Court settles dispute over pub held in a family trust

A dispute over a pub that was the main asset of a family trust has been settled in the High Court.

The trust had been set up a by a woman who named all her children as equal beneficiaries. One of her sons ran the pub as his main business; his siblings had no involvement.

When the mother died, the son wanted to acquire the freehold of the pub and continue to run it as his business. However, his siblings wanted to sell it on the open market where they felt they could get a better price.

The son argued that the value of the premises would be increased by him remaining in possession and running the business. He threatened proceedings for breach of trust and passing off on the basis that he had acquired the goodwill in the pub’s name, logo and reputation.

The court found in favour of the siblings. It held that the son had never had any legal or personal interest in the pub and no right to possession of it. His entitlement as a beneficiary of the trust created by his mother was no greater than those of his siblings.

Some of the goodwill relating to the business was personal to him but inevitably much of the goodwill belonged to the property itself. The right to use the pub’s name and the goodwill of the business was given to the trustees by the will and it was not open to the son to appropriate that goodwill to himself by virtue of his occupation and use of the pub without legal entitlement.

Such goodwill as was his could be taken with him. The trustees had received unequivocal advice that the value of the property with the son in occupation was nil whereas it was £2.1m without him. They were authorised to obtain vacant possession of the pub and to sell it.

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