Breach of trust – sufficiently complete declaration of trust – Iles v Iles [2012] EWHC 919

 In Trusts

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If there is a sufficiently complete declaration of trust in favour of a beneficiary, then that declaration is binding on the trustees who will act in breach of trust if they do not act in accordance with its terms.  This case shows that claiming ignorance of the terms of a trust will not protect the trustees if they act contrary to its terms.

The facts

Mr Bob Iles (the deceased) who was described to the judge as “the Del-Boy of Darlington” acquired the disputed land and other land over a period of time in Darlington which formed part of the Forge Industrial Estate (the Forge).

In 1983 the deceased and his wife Mrs Margaret Iles (Mrs Iles, the defendant). signed a declaration of trust declaring that they held a parcel of land at the Forge in favour of their daughter Rebecca (the claimant) upon her attaining 21 years of age.  In 1988 the Council compulsorily purchased all land held by the deceased and Mrs Iles at the Forge, which included this parcel of land.

After lengthy negotiations, there was an exchange of land and the deceased retained part of this parcel and acquired a further area of land at the Forge. In 1992 the deceased instructed solicitors to simplify the titles to the areas of land at the Forge and to create a new declaration of trust for Rebecca over replacement land he owned and the retained parcel.

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This 1992 declaration of trust was signed by the deceased and Mrs Iles as they were by then joint owners of this land.  By it they declared that they held land described in the schedule in favour of Rebecca upon her attaining 25 years of age.  Unfortunately, the declaration was incomplete as there was no schedule showing the land in question.  The Judge was able to follow through the evidence to identify the land referred to (the disputed land).

The Deceased told Rebecca and various others (including the tenants of the disputed land at the Forge) that he had made provision for her by setting aside land at the Forge for her which would be hers at 25.  The deceased died on 5 April 2000.  The defendant later claimed that she did not know what she had signed and that the deceased had never explained that this disputed land was held for Rebecca.

Following his death, the defendant treated this disputed land at the Forge as belonging to her (together with other land there which the deceased had left absolutely to her) and collected and retained the rents from all of it.  In 2004 just before Rebecca turned 25, Rebecca reminded her mother that from her 25th birthday she was entitled to some of the rents from the disputed land at the Forge.  The defendant started paying her £200 per month saying that this was all she could afford and the claimant did not object to this at that time.

In 2008 Rebecca found a copy of the 1992 declaration with a plan attached to it by a paperclip in a drawer at the family home.  Rebecca and her mother fell out shortly after this over an unrelated matter.  Rebecca obtained legal advice on the declaration and through a solicitor, asked her mother to account to her for the rents she was entitled to.  The defendant replied that she was not aware of any entitlement, despite being sent a copy of the 1992 declaration.

The claimant brought a claim for breach of trust against the defendant and for the rents from the disputed land from the deceased’s death until the present, less the amounts she had already received.

The law

For a breach of trust, there must first be a valid trust which is binding on the trustees.

The decision

The judge held that from 1992 the deceased and the defendant held the disputed land until the deceased’s death on trust for the claimant.  There was a valid trust which continued with the defendant as sole trustee after the deceased’s death. The disputed land was ordered to be transferred to the claimant. The judge did not accept that the defendant did not know about land being held for Rebecca at 25 and accepted evidence from witnesses including the claimant that the defendant herself had told them about her entitlement at 25.  He did not accept that she would have signed documents over the years without any knowledge, however vague, of their contents.

The judge did accept that the defendant was not aware of the precise terms of her daughter’s entitlement and had not obtained legal advice on it.  Both she and the claimant had believed that the claimant’s right to rents was only from her 25th birthday.

The judge therefore ordered relief under section 61 of the Trustee Act 1925 for the payment of the rents relating to the period from before the deceased’s death to 2004 when the claimant reached 25. He held that the defendant had a duty to ascertain the exact rights of her daughter to the disputed land by obtaining legal advice as “it was not the act of a reasonable trustee simply to give her daughter that part of the rent which she thought she could afford ” but was just persuaded that in the circumstances it was not unreasonable for her not to have done.

The claimant was therefore entitled to an account for the rents received by the defendant from the disputed land from April 2004.

Practice points

  1. Clearly, when drafting declarations of trust, plans should be attached to the Schedule so that the declaration is complete and the land in question is certain.
  2. The judge did not comment favourably on the solicitors who handled the administration of the estate as they did not ascertain the correct beneficial ownership of the disputed land.  If there are beneficial rights over land an appropriate notice should be entered at the Land Registry to avoid such a problem.
  3. Clients should always be recommended to obtain legal advice over the precise terms of anyone else’s entitlement to property.

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