Re the R Trust

• Jurisdiction: Bermuda
• Judgment Date: 03 June 2019
• Date: 03 June 2019
• Docket Number: Civil Jurisdiction 2018 Nos 321 and 382
• Court: Supreme Court (Bermuda)

[2019] Bda LR 39

In The Supreme Court of Bermuda

Civil Jurisdiction 2018 Nos 321 and 382

In the Matter of the R Trust

Mr D Kessaram for the Wife

Mr B Adamson for the Trustees

Mr A Martin for the Daughter

The following cases were referred to in the judgment:

Public Trustee v Cooper [2001] WTLR 901

Re the A Trusts [2018] Bda LR 53

Cotton v Earl of Cardigan [2014] EWCA Civ 1312

Pitt v Holt [2013] 2 AC 108

X v A [2000] 1 All ER 490

Public Trustee v Cooper application seeking approval of momentous decision — Relevance of wishes of Settlor — Whether trustees bound to give reasons for not following wishes of Settlor — Test of reasonableness

JUDGMENT of Hargun CJ

Introduction

1. These proceedings were commenced by Originating Summons filed by the wife (“the Wife”) of the late AA (“the Settlor”), dated 28 September 2018. The proceedings named as Defendants: RFS, the Trustee of the R Trust (“the Trustee” and “the Trust” respectively), and the daughter of the Settlor (“the Daughter”).

2. On 19 November 2018, the Trustee commenced separate proceedings by filing its separate Originating Summons and naming the Wife and the Daughter as Defendants. Both proceedings were consolidated by an Order of this court dated 29 November 2018.

3. By Originating Summons dated 28 September 2018, the Wife seeks a declaration from the Court that:

• i. Clauses 6 and 7 of the Last Will and Testament of the Settlor dated 19 April 2011 (“the Will”), represent the last wishes of the Settlor with respect to certain real property situated in the US (“the Property”); or alternatively, with respect to all the shares of the Bermuda company (“the Company”), which on the date of the Will owned and still owns the Property and which shares were at the date of the Will and are still owned and held by the Trustee of the Trust;

• ii. That on the true construction of Clauses 6 and 7 of the Will, it was the Settlor's wish that the Property or, alternatively, the shares of the Company be given to the Wife outright and that the Wife leave the Property to the Daughter in her last will and testament; and

• iii. A declaration that the Trustee is bound to take into account, in carrying out its duties as Trustee, the wishes of the Settlor as expressed in Clauses 6 and 7 of the Will.

4. By Originating Summons dated 19 November 2018, the Trustee seeks the approval and or sanction of the Court relating to decision by the Trustee to appoint the Property (or the shares in the Company holding the property) to a new trust domiciled in the United States on terms that provide that the Property is held for the Wife for her lifetime and then for the Daughter and the Daughter's issue. In essence, this is an application by the Trustee for the blessing of the Court of a momentous decision in accordance with the guidance given in Public Trustee v Cooper[2001] WTLR 901.

5. The application made by the Wife is supported by her initial affidavit dated 14 September 2018 and the application made by the Trustee is supported by the affidavit of Nadine Francis, a director of the Trustee Company, dated 5 November 2018. Following the direction order dated 29 November 2018, further evidence has been filed in the form of the First Affidavit of the Daughter dated 20 December 2018, Second Affidavit of the Wife dated 11 January 2019, and Second Affidavit of Nadine Francis dated 31 January 2019.

Factual Background

6. The factual background to the consolidated applications is taken from the First Affidavit of Nadine Francis.

7. The relevant Trust Deed is dated 29 December 1995. The beneficiaries of the Trust were originally the Daughter, the Daughter's issue, the University of A and “any other charity”. On 12 February 1999, the Settlor was added as a beneficiary and, on 12 December 2007, the Wife was added as a beneficiary for lifetime and, on 30 April 2009, she was added as a full beneficiary. The current beneficiaries of the Trust are now:

• i. The Daughter and her issue. The Daughter is the Settlor's only natural child, born during his first marriage. The Daughter has three small children;

• ii. The Wife, who is the Settlor's third wife and has four children from a previous marriage. The Wife and the Settlor married in 2004;

• iii. A University. The Settlor had a close relationship with the University and was a major benefactor to the University; and

• iv. Any other charity.

8. The Trust's assets came directly or indirectly from the Settlor, now deceased. The Settlor died suddenly in 2013.

9. The Trustee considers and has always considered that the Trust to be a family trust for the benefit of the Settlor's wife and his children. The Settlor made a generous provision for A University through other trusts and endowments. For this reason, the Trustee has never made appointments to the University (or to any other charities) from the Trust and does not currently intend to.

10. The Trust owns shares in a number of companies, which in turn own various portfolio investments (worth approximately $3 million in total) and a valuable and large property in the USA. The Settlor felt an emotional attachment to the Property, which was purchased in 1982. The Daughter spent time there as a child. The Wife also spent time there. The Property is important to the family.

11. On 28 October 2008, the Settlor provided the Trust with a Letter of Wishes which states:

“The Trust gives you wide discretionary powers over capital and income, including the power to distribute either capital or income within a very long period amongst the specified class of beneficiaries.

While I am aware that these discretions are under your absolute and unfettered control, you may find it helpful if I express in this letter my considered view as to how I would like you to exercise them. In view of recent changes in my circumstances, I now revise my request as follows:

With regard to [the Property] (held by the Trust through the Company) it is my expressed desire that:

During my lifetime I would wish you to treat me … as primary beneficiary, entitled the use and occupation of [the Property];

Should my wife … survive me then after my death, I would wish [the Wife] to have sole use and occupation of [the Property];

After [the Wife's] death, I would wish my daughter … to be solely entitled to [the Property], to be utilized both as to capital and income as she desires.”

While the 2008 Letter of Wishes expresses the Settlor's wishes with respect to E, and does not specifically refer to the fact that the Trust in fact owns the Company rather than E directly, the Trustee has never placed any weight on this distinction.

12. On 19 April 2011, the Settlor executed his Will. The Will refers to the Property at clauses 6 and 7;

i. Clause 6 states:

“I give [the Wife] free of any taxes or duties [the Property]…

In the event the [Property] is at the time of my death in the name of [the Company], then I give and request that all shares in the Company are to be owned by my wife. It is my wish that the [Property] should not be subdivided during my wife's lifetime and that when my wife dies the property should pass to my daughter…”

ii. Clause 7 states:

“I request that [my wife] have a Will that bequests [the Property]…to [my daughter] after both my wife and I are dead.”

13. It appears to be common ground that the Will is drafted on the assumption that the Settlor owned or would own the Property (directly or indirectly) at the time of his death. The Settlor did not however at the date of his death own the Property or the shares in the Company which owned the Property. The Property continues to be an asset of the Trust and it falls upon the Trustee to appoint this asset amongst the beneficiaries of the Trust.

14. In coming to its decision in relation to the appointment of the Property, the Trustee engaged in correspondence with the Wife and the Daughter and invited their views as to the distribution of the Property.

15. In his letter of 11 February 2016, Mr Andrew Stone of Kozusko Harris Duncan, US attorneys acting on behalf of the Daughter, set out certain tax restructuring proposals which took into account the interests of the individual beneficiaries of the Trust, all of whom are US citizens.

16. The Wife's Bermuda attorneys, Cox Hallett Wilkinson Limited (“CHW”), responded to the letter from Mr Stone by their letter of 7 May 2018 and took the following position on behalf of the Wife in relation to the Property:

• i. The Letter of Wishes was followed approximately three years afterwards by the Will. The Will contains the last expression of the Settlor's wishes with respect to the Property before he died. The Will “supersedes” the Letter of Wishes.

• ii. The Wife disagrees that the Letter of Wishes and the Will are “not in conflict” with respect to the Property. Whereas the Letter of Wishes only expresses the wish that the Wife had the use and occupation of the Property after the Settlor's death with the Daughter becoming solely entitled after the Wife's death. The Will expresses the wish that the Property be appointed to the Wife outright. This is a clear conflict.

• iii. The Will contains a wish that the Wife leave the Property to the Daughter in her will. This is expressed as a “request” made to the Wife and not to the Trustee. The Trustee could have no say in what the Wife decides to do with the Property. As far as the Trustee is concerned, the Settlor's wish is that the Wife should have the Property and the decision as to whether the Property passes to the Daughter eventually was to be the Wife's and not the Trustee's.

17. The Trustee's Bermuda attorneys, Conyers, responded to CHW by the letter of 8 June 2018 and advised that the Trustee was considering a number of important issues in relation to the Trust and in particular, whether to appoint out some or most of the assets to the beneficiaries and whether to migrate the Trust to the US. The letter advised that it was the Trustee's intention to...