Jersey Unreported Judgments

Trust.

[2024]JRC187

Royal Court

(Samedi)

15 September 2024

Before     :

A. R. Binnington, Commissioner, and Jurats Blampied and Ramsden

 

IN THE MATTER OF THE REPRESENTATION OF K TRUSTEES LIMITED

AND IN THE MATTER OF THE G TRUST

Advocate M. P. Renouf for the Representor

Advocate C. Hall for the First Respondent.

Advocate N. M. C. Santos-Costa and Advocate L. Calder for the Second to Fourth Respondents

judgment

in private

the commissioner:

1.        On 15 May 2023, we made certain orders in relation to a Representation seeking directions and Beddoe relief made by the Representor, ("K Limited") or ("the Trustees").  The following are the detailed reasons for our decision.

2.        K Limited is the current Trustee of the ("G Trust") (the "Trust"), a Jersey law trust settled by the First Respondent, ("B") and her late husband ("H") on 3 June 2015.  B is the sole living beneficiary of the Trust having now survived the other named beneficiary, H.  By a Representation dated 27 July 2021 (and amended on 21 December 2022), B commenced hostile proceedings in which she attacked the validity of a settlement of assets onto the Trust (the "Proceedings"). It is in relation to the Proceedings that K Limited sought the Court's direction, including the ordering of Beddoe relief.

3.        The original trustee of the Trust was H's niece, the Second Respondent, ("C").  On 10 January 2020, K Limited was added as a supplementary trustee and on 17 March 2021 C resigned as trustee, leaving K Limited in its current role.

4.        Paragraph 8.1 of the Trust Instrument is in the following terms:

"The Trustees shall, following the death of each of the Settlors, have power at any time or times during the Trust Period to add as Beneficiaries or Contingent Beneficiaries such person or class of persons whether or not ascertained (not being Excluded Persons) as they in their absolute discretion determine and any such addition shall be by instrument revocable or irrevocable signed by the Trustees and shall:

8.1.1 name or describe the person or class of persons (including any charity of (sic) charities) to be added; and

8.1.2 specify the date or the event (not being in either case earlier than the date of the instrument but during the Trust Period) from which such person or class of persons shall be added."

5.        Clause 10, which relates to Contingent Beneficiaries provides that:

"10.1 The person or class of persons named in part 4 of the Schedule shall each be a Contingent Beneficiary.

10.2 Upon the death of each of the Beneficiaries, each Contingent Beneficiary shall, for all purposes of this instrument, be deemed to be a Beneficiary and shall therefore immediately become a discretionary beneficiary of the Settlement."

6.        Schedule 4 of the Trust Instrument named H's three nieces, the Second to Fourth Respondents, namely C, ("D"), and ("E") (together, the "Contingent Beneficiaries") as the Contingent Beneficiaries. The Trustees interpret these provisions as meaning that the Contingent Beneficiaries are only capable of benefiting upon the death of the survivor of the two named Beneficiaries.

7.        The Trust's assets comprised, as at 31 December 2021, the following:

(a)      6 out of 9 shares in a Jersey company named ("Company A") settled by B;

(b)      3 out of 9 shares in the Company settled by H;

(c)      Loans of £3,074,678 contributed by H and B, owed by the Company to the Trust; and

(d)      the Company owned as at 31 December 2021:

(i)            cash and investment assets (the "Ravenscroft Portfolio") valued at £3,582,422, mostly settled by H into the Company; and

(ii)           a property known as Property 1, valued in the 31 December 2021 accounts at £4.25 million, plus £1.6million fixtures and fittings, but pursuant to revaluation on 13 October 2022 revalued at £3.45 million.

(e)     In substance it could be said that in 1999 B largely contributed Property 1 and H largely contributed the cash and investments, which both of them lived in / off for in excess of twenty years.

8.        By her Proceedings, B now challenges the transfer into trust of her shares in the Company.  She alleges, inter alia, that she operated under the undue influence and / or misrepresentation of H when she executed the transfer of those shares.  The relief that she seeks in the Proceedings includes a declaration that the Trust is invalid or unenforceable in respect of the shares in Company A settled by B or, in the alternative, that K Limited as Trustee of the Trust be authorised and directed to take such steps as it considers necessary and desirable to cause the property, Property 1, to be distributed to B ( Property 1, being owned by the Company, and in which she currently resides). Accordingly, the Trustees are faced by a claim by an existing beneficiary of the Trust to set aside the transfer into the Trust of an asset representing a substantial part of the Trust's assets.

9.        Ordinarily one might expect the remaining beneficiaries to defend the claim, with the Trustees remaining neutral.  However, the Contingent Beneficiaries are not current beneficiaries of the Trust, albeit they have a contingent interest which is dependent on the death of a woman who is currently aged ninety-one.  B entirely dependent on the Trust for financial support (and this includes funding the Proceedings) and were the Trustees to cease funding her then her claim would be stifled.

10.     In summary, the Trustees sought the following substantive orders:

(a)      Directions, in respect of the Proceedings, as to whether:

(i)            the Contingent Beneficiaries' costs can and should be funded out of the Trust's assets;

(ii)           B should be continued to be funded by the Trust;

(iii)          if any such costs are to be funded, (i) on what basis; and (ii) when from; and

(iv)          whether any such costs should be subject to any final order the Court might make in the Proceedings;

(b)      Directions as to whether the Trustees should be directed to defend the Proceedings, if so to what stage, and if not, whether to adopt a neutral stance.

11.     When the Representation first came before the Court on 17 February 2023, the Court ordered that the hearing proceed in private. We saw no reason to depart from this and accordingly the hearing of this application also proceeded in private.

12.     As is usual in applications of this type, the Trustees filed separate bundles in relation to the hearing, one bundle containing those documents which could be viewed by all parties, and a separate "confidential" bundle containing those documents which must remain confidential from the First Respondent. In terms of the hearing itself, we proceeded by way of an initial plenary session in which all parties could be heard and then a subsequent confidential session limited to the Representor and the Second to Fourth Respondents, given that their submissions might assist in determining the application (for example whether they intended to defend, either with or without costs). We were further requested by the Representator to order that the judgment issued in this application is not published, or is not published until the proceedings are disposed of, or is redacted in such manner that the merits of the proceedings are not disclosed.

The law

13.     The Court's jurisdiction is engaged under Article 51 of the Trusts (Jersey) Law 1984 ("the 1984 Law") which enables a trustee to apply to the Court and to receive directions.

14.     In relation to decisions as to whether or not to defend litigation (commonly referred to as Beddoe- type relief), the circumstances in which the Court will exercise the jurisdiction conferred upon it by Article 51 were summarised in the decision of Birt, Deputy Bailiff (as he then was) In re S Settlement [2001] JLR Note 37, following Public Trustee v Cooper English Chancery Division, [December 20th 1999, unreported] as follows:

"The following matters should be considered by the court when asked to approve a course of action proposed by trustees:

(a)       is the proposed action within the trustees' powers? This is a matter of construction of the trust instrument and/or statute, to be decided in open court after hearing arguments from both sides.

(b)       If so, is it a proper exercise of that power? The trustees may prudently seek the approval of the court, traditionally in chambers without adversarial argument, because of the momentous nature of the action. The court must be satisfied that:

(i)         the trustees' opinion has been formed in good faith;

(ii)        the opinion is one of a reasonable trustee; and

(iii)       it has not been vitiated by any actual or potential conflicts of interest.

(c)       Do the trustees wish to surrender their discretion to the court? Genuine deadlock, or conflict of interest, is sufficient reason for the court to accept surrender. These proceedings are traditionally heard in chambers without adversarial argument, if the parties agree, or do not violently disagree, on a particular course of action.

(d)       Have the trustees already taken action which is being challenged? Hostile litigation should be decided in open court."

15.     In relation to directions concerning participation in litigation, further clarification was provided in a judgment of Bailhache W, Bailiff (as he then was) In re S Charitable Trust [2017] (2) JLR 26, paragraph 13 of which provided:

"Where the substratum of the decision is the question of litigation, however, it appears to us that the court is not in quite the same position. One thing that can firmly be said about litigation is that it is something with which the court is familiar, probably in most cases more familiar than the trustee. Where the trustee therefore seeks to have a decision to litigate blessed by the court, it should expect the court to exercise a more direct, inquisitorial role, and be ready to form its own judgment as to whether it is sensible for the trust estate to be put at risk by the litigation in question. Clearly the court does not give advice in the sense that the trustee will have gained advice from its professional advisers in relation to the prospects of litigation - and it is entirely appropriate that the court should consider the advice carefully and certainly have a good reason if it should not be willing to bless the trustee's decision where it is based on that advice. Equally clearly, the court's view cannot guarantee the outcome of a hearing before a different court. We make this distinction where the substratum of the decision is litigation because there are many cases in which this court has followed that approach, still applying In re S Settlement, but in the more nuanced way as described above."

16.     Typically, the Court's jurisdiction tends to be engaged where trustees seek directions either as to whether or not to defend proceedings, or where they seek the blessing of a decision as to a particular stance decided upon by them in relation to the litigation, and indemnification from the trust fund in so doing.

17.     As to the question as to whose costs can be funded, Article 53 of the 1984 Law provides as follows:

"53. Payments of costs

The court may order the costs and expenses of and incidental to an application to the court under this law to be raised and paid out of the trust property or to be borne and paid in such manner and by such persons as it thinks fit."

18.     The Trustees submitted that the Court has the widest possible discretion in relation to the costs of an application and may order payment of the fees of any party on such basis as it thinks fit.  The Trustees accepted that the question of the costs of the parties to the Proceedings are not part of these proceedings, but part of separate hostile litigation to be decided by the trial court in the usual way.  There is however no reason why this Court cannot consider funding those costs or indemnifying a party or parties for them, provided it is in the best interests of the beneficiaries to do so.  

19.     Although Article 53 deals with applications for directions, the Trustees submitted that a direction to the Trustees for the payment out of the Trust fund of any party's costs may come within the wide meaning of Article 51(1) potentially being a "direction concerning the manner in which the trustee may or should act in connection with any matter concerning the trust and the court may make such order, if any, as it thinks fit".  Similarly, Article 51(2)(a)(i) permits the court to make an order concerning "the execution or the administration of any trust" or (ii) "an order relating to the exercise of any power, discretion or duty of the trustee... the conduct of the trustee and payments, whether payments into court or otherwise".

20.     In relation to the costs of a trustee in defending a claim, the Trustees may fund these costs out of the Trust fund but the Trustees may be at risk if they do so without a direction from the Court: see Alsop Wilkinson v Neary [1999] 1 WLR 1220 at 1225E.

21.     Where, however there are rival claims to the trust fund, the Court will often direct the trustees to remain neutral, leaving the rival claimants to argue the matter themselves. Thus, in VV v A, B, C and D [2011] JRC 209, the Royal Court, citing Alsop, had this to say:

"This case [Alsop] establishes a principle of neutrality where there are rival claims to the beneficial interests in the trust property, subject, of course, to any alternative directions that the court may give. Inherent to the concept of rival claims is that there are parties able and willing to prosecute and defend the same, thus leaving the trustee in a neutral role. In Re Bank of America (Jersey Unreported, 10 January 1995) the Court considered whether the principle of neutrality in respect of a trust dispute (in the Alsop Wilkinson classification) still held true where there "was no rival on the field to fight the battle against the plaintiff". In that case the Court declined to order the trustee to take an active role in the proceedings, in circumstances where one party to the dispute had already been determined to be a fraudster. However, the court was "troubled" by the prospect of one-sided litigation if the trustee had remained neutral and there was no one else to "take up the cudgels"."

22.     The Trustees submitted that Article 51 is clearly wide enough to permit the Court to direct a trustee to pay out any costs which are in the best interests of the beneficiaries to do so.  In support of the proposition that there is always a discretion for the Court to order costs to be paid out of a trust fund, even (exceptionally) to a non-beneficiary and outside the usual categories in which costs would be ordered, the Trustees referred to the decision of the Royal Court in Trilogy v YT [2013] (2) JLR N-14, the note of which stated:

"Even in a case such as the present which did not fall within those categories [the usual categories of case where costs would be ordered] the court had a discretion to make a pre-emptive costs order in favour of a trustee or beneficiary if the costs order at trial was predictable ( IBM UK Pension Trust Limited v Metcalf [2012] EWHC 125 (Ch) considered). In respect of a beneficiary or, indeed, a third party, the jurisdiction was truly exceptional and would not be exercised lightly in their favour. The underlying principle for the court was to seek justice and fairness."

23.     In relation to the question as to whether what was proposed was within the powers of the Trustees, the Trustees submitted that it was not disputed by any of the parties that the terms of the Trust were such that the directions in the Prayer to the Representation were within their powers as Trustees of the Trust.  The real question for the Court therefore was to consider on this application whether their proposals were a proper exercise of the Trustees' powers.

24.     Applying the analysis in In re S Settlement (supra), the Court would therefore have to be satisfied that:

(a)      the Trustees' opinion had been formed in good faith;

(b)      the opinion is one of a reasonable trustee; and

(c)      it had not been vitiated by any actual or potential conflict of interest.

25.     The Trustees suggested that the fundamental proposal in relation to which the application was made was whether the Contingent Beneficiaries were willing, could, and should be funded, to defend the Proceedings.  If not, the question arose as to whether the Trustees should be directed to defend the Proceedings.

26.     Additionally, there was a further question as to whether B should continue to be funded to bring the Proceedings and if costs orders were to be made in favour of either of those parties, should such orders be subject to the final costs order of the trial court?

27.     In relation to the matter of good faith, the Trustees noted that the Proceedings had as their objective the setting aside of a transfer of a substantial part of the Trust assets into the Trust.  The proceedings therefore challenged the validity of part of the Trust fund and sought to reduce the value of the assets in the Trust.  They accepted that in such circumstances, one would ordinarily expect beneficiaries impacted by the claim to be best placed to defend the claim, with the trustee taking a neutral stance.  The trustee might feel obliged to uphold the trust by defending the claims but might equally consider that the challenge to the transfer might be best defended by the beneficiaries if they are funded and willing to do so.  The Trustees pointed out that all of the parties were aware that the Trustees had taken the advice of leading counsel with substantial experience in trust litigation, Court of Protection matters and undue influence claims, including significant experience advising Jersey trustees in relation to the same.  Given that the Trustees were following the advice given by counsel in applying to the Court for directions they submitted that it was clear that the Trustees were acting in good faith. 

28.     In relation to whether the course proposed by the Trustees was a reasonable course of action, they suggested that what was reasonable would depend on the merits or otherwise of B's claims and would therefore have to be dealt with in the confidential part of the application in the absence of B and her counsel.

29.     In relation to the question of conflict, the Trustees pointed out that other than through its remuneration as Trustee of the Trust, neither K Limited nor any of its officers, employees or agents had any interest in the Trust or the Company or any of the assets of each. In so far as its remuneration as Trustee of the Trust was concerned, they submitted that it was not jeopardised because B had dropped her claim to set aside the whole Trust.  Accordingly, the continued existence of the Trust, with some assets, and therefore the Trustees' future trust administration fees, were not affected by the success or failure of B's claims.  In those circumstances they did not regard K Limited as having any conflict either way.

30.     The key question was, in the Trustees' submission, who could be funded in respect of the claims in the Proceedings.

31.     As the Contingent Beneficiaries were not current beneficiaries of the Trust, the Trustees considered that there might be an issue that they are not currently entitled to benefit from the Trust and that this would also extend to the provision of funding to defend the Proceedings.  However, upon analysis, the Representor submitted that that was not the position under Jersey law.  The wide discretion given to the Court under Article 51 of the 1984 Law suggests no such restriction applied.  They argued that it would seem artificial to say that the Contingent Beneficiaries were not entitled to costs because they are not present beneficiaries for several reasons:

(i)        Had the Trust been drafted slightly differently so that the Contingent Beneficiaries were present beneficiaries but only entitled to benefit after B had passed away, they would be entitled to costs in any event.  The position was in effect identical, so it would be artificial to say that they are entitled to costs in one position but not the other.

(ii)       In a discretionary trust, every beneficiary is always a "contingent beneficiary", either because a distribution to them is contingent on (a) the trustees deciding to make a distribution to them, (b) a protector (if any) agreeing, (c) the beneficiary being alive at the time distribution is made, or (d) there being sufficient funds in the trust to make the distribution at the time of distribution is made.  They submitted that it seemed artificial to say that they cannot benefit from costs because they are not a beneficiary now. 

(iii)      In the circumstances of this case, it would be harsh and unjust to say that the Contingent Beneficiaries are not eligible to have their costs funded out of the Trust if the claims go undefended.  The structure of the Trust as established was to provide for B for the rest of her life and then the remainder was to benefit the Contingent Beneficiaries then living.  As B was ninety-one years old and there were more than sufficient funds to look after her for the rest of her life, then if a claim were to succeed the assets removed from the Trust would come from what was originally destined to be the Contingent Beneficiaries' share (as would all the costs).  If the claim were to fail, as B had no other assets, the whole costs of the litigation would be borne from the Trust assets (and thus, ultimately, what was left over for the Contingent Beneficiaries).  Either way, the Contingent Beneficiaries would be the de facto losers to a greater or lesser extent.

32.     The Trustees submitted in the alternative that if the Court were of the view that it was not appropriate for the Contingent Beneficiaries to be funded, then it was clear from the decisions in W v A, B, C and D (supra) and Bank of America (supra) that the Court may direct the Trustees to defend the claim.  If it does that then:

(a)      the Trustees would have conduct of the defence of the litigation.  As such they may have to decide whether to compromise the claims made by B.  If they decide to do so, but the Contingent Beneficiaries (who are in effect the parties affected) do not agree the settlement, the Trustees would in all probability wish to come back to the Court for a blessing if they thought that the settlement was justifiable.

(b)      The disadvantages were:

(i)            that the Trustee would have to defend a claim brought by its principal beneficiary;

(ii)           that it would essentially have to litigate a claim on behalf of the Contingent Beneficiaries, ultimately at their cost, so would it not be preferable to get them to do so instead?

(c)      The advantages were:

(i)            that the Court interposes the Trustees between B and the Contingent Beneficiaries in circumstances where a mediation has failed to settle the matter already.

(ii)           The Trustees have a wide discretion to settle the matter (and it is accordingly harder for the Contingent Beneficiaries to complain, if the Trustees believe the settlement reached is a reasonable one).

(iii)          If the Contingent Beneficiaries do not agree that a settlement proposed by the Trustee is reasonable, the Trustees may apply to the Court to bless it, and if the blessing is granted the settlement will dispose of the matter with the Trustees being protected by Court order.

33.     The Trustees indicated their willingness to defend the claim if so directed.  However, equally, they indicated that they were willing to stand aside and to allow the Contingent Beneficiaries to defend the claim if the Court felt that this was the appropriate course.

B's costs of pursuing the Proceedings

34.     The further question to be considered was whether B's fees of pursuing the Proceedings should continue to be funded by the Trustees?  The Trustees submitted that this in part depended upon the merits of her claim which were to be dealt with in the confidential part of the hearing.

35.     The Trustees pointed out that a possible outcome was that B's claims were not funded by the Trustees, in which case it seemed likely that they would be stifled.  A further question posed in the Prayer to the Representation was whether any costs orders made in favour of either B or the Contingent Beneficiaries should be made subject to the final costs orders of the trial court. The Trustee did not believe that would work fairly in these proceedings.  If B were to lose, as all her assets were in the Trust and the Contingent Beneficiaries would end up eventually bearing those costs anyway.  It would therefore not be fair to impose such a requirement on the Contingent Beneficiaries' fees if they lose, as they would end up paying the costs of B's litigation whatever the outcome. The effect of such a caveat to the costs order would not apply equally to both sides.

The position of the Contingent Beneficiaries

36.     The Contingent Beneficiaries supported and adopted the legal arguments that had been put forward by the Trustees.

37.     The Contingent Beneficiaries submitted that there could be little doubt that the Proceedings should not go undefended, and the question therefore arose as to whether they should be defended by the Trustees or the Contingent Beneficiaries.  They did however suggest that the Court should ensure that there would be no duplication in relation to the defence of the Proceedings and therefore it should be one or the other and not both.  They suggested that either way the costs of defending the Proceedings should be met from the Trust fund as it would be wholly inappropriate for the defence of the action not to be met by the Trust which is ultimately being attacked.  They confirmed that, subject to the payment of costs, they would be prepared to defend the Proceedings if the Court were to consider that to be the appropriate course of action. In the event that the Court had concerns as to whether the payment of the Contingent Beneficiaries' legal costs out of the Trust fund might be problematic because they were "contingent" beneficiaries, then they submitted that the Court should order the Trustees to defend the Proceedings and to further order the Trustees' costs to be paid out of the trust fund on the indemnity basis, as would normally be the case.

38.     In relation to the costs incurred by B in pursuing her claims, they submitted that the Court is being asked to consider whether her legal costs should be paid out of the Trust fund and, in that regard, there are clearly competing propositions.  On the one hand, making an order that B's legal costs be paid out of the Trust fund might encourage an elderly lady to pursue what they submitted was, on any view, uncertain litigation in circumstances where that litigation would undoubtedly be expensive and, it was submitted, pointless. On the other hand, they noted that if B's costs were not to be paid out of the Trust fund this would, in all likelihood, stifle the claim.

39.     The Contingent Beneficiaries noted that there was the further question raised by the Trustees, namely whether there should be a final costs order made by the trial court.  They submitted that it would be unfair for that to be the case and in that regard, whatever costs orders the Court were to make in relation to the Beddoe application, the Court should also order that whatever the case there should be no final costs order made against the First Respondent or the Contingent Beneficiaries.  However, the Contingent Beneficiaries were content to rest on the wisdom of the Court in relation to that particular matter.

40.     The Contingent Beneficiaries did, however, suggest a possible way forward.  They noted that the Court was aware that there had been significant settlement discussions between the parties and although those discussions had not reached an agreement, they were significantly advanced.  The Contingent Beneficiaries were confident that further progress could be made to reach settlement in the near future.  They suggested that given the circumstances surrounding this case, including B's age and health and the size of the trust fund as a whole, it was in the best interests of all parties for a negotiated and amicable settlement to be concluded as soon as possible.  They submitted that the discussions could move forward in relatively short order if the Trustees were also to be actively involved in them.  They suggested that the discussions had reached a stage where in any event they required significant input on the part of the Trustees.  They therefore suggested that the most appropriate order that the Court could make at this stage, would be an order that B, the Contingent Beneficiaries and the Trustees should all have their costs met out of the Trust fund but only for the purposes of settlement discussions, both future and historic. This could not however be open-ended, and the Court might consider that it would be appropriate to impose a time limit for settlement to be reached. They therefore suggested that the deadline for settlement should be 30 June 2023. In the event that settlement was not achieved by that date, then they suggested that a further directions hearing be arranged in relation to the progress of the Proceedings.

41.     In conclusion, the Contingent Beneficiaries submitted that the Court should make orders in relation to the following:

(a)      that the Proceedings need to be defended;

(b)      who should defend the Proceedings; and

(c)      orders in relation to the costs of the Proceedings (including the First Respondent's costs).

42.     If the Court was minded doing so, these orders could be made now, but only to take effect in the event of settlement not being achieved by 30 June 2023.

The position of the First Respondent

43.     On behalf of B it was pointed out that the main claim in the Proceedings was separated into two parts, by way of alternative relief:

(a)      an order that the transfer of shares into the Trust by B be set aside for undue influence, and a consequent declaration (the "Undue Influence Claim"); and, alternatively,

(b)      an order that the Trustee is authorised and directed to take steps to cause the property known as Property 1, as an asset of the trust, be distributed to B (the "Distribution Request").

44.     It was submitted on behalf of B that it was unclear as to the role that the Trustees proposed to play in relation to the Proceedings and, in particular, whether the Trustees intended to defend the Undue Influence Claim and also reject the Distribution Request.

45.     B submitted that the Court must take into account the following factors when it considers the Beddoe application:

(i)        The merits of the Proceedings, ensuring that the separate merits of the Undue Influence Claim and the Distribution Request are considered;

(ii)       The value of the Trust assets;

(iii)      The likely costs which will be incurred by the Trustees and all other parties in the Proceedings, including an understanding of the costs which might need to be satisfied out of the Trust assets in relation to any adverse costs order;

(iv)     The settlement offers which have been made (and rejected) to date by all parties;

(v)      Who and to what extent should any of the parties be funded in relation to the Proceedings;

(vi)     What costs orders should be made by the Beddoe court.

46.     In relation to the issue of merits, B's position was that she had also taken advice from leading counsel specialising in trust matters, both contentious and non-contentious, and had issued the Proceedings on the basis of such advice.

47.     It was submitted that only the Trustees could deal with the Distribution Request, and it could not remain "neutral" and must decide whether to exercise its powers.  We do however note that it is pleaded as an alternative form of relief in the event that B's Undue Influence claim were to fail.  Furthermore, the Trustees argued that there was some doubt as to whether the Court could order a distribution in circumstances where the Trustee had not surrendered its discretion to the Court.

48.     B's position was that the Trustees must be involved in the litigation.  She suggested that since (and during) the mediation, the Trustees had chosen to let the Contingent Beneficiaries take the lead on any settlement discussions and had not been actively involved since the mediation.  It was her view that it was appropriate for the Trustees to drive the litigation and to decide whether to compromise B's claims.  The views of the Contingent Beneficiaries would be a relevant (but not a determinative) factor.  She accepted that in the event that the Trustees decided to compromise the claims then if the Contingent Beneficiaries did not agree the settlement, then the Trustees might nevertheless compromise the claim with the blessing of the Court.

49.     In relation to the costs of the various parties, B's position was as follows:

1.     The Trustee's costs

50.     On behalf of B, it was submitted that if the Court were satisfied that the Trustees should defend the main claim (both the Undue Influence Claim and the Distribution Request), then the Trustees should be authorised to pay their own costs of the litigation and also any costs which they might be ordered to pay to another party to the Proceedings out of the Trust assets.  As to the duration of any such order, the Court was entitled to limit its authorisation for the Trustees to pay their legal costs from the Trust fund up until a certain stage of the Proceedings, in order for the Court to be updated on the merits of the Proceedings and also on the progress of any settlement discussions which have taken place since the initial Beddoe hearing. If the Court was minded to take this approach, B's position was that the most appropriate stage to return to the Beddoe court would be after discovery has taken place.

2.         B's costs

51.     It was submitted that B's costs of the litigation should also be funded out of the Trust assets.  All of her assets had been transferred into the Trust with the exception of a small balance in her personal bank account and any dividends that she might receive from certain shares left to her by H.  She therefore had no other assets from which to fund the litigation and was currently the sole beneficiary of the Trust.  As such, it was submitted there could be no issue with the Trust assets being used for her benefit and there was no question that the Trustees had the power to pay her costs from the Trust assets.  She regarded the possibility referred to by the Trustees that she might not be funded out of the Trust therefore to be an extraordinary one.  It was submitted that it was difficult to imagine circumstances in which such an order would be appropriate against the sole beneficiary of a trust.  This was particularly so given that it would result in the sole beneficiary being required to abandon her claim relating to the Trust. 

3.         The Contingent Beneficiaries

52.     It was submitted that the position of the Contingent Beneficiaries was very different to that of B and the Trustees: given that the Contingent Beneficiaries were not currently beneficiaries of the Trust then at present no distributions could be made to them nor could Trust powers be exercised in their favour.  If the Court were to permit the Contingent Beneficiaries' costs to be paid out of the Trust assets that would be equivalent to permitting a distribution in their favour, yet the Contingent Beneficiaries were not currently permitted to benefit from the Trust.  It was submitted that whereas the Court has very wide powers under Article 53 of the 1984 Law, it should be slow to make any order contrary to the express terms of the Trust.

Prospective costs

53.     In relation to the Trustee's suggestion that the Court should make a prospective costs order, in effect tying a future trial judge's hands, the issue would depend on who was defending the claim.  If the Trustees were to be authorised to defend the claim, then it would be appropriate for any adverse costs against them to be funded out of the Trust fund (this being the purpose of the Beddoe Order).   All of B's assets were in the Trust of which she was the sole beneficiary.  If an adverse costs order were to be made against her then it would be appropriate for it to be funded out of the Trust as it is the only way in which B would be able to comply with an adverse costs order.  However, if the Contingent Beneficiaries were permitted to defend the litigation using Trust assets, and then adverse costs orders were to be made against them by the trial judge, then it may or may not be appropriate for that adverse costs order to be funded out of the Trust.  Whether or not that was appropriate would depend on the circumstances and why any adverse costs order has been made against them. It was not appropriate to prejudge this question before all the facts of the case were known. 

54.     Although it was noted that the Trustees had suggested that a prospective costs order would be fairer, it was submitted that it should be for the trial court (after hearing the full facts) to determine whether it was fair or not for the Contingent Beneficiaries to pay any adverse costs themselves. 

THE FOLLOWING SECTION CONFIDENTIAL TO THE REPRESENTOR AND THE SECOND TO FOURTH RESPONDENTS

55.     [redacted]

56.     [redacted]

57.     [redacted]

58.     [redacted]

59.     [redacted]

60.     [redacted]

61.     [redacted]

62.     [redacted]

THE FOLLOWING SECTION TO BE DISCLOSED TO ALL PARTIES

Our decision

63.     This is a somewhat unusual case. There are two potential parties who could defend the Proceedings in the event that we conclude that they should be defended: the Trustees and the Contingent Beneficiaries.  Whilst both parties are agreed that the proceedings should be defended, they are both relatively ambivalent as to who should do this.  The other unusual feature is that the claimant in the Proceedings, seeking to set aside the transfer into the Trust of a substantial portion of the Trust assets, is not only a beneficiary (indeed currently the sole beneficiary) of the Trust but is being funded by the Trustees to pursue her claims.

64.     Having considered the evidence filed by the Trustees in the confidential part of the hearing, but also noting that B had advice from leading counsel which led her to commence the Proceedings, we accept that the Trustees are acting in good faith in recommending that the Proceedings be defended, and we accordingly agreed that they should be defended. In relation to the identity of the party who should defend the Proceedings, we concluded that the appropriate party was the Trustees.  Given that B does not seek to set aside the Trust itself but only the transfer into it of a portion, albeit substantial, of the assets, it is entirely appropriate for the Trustees to conduct the defence.  Furthermore, in the particular circumstances of this case and in particular the fact that settlement negotiations have reached a reasonably advanced stage, we regard the Trustees as being best placed in any further settlement discussions, to weigh up not merely the merits of the claims but also the respective interests of B and the Contingent Beneficiaries.  We also took into account that were we not to authorise the defence then B's claim would in all probability be stifled.

65.     We accordingly directed that the Trustees defend the Proceedings and ordered that they be indemnified in so doing from the Trust fund on the trustee indemnity basis, up to the close of discovery and exchange of witness statements. 

66.     Although mediation may have failed, we noted that settlement discussions had progressed and strongly encouraged the parties to seek to agree a settlement of the Proceedings.  We also expressed the view that the Trustees endeavour to take the lead in those discussions.

67.     We regarded the powers available to the Court under the 1984 Law to be sufficiently wide to enable us to authorise the payment by the Trustees out of the Trust fund of the costs of the Second, Third and Fourth Respondents in relation to the settlement discussions both historic and up to 30 June 2023 on the standard basis and we so ordered. 

68.     We further authorised the Trustee to continue payment of the First Respondent's expenses in relation to the Proceedings from the Trust fund, this to include the costs of the Beddoe application.

69.     We ordered that the costs of the Second, Third and Fourth Respondents of the Beddoe application be paid out of the Trust fund on the standard basis.

70.     We did not make a prospective costs order in relation to the Proceedings as we regarded the costs of the Proceedings to be a matter for the trial judge, albeit that given that we have authorised the Trustees rather than the Contingent Beneficiaries to defend the Proceedings it may well be that the costs will come out of the Trust fund in any event.  Furthermore, the authorisation given to the Trustees is at present only up to a particular stage in the Proceedings, rather than to the end of a trial and the matter could be reviewed if necessary at a further Beddoe hearing.

Authorities

Trusts (Jersey) Law 1984.

In re S Settlement [2001] JLR Note 37.

Public Trustee v Cooper English Chancery Division, [December 20^th 1999, unreported].

In re S Charitable Trust [2017] (2) JLR 26.

Alsop Wilkinson v Neary [1999] 1 WLR 1220.

VV v A, B, C and D [2011] JRC 209.

Trilogy v YT [2013] (2) JLR N-14.