Representation of LL: application by a trustee for approval of a momentous decision

Representation of LL: application by a trustee for approval of a momentous decision

Representation of LL [2010]JRC222 is an example of the Royal Court’s power to approve a momentous decision by a trustee and concerns the payment from a trust of monies representing an award by the English High Court in divorce proceedings to the former wife of a beneficiary of the trust.

Facts

The representation was made to the Royal Court by the trustee of a Jersey trust, established as a retirement benefits scheme (the “Scheme”), to provide benefits by an employer to its employee (the “Member”). At the time of the representation, the trust fund had a value of £25,000,000.

The background to the representation concerned divorce proceedings in the Family Division of the High Court of Justice in England in which the Member was engaged with his now former wife. The divorce proceedings resulted in an order of the High Court awarding the Member’s former wife a sizeable lump sum payment of £6,015,115 and interest thereon. The Member requested that the trustee exercise its power under the Scheme rules to transfer monies representing the lump sum to his former wife from the trust.

Whilst the trustee had power under the Scheme rules to make payments “…to or for the benefit of the Member’s spouse or ex-spouse in connection with any divorce or separation proceedings relating to the Member…” it nevertheless sought the blessing of the Royal Court to the proposed payment to the Member’s former wife as being a momentous decision for which it is appropriate to seek the approval of the Court.

The Law

As set out in Re The S Settlement [2001]JRC154, the questions which the Court must consider when blessing a momentous decision are as follows:

• Is the Court satisfied that the trustee has formed its opinion or reached its decision in good faith that the circumstances of the case render it desirable and proper to make the payment in question?
• Is the Court satisfied that the opinion formed or decision taken is one at which a reasonable trustee properly instructed could have arrived?
• Is the Court satisfied that the opinion arrived at or the decision taken has not been vitiated by any actual or potential conflict of interest which might have affected its decision?

Decision

The Court was satisfied that these questions could be answered in the affirmative and concluded that the payment of the lump sum from the trust to the Member’s former wife was a proper and reasonable exercise of discretion by the trustee.

Comment

This representation is an example of an application by the trustee of a Jersey trust, pursuant to article 51 of the Trusts (Jersey) Law 1984, raising the issue as to whether a proposed course of action is a proper exercise of the trustee’s powers, in circumstances where there is no real doubt as to the scope of the trustee’s powers and where the trustee has decided how it intends to exercise such powers, but because the decision to do so is momentous, the trustee wishes to obtain the Court’s blessing to the proposed course of action in advance of exercising its powers in such a way. It is particularly interesting as it involves a payment by a trustee to the former wife of a beneficiary of a Jersey trust in connection with English divorce proceedings.

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