S andL and E v Bedell Cristin Trustees

JurisdictionJersey
CourtRoyal Court
JudgeBailiff
Judgment Date10 August 2005
Neutral Citation[2005] JRC 109
Date10 August 2005

[2005] JRC 109

ROYAL COURT

(Samedi Division)

Before:

M C St J Birt, Esq., Deputy Bailiff and Jurats Bullen and Allo

S
Representor
and
L
First Respondent

and

E
Second Respondent

and

Bedell Cristin Trustees Limited (formerly Serine Limited) as Trustee of the L Settlement
Third Respondent

Advocate P.C. Sinel for the Representor.

The First Respondent in person.

Advocate T.J. Le Cocq for the Third Respondent.

The Second Respondent did not appear and was not represented.

Authorities

Trusts (Jersey) Law 1984.

In Re S Settlement (Jersey Unreported 2001/154)

Lewin on Trusts (17 th Edition).

Application for an interim payment from a trust fund and the exercise of the Courts Jurisdiction under Article 51 of the Trusts (Jersey) Law 1984.

Bailiff DEPUTY
1

This is an application by the representor (“S”) for an order that the Trustee make an interim distribution out of the trust fund. It raises a point of principle concerning the exercise of the Court's jurisdiction under Article 51 (formerly 47) of the Trusts (Jersey) Law 1984 (“the 1984 Law”).

The Trust
2

The L Settlement (“the Trust”) was established by declaration of trust executed on 19 th April 1989 by the third respondent (“the Trustee”). The deed defined the first respondent (“the settlor”) as the settlor. The original beneficiaries were the settlor, his mother and father and his issue through all degrees. His parents have since died and he has no issue. In October 1990, at the request of the settlor, S, the second respondent (the settlor' brother) and the RNLI were added as beneficiaries by the Trustee.

3

By Clause 1(a) (xiv) the ‘Initial Period’ was defined as the period commencing on the date of the Trust and ending on the death of the settlor or such earlier date as the Trustee should declare to be the termination of the Initial Period. Any such declaration might be expressed to apply to part only of the trust fund.

4

During the Initial Period, the Trustee is to pay the income to the settlor and has power, exercisable from time to time at its discretion, to pay capital to or for the benefit of the settlor or, with the consent of the settlor, any one or more of the other beneficiaries. After the Initial Period, the trust fund is held upon conventional discretionary trusts for the beneficiaries.

5

On 7 th July 1989 the settlor settled £636,891 on the terms of the Trust. He added further smaller sums in 1992 and 1994.

S's claim
6

From about 1980 to 1999 (the exact dates appear to be in issue) the settlor and S were in a relationship. They lived together initially in Bristol, then the Isle of Man and finally the Republic of Ireland. They also carried on a scrap yard and motor vehicle spare parts business in partnership from 1980 until April 1989.

7

According to S, the partnership business was carried on from a plot of land (Plot 1) purchased by the settlor in 1977 for £1,700 with the help of a loan of £1,000 from his father. Further land, (Plot 2), was purchased in about November 1988, the purchase price being provided by a mortgage of £282,000. She asserts that the mortgage instalments were paid out of the partnership income. This plot was purchased in the sole name of the settlor. Plot 3 was purchased in 1988 for £14,057 and was funded by an overdraft extended to the partnership. Plot 3 was acquired in the joint names of the settlor and S.

8

There is no dispute that all three plots were sold as one parcel of land in July 1989 for the aggregate sum of £985,000. After clearing the mortgage and paying selling costs, the net proceeds amounted to £636,891. This sum was paid to the settlor who then settled it on the terms of the Trust as described earlier.

9

S claims that, after a small allowance for the amount contributed by the settlor to the purchase of Plot 1 before he met S, the net proceeds of the sale of all three plots belonged to her and the settlor in equal shares. She therefore alleges that approximately half of the initial settled funds belonged to her. The settlor, on the other hand, denies that this was so and asserts that all of the settled funds belonged to him. It appears that he will say that the equity in the land was all attributable to Plot 1 and that this plot was acquired and paid for by him before he met S.

10

S's claim was first brought to the attention of the Trustee in about 2001. Thereafter there was considerable correspondence and debate as to whether S proposed to attack the Trust or seek payment out of it as a beneficiary. Eventually she issued a representation in October 2004 and the Trustee issued one in November 2004. The matter is proceeding upon S's representation and a hearing date has been fixed for November 2005. The case is proceeding on the basis that S is not attacking the validity of the Trust in any way. She and the Trustee wish the Court to determine whether she contributed to the settled funds and if so what proportion. The Trustee has made it clear that it considers this an important matter in the exercise of its discretion. It has made it clear that if S did contribute to the trust fund, then on the information currently before the Trustee, it would be its intention (without fettering the future exercise of its discretion) to take into account the wishes of S in relation to that proportion of the current trust fund which represents that contribution. Conversely, if it is determined that S did not contribute to the trust fund, then on the information currently before the Trustee, it would be its intention (without fettering the future exercise of its powers) to exclude S as a beneficiary.

11

The assets of Trust currently comprise of approximately £360,000 of portfolio investments and a substantial property valued at just over €3 million. This is the home of the settlor and is apparently in a certain amount of disrepair. The investments are used to produce an income for the settlor and to pay the Trustee's fees and expenses.

This application
12

For some time S has been asking for an interim distribution of £50,000. We have not seen all the correspondence but have been shown a letter dated 6 th May 2003 from Sinels asking for an interim distribution of £50,000 for S so that she could pay their fees and put them in funds. Matters obviously continued to be discussed between Sinels and Bedell Cristin (acting for the Trustee) and on 2 nd August 2004 in connection with the request for a distribution, Bedell Cristin wrote to Sinels asking for details of S's means, her needs, the value of the distribution she was requesting and what she intended applying the funds to. We have not been referred to any reply to that request but on 12 th January 2005 Sinels renewed the request for an interim distribution of £50,000 for legal fees. This was repeated on various occasions in early 2005 and Bedell Cristin asked for clarification as to whether this was for past or future fees.

13

On 20 th April Sinels wrote to Advocate Clyde-Smith (who had by then been instructed by the Trustee) specifically requesting the Trustee to exercise its power to terminate the Initial Period in relation to £50,000 in order to enable a distribution to be made to S for her to finance her legal fees in the proceedings. On 27 th April they clarified that she had paid Sinels about £11,000 and now owed them a further £40,000. On 6 th May Bedell Cristin wrote saying that the Trustee had considered S's request for a distribution of £50,000. Having expressed surprise at the amount, the letter stated that, until such time as S's claim in respect of being a settlor of part of the trust funds had been determined, the Trustee was not prepared to exercise its discretion in her favour in relation to the request for a payment of £50,000 for legal fees. Somewhat confusingly, the letter went on to say that the Trustee would take a neutral position and surrender its discretion to the Court in relation to the forthcoming summons, which we take to be a reference to the summons currently before us requesting an interim distribution.

14

On 11 th May S duly issued a summons requesting that the Court order the Trustee to make an interim distribution and/or loan to S in the sum of £50,000 “…….. or such greater or lesser amount that the Court may deem fit”. Subsequently, by letter dated 21 st June, Advocate Clyde-Smith clarified that, on the factual basis set out in paragraph 4 of his letter (subsequently accepted by Sinels) the Trustee was not surrendering its discretion to the Court and was not willing to exercise its discretion to make an interim payment to S.

15

With the Court bundle, S filed a draft affidavit setting out details of her income and expenditure. She runs a landscape gardening business and she and her husband had a combined income for the year ending April 2005 of some £18,000. They have savings of some £11,681. The affidavit confirms that she is indebted to Sinels in the approximate sum of £50,000 for legal fees to date. Although she has a conditional fee arrangement with Sinels in respect of the current litigation (as Mr Sinel confirmed) it appears that that firm is no longer willing to fund the litigation to trial in November 2005. Accordingly, if a distribution is not made to enable Sinels to be paid, they will no longer agree to act for her.

16

During his submissions — and much to everyone's surprise — Mr Sinel said that the application was in fact for a distribution of £100,000 of which £50,000 was to pay Sinels' fees and £50,000 was for the various items of expenditure listed in paragraph 11 of S's affidavit. These include certain expenses in connection with her business, some household furniture and kitchen equipment, household decoration, carpets for the house and a holiday.

The Court's jurisdiction under Article 51 (formerly 47)
17

As already mentioned, the Trustee asserted both in correspondence and before the Court that it had not surrendered its discretion to the Court...

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