The E, L, O and R Trusts

JurisdictionJersey
CourtRoyal Court
JudgeThe Deputy Bailiff
Judgment Date11 September 2008
Neutral Citation[2008] JRC 150
Date11 September 2008

In the Matter of the E, L, O and R Trusts

Between
BA, SA and HA
Representors
and
(1) Verite Trust Company Limited
Respondents
(2) Appleby Trust (Jersey) Limited

and

(3) Advocate P. D. James (guardian ad litem and representative of the minor and unborn beneficiaries)
First Party Cited

[2008] JRC 150

Before:

M. C. St. J. Birt, Esq., Deputy Bailiff, and Jurats Le Breton and Liddiard.

ROYAL COURT

(Samedi Division)

Authorities

E Trust [2008] JRC 053.

Bristol & West Building Society v Mothew [1996] 4 All ER 698.

Eiro v Equinox Trustees Limited

Lewin on Trusts (18th Edition).

Letterstedt v Broers [1884] 9 AC 371.

Hunter v Hunter [1938] NZLR 520.

Advocate M. J. Thompson for the Representors.

Advocate L. J. Springate for the First Respondent.

Advocate F. B. Robertson for the Second Respondent.

Advocate N. Santos-Costa for the Third Respondent.

The Deputy Bailiff
1

This application arises out of two representations raising the issue of whether the first respondent (“Verite”) should retire or be removed as trustee of the four trusts. Shortly before the matter was due to be heard Verite agreed to retire as trustee. However the representors submit that Verite has acted unreasonably in not retiring earlier and that accordingly its remuneration and legal costs incurred in connection with the two representations should not be payable out of the trust funds. Furthermore, they submit that Verite should be ordered to pay the costs of the other parties on an indemnity basis. The application requires the Court to consider the position of a trustee who is requested to resign.

2

A preliminary issue arose in connection with the proceedings and this was dealt with in a judgment delivered on 3rd April 2008 at [2008] JRC 053. To the extent necessary, we propose to repeat some of that judgment when summarising the facts. Intending no discourtesy, we shall for convenience refer to the parties by their first names as they were during the hearing.

Background
(i) Before the request to resign
3

J and H are brothers. They are the children of BA and his wife SA. In May 1993 twelve discretionary settlements governed by Jersey law were established; six by BA and six by SA. In each case Verite was the trustee. These twelve trusts are referred to as the ‘Family trusts’. The settlor of each trust settled one share in a company (“the Company”). The Company is the parent company of a group of companies which carry on a successful business. J is the chairman and chief executive of the Company. By reason of the exercise of various options, the Family trusts between them hold approximately 89% of the issued share capital of the Company. Apart from modest amounts of cash, the sole asset of each Family trust is its share holding in the Company.

4

The Family trusts were all in broadly similar form. Thus the beneficiaries included (a) the widow or widower of the settlor as appropriate; (b) the children and remoter issue of the settlor; and (c) the spouses, widows or widowers of the children and remoter issue of the settlor. Furthermore, there was a power in each case for the trustees revocably or irrevocably to declare that the beneficiaries should cease to include any particular beneficiary or class of beneficiaries, in which case such persons became Excluded Persons and not entitled to benefit. In the case of a revocable exclusion, such persons remained Excluded Persons for so long as their exclusion remained un-revoked.

5

As can be seen therefore, J and H and their respective families were initially beneficiaries of all twelve of the Family trusts. However, some were earmarked for the benefit of J's family and some for that of H. This was achieved through letters of wishes. The settlor (being the relevant parent) of each trust signed a letter of wishes on 27th April 1994. The Family trusts were divided into three groups. Four of the Family trusts were clearly intended for J and his family but there was provision for the benefiting of directors and employees of the Company if J so wished. The second group of four family trusts were clearly intended solely for J and his family and the settlor's wishes in that respect were said to be ‘irrevocable’. The final group of four (which are the four trusts with which we are concerned) were intended to benefit H and his family and the letter of wishes contained the following material provisions:-

  • (i) the trustee should consult J on the management, administration and investment policy of the relevant trust;

  • (ii) the relevant trust had been set up for the benefit of H and his family and consequently all the benefit under the trust should go to him;

  • (iii) nevertheless, if J requested the trustee to pass some or all of the benefit under the trust to other beneficiaries, the trustee should follow his wishes; and

  • (iv) although the trust had been set up for the benefit of H and his family, the trustee should seek the wishes of J in relation to the trust and he might from time to time change his wishes.

6

The position changed in 1999. This occurred because H wished to achieve greater certainty that only he and his immediate family could benefit from the four trusts earmarked for him. On 25th May 1999 Verite as trustee executed revocable deeds of exclusion whereby the beneficiaries of the four trusts which are the subject of the representation in this case were confined to the relevant settlor's widow/widower, H and his issue and any spouses etc of H and his issue. We shall refer to these four trusts as the ‘H Family trusts’. Similarly, in relation to the remaining eight trusts, the beneficiaries were confined to the settlor's widow/widower, J and his issue and the spouses etc of J and his issue. We shall refer to these eight trusts as the ‘J Family trusts’. Although the deeds were revocable, those in respect of the J Family trusts cannot be revoked during J's life unless he has given his written consent and after his death may only be revoked with the consent of such person as J may have nominated for that purpose during his life or by will. There are matching provisions in the deeds relating to the H Family trusts so that the deeds can only be revoked with H's consent during his life and thereafter with the consent of the person nominated by him. Thus the H Family trusts (which own approximately 20% of the share capital of the Company) are held only for H and his family and the J Family trusts (which own approximately 69% of the share capital of the Company) are held only for the benefit of J and his family. In each case the settlor's widow or widower may still benefit.

7

There were accompanying changes to the letters of wishes. The first was on 3rd December 1998 signed by J. It was an over-arching letter of wishes which was expressed to apply to all twelve Family trusts. The key provision was that the letter expressed J's overriding wish that the shares in the Company held by the Family trusts should not be disposed of other than as part of a disposal of the entire family interest in the Company, including any shares held in various UK trusts for the benefit of the family. The letter also expressly requested the trustee not to divide the Company shares into smaller holdings, for example by passing blocks of shares to individual beneficiaries or by selling part of the shares to pass on a cash benefit to one or more beneficiaries. J expressed the view in the letter that any division or part disposal would reduce the overall value of the Family trusts and might create problems by having dissident shareholders. On 1st February 1999 J signed further letters of wishes in respect of all twelve Family trusts. One letter dealt with the H Family trusts and stated that the letter was subject to J's wishes concerning the shares in the Company as set out in the letter of 3rd December 1998. The letter then made it clear that it was J's irrevocable wish that the trustee should have regard to H's wishes with regard to any distributions from those trusts whether during his life or following his death. The position was of course formalised by the execution of the deeds of the exclusion on 25th May 1999. As to other matters, the letter made it clear that J might wish to change his wishes concerning the management policy of the H Family trusts and that if he did he would write again, although he would like the trustee to obtain H's consent before a new memorandum of wishes was substituted in place of that one.

8

On 10th November 2000 J executed a further overriding letter of wishes dealing with all twelve trusts, which was expressed to replace that of 3rd December 1998. However the material provision about keeping the holding of shares in the Company together was not altered. H counter-signed the letter of wishes so as to consent to it in respect of the four H Family trusts. The reason for giving J this stronger position in relation to the management of the trusts was said to be that he had been instrumental in arranging for the benefit of the options to acquire the shares in the Company being vested in the various trusts in the first place.

9

For the past few years J and H have been in dispute in relation to the affairs of the Company. Since 2005, together with their parents, they have been discussing ways in which they might resolve their differences, but so far to no avail.

10

From the creation of the Family trusts in 1993, the sole trustee has been Verite. However, against the background of the disagreement between the two brothers, the parents exercised their respective powers as settlor and appointed a co-trustee to each of the Family trusts to act with Verite. On 13th December 2005 Appleby Trust (Jersey) Limited (“Appleby”) was appointed co-trustee with Verite of the four H trusts and Jemma Trust Company Limited (“Jemma”) was appointed as co-trustee of the eight J Family trusts.

(ii) The request to resign
11

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