Representation of N, Re (Trusts: Variation: Benefit of Minors)

JurisdictionJersey
CourtRoyal Court
JudgeHamon, Deputy Bailiff and Jurats Myles and Tibbo:
Judgment Date25 March 1999
Date25 March 1999
ROYAL COURT
Hamon, Deputy Bailiff and Jurats Myles and Tibbo:

N.F. Journeaux for the representors;

M.H.D. Taylor for the trustee;

W.J. Bailhache and J.C. Martin for the beneficiaries.

Cases cited:

(1) Fargus, In re, 1997 JLR 89, considered.

(2) Irving, Re (1975), 66 DLR (3d) 387; 11 O.R. (2d) 443, applied.

(3) Osias Settlements, In re, 1987-88 JLR 389, applied.

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

(a) a minor or interdict having, directly or indirectly, an interest, whether vested or contingent, under the trust...

...

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 (a) ... of paragraph (1) unless the carrying out thereof appears to be for the benefit of that person."

Trustsvariation"for the benefit of" minorscourt may vary under Trusts (Jersey) Law 1984, art. 43 for "benefit" of minor beneficiaries"benefit" to be widely construed and not restricted to financial interestmay include, e.g. wider interest in maintaining assets for whole family, avoidance of possible conflict within family, reduction of tax liability of trust

Conflict of Lawschildrenage of majorityminor under Jersey law who has reached age of majority in country of domicile to be treated same as other minors for purpose of considering "benefit" in application to vary trust under Trusts (Jersey) Law 1984, art. 43wishes relevant but not able to consent to variation

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

The representors created a trust for the benefit of their children, four of whom were minors at the relevant time. The trust comprised a number of companies with considerable assets and was apparently created to avoid tax. Although specifying that the trustees could make appointments of capital and income to the children individually, who on attaining the age of majority could become absolutely entitled to the funds, the settlors and their children believed that the trust should be for the benefit of the family as a whole. Because absolute vesting of the funds in the minor children would, following the 1998 changes in the UK capital gains tax legislation, result in large tax liabilities, the settlors made the present application under art. 43 of the Trusts (Jersey) Law 1984 to vary the interests of the minor beneficiaries, both to minimize the tax liabilities and to make the terms of the trust accord with their intention to benefit the family. The variations would have the effect of substantially reducing the short-term financial entitlements of the beneficiaries.

One of the children resident in the United Kingdom had reached the age of majority there but was still a minor in Jersey law (being only 19). He stated that having received legal advice and fully understanding the effects of the proposed variation, he would give his consent to the variation if of full age. There was no disagreement over the proposal put forward and it was submitted that although the children would individually lose the possibility of receiving the entire trust fund absolutely, the proposal was nevertheless for their "benefit" as required by art. 43, since it reduced the fund's liability to tax, reduced the possibility of financial conflicts between the parents and children, and otherwise accorded with the intentions of the family.

Held, granting the representation:

In the exercise of its power to vary the interest of the minor beneficiaries under art. 43, the court had to decide whether they would be likely to benefit from the variation, adopting the test of whether a prudent adult, motivated by self-interest and having regard to the potential risks, would be likely to accept the variation proposed. In this context, "benefit" had to be widely construed; there was no need for the benefit to be financial, nor was a financial benefit automatically sufficient. In the present case, having regard to the interests of the family in keeping the trust fund intact for the benefit of the whole family, including future generations, and to the statement of wishes by the minor beneficiary (who would nevertheless be treated in the same manner as the other minors for this purpose), the proposed variation would be allowed (page 92, line 12 - page 93, line 38).

HAMON, DEPUTY BAILIFF: This is an application under art. 43 of the Trusts (Jersey) Law 1984, which confers power on the court...

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