TRUSTS; BLESSING APPLICATION; OBJECTING BENEFICIARY ALLEGING BREACH OF TRUST; WHETHER SEPARATE ORDER OF JUSTICE REQUIRED
Representation of A Trustees Limited re the ABC Trust [2024] JRC 221
Commissioner Thompson considered the circumstances in which a beneficiary’s challenge to the blessing of a decision by the trustee can be made by way of response to the trustee’s Representation and where the beneficiary’s makes hostile claims against the trustee or the trust such that a separate Order of Justice is required. Precious cases did not show any clear line. Proceeding by way of response to the Representation appeared to be allowed as long as the basis of the challenge was clear, i.e. a trustee knows the basis upon which their decision is being challenged. It also did not matter that the challenge was hostile. Challenges appeared to be allowed to be made where the decision was said to be one which no reasonable trustee could reach or irrational or perverse. What lay at the heart of these overlapping formulations was the contention that the trustee’s decision should not be approved. The leaned Commissioner concluded that the contentions made and remedies sought in the present case did not cross the line to the sort of case where an Order of Justice was required.
The question was raised as to what is the correct procedural approach to be taken where a trustee seeks by Representation a blessing of a momentous decision (the 2022 Decision), and a beneficiary wishes to contend that the decision taken and earlier conduct (the 2019 Appointment) said to be related to the decision amounts to, broadly speaking, (i) a fraud on a power, and (ii) were decisions that no reasonable trustee could have made. At the heart of this issue was whether those beneficiaries who wished to assert a breach of trust by a trustee should make their allegations by way of Order of Justice to be heard before the determination of the blessing application, or whether those beneficiaries wishing to challenge the blessing should be permitted to raise allegations of breach of trust in the context of the blessing application. Objecting to the blessing of the more recent decision the First Respondent beneficiary was directed to file and did file Particulars of Claim, running to 34 pages alleging breach of trust, and these were also adopted by the Second to Fourth Respondent beneficiaries.
It was argued for the First Respondent that the Representation procedure is very flexible in Jersey (Representation of G [2010] JRC 083 at paragraph 29(i)) and that the authorities indicated that there was no clear line between hostile litigation involving breach of trust or attacking past decision making and representation proceedings. It was argued that the Court had to review the validity of the 2019 Appointment because, if it was void or a fraud on a power or irrational, then the 2022 Decision was made on a false premise. Secondly, many of the considerations the Trustee took into account in 2022 were the same considerations it took into account in 2019 and therefore the same irrelevant considerations were key to both decisions as set out in the Particulars of Claim; and thirdly that the 2019 Appointment and the 2022 Decision now sought to be blessed were part of one and the same continuing decision-making process. To therefore require an Order of Justice and stay the Representation was an entirely artificial process.
Held:
(1) When Order of Justice is required.
(a) The Trustee was seeking a blessing of its 2022 Decision, an application falling within category 2 of Public Trustee v Cooper. The response by the First to Fourth Respondents was a challenge to the 2019 Appointment, i.e. a challenge to an action that the Trustees had actually taken. The First to Fourth Respondents then linked the 2019 Appointment and the 2022 Decision to contend that the 2022 Decision should not be blessed.
(b) As to whether a separate Order of Justice was required, the learned Commissioner referred in particular to Perczynski v Perczynski [2005] JRC 084, Representation of G [2010] JLR Note 27, In the matter of the Y Trust [2011] JRC 135, Representation of the C Trust [2012] JRC 086B, Representation of Jasmine Trustees Limited [2015] JRC 196, Representation of BOS Trustee Limited [2023] JRC 107, Representation of A re The O Trust and The J Trust [2019] JRC 220A and Representation of Geneva Trust Company SA [2023] JRC 109.
(c) These authorities did not show any clear line as to when proceedings involving a challenge to a decision of a trustee has to be brought by way of Order of Justice and when they may be brought by way of a response to a Representation.
(d) The authorities seemed to allow the latter approach as long as the basis of the challenge was clear, i.e. a trustee knows the basis upon which their decision is being challenged. It also did not seem to matter that the challenge was hostile. Challenges also appear to be allowed to be made where the decision under challenge is one that is said that no reasonable trustee could have reached, or one it is said that no rational trustee could have reached. A challenge can also be made to a decision of a trustee where a Court blessing is sought on the basis that it is perverse. What is at the heart of the slightly different but overlapping formulations, is the contention that the trustee’s decision should not be approved. This was different from claims which a beneficiary wishes to bring in a different capacity, as occurred in Representation of BOS Trustee Limited supra and possibly where fraud is alleged, or some other attack on the validity of a trust.
(2) Position in the present case.
(a) The present claims amounted to no more than the First to Fourth Respondents opposing the decision in respect of which the trustee sought approval. They were not a challenge to the validity of the trust as a whole or to any settlement of assets into the trust, on the basis that those assets belong to a third party and are not trust assets.
(b) The Particulars of Claim therefore did not cross the line to the sort of cases where an Order of Justice was required. The present case fell within the category of cases where the Court as a matter of discretion has allowed an application to a blessing of a trustee decision to be opposed.
(c) The present case did go further than previous decisions in that the challenge made extended to the 2019 Appointment and not just the 2022 Decision. However, it was at least arguable that there was a link between the 2019 Appointment and the 2022 Decision. The extent of that link could only be determined at trial. The fact that the Particulars of Claim sought an account of the administration of the trust, if the 2019 Appointment were either void or set aside, did not cross the line to the sort of case where an Order of Justice was required. An account does not provide the remedy; it is the first step in a process which enables any deficit in the trust fund to be ascertained: Lewin on Trusts 41.006.
(d) The Commissioner also dealt with who should be required to respond to the Particulars of Claim (in this case on the facts, only the trustee), discovery, prescription and exclusion, service out of the jurisdiction and security for costs.
(e) The conclusions reached were also consistent with the overriding objective to be found in Royal Court Rule 1/6 which applied to proceedings brought by Representation, just as much as it applies to any other form of proceedings including proceedings brought by way of Order of Justice. The approach taken was the most proportionate approach, notwithstanding there may be some complexities. It was also an approach that dealt with the case expeditiously and fairly and allowed the Court to decide promptly the issues.
Disposal. The First, and Second to Fourth Respondents were accordingly permitted to file the Particulars of Claim filed by their respective advocates in response to the Trustee’s blessing application. Further directions were to be issued on handing down for the filing of further pleadings, together with hearing any application by any party as to whether it wishes to file a pleading in light of the conclusions reached in this judgment.