Re Abc Trusts

• Jurisdiction: Bermuda
• Judgment Date: 10 September 2014
• Date: 10 September 2014
• Court: Court of Appeal (Bermuda)

[2014] Bda LR 117

In The Supreme Court of Bermuda

Civil Jurisdiction

In the matter of ABC Trusts

Mr K Robinson for the Trustee

Ms L Charleson for the 1^st Defendant

Mr J Elkinson for the 2^nd Defendant

Mr T Marshall for the 5^th Defendant

The following cases were referred to in the judgment:

Marley v Mutual Security Merchant Bank and Trust CoUNK [1991] 3 All ER 198

Public Trustee v Cooper [2001] WTLR 901

Trustee 1 et al v The Attorney General et alBDLR [2014] Bda LR 56

Re Thyssen-Bornemisza Continuity TrustBDLR [2002] Bda LR 8

Abacus (CI) Ltd v Al SabahUNK (2001) 3 ITELR 467

Bartlett v Barclay's Trust Co (No 1)ELR [1980] 1 Ch 515

In re WhitelyELR (1886) 33 ChD 347

Application for further directions — Exercise of Trustees' discretion — Surrender to Court — Trustee's power to negotiate on behalf of a beneficiary — Tax

RULING of Kawaley CJ

Introductory

1. On August 18, 2014, I approved the decision of the Trustees, which was supported by all beneficiaries before the Court save the 5th Defendant, to proceed to conclusion negotiations commenced some years ago with the onshore tax authorities about certain personal “wealth” taxes which were potentially due from the Trusts and/or the beneficiaries.

2. The contested application by the Trustees for further directions in relation to broader approval sought for a momentous decision raised legal questions which are likely to be relevant in future cases. I set out below the legal reasoning which formed the basis for my said decision. I have explained my assessment of the facts in a separate confidential judgment.

Findings: legal merits of the Trustees' application

Court's function in approving proposed exercise of Trustees' discretion

3. Mr Marshall relied upon dicta from the Judicial Committee of the Privy Council's decision in Marley v Mutual Security Merchant Bank and Trust CoUNK[1991] 3 All ER 198 in support of the submission that (a) the Trustees' application involved a surrender of their discretion to the Court, (b) the Court should accordingly be put in possession of all material relevant to the exercise of that discretion, and (c) the Court's function is solely to determine what ought to be done in the best interests of the estate.

4. The first two limbs of that submission were controversial, although a text authority relied upon by the Trustees' counsel suggested that whether or not a surrender of discretion was involved, the Court had to be fully informed of all relevant considerations to a comparable extent: Lewin on Trusts, 18^th ed (Sweet & Maxwell: London, 2008) at para 29–299. The 5th Defendant's counsel referred the Court to the following statement in that leading text:

‘The court's function where there is no surrender of discretion is a limited one. It is concerned to see that the proposed exercise of the trustee's powers is lawful and within the power and that is does not infringe the trustees' duty to act as ordinary, reasonable and prudent trustees might act, ignoring irrelevant, improper or irrational factors; but it requires only to be satisfied that the trustees can properly form the view that the proposed transaction is for the benefit of beneficiaries or the trust estate and that they have in fact formed that view…The court, however, acts with caution, because the result of giving approval is that the beneficiaries will be unable thereafter to complain that the exercise is a breach of trust or even to set it aside as flawed … If the court is left in doubt on the evidence as to the propriety of the trustees' proposal it will withhold its approval (though, doing so will not be the same thing as prohibiting the exercise proposed). Hence it seems that, as is true when they surrender their discretion, they must put before the court all relevant considerations supported by evidence. In our view that will include a disclosure of their reasons, though otherwise they are not obliged to make such disclosure, since the reasons will necessarily be material to the court's assessment of the proposed exercise.’

5. Although I accepted the above statement of principles, I did not accept that Marley v Mutual Security Merchant Bank and Trust CoUNK[1991] 3 All ER 198 compelled this Court to find that in seeking the directions which the Trustees sought, they were surrendering their discretion to the Court. The Judicial Committee in that case, considering whether a contested proposed sale of part of the estate of the late Bob Marley should be approved, were primarily concerned with whether...