The C Trust

JurisdictionBermuda
JudgeHargun
Judgment Date22 July 2019
Neutral Citation[2019] SC Bda 44 App
Docket NumberCIVIL JURISDICTION
CourtSupreme Court (Bermuda)
Date22 July 2019

[2019] SC (Bda) 44 App

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. 053

In the Matter of the C Trust
And in the Matter of the Trustee Act 1975
And in the Matter of Order 85 of the Rules of the Supreme Court
Appearances:

Mr Keith Robinson, Carey Olsen Bermuda Limited, for the Plaintiff

Mrs Fozeia Rana-Fahy, MJM Limited, for the 1 st and 2 nd Defendants

Mr Matthew Watson, Cox Hallett Wilkinson Limited, for the 3 rd Defendant

Mr Jonathon O'Mahony, Conyers, for the 4 th Defendant

Statutory jurisdiction of the Court appoint trustees under section 31(1) of the Trustee Act 1975; inherent jurisdiction of the Court to make an order authorising the trustees to administer the trust on the basis that the previous actions of the trustees were valid and effective actions

REASONS FOR RULING
Introduction
1

At the conclusion of the hearing of this matter on 27 June 2019 I ordered that:

  • (1) The Plaintiff (“Current Trustee”) be appointed as from the date of the Order as the sole trustee of the C Trust (“the Trust”) under section 31(1) of the Trustee Act 1975 (“1975 Act”);

  • (2) The Current Trustee may be at liberty to continue to manage the assets of the Trust on the basis that it had been validly appointed as trustee of the Trust by deed dated 1 July 2015.

2

The application was formally made by the Current Trustee and was supported by a range of adult beneficiaries as well as the guardian ad litem representing all minors, unborn and unascertained beneficiaries of the Trust. Indeed, the adult beneficiaries who appeared in relation to this application expressly sought relief from the Court in terms of paragraphs (1) and (2) above.

3

I now give my reasons for making the Order I made on 27 June 2019.

Background
4

The Trust was established by deed dated 22 June 1965 between the Settlor and the Original Trustee (“the Trust Deed”). The Trust is a discretionary trust for the benefit of a class of beneficiaries that includes the Settlor and the Settlor's brothers, then living or born at any time thereafter, subject to certain limitations in favour of the male line of descendants.

5

Pursuant to an Order dated 9 May 2019, the First and Second Defendants were appointed to represent all minors, unborn and unascertained beneficiaries of the Trust.

6

The assets owned by the Trust include controlling shares of several holding companies which in turn own a vast network of industrial trading entities in Africa, employing a very substantial workforce, and are extremely valuable.

7

By a Deed of Retirement and Appointment of New Trustees dated 29 December 1999 (“the Deed”), the Original Trustee retired and the Current Trustee was purportedly appointed in its place.

8

The power of appointing new trustees under the Trust Deed was vested in the Protectors appointed under the Trust Deed. The Trust Deed provided that a named company incorporated in the United Kingdom and another named company operated in the state of New York, United States of America, acting jointly, constituted the Protectors.

9

However, it appears that when the Current Trustee was appointed by the Deed, the appointment was made with the consent of a successor Protector. The validity of the successor Protector's own appointment is very much in doubt.

10

The Current Trustee has been recently advised by its legal advisers that it is likely its appointment was invalid, or ineffective, or void, and therefore it does not have the legal title to the assets and all the actions the Current Trustee has taken with respect to the Trust assets and all distributions that have been made in the belief that the Current Trustee was validly appointed, are likely to be invalid.

11

The same difficulty arises in respect of both subsequent purported changes of trustee. By a deed dated 9 August 2001, the Current Trustee was replaced by a trust company registered in Lichtenstein, followed by a deed dated 1 July 2015 whereby the Current Trustee was again purportedly appointed and the Lichtenstein trust company retired.

12

It is in these circumstances that the Current Trustee makes the application seeking an order that: (1) it be appointed as the sole trustee of the Trust; and (2) it may be at liberty to continue to manage the assets of the Trust on the basis that it had been validly appointed as the trustee of the Trust.

13

The present applications are supported by guardian ad litem to the First and Second Defendants. It is the considered position of the guardian ad litem that there can be no benefit to the class of beneficiaries to allowing the Trust to operate without a properly and validly appointed trustee who has the power and authority to perform the duties of trustee. In his view, the task of reconstituting the records of the Trust over the last 20 years would be an impossible task, and the expense of doing so would likely be an enormous drain on the resources of the Trust, which will also not be for the benefit of minors, unborn and unascertained beneficiaries of the Trust.

14

The Third Defendant is a beneficiary of the Trust and represents the position of 10 adult beneficiaries (including himself). In his view the Current Trustee has been involved in advising the family for many years on both the operation of trusts, as well as their management and has a very good understanding of the family, its philosophy and the way it has operated. Having carefully considered the matter, the Third Defendant believes that confirming the Current Trustee is in the best interests of the Trust. This course is to be preferred to the risk of potentially affecting the Trust through the appointment of a new trustee, which may take time to identify and get up to speed and impact the ability to address urgent issues. In light of these issues the Third Defendant requests the Court to make the Order in accordance with paragraph 1 and 2 of the Plaintiff's Amended Originating Summons.

15

The Fourth Defendant is also a beneficiary of the Trust. He says that because he has always considered the Current Trustee to be the trustee of the Trust, notwithstanding any potential technical defect in its appointment, and because he was and remains supportive of the confirmation of the Current Trustee's appointment as trustee, he asked to be joined to the proceedings. He requests “that the Court make the Order sought by the [Current Trustee] as putative trustee of the Trust”.

The application to appoint trustees
16

The statutory jurisdiction of the court to appoint trustees is to be found in section 31(1) of the 1975 Act which provides that:

“31(1) The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.”

17

In order to exercise its statutory jurisdiction to appoint trustees, the Court needs to be satisfied that it is expedient to make the proposed appointment (See Lewin on Trusts, 19 th edition at [15-005]). In principle the test for “expediency” under section 31(1) should be no different from the test of “expediency” under section 47 of the 1975 Act. In relation to section 47, the Court has previously held that the requirement of “expediency” should be construed to mean “expedient for the trust as a whole” (See GH v KL [2011] (Bda) Civ (2 December 2010), decision of Ground CJ; In the Matter of A Trust (Change of Governing Law) [2017] SC (Bda) 38 Civ (19 May 2017), and In the Matter of G Trusts [2017] SC (Bda) 98 Civ (15 November 2017), decisions of Kawaley CJ; and my own decision in In the Matter of the H Trust [2019] SC (Bda) 27 Com (30 April 2019)).

18

In this case the power of appointing new trustees of the Trust is given solely to the Protectors acting jointly. In 1997, for reasons which are not entirely clear, “ the family” assumed that it could validly appoint a sole Protector in place of the two Protectors specified in clause 6(a) of the Trust Deed. It now appears to be accepted that such an appointment is likely to be invalid. What is clear is that the mechanism for appointing new trustees under clause 6(a) can no longer be relied upon. In the circumstances, the only option open for the appointment of new trustees is an application to this Court under section 31(1) of the 1975 Act.

19

As submitted by the beneficiaries and the guardian ad litem the present position is clearly unsatisfactory. I accept the submission made by the guardian ad litem that there can be no benefit to allowing the Trust to operate without a properly and validly appointed trustee who has full power and authority to perform the duties of trustee. This is particularly so where, as here, the Trustee has an oversight responsibility over a vast network of extremely valuable trading concerns in Africa. In the circumstances, I have no hesitation in concluding that it is indeed “expedient” that the Court exercises its discretion under section 31(1) to order that the Current Trustee be appointed as the trustee of the Trust.

Inherent jurisdiction to confirm prior administration
20

The Current Trustee and the beneficiaries request the Court to make an order that the Current Trustee may be at liberty to continue to manage the assets of the Trust on the basis that it has been validly appointed as trustee of the Trust by deed dated 1 July 2015. It is submitted on behalf of the guardian ad litem, as noted above, that the task of reconstituting the records of the Trust over the last 20 years would be an impossible task, and the expense of doing so would likely be an enormous drain on the resources of the Trust. The guardian ad litem supports an order validating the actions that the Current Trustee has taken since 1 July...

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