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The trustee’s duty to account

Welcome clarity from the High Court

Among the many fundamental duties of a trustee to their beneficiaries is the well-established duty to account to their beneficiaries by keeping accurate records of the administration of the trust/estate. In the recent case of Ball v Ball and Anor [2020] EWHC 1020, the High Court dismissed a claim against two trustees by their fellow trustee (also a beneficiary of the trust) regarding an alleged failure to account, and simultaneously provided further guidance as to what may be considered an adequate account by a trustee to their beneficiaries.

Background

Our clients, Christopher Ball and Jenny Westaway, are directors of the Wroe’s department store company. Their mother, Dorothy Ethel Ball, founded the Wroe’s family store in Bude in 1946 and ultimately ran the store with their father, Christopher Edward Ball for the rest of their lives. The Wroe’s company has remained the family business to date. Christopher and Jenny’s brother, Jonathan Ball, is not involved with the family business.

Their father died in 1978. In his Will, he left their mother Dorothy a life interest (a right to income) from his assets for her lifetime with the assets being left, upon her death, to Jonathan, Jennifer and Christopher’s three children. He appointed his three children (i.e. Jonathan and our clients) as the trustees of their mother’s life interest trust.

Regrettably, the siblings’ relationship was strained, and broke down further following Dorothy’s death in 2016. Jonathan brought a claim against Jenny and Christopher seeking, as the principal relief, an account of his father’s estate.

Jonathan’s claim alleged that Jenny and Christopher had put their roles as directors of Wroe’s ahead of their roles as trustees of their father’s estate, and that the income of the trust had been improperly paid so that Dorothy had not received all of the income she was entitled to from 1978 to 2016 and the family business had wrongly benefitted as a result. In order to prove this, our clients were asked to provide an account of their father’s Will Trust as two of its three trustees.

The issues

The claim was issued in October 2018. At a directions’ hearing in September 2019, the Court approved a list of issues to be decided at trial. These questions concerned what monies had been paid to Dorothy pursuant to her life interest, what monies had been paid to the executors of Dorothy’s own Will Trust, and whether Christopher and Jennifer had already provided a sufficient account as to the administration of their father’s Will Trust. In the event that the Court found that Christopher and Jenny had not provided sufficient account, the Court would consider further whether to make an order for an account.

Judgment

In his judgment of 5 May 2020, Chief Master Marsh found that Christopher and Jenny had, in fact, provided an adequate account of their father’s Will Trust prior to the claim being issued. The full decision of Chief Master Marsh can be found here .

Chief Master Marsh drew attention to the fact that on 29 March 2018, in the course of pre-action correspondence, Clarke Willmott wrote to Carter Ruck (Jonathan’s solicitors at the time) on behalf of Christopher and Jenny. This letter consisted of five typed pages, and summarised the assets which formed their father’s estate and the income paid to Dorothy in her lifetime; it was further accompanied by a copy of their father’s Will, a spreadsheet of Dorothy’s income from Wroe’s between 1977 and 2004, and accompanying pages from the accounts.

Chief Master Marsh further reflected that when Jonathan had instructed Wright Hassall to bring this claim, Clarke Willmott had provided a copy of this letter to Jonathan’s new solicitors on 24 May 2018. Following issue of the claim in October 2018, Christopher and Jenny provided comprehensive witness statements setting out their dealings with their father’s estate, which were recognised by Chief Master Marsh as providing very full detail. These were then followed by a further letter from Clarke Willmott dated 9 August 2019, which indicated that an account had been provided in March 2018 and proceeded to set out again in detail Christopher and Jenny’s account, with accompanying schedules.

Chief Master Marsh summarised that the authorities in respect of a trustee’s duty to account do not provide a set form in which the trustee is required to discharge this duty and that the obligation is for the trustees to inform and provide explanation where necessary. Chief Master Marsh found that Christopher and Jenny had provided adequate account in the letter of 29 March 2018, which had subsequently been repeated and supplemented on later occasions despite there being no requirement to do so. As such, Jonathan’s claim was dismissed and Jonathan was ordered to pay Christopher’s and Jenny’s costs on the indemnity basis

Comment

This judgment provides some welcome clarity as to what will constitute an adequate account by a trustee. It confirms that the Court has a discretion as to whether or not to order an account and emphasises the consideration of whether such an order is likely to be of any practical use.

The judgment also outlines that when providing an account, a trustee must identify:

  • The assets;
  • What they have done with the assets;
  • What the assets now are; and
  • What distributions have taken place.

Finally, the judgment clarifies that a beneficiary entitled to the trust capital is not entitled to an account of the income payable to a different beneficiary but does have an interest in the way the income trust is managed. The beneficiary can seek an account if assets belonging to the trust have been transferred to the income beneficiary.

Ultimately there is no set form as to how a trustee must provide their account, and this will still turn on the specific circumstances of the case, as well as the size and nature of the trust in question. Trustees must be mindful of their duty to account at all times and be sure to keep sufficiently detailed accounts of how they manage an estate.

We welcome this decision and the acknowledgement by the Court of our clients’ fulfilment of their obligations as trustees.

For more information and guidance about the issues discussed in this article, please contact a member of our expert team.

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Your key contact

Emily Jenkins

Senior Associate

Taunton
Emily is a Senior Associate in the Commercial & Private Client Litigation team specialising in contentious probate and trusts, agricultural and agri-business disputes and commercial disputes.
View profile for Emily Jenkins >

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