The Shinorvic Trust

• Jurisdiction: Jersey
• Court: Royal Court
• Judge: The Bailiff
• Judgment Date: 20 April 2012
• Neutral Citation: [2012] JRC 81
• Date: 20 April 2012

Between

Bas Trust Corporation Limited

Jean Gabriel Goyet

Representors

and

MF and others

Respondents

[2012] JRC 81

Before:

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

ROYAL COURT

(Samedi)

Trust — application for declaration regarding trustee and beneficiary.

Authorities

East -v- Pantiles (Plant Hire Limited) [1982] EGLR 111.

Halsbury's Laws of England 4th Edition.

Snell's Equity 32nd Edition.

Lewin on Trusts 18th Edition.

Thomas on Powers 1st Edition.

Tollet -v- Tollet (1728) 2 Peere Wms 489.

Kennard -v- Kennard (1872) LR 8 Ch App 227.

Chapman -v- Gibson [1791] 3 Bro CC 229.

Moodie -v- Reid (1816) 1 Maddock 516 at 521.

Alison -v- Alison (1934) 51 CLR 653.

Kain -v- Hutton [2005] WTLR 996.

Breadner -v- Granville-Grossman [2000] 4 All ER 705.

Re The T 1998 Discretionary Settlement [2008] JRC 062.

2011 Jersey and Guernsey Law Review.

Davis -v- Richards and Wallington Industries Limited [1990] 1 WLR 1511.

Lees -v- Lees (1871) IR 5 Eq 549.

Re Farnell's Settled Estates [1886] 33 Ch. D 599.

Bailey -v- Hughes [1854] 19 Beav 169, 52 ER 313.

Advocate L. J. Springate for the Representors.

Advocate R. J. MacRae for MF.

The Bailiff

1 This is an application by the Representors as trustees of the Shinorvic trust (“the trust”) for a declaration as to whether the second representor is a trustee of the trust and whether a particular individual has or has not been added as a beneficiary of the trust. The second matter raises, inter alia, interesting issues as to the circumstances in which equity can assist following the defective execution of a power.

The history of the Trust

2 Before turning to consider the applicable legal principles, we must describe the relevant factual background.

3 The trust was established by trust deed dated 19th July, 1988, made between VB as settlor (“the settlor”) and Radcliffes Trustee Company SA (“Radcliffe”) as trustee. The trust is a discretionary trust expressed to be governed by the law of Jersey.

4 The beneficiaries are defined in the trust deed as being the settlor, the settlor's sister MF and the children and remoter issue of MF. Clause 2(3) conferred a power on the settlor"… by instrument executed at any time during the Trust Period or by Will or Codicil [to] declare that any person … named or described in such instrument Will or Codicil shall be added to the class of Beneficiaries and any such instrument Will or Codicil shall take effect according to its tenor…”.

5 On 21st February, 1990, the settlor purported to exercise his power to add a beneficiary under clause 2(3) and signed a deed of declaration (“the 1990 deed”) to add Mrs B to the class of beneficiaries. The 1990 deed is key to the second issue which the Court has to decide and it is therefore appropriate to describe it in some detail. The deed is made between the settlor and Radcliffe. Recital (1) describes the deed as being supplemental to the trust, recital (2) sets out the provisions of clause 2(3) of the trust deed and recital (3) states that the settlor is desirous of adding Mrs B to the class of beneficiaries pursuant to the power conferred on him by clause 2(3) of the trust. The effective provision of the deed then reads as follows:-

“ In exercise of the powers conferred on the Settlor by the said clause 2(3) of the Settlement and of every or any other power in that behalf enabling him the Settlor HEREBY DECLARES that as from the date hereof the said [Mrs B] shall be added to the class of Beneficiaries and that the Settlement shall henceforth be read construed and take effect in all respects as if the said [Mrs B] was named as a Beneficiary thereof.”

The deed is then signed by the settlor and duly executed by Radcliffe.

6 On 24th April, 1998, the settlor executed a further deed of declaration (“the 1998 deed”) by which he added his brother Levon to the class of beneficiaries. The deed is in similar terms to the 1990 deed except that, in the first recital, the deed is described as not only being supplemental to the trust but also " (ii) to a Deed of Declaration dated the twenty-first day of February nineteen ninety in terms of which [Mrs B] was added to the class of Beneficiaries”. The 1998 deed was signed by the parties to it and duly witnessed.

7 On 15th June, 1999, the settlor executed a further deed of declaration whereby he added his brother Hagop and Hagop's two sons to the class of beneficiaries. On this occasion the recital did not make any reference to the 1990 deed or the 1998 deed.

8 Finally, on 25th October, 2002, the settlor executed a further deed of declaration adding the children and remoter issue of the two sons to the class of beneficiaries.

9 On 18th October, 2002, the settlor signed a letter of wishes and his signature was attested to by one witness. The letter of wishes was quite detailed. It referred to a number of properties which were held in the trust at the time and requested that the income from the majority of these properties be held for the benefit of MF and Mrs B. The letter of wishes contained the following passage:-

“ I should like you to use capital for the benefit of income beneficiaries only if this is absolutely necessary. As far as possible, I should like you to preserve the capital of the Trust.

Above all, however, I should like [Mrs B's] welfare to be your paramount concern. Please use the trust income as necessary to ensure that she continues to enjoy the same standard of living as she did during my lifetime, and that all her medical needs are met. I expect the trust income to be sufficient for these purposes. However, you should also use capital if, in your discretion, you consider that this is reasonable and necessary for her benefit.”

10 The settlor died on 18th December, 2005. There is no power other than that contained in clause 2(3) to add beneficiaries and accordingly the beneficiaries at the date of the settlor's death were believed to comprise MF, her three children, Mrs B, the settlor's brothers Levon and Hagop, Hagop's sons, the remoter issue of MF and the remoter issue of the two sons.

11 The settlor left a Will which he had executed on 18th October, 2002, of which the executors were Mr Paul Christou and the second representor Mr Goyet. Clause 3 of the Will bequeathed to Mrs B the proceeds of an insurance policy and a pecuniary legacy of £250,000 free of tax. The Will also gave her a life interest in the income of the residuary estate. Unfortunately, the settlor had failed to pay the premiums on the insurance policy with the result that it did not take effect. Essentially, all of the settlor's assets had been placed in the trust and accordingly Mrs B received only some £10,000 pursuant to the pecuniary legacy.

12 The trust fund would appear to be worth approximately £1.5 million. Distributions were made to Mrs B beginning with a payment of £3,000 in July 2005. In October 2005 the trustees started making regular monthly distributions of £3,000 per month to Mrs B out of the trust in order to cover her living expenses. In February 2007 the payments were increased to £6,000 per month. Subsequently, they were reduced to £4,750 per month in the light of information which Mrs B provided concerning her financial position and because of concerns about the trust's financial position. Mrs B has also received occasional lump sum distributions from the trust to pay her tax, BUPA, dental treatment, legal fees and for a new car. In total, she has received approximately £400,806 from the trust since July 2005 and other beneficiaries have received a total of approximately £735,000 together with loans to certain beneficiaries of some £315,000.

13 Radcliffe remained the trustee until 6th January, 2009, although it changed its name to Investec Trust (Switzerland) SA (“Investec”) on 30th May, 2005. A further company was appointed as co-trustee for a time from 7th April, 1999, to 2002 but nothing turns on that.

14 Mr Goyet joined Radcliffe in April 1998 and was thereafter responsible for the administration of the trust on behalf of Radcliffe. He got to know the settlor comparatively well. He left Radcliffe in April 2004 and joined BasTrust Corporation Limited (“BasTrust”).

15 On 27th March, 2007, by means of a deed to which we shall refer shortly, Mr Goyet was purportedly appointed as a co-trustee with Radcliffe. On 6th January, 2009, Radcliffe (under its then name of Investec) retired as trustee and BasTrust was appointed in its place.

16 In May 2011, the trustees decided to take tax advice. In the course of preparing instructions to tax counsel, all the deeds of declaration executed by the settlor were reviewed and it was discovered that the 1990 deed had not been witnessed. This was highly significant for the following reason. Clause 2(3) of the trust deed states that the power to add a beneficiary is to be exercised by “ instrument”. That is defined in clause 2(1)(f) of the trust deed as:-

“ Any instrument in writing signed by the parties thereto and witnessed and dated or in the case of a party or parties thereto which shall be a body or bodies corporate then executed in accordance with the Articles of Association or Statutes of such corporate body or bodies.”

17 Although there is no doubt that the settlor executed the 1990 deed and that Radcliffe executed it appropriately under its articles of association, the signature of the settlor was not witnessed, even though there was provision for the signature of a witness as the attestation clause states “ signed sealed and delivered by [the Settlor] in the presence of:—…”. This appears to have been overlooked at the time of the execution of the 1990 deed and thereafter.

18 The trustees have been advised that, because the 1990 deed did not constitute an “instrument” for the purposes of the trust deed by reasons of the lack of a witness signature, there is an issue over whether Mrs B was ever added as...