A claim for breach of trust requires coherent and credible documentary and witness evidence if it is to succeed.
The claimant’s claim to be entitled to trace into property acquired with funds advanced in breach of trust has failed in Shovlin v Site Civils and Surfacing Ltd and another [2023] EWHC 1658 (Ch).
The SPH Trust was established by a declaration of trust executed by the claimant and Austin Fergus, an accountant in 2016. The sole beneficiary was the claimant’s son. A total of £2.5m was subsequently paid by the claimant into the trust account.
The claimant argued that, contrary to her instructions to invest conservatively, and without authority, Fergus advanced £645,000 in loans to SCS, which it used to fund purchases of two areas of land at Mercury Park in Manchester. Although SCS had repaid the sums loaned and interest, the claimant maintained that SCS was liable to account for the profit made on sale of the land in March 2020 and to be entitled to pursue an equitable proprietary tracing claim against property owned by the second defendant, George Crosby, the sole director of SCS.
Crosby and Fergus had a close relationship and had talked of a joint venture to develop land at Mercury Park. Fergus agreed to loan SCS funds to acquire the two areas of land in January 2017 and January 2019 of £525,000 and £120,000 respectively. There was no formal documentation in relation to either loan and Crosby believed the funds were loaned by Fergus personally. SCS obtained planning permission to develop the Mercury Park site into 10 industrial units. Following Fergus’s diagnosis of cancer, Crosby sought to repay the loans by selling the land, which was only concluded, for £2m, after Fergus’s death in 2019. The proceeds of sale were invested in residential property.
The claimant, who was elderly and unwell, did not give evidence at trial or provide a witness statement. Consequently, the court had difficulties in understanding the basis and purpose of the trust. The only evidence was hearsay evidence by the claimant’s son, which the court considered unreliable. However, the claimant had received trust bank account statements and met regularly with Fergus, a professional whom everybody regarded as an honest man. Despite the lack of documentation and security for the loans, the court decided the evidence was so unclear and uncertain that it could not safely conclude that the monies were entrusted to Fergus on terms which precluded the loans to SCS. The claim for breach of trust failed.
Louise Clark is a property law consultant and mediator
