Public Trustee v Cooper: 2001

The court looked at the circumstances required when a court was asked to approve a proposed exercise by trustees of a discretion vested in them. The second category of circumstances was (quoting Robert Walker J): ‘Where the issue was whether the proposed course of action was a proper exercise of the trustees’ powers where there was no real doubt as to the nature of the trustees’ powers and the trustees had decided how they want to exercise them but, because the decision is particularly momentous, they wished to obtain the blessing of the court for the action on which they have resolved and which was within their powers. Obvious examples of that, which are very familiar in the Chancery Division, are a decision by trustees to sell a family estate or to sell a controlling holding in a family company. In such circumstances there is no doubt at all as to the extent of the trustees’ powers nor is there any doubt as to what the trustees want to do but they think it prudent, and the court will give them their costs of doing so, to obtain the court’s blessing on a momentous decision. In a case like that, there is no question of surrender of discretion and indeed it is most unlikely that the court will be persuaded in the absence of special circumstances to accept the surrender of discretion on a question of that sort, where the trustees are prima facie in a much better position than the court to know what is in the best interest of the beneficiaries.’
Having identified the case as coming under this category, the court asked: ‘What then are the duties of the court in considering a category (2) case? They will depend upon the circumstances of each case’, and answered: ‘Secondly, was the opinion which the . . trustees formed one at which a reasonable body of trustees properly instructed as to the meaning of the relevant clause could properly have arrived?
Thirdly, was the opinion at which that body had arrived vitiated by any conflict of interest under which any of the trustees had been labouring, either because such conflict actually had, or because it might have had, an effect on the decision which they took?’
Where a decision would cause a conflict, Hart J added that: ‘In some areas of our law the existence of conflicts of this kind is recognised and managed by a variety of devices, ranging from requiring the affected person to declare his interest to requiring him to abstain from participation in the relevant decision-making process. In the law of private (ie non-charitable) trusts, where unanimity of decision-making is required, such devices are difficult to transplant. The beneficiary is entitled to the decision of all his trustees but, at the same time, he is entitled to require that the decision is made independently of any private interest or competing duty of any of the trustees. Where a trustee has such a private interest or competing duty, there are, as it seems to me, three possible ways in which the conflict can, in theory, successfully be managed. One is for the trustee concerned to resign. This will not always provide a practical or sensible solution. The trustee concerned may represent an important source of information or advice to his co-trustees or have a significant relationship to some or all of the beneficiaries such that his or her departure as a trustee will be potentially harmful to the interests of the trust estate of its beneficiaries.
Secondly, the nature of the conflict may be so pervasive throughout the trustee body that they, as a body, have no alternative but to surrender this discretion to the court.
Thirdly, the trustees may honestly and reasonably believe that, notwithstanding a conflict affecting one or more of their number, they are nevertheless able fairly and reasonably to take the decision. In this third case, it will usually be prudent, if time allows, for the trustees to allow their proposed exercise of discretion to be scrutinised in advance by the court, in proceedings in which any opposing beneficial interests are properly represented, and for them not to proceed unless and until the court has authorised them to do so. If they do not do so, they run the risk of having to justify the exercise of their discretion in subsequent hostile litigation and then satisfy the court that their decision was not only one which any reasonable body of trustees might have taken but was also one that had not in fact been influenced by the conflict. ‘
Hart J
[2001] WTLR 901
England and Wales
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CitedHillsdown Holdings plc v Pensions Ombudsman 1997
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CitedRe Egerton Trust Retirement Benefit Scheme ChD 2000
(No Date) Robert Walker J identified four categories of case in which the court has to consider actions taken or to be taken by trustees, as follows:-
‘ . . it seems to me that, when the court has to adjudicate on a course of action proposed . .

Cited by:
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CitedAirways Pension Scheme Trustee Ltd v Fielder and Another (3032) ChD 11-Nov-2019
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CitedLehtimaki and Others v Cooper SC 29-Jul-2020
Charitable Company- Directors’ Status and Duties
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Lists of cited by and citing cases may be incomplete.
Updated: 30 July 2021; Ref: scu.277073