Analysis
Two settlements known as the Manny and Brigitta Davidson settlements were established by Manny and Brigitta Davidson in 1967 upon broad discretionary trusts, with UK resident trustees. Manny and Brigitta had two children, Maxine and Gerald, born in 1958 and 1961 respectively. The settlements were in identical terms. There was an 80 year perpetuity period, and the appointed day was defined as three days before its expire. The specified class of discretionary beneficiaries included the settlors’ children and remoter issue, their spouses and other family members. Their combined value was around £500m.
By deeds of appointment dated 2 February 1976, the trustees of each settlement appointed the trust fund upon accumulation and maintenance trusts for Maxine and Gerald contingently on attaining the age of 25, with one third of the fund to be held for Maxine and two thirds for Gerald. Subject to that, the shares of Maxine and Gerald were held upon trust for them contingently upon attaining the age of 50. Clause 4 of each appointment contained a power of advancement empowering the trustees to transfer the whole or any part of the vested contingent or presumptive share in the trust fund of either who had attained the age of 25, and to pay or apply to same for their respective benefit.
The settlements were exported in 1989 and Monaco based trustees were appointed. In 1994, the trustees of each settlement exercised the powers of advancement, declaring fresh trusts of their still contingent shares. The effect was to defer their contingent entitlements to capital until the appointed day, with a life interest in the income of the share, subject to an overriding power of appointment vested in the trustees.
In 2003, these powers of appointment were exercised, reinstating the beneficial trusts of the 1994 deeds in substantially similar terms, but with a role for a protector who was granted various fiduciary powers.
On 30 July 2004, the settlors appointed the third defendant, Promenade Trustee Company Limited as the first protector of each settlement. In February 2013, promenade appointed the second defendant to act jointly as protector with Promenade, followed by the further appointment of the first defendant in September 2013.
In February 2014 Gerald and Maxine brought proceedings seeking a declaration that the 2003 appointments were void, or should be set aside, and alternatively, a declaration that the appointments as protectors of the first and or second defendants were void and should be set aside, and in the further alternative, an order under the inherent jurisdiction of the court removing the first and second defendants as protectors. The first defendant resigned on 19 November 2013. The trial was listed for April 2016 with a time estimate of 12 days.
In 24 April 2015, the second defendant filed a witness statement contesting his removal from office, but suggesting that if the court did see fit to remove him, it might wish to consider what other changes should be made to the trusteeship and/or the protectorate in order to protect the beneficiaries of the settlements. The trustees contended that the second defendant had not pleaded any positive case that the trustees should be removed, that had he done so, that they would have submitted evidence in response.
On 21 July 2015, the second defendant made an application to re-amend his pleadings. The proposed amendments contended that the current administration of the trusts was unsatisfactory, that the trustees should be removed, that the third defendant be removed as protector. They featured a counterclaim which repeated the re-amended defence and sought corresponding relief.
Held:
- 1) The proposed amendments had to be characterised as very late. There was no realistic way in which the trial date could have been held, even if permission to amend had been granted at the conclusion of the hearing on 15 December 2015. They raised significant new issues about the present, past and future administration of the trusts including in particular allegations of poor judgment and lack of independence on the part of the trustees.
- 2) The allegations pleaded in the draft re-amended defence were in crucial respects scanty and unparticularised. Much fuller particularisation would be needed before the central part of the proposed re-amendments could begin to satisfy the stringent criteria laid down by the Court of Appeal in Swain-Mason at [73].
- 3) There was no reason of why the second defendant had left it so late to raise the issues. There was no good reason why his attack on the trustee’s management could not have been mounted at a much earlier stage if he had considered it relevant to his defence.
- 4) To allow the amendment would impose wholly unreasonable burdens on parties who should be left free to complete their preparations for trial in an orderly fashion.
- 5) The second defendant did not have standing to bring the relevant claims and the relevant questions were unsuitable determination in the forthcoming trial and should be dealt with once his status as a protector had been confirmed. The proposed counterclaim offered no reasonable prospects of success, and permission to bring it should be refused.
- 6) The very late nature of the amendments, and the lack of any convincing material to support them, combined to produce the clear conclusion that permission to make them should also be refused.
7) There was no justification for having a trial of the issues raised by the second defendant’s re-amended defence, together with all the expensive and time-consuming preparation that this would entail the removal of his co-protector.
Continue reading "Davidson v Seelig [2016] EWHC 549 (Ch)"