Analysis
Introduction
W, who died some years ago, established several settlements (referred to generally as ‘the General Family Trusts’), either directly or by trustees to whom he had provided funds. The value of the General Family Trusts was very substantial indeed. W had been married several times and had a large family. A representation was issued in respect of two of the General Family Trusts: the Y Trust and the Z Trust. The trustee companies of both of the trusts were amongst the respondents.
It had been W’s wish that after his death, in the administration of the General Family Trusts, the trustees and protectors should consult as appropriate with a group of beneficiaries over the age of 21 years that had were known as the Family Council. The Representors in the proceedings were the members of the Family Council and included W’s widow, each of his children and some of his grandchildren.
The Y Trust
The Y Trust was established by a settlement governed by the proper law of Jersey and made by W. Following W’s death, the trust fund and income were to be held on discretionary trusts for W’s descendants (as defined), his widow and specified charitable organisations. There was no power to add beneficiaries. The provision of the settlement that was relevant to the representation concerned the definitions of ‘child’, ‘issue’ and ‘descendant’, which were limited to legitimate children and restricted categories of legitimated and adopted children and children the result of artificial insemination. The restrictions excluded children born into homosexual relationships, certain illegitimate children and children adopted when they were more than two years of age, reflecting W’s views about family.
The trustees of the Y Trust could exercise their powers to make charitable giving only by selecting from a list of charitable bodies. All of the other General Family Trusts allowed charitable giving to be channelled through a company limited by guarantee and referred to as the New Foundation, which was a family foundation that had been formed following a change of requirements by the Charity Commissioners of England and Wales about the presence of a majority of UK resident persons on the trustee board of a registered private charity. All of the members of the board of the New Foundation were principal beneficiaries of the General Family Trusts.
The Z Trust
The Z Trust was also a settlement governed by the law of Jersey under which the trustees held the trust fund on discretionary trusts for the benefit of the beneficiaries for the time being in existence. There was a limited power to add to the class of beneficiaries, subject to the written consent of the protector. A provision of the settlement that was relevant to the representation concerned the definition of ‘issue’ and ‘descendant’, which contained restrictions similar to those in the Y Trust.
An amending deed made in the year 2000 removed the power of the trustees to pay or apply capital to or for the benefit of beneficiaries in their absolute discretion. According to the evidence, this was the result of a mistake.
The representation
As a result of the definitions relating to ‘children’, ‘descendants’ and ‘issue’ in the General Family Trusts, a number of family members (‘the excluded family members’), who had been brought up and treated by W as his grandchildren, were originally excluded from benefit under the General Family Trusts but, for settlements other than the Y Trust and the Z Trust, the anomaly had been put right by appointments in 2014 and 2016. After W’s death, the Family Council considered the matter for almost three years, with the assistance of advice from a psychoanalyst, with a view to keeping the family together and securing family harmony. Following these considerations, it became the decision of them all that, despite the departure from W’s wishes, his definitions of issue and descendants should be modernised; leaving the present arrangements in place would simply leave a basis for unhappiness and dissension. The first purpose of the representation was to seek an order varying the definition of ‘issue’ and ‘descendants’ in the Y Trust and the Z Trust; this would bring the trust provisions into alignment with the other General Family Trusts and enable the excluded family members to become beneficiaries.
The second purpose of the representation was to remedy the mistake made in 2000 to remove the power of the trustees of the Z Trust to pay or apply capital. The court was asked to put it right, not by way of rectification but as a variation application.
The third purpose of the representation was for the addition of the New Foundation as a specific object of the Y Trust. The evidence showed that the existing position was potentially inconvenient and inefficient and added an additional layer of administrative complexity to what was otherwise a streamlined process.
The existing sui juris beneficiaries of the settlements agreed to the applications.
Public policy
As it was apparent to the court that it was likely that the representation was presented by a united family and would not be contested, alongside appointments of representative parties an amicus curiae was appointed to assist the court in two matters: determining how far W’s intentions should be taken into account in deciding the representation and the public policy issues relating to the contemporary validity of provisions in trust deeds, of the kind in the Y Trust and Z Trust or those contemplated by the representation.
Held
Under Art 47 of the Trusts (Jersey) Law 1984, as amended, the court had jurisdiction, on behalf of minor and unborn and other unascertained beneficiaries, to approve an arrangement that varied the terms of a trust or enlarged the powers of the trustee. It should not do so unless it concluded that it was for the benefit of the minor and unborn and other unascertained beneficiaries and that it was a fit and proper case for the exercise of the jurisdiction.
In reaching its conclusions, the court had regard to the interests only of the existing and potential beneficiaries and disregarded those persons who would be excluded under the existing provisions. Having regard to the significant wealth in the two settlements, the court considered that the possibility of financial dilution of benefit as a result of additions to the class of beneficiaries was not relevant to its decision. It praised the united approach of the wider family in seeking family harmony in making the applications and accepted the submission that leaving the present arrangements in place would be likely in the future to cause unhappiness and dissension in the family.
- (a) The court approved the first application for the adjustment of the definition of ‘issue’ and ‘descendants’, holding that it was in the interests of the minor and unborn beneficiaries of the Y Trust and the Z Trust.
- (b) The application to vary the Z Trust to reinstate the capital powers of the trustee of the Z Trust was also approved. Although there was no apparent benefit to the minor, unborn and other unascertained beneficiaries, the addition of the power would provide flexibility in the management of the trust, which would itself be a benefit.
- (c) The court approved the third application for the addition of the New Foundation as a beneficiary of the Y Trust. The New Foundation existed and was already making charitable donations; the board was comprised of family members, enabling them to be closely connected with the charitable giving, which was a benefit and increased efficiency. It was therefore in the interests of the minor, unborn and unascertained beneficiaries that approval be given.
Public Policy
The representation raised the issue of the court having regard to the desirability of practitioners being able to reassure putative settlors that their wishes would be resolutely enforced by Jersey courts. Such reassurance would encourage the formation of Jersey trusts. The court expressed the view, however, that it was wrong in principle to have regard to the intentions of a settlor who is not a beneficiary, save to the extent that they affect the interests of beneficiaries. Furthermore, although in the past the law of Jersey had been against upholding the validity of gifts in favour of persons such as concubines or persons born out of wedlock, since the adoption of modern legislation such as the Human Rights (Jersey) Law 2000, the court’s policy was one of tolerance towards and acceptance of the rights of others, acting within the law, to live their lives as they saw fit. This engaged the principle of non-discrimination, which had primacy over any other policy considerations.
JUDGMENT THE BAILIFF: [1] At a hearing of the representors’ representation in private on 11 April 2017, the court made orders in the exercise of its discretion approving on behalf of the minor unborn and unascertained beneficiaries a variation of the Y Trust and the Z Trust in accordance with the terms set out in …Continue reading "A & ors v K & ors [2019] WTLR 335"