Tuesday 1 May 2012

Self-dealing won't save family paintings, says court

Severnake Lodge: framed
paintings hung there
are not "fixtures"
Cardigan (Earl of) v Moore and Cotton [2012] EWHC 1024 (Ch), a decision of Mr Justice Newey (Chancery Division, England and Wales) on 20 April, is worthy of note if you are a trustee of ancestral paintings which form part of a family estate.

According to the court, not only can the trustees sell the paintings, but they can also apply to set aside a lease of those paintings, which vested them in a family member (the Earl of Cardigan), under the self-dealing rule in Tito v Waddell (No.2) [1977] Ch. 106, where the lease was granted by a partnership that held the family estate's property before it was placed in trust.

According to Mr Justice Newey a reasonable person would understand the deed which set up the trust to be transferring all the assets listed in a schedule to the deed, which included the paintings, to the trustees. As such, they no longer represented partnership property. Nor were they "fixtures" which could be said to be included in the lease to the Earl of Cardigan of Severnake Lodge, the house in which they hung.

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