Representation of the C Trust

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: J. A. Clyde-Smith,Jurats Kerley,Nicolle
• Judgment Date: 25 April 2012
• Neutral Citation: [2012] JRC 86B
• Date: 25 April 2012

[2012] JRC 86B

ROYAL COURT

(Samedi)

Before:

J. A. Clyde-Smith, Commissioner, andJurats KerleyandNicolle.

IN THE MATTER OF THE REPRESENTATION OF A (A MINOR) AND B (A MINOR) BY MARK HOWARD TEMPLE (GUARDIAN AD LITEM)

AND IN THE MATTER OF THE C TRUST AND IN THE MATTER OF ARTICLE 51 OF THE TRUSTS (JERSEY) LAW 1984 (AS AMENDED)

Between

A and B represented by their guardian ad litem Mark Howard Temple

Representors

and

Verite Trust Company Limited

First Respondent

George Machan

Second Respondent

D

Third Respondent

and

E

Fourth Respondent

Advocate M. J. Temple for himself.

Advocate R. J. MacRae for the First and Second Respondents.

Authorities

Lewin on Trusts 18 ^th edition.

In the matter of the H Trust [2007] JLR 569 .

The Law of Trusts by Thomas and Hudson, 2 ^nd edition.

S, L and E -v- Bedell Cristin Trustees [2005] JRC 109 .

Payne -v- Pirunico Trustees Limited [2001] JLR 1 .

Trusts (Guernsey) Law 1989.

Trusts (Jersey) Law 1984.

In re Esteem Settlement [2001] JLR 7 .

Trust — representors seek to set aside an instrument of appointment dated 5 ^th November, 2010.

THE COMMISSIONER:

1 The representors, through their guardian, Mr Temple, seek to set aside an instrument of appointment dated 5 ^th November, 2010, (“the instrument of appointment”) under which they were effectively excluded from the beneficial class of the C Trust (“the Trust”) during the lifetime of their grandmother, the fourth respondent, E.

2 The Trust was established by the first respondent Verite Trust Company Limited (“the trustee”) by declaration dated 30 ^th September, 1993, at the instigation of the representors' grandfather, G, who settled the majority of the assets (“the settlor”). The settlor was married to E (who we will refer to as “the widow”) and they had one surviving son by their marriage, namely D (who we will refer to as “the father”). He married H, who was born in Peru of an English mother and Peruvian father (we will refer to her as “the mother”), on 16 ^th May, 2001. The representors are their two children, born in July 2004 and July 2006 and who are seven and five years of age respectively (who we will refer to as “the grandchildren”). The first grandchild was born shortly after the settlor executed his last letter of wishes on 20 ^th June, 2004, when his health was failing. He died later that year.

3 Subsequently, in January 2007, the marriage between the father and the mother irretrievably broke down and she went to live in Peru with her mother, taking the grandchildren with her. Contact between the father (who lives in England) and the widow (who lives in Greece) on the one hand and the grandchildren on the other hand, has been sporadic.

4 On 15 ^th December, 2008, the father commenced divorce proceedings in the Family Division of the High Court of Justice of England and Wales and a decree nisi was pronounced on 24 ^th March, 2009. A decree absolute was made on 16 ^th October, 2010. On 27 ^th March, 2009, the mother commenced ancillary proceedings against the father which led to a final judgment and order of Moylan J on 27 ^th July, 2010. The decision to exclude the grandchildren was taken in the context of those proceedings.

The Trust

5 The Trust is a discretionary trust in familiar form. The beneficiaries are listed in Part II of the second schedule of the Trust Instrument as follows:-

• (i) The settlor;

• (ii) The widow;

• (iii) The father;

• (iv) The grandchildren and remoter issue of the settlor and the widow (now living or hereinafter born during the Trust Period);

• (v) Any body organisation or association the objects of which are by the law of the Island of Jersey charitable;

• (vi) Any person who is the subject of a nomination under Clause 3(2) of the Trust Instrument.

6 Originally, a protector committee was established under the Trust Instrument comprising the settlor, the second respondent George Machan and Advocate David Le Quesne, but at the material time, George Machan was the sole protector. He is also a director and the beneficial owner of the trustee. We will refer to him as “the protector”. Certain powers of the trustee can only be exercised with the written consent (defined in the trust instrument as the “prescribed consent”) of the protector, in particular, the power to exclude beneficiaries, the distribution of income or capital and the exercise of the trustee's overriding power of appointment (pursuant to which the instrument of appointment was executed). For the purposes of this judgment, we set out the clauses dealing with the power to exclude and the overriding power of appointment:-

Instrument of appointment

• " 4. The Trustees may by instrument revocable during the Trust Period or irrevocable having first obtained the prescribed consent wholly or partially exclude any Beneficiary (whether ascertained or not) from future benefit under this Trust and thereupon such Beneficiary shall be excluded accordinglyPROVIDED THATthis power shall not be capable of being exercised so as to derogate from any interest to which such beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise.

• ……

• 8 (1) The Trustees shall hold the Trust Fund and the income thereof upon such trusts for the benefit of all or any one or more exclusively of the others of the Beneficiaries at such ages or times with such powers of appointment maintenance advancement and otherwise in favour of all or any one or more of them and which such administrative powers and subject to such provisions (whether or not such powers and provisions are similar to those contained in this Trust) and generally in such manner in all respects as the Trustees may at any times subject to first having obtained the prescribed consent revocably or irrevocably appoint but so that any revocable appointment if not revoked before the date of expiration of the Trust Period shall become irrevocable on that date.

• ……

• 9.(1) Subject as aforesaid the Trustees shall hold the Trust Fund and the income thereof upon trust to pay or apply the whole or any parts of the income or capital of the Trust Fund to or for the maintenance education advancement or benefit of all or such one or more exclusively of the others of the Beneficiaries for the time being in existence if more than one in such shares and in such manner generally as the Trustees shall in their discretion from time to time think fit subject to first having obtained the prescribed consent.”

7 The material terms of the instrument of appointment are as follows:-

• " 1. In exercise of the power conferred by Clause 8(1) of the Trust Instrument and all other powers of the Trustee, the Trustee hereby irrevocably appoints that from the date of this instrument [the widow] shall be the sole Beneficiary of the Trust during her lifetime and that thereafter it shall hold the Trust Fund of the Trust upon trust for the benefit of the Beneficiaries described at paragraphs 3 to 6 of Part 11 of the Second Schedule to the Trust Instrument.

• ….

• 3. The trusts, powers and provisions contained in the Trust instrument shall continue to be applicable to the Trust Fund so far as is consistent with the provisions of this instrument.”

8 As can be noted, the appointment is irrevocable. In the two days reserved for this hearing, time did not permit a discussion with counsel as to the precise effect of the instrument of appointment. Clause 8(1) of the Trust empowers the trustee to appoint the trust fund upon new trusts for the benefit of any one or more of the beneficiaries. It would seem that under the instrument of appointment no new trusts were appointed but the widow was declared the sole beneficiary of the existing trusts. In effect, the father and any grandchildren and remoter issue were removed as beneficiaries during her lifetime, in which event it might be argued that the trustee might more appropriately have exercised its power under Clause 4 to partially exclude the father and the grandchildren, as the only other living beneficiaries, from benefiting under the Trust during the widow's lifetime. In any event, it seems to us that the effect of the instrument of appointment is to exclude the father and the grandchildren as beneficiaries of the Trust during the lifetime of the widow so that she became the sole beneficiary.

Letter of wishes

9 The settlor executed a number of letters of wishes before signing the last letter dated 20 ^th June, 2004, but as the trustee and the protector relied very substantially upon his wishes for justifying the exclusion of the grandchildren, it is necessary to set out the last letter in full:-

“ To:

The Trustees from time to time of the settlement dated 30 ^th September, 1993, created by an instrument of Trust made by Verite Trust Company and known as THE [C] TRUST.

The Trust Deed gives the Trustees discretionary powers over capital and income, including power to distribute either capital or income within a very long period amongst a class of beneficiaries from time to time.

I appreciate that I cannot fetter your discretion or determine the way in which you exercise your powers but I believe the Trustees may find it helpful if I express in this letter my considered views as to how I would wish such distributions and powers to be exercised. I appreciate that I only recently set out my wishes to you however as you are aware I have been unwell for some time resulting in your communicating by necessity with my wife to whom I have been married for over 40 years and in whom I have great faith and trust. I would therefore ask that all future communications are directed through my wife as her long term financial requirements are of paramount importance and as you will understand it is my wish that her needs are provided for to the best of my ability.

Firstly, I would ask that the Trustees communicate directly with my wife on all matters concerning the...