Butterfield Trust (Bermuda) Ltd et Al v Matthew Watson

• Jurisdiction: Bermuda
• Judge: Hargun CJ
• Judgment Date: 29 November 2022
• Neutral Citation: [2022] SC Bda 92 Civ
• Court: Supreme Court (Bermuda)
• Docket Number: CIVIL JURISDICTION

In the Matter of the AB Settlement and in the Matter of Section 9 of the Trust (Special Provisions) Act 1989

And in the Matter of Section 47 of the Trustee Act 1975

And in the Matter of Section 4 of the Perpetuities and Accumulations Act 2009

And in the Matter of Order 85 of the Rules of the Supreme Court

Between:

Butterfield Trust (Bermuda) Limited Et Al

Plaintiffs

and

Matthew Watson

(Representative of such of the beneficiaries as are minors, unborn or unascertained)

Defendant

BM 2022 SC 88

[2022] SC (Bda) 92 Civ.

Before:

The Hon. Chief Justice Hargun

CIVIL JURISDICTION

2022 No. 258

In The Supreme Court of Bermuda

Whether change of the governing law of a trust from English law to Bermuda law and an order under section 4 of the Perpetuities and Accumulations Act 2009 disapplying the perpetuities rule to the trust and extending the duration of the trust, results in a resettlement of the trust

Representation:

David Brownbill KC and Keith Robinson of Carey Olsen Bermuda Limited for the Plaintiffs

Nicholas Le Poidevin KC and David Kessaram of Cox Hallett Wilkinson Limited for the Defendant

Hargun CJ

Introduction

1 The Plaintiffs are trustees of a Settlement (“Trust” or “Settlement”), established under English law. At the conclusion of the hearing on 1 November 2022 the Court granted the following relief:

• (1) A declaration that (i) a change of governing law of the Trust from English law to Bermuda law; (ii) the Court making the orders described below under section 4 of the Perpetuities and Accumulations Act 2009 and under section 47 of the Trustee Act 1975; and (iii) the Plaintiffs exercising the powers of variation under section 47 will not constitute a resettlement of the Trust or otherwise effect to create a new settlement; and will not cause section 18A to D of the Children Act 1998 as inserted by the Children Amendment Act 2002 to apply to the Trust.

• (2) An Order under section 4 of the Perpetuities and Accumulations Act 2009 (i) disapplying the perpetuities rule to the Trust and extending the duration of the Trust to August 2127 and (ii) making consequential variations to the terms of the Trust.

• (3) An Order under section 47 of the Trustee Act, authorising the Plaintiffs to execute a deed of variation in the form scheduled to the Order varying the terms of the Trust.

• (4) An Order under Order 15, rule 13(1) the Defendant, Matthew Watson, to represent in these proceedings the interests of all persons who are or may at any time in the future become interested under the Trust as are minors, unborn or unascertained.

2 This judgment sets out briefly the reasons for granting the relief at the conclusion of the hearing on 1 November 2022.

3 The terms and background to the Trust are set out in the first affidavit of John Richmond dated 21 October 2022 and helpfully summarised in the written submissions of the Plaintiffs. The Trust establishes a discretionary trust with dispositive powers, exercisable during an 80 year “Trust Period”, for the benefit of the “Specified Class”, coupled with a power to accumulate income over a 21 year period (which has expired).

4 The application made to the Court is the result of a detailed strategy review undertaken by the trustees with their various advisers. The trustees concluded that it would be advantageous to the beneficiaries for (i) the life of the Trust to be extended substantially beyond its present termination date in 2047; (ii) the class of beneficiaries to be narrowed so as to remove therefrom those who are unlikely ever to benefit under the Trust and the spouses of future generations of beneficiaries; and (iii) to vary the Trust so as to modernise its terms, enable provision to be made for charity, and increase flexibility in relation to the beneficiaries.

5 The extension to the life of the Trust necessitates a change of governing law to that of Bermuda and the application of section 4 of the Trust of the Perpetuities and Accumulations Act 2009. The modernisation and other changes contained in the Deed of Variation requires authority from the Court and an application under section 47 of the Trustee Act 1975.

Declaration that there is no resettlement

6 The decision of the House of Lords in Roome v Edwards [1982] AC 279 remains the leading authority on the question whether a new or separate settlement has been created. In that case Lord Wilberforce considered at 292H-293G the indicia which may help to show whether a settlement, or a settlement separate from another settlement, exists:

“There are a number of obvious indicia which may help to show whether a settlement, or a settlement separate from another settlement, exists. One might expect to find separate and defined property; separate trusts; and separate trustees. One might also expect to find a separate disposition bringing the separate settlement into existence. These indicia may be helpful, but they are not decisive. For example, a single disposition, e.g., a will with a single set of trustees, may create what are clearly separate settlements, relating to different properties, in favour of different beneficiaries, and conversely separate trusts may arise in what is clearly a single settlement, e.g. when the settled property is divided into shares. There are so many possible combinations of fact that even where these indicia or some of them are present, the answer may be doubtful, and may depend upon an appreciation of them as a whole.

Since “settlement” and “trusts” are legal terms, which are also used by businessmen or laymen in a business or practical sense, I think that the question whether a particular set of facts amounts to a settlement should be approached by asking what a person, with knowledge of the legal context of the word under established doctrine and applying this knowledge in a practical and common-sense manner to the facts under examination, would conclude. To take two fairly typical cases. Many settlements contain powers to appoint apart or a proportion of the trust property to beneficiaries: some may also confer power to appoint separate trustees of the property so appointed, or such power may be conferred by law: see Trustee Act 1925, section 37. It is established doctrine that the trusts declared by a document exercising a special power of appointment are to be read into the original settlement: see Muir (or Williams) v. Muir [1943] A.C. 468. If such a power is exercised, whether or not separate trustees are appointed, I do not think that it would be natural for such a person as I have presupposed to say that a separate settlement had been created: still less so if it were found that provisions of the original settlement continued to apply to the appointed fund, or that the appointed fund were liable, in certain events, to fall back into the rest of the settled property. On the other hand, there may be a power to appoint and appropriate a part or portion of the trust property to beneficiaries and to settle it for their benefit. If such a power is exercised, the natural conclusion might be that a separate settlement was created, all the more so if a complete new set of trusts were declared as to the appropriated property, and if it could be said that the trusts of the original settlement ceased to apply to it. There can be many variations on these cases each of which will have to be judged on its facts.” (emphasis added)

“If the original settlement survives and continues to apply to the appointed part, it must follow that no separate settlement has been created.” (at 294D emphasis added).

“It seems in fact clear how the parties to the settlement of 1944 and the 1955 appointment viewed the matter. In the first place, although the wife had divested herself of her life interest, it remained in existence for the purpose of enabling the trustees, during her life, to accumulate the income…So the intention throughout seems clearly to have been to treat the 1955 fund as being held upon the trusts of the 1944 settlement as added to and varied by the 1955 appointment.” (at 294G and 295C)

7 Lord Wilberforce's judgment in Roome v Edwards requires the Court to approach the question of whether a particular set of facts amounts to a settlement (i) by asking what a person, with knowledge of the legal context of the word under established doctrine and applying this knowledge in a practical and common-sense manner to the facts under examination, would conclude; (ii) the intention of the trustees, as objectively ascertained, is relevant and of assistance in determining whether or not a resettlement has taken place; (iii) there is likely to be a single settlement where, following an appointment, the provisions of the original settlement continue to apply to the appointed fund; (iv) the existence of separate and defined property, separate trust, separate trustees, and separate disposition establishing the trusts, may be indicative of a separate settlement; (iv) no single factor is decisive and it is necessary to consider all the facts of a particular case.

8 In Bond v Pickford [1983] STC 517 (CA) Slade LJ considered at 522 h/j that a separate settlement will exist if there is a complete new set of trusts such that the trusts of the original settlement ceased to apply to it.

9 In the present case, following the proposed variation, the principal trusts of the main settlement remain fully operative, and those trusts of the main settlement remain fundamentally the same — being held on discretionary trusts and for essentially the same class of beneficiaries. The administrative provisions are to be enhanced and provision made for a protector. However, none of these provisions change the fundamental nature. All the instruments (the settled advances, the proposed Deed of Change of Governing Law and the proposed Deed of Variation) make clear the trustees' intention that they do not intend to create a separate settlement. I accept...