Cardigan v Moore & Anor

The Savernake Forest estate (“the Estate”) in Wiltshire has been owned by the family of the Claimant, the Earl of Cardigan, for the best part of a thousand years. I gather that the Estate was originally granted to an ancestor of the Earl shortly after the Norman Conquest. Over the succeeding centuries, it has been passed down through the generations.

The Estate nowadays includes more than a dozen houses. The family moved out of the largest of them, a mansion called Tottenham House, at the end of the Second World War. At least two of the other houses are, however, occupied by members of the family. The Earl moved into one of the houses, Savernake Lodge, with his then wife in about 1981, and he continues to live there. An uncle of the Earl occupies Little Lye Hill, another of the properties.

Over time, the family has built up a valuable collection of paintings. The paintings are mainly of ancestors. A very large painting referred to as the “Unnamed Landscape” is of Tottenham House. The earliest of the paintings date back some 500 years. Many of the paintings have in recent years been housed in Savernake Lodge.

The present proceedings are mostly concerned with ownership of the paintings. The Defendants (“the Trustees”), who are the trustees of family trusts, wish to sell some of them. They take the view that financial pressures on the Estate make that necessary. However, the Earl, who does not accept that paintings need to be sold, claims that the Trustees are not legally entitled to sell them without his consent. He argues that the paintings belong to a partnership of which he is a partner and that many of them were anyway leased to him with Savernake Lodge in 1999. The latter contention has prompted the Trustees to seek to have the lease in question set aside on the basis that the “self-dealing rule” applies.

At the end of the 1940s, the Estate was held by a company owned by the Earl’s father (later to become the 8^th Marquess of Ailesbury) and grandfather (the 7^th Marquess). The former was beneficially entitled to 49% of the shares and the latter to the remaining 51%.

Between 1949 and 1951, the company was replaced by a partnership. The company was put into members’ voluntary liquidation, and it was resolved that its assets should be divided between its members in specie. On 29 September 1951, the 7^th and 8^th Marquesses entered into a partnership agreement (which, unfortunately, cannot be found) under which, it appears, the 7^th Marquess was to have a 51% share and the 8^th Marquess a 49% share (as had been the case with the company). On the same day, the Estate was conveyed by deed (“the 1951 Conveyance”) to the 7^th and 8^th Marquesses to be held on trust for sale as part of their partnership property. It is to be inferred, in my view, that the partnership property also included (or came to include) the family’s collection of paintings and other chattels. That conclusion is supported by, among other things, the following description of the partnership assets in a schedule to the deed establishing the trust mentioned in paragraph 8 below:

“which partnership assets include the pictures and portraits currently hanging at Sturmy House Savernake Lodge Little Lye Hill and Flat 2 Tottenham Stable Block Savernake Forest … and Littlecote House Berkshire the estate silver currently stored at Sturmy House and Savernake Lodge … and such other chattels as were owned by the Seventh Marquess of Ailesbury at the date of his death”.

By the early 1960s, there had been a generational shift. An agreement dated 9 July 1963 provided that the partnership was in future to be carried on by (a) the 8^th Marquess and (b) trustees for the present Earl (who had been born on 12 November 1952). The 8^th Marquess now had a 51% share, while his son’s trustees had a 49% share.

In 1987 there was another generational shift. The 49% partnership share which had been held on trust for the Earl was appointed to him absolutely on 22 May 1987. At the same time, the 8^th Marquess assigned assets including his 51% share in the partnership to Mr David Shorey (then a partner in the firm of solicitors which has since become HMG Law LLP) and Mr Brian Butler on trusts for the Earl’s children (“the 1987 Trust”). An agreement of the same date provided that the partnership was henceforth to be carried on by the Earl on the one hand and the trustees of the new trust on the other. The assets of the partnership were stated to belong as to 49% to the Earl and 51% to the trustees of the 1987 Trust. The Earl replaced Mr Butler as a trustee of the trusts affecting the Estate.

The 1987 Trust contains a power to make appointments in favour of the Earl’s children, Viscount Savernake (born on 11 February 1982) and Lady Catherine Brudenell-Bruce (born on 25 November 1984). Had the Earl had other children before 27 May 2011, they would also have become potential beneficiaries, but in the event the class closed on that date. Viscount Savernake stands to become absolutely entitled to the trust property on attaining the age of 40 years.

In 1994, Mr Butler retired as a trustee of the 1987 Trust, and the Earl was appointed in his place. As a result, the Earl and Mr Shorey became the only trustees of both the 1987 Trust and the trusts affecting the Estate. A new partnership agreement was entered into reflecting the change of trustee. The agreement stated that the partnership was now to be carried on by, on the one hand, the Earl and, on the other, Mr Shorey and the Earl as trustees of the 1987 Trust.

By a lease dated 16 March 1999 (“the Lease”), Savernake Lodge was demised to the Earl for a 20-year term at a peppercorn rent. At the time, the Earl was living in Savernake Lodge with his then wife and his two children (aged respectively 17 and 14).

In 2003, Mr Shorey retired as a trustee of the Estate and the 1987 Trust. He was replaced as a trustee by Mr Richard Ford, a partner in the firm of solicitors that has become Thrings.

In 2007 Mr Ford instituted proceedings in which he alleged that the Earl had been guilty of breach of trust and sought his removal as a trustee. Viscount Savernake and Lady Catherine Brudenell-Bruce were also parties to the litigation. The Earl denied (and still denies) the allegations against him.

The proceedings were compromised on the basis of an agreement set out in the schedule to a Tomlin order made by Kitchin J on 21 October 2008 (“the Tomlin Order”). The agreement provided for the Trustees to replace the Earl and Mr Ford as trustees of the Estate, and for the Second Defendant, Mr Wilson Cotton, also to take over from the Earl as a trustee of the 1987 Trust. The Trustees were thus to be the only trustees of the Estate, and Mr Ford and Mr Cotton the only trustees of the 1987 Trust. The Earl and Mr Ford were to execute deeds of retirement and appointment and (under paragraph 5(c) of the schedule) “all such other documents as shall be necessary to ensure the vesting of the property comprised in the Settlement [i.e. the 1987 Trust] and trusts of Land [i.e. the Estate] in Mr Cotton and/or Mr Moore”. The schedule went on to refer to the partnership. Paragraphs 7 and 8 provided as follows:

“7.

The 1^st Defendant [i.e. the Earl] shall within 14 days of the date of this Order account for all moneys due to the Settlement or to the partnership carried on between the Claimant [i.e. Mr Ford] and the 1^st Defendant in their capacity as trustees of the Settlement [i.e. the 1987 Trust] and of the Land [i.e. the Estate] and the 1^st Defendant as absolute owner of 49% of the Land under the terms of a Partnership Agreement dated 29 September 1951 as amended (‘the Partnership’) on a full and proper basis to the satisfaction of Messrs Cox & Hinkins, accountants for both the Settlement and the Partnership.

8.

The Partnership shall as soon as reasonably practicable after the appointment of Mr Cotton and Mr Moore be wound up and after payment of all its debts and subject to any necessary accounting between the partners, its assets shall be vested in the trustees of the Land to hold as to 51% for the trustees of the Settlement and as to 49% for the 1^st Defendant as tenants in common”.

Two deeds of retirement and appointment of trustees were executed on 3 November 2008. One related to the 1987 Trust, the other to the Estate. The latter (“the 2008 Deed”) was executed by the Earl, Mr Ford, Mr Cotton and Mr Moore. After defining “the Trusts” to refer to those of the 1951 Conveyance, the recitals to the deed explained that it was “intended that the property now in the Trusts” was to be transferred to or under the control of the Claimants as new trustees and that “[t]he Assets of the Trusts are identified in the Second Schedule”. Clause 1(i) of the deed provided for Mr Cotton and Mr Moore to be appointed as trustees in place of the Earl and Mr Ford. Clause 1 then continued as follows:

“(ii)

The Retiring Trustees [i.e. the Earl and Mr Ford] confirm and acknowledge that the assets of the Trust that are either vested in them or physically under Trust control are identified in the Second Schedule comprising … the [real] property assets in Part 1, the pictures in Part 2, the silver and chattels in Part 3 and furniture in Part 4.

(iii)

The New Trustees [i.e. the Claimants] hereby acknowledge receipt of the assets specified in the Second Schedule in respect of which property passes by physical delivery”.

As indicated in clause 1(ii), Part 1 of the Second Schedule to the 2008 Deed contained a “List of Real Property”. Part 2 comprised a long list of pictures, divided between those described as being “on loan to Littlecote House”, those said to be “hanging at Savernake Lodge” and a smaller number stated to be “hanging at Tottenham Park”. Part 3 was concerned with “Silver and Miscellaneous Items”. Part 4 dealt with furniture, the “provenance” of which was in each case given as “Savernake Lodge, Marlborough”.

On 17 March 2009 the Earl and his wife were divorced. A house on the Estate was transferred to the Earl’s wife as part of the divorce settlement, the property having been appropriated to the Earl’s share under the trusts affecting the Estate.

Between 2005 and 2011 the Earl spent much of his time in the United States, where he received treatment for depression. He returned to this country on a permanent basis in April 2011.

The following issues arise:

I shall consider these issues in turn. The arguments were presented very attractively on both sides.

It is the Earl’s case that the Paintings were assets of the Partnership before 2008 and that they remain so. Mr Malcolm Bishop QC, who appeared for the Earl with Mr Seth Cumming, argued that paragraph 8 of the schedule to the Tomlin Order provided for assets of the Partnership to vest in the Trustees only once it had been wound up and that that has not yet happened. Moreover, the 2008 Deed did not (so it was submitted) purport to vest in the Trustees anything beyond the property comprised in the 1951 Conveyance. The 2008 Deed did not mention the Partnership at all; the recitals recorded an intention to transfer “the property now in the Trusts”, and the “Trusts” in question were those of the 1951 Conveyance; clause 1(ii) distinguished between assets vested in the “Retiring Trustees” and those merely “physically under Trust control”, and assets of the Partnership fell within the latter category; and clause 1(iii) contemplated the passing of property by physical delivery, and no physical delivery of the Paintings took place.

The Trustees, on the other hand, maintain that the 2008 Deed served to vest the Paintings in the Trustees. According to Miss Penelope Reed QC, who appeared for the Trustees with Mr Thomas Entwistle, it is apparent from the agreement incorporated in the Tomlin Order that it was intended that all relevant assets, including Partnership assets, should vest in the Trustees, and the 2008 Deed gave effect to that intention. The idea was, Miss Reed submitted, to bring to an end the “rather odd structure of the partnership running alongside the trust albeit involving the same people” (to quote from the skeleton argument served on behalf of the Trustees). The result, Miss Reed argued, is that the Paintings, like the Estate, came to be held by the Trustees as to 51% for the 1987 Trust and 49% for the Earl, in accordance with paragraph 8 of the schedule to the Tomlin Order. Further, the Earl is (Miss Reed suggested) estopped from suggesting otherwise in consequence of the recitals to the 2008 Deed.

The first question must, I think, logically be whether the Earl is so estopped. It has long been the law that a statement in a deed is capable of giving rise to an estoppel. Lord Maugham summarised the principle in this way in Greer v Kettle [1938] AC 156 (at 171):

“Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies and therefore as not admitting any contradictory proof”.

In the course of the nineteenth century, the principle was extended to recitals to deeds. The circumstances in which an estoppel can arise from a recital were discussed in Greer v Kettle. Lord Russell of Killowen there said (at 166-167):

“Later decisions, however, put the matter on what seems to be the sounder basis. In Young v. Raincock Coltman J. said: ‘Where it can be collected from the deed, that the parties to it have agreed upon a certain admitted state of facts as the basis on which they contract, the statement of those facts, though but in the way of recital, shall estop the parties to aver the contrary.’ So, too, in Stroughill v. Buck a recital in a deed between the plaintiff and defendant that money had been advanced by the defendant to one Ogle was held to be the language of the defendant only and not to estop the plaintiff from proving that no money had been so advanced: and it was stated that where a recital is intended to be an agreement of both parties to admit a fact it estops both parties; but it is a question of construction whether the recital is so intended”.

The position, accordingly, is that, if a recital contains a statement which a party to the deed is to be taken to have agreed to admit as true, the statement is binding on him.

In the present case, one of the recitals to the 2008 Deed stated clearly and unambiguously that “[t]he Assets of the Trusts are identified in the Second Schedule”. Further, the Earl is, in my view, to be taken to have agreed to admit the truth of the recital. That that was the intention is, Miss Reed argued, confirmed by an email of 20 October 2008 to the solicitor then acting for the Earl in which the solicitor acting for Mr Ford said that he had “decided that it would be sensible for all concerned and not least the Trustees to have a complete schedule of assets that are actually held by the present trustees appended to the Deeds”. Even, however, without reference to such materials (which strike me as inadmissible), it can be inferred that the recital was intended to settle whether the items listed in the Second Schedule were to be considered to be “Assets of the Trusts”. It follows that I agree with Miss Reed that the Earl is estopped from arguing otherwise and, hence, from contending that the Paintings are now partnership property.

In any case, I consider that, as a matter of construction, the 2008 Deed served to transfer the Paintings to the Trustees. The interpretation of a document involves looking at the meaning that it would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties (see e.g. Lord Hoffmann’s speeches in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 and Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, at 912-913). Here, it seems to me that a reasonable person would understand the 2008 Deed to be transferring all the assets listed in the Second Schedule, including the Paintings, to the Trustees. The reasons include these:

In all the circumstances, the Paintings no longer, in my judgment, represent partnership property. They are now held by the Trustees on the basis for which paragraph 8 of the schedule to the Tomlin Order provided, viz. as to 51% for the 1987 Trust and as to 49% for the Earl.

It is the Earl’s case that many of the Paintings are included in the Lease. The Paintings in question were taken to Savernake Lodge from elsewhere on the Estate when the Earl moved into the property in the early 1980s. The 8^th Marquess explained in a witness statement:

“I was aware that my son felt in the same way about the family heirlooms – especially the collection of family paintings – as my father did, and so we agreed that my son should permanently take the bulk of the family collection to Savernake Lodge with him, excepting the very largest canvasses that had been particularly painted for the halls in the enormous Tottenham House, which were therefore too large to get in the front door of Savernake Lodge”.

Once at Savernake Lodge, larger Paintings were secured by means of large heavy-duty hooks drilled into the walls. Smaller Paintings were hung from steel hooks hammered into the walls. An extensive burglar alarm system was installed to protect the collection. The main room was upholstered in such a way as to match the “Unnamed Landscape”. The Earl’s mother recalled in her witness statement that “[t]he fabric selection for the curtains and sofas were all designed to echo the soft orange and light green colours of the Unnamed Landscape”.

Under clause 1 of the Lease, Savernake Lodge is demised to the Earl together with, among other things, “the use of all the Landlords’ furniture fixtures and fittings in or on the premises”. Mr Bishop relied on each of the words: “furniture”, “fixtures” and “fittings”.

With regard to the first of the words, the Concise Oxford Dictionary defines “furniture” as “the movable articles that are used to make a room or building suitable for living or working in, such as tables, chairs or desks”. As this definition indicates, the word “furniture” nowadays connotes items such as tables, chairs and desks which have a function other than decoration. To my mind, artwork displayed on a room’s walls, which is essentially decorative, would not normally be regarded as furniture. Paintings might perhaps be said to help to furnish a room. I do not think, however, that they would naturally be considered furniture.

Turning to “fixtures”, there was little or no disagreement between the parties as to the relevant legal principles. It was common ground that, when considering whether a chattel has become a fixture, regard is to be had to (a) the degree to which the chattel has become annexed to the land and (b) the purpose of such annexation. The law was explained by Blackburn J in these terms in Holland v Hodgson (1872) LR 7 CP 328 (at 334-335):

“There is no doubt that the general maxim of the law is, that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz., the degree of annexation and the object of the annexation. When the article in question is no further attached to the land, then by its own weight it is generally to be considered a mere chattel; see Wiltshear v. Cottrell, and the cases there cited. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land: see D'Eyncourt v. Gregory. Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder's yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to shew that it was never intended to be part of the land, and then it does not become part of the land. The anchor of a large ship must be very firmly fixed in the ground in order to bear the strain of the cable, yet no one could suppose that it became part of the land, even though it should chance that the shipowner was also the owner of the fee of the spot where the anchor was dropped. An anchor similarly fixed in the soil for the purpose of bearing the strain of the chain of a suspension bridge would be part of the land. Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel.”

Rather more recently, Scarman LJ said this about the law in Berkley v Poulett [1977] 1 EGLR 86 (at 88-89):

“If the purpose of the annexation be for the better enjoyment of the object itself, it may remain a chattel, notwithstanding a high degree of physical annexation. Clearly, however, it remains significant to discover the extent of physical disturbance of the building or the land involved in the removal of the object. If an object cannot be removed without serious damage to, or destruction of, some part of the realty, the case for its having become a fixture is a strong one. The relationship of the two tests to each other requires consideration. If there is no physical annexation there is no fixture. Quicquid plantatur solo solo cedit. Nevertheless an object, resting on the ground by its own weight alone, can be a fixture, if it be so heavy that there is no need to tie it into a foundation, and if it were put in place to improve the realty. Prima facie, however, an object resting on the ground by its own weight alone is not a fixture: see Megarry and Wade, p 716. Conversely, an object affixed to realty but capable of being removed without much difficulty may yet be a fixture, if, for example, the purpose of its affixing be that “of creating a beautiful room as a whole” (Neville J in In Re Whaley [1908] 1 Ch 615 at p 619). And in the famous instance of Lord Chesterfield's Settled Estates [1911] 1 Ch 237 Grinling Gibbons carvings, which had been affixed to a suite of rooms 200 years earlier, were held to be fixtures. Today so great are the technical skills of affixing and removing objects to land or buildings that the second test is more likely than the first to be decisive. Perhaps the enduring significance of the first test is a reminder that there must be some degree of physical annexation before a chattel can be treated as part of the realty”.

As Miss Reed pointed out, the present case has similarities to Berkley v Poulett. That case concerned, among other things, whether some pictures in an ancestral home were fixtures and so had been sold with the house. Each of the pictures in question had been “fixed into the recesses of a panelled wall” (see 87). The Court of Appeal held, by a majority, that the pictures were not fixtures. Scarman LJ explained his thinking in these terms (at 89):

“It is enough to say that the pictures were firmly fixed and that their removal needed skill and experience if it were to be done without damage to the wall and panelling. Certainly they were firmly enough fixed to become fixtures if that was the object and purpose of their affixing. But, if ordinary skill was used, as it was, in their removal, they could be taken down, and in the event were taken down, without much trouble and without damage to the structure of the rooms. The decisive question is therefore as to the object and purpose of their affixing. Pictures had hung in the two rooms for centuries. ‘The Return’ had been in the anteroom for a very long time—perhaps ever since it was painted. The 7th Earl decided in the early part of the 20th century to install in the two rooms the panelling and so designed it that there were recesses for pictures. It is this feature which lends plausibility to the suggestion that the pictures, fitted into the recesses left for them, were not to be enjoyed as objects in themselves but as part of the grand architectural design of the two rooms. The Vice-Chancellor rejected this view. So do I. When the panelling was installed in the two rooms the design was either panelled walls with recesses for pictures to be enjoyed as pictures, or rooms having walls which were a composite of panelling and pictures: in other words, the pictures were to be part of a composite mural. I think the former was the truth. The panelling was Victorian, the pictures a heterogeneous collection”.

In the course of his judgment, Stamp LJ, the other member of the majority, remarked (at 95):

“Framed pictures are hung on or fixed to the walls for their better enjoyment as pictures, however much they may beautify the rooms in which they are found”.

He also said (again at 95):

“Framed oil paintings in my judgment are, and remain, chattels whether they be hung upon, or over, or screwed by mirror plates to, the panelling of a room, or hung from, over, or screwed by mirror plates to, the walls of an unpanelled room”.

Mr Bishop stressed that, whereas the pictures at issue in Berkley v Poulett were a “heterogeneous collection” (in Scarman LJ’s words), the Paintings are all associated with the Earl’s family. On the other hand, the Paintings do not seem to have been as firmly fixed to the walls as those with which the Court of Appeal was concerned in Berkley v Poulett. Moreover, the Paintings have not been in Savernake Lodge as long as the pictures in dispute in Berkley v Poulett had been in place. While the Paintings have a strong association with the Earl’s family, the link with Savernake Lodge is far weaker.

In all the circumstances, it appears to me that the Paintings are not fixtures. As is apparent from Stamp LJ’s comments in Berkley v Poulett, framed paintings do not usually constitute fixtures, and there is no good reason for the position to be different with the Paintings. They were housed in Savernake Lodge. They never became part of the building. That, in the case of the “Unnamed Landscape”, the colour scheme of a room was based on a painting does not, in my view, alter the position.

Moving on to the word “fittings”, it was suggested that clause 2.26 casts light on what the Lease was intended to comprise. By that clause, the Earl covenanted:

“At the expiration or sooner determination of the said term quietly to yield up the demised premises together with all furniture fixtures and fastenings that now are or which during the said term shall be affixed or fastened thereto (except tenant’s fixtures) in such condition as shall be in accordance with the covenants on the part of the Tenant herein contained and in case any of the said fixtures and fittings shall be missing broken damaged or destroyed forthwith to replace them with others of a similar kind and of equal value and to make good any damage caused to the demised premises by the removal of the Tenant’s fixtures fittings furniture and effects”.

Mr Bishop argued that clause 2.26 uses “fastenings” and “fittings” interchangeably (speaking of “furniture fixtures and fastenings” and “the said fixtures and fittings”) and that the reference in clause 1 to “fixtures and fittings” should therefore be read so as to include chattels which were “fastenings” or “fastened” to Savernake Lodge. The Paintings (it was submitted) fall comfortably within “fastenings” and so are also “fittings”.

On balance, however, the preferable view is, I think, that the Paintings do not represent “fittings”. The word “fittings” is not a legal term of art (see Woodfall, “Landlord and Tenant”, at paragraph 13.131). It is often used in combination with “fixtures” (as in “fixtures and fittings”). That was the case in Berkley v Poulett (see [1977] 1 EGLR 86 at 88), but no one appears to have considered the addition of “fittings” important. Nor does reference to the Oxford English Dictionary suggest that the word “fittings” extends the scope of clause 1 in a relevant way. The Dictionary defines “fittings” as “Fixtures, apparatus, furniture”. Clause 1 makes separate reference to “fixtures” and “furniture”, and the Paintings would not normally be regarded as “apparatus”. Further, the word “fitted” would not naturally apply to the Paintings. A carpet or cupboard might be “fitted”. The Paintings were surely hung rather than “fitted”. The value of the Paintings is also, to my mind, of significance. Had the parties intended the Lease to extend to such valuable items, they might have been expected to refer to them specifically, not to rely on the somewhat vague word “fittings”.

With regard to clause 2.26, the word “fastenings” is not obviously apt to refer to the Paintings. The word would, I should have thought, refer more naturally to an attachment than to the thing attached. On that basis, the chains used to secure Paintings might be “fastenings” but the Paintings themselves would not be. Alternatively, it might be said that the meaning of “fastenings” should be determined by reference to “fittings” rather than the other way around. In any case, the “furniture fixtures and fastenings” which are to be yielded up need not correspond precisely with the “furniture fixtures and fittings” demised. It makes sense that the Earl should be obliged to yield up chattels in Savernake Lodge belonging to the landlords regardless of whether they were encompassed by clause 1.

Accordingly, the Lease does not, in my judgment, extend to any of the Paintings. They do not, as it seems to me, fall within the words “furniture fixtures and fittings”, as those words are used in clause 1 of the Lease.

It is the Trustees’ case that they are therefore entitled to have the Lease set aside on the basis of the self-dealing rule.

The self-dealing rule is (in the words of Megarry V-C in Tito v Waddell (No. 2) [1977] Ch 106, at 241) that:

“if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction”.

The rule “is based, not only upon the consideration that a trustee cannot be both seller and buyer … but also on the wider principle that a trustee must not put himself in a position where there is a conflict or possible conflict between his interest and duty” (Lewin on Trusts, 18^th edition, at paragraph 20-63; see also e.g. Wright v Morgan [1926] AC 788, at 797). The rule is “a severe one which applies however honest the circumstances, even though the price is fair and irrespective of whether any profit is made by the trustee” (Lewin, at paragraph 20-63). The rule extends, moreover, to the grant of leases (see Lewin, at paragraph 20-66, Ex p. Hughes (1802) 6 Ves. Jun. 617 and Walker v Walker [2010] WTLR 1617, at paragraphs 232-237).

The Trustees maintain that the rule means that they are entitled to have the Lease set aside regardless of its fairness. They further argue, however, that the Lease was in fact unduly favourable to the Earl. The Lease confers a 20-year term at a peppercorn rent while imposing on the landlords obligations to keep Savernake Lodge in repair and pay outgoings in respect of it (see clause 3). Miss Reed noted that, when the Lease was granted, Viscount Savernake and Lady Catherine Brudenell-Bruce, the beneficiaries under the 1987 Trust, were still minors and living with their parents at Savernake Lodge. She pointed out, however, that Viscount Savernake and Lady Catherine Brudenell-Bruce will be 37 and 34 respectively by the time the term granted by the Lease comes to an end. She argued that, in the circumstances, it could not have been in the interests of Viscount Savernake or Lady Catherine Brudenell-Bruce for Savernake Lodge to be let on the terms of the Lease for such a long period.

The Trustees’ counterclaim asks, among other things, for an order requiring the Earl to account for loss suffered as a result of the grant of the Lease. In the course, however, of submissions, Miss Reed explained that the Trustees were not suggesting that the Earl should make any payment in respect of past occupation, especially since Viscount Savernake continued to live at Savernake Lodge until quite recently (2010). She also said that, while they might wish to change the terms on which the Earl occupies Savernake Lodge, the Trustees are not intending to evict him from the property.

Mr Bishop advanced a number of arguments against the Lease being set aside. He submitted, first, that the Earl had not chosen to place himself in a position of conflict but had been put there by the settlors and the terms of the trusts affecting the Estate; secondly, that the beneficiaries of the trusts of the Estate had consented to the Lease; thirdly, that the Court should decline to set aside the Lease by reason of laches and acquiescence; and, lastly, that the Court should in any event decline to set aside the Lease in the exercise of its discretion.

Mr Bishop sought support for the first of these points in Sargeant v National Westminster Bank plc (1990) 61 P&CR 518. In that case, a testator had both appointed his three children as executors and let to them farms he owned. The farms were farmed by the children in partnership. Some time after the testator’s death, one of the children, Charles, also died, and the surviving children then exercised an option contained in the partnership deed to acquire Charles’ share in the partnership. That meant that the surviving children became the only tenants of farms of which they were the legal owners and in which they and Charles’ estate were all beneficially interested. The surviving children now wished to sell the farms, but it was argued on behalf of Charles’ estate that they were not entitled to do so subject to their tenancies since their interests as tenants would conflict with their duties as trustees. However, Nourse LJ (with whom Bingham LJ and Sir George Waller agreed) said this (at 523):

“It cannot be doubted that the trustees have ever since been in a position where their interests as tenants may conflict with their duties as trustees to the estate of Charles. But the conclusive objection to the application of the absolute rule on which [counsel for Charles’ personal representatives] relies is that it is not they who have put themselves in that position. They have been put there mainly by the testator’s grant of the tenancies and by the provisions of his will and partly by contractual arrangements to which Charles himself was a party and of which his representatives cannot complain. The administrators cannot therefore complain of the trustees’ continued assertion of their rights as tenants”.

Mr Bishop submitted that the present case is analogous. The Earl, he said, had been placed in his position by the former settlors and trustees of the trusts affecting the Estate:

“who permitted [the Earl] to occupy Savernake Lodge from 1982, who appointed him as partner of the 1951 Partnership in 1987 …, who assigned [him] an interest in the 1951 Trust in 1994 …, and who then appointed him as trustee in 1994”.

It seems to me, however, that Sargeant v National Westminster Bank plc was rather different from the present case. The Earl was not originally a trustee of either the Estate or the 1987 Trust; in fact, the Earl had not even been born at the date of the 1951 Conveyance. The potential for conflict between interest and duty did not arise until the Earl was appointed as a trustee of the Estate and the 1987 Trust, in 1987 and 1994 respectively. The possibility of conflict thus arose from the Earl’s decision to accept appointment as a trustee. It was neither something imposed on the Earl by the settlors of the trusts nor an inevitable consequence of the arrangements they established.

Turning to the second argument (that the beneficiaries of the trusts of the Estate had consented to the Lease), Mr Bishop submitted that the beneficiaries in question were (a) the Earl in a personal capacity and (b) the Earl and Mr Shorey as the then trustees of the 1987 Trust. Since the Earl and Mr Shorey were the parties to the Lease, they clearly knew of the transaction and approved it.

One answer to this contention is, I think, to be found in the self-dealing rule itself. In re Thompson’s Settlement [1986] Ch 99 is significant in this context. In that case, farm estates owned by a trust referred to as the “grandchildren’s settlement” were taken over by entities (a partnership and a company) associated with trustees of the trust on the assumption that leases of the estates had been validly assigned. It was argued that the self-dealing rule had no application because “the only dealings analogous to the sale of property were the assignments or purported assignments of the leases which were never themselves trust property” (see 115). However, Vinelott J decided otherwise. He explained as follows (at 115):

“It is clear that the self-dealing rule is an application of the wider principle that a man must not put himself in a position where duty and interest conflict or where his duty to one conflicts with his duty to another: see in particular the opinion of Lord Dunedin in Wright v. Morgan [1926] A.C. 788 …. The principle is applied stringently in cases where a trustee concurs in a transaction which cannot be carried into effect without his concurrence and who also has an interest in or owes a fiduciary duty to another in relation to the same transaction. The transaction cannot stand if challenged by a beneficiary because in the absence of an express provision in the trust instrument the beneficiaries are entitled to require that the trustees act unanimously and that each brings to bear a mind unclouded by any contrary interest or duty in deciding whether it is in the interest of the beneficiaries that the trustees concur in it”.

With regard to the facts of the case before him, Vinelott J said (at 116):

“In the instant case the concurrence of the trustees of the grandchildren's settlement was required if the leases were to be assigned to or new tenancies created in favour of the new company and the partnership. The beneficiaries were entitled to ask that the trustees should give unprejudiced consideration to the question whether they should refuse to concur in the assignments in the expectation that a surrender of the leases might be negotiated from the old company and the estates sold or let on the open market.”

The self-dealing rule can accordingly apply where trustees merely concur in a transaction.

In Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862, Knox J distinguished In re Thompson’s Settlement on the basis that “[w]here a limited company is involved on one side there is … a less rigid line” (see 896). In the present case, however, it is suggested on the Earl’s behalf that the trustees of the 1987 Trust (namely, the Earl and Mr Shorey) consented to the grant of a lease, not to a limited company, but to one of themselves. In those circumstances, it seems to me entirely appropriate that the self-dealing rule should apply. As both the prospective lessee and a trustee of the 1987 Trust, the Earl will have been in a position of real conflict as regards any decision to consent to the grant of the Lease.

Further, it appears from the decision of the Court of Appeal in Pitt v Holt [2011] EWCA Civ 197, [2011] 3 WLR 19 that trustees’ acts can be voidable if, in breach of duty, they failed to take relevant matters into account. Lloyd LJ said this in paragraph 127:

“The cases which I am now considering concern acts which are within the powers of the trustees but are said to be vitiated by the failure of the trustees to take into account a relevant factor to which they should have had regard—usually tax consequences—or by their taking into account some irrelevant matter. It seems to me that the principled and correct approach to these cases is, first, that the trustees’ act is not void, but that it may be voidable. It will be voidable if, and only if, it can be shown to have been done in breach of fiduciary duty on the part of the trustees. If it is voidable, then it may be capable of being set aside at the suit of a beneficiary, but this would be subject to equitable defences and to the court's discretion. The trustees' duty to take relevant matters into account is a fiduciary duty, so an act done as a result of a breach of that duty is voidable.”

In deciding whether to consent to the Lease as trustees of the 1987 Trust, it must have been incumbent on the Earl and Mr Shorey to consider whether the Lease was in the interests of the beneficiaries of that trust. I do not think that question was in fact addressed in any meaningful way by either the Earl or Mr Shorey.

The Lease was not the Earl’s idea and he had no great enthusiasm for it. As he explained in evidence, he could never see any point in the Lease, but went along with it because Mr Shorey favoured it. It is doubtless the case that the Earl was, in general terms, concerned about the interests of future generations. I am sure, too, that the Earl did not consider the Lease to be contrary to the interests of the beneficiaries of the 1987 Trust. On the other hand, I do not believe that the Earl actually asked himself whether the Lease was in the interests of those beneficiaries.

As far as Mr Shorey was concerned, the Estate was a family estate available to members of the family. Leases had been granted to other family members in the past, and it was appropriate for the Earl’s longstanding occupation of Savernake Lodge to be formalised in a similar way. The self-dealing rule did not cross Mr Shorey’s mind at all given the nature of the estate and what had happened before. The Lease was “par for the course”. Mr Shorey suggested, moreover, that the Earl’s children would have been concerned about their parents being secure in what was the family home.

In my judgment, however, Mr Shorey, like the Earl, did not give proper consideration to the separate interests of the beneficiaries of the 1987 Trust. There is no question of his having thought that he was acting against the interests of those beneficiaries. He simply did not focus on their interests. Had he done so, he would, in my view, have been bound to conclude that the Lease was not in fact in the interests of the 1987 Trust.

It thus seems to me that, if and in so far as consent to the Lease was given on behalf of the 1987 Trust, it is vitiated by failure to take relevant considerations into account as well as under the self-dealing rule.

In all the circumstances, I do not think the Earl can rely on the concurrence of himself and Mr Shorey in the Lease as an answer to the Trustees’ challenge to it. One of the Trustees, Mr Cotton, is one of the current trustees of the 1987 Trust as well as a trustee of the Estate. The other trustee of the 1987 Trust, Mr Ford, is not a party to the proceedings, but only because, when an application was made to join him, the Chief Master considered that it was preferable for Mr Ford to be given notice of the claim under CPR 19.8A. Mr Ford has, moreover, confirmed in his witness statement that he supports the Trustees’ claim to have the Lease set aside.

Mr Bishop pointed out that no beneficiary of the 1987 Trust is a party to the proceedings. I do not think that matters, however. It seems to me that it is open to the trustees of the trust to challenge any consent their predecessors may have given to the Lease (compare e.g. In re Benett [1906] 1 Ch 216, especially at 230-231, Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072, at 1074, and Young v Murphy [1996] 1 VR 279, particularly the judgment of Brooking J).

With regard to laches and acquiescence, Sir Barnes Peacock referred to the doctrine of laches in these terms in Lindsay Petroleum Co v Hurd (1873-74) LR 5 PC 221 (at 239):

“Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

In Frawley v Neill [2000] C.P. Rep. 20, Aldous LJ said that the Court should adopt “a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right”. In Fisher v Brooker [2009] UKHL 41, [2009] 1 WLR 1764, Lord Neuberger expressed the opinion (at paragraph 64) that “some sort of detrimental reliance is usually an essential ingredient of laches”.

Mr Bishop argued that, on the facts of the present case, it would be unconscionable to allow the Trustees to invoke the self-dealing rule. He pointed out that, prior to these proceedings, there had been no challenge to the Lease even though it was entered into more than 12 years ago, five people have been trustees of the Estate during those years and the present trustees have held office since November 2008. Mr Bishop also observed, among other things, that trustees of the Estate have relied on the Lease to obtain access to Savernake Lodge for insurance purposes and have paid council tax on the property in accordance with the Lease’s terms. Mr Bishop noted, too, that avoiding the Lease would be to the manifest prejudice of the Earl if he were called on to make any payment in respect of his occupation of Savernake Lodge since 1999.

On balance, however, I do not consider that the Trustees are precluded by laches or acquiescence from invoking the self-dealing rule. So far as length of delay is concerned, the Earl was himself a trustee of both the Estate and the 1987 Trust until November 2008. That being so, I do not consider that the Earl is entitled to rely on the trustees’ failure to challenge the Lease up to this point. As a trustee, the Earl shares responsibility for the fact that nothing was done to impugn the Lease. Mr Ford has, moreover, explained that the reason he took no steps to set aside the Lease while he was a trustee of the Estate was that his co-trustee was the Earl. In any event, I cannot see how the Earl can have been prejudiced by the lapse of time. There being no suggestion that the Earl should make any payment in respect of past occupation of Savernake Lodge, the delay will, if anything, have been to his benefit. It may be that, even if the Lease had been set aside, the Earl would have been permitted to continue to occupy Savernake Lodge on terms that were no more onerous, at least until Viscount Savernake moved out of Savernake Lodge in 2010. There can surely, however, have been no question of the Earl having been allowed to occupy Savernake Lodge on more favourable terms had the Lease been set aside sooner.

Finally, Mr Bishop argued that the modern authorities show that the self-dealing rule will not always be applied with its traditional severity. In support of this proposition, Mr Bishop relied particularly on the decision of the Court of Appeal in Edge v Pensions Ombudsman [2000] Ch 602. That case concerned decisions made by the trustees of a pension scheme who were for the most part appointed by either employers or employees. It was suggested that the trustees had been placed in a position of conflict such that it was incumbent on them to show that their decisions were fair. The Court of Appeal, however, rejected the idea that it was for the trustees to justify their decisions. Chadwick LJ, giving the judgment of the Court, said this (at 632-633):

“In the present case the rules specify the composition of the trustees. The board’s trustees must be past or present members of a board—that is to say, holding (or having held) an office equivalent to that of director. The members’ trustees must be appointed from amongst members in service. There is no provision in the rules for the appointment of trustees from amongst the pensioners. Yet it must have been obvious, at the time when the scheme was established, that the trustees would need, from time to time, to take decisions which required them to arrive at a balance between the interests of the employers (as contributors), the members in service (as contributors and as potential beneficiaries) and the pensioners. It is inevitable that such decisions will be perceived by some to favour one interest at the expense of another. But it could not have been intended that, if and when the validity of any particular decision reached by the trustees as a body was under challenge, the question ‘on whom does the onus of proving that the decision was reached on a proper basis fall’ would depend on whether the decision was said to favour the employers, the members in service or the pensioners. To take an obvious example: the same decision to increase all benefits might be challenged by a pensioner on the grounds that the increase was insufficient and by a member in service on the grounds that it was over-generous (with a consequential effect on the level of members’ contributions). Is it to be said that, in the first case, the onus of showing the decision to be proper falls on the trustees; but, in the second case on the member? Or that, in both cases, the onus falls on the trustees? And, if the latter, why not in all cases? The only sensible conclusion in a case like the present is to accept that the scheme was established on the basis that the elaborate provisions regulating the composition of the trustees as a body were intended to provide a body of trustees which could be relied upon to consider all interests fairly and properly; and that those who seek to challenge a decision of that body should bear the ordinary burden of establishing that the decision has been reached improperly”.

However, the present case is, in my view, too different from Edge v Pensions Ombudsman for that case to be any help. Apart from anything else, the Court of Appeal’s reasoning depended on provisions in the pension scheme’s rules which have no parallel in the present case. In Edge, the potential for conflicts of interest arose from the relevant rules. In contrast, the possibility of conflict in the present case arose, as I have already said, from the Earl’s decision to accept appointment as a trustee.

That there can be exceptional cases in which the self-dealing rule does not apply to a purchase of trust property by a fiduciary is indicated by the decision of the Court of Appeal in Holder v Holder [1968] Ch 353. Again, however, the circumstances there were quite different from those of the present case. Holder v Holder concerned an executor who had taken steps to renounce probate, whose interference with the estate was minimal, whose knowledge did not derive from being an executor and who to the knowledge of the beneficiaries was acting only as a purchaser. Harman LJ said (at 392) that “in a case where the reasons behind the rule do not exist” he did “not feel bound to apply it”. In the case before me, in contrast, the rationale for the self-dealing rule was in point. When the Lease was granted, there was plainly a potential for conflict between the Earl’s duties as a trustee and his own interests.

Mr Bishop made reference to clause 5 of the 1951 Conveyance. That gave the trustees of the Estate:

“the same full and unrestricted power of mortgaging the premises or any part thereof for any purpose and in any manner and of leasing or otherwise dealing therewith as an absolute beneficial owner of the premises would have if the premises had been vested in him in fee simple”.

I do not consider, however, that this general power in any way derogates from the self-dealing rule, of which there is no mention.

In all the circumstances, it seems to me that the Trustees are entitled to have the Lease set aside.

My conclusions can be summarised as follows: