Manx Court blesses a Trustee decision to retain funds for potential future liabilities
The judgment of C v D et al (judgment of 17 December 2025) in the Isle of Man provides trustees with the helpful confirmation that a trustee can seek the blessing of the Court of a decision to retain funds in circumstances where the trust faces potential future liabilities. Furthermore, it confirms the position that the applicable test in the Isle of Man for a trustee to retain funds in respect of potential future liabilities is that those potential future liabilities must be “more than merely fanciful”.
In this case, the Trustee (also referred to as Party C) was represented by Appleby (Isle of Man) LLC.
Party C is the Trustee of a discretionary trust governed by Isle of Man Law (referred to as the 2015 Trust). Parties A and B were beneficiaries of the 2015 Trust and Party D was a former beneficiary to whom assets had been appointed immediately prior to her exclusion. Having failed to agree a suitable indemnity with Party D, and knowing (on the basis of professional advice) that there was a potential tax liability, the Trustee had decided to retain funds (specifying the amounts to be retained and the periods applicable to those amounts) to cover that beneficiary’s share of those potential future liabilities which had been identified. The Trustee then sought the blessing of the Isle of Man Court (pursuant to section 61 of the Trustee Act 1961 and in accordance with Public Trustee v Cooper category two principles) of its decision to retain those funds (the Trustee’s Application).
Party D opposed the Trustee’s Application on a number of (increasingly creative) grounds, challenging both the Trustee’s ability to make the decision in question and the Court’s power to deal with it. Perhaps the most interesting basis for challenge was that the potential tax liability was ‘wholly illusory’ and thus did not meet the requisite test. In the circumstances, the Court dismissed Party D’s objections and blessed the trustee’s decision to retain funds, thus confirming both the principle that a trustee can seek the blessing of the Court of a decision to retain funds and also that the test in the Isle of Man for a retention in respect of potential future liabilities mirrors that in England and Wales per Concord Trust Concord Trust v The Law Debenture Corporation [2005] 1 WLR 1591.
Link to judgment: CHP_ANON-171225.pdf
Our trust disputes team regularly advises trustees and beneficiaries on both contested and uncontested blessing applications. Should you have any queries then please do not hesitate to contact us.
