Background

The case arose against the background of matrimonial proceedings commenced by the Settlor (S) of a discretionary Jersey Trust against his wife (B).  B had the status of a beneficiary of the Trust as the “Settlor’s Spouse”.

Matrimonial proceedings had been commenced in 2017 with a decree nisi being pronounced later that year.  It had, however, been agreed between S and B that S would not seek a decree absolute until the conclusion of B’s application for ancillary relief in those proceedings in order to ensure she would not cease to be a spouse (and thus no longer a beneficiary of the Trust) without any ancillary provision.

Notwithstanding this agreement, B had concerns as to her position if S should die (he was elderly and in very poor health) before the decree was made absolute, as the matrimonial proceedings would then abate and she would arguably cease to be a beneficiary of the Trust (as she would then be a widow rather than a spouse of S).

Proceedings were thus issued in January 2019 invoking the supervisory jurisdiction of the Court seeking various orders including that B be appointed as a beneficiary of the Trust in her own right.

Various procedural steps followed resulting in the Trustee considering the matter at a meeting in January 2020.  In the event the Trustee resolved not to appoint B as a beneficiary “at this time”.  The Trustee further noted that should S die before the resolution of the matrimonial proceedings that it would consider whether it was appropriate to add B as a beneficiary “at that time”, and that, “without fettering its discretion” it considered that it would be likely to consider such additions to be appropriate.

The Hearing and Decision

B’s primary submission was that the Court had jurisdiction under Article 51 of the Trusts (Jersey) Law 1984 (as amended) to make any order concerning the administration of a trusts including varying a trust deed in order to add beneficiaries.  It was further submitted that the Court’s jurisdiction under Article 51 was unrestricted and that the principles of “non-intervention” under English law did not apply in Jersey.

It is fair to say the Court expressed surprise and concern at these submissions not least because they had been considered and rejected in the earlier case of S v Bedell Cristin [2005] JRC 109 in which the advocate for B in the instant case had made the same unsuccessful submissions!

The Court reiterated that whilst the Court’s jurisdiction under Article 51 was wide it had to be exercised on a “sensible principled basis”.  The Court re-emphasised the conclusions reached in S v Bedell Cristin which are now reflected in the current edition of ‘Lewin on Trusts’ (20th Edition);

“Where a power is given to trustees to do or not to do a particular thing at their absolute discretion, the court will not restrain or compel the trustees in the exercise of that power, provided that their conduct is informed, bona fide and uninfluenced by improper motives:

‘It is settled law that when a testator has given a pure discretion to trustees as to the exercise of a power, the Court does not enforce the exercise of the power against the wish of the trustees, but it does prevent them from exercising it improperly’.

‘The mere fact that the court would not have acted as the trustees have done is no ground for interference.  The settlor has chosen to entrust the power to the trustees, not to the court’”.

The Court rejected the suggestion that the Court should exercise the powers the Trustee had to vary the Trust and thus appoint B as a beneficiary via that route.  The Court observed that the Trustee had the power in any event to appoint beneficiaries but had decided not to exercise that power in its decision of January 2020.  It was that decision which had to be challenged, (the power to amend being irrelevant).

In other words, it was for B to challenge the decision of the Trustees, (which had not surrendered its discretion) not to add her as a beneficiary, and she had to show (i) that the decision was one which no reasonable trustee could have reached or (ii) in making its decision it had failed to take into account a relevant consideration or took into account an irrelevant consideration.

On the facts the Court held that there was no ‘malice’ (as alleged) against B by the Trustee.  Notwithstanding that, and the fact that the Trustee could show that it had at least considered the position of B and the risk of her losing her rights under the Trust should S die before the conclusion of the matrimonial proceedings, the Court concluded that it did not consider that the Trustee had truly taken her position and concerns into account and had failed to give them sufficient weight.

The Court then ran the risk of confusing matters (in the writer’s view) having stated that it was troubled by the conclusion the Trustee had reached but then adding; “If (the Trustees’) discretion had been surrendered to the Court it would have appointed B as a beneficiary in her own right”.

This of course is not the correct test as the fact that the court would not have acted in the same manner as the Trustees is not of itself a ground for interference.

The court subsequently clarified matters in noting that the test for intervention was high but concluding that for the reasons it expressed the Trustee’s decision not to appoint B as a Beneficiary in her own right was a decision that no reasonable trustee would have made.

The Court added it would thus intervene in the administration of the Trust by setting aside the Trustee’s decision not to add.  That of itself did not resolve matters (as B was still not a beneficiary). The Court, however, indicated in clear terms that it presumed that in light of the Judgement the Trustee would now appoint B as beneficiary “without delay” failing which the Court would further intervene by presumably adding her itself.

Conclusion

The case had an interesting factual background and contained a number of confusing (and erroneous) submissions on behalf of the ultimately successful party, partly explained by the fact that the Trustee’s decision, subsequently challenged as being improper was only made a year after the commencement of proceedings to have B appointed as beneficiary!  In the event through a careful well-reasoned Judgement the Court has further clarified the law in this area.

Type

Insight

Locations

Jersey

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