Savage v Savage – Minority Beneficiary Right

When there is a dispute between beneficiaries concerning a Trust, which was discussed in our previous blog, Section 15(3) of the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) requires the Court to have regard to the circumstances and wishes of the majority. The question is: Should the Court disregard the circumstances and wishes of the minority? The answer is no as shown in the recent Court of Appeal judgment of Savage v Savage [2024] EWCA Civ 49.

Savage v Savage [2024] EWCA Civ 49

Background

An order was made in financial remedy proceedings between Raymond Savage and his ex-wife that concerned the method of sale of three parcels of land. The parcels of land were held upon Trusts for Raymond and the four children of his late brother, one of them being Frank Savage. Frank ran a business on the land. Raymond had a two-thirds interest in the largest parcel of land, a three quarters interest in the second largest parcel of land and a one-half interest in the smallest parcel of land. The remaining interests were held by the children. Raymond sought the sale of the parcels of land, but the beneficiaries could not agree between themselves on the method of sale.

At first instance, the Court made an order that gave Frank a right to buy out Raymond’s interest in the parcels of land before they were offered for sale on the open market. In relation to Section 15(3) of TOLATA, the Judge held that the main discretion was conferred by Sections 14 and 15 of TOLATA, which included only a non-exhaustive list of factors. Though the Court was obliged to take into account the factors in Section 14 of TOLATA, it was not governed by them alone.

Decisions

First Appeal

On appeal, the Court set aside the initial order. The reason being that the wording of Section 15(3) of TOLATA meant that once parties are in dispute, only the wishes and circumstances of the majority beneficiary could be taken into account, and the Court does not need to weigh the views of one up against the other. The Court permitted the parcels of land to be sold on the open market without giving Frank the right of pre-emption.

Second Appeal

Appeal was allowed on the basis that the Judge had misinterpreted Section 15(3) of TOLATA and misapplied it to the case. The Court confirmed that the circumstances and wishes of minority beneficiaries should not be disregarded. There is nothing in the wording or structure of Section 15(3) of TOLATA that expressly or by implication prevents the Court from taking factors other than those listed into account. The structure and purpose of section 15 of TOLATA is to set out the factors to which the Court is obliged to have regard and it is not intended to limit other factors that the Court is permitted to consider. The statutory wording did not debar the Court from considering the interests of minority beneficiaries. Frank was given a right of pre-emption in respect of the parcels of land from which he operated his business, despite Raymond objecting and seeking an immediate sale on the open market.

Comment

This case demonstrates that the Court will factor the circumstances and wishes of the minority beneficiaries in when exercising its discretion. It is not to say that any one factor should automatically be given more weight over the others. The Court is ready to take a holistic approach in making its decision.