Guardian Ltd v Bermuda Trust Company Ltd

• Jurisdiction: Bermuda
• Judgment Date: 01 December 2009
• Date: 01 December 2009
• Docket Number: Civil Jurisdiction 2009 No. 303
• Court: Supreme Court (Bermuda)

In The Supreme Court of Bermuda

Civil Jurisdiction 2009 No. 303

BETWEEN:

GUARDIAN LIMITED

Plaintiff

and

BERMUDA TRUST COMPANY LIMITED

Defendant

Mr P Smith for the Plaintiff

Mr K Robinson for the Defendant

The following cases were referred to in the judgment:

Chartbrook Limited v Persimmon Homes Ltd [2009] UKHL 38

Re Williams Settlement [1929] 2 Ch 361

Bullmore v Wynter (1882) 22 ChD 619

In re Morrieson (1888) 40 ChD 30

In re Slaughter [1945] 1 Ch 355

Greenwold v Greenwold [2008] EWHC 820

In re Trusts of X Charity [2003] 1 WLR 2751

Abstract:

Application for directions in relation to a trust - Whether the widow of a settlor is an excluded person - Whether "spouse" includes a widow

RULING of KAWALEY, J

Introductory

1. On November 18, 2009, I heard the Plaintiff Protector's application for directions in relation to a trust ("the Trust") which the Defendant Trustee supported. Because the application essentially required the Court to give a legal ruling on a point of law of general importance to the development of Bermuda trust law, I indicated that I would give reasons later. The hearing was concluded.

2. Counsel sought a further hearing later in the day at which they addressed me on the question of whether the Judgment should be published and, if so, on an anonymous basis, to protect the privacy of the beneficiaries. I indicated that I would embody my decision on this supplementary application in the present judgment, after indicating my provisional view that publication was appropriate but anonymity might equally be required.

3. I set out below my reasons for deciding (a) that the widow of the settlor of the Trust was not an excluded beneficiary by virtue of a clause excluding a "spouse", and (b) that publication of this Judgment is appropriate although disclosing the identity of the Trust and its beneficiaries is not required.

The relevant provisions of the Trust Deed and the construction question

4. Clause 1(h) of the Trust provides in material part as follows:

"'Excluded Persons' means:-

(i) the Protector for the time being;

(ii) any Settlor;

(iii) the spouses of persons who are Excluded Persons by virtue of paragraphs (1) and (2)"

5. Clause 36 of the Deed provides as follows:

"This Settlement is irrevocable and notwithstanding anything to the contrary herein contained or implied the Trust Fund and the income thereof shall

henceforth be possessed and enjoyed to the entire exclusion of any Excluded Persons and of any benefit to any such person by contract or otherwise. No discretion or power conferred on the Trustees or on any other person by this Settlement or by law shall be capable of being exercised in such manner as shall cause any part of the Trust Fund or the income thereof to be paid or lent to or applied for the benefit of any Excluded Person whether directly or indirectly or in any circumstances whatever."

6. The question of construction which was placed before the Court was whether an individual who was at one time an Excluded Person by virtue of being the "spouse" of a Settlor was excluded for all time, even after she ceased to be a "spouse" and had become a "widow". This question was relevant to the ability of the Protector to add the widow to the list of beneficiaries and, consequentially, impacted upon the ability of the Trustee to make an appointment to her.

Applicable rules of construction and trust drafting practice

7. It appeared to be uncontroversial that trust deeds fell to be interpreted in accordance with the rules applicable to the construction of contracts. Accordingly, the subjective intentions of the draftsman were inadmissible. Mr. Robinson cited in this regard the following dictum of Lord Hoffman in Chartbrook Limited v Persimmon Homes Limited[2009] UKHL 38:

"14. There is no dispute that the principles on which a contract (or any other instrument or utterance) should be interpreted are those summarised by the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society[1998] 1 WLR 896, 912-913. They are well known and need not be repeated. It is agreed that the question is what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean."

8. In reliance on this principle, the Court was invited to take into account the fact that the draftsman deposed as to the drafting practice which existed at the time when the Trust was settled. In particular, reliance was placed on a practitioner's text, Kessler, 'Drafting Trusts and Will Trusts: a Modern Approach', 1st edition (Sweet & Maxwell: London, 1992) paragraph 4-068. This text in material part provides as follows:

"It is generally necessary to exclude the settlor and his spouse from all possible benefit under their settlement. If this is not done, then trust income and capital gains may be taxed at the settlor's rates, and the settlor may be subject to inheritance tax on the settled property as if he had never given it awayThe 'spouse' of the settlor means the person for the time being married to the settlor. Thus it is permissible to benefit the widow of the settlor [Footnote] It is desirable to include the widow of the settlor as a matter of...