Where a property is subject to a trust and the trustees are in doubt whether they should proceed with a propose sale, they can protect themselves from future actions by the beneficiaries by seeking court approval.
Since the giving of such approval will deprive the beneficiaries of their remedy, the legal precedents emphasise the requirement for caution by the court before approving trustees’ decisions to carry out “a momentous transaction”. The court will not approve a trustee’s decision without a proper evidential basis for doing so. Equally the court should not withhold approval from trustees “without good reason”.
One of the main tests is whether the trustees can show 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”.
In the Court of Appeal case of Cotton & Anor v Brudenell-Bruce & Ors  the court had to decide whether or not to approve a “momentous decision” made by trustees.
The case concerned Tottenham House, Savernake, Wiltshire (“Tottenham House”) which was the main asset of the Savernake Estate. It had been unoccupied since the 1990s, and was rapidly deteriorating. It was on English Heritage’s register of ‘at risk’ properties. Should the court approve the proposed sale to the existing buyer?
The trustees wanted the court to approve the intended sale. One of the main beneficiaries of the trust, Lord Cardigan opposed the intended sale.
For the trustees the intended sale price was a good one that presented an opportunity not to be missed. For Lord Cardigan the price was inadequate and was the outcome of an ineffective and inadequate marketing exercise.
The intended purchaser would originally have been able to walk away from the sale contract by now but had given the trustees an extension to the long-stop date to enable these proceedings.
The court was much concerned that the trust would be put “in an impossible bind” if court approval were withheld. The effects were potentially dire.
The trust had no money, and had to spend large amounts on insurance and maintenance. The trust had already defaulted in paying the bank, and the bank would probably enforce the security it held against three of the smaller properties on the estate.
The trustees would be thrown into an open marketing campaign, against the advice of their estate agent, GVA. They would risk losing the specially interested buyers who had meticulously assembled their bids.
The court had to be cautious to ensure that the trustees were indeed justified in proceeding with the sale but it was not the job of the court to place insurmountable hurdles in the path of trustees as badly placed as the Savernake Trustees were. “Caution cut both ways.”
The court confirmed to the trustees, that in acting on GVA’s professional advice to sell to that buyer at that price, the trustees would be fulfilling their duties to the trust beneficiaries.
This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.