In the Settlement of Douglas

CourtRoyal Court
JudgeBirt, Deputy Bailiff and Jurats Rumfitt and Le Breton:
Judgment Date03 April 2000
Date03 April 2000
Birt, Deputy Bailiff and Jurats Rumfitt and Le Breton:

R.G.S. Fielding for the representor;

C.G.P. Lakeman for the trustees and the unborn beneficiaries;

S.J. Young for the adult beneficiaries.

Cases cited:

(1) N, In re, 1999 JLR 86, considered.

(2) Osias Settlements, In re, 1987-88 JLR 389, considered.

(3) Weston's Settlements, In re, [1969] 1 Ch. 223; [1968] 3 All E.R. 338; [1968] T.R. 295; (1968), 47 A.T.C. 324; 112 Sol. Jo. 641, followed.

(4) Whitehead's Will Trusts, In re, [1971] 1 W.L.R. 833, followed.

Legislation construed:

Trusts (Jersey) Law 1984, art. 43:

"(1) Subject to paragraph (2), the court may, if it thinks fit, by order approve on behalf of


(c) any person unborn;


any arrangement ... varying or revoking all or any of the terms of the trust or enlarging the powers of the trustee of managing or administering any of the trust property.

(2) The court shall not approve an arrangement on behalf of any person within sub-paragraph ... (c) of paragraph (1) unless the carrying out thereof appears to be for the benefit of that person."

Trustsvariation"for the benefit of"avoidance, minimization or deferral of taxation is capable of being benefitbenefit of this nature no reason for court's refusal to approve variation

Trustsvariation"for the benefit of"court may vary if prevents depletion of trust assets by avoiding UK tax and provides greater scope for effective tax planning of beneficiaries

The settlor sought to vary the terms of a settlement under art. 43 of the Trusts (Jersey) Law 1984.

In 1990 the settlor, a UK resident, had created a trust in Jersey for the benefit of his family (which comprised, at that stage, his wife and two children). In 1998 the UK tax regime applicable to offshore trusts was changed so that capital gains tax would be imposed on any gains realized by the trust after March 1998. This would have resulted in a 500,000 tax liability for the settlor.

To avoid this liability, the settlor proposed that the trustees would appoint the majority of the trust assets to a new trust which would be created by him and be structured to avoid the tax. However, the new trust was proposed to have an increased class of beneficiaries and the powers conferred on the trustees of the original trust were not wide enough to enable them to appoint assets to a trust which included as beneficiaries persons who were not beneficiaries under their trust. The present application was therefore made to vary the terms of the trust, including an application to confer such a power on the trustees. The settlor's wife and his two children consented to the variation, but the court's approval was sought on behalf of the unborn children and remoter issue of the settlor who could benefit under the original trust.

The settlor submitted that the benefit to his unborn children and remoter issue was clear since if nothing was done he would be forced to pay 500,000 in capital gains tax for which he would be reimbursed out of the trust, whereas if the variation were made there would be no such tax levied on him and that sum would be available for the possible future benefit of his unborn beneficiaries. Furthermore, he submitted that the wider class of beneficiaries in the new trust (which included the spouses of his children) might provide advantages in future tax planning for some of the beneficiaries under the original trust.

Held, allowing the variation:

(1) The avoidance, minimization or deferral of taxation was capable of being "for the benefit" of beneficiaries under art. 43 of the Trusts (Jersey) Law 1984 and the fact that such avoidance, minimization or deferral was the principal object of the variation was not a reason for a court to refuse to give its consent if it were satisfied that the arrangement was for the benefit of the persons concerned. This was the approach taken by the English courts in relation to the...

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    • Royal Court
    • 28 December 2011
    ...In re Whitehead's Will Trusts, [1971] 1 W.L.R. 833, dictum of Pennycuick, V.-C. applied; In re N, 1999 JLR 86, applied; In re Douglas, 2000 JLR 73, applied). (3) The court could not approve the arrangement on the ground that there was no good reason for C to be treated differently to other ......
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