Outer House grants permission for RBS to resign as trustee on remaining trust interests following sale of business
A Lord Ordinary has granted authority to the Royal Bank of Scotland to resign as the trustee on a series of trusts it administered following a decision by the bank to discontinue its trusts and administration business and sell it to another company.
About this case:
- Citation: CSOH 3
- Court:Court of Session Outer House
- Judge:Lord Braid
RBS had sold its trust business to Ludlow Trust Company Ltd in 2021. It brought eight petitions relating to separate trusts to the court, of which four were considered simultaneously with the remaining four being continued sine die to allow them to call alongside further petitions.
The four cases were considered by Lord Braid, who issued an opinion in respect of one of the petitions. Howie QC and Welsh, advocate, appeared for the petitioner. No other parties made representations.
Interests of the trusts
It was averred by the petitioner that the size of its trust business had diminished over the years in comparison to its other business, and it was increasingly dependent on a smaller number of staff without whom the business could not be managed efficiently. It therefore formed the view that it would be in the interests of the trusts, and the petitioner, if it were to divest itself of the trust administration business and try to seek its replacement as trustee by a specialist trust company.
Following a lengthy selection process, the petitioner ultimately selected Ludlow as its preferred buyer for the trust interests. However, as professional trustees, the petitioner was unable to make use of the statutory power to resign from office under section 3 of the Trusts (Scotland) Act 1921 and required to make a court application in the absence of an express power to resign contained in the trust deeds.
It was noted that Ludlow was established in 2019 for the express purpose of acquiring the petitioner’s trust business by a number of respected figures in the trusts field that were known to the petitioner. Its directors included former senior figures in Barclays Bank, including a former managing director of its global trust business, and many of its staff had previously been employed by the petitioner. Statutory accounts published in December 2021 showed that the company had made a loss of over £1 million in the period from incorporation to 1 June 2021.
Counsel for the petitioner invited the court to regard Ludlow as a suitable person to replace the petitioner. It was submitted that Ludlow was a company well capable of properly and successfully administering the several trusts for the benefit of their respective beneficiaries and that it had the financial wherewithal to meet any liabilities which its conduct of the trust administration may reasonably be expected to visit upon it. The current state of its balance sheet was a reflection of the substantial costs involved in setting up the business and a profit would likely begin to be turned in the third quarter of 2022.
Impressive track record
In his opinion, Lord Braid said of his approach to the petitions: “What I say in this Opinion applies equally to the other three petitions dealt with on 17 December 2021, and I do not intend to issue separate Opinions in those cases. This Opinion will be equally applicable to the remaining rump of cases, albeit additional issues may arise in them.”
Considering the petitioners stated reasons for wishing to resign, he said: “While to an extent the petitioner might be said to have caused the inefficiency which has given rise to its need to resign and to appoint Ludlow, by selling its trust business to Ludlow, there were sound business reasons underlying the decision to sell, not least the diminishing pool of expertise available to the petitioner and the consequent risks to the trusts.”
Turning to the suitability of Ludlow as a replacement trustee, Lord Braid noted: “I have attached particular weight to the impressive track records of the individuals involved in establishing it, and their evident commitment to making the business a success; and to the Letter of Commitment guaranteeing significant financial support through its formative years should such be required. Those factors outweigh any concerns arising from its financial performance to date.”
He concluded: “I am therefore satisfied that it is necessary in the interests of this, and the other three trusts before me, that the petitioner be granted leave to resign, with a view to Ludlow in due course being assumed as (ultimately) the new sole trustee using the mechanism described above. The question of exoneration does not arise, since that is not sought, nor is there any question of imposing conditions.”
Lord Braid therefore granted the prayer of all four petitions under section 3 of the 1921 Act.