TRUST; APPLICATION UNDER ARTICLES 47 AND 51 OF THE TRUSTS (JERSEY) LAW 1984; WHETHER BENEFIT WHEN TRUST TO BE TERMINATED
Representation of R & H Trust Co (Jersey) Limited re Tomato Trust [2025] JRC 082
The Court considered applications by a trustee under Article 47 of the Trusts (Jersey) Law 1984 for the approval on behalf of minor etc beneficiaries of a variation removing an exclusion of a person as a potential beneficiary, and under Article 51 for the appointment of the trust assets to that person, effectively terminating the trust. The Court noted that the question whether a variation in this context is for the benefit of the persons whom the Court is called upon to approve the variation has been considered before and is fact sensitive. On the facts the application was granted.
The applicant trustee applied for orders under Articles 47 and 51 of the Trusts (Jersey) Law 1984 in its capacity as trustee of two Jersey law discretionary trusts. Under both trusts, F and his wife, M, the spouses of their children and others were irrevocably excluded from beneficial classes. The trustee’s power to add beneficiaries was expressly limited so that no person who has been excluded irrevocably as a beneficiary may be added as a beneficiary during the period of exclusion. The trustee’s power to vary the trusts was similarly limited. Both trusts provided for charitable beneficiaries in default of the existence of the persons referred to.
By its Representation, the trustee sought orders (i) approving on behalf of the unborn beneficiaries a variation of the terms of the trusts pursuant to Article 47 such that the reference to F being irrevocably excluded from benefit from the class of beneficiaries of the Trusts is removed; and (ii) approving, pursuant to Article 51 of the 1984 Law, the trustee’s in principle decision to: (a) appoint F as a beneficiary of each of the trusts; and (b) distribute the assets of the trusts to F with a view to the trusts being terminated thereafter. The application was driven by anticipated changes to the UK taxation regime which worked to the significant disadvantage of F’s adult children L and N, who were discretionary beneficiaries of the trusts, the potential tax liability dwarfing their salaries as young professionals.
Held:
(1) Jurisdiction and approach to application under Article 47.
(a) The Court’s jurisdiction under Article 47 was engaged for the purpose of considering approval of the variation on behalf of the unborn beneficiaries of the trusts and the Court “shall not” approve the variation unless it is to the “benefit” of these individuals.
(b) The issue, which the Court has had to grapple with before, is whether it can be said to be for the benefit of persons who may benefit in due course under a particular trust for that trust to be wound up and distributed to another person.
(c) The Court has jurisdiction to make the order sought in this case and has made similar orders in circumstances which bear some similarity to the circumstances of this application: Accuro Trust (Switzerland) SA re The Colling and Palmyra Trust [2023] JRC 215; Re DDD Settlements [2012] (1) JLR (Note 8), Re DDD Settlements [2011] JRC 243; Re Paicolex Trust Company [2023] JRC 127.
(d) Every case is, however, different and these applications are fact sensitive.
(e) When considering the question of “benefit”, the Court in DDD rejected the assertion that it would constitute a “benefit” if the outcome of the application would be that the settlor would no longer be treated differently from other members of the family, or that there was a moral obligation which the adult beneficiaries owed to her to enable her to be brought back into the class of beneficiaries. The Court in DDD accepted, however, the argument that there were tax benefits which might be available to the family at large if she were to be permitted to become a beneficiary again. This could amount to a benefit.
(f) As to the approach to applications to vary trusts under Article 47, the Court in IQEQ (Jersey) Limited re B Trust [2024] JRC 210said at paragraph 27: “In our judgment, the Court has jurisdiction to approve a variation of trusts under Article 47 if it is satisfied on the balance of probabilities that it is for the benefit of the beneficiaries. If not so satisfied, there is no jurisdiction to do so. If it has jurisdiction, it does not follow that the proposed variation will be approved. The Court still retains a discretion which it may or may not exercise.”
(2) Approach to application under Article 51.
(a) As to the Trustee’s in-principle decision and the application for approval under Article 51 of the Law, in view of the fact that the Court is being asked to approve the distribution of the entire trust fund to an individual who, until recently, was not a beneficiary this was a momentous decision, which is a pre-condition for the Court exercising its jurisdiction to approve the decision of a trustee.
(b) Having regard to the test set out in Re S Settlement 2001/154, the Court needs to determine that the in-principle decisions: (i) were made in good faith and are decisions, subject to the variation of the Trusts being granted, that the Trustee is empowered to make; (ii) fall within the band of reasonable trustee decisions, taking into account all relevant considerations; and (iii) are not vitiated by any actual or potential conflict of interest.
(c) As has previously been identified by the Royal Court, it is difficult to see how a proposal which is found to be for the benefit of the beneficiaries under Article 47 would not fall within the band of reasonable decisions for the purpose of approving the same.
(3) Disposal.
(a) The word “benefit” has traditionally been given a wide meaning by the Royal Court. In view of the circumstances of this case, the impending UK tax changes and their likely immediate and longer-term effect upon the Trusts, and F’s short and longer term plans for the assets currently held within the Trusts, the Court was in no doubt that to approve the proposed variation is to the benefit of the beneficiaries on whose behalf the Court sanctions this variation.
(b) Further, there was no doubt that the trustee’s in-principle decision was within its powers, is reasonable and is not vitiated by any actual or potential conflict of interest.
Accordingly, both applications were granted.
Bridgeford A. WDJL 16-22 June 2025