Sale of land – Trust assets – Approval of court – Claimant trustees applying to court under CPR 8 for approval of proposed sale of main trust asset by completion of conditional contract for sale – First defendant beneficiary opposing sale on ground that price inadequate and resulting from ineffective marketing exercise – Whether approval properly given – Whether claimants giving adequate disclosure to court – Whether entitled to follow advice of experts as to best marketing strategy – Appeal dismissed
The claimants were the trustees under a trust of the Savernake estate, the principal asset of which was Tottenham House in Savernake, Wiltshire, comprising a large Grade I listed house and Grade II* listed stable block. The property had been unoccupied since the 1990s, was fast decaying and was on the English heritage “at risk” register. The claimants decided to sell the property and instructed experts to value and market it. Bids were invited from selected parties and an offer of £11.25m was obtained, which the claimants accepted on the advice of their property agent. A contract for sale was concluded in August 1013, conditional on the court approving the sale. By that time, the trust was in financial difficulty and had obtained an extension of its loan facility with a bank only on condition that it sold sufficient assets to repay the borrowing within the period of the loan. The claimants applied to the court for approval of the sale under CPR 8; the defendants to the action were the beneficiaries of the trust.
It was not disputed that the property had to be sold, but the first defendant objected to the terms of the proposed sale, arguing that the price was inadequate and the result of an ineffective and inadequate marketing exercise. The claimants’ approval application was adjourned by an order of pending the hearing of an action by the first defendant for their removal as trustees. The deputy judge who made that order indicated that he would authorised the completion of the sale were it not for the existence of the claims in the removal action. The hearing of the removal action was delayed and, in the meantime, the stay on the approval of the intended sale was lifted by order of a judge, who, in effect, authorised the claimants to complete the sale. The removal action was subsequently tried and judgment reserved.
The first defendant appealed against the orders in the approval proceedings. Issues arose as to the procedure to be followed on an approval application, the effects of any relevant non-disclosure by the claimants and the circumstances in which the court could approve a transaction where the trustees had followed expert advice.
Held: The appeal was dismissed.
(1) Trustees might apply to the court for approval where, as in the instant case, there was no real doubt as to the nature of their trustees’ powers but their decision on how they proposed to exercise those powers was so momentous that they wished to obtain the blessing of the court for that action. The court would ordinarily need to be satisfied, on the evidence, that the trustees had in fact former the opinion that they should act in the relevant way, that their decision was to one which a reasonable body of trustees could properly come, and that the opinion was not vitiated by any conflict of interest: Public Trustee v Cooper [2001] WTLR 901 applied.
The claimants’ approval application had been brought under CPR 8, as was normal for such applications, and there had been with no order for disclosure and no hearing of oral evidence or cross-examination. In order to succeed in the application, the claimants had to put the court in possession of all relevant facts so that it could be satisfied that their decision was proper and for the benefit of the beneficiaries: Tamlin v Edgar [2011] EWHC 3949 (Ch) applied. It had also to be demonstrated that the exercise of the claimants’ discretion was untainted by any collateral purpose. Although that process could be seen as one of “disclosure”, it was better regarded as an evidential exercise. The trustees had the burden of proof and therefore needed to give the court all the information and disclosure that it required to be satisfied that approval could be granted. If they failed to do so, they would not obtain that approval. However, the court could, in such a case, send the trustees away to produce more evidence. Whilst the process was not inquisitorial, it was part of the inherent jurisdiction of the court to supervise trustees. The court would be unwilling to countenance the refusal to approve a proper, and momentous, transaction on some technical ground based on an incidental failure to produce adequate material to the court. Although the court should exercise caution in approving a trustee’s decision to undertake a momentous transaction, and should not approve the decision without a proper evidential basis for doing so, it should equally not deprive a trustee of approval without good reason. The court had a supervisory jurisdiction that needed to be exercised in appropriate circumstances, but it should not place insurmountable hurdles in the way of trustees: Richard v Mackay [2008] WTLR 1667, Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 and X v A [2006] 1 WLR 741 considered.
(2) Although the first defendant alleged that one of the claimants had received unlawful remuneration, that matter was now academic in relation to the approval proceedings where all parties were agreed that a sale was necessary; it would however be relevant to the removal proceedings. There was no question of the trustees having a conflict of interest in wanting to sell Tottenham House. The sale need to happen sooner rather than later in light of the trust’s poor financial position. Nor were the claimants at fault in following the advice of their property agent in relation to the marketing of the property. Although an expert valuation of the property had warned of the risk that a sale that was not tested in the open market, with marketing and publicity, might not achieve a sum that represented its true market value, the claimants’ property agent had advised them clearly and cogently that a limited directed marketing strategy was advantageous and appropriate. It had given good reasons for rejecting an open market campaign if the targeted approach produced the desired results. Those reasons were sensible and intelligible, relating, in essence, to the need for a speedy, low-cost sale. The specialist bidders that a targeted approach produced would not be interested in the property if there were an open market campaign, because they wanted the time and comfort of being allowed to work up their bids in a period of calm and confidence. Whilst perhaps counter-intuitive, a property with the difficulties and dilapidations of Tottenham House might well secure a better price if marketed only to those who had already expressed a real interest and had the money available. The claimants were entitled to take the property agent’s advice on that matter. They were not obliged to second-guess the professional view of the experts they had instructed to market the property and to obtain the best price available in the circumstances.
The procedure adopted when trustees sought the approval of the court to a momentous transaction was intended to be quick and accessible. The trustees were not asking the court to find facts but were instead asking it to decide whether they had presented sufficient evidence to satisfy it that they had fulfilled their duties to their beneficiaries in deciding on the transaction in question, and had formed a view which, in all the circumstances, reasonable trustees could properly have formed. In that context, questions as to the limited nature of the marketing exercise did not need to be answered as matters of fact before the court. The detail of how a professional marketing expert came by an interested bidder did not really matter. What was important was that the bidder fulfilled the desired criteria. While the trustees had to act as prudent men of business and obtain answers to questions that such a prudent person would ask, the advice that they had obtained from the property agent provided those answers. The intended sale was advisable in preference to an open market campaign for the cogent reasons that the agent gave. Accordingly, the trustees had shown that their decision to enter into and complete the intended sale was one which reasonable trustees could properly take in the interests of the beneficiaries. The sale should be approved.
Gilead Cooper QC and James Weale (instructed by Berwin Leighton Paisner LLP) appeared for the appellant; Penelope Reed QC and Thomas Entwistle (instructed by Thrings LP) appeared for the first respondents; Chrisopher Tidmarsh QC (instructed by Forsters LLP) appeared for the second and third respondents.
Sally Dobson, barrister
Click here to read transcript: Cotton and another v Brudenell-Bruce and others
