The Trustee v Principal Beneficiary

JurisdictionJersey
CourtRoyal Court
JudgeBailiff
Judgment Date14 September 2020
Neutral Citation[2020] JRC 183
Date14 September 2020

[2020] JRC 183

ROYAL COURT

(Samedi)

Before:

R. J. MacRae., Deputy Bailiff, and Jurats Thomas and Christensen.

In the Matter of the Arpettaz Settlement

And in the Matter of Articles 51 & 53 of the Trusts (Jersey) Law 1984 (As Amended)

Between
The Trustee
Representor
and
Principal Beneficiary
First Respondent

and

[the English Claimants]
Second to Fifth Respondents

Advocate R. J. McNulty for the First Representor.

Advocate A. Kistler for the Principal Beneficiary.

Advocate N. M. Sanders for the English Claimants (Second to the Fifth Respondents).

Authorities

In the matter of the Arpettaz Settlement [2020] JRC 161.

S Settlement [2001] JLR N37.

Kahn v HSBC International Trustee Limited, O Poon, K Poon and Franckel, [2015] (1) Note 31)

Representation of O Poon Trust [2015] JCA 109

Re E, R, O and L Trusts [2008] JRC 051

Trusts — reasons for the decision.

Bailiff

THE DEPUTY

1

On 11 th August, 2020, the Court heard and determined an application made on behalf of the trustee (“the Trustee”) of the Arpettaz Settlement (“the Trust”).

2

We now give reasons for our decision.

Background
3

The background to this application is contained in the judgment of the Royal Court in relation to this Trust reported at In the matter of the Arpettaz Settlement [2020] JRC 161.

4

As can be seen from that judgment, on 29 th June, 2020, the Court made various orders including approving the in principle decision of the Trustee to submit to the jurisdiction of the English High Court in relation to claims issued by the English Claimants, to consent to being added as a party to the said proceedings and to adopt a neutral stance in relation to allegations made in the English Claimants' draft re-amended particulars of claim.

5

In those proceedings the Principal Beneficiary is also a defendant and has adopted an active stance defending the claims made by the English Claimants in respect of the assets which form the corpus of the trust fund.

6

On receipt of the order made by the Royal Court the Trustee filed an acknowledgement of service in the English proceedings on 30 th June, 2020. On 15 th July, 2020, the Trustee, in accordance with the order made by this Court on 29 th June, 2020, provided the English Claimants with the identity and whereabouts of the trust assets. The trust assets are divided into two broad categories namely receivables arising from loans made to the Principal Beneficiary personally, as to approximately 70% of the trust fund, and investments held by Quilter Cheviot as to approximately 30% of the trust fund.

7

Shortly after the trustee provided this material to the English Claimants the Trustee was informed that settlement discussions between the English Claimants and the Principal Beneficiary were at an advanced stage. Those discussions have resulted in an in principle agreement as to the terms of a potential compromise. On 17 th July, 2020, the Trustee became involved in tripartite settlement discussions which led to a settlement agreement being negotiated, finalised and executed, subject to order of this Court, on 27 th July, 2020.

8

It is a condition precedent to the implementation of the settlement agreement that this Court issues an Act of Court directing the Trustee to, inter alia:

(a) make a payment to the English Claimants;

(b) give certain releases to the Principal Beneficiary and the English Claimants; and

(c) be permitted to sign a consent order discontinuing the English proceedings.

The Trustee's application
9

The Trustee invited the Court to:

  • (i) approve the Trustee's decision to enter into the settlement agreement;

  • (ii) approve the prospective actions of the Trustee in performing its obligations under the settlement agreement including those referred to at paragraph 8 herein;

  • (iii) approve the decision of the Trustee to write-off various loans made for the Principal Beneficiary and thereafter terminate the Trust.

10

The key terms of the settlement agreement are referred to at paragraphs 29 and 30 below.

11

As referred to above, initially the Trustee invited the Court to approve the Trustee's in principle decision to write-off the outstanding loans made to the Principal Beneficiary (which he has used to purchase and develop a property in southern Europe) and thereafter terminate the Trust.

12

There is no doubt that the terms of the Trust permit the Trustee to enter into these transactions, i.e. enter into the settlement agreement, write-off the outstanding loans made to the Principal Beneficiary (by way of making a notional distribution to him in those sums) and to terminate the Trust. However, the Trustee sought the Court's approval of these matters on the footing that they amounted to “momentous” decisions and the Court should sanction them in accordance with the well-known principles in S Settlement [2001] JLR N37 which were set out by the Court in the judgment reported at In the matter of the Arpettaz Settlement, [2020] JRC 161. This gave rise to a procedural question. The Beddoe proceedings were principally concerned with whether or not the Trustee should submit to the jurisdiction of the English High Court. In those proceedings the interests of all the beneficiaries were similar i.e. that the claims of the English Claimants should not succeed. If they did then the trust fund would be lost in its entirety. The beneficiaries under the Trust are the Principal Beneficiary, his parents who are approaching 80 years of age, and his two siblings who are in their 50s. They are not aware of this Trust and not only have they never benefitted from it but the Court accepted that it was unlikely, absent the early death of the Principal Beneficiary, that they would do so. But because their interests in resisting the English proceedings were aligned with the Principal Beneficiary, it was appropriate to convene him alone to the Beddoe proceedings.

13

By the same token the beneficiaries as a whole have a similar interest in the outcome of the English proceedings, as provided for in the proposed settlement agreement. The Principal Beneficiary is more directly affected than the other beneficiaries and at greater risk of costs as he is a party to those proceedings; but, again, his interests are aligned with those of his parents and siblings.

14

The Trustee chose not to issue a fresh representation so as to bring this application to the Court, and sought to apply to the Court for relief under the provision in the order made on 29 th June 2020 giving the parties liberty to apply.

15

It might have been better for the Trustee to have issued a fresh representation seeking the Court's sanction of the in principle decision of the Trustee to enter into the settlement agreement but it was not essential to do so, particularly having regard to the need for this matter to be resolved reasonably quickly in order to avoid substantial litigation costs which would soon need to be expended in the English proceedings. Accordingly we permitted the Trustee to proceed under the liberty to apply provision in respect of matters connected with the settlement agreement.

16

However, the position is different in relation to the Trustee's request that the Court sanction the in principle decision to write-off the outstanding loans to the Principal Beneficiary and terminate the Trust. Firstly, a fresh representation should have been issued as such matters are not sufficiently connected to the Beddoe proceedings to warrant an application being made under the liberty to apply provision.

17

Secondly, the Court expressed the view in the course of argument that all the beneficiaries of the Trust would need to have been convened to such a representation.

18

It needs to be borne in mind the reason why a trustee seeks the Court's approval/blessing to an in principle decision which it has reached. One of the reasons is to insulate a trustee from any subsequent claim by a disappointed beneficiary that the decision...

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