I am delighted to announce that my new, and seventh book, the ‘Contentious Trusts Handbook’ has been accepted for publication by the Law Society in 2020.
The book currently runs to 146,610 words, and the Preface and List of Contents are set out below.

I would like to thank:
• Toby Graham, Head of Farrer & Co’s contentious trusts and estates group, who is writing the Foreword;
• Pandora Mather-Lees, who is a distinguished Art Historian: https://www.artonsuperyachts.com/;
• Hector Robinson QC, who is a partner in the international offshore law firm Mourant, and is Head of the Cayman Islands Practice Group for International Trust and Private Client Litigation. www.mourant.com; and
• Anthony Trace QC, 4 Pump Court, Temple, England, who won ‘Mediator of the Year’ in the Innovation & Excellence Awards 2019.
for their expert contributions.

Preface
Trust litigation takes place within a sophisticated theoretical and policy framework in which the legal principles governing: (i) the exercise of powers; (ii) the performance of duties; (iii) the rights of beneficiaries; and (iv) the equitable remedies and defences available on a specific set of facts, have been formulated, applied, and developed by courts of equity in England and throughout the common law world, for centuries. Consequently, the building blocks of equity are almost monolithic. The Contentious Trusts Handbook aims to provide a clear practical and comprehensive exposition of the English law principles that apply in commonly encountered trust disputes, and of the practice and procedure governing trust litigation in the English courts. The book also discusses mediation and arbitration in trust disputes, and is accompanied by a suite of precedents.
My aim throughout, has been to write a practical, accessible and authoritative handbook for the busy practitioner, which is a portable reference that covers all aspects of the law and practice governing trust disputes in the English courts. The book contains a comprehensive bibliography of current research sources, and practitioners should note that the new 34th edition of Snell’s Equity has just been published, and the 20th edition of Lewin on Trusts is due to be published in January 2020.

Many of the principles discussed in this book also apply to commercial disputes involving allegations of breach of fiduciary duty/trust. This has recently been illustrated by:
(i) Faichney & Anor v. Aquila Advisory Ltd & Ors [2018] EWHC 565 (Ch), a breach of fiduciary duty/constructive trust claim in which the judge applied the law of illegality and the doctrine of ex turpi causa to breach of fiduciary duty claims following the recent Supreme Court cases of Bilta v Nazir [2016] AC 1 and Patel v Mirza [2017] AC 417;
(ii) Credit Agricole Corporation and Investment Bank v. Papadimitriou (Gibraltar) [2015] UKPC 13, in which the proceeds of an antique collection worth $15 million was misapplied in breach of trust, and the claimant pursued a proprietary claim against the bank which received the money; and
(iii) Stobart Group Ltd v. Tinkler [2019] EWHC 258 (Comm), in which Judge Russen QC found that the former Chief Executive of the infrastructure group Stobart, had acted in breach of his fiduciary duties in: speaking to Stobart’s investors; criticising management; and agitating for the removal of the company’s chairman.
(See also, ‘Breach of Fiduciary Duty Claims and the Quiet Fiduciary Thesis’, by Carl Islam, Trusts & Trustees, Volume 25, Issue 2, March 2019, pp 237–265).
As Lord Briggs of Westbourne said in the 2018 Denning Society Annual Lecture, ‘Equity in Business’, delivered in the Old Hall at Lincoln’s Inn, ‘There can be no general principle which ring-fences all commercial dealings from equitable intervention. Nor is it right that there is less need for the intervention of equity in business rather than personal or family relationships. Business people can be just as abusive, unconscionable and plain beastly to each other as members of a family.’
Company and commercial disputes (including joint-venture and shareholder disputes) that hinge upon proof of breach of fiduciary duty, are on the increase. The bridge that fuses the traditional technical skill-set of company and commercial lawyers with that of trust lawyers (who in solicitors firms used to live in separate boxes), is however, a relatively recent phenomenon outside of the Chancery Bar. I therefore hope, that this book will also be of value to Solicitors who need to apply first principles when confronted with complex and novel facts that engage the ‘super-highway’ of equitable remedies and principles, when proceedings are issued in any of the lists and courts that constitute the Business and Property Courts of England and Wales. That is how equity evolves. Furthermore, for fiduciary disputes, the Rolls Building in London, is used by litigants as the venue to determine high value disputes, worldwide.
Carl Islam
1 Essex Court
Middle Temple, London
Michaelmas Term 2019

Contents

Foreword
Acknowledgments
Preface
CHAPTER 1 – INTRODUCTION
1.1 Aim
1.2 Introduction
1.3 Classification of trust claims
1.4 Trusteeship
15 Trusts and powers
1.6 Terms of the trust
1.7 Irreducible core of the trust
1.8 Duties
1.9 Decision making
1.10 Breach
1.11 Rights to information
1.12 Equitable jurisdiction
1.13 Remedies
1.14 Liability of trustees
1.15 Standing
1.16 Case preparation
1.17 Letter before claim
1.18 Proof
1.19 Disclosure
1.20 ADR
CHAPTER 2 – SUPERVISORY JURISDICTION OF THE COURT
2.1 Introduction
2.2 Supervisory jurisdiction
2.3 Limits
CHAPTER 3 – POWERS OF TRUSTEES
3.1 Introduction
3.2 Administrative or managerial powers
3.3 Dispositive powers
3.4 Powers of appointment
3.5 Simple general powers
3.6 Special powers
3.7 Duties of donees
3.8 Delegation
3.9 Failure to exercise a power
3.10 Fraud on a power
3.11 Rule in Hastings-Bass
CHAPTER 4 – DUTIES OF TRUSTEES
4.1 Introduction
4.2 Fiduciary duties
4.3 Fiduciary relationships

4.4 Scope and content
4.5 Self-dealing rule
4.6 Fair dealing rule
4.7 Statutory duty of care
4.8 Investment

CHAPTER 5 – BREACH
5.1 Introduction
5.2 Breach of trust
5.3 Breach of fiduciary duty
5.4 Quiet fiduciary thesis
5.5 Wrongful distribution
CHAPTER 6 – THIRD PARTY LIABILITY
6.1 Introduction
6.2 Trustee de son tort
6.3 Unconscionable receipt
6.4 Accessorial liability
6.5 Summary
CHAPTER 7 – CLAIMS
7.1 Introduction
7.2 Personal and proprietary claims for breach
7.3 Construction
7.4 Directions
7.5 Benjamin order
7.6 Removal of a trustee
7.7 Declaration of a beneficial interest in property
7.8 Sham trusts
7.9 Illusory trusts
7.10 Capacity
7.11 Undue influence
CHAPTER 8 – EQUITABLE REMEDIES
8.1 Introduction
8.2 Personal and proprietary remedies
8.3 Election
8.4 Rescission
8.5 Equitable compensation
8.6 Account in common form
8.7 Account of profits
8.8 Tracing
8.9 Injunctions
CHAPTER 9 – DEFENCES
9.1 Introduction
9.2 Limitation
9.3 Laches
9.4 Exemption clauses
9.5 Section 61 TA 1925
9.6 Consent
9.7 Set-off
CHAPTER 10 – LITIGATION
10.1 Introduction
10.2 CPR
10.3 Chancery Division
10.4 County Court
10.5 Transfer
10.6 Claim
10.7 Defence
10.8 Case management
10.9 CPR compliance and sanctions
10.10 Disclosure
10.11 Pre-action disclosure
10.12 Non-party disclosure orders
10.13 Norwich Pharmacal Orders
10.14 Bankers Trust Orders
10.15 Privilege
10.16 Part 18 Requests
10.17 Presumptions
10.18 Inferences
10.19 Trial
10.20 Adducing evidence at trial

CHAPTER 11 – COSTS
11.1 Introduction
11.2 Beddoe Orders
11.3 Non-party costs orders
11.4 Security for costs against a non-party
11.5 Part 36 Offers
11.6 Calderbank Offers

CHAPTER 12 – ADR & SETTLEMENT
12.1 Introduction
12.2 Methodology
12.3 Communication
12.4 Mediation
12.5 Arbitration

APPENDICES
A Precedents
A1 Beddoe Application – Details of Claim
A2 Benjamin Order
A3 Calderbank Offer (Equitable compensation)
A4 Calderbank Offer (Rescission)
A5 Confidential Note for Mediator
A6 Draft CMC Directions Order
A7 Draft Order (Interim application)
A8 Initial Disclosure List
A9 Mediation Position Statement & Offer
A10 Norwich Pharmacal Order
A11 Particulars of Claim (Breach of Fiduciary Duty/Accessory Liability/Powers of Investment/Information)
A12 Particulars of Claim (Breach of trust)
A13 Particulars of Claim (Liability to account)
A14 Particulars of Claim (Tracing)
A15 Part 36 Offer (Equitable compensation)
A16 Part 36 Offer (Rescission)
A17 Request For Further Information (‘RFI’) – Letter
A18 Skeleton Argument
A19 Tomlin Order and Tomlin Schedule
A20 Trusts of Land and Appointment of Trustees Act 1996, section 14 Application

B Notes
B1 Art & Heritage Assets – Duties of Trustees, by Pandora Mather-Lees
B2 Trust Litigation In The Cayman Islands, by Hector Robinson QC
B3 A Mediator’s View by Anthony Trace QC, 4 Pump Court, Temple, England

C Bibliography

A ‘planning obligation’ may be made with a local planning authority (‘LPA’) or offered as a unilateral undertaking by a developer as an incident to the grant of planning permission, Town and County Planning Act 1990, s.106.

Any ‘planning obligation’ must be for a ‘planning purpose’, and can be challenged at a public enquiry. A public inspector can then determine whether or not any restriction or regulation of the development or use of land is ‘Wednesbury unreasonable’, e.g. because it is ‘nebulous’.

Each planning obligation contained in a s.106 agreement must serve a specific purpose related to the site and cannot be used for an ulterior purpose, such as to build more schools in order to accommodate the consequential increase in population arising from the development because that would be unlawful.

Therefore, prior to execution of any s.106 agreement, an adjoining owner of land has the standing to invite the LPA to provide:

·      a copy of the terms of each planning obligation contained in the proposed agreement; and

·       a record of the reasons for each contemplated planning obligation.

In Miller, R (on the application of) v The Prime Minister [2019] UKSC 41 (24 September 2019), Lady Hale and Lord Reed giving the unanimous judgment of the Supreme Court stated at paragraph 61,

‘It is impossible for us to conclude, on the evidence which has been put before us, that there was any reason – let alone a good reason – to advise Her Majesty to prorogue Parliament for five weeks, from 9th or 12th September until 14th October. We cannot speculate, in the absence of further evidence, upon what such reasons might have been. It follows that the decision was unlawful.’

In default of disclosure, it may therefore be argued that each and every planning obligation contained in a s.106 planning agreement executed before adequate reasons have been provided, is prima facie unlawful and void.

Furthermore, unless the LPA confirm that any social landlord will be a signatory (i.e. in order to comply with the Law Of Property (Miscellaneous Provisions) Act 1989, s.2), then any s.106 agreement that contains an obligation to transfer land to a social landlord, e.g. a housing association, is technically invalid, and thus unlawful and void.

I refer to the legal principles decided in the following cases:

·      Good Energy Ltd v Secretary of State [2018] EWHC Civ 2102;

·      Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Co Ltd [2017] UKSC 66;

·      R (Thakenham Village Action Ltd) v Horsham District Council [2014] JPL 772;

·      R (Derwent Holdings Ltd) v Trafford Borough Council [2011] All ER (D) 216;

·      R (Sainsbury’s Supermarkets Ltd) v Wolverhampton City Council [2010] UKSC 20; and

·      Jelson Ltd v Derby City Council [2000] JPL 2013; and

·      Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759 (the ‘governing principles’).

Applying the governing principles, unless the LPA also provide a statement (which may be relied upon as evidence at a public enquiry) specifying:

·      why it is not possible to address any unacceptable impact through a planning ‘condition’ instead of an ‘obligation’ (NPPF, paragraph 203);

·      why each obligation is necessary to make the application acceptable in planning terms (see Jelson);

·      how each obligation is directly related to the development (see Derwent Holdings); and

·      how each obligation is ‘fairly’ and ‘reasonably’ related in ‘scale’ and ‘kind’ to the development,

then it is axiomatic that no clear and adequate reasons have been provided to demonstrate fulfilment of each of the four legal tests enumerated above (the ‘legal tests’).

Therefore, because the legal tests have not been satisfied, any s.106 agreement that is signed before clear and adequate ‘reasons’ are provided is null and void. That is because in a vacuum, no planning obligation can constitute a valid reason for granting planning permission.

Hence, if the LPA elect to be silent, then the public inspector, as a matter of public law, may draw adverse and negative inferences from the failure of the LPA to provide clear and adequate reasons. On that basis alone, it is submitted that the inspector may conclude that in breach of statutory duty, planning permission was unlawful. Paragraph 7-115 of De Smith’s Judicial Review, Eighth Edition, (2018) states that ‘[u]sually, the remedy given in a case of breach of duty to give reasons or adequate reasons is an order quashing the unreasoned decision.’ (Flannery v Halifax Estate Agencies Ltd (T/A Colley’s Professional Services) [2000] 1 WLR 377).

Consequently, following the decision of the Supreme Court in Miller, any vendor of agricultural land, such as a registered Charity, who refuses to provide information about the reasons relied upon in support of a s.106 agreement, and any LPA, who acts in concert in withholding any reasons from local tax-payers, is likely to face a test case in the Supreme Court if they challenge either:

(i)     the jurisdiction of a public inspector to make a finding about whether planning permission for a development linked to a s.106 agreement was lawful; or

(ii)    any finding that it was unlawful, which results in judicial review, and an appeal to the Supreme Court.

It is submitted that following Miller there is a clear evidentiary presumption that where a vendor and/or the LPA remain silent, and refuse to disclose ‘reasons’ either ‘adequately’, or ‘at all’, that the decision about planning permission is prima facie void, unless and until the LPA demonstrate otherwise by satisfying the legal tests set out above, which is impossible if a s.106 agreement has been signed before adequate reasons have been stated.

This is likely to result in a boom in judicial review applications if the Government has made an irrational decision about whether or not the underlying economic rationale for a planning obligation, i.e. based upon need is lawful where it is based upon a demonstrable statistical error. For example where a LPA rely upon a projection about population growth that indicates growth when accurate and up to date data demonstrates that growth is falling (which is a matter of expert evidence and opinion).

Therefore any: (i) vendor (including e.g. a UK registered charity), (ii) purchaser/developer, and (iii) LPA, who does not provide ‘reasons’, is likely to face litigation if they are involved in a land transaction that is contingent or dependent upon any planning obligation contained in a s.106 agreement being lawful.

Because trustees are fiduciaries this may also result in civil litigation in the Chancery Division in parallel with proceedings brought in the administrative court, brought by litigants who have the standing to allege breach of fiduciary duty. That will engage disclosure remedies that are not available in the administrative court, including ‘train of enquiry’ applications under PD 51 U Disclosure Model E and imaginative applications for a Norwich Pharmacal order, which the author has been researching since May in connection with his forthcoming book about trust litigation.

The following is a comment I provided to a journalist at Channel 4 News who called to enquire about examples of the Police entering diplomatic and consular premises to save life in the aftermath of an incident which took place at the Bahrain Embassy in London. The incident was unprecedented on UK soil. Unlike the Libyan embassy incident which resulted in the death of PC Yvonne Fletcher, (see, http://newsite.diplomaticlawguide.com/ [articles page]) the Police were able to enter and intervene before murder was committed. Staff in the embassy were apparently and allegedly about to throw a protestor off the roof when the police forced entry into the embassy. The entry was made without the prior consent of the head of the mission.

See: https://www.channel4.com/news/police-break-down-door-of-bahrain-embassy-in-uk-after-roof-protester-threatened

(Link to the story provided 09.08.2019 by ITV News)

Further to your enquiry, Article 22 of the Vienna Conventions states, 

‘1.    The premises of the mission shall be inviolable. The agents of the receiving State may not enter them, except with the consent of the head of the mission.

2.     The receiving State is under a special duty to take all appropriate steps to protect the premises of the mission against any intrusion or damage and to prevent any disturbance of the peace of the mission or impairment of its dignity.

3.     The premises of the mission, their furnishings and other property thereon and the means of transport of the mission shall be immune from search, requisition, attachment or execution.’ 

An embassy is therefore prima facie immune from entry by the Police under any circumstances, unless the Head of the Mission has granted his consent, or the status of the premises has been removed, see paragraph 8.11 of Satow’s Diplomatic Practice (6th ed) by Sir Ivor Roberts (attached). 

However, under paragraph 2 of Article 22 of the Vienna Convention, the receiving state is under a duty to ‘take all appropriate steps to protect the premises of the mission against any … impairment of its dignity.’ Therefore, in my opinion, if the Police judge that by throwing a protester off the roof (and possibly to his death), the dignity of the Bahrain embassy will be impaired, they may enter in order to prevent that act by removing the protester from the premises (i.e. to save life as violence by embassy staff would otherwise impair the dignity of the premises). The same principle presumptively applies to the death of Jamal Khashoggi in the consulate of Saudi Arabia in Ankarra, i.e. had the authorities been able to prevent the murder of this journalist.

Hard copies of the March 2019 edition of Trusts & Trustees (published by Oxford University Press) containing my new article ‘Breach of Fiduciary Duty Claims and the Quiet Fiduciary Thesis’ are now being sent out to subscribers worldwide.

To read the article please click on the link to the article on the ‘Publications’ page at: https://newsite.carlislam.co.uk/publications

On the same page you will also find a link to my article published in 2018 about equitable compensation.

As a practising Barrister, I am currently acting in several cases involving breach of fiduciary duty, and am developing my practice to include minority shareholder disputes, and civil fraud.

My forthcoming book, the ‘Contentious Trusts Handbook’, which I have been commissioned to write by the Law Society for publication in October, will also include detailed chapters about: (i) breach of duty; (ii) equitable remedies; and (iii) equitable defences.

As a registered Public Access Barrister, I can be instructed directly by members of the public (including executors and trustees) without the involvement of a solicitor.

I exercise rights of audience before every court in England and Wales in relation to all proceedings and principally appear inwill, trust, and inheritance disputes in the Business and Property Courts and Central London County Court. I also appear as an advocate in the Court of Protection (see my article the ‘Advocate and the Expert in the Court of Protection’ co-authored with Dr Hugh Series of Oxford University which is also available on the Publications page of my website).

I formerly practised as a solicitor, and am authorised by the Bar Standards Board to conduct litigation. In an appropriate case, this permits me to carry out day to day case management activities (including the issue of a Claim Form in any court in England and Wales) which are reserved to Solicitors. This enables me to offer a one stop shop litigation and advocacy service to members of the public, from evaluation of the merits, evidence, and remedies, through to trial or settlement of the claim.

To enquire about instructing me please contact my Clerk at 1 Essex Court: 

Tel: 020 7936 3030 or 020 7832 1010.

Tel out of hours: 07721 866 858.

Email: clerks@1ec.co.uk

www.ihtbar.com 

‘Trusts & Trustees is the leading international journal on trust law and practice. The most significant source of information in its field, the journal is essential for all trusts practitioners and lawyers … The journal is ideal for international trust lawyers working in both private practice and in-house in trust companies; trusts practitioners; and those working in trust companies. It will also be an essential source of reference for academics specializing in trusts; members of the judiciary; members of regulatory bodies; and institutional libraries.’ Oxford University Press.

My article, ‘Breach of Fiduciary Duty Claims and the Quiet Fiduciary Thesis’ has been published in Trusts & Trustees by Oxford University Press, and a link to the article has been posted on the Publications page at www.ihtbar.com.
My new book about Contentious Trusts (due to be published by the Law Society in October) will also contain an extensive chapter on breach of trust and breach of fiduciary duty claims.
The abstract of the article is as follows:
‘In arriving at the conclusion that a claim for fraudulent calumny can be brought on the grounds of breach of fiduciary duty where a fiduciary has been silent (the ‘Quiet fiduciary thesis’), the author examines:
· the approach of the court to breach of fiduciary duty claims—i.e. the framework of applicable legal principles;
· the hallmarks of a fiduciary—i.e. who is a fiduciary;
· the scope and content of fiduciary duties—i.e. the nature of the duties which define a fiduciary; and
· the equitable remedies available to the claimant which result—i.e. the remedial consequences of breach of fiduciary duty, which include: (i) the availability of the section 21(1) Limitation Act 1980 carve-out; (ii) equitable proprietary remedies, including tracing in equity, which is not defeated by the irretrievable mixing of property, Agip (Africa) Ltd v Jackson [1991] Ch 417; and (iii) the non-application of common law principles of remoteness in claims for equitable compensation based upon breach of fiduciary duty. (the ‘fiduciary principle’).
After applying the Fiduciary Principle to demonstrate the validity of the Quiet Fiduciary Thesis, the author discusses the operation of the fiduciary principle in the wider commercial and contractual context. Because rescission is a self-help remedy at common law, in equity the question that arises is, ‘can a contract be rescinded on the grounds of breach of fiduciary duty, by reason of silence/non-disclosure e.g. by a company director or co-venturer?’ The author concludes that it can. The principles applicable to breach of fiduciary duty claims in the context of a commercial joint-venture were recently examined in: Glenn v Watson & Ors [2018] EWHC 2016 (Ch) (31 July 2018) and Sheikh Al Nehayan v Kent [2018] EWHC 333 (Comm).’
I am currently acting in 3 breach of fiduciary duty cases, one of which is currently in the High Court in Cardiff where I appeared in January.
To enquire about instructing me in relation to a will, trust, or breach of fiduciary duty dispute please contact Ian Hogg at 1 Essex Court on 0207 936 3030.
www.ihtbar.com
‘Trusts & Trustees is the leading international journal on trust law and practice. The most significant source of information in its field, the journal is essential for all trusts practitioners and lawyers … The journal is ideal for international trust lawyers working in both private practice and in-house in trust companies; trusts practitioners; and those working in trust companies. It will also be an essential source of reference for academics specializing in trusts; members of the judiciary; members of regulatory bodies; and institutional libraries.’ Oxford University Press.

It’s beginning to look a lot like Christmas, lawyers in every store, and to celebrate my anniversary of 4 years at 1 Essex Court, here is an early present just for you…

So let your heart be light and have yourself a merry little Christmas now.

Now, listen to what I say …

When planning the cross-examination of a witness, the starting point is to ask yourself what your cross-examination is directed at eliciting and proving, which in this case is the existence of Santa Claus. So, you better be good!

Even though it’s lovely weather for a sleigh ride with the witness, your aim should be to:
(i) destroy the material parts of his evidence – i.e. that NASA have found no evidence of the existence of dwellings at the North Pole sufficient to accommodate a colony of Elves that is large enough to manufacture at least one toy for every child in the world – ‘Of course not as my expert witness (Mr Kris Kringle of 34th Street New York, New York) has clearly stated in his report, ‘they only exist in the dream world’ – really I thought everyone knew that!’;
(ii) weaken the evidence where it cannot be destroyed – i.e. that reindeer cannot fly – ‘The case I shall advance on behalf of my Client is that Reindeer only fly at midnight on Christmas Eve’;
(iii) elicit helpful evidence, i.e. the Christmas albums of Bing Crosby, Frank Sinatra, the great Nat King Cole, Andy Williams, Perry Como, Johnny Mathis; Deano, Rod Stewart, Michael Bublé and Cliff – well why not it’s Christmas …;
(iv) to undermine the witness (or shake his credit) by showing that he cannot be trusted to speak the truth, or that he is deposing (however honestly) to matters of which he has no real knowledge, ‘I will demonstrate that Frosty the snowman has no peripheral vision whatsoever. I shall also prove that at all material times he was wearing woolen ear muffs.’

The ideal to be aimed at is to lead the witness to admit that his evidence was untruthful or mistaken. ‘How do you know that you saw Mummy kissing Santa Claus underneath the mistletoe?’

Cast doubt.

Bring in Schrodinger’s cat: https://whatis.techtarget.com/definition/Schrodingers-cat

Then distract and use as an opportunity to get the witness to prove another fact, e.g. that reindeer can fly.

‘My next question, as you no doubt correctly anticipated [flatter witness to disarm], is that outside, the snow is falling, and friends are calling, “yoo-hoo!” – Yes?’
Then get the witness to gradually agree.
‘There’s a birthday party at the home of Farmer Gray – Yes?
It’ll be the perfect ending of a perfect day?
We’ll be singing the songs we love to sing without a single stop?
At the fireplace while we watch the chestnuts pop, pop, pop, pop?
There’s a happy feeling nothing in the world can buy?
When they pass around the coffee and the pumpkin pie?
It’ll nearly be like a picture print by Currier and Ives?
These wonderful things are the things we remember all through our lives?
Do you hear those sleigh bells jingling, ring-ting-tingling, too?’
‘Sleigh bells ring – are you listening – Yes?’
‘Please turn to Bundle J, Tab 14 at page 300 Do you see exhibit …
‘It is a picture print by Currier and Ives isn’t it – yes?’
‘What is the reindeer doing?
‘It’s flying isn’t it!’

After the witness has said, ‘yes – I suppose so’ nod vigorously, flick a large wad of pages over in your file (any will do), and declare ‘so you have seen a reindeer fly!’ – then move on quickly to your next question.
In most cases, the objective is not so much to destroy the evidence outright, as to weaken it, i.e. to reduce the weight of the evidence and qualify the inferences which might be drawn from it. This objective is particularly important where the evidence is circumstantial, so that its damaging effect depends not so much on what is actually said as on what may be deduced from it. The witness may be induced to admit that other explanations are possible. Relentlessly probing into the details, as in cases where identification is in issue may show that there is a possibility of a mistake. The eliciting of fresh evidence may lead to a new topic altogether. More often, however, the new evidence simply consists of facts which put a new colour on the evidence in chief. If this is done successfully, the result is not only to help in the building up of one’s case, but also, at the same time, to weaken the other side. Undermining, if successful, destroys the assumptions on which the reliability of the evidence depends. ‘How can you be sure that reindeer don’t like heights? After all, don’t they bear an uncanny resemblance to mountain goats? – only with big red noses and antlers. Is it a coincidence that they both like carrots? What other possible explanation can there be – reindeer are an elevated species of mountain goat. QED, I believe.’
After enjoying the sight of the witness’ jaw dropping to the ground savour the silence as if you had just stepped into the winter wonderland (i.e. Harrods – pronounced ‘arrods’) and taken in a deep breath of refreshingly pure winter air. Smile – but for not more than 5 seconds.

It does not follow that because an individual’s evidence is unreliable in some respects it is must also be unreliable in others.’ i.e. just because Gloria Estefan said that ‘all she wanted for Christmas was me’ [NB what she actually said was ‘you’ but that’s not how I heard it], it is not axiomatic that she did not also want a copy of my latest book on Contentious Probate – which incidentally is very reasonably priced at £79.95 and ordering links appear on the Publications page at www.carlislam.co.uk. Spread the love at Christmas.

Cross-examination requires the greatest ingenuity:
· a habit of logical thought;
· clearness of perception in general;
· infinite patience and self-control;
· power to read men’s minds intuitively, to judge their characters by their faces, to appreciate their motives;
· ability to act with force and precision; a masterful knowledge of the subject-matter itself; an extreme caution; and
· above all, the instinct to discover the weak point in the witness under examination.
By our manner toward a witness we may have in a measure disarmed him, or at least thrown him off his guard, whilst his memory and conscience are being ransacked by subtle and searching questions, the scope of which will hardly be apparent to himself, it it is however, only with the matter of our cross-examination, that we can hope to destroy him.

‘Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner, and Blitzen – are all professional dancers on ‘Strictly Come Dancing’ [which incidentally was very good this year, and I am voting for Stacey] – yes?
So, you stay in on Saturday nights?
You also stay in on Sunday nights to watch the results show – don’t you!
And yet here you stand today telling us that your field of expertise is ‘jingle bells’.
Not very likely is it?
In fact, you have never been conveyed in a one-horse open sleigh, have you?
Ever!’

There are three principal techniques for undermining credibility. An advocate may suggest that a witness is:
(i) being dishonest;
(ii) inaccurate or inconsistent; or
(iii) biased.

Alternatively, the advocate may seek to suggest some combination of (i) to (iii).
In cross-examination an advocate may either:
(i) confront the witness with evidence that is inconsistent with their account;
(ii) insinuate another version of events; or
(iii) probe the witness’s evidence for flaws.
‘Your childhood hero was Ebenezer Scrooge – was he not?
you worshiped his work ethic – didn’t you.
So, you espouse thrift as a core value?
Your friends – if you had any, might call you ‘thrifty’ – is that not so?
Scroogle knew about Tiny Tim – didn’t he! [note I have got the fact at which my question is directed down to only 5 words].
Charity does not feature in your vocabulary – does it?
In the hierarchy of moral values – Scrooge comes first doesn’t he?
Neither of you shed a tear for poor Tiny Tim before the midnight chimes ran out through your empty house – which until then had been as quiet as a mouse. [NB not a moose!].
So why should we believe you when you say that you were visited by Muppets at midnight on Christmas Eve?
Your evidence is nothing more than fantasy is it!’

Confrontation, as the name indicates, consists of confronting the witness with a great mass of damaging facts which he cannot deny, and which are inconsistent with his evidence. It is a destructive technique, but when it fails to destroy it may still succeed in weakening. Probing consists of inquiring thoroughly into the details of the story to discover flaws. It may be used either to weaken or destroy, or open up a lead to something new. Insinuation is a many-sided technique. In essence, it is the building-up of a different version of the evidence-in-chief, by bringing out new facts and possibilities, so that, while helping to establish a positive case in one’s own favour, at the same time it weakens the evidence-in-chief by drawing out its sting. Insinuation may take the form of quietly leading the witness on, little by little: alternatively, it may be necessary to drive him. Thus, there are two main forms of the technique, gentle insinuation and firm insinuation. The object of undermining is not to break down the evidence by inquiring into the facts, but to take away the foundations of the evidence by showing that either: (i) the witness does not know what he is talking about; or (ii) if he does know the truth, he cannot be trusted to tell it.

‘Santa Claus is also known by other names isn’t he?
[Santa anoraks please visit: https://www.wordhippo.com/what-is/the-meaning-of/swahili-word-106819fed9cd37eab541002dcf4e23899c833f98.html]
In Swahili Santa Claus means Santa Claus!
That is right isn’t it!
The evidence is therefore overwhelming, and without doubt points to only one conclusion – namely that there is a Santa Claus, because during the holidays he parties with the Zulus.
Surely you are not suggesting that the Zulus invented Santa Clause – and if I were you I really wouldn’t go there, because as Michael Caine will tell you (see film on boxing day), it’s not a smart move to upset the Zulus – they are very sensitive about things like that.
So you better watch out
You better not cry
You better not pout
I’m telling you why
Santa Claus is coming to town
He’s making a list,
Checking it twice,
Gonna find out who’s naughty or nice.
He sees you when you’re sleeping
He knows when you’re awake
He knows if you’ve been bad or good
So be good for goodness sake
With little tin horns, little toy drums
Rooty toot toots and rummy tum tums
Santa Claus is coming to town
And curly head dolls that toddle and coo
Elephants, boats, and kiddie cars too
Santa Claus is comin’ to town
Then kids in Girls and Boy land will have a jubilee
They’re gonna build a Toyland town
all around the Christmas tree
So! You better watch out, you better not cry
Better not pout, I’m telling you why
Santa Claus is comin’ to town – Yes?’
Then pause for silence and throw in a splattering of latin phrases, whilst looking meek – as if praying for the salvation of the soul of the witness.
‘En grege relicto
Humiles ad cunas,
Vocati pastores adproperant,
Et nos ovanti,
Gradu festinemus.
Venite, adoremus!’

An expert’s possession of special expertise or knowledge is obviously the main foundational fact for expert opinion evidence; but it is not sufficient to prove some expertise at large. The expert witness must also be shown to be an expert in the field to which the issue about which they have been called to give evidence belongs.
Move in for the kill …

‘I notice that your CV does not mention ‘walking in the winter wonder-land.’
You live in a village, don’t you?
So how do you know that Santa Clause ‘is not coming to town’?
You have never heard sleigh bells in the snow have you?
In fact, you were not even dreaming of a white Christmas when you gave your evidence were you?
Examine your conscience.
Can you tell us truthfully whether you have you been naughty or nice this year?
Finally [the five golden rings question!]
Please turn to Bundle A, Tab 4 at page 108 – do you see what I see? – an exhibit as big as a kite? – a receipt marked ‘all items we supply have been certified as complying with Elf and Safety.’
Listen to what I say …
‘on the fifth day of Christmas DHL, who bring goodness and light, delivered –
Five golden rings!
Four calling birds,
Three French hens,
Two turtle doves,
And a partridge in a pear tree?’
What did DHL bring on the 12th day of Christmas?
You don’t know! … ’

Look astounded and shake head 3 times in disbelief.
Then pull yourself up by lapels on gown, look judge straight in the eye and gently say in re-assuring voice …

‘My Lord, I bring tidings of comfort and joy.
The only question you have to ask yourself is ‘do I believe?’
I submit that there is only one conclusion which can be reached on the facts in this case – and please think of the little children when you deliver your ruling, silver bells, presents on the tree, and bonuses in the City …
and that conclusion is that Santa Clause does exist, and that he exists in the person of my expert witness Kris Kringle!’

Then whilst opposing counsel’s head slumps into his papers as he thumps the table with his right hand, spread the joy! – and don’t hold back – it’s Christmas:
‘So, deck the halls with boughs of holly, strike the harp and join the chorus …
May your days always be merry and bright!
Joyeux Noël et bonne année
Frohe Weihnachten und neues Jahr, Glückliches
Buon Natale e felice anno nuovo
Feliz Navidad, Próspero año y Felicidad’.

Result.

Then do a high five with the court usher – but only in an American court!

Disclaimer

This is a work of pure fiction. Any similarity to actual persons, living or dead, or actual events, is purely coincidental, and that includes Zulus.

May all your future cross-examinations be well-mannered and polite!
Merry Christmas and a Happy New Year to one and all wherever you may be.

This year I have been involved in 3 cases involving allegations of breach of fiduciary duty (including self-dealing by executors and fraudulent calumny by a fiduciary who remained silent), and this subject features in my forthcoming book the ‘Contentious Trusts Handbook’ which I am writing for the Law Society.

I am also giving a talk about ‘Breach of fiduciary duties by trustees’ at Barlow Robbins Solicitors in Guildford on Tuesday 13 November 2018, and will address the recent judgment by Mr Justice Nugee in  Glenn v Watson & Ors [2018] EWHC 2016 (Ch) (31 July 2018), in which the Judge observed,

‘I was referred by both [Counsel] to a number of authorities on the question whether a fiduciary duty is owed by one person to another.  For the most part I did not detect any significant difference between them as to the law; the authorities referred to were rather put forward as illustrations, thought to be helpful to one side or the other, of the principles.  In those circumstances, I do not intend to discuss the authorities at length, but will try and summarise what I understand the principles to be.

Those are I think as follows:

(1)                   There are a number of settled categories of fiduciary relationship.  The paradigm example is that of trustee and beneficiary; other well-settled examples are solicitor and client, agent and principal, director and company (subject to the impact of the Companies Act 2006), and the relationship between partners: Snell’s Equity (33^rd edn, 2015) at §7‑004.

(2)                   Outside these settled categories, fiduciary duties may be held to arise if the particular facts warrant it.  Identifying the circumstances that justify the imposition of fiduciary duties has been said to be difficult because the courts have consistently declined to provide a definition, or even a uniform description, of a fiduciary relationship: ibid at §7‑005.

(3)                …

(4)                …

(5)                …

(6)                   What then are the particular factual circumstances that will lead to the Court finding that fiduciary duties are owed?  This can best be elucidated by a number of citations:

(a)        In his well-known classic judgment in Bristol & West Building Society v Mothew [1998] Ch 1 (“Mothew”) at 18A, Millett LJ said:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

(b)        In Arklow Investments Ltd v Maclean [2000] 1 WLR 594 at 598G, Henry J, giving the judgment of the Privy Council, said:

“the concept encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal.”

(c)        In F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2011] EWHC 1731 (Ch) at [225], Sales J said:

“Fiduciary duties are obligations imposed by law as a reaction to particular circumstances of responsibility assumed by one person in respect of the conduct of the affairs of another.”

(d)       In another case involving Ross River Ltd, Ross River Ltd v Cambridge City Football Club [2007] EWHC 2115 (Ch) (cited by Lloyd LJ in Ross River at [56]-[58]), Briggs J referred at [198] to:

“well known badges or hallmarks of a fiduciary relationship, such as … [if] the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit.”

(e)        In Ross River at [51]-[52] Lloyd LJ cited with approval a passage from Bean, Fiduciary Obligations and Joint Ventures (1995) (itself referring to Finn, Fiduciary Obligations (1977)), which is too long to set out in full but the essence of which is as follows:

“[Fiduciary] office holders are entrusted with power to act for the benefit of another, but are not under the immediate control and supervision of the beneficiary…

Finn’s rationale is that the fiduciary who has freedom to determine how the interests of the beneficiary are to be served requires the supervision of equity. Indeed, it is the fiduciary’s autonomy in decision-making that requires equity’s supervision and this is required whether or not the autonomy is created under a contract between the parties or is inherent in the office.”

(7)                   Without in any way attempting to define the circumstances in which fiduciary duties arise (something the courts have avoided doing), it seems to me that what all these citations have in common is the idea that A will be held to owe fiduciary duties to B if B is reliant or dependent on A to exercise rights or powers, or otherwise act, for the benefit of B in circumstances where B can reasonably expect A to put B’s interests first.  That may be because (as in the case of solicitor and client, or principal and agent) B has himself put his affairs in the hands of A; or it may be because (as in the case of trustee and beneficiary, or receivers, administrators and the like) A has agreed, and/or been appointed, to act for B’s benefit.  In each case however the nature of the relationship is such that B can expect A in colloquial language to be on his side.  That is why the distinguishing obligation of a fiduciary is the obligation of loyalty, the principal being entitled to “the single-minded loyalty of his fiduciary” (Mothew at 18A): someone who has agreed to act in the interests of another has to put the interests of that other first.  That means he must not make use of his position to benefit himself, or anyone else, without B’s informed consent.

(8)                   …

(9)                  …

(10)               Even if a party is held to have owed a fiduciary duty to another party, the nature of the fiduciary obligations owed is itself a fact-sensitive enquiry, to be determined by considering the particular relationship between the parties: Ross River at [64].  Thus for example in John v James the defendants were not disposed to dispute that the publisher owed a fiduciary obligation to account for royalties received, but it was disputed, and had to be decided, whether it owed a fiduciary obligation in respect of exploitation of the copyrights; in Ross River Morgan J had found that the defendants owed fiduciary duties in certain respects but not others, and the Court of Appeal found that the duties were more extensive.

132. Mr McCaughran had a further submission on this point, which is that a distinction can be seen in the authorities between cases in which the Court has held that a fiduciary duty arises out of an existing contractual relationship as an incident of the contract between the parties, and cases in which a party is held to owe a fiduciary duty to the other party in the negotiation of the contract.  He relied on what Lord Walker had said in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55 at [81] where he referred to:

“the general principle that the court should be very slow to introduce uncertainty into commercial transactions by over-ready use of equitable concepts such as fiduciary obligations and equitable estoppel.  That applies to commercial negotiations whether or not they are expressly stated to be subject to contract.”

That was not in fact a case about fiduciary duties but about promissory estoppel, but I do not think that detracts from the force of what Lord Walker says, or from its good sense.  Parties negotiating for a contract are normally entitled to act in their own interests and are not obliged to have regard to the interests of the other party, and it takes particular circumstances before fiduciary duties are to be imposed on them.  Mr McCaughran said that in the case of negotiations for a joint venture such cases were very rare, the only example he had found being Murad.  In Murad the claimants were two sisters who lived abroad and looked to the defendant, a Mr Al-Saraj, to make appropriate recommendations and assist them in connection with investments in England; they had no relevant experience, had no knowledge of the arrangements made by the defendant with third parties, and entrusted him with extensive discretion to act in matters affecting their interests.  They were, in the words of Etherton J “wholly dependent” on him for his advice and recommendation, the negotiations with the vendors, and the instruction of professionals on their behalf, including in relation to the structure of the transaction and documentation; see at [328], [332].

133. …

I will add one further point here.  The reference in the cases (such as John v James, Mothew and Longstaff v Birtles) to a relationship of “trust and confidence” does not mean that every relationship in which one party trusts the other is a fiduciary relationship.  Contracting parties usually do trust each other – indeed they would be unlikely to do business with each other if they did not – but this does not mean that they owe each other the duties which are peculiar to fiduciaries.  What I think is meant by a relationship of trust and confidence in this context is where one party places himself, or is placed, in the position where he trusts and confides that the other party will act exclusively in the first party’s interests.  If the concept of trust and confidence is not confined in this way, it seems to me to cease to be of any utility in determining whether a fiduciary duty is owed: cf the recent decision of Leggatt LJ (at first instance) in Sheikh Al Nehayan v Kent [2018] EWHC 333 (Comm) (“Al Nehayan”) at [164]-[165]. This judgment, which contains a valuable analysis of the whole question of fiduciary duties (see at [153ff]), was not available at the time of the hearing, but it contains nothing with which I disagree, and on this particular point seems to me plainly right, and I have not thought it necessary to ask for the parties’ further submissions on it.’

In Sheikh Al Nehayan v Kent [2018] Lord Justice Leggatt stated,

‘As Lord Browne-Wilkinson cautioned in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206:

“The phrase ‘fiduciary duties’ is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances.  That is not the case.” … I bear in mind that it is exceptional for fiduciary duties to arise other than in certain settled categories of relationship.  The paradigm case of a fiduciary relationship is of course that between a trustee and the beneficiary of a trust.  Other settled categories of fiduciary include partners, company directors, solicitors and agents.  Those categories do not include shareholders, either in relation to the company in which they own shares or to each other.   While it is clear that fiduciary duties may exist outside such established categories, the task of determining when they do is not straightforward, as there is no generally accepted definition of a fiduciary.  Indeed, it has been said that a fiduciary “is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary”: see Finn, Fiduciary Obligations (1977), p2, cited with approval by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, 18.  If this is right, it simply begs the question of how to determine when a person is subject to fiduciary obligations if not by analysing the nature of their relationship with the person to whom the obligations are owed.

Despite saying in the Mothew case that a fiduciary is defined by the obligations to which he is subject and not the other way round, Millett LJ did give a general description of a fiduciary as “someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence”: see [1998] Ch 1, 18.  This description has often since been cited with approval, including by the Supreme Court in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250, para 5.  To similar effect, in another much quoted statement, Mason J in the High Court of Australia in Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 96-97, said:

“The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.”

Thus, fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person.  (Such duties may also arise where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party’s decision-making: see Lionel Smith, “Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another” (2014) 130 LQR 608.)  The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal.  This is the core of the obligation of loyalty which Millett LJ in the Mothew case [1998] Ch 1 at 18, described as the “distinguishing obligation of a fiduciary”.  Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary’s own interests.  To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal) place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal.  They are also liable to account for any profit obtained for themselves as a result of their position …

But the existence of trust and confidence is not sufficient by itself to give rise to fiduciary obligations.  In the first place, the question whether one party did in fact subjectively place trust in the other is not the test.  As Dawson J said in the Hospital Products case (1984) 156 CLR 41 at 71:

“A fiduciary relationship does not arise where, because one of the parties to a relationship has wrongly assessed the trustworthiness of another, he has reposed confidence in him which he would not have done had he known the true intentions of that other.  In ordinary business affairs persons who have dealings with one another frequently have confidence in each other and sometimes that confidence is misplaced.  That does not make the relationship a fiduciary one.  A fiduciary relationship exists where one party is in a position of reliance upon the other because of the nature of the relationship and not because of a wrong assessment of character or reliability.”

The inquiry, in other words, is an objective one involving the normative question whether the nature of the relationship is such that one party is entitled to repose trust and confidence in the other.

It is also necessary to identify more precisely the nature of the trust and confidence which is a feature of a fiduciary relationship.  There plainly are many situations in which a party to a commercial transaction may legitimately repose trust and confidence in another without the other party owing any fiduciary duties.  Thus, in Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74, the Privy Council rejected an argument that a company was a fiduciary because it had agreed to keep gold bullion in safe custody for customers in circumstances where the customers were totally dependent on the company and trusted the company to do what it had promised without in practice there being any means of verification.  Lord Mustill said (at 98):

“Many commercial relationships involve just such a reliance by one party on the other, and to introduce the whole new dimension into such relationships which would flow from giving them a fiduciary character would (as it seems to their Lordships) have adverse consequences …. It is possible without misuse of language to say that the customers put faith in the company, and that their trust has not been repaid. But the vocabulary is misleading; high expectations do not necessarily lead to equitable remedies.”

Mutual trust and confidence between parties dealing with one another can be of different kinds.  At a basic level any contracting party is entitled to rely on the other party to perform its contractual obligations without having to monitor performance or even if (as in Re Goldcorp Exchange Ltd) it is unable to monitor performance.  The kind of trust and confidence characteristic of a fiduciary relationship is different.  As discussed above, it is founded on the acceptance by one party of a role which requires exercising judgment and making discretionary decisions on behalf of another and constitutes trust and confidence in the loyalty of the decision-maker to put aside his or her own interests and act solely in the interests of the principal.’

Thesis
The thesis of this post is that the equitable doctrine of self-dealing applies to ‘intermeddling’.

Intermeddling
A person who intrudes upon the affairs of a deceased testator, before obtaining a grant of probate, may be treated as having assumed the executorship.

Such an ‘intermeddler’ is called a tort executor or an ‘executor de son tort’ (i.e. of his own wrong). The concept is derived from the principle that a person who has assumed authority where he has none, is accountable as if he had that authority, Pollard v Jackson [1993]. Depending upon the circumstances, such a person may also become a constructive trustee for those entitled to the assets. The fact a person intermeddles without any grant may be a reason why such a person is not merely an executor de son tort but is also a constructive trustee, James v Williams [2000].

Scope of the self-dealing rule
‘A purchase of trust, or other self-dealing transaction by a trustee, may be impugned under … the self-dealing rule … [which broadly speaking is] based on the conflict rule that a trustee must not put himself in a position where there is a conflict between his interest and duty, and has the effect of rendering the transaction voidable.’ [Lewin on Trusts, 18th ed (‘Lewin’), paragraph 20-58].

I submit that the rule applies in its strict form to a trustee (including a trustee under a constructive trust); an executor; and an executor de son tort.

‘[The] rule applies in its strict form not only to trustees strictly so called; it applies also to all who, though differing in name, are invested with the like fiduciary character, such as an … executor … an executor de son tort’ [Lewin paragraph 20-84, citing Mulvany v Dillon [1810]].

The ‘… constructive trustee, although not expressly appointed as a trustee, has assumed the duties of a trustee before the events which are alleged to constitute the breach of trust’ and is therefore a true trustee (Blackstone’s Civil Practice 2018, paragraph 10.38, which also states, ‘When considering the boundary between cases where the defendant is a true trustee under an express or constructive trust, sand those where he is not, the key factor is whether there is trust property (Clarke v Marlborough Fine Art (London) Ltd [(2001).’)

I further submit that the ‘… rule applies to self-dealing transactions other than purchases of trust property by a trustee … [whilst noting that] the presence of a conflict of interest, or a conflict of duties in different fiduciary capacities, does not in the case of all transactions concerning the trust property involve the application of the self-dealing rule in its full severity. Sometimes the conflict operates merely to impose a burden on the trustee to prove that the transaction in question was fair and reasonable and that he took no advantage of his position as trustee.’ [Lewin, paragraph 20-64].

If therefore the trustee fails to discharge the burden of proof, then the self-dealing transaction is voidable ex debito justitiae (i.e. ‘as of right’) at the suit of e.g. a residuary beneficiary [‘B’] because ‘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’, Re Thompson’s Settlement [1986] 1 Ch.99, 115.

Where the rule applies B may prevent an intended sale by injunction and if the sale has already taken place, the range of possible orders against a purchaser for value without notice include:
– a reconveyance of the property to the trust;
– an order for an account of profits (where the trustee has sold at a profit); and
– equitable compensation (where the trustee has sold at a loss).

Exceptions to the rule

Section 41 of the Administration of Estates Act 1925 which confers wide powers of appropriation on a ‘personal representative’ provides:

‘(1) The personal representative may appropriate any part of the real or personal estate, including things in action, of the deceased in the actual condition or state of investment thereof at the time of appropriation in or towards satisfaction of any legacy bequeathed by the deceased, or of any other interest or share in his property, whether settled or not, as to the personal representative may seem just and reasonable, according to the respective rights of the persons interested in the property of the deceased:

Provided that—
an appropriation shall not be made under this section so as to affect prejudicially any specific devise or bequest;
(ii) an appropriation of property, whether or not being an investment authorised by law or by the will, if any, of the deceased for the investment of money subject to the trust, shall not (save as hereinafter mentioned) be made under this section except with the following consents:—
(a) when made for the benefit of a person absolutely and beneficially entitled in possession, the consent of that person;
(b) when made in respect of any settled legacy share or interest, the consent of either the trustee thereof, if any (not being also the personal representative), or the person who may for the time being be entitled to the income:
If the person whose consent is so required as aforesaid is an infant or lacks capacity (within the meaning of the Mental Capacity Act 2005) to give the consent, it shall be given on his behalf by his parents or parent, testamentary or other guardian, . . or a person appointed as deputy for him by the Court of Protection, or if, in the case of an infant, there is no such parent or guardian, by the court on the application of his next friend;

no consent (save of such trustee as aforesaid) shall be required on behalf of a person who may come into existence after the time of appropriation, or who cannot be found or ascertained at that time;

(iv) if no deputy is appointed for a person who lacks capacity to consent, then, if the appropriation is of an investment authorised by law or by the will, if any, of the deceased for the investment of money subject to the trust, no consent shall be required on behalf of the said person;

(v) if, independently of the personal representative, there is no trustee of a settled legacy share or interest, and no person of full age and capacity entitled to the income thereof, no consent shall be required to an appropriation in respect of such legacy share or interest, provided that the appropriation is of an investment authorised as aforesaid.

(1A) The county court has jurisdiction under proviso (ii) to subsection (1) of this section where the estate in respect of which the application is made does not exceed in amount or value the county court limit.
(2) Any property duly appropriated under the powers conferred by this section shall thereafter be treated as an authorised investment, and may be retained or dealt with accordingly.
(3) For the purposes of such appropriation, the personal representative may ascertain and fix the value of the respective parts of the real and personal estate and the liabilities of the deceased as he may think fit, and shall for that purpose employ a duly qualified valuer in any case where such employment may be necessary; and may make any conveyance (including an assent) which may be requisite for giving effect to the appropriation.
(4) An appropriation made pursuant to this section shall bind all persons interested in the property of the deceased whose consent is not hereby made requisite.
(5) The personal representative shall, in making the appropriation, have regard to the rights of any person who may thereafter come into existence, or who cannot be found or ascertained at the time of appropriation, and of any other person whose consent is not required by this section.
(6) This section does not prejudice any other power of appropriation conferred by law or by the will (if any) of the deceased, and takes effect with any extended powers conferred by the will (if any) of the deceased, and where an appropriation is made under this section, in respect of a settled legacy, share or interest, the property appropriated shall remain subject to all trusts and powers of leasing, disposition, and management or varying investments which would have been applicable thereto or to the legacy, share or interest in respect of which the appropriation is made, if no such appropriation had been made.
(7) If after any real estate has been appropriated in purported exercise of the powers conferred by this section, the person to whom it was conveyed disposes of it or any interest therein, then, in favour of a purchaser, the appropriation shall be deemed to have been made in accordance with the requirements of this section and after all requisite consents, if any, had been given.
(8) In this section, a settled legacy, share or interest includes any legacy, share or interest to which a person is not absolutely entitled in possession at the date of the appropriation, also an annuity, and “purchaser” means a purchaser for money or money’s worth.
(9) This section applies whether the deceased died intestate or not, and whether before or after the commencement of this Act, and extends to property over which a testator exercises a general power of appointment, including the statutory power to dispose of entailed interests, and authorises the setting apart of a fund to answer an annuity by means of the income of that fund or otherwise.’

However,
‘Where assets are being appropriated by a personal representative in satisfaction of his own interest as a beneficiary in the estate, self-dealing questions arise (Kane v Radley-Kane [1999] 1 Ch 274). If the personal representative wishes to take the asset himself, agreement to the act of appropriation and to the valuation used, with all the interests affected by the appropriation, will be necessary. This is because the transaction places the personal representative in a position of conflict between his personal interests and his duty toward the other beneficiaries of the estate. Without the agreement of those also interested, the personal representative must satisfy his beneficial interest by the appropriation of cash or assets which have an open and independently verifiable value such as quoted stocks and shares.’ (‘A Practitioner’s Guide To Legacies’, by Martyn Frost, Paul Saunders, Arabella Saker, Geoffrey Shindler, Tim Stone, Richard Wilson’ (2003) Lexi Nexis Tolley, paragraph 12.3).

As James Kessler QC and Charlotte Ford state in paragraph 21.50 and footnote 105 of ‘Drafting Trusts and Will Trusts’ (13 ed),

In the absence of an express power of appropriation under the terms of a will, ‘[the] powers conferred by the general law are inadequate … (1) Section 41 AEA 1925 confers the power on personal representatives, but not on trustees, (2) Section 7 TOLATA 1996 confers a power of appropriation in relation to land in England and Wales. (3) Section 15(b) TA 1925 confers power to sever and apportion “blended trust funds or property”. It is considered that this gives trustees power to appropriate whenever trustees hold trust property in undivided shares – so the power overlaps with (1) and (2) above. This is significant since this power (unlike the above) does not require any beneficiary to consent. (4) The extent to which the common law allows appropriation is unclear. The old cases are discussed in Kane v Radley-Kane [1999] Ch 274.’

It is also worth noting that:
An appropriation cannot take place if the value of the asset exceeds the entitlement of the beneficiary (although the beneficiary could purchase the asset from the personal representatives).

Had there been a purchase by a person connected with the trustee, then ‘in practice it is prudent for trustees to consider seeking the consent of the beneficiaries or the directions and if necessary sanction of the court before selling trust property to their spouses (or civil partners).’ [Lewin, paragraph 20-77] – where the trustees include a professional trustee (such as a solicitor) a trustee resolution or minute should therefore have been drafted to record the seeking of consent/directions in default of which the evidential presumption is that no such consent or directions were in fact sought.
‘The traditional way of dealing with residuary gifts is to vest the residue in the trustees on trust for sale with power to postpone the sale. Where there is an outright gift of residue and no continuing trust will come into being, it may be better to vest the residue in trustees but to rely upon the powers of executors to give effect to the terms of the will. Where the residuary estate will or may be subject to a trust, it is suggested that it is vested in the trustees on an express trust for sale with power to postpone the sale. In the case of land, a power to postpone the sale is implied by Trusts of Land and Appointment of Trustees Act 1996, s4 but it may be desirable to include an express power to postpone for the personalty which, invariably, will form part of the residuary estate … It is in many cases not necessary to include an express trust for sale but many practitioners continue to do so and lay executors often appreciate an express statement of their powers …

[For example, Precedent Form 11.1 (Creation of trust for sale with debts, inheritance tax etc to be paid out of proceeds) provides],
“My Trustees shall hold [the rest of] my estate on trust for sale [with power to postpone sale] to pay executorship expenses and debts … and any inheritance tax in respect of property passing under this will”.’ Parker’s Modern Will Precedents 7th Ed (2011) by Michael Waterworth.

As Professor Lesley King [‘King’] states in paragraph 8.9.2 of the ‘Probate Practitioners Handbook’ published by the Law Society (April 2018), whilst, ‘Every trust for sale of land created by a disposition on or after 1 January 1997 has an implied power for the trustees to postpone sale. Property of an intestate is no longer held on a trust for sale. Before [TLATA came into force on 1 January 1997] it was standard practice to include an express trust for sale (with power to postpone sale) to avoid the complication of the Settled Land Act 1925. It is no longer necessary to include a trust for sale for this reason. Trustees of a ‘trust of land’ as defined by TLATA 1996 have all the powers of an absolute owner, including sale. [However, there is] some point to including an express trust for sale to deal with the possibility of a continuing trust of personalty … Where a will creates a continuing trust, s.11 [TLATA] imposes an obligation on trustees of land to consult beneficiaries of full age with an interest in possession when exercising any function in respect of land’.

‘Once the PR has ascertained the amount of residue available to the residuary beneficiary and, if appropriate, obtained approval of the estate accounts it is likely that the PR then holds the remaining assets as trustee. If, however, other assets or liabilities were discovered, the PR would have to deal with these assets or liabilities as PR since that office is never lost.’ [King, paragraph 8.10.1].