James & Anor v Louisewilliams & Ors

This application relates to the estate and will trusts of Thomas Edward Weetman (”the deceased”) who died on 3^rd of November 2008. Most importantly, I am asked to appoint replacement trustees under certain of the will trusts created by his last will.

The deceased’s last will was made on 19^th of September 2008. He had built up a successful company, Weetman (Haulage & Storage) Ltd. (which I shall call "the company") during his lifetime with the help of what appear to have been a large body of staff. Naturally, he wished the company to continue to flourish after his death and for his loyal staff to be recognised for what they had done.

The matter came before me initially for directions which were sought by the executors in relation to matters which had proved difficult to resolve. The estate is one of some considerable value but was lacking in liquid assets. The two principal assets were the deceased's shares in the company and a property known as Pasturefields Enterprise Park (“Pasturefields”) which the deceased owned but which was occupied, in whole or in part, by the company under a lease of the whole which had expired but where the company had held over. That happened during the deceased's lifetime, and was unchanged at his death.

Accordingly, that property was intimately connected with the well-being of the company, and vice-versa, because the company was both using it and paying rent for its use which, subject to one point, it continued to do after the deceased’s death.

I say the company was paying rent subject to one point. At the date of his death the deceased was a debtor of the company and rental payments have been withheld since his death so as to reduce that indebtedness.

There have also, of late, been substantial dividends which the company, which is a continuing success, has been able to pay and which have been to the benefit of all concerned in the estate. The company has also advanced loans during the course of the administration of the estate to enable the administration to proceed despite the absence of liquid funds.

The administration has not been entirely straightforward. The deceased seems to have been somewhat larger than life, and left behind two individuals who brought claims for family provision as no provision was made for them in the will: a former wife and a mistress. Those claims came over time to be resolved.

The court eventually, in May of last year, ordered the sale of Pasturefields by public auction but for various reasons that could not proceed as the chances of meeting the reserve price were non-existent in the absence of a proper lease between the executors and the company. The company, for its part, was reluctant to agree the terms of a new lease, especially of the whole of the premises as it only needed part, and considered moving out. Nevertheless, it has not done so to date.

The executors named under the will were the deceased's sister, Dorothy Helen Cottrill (“Ms Cottrill”), his solicitor John Arthur William James (“Mr James”) and his accountant Stephen Neil Mountford (“Mr Mountford”). Ms Cottrill renounced probate. The two other executors are the Claimants in the Part 8 proceedings before me, seeking directions.

The difficulties faced by the estate have in large part been resolved and I made a consent order on 16^th of February 2015 after full argument. Full argument was required because there are minor Defendants, who appear by a litigation friend. I approved the consent order on behalf of those Defendants, Edward and Patrick Williams, who are grandchildren of the deceased. The deceased had two daughters (Kathleen and Elaine) and there are a number of adult grandchildren as well. Edward and Patrick are Kathleen’s minor sons.

As mentioned, Ms Cottrill (the deceased's sister) renounced probate and Mr James and Mr Mountford eventually took out a grant, but not until 5^th of November 2010. Initial unease was expressed by Mr James as to the position of Mr Mountford, which appears to have been shared by family members, because Mr Mountford had, according to Mr James, acted as a de facto director of the company and it was foreseeable that conflict might arise between the interests of the company and the interests of family members not involved, as such, in the day-to-day running of the company.

The will itself foresaw some such difficulties. The will provided that fifty per cent of the deceased's shares in the company should go to employees, as long as they were working for him at the date of his death (by which was meant working for the company). The remaining fifty per cent of his shares in the company were left amongst family members. Twenty per cent were left to family members absolutely. A further twenty per cent were left to be held upon trust for his daughter Kathleen Williams and the two grandsons previously mentioned, Edward Williams and Patrick Williams, both minors. The remaining ten per cent were to be held upon trust for his other daughter, Elaine Beeston as she then was, for life, and after her death to such of her children living at her death in equal shares absolutely. The executors were to act as trustees of the will trusts.

Provision was also made for what should happen if any of the employees did not in fact work for the company at the date of death. In summary, the gift of their shares did not take effect and were instead distributed amongst the grandchildren. Thus, although the initial aim of the will was to divide the estate's shareholding 50/50 between family and employees, that would not be the case if any of the employees were no longer employed by the company at the date of death. In fact they all were, though that has not remained the case since the death. Some are; some are not.

There is now concern amongst those working for the company, which is reflected in the approach of the executors, that one or more of the ex-employees may take sides with the family members and, to put it colloquially, wreak some form of havoc within the company by removing directors or otherwise affecting the company's well-being.

As the company is trading successfully and paying dividends, the wreaking of havoc in that way might appear to be a case of killing the goose despite its continued production of golden eggs. This has not happened to date, but there has, undoubtedly, been tension, following the death of the deceased, in the administration of the estate, affecting relations between family and employee beneficiaries. The employees are not however beneficiaries under any of the will trusts where I am asked to appoint replacement trustees.

As I have said, there was initial objection, which was overcome, to Mr Mountford's position as executor, and he and Mr James eventually both took out a grant.

Mr Mountford, who is perceived to be very close to the company, and has (on one view of the matter) acted as a de facto director, still acts (or his firm does) for the company. There is no doubt that his position is seen by some family members as being in a different camp to the family, and that is how things appear initially to have been viewed by Mr James. It is said that that is an unsatisfactory position for him to find himself in as a trustee of the will trusts, which he will become once the administration of the estate is complete.

The will trusts with which I am concerned are those relating to the shares in the company, which I have briefly outlined. There were other companies within the group, but they are now all held underneath the company as parent and so I need not deal separately with them.

The relevant will trusts are those for the deceased’s daughters and grandchildren.

The family members, including the litigation friend of the two minor children, all wish the Claimants, Mr James and Mr Mountford, to stand down as trustees or, more strictly, not to take office as trustees. There has been no application to remove them as executors. As a result of the consent order I made last week, it is expected and hoped that the administration will soon come to an end, and that the will trusts will take effect.

Another trusteeship relates to Pasturefields. As a result of the order I made last week, that is to be sold to the deceased’s daughters for a sum which everyone agrees, and the evidence establishes, is a proper price.

A substantial sum of money will remain from the proceeds of sale of Pasturefields which, by the terms of the will, are subject to family trusts for the children and the surviving grandchildren, if they attain the age of twenty-one, and otherwise fall into residue, which is held for the grandchildren.

Accordingly, that money is the family's money collectively and there is no real potential for conflict in the position of the trustees appointed by the will, looked at in relation to that money alone.

However, everyone in this case agrees that there should be the same trustees both for the money and for the shares. Any other course of action might lead to unnecessary duplication and significant additional expense.

The estate’s shares have been left by the will in the way that I have indicated. These are not the only shares in the company. Under arrangements approved by the deceased during his lifetime, some directors between them control an additional two per cent of the shares. Thus, it was envisaged that fifty-two per cent of the shares in the company woud be held after the deceased’s death under the control of the employees as a group. The inference is that the deceased wished them, so long as they jointly worked for the company, to retain ultimate day-to-day control. However, not all the employees are still with the company, so that wish is incapable of fulfilment.

In my judgment the family are entitled to voice concerns in relation to the position of Mr Mountford and Mr James as will trustees. So far as Mr Mountford is concerned, Mr James himself saw him as someone who was initially conflicted, because he was perceived to have acted as a de facto director of the company. Looking at the matter objectively, a well-informed observer would see Mr Mountford's position as impossible or, at least, seriously compromised, in the event of a conflict of interest arising between the interests of those in day-to-day control of the company and the family beneficiaries. That must affect Mr James also, now that he has joined in taking out a grant with Mr Mountford, overcoming his earlier disquiet. In one sense, that was the deceased’s choice, but he did not choose these two alone as executors or will trustees. He envisaged them acting with his sister as co-executor and co-trustee, which will not now happen, as she is unwilling to act, and has renounced probate.

It is said that none of this is enough to justify my intervening and removing Mr James and Mr Mountford as trustees. I agree that a mere loss of confidence in a set of trustees is not of itself enough, but loss of confidence can in turn lead to avoidable conflict and dispute, and therefore to expense which is, of necessity, detrimental to the trust estate.

Mr James, recognising this, has made a full and fair written statement explaining the position of the trustees and stating expressly in paragraph 10 of that witness statement:

I have not set out the details of those allegations and it is not appropriate in my judgment to do so. The matter came before me as an application made within the Claimant's Part 8 application for directions. It was heard on relatively limited evidence and without cross-examination, expert evidence or disclosure of anything over and above that which the parties have chosen to put before me.

I was invited by both sides to decide, if I could, the removal application, applying the criteria appropriate to a summary judgment application. That is what I have endeavoured to do, but it necessarily follows that it would be grossly unfair on Mr James and Mr Mountford to rehearse in detail - still less decide - the matters of complaint alleged against them without their having had a full opportunity to answer those complaints.

I merely record that the estate has proved difficult to administer, but the difficulties have not, so far as I can tell, been of the making of Mr James and Mr Mountford. Hostile claims have been made by third parties, which had to be dealt with and which were necessarily expensive.

Other difficulties were occasioned by the holding over of Pasturefields, which occurred before the deceased's death, and were not of Mr James and Mr Mountford's making either. The need to resolve the Pasturefields situation did however highlight the continuing conflict, or potential conflict, between the interests of the company, viewed separately, and the interests of the estate.

I can well see that Mr James and Mr Mountfield found themselves, as executors, on the horns of a dilemma, which could hardly be avoided, in dealing with Pasturefields. That is now in the past, as a result of the consent order made last week. Nonetheless their role as trustees will necessitate regular contact with the directors and employees of the company. Family members will obviously wish the will trustees to maximise the return from the investment in the company. Against that, the company will or may need to deploy its finite resources for other business purposes and the proper reward of its workforce. There thus remains (as there was when Mr James took the point initially) a potential for conflict between the interests of the directors and employees of the company and the interests of the family beneficiaries which Mr Mountford, as someone perceived to have acted as a de facto director, is not ideally suited to deal with as trustee of the will trusts. Given further that Mr James has now - though not in any aggressive sense - joined forces with Mr Mountford in the sense of taking out a joint grant with him, those two will be seen objectively, not just by the family, as being more inclined to the company's camp than the family’s.

Accordingly, in those circumstances, it seems to me that there is a strong case here (as Mr James effectively recognises in his witness statement) for further trustees to be appointed in place of Mr James and Mr Mountford.

The power of appointment of new trustees is vested in the existing trustees under section 32 of the Trustee Act 1925. Mr James and Mr Mountford are willing to exercise that power and have proposed to appoint two other identified individuals – respected professional men, one an accountant and the other a solicitor - to act in their place as trustees of the will trusts. These proposals have been debated in a somewhat languorous way over many months, but have not produced any agreement.

Accordingly, the present application has been made. The present application seeks, primarily, an order that the First and Second Defendants (who are the daughters of the deceased) and the probate solicitor now acting for them be appointed as trustees of the will trusts in place of the Claimants, and all necessary vesting and other orders to enable that to be effective.

In my judgment the suggestion that the sisters should be the majority trustees with their solicitor is one which has a great deal of attraction from the perspective of the proper administration of these will trusts. The engagement of professional people of different albeit complementary disciplines comes at a cost. One only has to look at the costs that have been incurred in the administration of the estate to date to illustrate that point. I do not suggest, because I do not know, that any of the costs were improperly incurred. I assume for the purposes of this application that they were all properly incurred, but if Mr James and Mr Mountford (or two other outside professionals) are to supervise the substantial minority shareholdings, it seems to me that that will create a costs centre which is in danger of becoming disproportionately enlarged. Modern reality requires the court to take into account the risk of increasing costs when considering issues of administration.

The will trusts are likely to generate substantial cash resources, either in the form of dividends if the present dividend policy is maintained by the company, or under the separate will trust relating to Pasturefields when sold. There will therefore be no shortage of funds ultimately (despite past cash flow difficulties) from which to meet the costs of administration.

There is, in my judgement, looking at the matter objectively, a justified fear that it would prove to be too costly to retain or appoint two professional trustees of different albeit complementary disciplines rather than the counter-suggestion of two individuals who are already beneficiaries (and who will not charge anything) assisted by an experienced probate solicitor who is already acquainted with the dynamics of the family, and the position of the company, and in whom the family beneficiaries have confidence.

Those considerations in my judgment justify the court's intervention, given also the additional factor that, for good reason or bad, that is what the family wants.

I should record that there is no serious suggestion in the papers that the family are bent on destroying the company upon which they, as with others, are dependent. I must recognise nevertheless that sometimes small companies, especially after the death of a charismatic founder, encounter tensions and strains which are all too prone to result in litigation.

That was a fear expressed by Mr Burton, who appeared for some of the company employees interested in the estate, though not under the will trusts with which I am concerned. I can see that someone like Mr James and Mr Mountford (or their suggested replacements, as independent professionals) might operate as a restraint in that regard. However, if tensions do surface between the family members and those running the company, it is most undesirable that they should also adversely impact upon relations between the trustees and their beneficiaries. The appointment, or continuation in office, of trustees, against the wishes of the beneficiaries, who are perceived as being in a position of potential conflict brings in another level of litigation risk, with an attendant substantial increase in costs.

If, against that, the reasonable wishes of the family can be met by the appointment of the trustees they suggest, that is likely to create a greater atmosphere of harmony which will bode better for the future than the present starting point of mistrust and resentment, however unjustified, against those currently holding office as trustees.

So far as the law is concerned, I have ample power under the court's inherent jurisdiction to remove trustees and appoint replacements.

I was referred to the recent decision of the Court of Appeal in National Westminster Bank v. Lucas & Others [2014] EWCA Civ 1632, which concerned the estate of Sir James Savile. Amongst other questions considered was the removal of a bank as executor, to which similar principles apply as in the case of the removal of trustees. By the time of the hearing, a Scheme had been put in place to scrutinise and determine claims against the estate, which were considerable.

It was said at paragraph [81] that relations had broken down between the bank and beneficiaries so that they no longer retained the confidence in the bank's ability to administer the estate and that since an alternative appointee remained available, the court should require the bank to step down in favour of a new and impartial administrator.

It is important to note the ultimate finding of the judge at first instance, from which this was an appeal, as recited in paragraph 85:

That therefore was a different case from the present. There was no equivalent of someone such as Mr Mountford (along with the person now seen as his ally, Mr James) being seen as in the company camp rather than the family camp, should the tensions surface and matters come to a head.

The leading case in this area is Letterstedt v. Broers (1884) 9 App. Cas. 371, where this was said by Lord Blackburn at pp 386-7:

In the National Westminster Bank v Lucas case, Patten LJ said this at paragraph [83]:

I was referred also to the decision of Vaisey J in re Brockbank [1948] Ch 206. This was a case in which beneficiaries, all of whom were of full age, applied for a direction from the court requiring a will trustee to exercise the statutory power of appointment by appointing a particular person as a new trustee. The application was dismissed. Vaisey J, not faced with an application to remove the existing trustee, proceeded on the basis that such an application would, on the particular facts of that case, have failed, citing respectable authority of some antiquity (but still binding upon him and me) of re Gadd (1883) 23 Ch 134 and re Higginbottom [1892] 3 Ch 132. His reasoning at page 210 was as follows:

In effect therefore what Vaisey J was saying was that the beneficiaries could not, by seeking a direction requiring trustees to exercise their statutory power of appointment in accordance with the beneficaries’ wishes, achieve what the court would not do directly by appointing new trustees, overriding the statutory power of appointment vested in the trustees.

However, if circumstances exist which justify a trustee's removal (as they clearly can do within the criteria recognised in the Savile case) then the court has power to act and to choose the replacement trustees.

I have already said that, in my judgment, the administration of these trusts is likely to benefit if the family assets are held by the two family members with the assistance of their chosen probate solicitor rather than in the hands of two professionals of different albeit complementary disciplines, who will attract greater charges than the assistance that is likely to be needed from the solicitor, and who in the event that new professionals are appointed will require to read into the background and familiarise themselves with the estate and family dynamics.

As is well known, trustees holding a substantial block of shares in a company must have regard to the power which holding a significant block of shares confers on them. They should require sufficient information from the company’s management to allow proper decisions to be taken. It is not enough for them simply to attend the AGM and any ensuing lunch, rather than show an informed interest in the actual business of the company: per Brightman LJ in Bartlett v Barclays Bank [1980] Ch 515 at 532G and 534G. The appointment of two professional trustees therefore bristles with costs implications.

This is a family company. It was founded and owned substantially by Mr Weetman until his death. The beneficiaries under his will are his family and the employees. He may well have regarded the employees in a sense as extended family. Nevertheless, the will trusts with which I am concerned have only family members as beneficiaries. It seems to me that these will trusts should be administered by those who are indisputably within the family camp.

I was also referred to Scott v Scott [2012] EWHC 2397 (Ch), a decision of Judge Behrens sitting as a High Court Judge. He considered the observations of Newey J in Kershaw v. Micklethwaite [2010] EWHC 506 (Ch) (a case on the removal of executors where it was common ground that the same principles applied as in the case of the removal of trustees), which included the following:

Judge Behrens in turn observed in para [142] of Scott:

Trusts, it can be said generally, are better administered in an atmosphere of harmony, not disharmony. In my judgment the better chance of harmony in this case is achieved by appointing the family members, with the probate solicitor of their choice, as trustees rather than anyone else. That is also likely to be significantly cheaper that the appointment of two professionals of different albeit complementary disciplines. In those circumstances, I accede to the application to appoint new trustees.

The appointment will not of course be effective until the administration is complete. There is no application to remove the Claimants as executors. I do not see any overwhelming difficulty, as a matter of jurisdiction or otherwise, arising from the fact that the order I am making will only take effect from a future date.

There will be permission to apply within the order for the appropriate directions when the administration is complete. The appointment of the new trustees in place of Mr James and Mr Mountfield is to take place immediately upon completion of the administration.

I will hear counsel on any other matters arising out of this judgment.