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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Moness Country Club & Ors v First National Trustee Company Ltd [2013] ScotCS CSOH_188 (10 December 2013)
URL: http://www.bailii.org/scot/cases/ScotCS/2013/2013CSOH188.html
Cite as: [2013] ScotCS CSOH_188

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OUTER HOUSE, COURT OF SESSION


[2013] CSOH 188

A286/12

OPINION OF LORD DOHERTY

in the cause

THE MONESS COUNTRY CLUB and TERENCE LOUIS VOSE, ISOBEL McNEILL, CHARLES TAYLOR, JOY BOYLE and JULIE KILPATRICK

Pursuers;

against

FIRST NATIONAL TRUSTEE COMPANY LIMITED

Defenders:

________________

Pursuers: D M Thomson; Halliday Campbell WS

Defenders: M V Ross; Turcan Connell

10 December 2013

Introduction


[1] The issue in this case concerns the validity or otherwise of the pursuers' purported termination of the defender's appointment as Trustee in terms of a Deed of Trust entered into in 1993.

The pursuers


[2] The first pursuer is a non-profit-making club ("the Club") the objects of which are to secure for the members joint rights of ownership of cottages at the Moness resort in Aberfeldy and exclusive rights of occupation of them for specified periods in each year; and to provide additional sporting and other facilities for the members. The second to sixth pursuers are the members of the Club's management committee.

The Constitution


[3] The Club is a voluntary association. It cannot hold title to heritable property. As of 24 May 1993 the Constitution of the Club provided:

" 5. ...The Founder Member will arrange for the said cottages and others and any amenity ground pertaining thereto to be conveyed to an independent Trustee and Custodian which will hold the same for behoof of the members of the Club from time to time...

11. ... The Founder Member will...on behalf of the Club, enter into a Deed of Trust with an independent body or person to act as a Trustee or Custodian to hold the Club's heritable property. The said Deed of Trust shall be of a style as varied from time to time and to be entered into between the Founder Member and the current Trustee. Without prejudice to the foregoing the Committee shall have the following specific powers:

....

(g) In the event of the Trustee or Custodian appointed by the founder Member at any time resigning office or the Club terminating such appointment to appoint another body or person as Trustee and Custodian of the heritable property of the Club.

...."


The first Deed of Trust


[4] In furtherance of articles 5 and 11 of the Constitution the Founder Member and The Royal Bank of Scotland plc ("the Bank") entered into a Deed of Trust dated 29 October and 6 November 1986 in terms of which the Bank was appointed as Trustee and Custodian on behalf of the Club and the members to hold title to the heritable property of the Club. Clause 11 of the Deed of Trust provided:

"11. This trust shall commence on the last day hereof and shall continue thereafter in full force and effect until terminated either by the Founder or the Club giving not less than three months notice in writing to the Bank or by the Bank giving to the Founder and the Club not less than three months notice in writing... Upon termination of this Trust the Founder whom failing the Club shall pay to the Bank all remuneration then owing to the Bank together with any outstanding out-of-pocket expenses and all expenses incurred by the Bank in conveying the title to the Property in manner after provided. The Bank shall in the event of this Trust being terminated convey or cause to be conveyed at the expense of the Club whom failing at the expense of the Founder to any succeeding Trustee and Custodian (which has entered into a Deed of Trust with the Club and which the Founder or the Club have shown to the reasonable satisfaction of the Bank to be acceptable as Trustee and Custodian to the members of the Club) or to the Club the Property, the title to which is then vested in the Bank ..."


[5] In 1987 the Founder Member assigned its interest in the Club to Moness Management Limited ("the Company").

The 1993 termination


[6] In 1993 the Bank duly gave notice in writing of termination in terms of Clause 11. A Deed of Retirement and Appointment was entered into between the Founder Member, the members of the Management Committee of the Club, the defender, and the Bank. At the same time a new Deed of Trust was entered into between the Founder Member, the Company, and the defender.


[7] In terms of clause 2 of the Deed of Retirement and Appointment the Bank retired as Trustee. In terms of clause 7 the Founder Member on behalf of itself and the Committee on behalf of the members of the Club appointed the defender to act as Trustee in place of the Bank on the terms of and for the purposes of the new Deed of Trust.

The 1993 Deed of Trust


[8] The new Deed of Trust provided:

"2. The Founder Member hereby appoints the Trustee and the Trustee hereby agrees to act as Trustee on behalf of the Club and the Members thereof on the terms set out in this Deed of Trust and the general terms and conditions upon which the trustee acts as a trustee last published before the date hereof which are more particularly set out in Schedule 1 hereto. The said general terms and conditions shall apply and be incorporated herein and if there shall be any conflict between the same and the other provisions of this Deed of Trust then such terms and conditions set out in Schedule 1 shall pro tanto prevail. The Founder Member shall procure that the Share Certificates and the title deeds evidencing the ownership of the Cottages and documents relating to any other property are delivered to the Trustee as soon as reasonably possible and will remain throughout the period of this Deed of Trust in the custody of the Trustee...

15.1 This Deed of Trust shall continue until terminated either by the Club giving not less than six months notice in writing to the Trustee or by the Trustee giving the founder Member and the Club not less than six months notice in writing.... Upon termination of this Deed of Trust the Founder Member (or failing which the Club) shall pay to the Trustee all remuneration then owing to the Trustee ...The Trustee shall in the event of this Deed of Trust being terminated convey or assign the Property or Cottages ... to any succeeding Trustee or otherwise as the Committee in writing may direct.

15.2 Upon the termination or expiration of this Deed of Trust pursuant to the foregoing provisions or as soon as reasonably practicable the trustee shall as directed by the Committee either:-

(a) transfer the Property and the Cottages or procure the same to be transferred by the Owning Company to the alternative trustee of this or any new trust constituted in accordance with the Constitution or

(b) retain the Property and the Cottages upon the terms of any new trust constituted in accordance with the Constitution or

(c) sell the Cottages (or in its sole discretion, the Shares) in such manner as it may choose ...

15.3 ... (T)he Trustee shall distribute the net proceeds of sale to such persons as would be entitled under the Constitution to such proceeds upon dissolution of the Club ...

22. If the Trustee retires from the trust ... such Trustee shall, subject to the terms of Clause 15 hereof, be released from all claims, demands, actions, proceedings and accounts of any kind on the part of the beneficiary (whether in existence or not) actually or prospectively interested under this Deed of Trust for or in respect of the Property or the income thereof or the Trusts of this Deed of Trust or in any act or thing done or omitted in execution or purported execution of such trusts other than and except only actions:- [the clause proceeds to list certain exceptions].

23. The Trustee declares and it is hereby agreed that it shall have all the additional powers, discretions and rights set out in Schedule 1 hereof...

Schedule 1

General terms and conditions upon which the Trustee accepts appointment

....

8. Unless otherwise provided in the trust instrument, every appointment whether under the statutory power or under any special power of a new trustee during the period of the trusteeship shall be subject to the consent in writing of the Trustee."


The 2008 termination


[9] At the annual general meeting of the Club in May 2008 the Members voted to terminate the defender's appointment as Trustee by giving it six months notice. On 28 November 2008 the Committee wrote to the defender in the following terms:

"Re: Moness House Hotel and Country Club (Timeshare resort)

I have been asked to write to you on behalf of the Moness Owners Club Committee.

Please accept this letter on behalf of the owners and the Owners Committee and Founder Members, as formal notification that as a result of a vote taken at this years (sic) Annual General Meeting held in May, we are hereby giving First National Trustee Company Ltd six months notice to cease being trustees of the Moness Owners Club.

We are in the process of appointing a new trustee and shall be in contact soon to inform you who the Club has formally appointed. We would, on behalf of ourselves, Owners committee and the owners at large, like to thank you for all the services carried out for the Club over the years.

Should you have any questions or queries please do not hesitate to call.

Yours sincerely,

Terry Vose, Managing Director

For and on behalf of Moness Owners Club Committee"

The aftermath of the notice


[10] Following receipt of the notice the defender indicated dissatisfaction as to a number of matters relating to the annual general meeting and the notice. None of those matters are in issue in the present action. By letter dated 8 December 2011 the defender's solicitors wrote to the pursuers' solicitors suggesting that the pursuers had had no power to terminate the appointment of the Trustee and that the notice was therefore invalid.

The action and the counterclaim


[11] In the present action the pursuers seek declarator (a) that the notice of 28 November 2008 was a valid termination of the defender's appointment as Trustee; and (b) that the defender is therefore bound to comply with the directions of the Committee as to the transfer of the Property and Cottages in terms of Clause 15.2 of the 1993 Deed of Trust. The defender contends that the purported termination was invalid and ineffective. It counterclaims for payment of remuneration, and out-of-pocket expenses incurred by it, for the period since the termination purported to have effect. The matter came before me for a procedure roll hearing.

Counsel for the defender's submissions


[12] Miss Ross submitted that the defender's plea to the relevancy of the pursuer's averments should be sustained and that the action should be dismissed. In that event the Court should also sustain the defender's first plea-in-law in the counterclaim and hold it entitled to remuneration for services provided as Trustee after the purported termination, and allow an enquiry as to quantum in relation to the sum claimed.


[13] The Deed of Trust was a private trust. While there was a spectrum of private trusts (with ordinary private trusts at one end and commercial arrangements at the other) and this Deed of Trust was nearer the commercial end of the spectrum, it was not appropriate to construe it as if it were an ordinary commercial contract (Low & Bonar Plc v Mercer Ltd [2010] CSOH 47 per Lord Drummond Young at paragraphs [8] and [9]). On the contrary, it ought to be construed strictly. It was legitimate to treat the Club's Constitution as part of the factual background, but the fact that clause 11(g) of the Constitution appeared to contemplate that the Club had power to terminate the appointment of a Trustee and appoint another did not entitle the Court to give clause 15.1 of the Deed of Trust a meaning which it could not bear. The ordinary meaning of clause 15.1 was clear. That ordinary meaning ought to prevail. Properly construed, it did not empower the pursuers to terminate the appointment of the Trustee. Rather, it authorised them to give notice of termination of the trust. A trustee appointed on the footing he would be remunerated was not empowered by statute to resign in the absence of an express power of resignation being contained in the trust deed (Trusts (Scotland) Act 1921, s.3). It was unusual for a trust deed to confer power to remove a trustee, or for it to empower a sole trustee to resign without assuming a new trustee. Clause 15.1 ought not to be construed as expressly conferring the powers in question. If the pursuers wished to terminate the defender's appointment the proper way to do that was to give notice of termination of the trust and to enter into a new Deed of Trust with a new Trustee. That was what had happened in 1993 - that too was part of the relevant factual matrix. The words "Deed of Trust" where they occurred in Clause 15.1 meant the trust established by the Deed of Trust.


[14] Miss Ross accepted that the terms of clause 15.2(a) (which provide for "transfer ...to the alternative trustee of this or any new trust" (emphasis added)) could not be reconciled with the construction which she put forward. She asked me to treat the words "of this" as mere surplusage, a slip of the draftsman's pen.


Counsel for the pursuers' submissions


[15] Mr Thomson moved me to grant decree of declarator in the principal action and to dismiss the counterclaim.


[16] The trust created by the Deed of Trust was an administrative trust. It was necessary only because the Club, as a voluntary association, could not hold title to heritable property. The whole members of the Club were the beneficial owners of the property. That was an important part of the context in which the provisions of the Trust Deed fell to be construed.


[17] The terms of the Club's Constitution in 1993 were also part of the available context. The terms of the Constitution in 1986 and the terms of the 1986 Deed of Trust had been materially different from their 1993 counterparts. It was the wording of the 1993 Deed, and of the Constitution as it stood then, that had to be considered. Given that context, the question was what would a reasonable person, circumstanced as the parties were, have understood the provisions in dispute to mean? Reference was made to Low & Bonar Plc v Mercer Ltd, supra, paragraphs [8],[9] and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, per Lord Clarke at paragraphs 14 and 21.


[18] On a proper construction of clause 15.1 it empowered the pursuers to terminate the appointment of the defender as Trustee of the trust constituted by the Deed of Trust. Having regard to the relevant context the most commercially sensible interpretation of words "Deed of Trust" was that it meant the appointment of the Trustee under the Deed of Trust. Standing the nature of the trust - an administrative trust with a trustee who was appointed and remunerated on a commercial basis - it was not surprising that there was power to terminate the appointment of the Trustee, nor was it surprising that the Trustee was given power to resign. That interpretation was consistent with the Constitution. It was also consistent with clause 15(2)(a) and clause 22. On the other hand, as the defender was forced to concede, the defender's construction was irreconcilable with clause 15 (2)(a).

Discussion and decision


[19] It was common ground that the Deed of Trust created an administrative trust. The creation of a trust was required only because the Club, as a voluntary association, could not hold title to heritable property. That is part of the context in which the provisions of the Deed of Trust require to be construed. The granter of the Trust was the Founder Member acting on behalf of all the members of the Club. The beneficial interest in the trust property is vested in the members of the Club.


[20] I do not accept Miss Ross' submission that the Trust Deed should be construed "strictly". The words used should be given their natural meaning, bearing in mind their context and the underlying purpose of the trust. In the event of that exercise giving rise to two plausible interpretations of a provision there would be grounds (particularly given the nature of the trust, and the relationship between the Trustee on the one hand and the truster and beneficiaries on the other) for concluding that the more commercially sensible construction is what the participants to the Deed of Trust intended.


[21] The critical issue is whether clause 15.1 empowers the pursuers to terminate the defender's appointment as Trustee. In my opinion, on an ordinary reading of clause 15.1 and 15.2, it does.


[22] I agree with Mr Thomson that the expression "Deed of Trust" in clause 15.1 and 15.2 should be construed as referring to the appointment of the Trustee on the trust created by the Deed of Trust. In my view the terms of clauses 15.2 to 15.5 make this clear. They provide for the Committee having four different options following a clause 15.1 notice. Clause 15.2(a) sets out two of those options. The Committee may direct the Trustee to transfer the trust property to "the alternative trustee of this or any new trust". Accordingly, one of the options under clause 15(2)(a) is for the Trustee to cease (by removal or resignation) being Trustee under the trust created by the Deed of Trust, but for the trust to continue and for an alternative Trustee to be assumed. The second option under Clause 15(2)(a) is for the Committee to direct the Trustee to transfer the trust property to a new trust constituted in accordance with the Constitution. The third option is given in clause 15(2)(b), viz., the Committee may direct the Trustee to retain the trust property upon the terms of any new trust constituted in accordance with the Constitution. Upon termination (by removal or resignation) of the Trustee's appointment as Trustee (of the trust created by the Deed of Trust) the Committee may direct him to retain the trust property upon the terms of a new trust. (Plainly, in order for that option to be exercised successfully the Trustee would have to agree to accept appointment as a trustee of the new trust). The fourth option is that the Committee direct the Trustee to sell the trust property and to distribute the net proceeds to such persons as would be entitled under the Constitution upon dissolution of the Club (clauses 15(2)(c), 15.3 -15.5). That option would only be exercised if on termination of the Trustee's appointment (by removal or resignation) the members decided neither to assume an alternative trustee nor to create a new trust. The trust would be wound up, its property realised, and the net assets distributed to the beneficiaries.


[23] Miss Ross recognised that if on a proper construction the first of the options in clause 15.2(a) was available it posed an insuperable difficulty for her proposed construction. She suggested that the option would not be available if the words "of this" were treated as meaningless surplusage, or as a drafting error. I am not persuaded that it is either legitimate or appropriate to follow such a drastic course. It cannot be said that the words, as they stand in their context, have no sensible meaning (cf. Hunter v Fox 1964 SC (HL) 95, per Lord Reid at pp. 99-100, Lord Guest at p. 101). The words can be, and ought to be, given content. The pursuers' construction gives them content. The defender's construction ignores them.


[24] Further contextual assistance is found in the Constitution. Clause 11(g) of the Constitution is predicated on the basis that the Trustee can resign, and that the Club can terminate the appointment of the Trustee. Clause 22 of the Deed of Trust also proceeds on the footing that the Trustee does indeed have a right to retire.


[25] Miss Ross did not suggest that paragraph 8 of Schedule 1 posed any impediment to the pursuers' construction. It is not hard to see why. That paragraph deals with the appointment of a new trustee while the Trustee remains in office: it does not deal with such appointments after the Trustee's appointment has been terminated. A trustee may have a legitimate interest to satisfy himself that a new trustee appointed to act alongside him is fit and suitable for office, and that no conflict or incompatibility arises. The same considerations do not apply where a trustee's appointment has been terminated and a new trustee is appointed.


[26] I am not persuaded that the way in which a change of trustee was effected in 1993 under the first Deed of Trust provides any assistance in interpreting the terms of Clause 15.1. It is the wording of the current Deed and its context which require to be considered. The terms and context the 1986 Deed were not the same as the terms and context of the 1993 Deed. The Constitution was amended on more than one occasion between 1986 and 1993. More significantly, some of the provisions of the later Deed are materially different from the corresponding provisions in the earlier Deed. Clause 11 of the 1986 Deed made express provision for termination of "this trust". It contained no equivalent to the first option contained in clause 15.2 (a) of the 1993 Deed. Clause 11 provided for only two options in the event of the trust being terminated - conveying the trust property to the Club or to "any succeeding Trustee and Custodian (which has entered into a Deed of Trust with the Club...)".


[27] What then of the other arguments which Miss Ross said should lead me to conclude that clause 15.1 did not empower the pursuers to remove the Trustee (and did not empower the Trustee to resign)?


[28] There is no doubt that a trust deed may competently include an express power to remove a trustee without an application to the Court (Wilson and Duncan, supra, paragraph 22-44). Such a power would indeed be unusual in an ordinary private trust, but in my opinion it is much less surprising where the trust is an administrative trust and the trustee is a commercial trustee who is remunerated. The same observations apply mutatis mutandis to trustees' powers of resignation. Express power to appoint new trustees is not unusual: and at common law, in the absence of an express power, there is by implication reserved to the creator of any trust, as the holder of the original or radical right to the assets placed in trust, a right to nominate new trustees on the failure for any reason of those originally or subsequently appointed (Wilson and Duncan, supra, paragraph 20-02; Menzies, The Law of Scotland Affecting Trustees, p. 36; Newlands v Miller (1882) 9 R 1104, per Lord Shand at pp.1113-4). There is no doubt that a trust deed can enable a trustee to resign at his own hand (Wilson and Duncan, supra, paragraph 22-15); and in practice commercial trustees such as banks insist that the terms of any trust in which they accept office permits their voluntary resignation at any time (Wilson and Duncan, supra, paragraph 22-21).


[29] The meaning of the words used in clause 15.1 seems to me to be clear. The powers the pursuers say the clause confers may competently be conferred by a trust deed. I do not accept that, for a trust of this type, the grant of those powers is so peculiar that the parties to the Deed cannot be taken to have intended it. On the contrary, the defender's construction would result in a scenario which in my opinion would be far more peculiar; viz. that the Trustee could, at his own hand, bring the trust to an end.


[30] Finally, while I am not in any doubt as to the correct construction of clause 15.1, the pursuers' construction appears to me to be more commercially sensible than the defender's construction: in my opinion it is what a reasonable person, circumstanced as the parties were, would have understood the provision to mean.

Disposal


[31] The argument before me proceeded on the basis that if the pursuers' construction is correct I should pronounce the declarator sought and dismiss the counterclaim. The letter of 28 November 2008 gave six months notice of termination. As I read clause 15.1 that means the termination ought to have become effective as from the last day of May 2009. It is not clear to me whether any of the sum counterclaimed by the defender relates to Trustee services and out-of-pocket expenses prior to that time. I shall put the case out by order for counsel to clarify that matter and make any further submissions they may wish as to the terms of the interlocutor which ought to be pronounced to give effect to my decision.


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