Challenges for lay trustees

Wednesday, 16 October 2019

Anyone setting up a private trust is primarily seeking to protect assets for the beneficiaries. It is naturally within everyone’s interests to appoint responsible and trusted individuals to manage the trust.

While some ‘settlors’ will use professional trustees, others will appoint lay trustees, such as family members or friends who take on the full responsibility of the trust themselves. In some cases professional and lay trustees work alongside each other.

Sadly disputes over trusts are becoming more commonplace, with claims against trustees often being brought by beneficiaries themselves.

Breach of Trust Case Study: Brudenell-Bruce v Moore (2014)

In the Brudenell-Bruce v Moore case, a lay trustee, Mr Moore, who was invited by one of the beneficiaries to become a trustee and work alongside a professional trustee, found himself defending a number of claims. The claims were brought by the very beneficiary that had asked him to become a trustee: Lord Cardigan. Lord Cardigan argued that there had been breach of trust by trustees in the management of the trust, citing three specific examples:

  • Lord Cardigan asserted that trustees had failed to charge commercial rent to a family member who was not a beneficiary of the trust, resulting in a diminution of the trust in lost rental income. The claim against trustees was upheld but limited to rent that could have been charged from 2013, as Lord Cardigan had himself allowed his half-uncle to occupy the property rent free until 2013.
  • Failure to maintain property assets which also resulted in loss of rental income. Another let property that formed part of the estate suffered extensive damage, due to a burst pipe after it was vacated by the tenant. Lord Cardigan argued that while trustees organised emergency repairs the property was not reinstated into a rentable condition and 18 months rental income was lost to the trust, amounting to GBP53,100. Again, the judge upheld the claim that trustees had failed to maintain the assets of the trust and the trustees, were ordered to make good the lost rental themselves.
  • Finally, a claim was made exclusively against the lay trustee Mr Moore, contesting payments made from the trust to him for work carried out between 2009-2012. Mr Moore had invoiced and received remuneration of GBP117,000 with the full approval of the professional trustee involved, but Lord Cardigan argued that Mr Moore had taken on the role in the full knowledge that it was without remuneration.

Mr Moore claimed that he had been misled by Lord Cardigan about the extent of work involved in the trust management, and he also argued that Lord Cardigan had implied through a series of emails that he should receive some remuneration from the trust. While the judge acknowledged that Mr Moore had undertaken considerable work as a trustee it was no more or less than he should have anticipated as part of the general affairs of the estate. He stated that Mr Moore had not performed any exceptional services which would warrant remuneration and that the emails from Lord Cardigan were inconclusive. Mr Moore was ordered to reimburse the estate.

In this case, the lay executor, Mr Moore, voluntary accepted the role, a responsible and difficult position without the promise of remuneration. It was only once he had become more involved that he realised how onerous and problematic it was. The result was an acrimonious dispute with one of the beneficiaries, a serious court case in which he had to defend his actions and an order to pay for mistakes made in the role.

Lay trustees may not be fully aware of all the potential pitfalls, nor that they face personal and unlimited liability if found guilty of wrongful acts, mis-management or negligence. In these circumstances trustees would have to pay any successful claims themselves with no financial reimbursement from the trust, unless there is an agreement in place through the trust deed. A professional estate practitioner normally benefits from the protection of professional indemnity insurance, and it makes perfect sense that a less experienced lay trustee should also enjoy the protection of an insurance policy.

Castleacre Director Hugo Johnsen says: ‘Any professional involved with trusts knows how complex these can be and how hostile disputes may become. We’ve worked with insurers to develop a trustee policy which protects lay trustees in the same way as a professional indemnity policy. Without this cover trusts may find it difficult in the future to recruit potential trustees, who may not wish to expose themselves to personal and unlimited liability.’

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