Is trustee agreement to retire subject to without prejudice privilege?

A trustee has agreed to retire, subject to sorting out indemnities and other matters. This agreement was communicated in the course of without prejudice discussions. Negotiations over indemnities and other matters are not progressing. The beneficiaries are therefore considering an application to court for an order that the trustee be removed. They want to refer to the trustee’s agreement to retire, but the trustee objects - saying that this agreement was communicated in the course of without prejudice negotiations which is inadmissible. Is a trustees’ agreement to retire something that is capable of being protected by without prejudice protection?

There is surely no reason why a trustee’s agreement in principle to retire, made ‘without prejudice’, should lack protection. There is nothing special about the role of trustee that excludes the ordinary rules. Had a binding agreement been reached, then the ‘without prejudice’ protection would have fallen away; but that is also in accordance with the ordinary rules.

Nicholas Le Poidevin, Q.C.
New Square Chambers

I agree with Nick.
There is of course the rule that a trustee will normally not be able to assert legal privilege over advice taken for the benefit of the trust (rather than the trustee personally) when a beneficiary seeks disclosure in litigation against the trustee. Who qualifies as a beneficiary in such cases has just been considered in Re Cooke Decd [2015] EWHC 1003 (Ch).
Whether such advice should be disclosed as trust disclosure would seem to depend on Schmidt principles.
But this would not seem to me to have anything to do with the without prejudice rule and exactly the same policy considerations would appear to apply in the case of negotiations between trustee and beneficiaries in relation to the trustee’s personal position where a dispute has arisen, as in other situations where the without prejudice rule may apply. If the beneficiaries repeat their offer in open correspondence, the trustee may be hard put not to respond in a way which makes it clear that the trustee is content to go subject to agreeing terms. Much may then depend on the reasonableness of the offer.

Mark Hubbard
New Square Chambers