H

JurisdictionJersey
CourtRoyal Court
JudgeThe Bailiff
Date30 March 2011

[2011] JRC 70

ROYAL COURT

(Samedi Division)

Before:

M. C. St. J. Birt, Esq., Bailiff, sitting as a Single Judge.

IN THE MATTER OF H

Between
A
Representor
and
1. B Management Limited
First Respondent
2. C Charitable Foundation (International) Limited
Second Respondent

and

3. HM Attorney General
Third Respondent

Advocate N. F. Journeaux for the Representor.

Advocate S. M. Baker for the First Respondent.

Advocate J. P. Speck for the Second Respondent.

The Third Respondent did not appear and was not represented.

Authorities

Re the E R O and L Trusts [2008] JLR N17 .

Re the E R O and L Trusts [2008] JRC 053 .

Re JW Laing Trust [1984] Ch 143 .

Attorney General v Dedham School (1857) 23 Beav 350 .

Charities Act 1960.

Bradshaw v University College of Wales [1988] 1 WLR 190 .

Re Hampton Fuel Allotment Charity [1989] 1 Ch 484 .

The Bailiff
1

This is an application by A (“the widow”) to participate in proceedings (“the main proceedings”) brought by the first respondent (“the Sub-trustee”) seeking certain relief in connection with a charitable trust known as the C Charitable Foundation (“the Trust”). The second respondent (“the Trustee”) is the trustee of the Trust. The widow seeks an order that she:-

Alternatively, she seeks an order that she be made a party to the main proceedings.

  • (i) is served with copies of all the documents served or filed in the main proceedings;

  • (ii) be permitted to be heard by her advocate at any hearing in the main proceedings; and

  • (iii) be permitted to file submissions and evidence in the main proceedings.

2

Her application is supported by the Trustee but opposed by the Sub-trustee.

The factual background
3

It is not necessary to go into great detail about the main proceedings but it is necessary to describe them sufficiently for the context of the widow's application to be understood.

4

The Trust was established by a trust instrument dated 28th May 1987 made between the settlor and the Trustee. The main asset of the Trust consists of all the issued B shares in a substantial investment company incorporated in Jersey to which we shall refer as “the investment company”. The B shares carry the whole economic interest in the investment company and were transferred to the Trustee during the life of the settlor. The A shares carry the right to appoint and remove directors of the company and were owned by the settlor at the date of his death. The settlor also owned the entire share capital of the Trustee.

5

The settlor died in 2001. He was survived by the widow and their eight children. He named four of his children as executors of his will together with a partner of a leading firm of solicitors in London. By his will he left the shares in the Trustee and the A shares in the investment company to his executors as trustees upon certain trusts described in clause 6 of the will. As to the residue of his estate, he left this as to 1% to the widow and 99% to BNP Paribas Jersey Trust Corporation Limited (“BNP”) as trustee of a discretionary trust.

6

Certain difficulties arose in connection with the administration of the will and two of the executors instituted proceedings before this Court seeking directions, including on whether clause 6 was valid. The parties convened to the representation of the two executors were the remaining executors, the Trustee and BNP. The widow and the other four children were not formally convened but they were permitted by the Court to address it through counsel at the hearing to which we now turn.

7

The matter came before this Court and was ultimately compromised by an agreement which was reflected in an order of the Court dated 11th June 2004 (“the compromise”). In outline, the relevant terms of the compromise were as follows:-

  • (i) The settlor's A shares in the investment company (conferring the right to appoint directors to that company) were to be transferred as to 99% to the Trustee and as to 1% to the widow.

  • (ii) The settlor's shares in the Trustee were transferred as to 1% to the widow, 3% to BNP as trustee of the discretionary trust and the balance of 96% to Mourant and Co Trustees Limited (“Mourant Trustees”) as trustee to hold on the trusts of a new purpose trust, with the four children who were executors designated as Enforcers of the purpose trust.

  • (iii) Agreed amendments were to be made to the Articles of Association of the investment company in connection with the distribution of profits of that company.

  • (iv) An instrument of appointment declaring new trusts in respect of the Trust's shares in the investment company was to be executed. The object of this was that the Trustee should hold the Trust's ‘B’ shares in the investment company on trust to pay the income and any capital distribution there from in equal shares for the trustees of eight sub-trusts to be established for charitable purposes (“the charitable sub-trusts”). These were subsequently established with a different child of the settlor as the guardian of each charitable settlement. The Sub-trustee is the trustee of three of the charitable sub-trusts of which three of the children who are not executors are guardians.

8

The new Article 96 of the Articles of Association of the investment company provides that not less than 75% of the profits available for dividend should be distributed to the Trust subject to certain exceptions.

9

Under the terms of the purpose trust, the four children who are executors are the directors of the Trustee and of the investment company as well as being the Enforcers of the purpose trust. Advocate Alan Binnington is an independent director of the Trustee and the investment company.

10

Differences have arisen between three of the children and the remaining five in relation to how the compromise has been put into effect. This has resulted in the Sub-trustee (as trustee of three of the charitable sub-trusts) instituting the main proceedings by way of representation dated 3rd November 2010. In brief, it is alleged in the main proceedings that the investment company has not distributed 75% of its profits as required under the Articles of Association adopted pursuant to the compromise and the Trustee has failed to ensure that proper distributions are made, as well as committing certain other alleged defaults. In effect, says the Sub-trustee, the three charitable sub-trusts of which it is trustee have not received the funds to which they are entitled under the compromise. We should add that the accounts of the investment company show that the sums involved are very considerable.

11

The representation in the main proceedings seeks a number of matters by way of relief:-

The parties convened to the main proceedings at present comprise the Trustee, the Attorney General and the trustees of the five other charitable sub-trusts.

  • (i) Adjudication upon what sums are properly available for distribution by way of a dividend in the investment company under Article 96 as adopted following the compromise;

  • (ii) An order that the Trustee procure immediate payment by way of dividend of whatever sums are found to be available for distribution from the investment company;

  • (iii) An order that the Trustee transfer 3/8ths of the assets of the investment company to W as trustee of the three charitable sub-trusts;

  • (iv) Alternatively, an order that the Trustee distribute the trust fund equally between the eight charitable sub-trusts;

  • (v) Alternatively an order removing the Trustee as trustee of the Trust.

12

It is in these circumstances that the widow seeks to be convened or to participate in the more limited capacity described at para 1 above.

The applicable principles
13

There appears to be no Jersey case where consideration has had to be given to the test for convening parties to an application concerning a charitable trust. However all counsel agreed that, although it related to private trusts rather than charitable trusts, the observations of the court in Re the E R O and L Trusts [2008] JLR N17; [2008] JRC 053 at paras 21 – 25 provide a useful starting point:-

  • “21. When the Court sits in its supervisory capacity to consider directions or rulings it should give in relation to a trust, it has to consider in each case who should be convened to the hearing. The starting point is that the trust property is held beneficially for the beneficiaries and accordingly it is normally appropriate that they should be convened (see Re a Settlement 1994 JLR 139 at 144 per Bailhache, Bailiff). However, as that case made clear, it is not invariably the case that all the beneficiaries need to be heard. Many of them may have an identical interest; alternatively their interest may be extremely remote. It is ultimately a matter for the discretion of the Court as to which beneficiaries should be convened having regard to the nature of the particular application and the particular circumstances .

  • 22. …

  • 23. As well as beneficiaries, the Court may think it appropriate to hear from others who have a close connection with the trust even if they are not beneficiaries. For example there may be a protector whose views would be material; and sometimes the nature of the issue before the Court may mean that is appropriate to hear from the settlor even if he is not a beneficiary. But again, whether this is appropriate will depend upon the circumstances .

  • 24. Occasionally, but rarely, the Court may think it appropriate to hear from persons who are neither beneficiaries nor have the sort of connection just referred to. An example of this is the case of Re Abacus referred to by Advocate Journeaux. In that case Grupo Torros was a creditor of the settlor and had brought proceedings seeking to challenge the gifts into the trust. It also had a proprietary claim against some of the trust assets. The trustee sought directions as to whether it should distribute...

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