Folds Farm Trustees Ltd and others v Cutts and others case: the power of discretionary decision making

read time: 5 mins
22.10.24

The recent case of Folds Farm Trustees Ltd and others v Cutts and others reeled in the press in early 2024 due to the allegation that a vintage stuffed pike was evidence of the trustees’ bias towards one of four principal beneficiaries. However, the court found that there were no grounds to intervene in the discretionary decision making of the trustees. 

In this article, we summarise this lengthy case and briefly examine why the court ultimately decided to approve the trustees’ decision.

Background of the case

In early 2022, the trustees of two discretionary trusts established under the wills (or variations thereof) of Oliver and Susan Cutts sought the court’s approval of a decision they intended to make in relation to the primary asset of the trusts: the family farm, totalling almost 340 acres. 

Oliver and Susan had four children: Alister, Victoria, Charlotte and Cecilia. Together with their issue, the siblings were the principal beneficiaries of the discretionary trusts. 

Oliver had died on 15 August 1995, leaving Susan with considerable debts. The trusts were in bad financial shape, with debt in excess of £400,000 and minimal cash assets. The majority of the value of the trusts was tied up in the farmland and buildings, which provided negligible income, and the trustees were unable to provide any significant distributions to the beneficiaries despite Victoria, Charlotte and Cecilia all indicating that they wanted or needed capital provision.

In a letter of wishes, Susan documented her wish for the farm to be retained for future generations and only sold if absolutely necessary. Alister had occupied a portion of the farm for his contracting business and following Susan’s death on 11 April 2015, the trustees allowed Alister to occupy the majority of the land and run the farming business under a Farm Business Tenancy. 

The trustees’ decision

Following backlash from all four of the siblings on a proposal to generate income for the trust by selling one of the properties on the farm, the trustees decided to make an offer to Alister to purchase the farm. 

Alister accepted this proposal and, considering a recently obtained valuation of the farm and the value of work undertaken by Alister over the years in maintaining the farm, after more than 12 months of discussions a price was finally agreed at £4.2million. 

The trustees’ application to the court

Although the trustees’ decision was within their discretionary powers, they sought the approval of the court due to the significance of appointing out the majority of the trusts’ assets. Alister naturally supported the claim, whilst Victoria and Charlotte opposed the claim.  Cecilia did not oppose the claim outright, but she did contest the terms of the proposed distribution and sought a ‘more equitable’ distribution. 

The arguments raised in opposition of the trustees’ decision were numerous, including: 

  • The sale price was so low as to create an unequitable distribution between the four siblings, which was irrational behaviour on the part of the trustees.
  • The trustees had failed to consider the needs of the other beneficiaries and the extent to which Alister had benefitted already due to his occupation of the farm at below market rent.
  • The trustees had wrongfully taken into consideration the amount Alister would need to borrow to secure the funds to purchase the farm, and threats by Alister of litigation should they fail to appoint the farm to him as had been agreed in principle.
  • The relationship between Alister and two of the trustees, Mr Pollard and Mr Cutts, was ‘too close’ (supposedly evidenced by the purchase of a vintage stuffed pike by Alister for Mr Cutts) creating bias towards Alister and affecting the trustees’ decision making. 

Therefore the key issues that the court needed to determine were whether the decision was a rational one which the trustees could have reasonably arrived at, and whether the decision was corrupted by a conflict of interest on the part of the trustees. 

The court’s findings

The court concluded that the siblings were not entitled to an equal division of the trust assets, for that is not the nature of a discretionary trust. The decision to benefit, or not benefit, a beneficiary is one of ‘unfettered discretion’ of the trustees and the unequal value of the appointment to Alister was not in itself grounds for challenging the trustees’ decision.

The court found that the trustees had reasonably considered many relevant factors in making their decision, including the recent valuation, the debts of the trusts and the wishes of Susan Cutts.

The court also found that the price Alister was willing to pay for the farm was relevant as too high a price may force Alister to sell the land to pay the mortgage, which would negate Susan’s wish for the farm to remain in the family. 

The trustees had also, the court concluded, taken the appropriate course to manage the threat of litigation by Alister in seeking the court’s approval of the decision.

As to Mr Cutts and the stuffed pike, the court found that the purchase of the stuffed pike (which had previously belonged to Mr Cutts’ father) at auction was not evidence a level of closeness which would affect Mr Cutts’ conduct as a trustee. Mr Cutts viewed the purchase as the return of a favour: he had previously advised Alister of a stuffed chub which had belonged to Oliver Cutts coming up for auction, which had allowed Alister and Susan to attend the auction and buy it. 

Takeaway

  1. A settlor of a trust makes a deliberate decision on who they want to have the discretion to make decisions, and the court will rarely circumvent that unless absolutely necessary, even if it would not have made the same decision.
  2. Discretionary decisions by trustees are not unchallengeable, but a disappointed beneficiary should be aware that discretion by definition is the freedom to decide, and the court will only intervene where trustees are exercising their discretionary powers improperly. 
  3. Don’t litigate where a stuffed pike is involved. 
     

For further information, please contact our disputed wills team.

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