Facts
Twelve separate Jersey law discretionary settlements had been established in 1993, the beneficiaries of each of which included B, his wife S, their sons J and H and the spouses, children and further issue of both J and H. The sole trustee of each of the trusts was Verite Trust Company Limited ("Verite") and the main asset of each of the trusts was a number of shares in the family company (the "Company"). At the time of the hearing, the trusts held between them approximately 89% of the issued share capital of the Company.
In 1999 it was decided to provide that certain of the trusts should be used for the benefit of J and his family, and the balance should be used for the benefit of H and his family. Accordingly Verite, in respect of each of the trusts, executed revocable deeds of exclusion. In the case of the E, R, O and L Trusts the effect of these deeds was to exclude J and his family from benefit. By contrast, in respect of the eight other trusts, the deeds of exclusion excluded H and his family from benefit thereunder.
A dispute subsequently arose between J and H as to the running of the Company and, against this background, in 2005 B and S exercised their powers as original settlors of the trusts to appoint co-trustees to act alongside Verite. In the case of the E, R, O and L Trusts (the "H Family Trusts") Appleby Trust (Jersey) Limited ("Appleby") was appointed to this role and in the case of the other trusts (the "J Family Trusts") Jemma Trust Company Limited was so appointed.
Unfortunately the dispute between J and H continued unresolved and reached the point where H was considering bringing a minority shareholders' petition in his own name in front of the English High Court. Were he to take such an action he would also wish the co-trustees of the H Family Trusts to join with him and, as a result, along with B and S, H brought a representation (the "Representation") to the Royal Court in 2007 seeking the removal from office of Verite as a co-trustee of the H Family Trusts on the basis that Verite's obligations to the beneficiaries of the J Family Trusts (including J himself, against whom any action in England would effectively be aimed) would inhibit it from acting wholly in the best interests of the beneficiaries of the H Family Trusts. Effectively, H was asserting that Verite would have an insurmountable conflict of interest.
As well as H, B and S as representors, the current co-trustees of the H Family Trusts (i.e. Verite and Appleby) and all of the other beneficiaries of the H Family Trusts were convened to the hearing of the Representation. Before hearing the Representation, however, the Royal Court first considered the current application made by J that, despite the fact that he was not a beneficiary of the H Family Trusts, he ought to be allowed to intervene in the hearing of the Representation.
Decision
J sought leave to intervene in the Representation on the grounds that:
- he was effectively the settlor of the H Family Trusts in so far as it was he who had arranged for shares in the Company to be settled in to the H Family Trusts;
- he had "strong views and considerable information" to put forward on the importance of keeping the family's shareholding in the Company together (i.e. in the hands of Verite along with one or the other of the co-trustees as the case might be); and
- that were he allowed to intervene he would discover more information about the potential minority shareholder's action which H was considering launching in the English courts.
The Royal Court disagreed with these arguments. It made it clear that the test for whether or not a stranger to a trust would be allowed to intervene in a representation of this type was simply whether it was necessary for a party to be convened in order properly to determine the issue before the Court. In this case, the sole issue was whether Verite should be removed from office as a co-trustee of the H Family Trusts on the basis that it had or might have a conflict of interest in relation to the proposed English proceedings. Since J was neither a beneficiary of, a co-trustee of or somebody who held any other powers in relation to the H Family Trusts the question of Verite's removal was not one on which the Court needed to hear from him.
Comment
This case clarifies the degree of involvement or interest required to allow a stranger to a trust to intervene in a representation brought either by that trust's trustee or, as in this case, its beneficiaries. Unless the convening of the stranger is necessary to the determination of the specific issue before the Court, such an intervention will not be allowed. There may well be circumstances in which professional trustees will feel it appropriate to highlight this point to any settlors or beneficiaries who are considering excluding themselves from benefit under a trust or otherwise breaking any direct relationship that they might have with the administration of that trust.
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