Our property expert recommended me to a client recently who had inadvertently got caught up in a wasteful and unnecessary dispute.
A professional trustee ABC Fiduciary Limited, (ABC) held a property portfolio for a trust it was administering, worth in excess of £20 millions. The trust had been set up by lawyers in the UK, for the settlor Amin, his wife Sally and their three sons of whom Rauolf was the eldest. Amin lived in the Middle East and worked on an export business with his brother, Saoud.
The first property the trust acquired was a mews house in Mayfair, which the family wanted to use, from time to time, when they visited London, which was once or twice a year.
When Raoulf, turned twelve Amin and Sally decided to send him to school in the UK, and given that the family would be spending more time here, decided the mews house would be too small.
The Trustees of Amin’s trust bought a more substantial property in Mayfair for the family as well as Raoulf’s friends, some of whom would be staying in the UK over the school vacations.
About this time, Saoud’s son, Maan, Raoulf’s cousin, finished his education and was looking for a job in London. He did not have anywhere to live so Amin agreed with Saoud, that Maan could live in their mews house, since Amin and his family now had somewhere else to stay. The Trustees kept a minute of their decision.
Time went on, and Saoud and Amin fell out, Amin took over the Western side of their business and Saoud the East. In due course, their grievances grew into a serious dispute and the families stopped speaking with each other, but Maan and his occupation of the mews house was overlooked.
In due course, Raoulf finished his education and went to university in Durham, where he did very well. After university, he was offered a training contract with a US law firm in London. But by now his younger brothers were at university and school in the UK, and Raoulf found their home too crowded and noisy to live in and asked his parents for a place of his own.
It was at this time, that Amin remembered that Maan was living in their mews house and asked the trustees to obtain vacant possession so that Raoulf could move in.
Maan had by now been living in the mews house for fifteen years completely free of charge, apart from paying the bills and outgoings which he had in his name. He had no intention of moving out. He spent most of his time in Mayfair, ‘doing deals’ which rarely came to anything, but that did not stop him living a lavish lifestyle with expensive holidays and habits.
Amin took legal advice, and was told that in the absence of any License Agreement or correspondence stating that his occupation was unwelcome he had obtained squatters rights of ownership and could apply to have the mews property registered in his name. ABC Fiduciary was informed of the application, as the registered owner.
It instructed solicitors, who advised ABC Fiduciary to object to the application which it did, it then started legal action to get Raoulf removed from the property which was not easy.
Raoulf was adamant that the mews property was his, and would not give up without a court order. Years of expensive legal wrangling ensued and finally both parties had to appear before the Land Tribunal, each represented by a qualified and expensive barrister.
The Judge in his summing up was critical of ABC for not taking its responsibilities as a property owner and trustee with due care and attention. He specifically pointed out that Raoulf, at no time was asked to sign a License Agreement and not once had ABC inspected the property to see who was living there or how well it was being maintained.
However, despite being critical of ABC, Raoulf was ordered to vacate the property.
By the time he moved, out the total cost in legal fees payable out of the trust fund was in excess of £500,000.
ABC was anxious to avoid Amin suing it, given the harsh criticism of the Judge, but Amin was keen to give it a bloody nose. Our property expert suggested Amin see me.
My advice was that given the wide non-interference and indemnity clauses it was probably futile for Amin to sue ABC, but that he should replace ABC with a Special Purpose Trustee. We could then remove the non-interference clauses and replace them with positive obligations on the Trustee to interfere in the inspection and legal audit of the trust properties (and other trust assets) to avoid this unnecessary and costly omission occurring again.
GFOS was able to introduce Amin to our team of investment performance analysts including our property expert, bankers, dispute resolution specialists, investment managers and fiduciaries who are skilled and able to carry out an independent report as to whether Amin’s trust assets or trustees were doing what they should to maintain and preserve the value of his trust fund.
If you would like to find out more about our team and what they can do to ensure you and your trustees avoid expensive disputes and diminution of value, call GFOS on 020 3740 7422 or drop us an email at caroline@garnhamfos.com.
You can also buy Caroline’s book ‘When you are super rich who can you trust?’ or ‘Uncovering Secrets; How to win business from Private Clients’ direct from ww.garnhamfos.com or direct from Amazon.