Trusts: Express power of variation given to Trustee; blessing of court for exercise of power of variation to vary trust to add female line to class of beneficiaries

Representation of Zedra Trust Company (Suisse) SA re C and D Trusts [2023] JRC 213

In a case where the trustee had express power to vary the trust, the Royal Court gave its blessing to the exercise of this power so as to widen the class of beneficiaries to include the settlor’s descendants in the female line, notwithstanding that this would be contrary to the non-binding wishes of the now deceased settlor. The application was supported by the adult beneficiaries. The Court was guided by the approach taken in In the Matter of the Y Trust and the Z Trust [2017] (1) JLR 266. In that case, there was no power to vary under the trust, and the Court was asked to approve under Art 47 of the Trusts (Jersey) Law 1984 on behalf of minor and unborn beneficiaries a variation agreed by the adult beneficiaries that removed a discriminatory provision which similarly ran against the tenor of modern policy. The fact that the Court was now exercising a different power and had a different role in a blessing application did not make a difference to the general approach to such issues. The Court in the present case noted that the settlor’s views reflected a different time and a different culture to that of the current beneficiaries, who supported the change, and that the continuing exclusion of the female line in this family trust could lead to disharmony among the family, which was not in the interests of the beneficiaries.

The trustees had power under two Jersey trusts to vary, add to or delete all or any of the trusts and powers and other provisions (both administrative and dispositive) of the trusts in respect of the whole of such part of the income and capital of the trust fund, and in such manner in all respects as the trustees might consider in their discretion to be for the benefit of all or any one or more exclusive of the others of the beneficiaries.

The Court was asked to bless the exercise by the trustee of this power of variation. One proposed variation was that the class of beneficiaries under the trusts should no longer be limited to the settlor’s issue in the male line, as was currently the case. The settlor’s intention had been that the class of beneficiaries of these trusts would be so limited. He was now deceased. The current beneficiaries supported the change. The trust period was also to be varied so as to be unlimited. The Court was also asked to bless the trustee’s decision to transfer the assets of one of the trusts to the other, with the consequence that the first trust would be terminated.

Held:

(1) Test for blessing of momentous decision. The test to be applied on application for the blessing of a momentous decision is a familiar one, having been helpfully summarised by the Court of Appeal in Representation of Otto Poon [2015] JCA 109 (at paragraph 14) as follows: “Where a trustee has made a momentous decision, that is a decision of real importance for the trust, and seeks the court’s approval for the decision, the legal test to be applied by the court is well established in this jurisdiction. As explained in Re S Settlement [2001] JLR N.37 the court must satisfy itself (i) first, that the trustee’s decision has been formed in good faith, (ii) second, that the decision is one which a reasonable trustee properly instructed could have reached, and (iii) third, that the decision has not been vitiated by any actual or potential conflict of interest.” The Court of Appeal further observed that the lengths to which the court must go in examining the process by which the trustee arrived at the decision depend upon the particular decision.

(2) Removal of policy-objectionable discriminatory provisions. In the present case, the trustee sought to address provisions in the trust deed which were of a discriminatory nature. There was little authority in Jersey on the approach to be taken in such cases. There was however some helpful guidance in In the Matter of the Y Trust and the Z Trust [2017] (1) JLR 266, in which the Royal Court considered the variation of trusts to enable the children of unmarried or same-sex parents to be added to the beneficial class, in circumstances where they had been expressly excluded by the settlor. Although that was an application under Article 47 of the Trusts (Jersey) Law 1984, there being no power of variation in the trusts, the Court’s observations in relation to a proposed exercise of the present Court’s discretion were of assistance. The Court in that case said that balanced against the desirability of enabling the wishes of settlors to be resolutely complied with were competing considerations; the first was that policy follows the law – if (in the case of a variation to be approved by the Court on behalf of minors etc) the Court is to have exclusive regard to the interests of the settlor or testator, it would be in effect having regard to the views of a person whose interests are not contemplated by Article 47(1) as relevant to the interests which had to be considered; the second was that other competing public policy considerations not only pointed against but outweighed the discrimination that was contemplated in that case, reference being made to the Human Rights (Jersey) Law 2000 and the Discrimination (Jersey) Law 2013.

(3) Decision.

(a) In the Y Trust and Z Trust case the Court was part of the decision-making process – in that there was no power to vary under the trust and it was approving pursuant to Article 47(1) on behalf of minor, unborn and unascertained beneficiaries a variation agreed by the adult beneficiaries. In the present case the Court was only called upon to bless the proposed exercise of an express power of variation by the trustees. This difference did not affect the approach to be taken.

(b) The Court blessed the proposed variations to be made by the trustees. As regards the removal of the male-line restriction, the Court summarised its conclusion as follows: “22. We accept, as does the Representor, that their decision is contrary to the views expressed by the Settlor in his letter of wishes. However, whilst it is appropriate to have regard to the Settlor’s views, it is equally appropriate to take into account the views of the current beneficiaries. The views expressed by the Settlor would appear to be reflective of the culture and values of a different community in a different country in the 1970s, and it is reasonable for the trustees to conclude that they are not reflective of the culture, values and lifestyle of the current living beneficiaries (all of whom live in Country Y) as demonstrated by their support for the Trustee’s decisions. A dynastic trust is likely to have to provide for a number of generations and, as the philosophy of the family changes, it is appropriate for consideration to be given as to whether it reflects that philosophy and, if it does not, whether any changes are appropriate. In the case of these Trusts, we can see that to continue to exclude the female line could well lead to family disharmony. “

(c) The Court also blessed the trustee’s decision to make the trusts of potentially unlimited duration extension (noting that at the time the trusts were established trusts of unlimited duration were not permitted by Jersey law); and the Court approved the transfer of assets from one trust to the other and the termination of the former.

Bridgeford A, WDJL 29 January – 4 February 2024