E Trust

JurisdictionJersey
CourtRoyal Court
JudgeDeputy Bailiff
Judgment Date03 April 2008
Neutral Citation[2008] JRC 53
Date03 April 2008

[2008] JRC 53

ROYAL COURT

(Samedi Division)

Before:

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

In the Matter of an Application by JA to Intervene in the Representaion of BA, SA and HA

And in the Matter of the E, R, O and L Trusts

Between
JA
Applicant
and
BA, SA and HA
Representors

and

Verite Trust Company Limited
Appleby Trust (Jersey) Limited

and

Advocate P. D. James (guardian ad litem and representative of the minor, unborn beneficiaries
Respondents

Advocate N. F. Journeaux for the Applicant.

Advocate M. J. Thompson for the Representors.

Advocate L. J. Springate for Verite Trust Company Limited.

Advocate F. B. Robertson for Appleby Trust (Jersey) Limited.

Advocate P. D. James in person.

Advocate A. D. Hoy for Jemma Trust Company Limited.

Authorities

In Re Abacus [2000] JLR 165.

Companies Act 2006.

Re a Settlement [1994] JLR 139.

Re Moritz [1959] 3 All ER 767.

Deputy Bailiff

THE

1

This is an application by JA for leave to intervene in certain proceedings instituted by representation by the Representors seeking directions as to whether Verite Trust Company Limited ("Verite") should be removed as one of the co-trustees of four trusts. Intending no discourtesy, we shall for convenience refer to the parties in the same manner as they were during the hearing. Thus we shall refer to the applicant as 'J', HA as 'H' and BA and SA as 'the settlors' or 'the parents' or 'B' and 'S' as the case may be.

The factual background
2

J and H are brothers. J is 16 years older than H. They are the children of B and his wife S. In May 1993 twelve discretionary settlements governed by Jersey law were established; six by B and six by S. 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 called A Limited ("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. A further 8% is held directly by members of the A family or other Family trusts and the balance is held by another family. Apart from modest amounts of cash, the sole asset of each Family trust is its shareholding in the Company.

3

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 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. As can be seen therefore J and H and their respective families were initially beneficiaries of all twelve of the Family trusts although, as we shall see, some were earmarked for the benefit of J's family and some for that of H.

4

On 25th May 1999, following discussions between the brothers, it was agreed to formalise matters further. Verite as trustee executed revocable deeds of exclusion whereby the beneficiaries of the four trusts which are the subject of the Representation 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 a 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 his 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.

5

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.

6

From the creation of the Family trusts in 1993, the sole trustee had been Verite. However, against the background of this 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 family trusts and Jemma Trust Company Limited ("Jemma") was appointed as co-trustee of the eight J family trusts.

7

In October 2006 Verite issued two representations, one concerning the J family trusts and the other the H family trusts. In essence, the representation sought directions from the Court as to whether Verite should resign as trustee of some or all of the trusts. This was on the basis that a dispute had arisen between H and J, and H and the parents had requested Verite to resign as trustee of the H family trusts. Verite was concerned as to whether it was now in a position of conflict of interest. On 5th February 2007, Verite withdrew its representations. However, on 9th March 2007, the parents and H brought their current representation which seeks the removal of Verite as co-trustees of the H family trusts. The application has been adjourned on various occasions to enable 'without prejudice' negotiations to take place between the brothers but no resolution has yet been reached. A date has now been fixed for the hearing of the representation on 21st May 2008 and it is in those circumstances that J has proceeded with his application to intervene.

8

Although the representation and supporting affidavit of H give little detail of the alleged conflict of interest, H has sworn a second affidavit for the purposes of this application. In the affidavit he states that, because of the dispute between him and J in relation to the affairs of the Company (as to which he gives little detail) he is considering bringing a minority shareholder's petition (he is personally a shareholder in the Company) in the High Court in England in relation to the conduct of the affairs of the Company. He wishes the trustees of the H family trusts to consider whether they should join with him in bringing that petition. In order to progress this, he needs to discuss the position fully and confidentially with his trustees. He says that he cannot do this as long as Verite is a co-trustee because it is also trustee of the J family trusts and owes duties to the beneficiaries of those trusts.

The Letters of Wishes
9

The parties convened to the representation seeking removal of Verite as co-trustee of the H family trusts are the beneficiaries of those trusts (i.e. H's family and the minor and unborn beneficiaries) and Appleby as co-trustee. On the face of it, J is not entitled to be convened as he is not a beneficiary of those trusts; he is a stranger to them.

10

However J argues that he is the de facto settlor of these trusts and accordingly ought to be convened so that he has an opportunity of providing evidence and making submissions upon the proposed removal of Verite. He has produced an affirmation which goes into considerable detail concerning the origin of the Family trusts and the various letters of wishes which have been written over the period. It is necessary for us to summarise the effect of his evidence briefly.

11

He explained how, in the years leading up to 1990, he had built up the Company as a successful company. He owned 45% of the shares. However, in the early 1990's the Company ran into financial difficulties as a result of the recession, the collapse of BCCI and other matters. Accordingly he entered into negotiations with the Company's bankers in an attempt to secure a rescue package to save the Company from insolvent liquidation. A plan was developed whereby the banks would acquire certain shareholdings in the Company; but, he explained, they were very keen to incentivise J in order that he should remain and steer the Company out of its difficulties so that the banks could recover their money. The arrangement reached was that various options would be conferred on the family. It was, says J, entirely his decision as to who should receive the benefit of these options. The banks would have agreed with any suggestion he made because he was the key person whom they wished to retain. Following receipt of tax advice, J arranged that the options should be conferred on the twelve Family trusts which would be established in Jersey by his parents, who were not domiciled in England. After the Family trusts were established (with an initial gift of £10) the relevant settlor transferred a single share of £1 in the Company to each of the Family trusts in October 1993. As a shareholder of the Company Verite, on behalf of the various trusts, then entered into a shareholders' agreement which conferred the relevant...

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