978, been entitled to charge remuneration not exceeding the remuneration authorised by its published terms from time to time with only such moderations or concessions, if any, as the defendant decides upon in its absolute, uncontrolled and unconstrained discretion; or (b) whether the discretion of the defendant in moderating its charges or granting concessions concerning them has been constrained in some way, and, if so, in what way."
I should emphasise that there is no material before me on the question whether the defendant has, or has not, in fact monitored the time and level of expertise in relation to the administration of the trust; nor is there any material before me as to whether the defendant has, or has not, moderated the scale fees (to use the 1978 wording), or applied appropriate concessions (to use the later wording) in the case of this, or any other, trust, save that I was told that there is no dispute between the parties as to the practice of the defendant since, I think, 2002 as a result of an accommodation which had been reached between them.
The claimants' case is that the note is part of the Terms & Conditions to which the defendant has voluntarily subjected itself, and observance of which conditions its entitlement to be remunerated out of the trust fund and its income pursuant to the charging clause in the settlement. As put by Miss Proudman on their behalf, the discretion referred to in the note is a discretion vested in the defendant as a trustee, and one which it is therefore bound to consider exercising, and in relation to the exercise, or non-exercise, of which the beneficiaries have an entitlement on established principles to call it to account. It is, on that submission, a power identified by Mr. Justice Warner in Mettoy Pension (Trustees) Ltd. -v- Evans [1990] 1 WLR, 1587 at 1613�1614 as a Category 2 power. The relevant passage in Mr. Justice Warner's decision which contains that classification begins on p.1613G:
"In this classification [that was a classification which had been advanced to him by Mr. Robert Walker, QC, as he then was, on behalf of the trustees], category 1 comprises any power given to a person to determine the destination of trust property without that person being under any obligation to exercise the power or preserve it. Typical of powers in this category is a special power of appointment given to an individual where there was a trust in default of appointment. In such a case the donee of the power owes a duty to the beneficiaries under that trust not to mis-use the power, but he owes no duty to the object of the power. He may therefore release the power but he may not enter into any transaction that would amount to a fraud on the power, a fraud on the power being a wrong...
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