Re The a Trusts
| Jurisdiction | Bermuda |
| Judge | Kawaley, C.J. |
| Judgment Date | 17 May 2018 |
| Neutral Citation | [2018] SC Bda 42 Civ |
| Docket Number | CIVIL JURISDICTION 2017: 317 |
| Court | Supreme Court (Bermuda) |
| Date | 17 May 2018 |
[2018] SC (Bda) 42 Civ
In The Supreme Court of Bermuda
Kawaley, C.J.
CIVIL JURISDICTION 2017: 317
Mr Nicholas Le Poidevin QC of counsel and Mr Alex Potts QC, Kennedys Chudleigh Ltd., for the Plaintiffs/Trustees
Mr Frank Hinks QC of counsel and Mr Keith Robinson, Carey Olsen, for the 1 st Defendant
Mr Robert Miles QC of counsel and Ms Nicole Tovey, Taylor's, for the 2 nd Defendant and the 8 th-10 th Defendants
Mr Nikki Singla QC of counsel and Mr Justin Williams, Williams, for the 3 rd-5 th Defendants
Mr Jonathan Hilliard QC of counsel and Mr Steven White, Appleby (Bermuda) Limited, for the 6 th Defendant
Mr Simon Taube QC of counsel and Ms Lilla Zuill, Zuill & Co (Harneys), for the 7 th Defendant
Mr Tom Leech QC of counsel and Mr Paul Harshaw, Canterbury Law Limited, for the 11 th–13 th Defendants
Trustees' application for approval of momentous decision — nature and scope of Court's approval jurisdiction — approach to expert evidence-relevance of alleged conflicts of interest to approval application
(in Camera) 1
By an Originating Summons issued on September 13, 2017 and amended on February 16, 2018, the Trustees sought approval for their decision to permit a company they controlled to make a substantial investment.
On May 10, 2018, I decided to grant the approval sought. These are the legal principles which informed that decision.
The governing principles were essentially common ground. There was to my mind no serious doubt that the Trustees possessed the power to make the relevant decisions which, involving substantial sums, were clearly momentous. The application was clearly a Category (2) case as explained in Public Trustee -v- Cooper [2001] 1 WTLR 901 (Hart J). Any objections to the existence of the power were in my judgment only comprehensible as objections to the appropriateness of exercising the power in the factual circumstances of the present case.
In Re ABC Trusts [2014] Bda LR 117, this Court observed:
“7…the Bermudian Courts have entertained ‘category two’ applications for many years. A prominent instance, relied upon by the Trustees' counsel, is Norma Wade-Miller's judgment approving the compromise of contentious trust litigation in Re Thyssen-Bornemisza Continuity Trust [2002] Bda LR 8. In that case, Wade-Miller J accepted the invitation of the trustees' counsel to approach the application for approval by reference to the following four questions:
i. ‘do the Trustees have the power to enter into the proposed compromise?’;
ii. ‘is the Court satisfied that the Trustees have genuinely formed the view that the compromise is in the interest of the …Trust and its beneficiaries?’;
iii. ‘is the Court satisfied that this is a view at which a reasonable body of trustees could properly have arrived at?’;
iv. ‘does the Court consider that any of the individual Trustees have any actual or potential conflict of interests and, if so, does it consider
that this conflict of interests prevents the Court from approving the unanimous decision of the Trustees to compromise the litigation?’”
Mr Le Poidevin QC for the Trustees submitted that issue was only seriously joined by beneficiaries opposing the application on the third of these questions. It followed that, it not being for the Court to form its own view of the merits of the decisions for which approval was sought, those opposing the application had to satisfy the Court that the impugned decisions were irrational. This was setting a very high bar indeed. Mr Singla QC for D3-D5 submitted that to the previously recognised four questions which arise on this sort of application the following “additional” question should be added:
“Whether it can be said that in reaching its decision to implement the proposal the trustee has taken into account irrelevant, improper or irrational factors or whether it has reached a decision that no reasonable body of trustees properly directing themselves could have reached.”
This formulation was supported by the dicta of Scott -V C (as he then was) in Edge -v- Pension Ombudsman [1998] Ch 512 at 534. Mr Hilliard QC for the supporting D6 agreed that the Court had to decide whether or not the Trustees had reached a decision which no reasonable trustee would have reached. However in his Skeleton Argument, addressing the closely connected question of how the Court should approach the evidence, he submitted:
“…the ultimate question is whether the Trustees have asked themselves the right questions, and taken necessary professional advice.”
Properly analysed, there is no real distinction between the third question approved by this Court in Re ABC Trusts and the “additional” question proposed by Mr Singla QC. The latter is simply an expanded articulation of the former. The question “is the Court satisfied that this is a view at which a reasonable body of trustees could properly have arrived at?” necessarily requires regard to whether a proper decision-making process occurred. Reasonable trustees would not take into account irrelevant, improper or irrational factors, and would only be informed by considerations which are relevant to their decision. This more fully articulated test was adopted by Blackburne J in Merchant Navy Ratings Pension Fund Trustees Ltd. -v- Chambers & Ors [2001] PLR 137 at [7]. The latter “threshold test” for approving a category 2 decision was approved by Asplin J in Pollock -v- Reed [2015] EWHC 3685 (at paragraph 129) in a passage to which Mr Singla QC referred:
“It is whether in reaching its decision the trustee has taken into account irrelevant, improper or irrational factors, or whether it has reached a decision that no reasonable body of trustees properly directing themselves could have reached.”
Accordingly I accepted the submission of Mr Singla QC that this Court was required, as part of the process of deciding whether or not the decisions would have been reached by a reasonable body of trustees, to have regard to whether or not the Trustees had taken into account irrelevant, improper or irrational factors.
For completeness, I should record that I summarily rejected what Mr Le Poidevin QC aptly described as the “extraordinary” submission that any approval granted to the Trustees by this Court should not preclude any subsequent breach of trust claim by the beneficiaries.
Central to the disposition of the Amended Originating Summons was the legal question of how the Court should approach the expert evidence. The Trustees relied on the approach articulated by Vos LJ in Cotton and another -v- Earl of Cardigan and others [2014] EWCA Civ 1312, for one overarching principle and a second subsidiary point. The broader point of principle was the straightforward proposition that unless the Court had deliberately embarked upon a fact-finding exercise involving oral evidence and cross-examination, an...
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