In the Matter the XYZ Trusts Ruling

• Jurisdiction: Bermuda
• Judge: Shade Subair Williams J
• Judgment Date: 16 February 2022
• Court: Supreme Court (Bermuda)
• Docket Number: CIVIL JURISDICTION

In the Matter the XYZ Trusts Ruling

[2022] SC (Bda) 10 Civ

CIVIL JURISDICTION

Consolidated actions 2012: 32 and 348

In The Supreme Court of Bermuda

Discretionary Trusts — Application for approval of Trustees' implementation of a Proposed Restructuring — Objections to Trustees' proposals on grounds of irrationality — Question as to whether the Proposed Restructuring constitutes new trust settlements — Rule against Perpetuities

Plaintiff Trustees Mr Robert Ham QC (Wilberforce Chambers) of Counsel and Mr Keith Robinson ( Carey Olsen (Bermuda) Limited)

First Family Defendants (First Branch) (Adult Beneficiaries: (4 ^th, 5 ^th, 7 ^th, 8 ^th and10 ^th Defendants) Mr. Ben Adamson and Ms. Judith Roche ( Conyers Dill & Pearman Limited)

First Family Defendants (First Branch) (Adult Beneficiary: 6 ^th Defendant) Mr. Scott Pearman and Ms. Bailey Munroe ( Conyers Dill & Pearman Limited)

First Family Defendants (First Branch) (Minor Beneficiary: 9 ^th Defendant through her Guardian Ad Litem and Unborn Issue 1 of the 4 ^th Defendant's Widower) Mr. Jeffrey Elkinson and Ms. Britt Smith ( Conyers Dill & Pearman Limited)

First Family Defendants (Second Branch) (Adult Beneficiaries: 11 ^th, 12 ^th, 13 ^th, 14 ^th, 16 ^th, 17 ^th, 19 ^th, 20 ^th and 24 ^th Defendants) Mr. Dakis Steven Hagen QC (Serle Court) of Counsel and Mr. Matthew Watson ( Cox Hallett Wilkinson Limited)

First Family Defendants (Second Branch) (Minor Beneficiaries: 15 ^th, 18 ^th, 22 ^nd, 23 ^rd, 25 ^th, 29 ^th and 31 ^st Defendants and Unborn Issue of 11 ^th Defendant, all by their Guardian Ad Litem) Mr. Craig Rothwell and Mr. Warren Bank ( Cox Hallett Wilkinson Limited)

Second Family Defendants (Third Branch) (Adult Beneficiaries: 1 ^st, 3 ^rd and 26 ^th Defendants) Mr. Stephen Moverley Smith QC (XXIV Old Buildings) of Counsel and Ms. Fozeia Rana-Fahy ( MJM Limited)

Second Family Defendants (Third Branch) (Minor Beneficiary: 28 ^th Defendant represented by 3 ^rd Defendant as his Guardian Ad Litem and his Unborn Issue, future spouses, widows and widowers and those of the 28 ^th Defendant) Mr. Delroy Duncan QC ( Trott & Duncan Limited)

Second Family Defendants (Third Branch) (Adult Beneficiary: 2 ^nd Defendant) Mr. Michael Furness QC (Wilberforce Chambers) of Counsel and Ms. Katie Tornari ( Marshall Diel & Meyers Limited)

Second Family Defendants (Third Branch) (Minor Beneficiaries: 21 ^st, 27 ^th and 30 ^th Defendants represented by their Guardian Ad Litem) and the 2 ^nd Defendant's Unborn Issue and their future spouses, widows and widowers Mr. Thomas Seymour of Counsel and Mr. Jai Pachai ( Wakefield Quin Limited) as Guardian Ad Litem

RULING of Shade Subair Williams J

Shade Subair Williams J

Introduction

1 The Trustees have come before this Court on a summons application for the Court's sanction of blessing of a proposal to restructure 23 trust settlements (“the Proposed Restructuring” / “the Restructuring Proposal” / “Restructuring”) to which three distinguishable branches of a family are beneficially interested.

2 The hearing of the application was contentious on account of objections made by one limb of the third family branch. That is to say that out of the 31 Defendant beneficiaries in these proceedings, only the 2 ^nd Defendant and her three minor children, the 21 ^st, the 27 ^th and the 30 ^th Defendants dissented to the Proposed Restructuring. At the close of the hearing, having heard all of the parties on the oral and written submissions made by a fortress of top chancery and commercial lawyers from near and far, I advised that I would reserve my decision, which I now provide with the reasons outlined below.

The Family Structure

3 As is the tale of a number of other family dynasties who have appeared in this jurisdiction of Court, substantial wealth was generated by a patriarch (the “Patriarch”) who established a booming business. The Patriarch had two successive marriages, under which two distinct sides of the family (collectively the “Family”) were created. I shall refer to those two sides as the “First Family” and the “Second Family”.

4 The Proposed Restructuring effectively divides the children of the two marriages into three branches by way of asset allocation to three sub-funds (the “Sub-Funds”). The First Family for the purpose of the restructuring proposal is to be divided into two branches. The Second Family constitutes the third branch.

The First Branch of the Family (The First Family)

5 The 4 ^th Defendant is the living matriarch of the first branch of the family (the “First Family Matriarch 2”). The First Family Matriarch has two adult daughters. The younger daughter is the 10 ^th Defendant. The elder daughter, the 5 ^th Defendant, is married to the 6 ^th Defendant, with whom they have three children (the 7 ^th, 8 ^th and 9 ^th Defendants). The 9 ^th Defendant is the

only child of minor age. These are the family members to whom the Proposed Restructuring refers to as the first branch

The Second Branch of the Family (The First Family)

6 The second branch of the restructuring proposal applies to the part of the First Family which is headed by the First Family Matriarch's sister in law, the 12 ^th Defendant. She and her late husband (the First Family Matriarch's deceased brother) had four children, three of whom are married and have their own children. Those children total seven in number, all of whom are minors.

The Third Branch of the Family (The Second Family)

7 The matriarch of the Second Family is the 1 ^st Defendant (the “Second Family Matriarch”) 3. She has an adult son and daughter, both of whom have their own children totaling five in number. The son of the Second Family Matriarch is the 3 ^rd Defendant. He is married to the 26 ^th Defendant and together they have a young child who is the 28 ^th Defendant and another child more newly born. The Second Family Matriarch's daughter is the 2 ^nd Defendant. The 2 ^nd Defendant is the principal objector to the Proposed Restructuring. Her three children, through their Guardian Ad Litem, also oppose the Restructuring.

The Trust Settlements and the Proposed Restructuring

8 Over a 24 year period, between April 1965 and April 1989, there were 23 trust settlements (collectively the “settlements” or the “structure”) established by deed to which the Trustees' plan for a restructuring applies. The assets of those settlements fall into two categories, namely core assets (the “Core Assets”) and (the “Non-Core Assets”).

The Core Assets:

9 The Core Assets comprise shareholdings in limited liability companies which are referred to as the “Core Companies”. One of the Core Companies is “Company M”. Company M has the majority shareholding in two other Core Companies, namely “Company D” and “F Holdings”. Company D wholly owns the principal operating company (“the principal operating company”). F Holdings has 100% ownership of what may be termed “F Estates”, the principal property holding company within the settlements.

The Non-Core Assets:

10 The Non-Core Assets comprise four residential properties in England and seven investment properties in Ireland. Additionally, the Non-Core Assets refer to various investment portfolios and loan receivables.

The Proposed Trust Structure upon Implementation of Phases 1 and 2 of the Restructuring:

11 The Trustees propose to liquidate a significant number of the settlements for the assets to be transferred to the CMM 2060 Settlement for allocation to the Sub-Funds, which total three in number. Each of the Sub-Funds, namely the ‘D Fund’, the ‘B Fund’ and the ‘S Fund’ is to be assigned its respective branch of the Family. This is intended to enable the separate branches of the Family to be somewhat financially independent from the other. Each Sub-Fund will own 33.3% of Company M which in turn will have 100% ownership of Company D and F Holdings. Company D will continue to have direct ownership of all the shares in the principal operating company and indirect ownership of other subsidiaries in the group of companies. F Holdings will also continue to wholly own F Estates and its subsidiaries.

The Development of the Restructuring Proposal:

12 The plan for restructuring was kick-started by years of informal discussions between the First and Second Family and their legal representatives. By November 2009, the discussions took the form of a mediation followed by another mediation in April 2010. On 6 May 2010 a non-binding document described “Heads of Terms” recording the accord of the family members was signed and later supplemented on 1 July 2013.

13 The Heads of Terms provided for an agreement that the assets of the settlements would be divided into thirds for allocation to the three branches of the Family, so long as none of the real property in Ireland, constituting the Non-Core Assets, would be vested in any members of the Second Family. Amongst various other items of accord, a “hotchpot” type adjustment was agreed in that previous distributions to the Family would be taken into account in determining the allocation of assets going forward. These hotchpot clauses provided [9.1–9.2]:

• “ 9.1 Prior to the allocation of assets described at paragraph 3 above, the total value of all distributions from 1 January 2000 to date shall be added back to the total value of Assets for the purposes of such asset allocation.

• 9.2 Following such allocation of assets, distributions shall be deducted from the respective funds for [each of the three branches of the Family] … and… [the 1 ^st Defendant's] Fund, on the basis of the individuals who originally received such distribution.”

14 The Trustees were not signatories to the Heads of Terms nor were they privy to the preparatory discussions. Their active involvement in any plan for the restructuring of the settlements began at a stage when it was determined that a Proposed Asset Allocation would be prepared. The joint efforts of the Trustees and an independent Council of Protectors culminated in the...