Before : |
A. R. Binnington, Esq., Commissioner, and Jurats Austin-Vautier and Opfermann |
IN THE MATTER OF THE REPRESENTATION OF SUMMIT SERVICES LIMITED
AS TRUSTEE OF THE B TRUST, THE C TRUST,
THE D TRUST AND THE E TRUST
AND
IN THE MATTER OF ARTICLE 51 OF THE TRUSTS (JERSEY) LAW 1984,
AS AMENDED
Advocate J. M. Dann for the Representors
Advocate M. P. Renouf for the Protector
Advocate D. James for K
Advocate D. Evans for J and H
IN PRIVATE
JUDGMENT
the COMMISSIONER:
1. On 9 July 2024, we heard an application in proceedings brought by way of Representation dated 23 November 2020 by Summit Services Limited ("the Trustee"), as trustee of certain family trusts to which we refer below. The Representation was issued pursuant to Article 51 of the Trusts (Jersey) Law 1984 ("the 1984 Law") for the Court to "bless" various decisions of the Trustee in connection with the separation of the assets of the family trusts, of which this hearing is a part of the process. At the conclusion of the hearing, we reserved our decision, which we now give.
2. When the proceedings first commenced, the Trustee was the trustee of four Jersey law discretionary trusts: the ("B"), ("C"), ("D") and ("E") Trusts ('the Trusts").
3. The Trusts were settled by ("JLS" or "the Settlor"), who died in Country 1 in December 1991 leaving three sons: ("DJ"), ("MJ"), and ("JJ"). A fourth son, ("BJ") had pre-deceased the Settlor.
4. Not long after the establishment of the four Jersey trusts, the sons of the Settlor (and spouses), were excluded as beneficiaries.
5. The Settlor was born in Country 1 in 1902 and moved to the Country 2 around 1917. He and his four sons by his first wife worked in the family's import business in Country 2. He immigrated to the UK in the 1960s, and capital from the Country 2 business was then used to establish a property investment and finance business based principally in the UK, (although assets and investments in Country 2, Country 1 and elsewhere appear to have formed part of the overarching business) with JJ, MJ, and DJ respectively moving to London from Country 2. JJ subsequently emigrated to Country 3 State to establish operations there.
6. BJ, DJ, JJ and MJ are now all deceased. MJ, DJ and JJ were excluded from the beneficial class of the Trusts by way of deeds of exclusion in 1992. BJ was not excluded at that time because he was already deceased.
7. The current living members of the beneficial class of the overall structure therefore comprise the lineal descendants of BJ, DJ, MJ, and JJ, including their children and remoter issue (and the class includes their unborn descendants).
8. The ten adult grandchildren of JLS are the current "active" generation in the sense that all but two of them are members of the Family Advisory Group (whose meetings are the primary means of communication between the Trustee and the beneficiaries). A number of them are also involved in the management of properties held by the Trusts.
9. The Trusts hold between them a property portfolio (consisting of [redacted] properties in London) and cash. The current net assets of the Trusts are approximately £75 million. The properties held by the Trusts are managed by partnerships or companies in which various members of the [Redacted] family participate. Management charges are paid to these managing entities in line with market rates. The individual members of the family also mostly have sources of income which are independent of the Trusts or their assets.
10. The first Protector of the Trust was JLS. JLS died on 26 December 1991. ("F"), who had advised the family from time to time in relation to banking matters, was appointed protector of the "D" Trust on 4th January 1994. Following a lengthy period without a protector, F was appointed protector of the B, C and E Trusts on 14 May 2013. The current Protector of the Trusts is Turicum Services Limited, a company which is incorporated in St Vincent and the Grenadines and which was appointed on 11th July 2017. The directors of Turicum comprise the two sons of F, the latter having passed away in May 2023. The terms of the Trusts require that the consent of the Protector be obtained for the appointment of assets out of the Trusts.
11. There had been ongoing discussions between the [Redacted] family and their successive sets of trustees since 2004 as to the possibility of separating the Trusts into individual funds for each branch of the family. This process had more recently become imperative given that the third generation is the "active" generation in the Trusts, and the Trustee's decision-making process in relation to the Trusts now needed to take into account the views of a fairly large group of people who were spread over three continents and are at different stages in their lives and their careers. The potential for differences of opinion was obvious, as were the advantages of each family branch having its own fund in respect of which the wishes and needs of that family branch can specifically be taken into account.
12. As a result of the family dynamics, it appears to have been inevitable that the task of the Trustees in dividing the assets between the different family groups was not going to be straightforward.
13. In his first affidavit Andrew Haynes, a director of the Trustee said (at para 23):
"....in my experience at Advisory Group meetings I constantly encountered a uniform reluctance on the part of the family to resolve differences of opinion. This is not intended as a criticism but simply an observation to explain the situation with which the Trustee now has to grapple. Neither side in any argument expressed a willing (sic) to compromise. Arguments persisted and no side recognised any aspect of the facts or arguments other than their own. Deadlock therefore required a determination by the trustees which invariably, triggered accusations of bias and unfairness by those members of the Advisory Group whose argument was not upheld. It became apparent over time that this inability to reach consensus extended to family affairs outside the ambit of the trusts, some matters going back 20 years or more."
14. There are sufficient assets in the Trusts to allow for separation of the Trusts without disadvantaging any family branch. UK tax advice was obtained, which confirmed that the proposed separation would not give rise to any adverse UK tax consequences.
15. Following extensive consultations with the family members, the Trustee developed a plan to separate the trusts into funds for individual branches of the family, for which the approval of the Court was to be sought, by means of the Representation, as a decision which was momentous in the life of the Trusts.
16. The impetus for separation could be traced back to a letter of wishes written by JLS dated 23 December 1991, in which he indicated that he wished for the wealth which was held in the Trusts to be divided as follows:
(a) For JJ's descendants: 29.3%
(b) For MJ's descendants: 29.3%
(c) For DJ's descendants: 25%
(d) For BJ's descendants: 16.4%
17. These proportions have been referred to by the Trustee and the family as the "four-way uneven split". The four-way uneven split principally reflected the differing levels of contribution to the family business that had been made by JLS' four sons. The proportion for the BJ Group, in particular, reflected the fact that BJ died in the 1970s and was not therefore involved in the subsequent creation of wealth. The Trustee did however point out in its evidence that this uneven split was not to suggest that the family was not a close one, and it is of note that DJ requested that part of his family's allocation be redirected to BJ's family.
18. At a hearing before the Court (Birt, Commissioner) on 17 May 2021 [unpublished] , the uneven four-way split was approved by the Court, as was the creation of ten new Jersey law trusts to facilitate the separation, and it was envisaged that the Trustee would return to the Court for approval of the precise terms of the new trusts in due course. The balance of the orders sought in the Representation were adjourned to a further hearing or hearings.
19. The terms of the ten new trusts were approved by the Court at a hearing on 31 May 2022.
20. It is accepted by the parties that the power that the Trustee seeks to exercise in order to fund the new trusts is, pursuant to the relevant trust instruments, exercisable only "with the prior or simultaneous consent of the Protector".
21. The separation of the assets of the Trusts for the benefit of the members of three of the four groups of the [Redacted] family (the JJ Group, the DJ Group and the BJ Group) is now largely complete, following agreement between the respective family members of those Groups as to the allocation of the relevant assets. Seven of the ten individual trusts have now been created, and all assets held by the D Trust and the B Trust have been transferred to the C Trust. The shareholdings of each of the companies held in the C Trust have been restructured in accordance with tax advice received by the Trustee, and the underlying properties have been transferred to new corporate shareholders. The shares in the new property holding companies have been appointed out as appropriate to the seven new trusts and the relevant filings have been made with HMRC. Separation accounts are in the process of being updated to take into account income and expenditure since April 2022, after which the accumulated income and gains will also be apportioned out to the new trusts.
22. Unfortunately, it has not been possible to reach agreement in relation to the allocation of assets (the 'MJ Group Assets') between the trusts which are to be established for the benefit of each of the three members of the MJ Group ("H"), ("J"), and ("K")) and their respective families. Pending resolution of this issue, the MJ Group Assets are held in a single Jersey law trust, which has been established for the benefit of all the members of the MJ Group. Following resolution of the allocation of the MJ Group Assets, this trust will form the eighth of the ten new individual trusts, and will be for the benefit of one of the MJ Group beneficiaries and their family. At the same time, the other MJ Group beneficiaries will be excluded from this trust and two further new trusts will be created for their benefit. At the conclusion of this process, ten new trusts will have been created for the ten branches of the family, as originally envisaged.
23. In the absence of any agreement as to allocation, and in the circumstances to which we refer below, the Trustee made a decision ("the Determination") as to how it ought to allocate the MJ Group Assets between the three trusts to be established for the benefit of members of the MJ Group. The Trustee's decision, subject to the Court's approval, was that it would allocate the MJ Group Assets equally. The Protector has however refused to consent to the exercise of the Trustee's powers in that way.
24. It is the contention of H and J that the Trustee should (pursuant, they say, to the wishes of the Settlor) implement the wishes of their father MJ [Redacted] by allocating the fixed sum of £1.8 million to the trust for the benefit of K and her family, and by dividing the remaining assets equally between the respective trusts for the benefit of themselves and their own families. Conversely, K's position is that the MJ Group Assets should be allocated between the three trusts in three equal shares.
25. Although there is a further issue in relation to Protector consent, which we shall address later in this judgment, the principles that govern the Court's jurisdiction to bless a decision of a momentous character by a trustee are well established. The test is summarised in the Court of Appeal's decision in Representation of Otto Poon Trust [2015] JCA 109 (K71), (at paragraph 14 of the judgment):
"Where a trustee has made a momentous decision, that is a decision of real importance for the trust, and seeks the court's approval for the decision, the legal test to be applied by the court is well established in this jurisdiction. As explained in Re S Settlement [2001] JLR N 37, the court must satisfy itself (i) first, that the trustee's decision has been formed in good faith, (ii) second, that the decision is one which a reasonable trustee properly instructed could have reached, and (ii) third, that the decision has not been vitiated by any actual or potential conflict of interest. A similar approach is taken in England: - see Public Trustee-v-Cooper [2001] WTLR 901."
26. There is therefore a threefold test as to whether the Court ought to approve or bless a momentous decision taken by the trustee (the "Re S test"), namely:
(a) Was the decision formed in good faith?
(b) Was the decision one which a reasonable trustee properly instructed could have reached?
(c) Is the decision vitiated by any actual or potential conflict of interests?
27. The Court of Appeal in Otto Poon (at paragraph 15 of the judgment) considered, but rejected, a submission that there now exists a fourth requirement, that the trustee must also prove that it has given proper consideration to the matter under scrutiny, setting out in detail the steps which it has taken and the matters which it has considered.
28. The Court of Appeal said (at paragraph 17):
"We do not read the English case-law as introducing a new and additional requirement that a trustee must in all cases prove anything other than that the three-part test set out above has been satisfied. Furthermore, we consider that it is both unnecessary and undesirable to introduce a separate requirement for a trustee to prove in all cases precisely what it has done in giving consideration to the matter under scrutiny: a decision-maker can consider matters carefully and still reach an irrational decision, and conversely an entirely rational decision can be reached on the basis of superficial thought processes."
29. The reasons expressed by J and H for not supporting the Determination are, in summary:
(a) the Trustee has applied too rigorous a threshold for ascertaining the wishes of the Settlor. In doing so, the Trustee has disregarded (or attached insufficient weight to) a body of material which is relevant to that question;
(b) the Trustee pre-determined its intended approach to the division of assets between the MJ Branch as far back as 2017. Since that time, the Trustee has assessed everything put to it from that pre-determined starting point, rather than considering the issue completely afresh;
(c) the Trustee has attributed too much weight to the fact that none of J, H or K have provided the Trustee with details of their current financial means and needs, and has used that to determine that there is no basis for departing from an equal split;
(d) the Trustee has given insufficient weight to the cultural values of families such as the [Redacted] family; and
(e) the Trustee has, in the Determination, taken account of irrelevant considerations and has also failed to take into account relevant considerations.
30. To the above can be added a further criticism in relation to process. In their skeleton argument, J and H make the following points in relation to the evidence of the Determination that was presented to the Court by the Trustee:
(a) the Determination is a relatively short document, spanning some nine and a half pages, in large typeface;
(b) it is undated, meaning that it is impossible to determine how proximately it was prepared to the decision-making process it purports to document (although, it appears to have been taken after the Opinion of Andrew Holden dated 19 February 2023 and before 27 March 2023 when it was emailed to J, H and K);
(c) it is not clear whether the Trustee convened any formal meeting for the purposes of taking the decision which the Determination purports to document;
(d) if there was such a meeting it is equally unclear who attended that meeting, who chaired the meeting, whether the relevant quorum and such other formalities were complied with in accordance with the requirements of the Trustee's articles of association (or Gibraltarian companies' law), and whether there was any dissenting view expressed;
(e) it is unclear what documents were tabled to the meeting (if there was a meeting) because there is no reference to a board pack or to any other index of documents tabled at such a meeting (if there was such a meeting);
(f) it is equally unclear what documents were considered in respect of each issue, what particular features of those documents were weighed in the balance by the Trustee in arriving at its particular determination, and what weight was attached to each and why; and
(g) there is no statement or explanation of what other matters, issues, options and ways forward (if any) were considered by the Trustee at the meeting (if there was one) and dismissed, including the reasons for them being dismissed.
31. Whilst we agree that it would have been helpful for there to have been a formal minute of the meeting of the Trustee, identifying where and when it took place, who was present and listing those documents that were reviewed by those present, we are satisfied that there is sufficient evidence before us to enable the Court properly to scrutinise the Trustee's decision in order for us to determine whether the three-part test referred to in Otto Poon has been satisfied. Mr Haynes swore four affidavits prior to the Determination summarising the enquiries that the Trustee had made and the results of those enquiries and a further affidavit to which the Determination, which he said was made on 27 March 2023, was exhibited. The Determination summarises the background leading to the Trustee's decision, identifies the issues identified by the Trustee as relevant, summarises the arguments of the parties in relation to those issues and the conclusions reached by the Trustee in relation to them. The principal parties obtained opinions from eminent trust counsel and those opinions were clearly available to and considered by the Trustee in reaching its Determination. Indeed, the Determination makes specific reference to excerpts from the opinions of Tim Collingwood KC on behalf of K, Tom Dumont KC on behalf of MJ, J and H, and the opinions obtained by the Trustee from Kathryn Purkis and Andrew Holden.
32. Although, as the Court of Appeal in Otto Poon made clear, there is no requirement for the Trustee to provide evidence of its deliberations and decision in any particular manner, we do not regard ourselves as disadvantaged by the manner in which the Trustee has presented its evidence.
33. In its Determination, the Trustee, whilst recognising that numerous arguments had been raised by J and H against the equal split, identified five relevant considerations to be examined, namely:
(i) The Settlor's wishes.
(ii) MJ's wishes.
(iii) The views of the three siblings, (including their financial needs and reasonable expectations).
(iv) The contribution made to the business by H and J, and the benefits received by the brothers.
(v) The application of Country 1 cultural rules and values to the governance of the affairs of the MJ family branch.
34. The Letters of Wishes written by the Settlor, and which relate to the Jersey Trusts, are a letter of 8 August 1991, a letter dated 22 December 1991 and a final letter dated 23 December 1991. The Settlor died three days later.
35. It appears that the letter of wishes dated 22 December 1991 was provided to the trustee by the former Protector in early 2018. The letter of wishes dated 8 August 1991 was provided to the trustee by the lawyers acting for MJ, H and J in June 2020. Prior to this date the trustees of the trusts had administered the trusts solely by reference to the letter of wishes dated 23 December 1991.
36. In the letter of wishes dated 22 December 1991, addressed to the Protector, the Settlor stated (in translation from the original ("language"):
"My capital outside [Country 1] that I have put in (4) trusts (B, C, E and D) and in companies under them, I wish be managed for the welfare of descendants of my (4) sons ([DJ], [MJ], [JJ] and late [BJ] and I request you to manage as per the wish and instructions of [DJ], [MJ], and [JJ]. I wish you the best and send my salam."
37. In his last letter of wishes, dated 23 December 1991 which, as we have noted, was only three days before his death, the Settlor wrote (in translation):
"My capital/holding outside [Country 1], I have put in (4) Trusts [E], [C], [B] and [D] and in various companies under these trusts. I wish this my wealth be managed for the welfare of descendants of my (4) sons ([JJ], [MJ], [DJ] and late [BJ]). I also wish this my wealth should be shared by the descendants of my above mentioned (4) sons as under:
For [JJ's] descendants 29.3%
For [MJ's] descendants 29.3%
For [DJ's] descendants 25%
For late [BJ's] descendants 16.4%
Holding in above mentioned Trusts and in their relative companies to be managed as above is my wish and request you to do needful for same.
Wish you best and my salams."
38. Some years after the Settlor's death, in a letter of wishes dated 1 July 2015, MJ stated, inter alia:
"(4.2) A sum certain of £1.8m (Pounds one million eight hundred thousand) (the "[K] Allocation') should be earmarked and allocated from the [MJ] Trust Benefits for the benefit of [K] Beneficiaries. This sum amounts to approximately 10% of the MJ Trust Benefits. I reiterate that the [K] Allocation is to be a fixed sum and shall not be varied nor be dependent on the actual realisations....
(4.4) In formulating my wishes in relation to the [K] Allocation and the [K] Trust, both in terms of the quantum of benefits allocated to the [K] Beneficiaries, and my wish to remove the abovementioned uncertainties from the arrangements that relate to them, I have had regard to the facts that: [K] has her independent family; she has not been involved in the family business; she is not familiar with family matters; and she and her husband, [L]j, are both highly successful and very prosperous in their respective professions and occupations."
39. MJ (who died on 2 February 2023) wrote a further letter dated 18 August 2017, co-signed by his wife ("G"), setting out his wishes (albeit that at the date of the letters MJ was not a beneficiary of the Trusts):
"This is further to the letter of wishes dated 01 July 2015 signed by me and my wife, [G]. This document was sent to you by my solicitor Anup Viyas in July 2015 and I trust that you had received it safely. I am attaching a copy of the same for your ready reference.
It has recently become apparent that the trustees of the JLS trusts are requesting an agreement signed by my 3 children (H, J and K) in order to implement the said wishes. Given the content of the said wishes and the relative split between the 3 children, this will likely not be possible.
The trustee is clearly not well versed with the workings of an [Country 1] business family, such as ours. As you are well aware, according to our culture and customs, once the daughter gets married and leaves her parents' home, she goes into a new family and makes a new life and home for herself. Her husband's family is her family and his home is her new home. If she has no connection with the family business (which may be through active involvement or by working within it), then she does not involve herself in the affairs of her parents' or brothers' home or business.
Indeed, I can confirm that [K] has never had any connection with the family business. Meanwhile, the sons of the family usually join the family business and work together with the father. In such cases, the understanding is that there is a partnership between the father and sons, even though there may not be a formal partnership agreement between them. Where the daughter is not involved in the family business, as is indeed the case of [K], she does not get involved with nor interfere in her father's and brothers' business and its workings.
Indeed, it is true that the structure of [Country 1] families and [Country 1] culture treats men working in the family business differently from married women not working in the family business. Another important aspect that the trustees have not appreciated is that it was always the intention of JLS to pass the wealth down to his sons (BJ, DJ, MJ and JJ) and for the sons, as the head of their respective branch, to exercise control and discretion as to how the family wealth was distributed further down. This is also a part of our [Country 1] tradition and culture. And each head of the respective branch would exercise such control and discretion based on the culture and workings of [Country 1] families, as described above, as it applies to them.
I have made my wishes based on the above and can confirm that we have an understanding amongst us (myself, [H] and [J]) that the three of us are partners in the business, and indeed I have to say that my two sons have been more active in the businesses than me for very many years now, indeed for all but the first few years after their joining the family business and certainly since 1988. For the sake of clarity, I can also confirm that [K] is not a partner of ours (myself, [H] and [K]) and so does not have the same status."
40. The Trustee's understanding of how the figure of £1.8 million had been calculated by MJ was set out in the record of its Determination, dated 27 March 2023 as follows:
"MJ's wishes were for an unequal split of the assets which would result in the main share of assets passing to his two sons. The formula which resulted in the unequal division between the three MJ siblings was explained to the Trustee to have been arrived at by agreement between MJ and his sons as follows:
· The trust assets allocated to the MJ branch would be divided equally among the three "partners": MJ, [H], and [J].
MJ, being 'excluded' as a beneficiary would pass his share equally among his grandchildren: six in total, two of which are [K's] children, thereby resulting in 1/3 of MJ's 'share' being applied to [K]. (The error in Kathryn Purkis' opinion which calculated [K's] share under her fathers' letter of wishes as being equal to 15% was repeated by Mr Dumont. The error arises as a result of the base figure representing the value of the total share allocated to the MJ branch. The number relied on by Kathryn Purkis: £12,172.000 is incorrect and the current estimate is £20,792,635, so that the allocation of £1.8m for [K] set-out in MJ's letter of wishes amounts to approximately 9%)."
41. Mr Dumont KC, on behalf of H and J, had argued that the letters of wishes supported what has been described as "the Sons/Daughters Principle", "the Working Family Members Only Principle" and the "Head of Branch Principle".
42. It was suggested that the Sons/Daughters Principle was that if a daughter (who did not work in the family business) married, she ceased to be an individual whom the Settlor intended should benefit from the fruits of the family business (save perhaps in exceptional circumstances and/or in accordance with the wishes of the head of the family).
43. The Working Family Members Only Principle was that sons who did not work in the family business were also likely to be excluded from benefit.
44. The Head of Branch principle was that the head of each branch of the family should decide how funds are to be allocated within that branch.
45. Whilst it is fair to say that the Settlor's wishes for an unequal division of the trust assets between the different family branches, set out in his letter of wishes of 23 December 1991, recognised the respective contributions that his sons had made to the creation of the family wealth there is no reference to that recognition being extended to succeeding generations. Indeed, he went on to refer to the assets thereafter being managed "for the welfare of descendants of my (4) sons" without any further restriction, whether as to working in or contributing to the family business or as to sex.
46. In relation to the letters of wishes written by MJ, whilst he was neither a settlor nor a beneficiary it was clear that the Settlor wished his sons to be consulted by the Trustees and that this consultation could be both as to "management" of the trust assets and disposition. In the letters of wishes of 22 and 23 December 1991, the Settlor said "I request you to manage as per the wish and instructions of [DJ], [MJ] and [JJ]". The Trustee was advised by Mr Holden that whilst this referred to "management" rather than disposition, there was no reason to circumscribe this wish as if it applied only to the management or investment of the Trusts' assets and the Settlor may well have anticipated his sons being consulted on the distribution of Trust assets. However, he pointed out that this fell short of an expression of a wish that each of his sons were to have the exclusive right to dictate the devolution of his branch's share of the Trust fund.
47. MJ's expressed wishes, which were, unsurprisingly, supported by H and J were that K's new trust should receive only a fixed sum of £1.8 million, the balance going to the trust for H and J. This was justified by MJ on the basis of the Sons/Daughters and Working Family Members Only principles, which he said reflected the customs and culture of a Country 1 family business. However, we note that if it was so ingrained in the [Redacted] family culture it is surprising that it was not mentioned by the Settlor in his letters of wishes nor was it applied by the other branches of the family, whose shares of the trust assets were agreed to be divided equally. That is of course not to say that MJ's wishes should have been disregarded by the Trustees, but it may affect the weight given to his views.
48. No authority is required for the proposition that when considering the exercise of their powers in a matter such as this, trustees should take into account the wishes of the beneficiaries and their needs. Whilst the wishes of H, J and K in relation to the split of trust assets were clear, their financial needs were not. Although the Trustee had sent a detailed financial questionnaire to all three, making it clear that if the questionnaire was not returned then it would proceed on the basis that no beneficiary was asserting any particular financial need, none of the beneficiaries returned the questionnaire. Accordingly, the Trustee proceeded on the basis that none of them had any particular financial need for funding from the trust assets.
49. The Trustee had noted in its Determination that the potential for a dispute within the MJ Branch was apparent to both of MJ's brothers, DJ and JJ. It would appear that JJ took it upon himself to invite K to join the Advisory Group and that there was an initial objection made by J on behalf of the MJ branch to her joining or even attending meetings, but this was not supported by either JJ or DJ, and so K was admitted. It was apparent to the Trustee that K had not been aware of her father's wishes and she made clear her opposition to her father's proposed unequal split as soon as she was informed. Later, while dealing with another dispute that arose within the family, it became clear to the Trustee that MJ, as also H and J, had been in no doubt that K would oppose the letter of wishes as and when she was made aware of the contents. The Trustee concluded that K had not been conditioned to expect a lesser share than her brothers either by the Settlor during his lifetime nor by her father or the previous trustees.
50. However, H and J argued that they were entitled to a greater share of the assets as they had dedicated themselves to the success of the family business and had thereby acted to their detriment.
51. In an affidavit sworn by J on 6 December 2023 he stated, having referred to the Trustee's alleged disregard for the wishes of the Settlor and MJ:
"Having fallen into the errors described above, the Trustee then proceeds to consider the financial circumstances of [H], [K] and I. In this regard, the Trustee has noted that it has not received information as to ours and [K's] financial needs and has therefore assumed that no one has a particular financial need. Whilst it is correct that we have not provided the Trustee with that information, that does not, without more, justify an equal split. All that it justifies is the assumption that none of [K], [H] or I have an immediate financial need."
52. Notwithstanding his acceptance of a lack of financial need, he then went on to assert that he was underpaid for the many years in which he was working in the "family business" (which, it should be noted, comprised businesses that were assets of the trust and others that were not). He exhibited a schedule which detailed the alleged underpayment, which he had submitted to the family some years previously, stating:
"From these documents, I can confirm that I made a claim to the family for a total of £493,085 in respect of both underpaid salary and for overtime work that I did over the years that I worked in the family business. I will explain the following in respect of my claim: (a) The figures in the "Proper Salary" column are derived from what some of my peers (those that I studied with) were earning, doing jobs representing a lower level of skills set and responsibility. I say that I was doing work that required both accounting and finance knowledge and legal knowledge, none of which I had learnt formally, but which I had self-taught and became reasonably proficient at. I am proud to say that I was the one amongst all in the family office best able to deal with accountants and lawyers. (I would refer the reader to the Work Note to see the description of the work that I did, but also see below.) This assertion of mine can also be verified by those members of the family who I have worked with and/or know of my capabilities. As such, I consider the figures shown in the "Proper Salary" column to be a conservative estimate."
53. It would appear that J's claims fell on deaf ears as far as other family members were concerned, J going on to say:
"Most of the discussions over pay, nearly always turning into arguments, occurred verbally in meetings, which always included DJ......I would point out that none of my efforts to communicate and engage with the main target of those communications, DJ, seemed to produce any results whatsoever, apart from more discussions in which we were told as to why we were working to look after our share in the family (including the trusts) wealth and that we are partners and will reap the rewards later."
54. In its Determination, the Trustee noted that Ms Purkis, in her opinion, had "made clear that the trustee could accede to the brothers' position: it would obviously be possible for the trustee to justify, and the court to bless, differing distributions in a case in which a beneficiary had been permitted by the trustee to work on trust assets, and had been under-remunerated for doing so or had enhanced their value".
55. The Trustee further noted that "Linked to the matter of 'expectations" is the question of the financial position of each of the siblings. As per Kathryn Purkis's Opinion "The Jersey trusts represent only a proportion of the family wealth. No full picture of that is available. Nor is it clear how much each individual receives or has in the past received from the family wealth".
56. Notwithstanding J's expressed sense of grievance, his assertion of a quantified under-remuneration was highly subjective, being based on his assessment of the earnings of his university peers. Furthermore, it ignored other benefits that he and H had received from the family assets which included the allocation of three flats in central London to MJ, J and H around 1990 as part of a settlement of an Inland Revenue enquiry and the drawing of family capital by J and H in 1996 or 1997 to buy their respective houses.
57. However, the Trustee went on to say:
"The two difficulties faced by the trustee are:
As per Andrew Holden: that it has no real way of evaluating the extent to which [H] and [J] have either been prejudiced by, or have benefitted from their decision to work for the family business.
...
That whilst the work of the 'London Managers', [the [Redacted] family members responsible for managing the trust property portfolio] is known and can be quantified and assessed, nevertheless the same cannot be said of the work undertaken by MJ and his sons in respect of the family business operated outside the trusts."
58. The conclusion reached by the Trustee on this point was that:
"The expectations raised in the minds of [H] and [J] cannot, in the estimation of the trustee, be attributed either to the Settlor or any former trustees. Any expectations raised by either MJ or the former Protector have, in the estimation of the trustee, less weight than would have been the case had they originated from either the Settlor or the trustee. The argument made regarding the under-remunerated work of the brothers for the benefit of the family has not addressed the issues identified by Kathryn Purkis in June 2019, despite the brothers having had ample opportunity to provide a sufficient response."
59. In its Determination the Trustee noted that:
"MJ's letter of wishes was followed by a letter signed by both MJ and his spouse dated 18th August 2017. The letter sought to provide a rationale for the trustee to approve MJ's dispositive wishes without seeking the consent of his daughter. The letter makes the case for the application of [Country 1] Cultural mores whereby [K] not being a partner in the family business, did not have the same 'status" as her brothers. The letter goes on to explain: "The structure of Country 1 families and Country 1 culture in general and our family specifically treats men working in the family business differently from married women not working in the family business."
60. This was an assertion that was considered in some detail by the Trustee. Ms Purkis was asked to advise the Trustee on this point and she noted that, contrary to what she might have expected, there was nothing in the Settlor's letters of wishes that suggested that he wished the Trustee to distinguish between the claims of men and women to the trust fund, as might be the case if he had intended some form of Sharia equivalent regime to apply.
61. Ms Purkis undertook some research into the Hindu (and Sikh) legal concept of the joint family, and in particular, the laws that relate to joint family property.
62. She noted that the Royal Court in M v W Ltd, re the L Trust [2017] JRC 168A, which was an application by beneficiaries for disclosure of trust documents, considered the concept of a Hindu joint family in the context of an express trust. In its decision the Court stated:
"By the expression "Hindu joint family" (or what is sometimes called a "Hindu united family"), we mean a family where the ownership, production and consumption of wealth takes place on a joint basis - something akin to a cooperative institution, similar to a joint stock company in which there is joint property. In the typical Hindu joint family, the head of the family is like a trustee who manages the property of the family for the material and spiritual welfare of all family members."
63. The Court went on to note that:
"It is noteworthy that in the typical joint Hindu family, the rights and obligations of members of the joint family are the same. None except the head of the family has special privileges, and every member of the family has equal obligations."
64. The Court concluded that:
"This feature of the joint Hindu family sits alongside the Trust and it informs the expectations of the beneficiaries and the way in which we should exercise our discretion in the provision of information to them."
65. Ms Purkis noted that in the present case, the Trustee had never been told that the [Redacted] family operated even in part under such a system, and there was no provision in the trust deed referring to community property, as in the L Trusts case. However, she suggested that the summary of the applicable principles by the Court indicated that if in fact there is something of that kind in place, it would "inform the expectations of the beneficiaries" and potentially be relevant not only to administrative questions like disclosure, but also to the discretions of the trustee on disposition where there is wealth outside the trusts.
66. Ms Purkis had accordingly asked the Trustee to ask the male members of the MJ branch to answer a careful set of questions about their contentions. Efforts were made to elicit detail on the points that appeared to be central, without identifying the doctrine in terms, with a view to then approaching K if necessary.
67. Ms Purkis's response to the answers that were subsequently provided on behalf of J and H was that MJ's family's values were really their own, albeit shaped by their culture, rather than the result of subscribing to an extraneous and independent religious doctrine. Her conclusion was that the Trustee need not therefore view "[Country 1] cultural values" as some sort of extraneous objective factor albeit that expectations of benefit could properly be factored in.
68. K had represented to the Trustee that there was no basis for the Trustee to accede to the "Head of Line" principle. The argument in favour of an informal partnership established between MJ and his sons in the context of Country 1 cultural rules and for the fruits of that partnership to be attributed also in accordance with Country 1 cultural rules were rejected by K. The basis for rejecting the application of Country 1 cultural values or rules, according to K, was that these had no place in a family which was and had operated in accordance with values of their adopted country where the two younger MJ siblings were born. K also rejected her brothers' arguments that they were underpaid and pointed out that they received additional benefits from their father separate from their income.
69. Given the advice from Ms Purkis and the responses from H, J and K the Trustee concluded that in light of the family's current circumstances, the Trustee did not consider that the application of Country 1 cultural values should be given any real weight in its overall deliberation.
70. Having reviewed all the evidence placed before us, we note that the Trustee took careful note of the arguments put forward by H and J and had the benefit not only of opinions from their own counsel but from leading counsel instructed by the other parties. Even if it were to be accepted that H and J had been under-remunerated for their work in the family businesses, the result of their claim to an unequal split would have been that the burden of compensation for that under-remuneration would have fallen solely on K and her descendants rather than on the family as a whole. Furthermore, whilst the Settlor had requested an unequal split between the second generation, he did not express the view that there should be unequal splits, based on the "the Sons/Daughters Principle", "the Working Family Members Only Principle" or the "Head of Branch Principle" thereafter. It is also worthy of note that none of the other three branches of the family appear to have been guided by those principles.
71. In all the circumstances, we find that the Determination was formed in good faith, that it was one which a reasonable trustee properly instructed could have reached, and that the decision has not been vitiated by any actual or potential conflict of interest.
72. As we have already noted, the decision of the Trustee was subject to the Protector's consent. The Representation does not seek any order in relation to the Protector or its consent, nor has the Protector sought the Court's blessing for it. However, in its skeleton argument the Trustee requested the Court to consider the propriety of the decision of the Protector and in the event that the Trustee's decision was blessed, and the decision of the Protector was found to be improper, either to direct the Protector to consent or to give directions to break the deadlock.
73. Given that there was no formal application before us in relation to the Protector's decision and mindful of the principle of non-intervention we declined to consider the making of orders such as those suggested by the Trustee. However, Advocate Renouf, on behalf of the Protector, indicated that should the Court make any comment on the Protector's position, not objecting to such comments being made, then the Protector would give those comments careful consideration. With that in mind we turn to a brief review of certain matters relevant to the Protector's decision.
74. The role of a Protector in considering whether or not to consent to the exercise of a power by a trustee is currently the subject of some judicial debate. In essence, the debate is between what has been described by the Bermuda Court of Appeal as the "Narrow Review Role" and the "Wide Review Role", the former having been favoured by the Bermuda Court of Appeal in Re X Trusts [2023] CA (Bda) 4 Civ, the latter by the Royal Court in Re Piedmont and Riviera Trusts [2021] JRC 248 (Birt, Commissioner).
75. Under the Wide Review Role the protector, when deciding whether or not to give consent to a proposed exercise of a power of the trustees which requires protector consent, must exercise an independent discretion, taking into account relevant considerations and disregarding irrelevant considerations, so that the protector might withhold their consent to a proposed exercise of power by the trustees even if the proposed exercise of power was an exercise of power which a reasonable body of properly informed trustees was entitled to decide upon (the latter being a relevant factor, but not the only relevant factor, for the protector to take into account).
76. Under the Narrow Review Role, the protector must be satisfied that the proposed exercise of a power by the trustees is an exercise which a reasonable body of properly informed trustees is entitled to undertake and, if so satisfied, consent to the same.
77. In Piedmont (at para 90), Birt, Commissioner referred to the function of a court in blessing trustee decisions as a "limited review function", reasoning that:
"A settlor does not choose the Court as a trustee; he chooses his appointed trustee. It is that trustee upon whom the various discretions conferred by the trust deed have been conferred. If the Court were to exercise a wide-ranging role on such applications and decide the matter entirely for itself, the effect would be to constitute the Court as a trustee. That is not the Court's role. The Court's role is a supervisory one and it is simply to ensure that decisions taken by trustees are reasonable and lawful. Accordingly, the Court does not simply substitute its own discretion for that of the trustee."
78. In relation to the protector's function, the Commissioner went on to say that:
"These considerations do not apply to a protector. The settlor has decided that a protector (often himself or a longstanding friend or adviser whose judgment he trusts) should be appointed pursuant to the trust deed and has specified those matters where the protector's consent is required. The settlor must be taken in those circumstances to have intended that the protector should exercise his own judgment in exercising those powers; otherwise, why bother to go to the trouble of appointed a trusted friend or adviser (or himself) as protector rather than someone with a legal qualification to judge issues of rationality. Furthermore, if the role of a protector was simply to review the trustee's decision in the same way that the Court would do, his role would be almost redundant; he would bring nothing to the table that the Court itself would not bring on a blessing application. It follows that, depending on the circumstances, a protector may well be entitled to veto a decision of a trustee which is rational, in the sense that the Court would bless it."
79. The Commissioner did nevertheless recognise that where the protector is exercising a power of consent its role differed from that of a trustee, saying (at para 92):
"In the context of a power to consent, as in this case, a protector's discretion lies within a narrower compass than that of a trustee. He is not the trustee. It is for the trustee to make a decision in the first place as to distributions or in relation to the exercise of any other discretionary power conferred on the trustee. It is emphatically not the duty of the protector to take that decision himself or to force the trustee into making the decision which the protector would make if he were the trustee by stating that he will only consent to a particular decision. That would be to exceed his proper role and to use the power given to him otherwise than for its intended purpose. Such conduct would also almost certainly not be in the interests of the beneficiaries and would be likely to lead to deadlock requiring the intervention of the Court. A protector may often find that he should consent to a discretionary decision of a trustee on the basis that it is for the benefit of one or more of the beneficiaries even though, if he had been the trustee, he might have made a different decision which he thought to be even more beneficial."
80. The Commissioner's approach was criticised by the Bermuda Court of Appeal, Gloster, JA stating (at para 133):
"In my judgment that is an inaccurate description of the role of the Protectors; it fails to include any reference to (i) the special role of the Protectors in bringing relevant information relating to (for example) the circumstances of individual beneficiaries or the wishes of the settlor, to the notice of the Trustees; and (ii) and what Mr Green descriptively referred to as the "control mechanism for the real-time assurance of proper administration of a trust" which "reflects the safeguarding function that the investment of a consent power - rather than a joint power - in the separately constituted fiduciary office-holder entails". Even within the confines of the Narrow Review Role, the Protectors exercise undoubted practical control over the Trustees' discretion, through the leverage of the requirement for the former's consent. That is a significant benefit to the administration of the trust as it might well obviate the need for the Trustees to obtain the assistance of the Court through a Public Trustee v Cooper category 2 confirmation that it has reached a lawful and reasonable conclusion in the exercise of its discretion, as to which I refer further below."
81. Referring to the risk of deadlock Gloster JA went on to say:
"However, it does not seem to me that it is necessary, or indeed appropriate, for this court on this appeal to decide whether or not an application by means of any of the above routes would enable the court, on the application of the Trustees, to override a refusal of consent by the Protectors to a decision by the former. What is clear to me, is that the obstacles and uncertainties which would lie in the way of the Trustees attempting to set aside, or overcome, a refusal of the Protectors to consent to a decision which the Trustees considered manifestly in the best interests of the beneficiaries, strongly support the conclusion that the Narrow Review Role is the correct one. Problems about impasse do not arise when the criteria entitling the Protectors to refuse their consent are clear - namely a decision by the Trustees which the Protectors regard as not reasonable, tainted by improper process or which has failed to take into account relevant considerations. On the assumption that the Narrow Review Role applies, and accordingly the criteria are clear, any disagreement between the Trustees and the Protectors as to whether the latter were entitled to refuse consent, if not resolved by agreement, could be resolved by a simple application to the court under the Public Trustee v. Cooper category 2 jurisdiction. And, contrary to Mr Taube's submission that the Protectors' right to refuse consent is absolute, the Supreme Court's decision in CIFF certainly does not support the notion that a fiduciary, in the position of a protector and holding a consent power, has an absolute right of veto, even in circumstances where the court considers that the primary decision taker, such as a trustee, had reached a rational and proper decision to exercise a power of appointment."
82. Given that no order was sought from the Court in relation to the Protector's refusal of consent, the question as to which of the Narrow View or the Wide View should be applied was not argued before us and we therefore express no view on it.
83. Instead, the Trustee suggested, without objection from the other parties, that until these open issues of law are definitively resolved the law relating to the exercise of the Protector's consent function may nevertheless be stated in the following terms:
(a) The Protector's consent function, whether wider (being an independent discretion) or narrower (being a pure review function) is nevertheless clearly subsidiary to the Trustee's own decision. The Protector does not exercise a joint power with the Trustee.
(b) It follows that, in determining whether to consent to the Trustee's exercise of its power, the Protector should not consider how it would have exercised the Trustee's power. Nor should the Protector refuse to consent to the Trustee's exercise of its power on the basis that it (the Protector) might have exercised the power in a different way, had it been the Trustee. Rather, the Protector's role is to consider how the Trustee has exercised the power, and to determine whether to consent to that exercise of the Trustee's power on the basis of an evaluation as to whether it is in the best interests of the beneficiaries as a whole for it to do so.
(c) If the Protector's refusal to consent to the Trustee's exercise of its power is irrational or otherwise legally flawed, the Court has jurisdiction to overturn the Protector's veto.
(d) By contrast, if the Protector's refusal to consent to the Trustee's exercise of its power is itself a proper exercise of that function, the Court can either (i) give directions for further discussions between the Trustee and the Protector to see whether the deadlock can be broken by a process of dialogue; or (ii) break the deadlock which has emerged by directing the Protector's exercise of its power (by analogy to the Court's ability to break a deadlock between co-trustees acting in good faith). In deciding how to proceed in this regard, the Court will no doubt consider the history of the matter, the circumstances in which the deadlock has arisen, and whether further dialogue or a decision by the Court itself is likely to be in the best interests of the beneficiaries as a whole.
84. Whilst not ruling on the matter, we can see some merit in the Trustee's suggested approach. What is clear is that the Protector's consent is subsidiary to a decision by the Trustee. Without a decision of the Trustee there is nothing to which the Protector can consent. The Protector therefore exercises a review function, irrespective of whether it is a narrow or wider review, and is not exercising a power jointly with the Trustee.
85. The Protector, Turicum Services Limited ("Turicum" or "the Protector"), held a meeting on 4 April 2024, to consider whether to provide its consent to the decision of the trustee of the Trusts in relation to the allocation of the Trusts' assets. As we have already noted, the original Protector of the Trusts was F, the late father of the two present directors of Turicum. Turicum became the Protector of the Trusts and discharged its obligations in that regard through the late F until his death in 2023.
86. The conclusion of the meeting was that:
"It was determined that there were marginally more factors weighing in favour of an uneven split than there were weighing in favour of an even split. It was decided that the MJ Branch assets should be split unevenly, with [K] receiving less than each of [H] and [J]. It was however determined that the Company invite the trustee to make alternative proposals, such that may enable the trustee to obtain a negotiated agreement."
87. In reaching its decision the Protector indicated that it had had regard to the following factors:
(i) The former Protector, and late father of the directors of the Company, was a very close friend and trusted advisor of the Settlor, and his evidence of the Settlor's wishes were relevant because of that proximity. It was determined that little guidance could be found in the wording of the trust instruments.
(ii) It was noted that the Company should not attach any weight to the former Protector's personally held views, though his evidence of the Settlor's wishes was relevant. Upon review of all the documents, it was considered that the Settlor did favour arrangements that preferred those family members who worked in the family businesses, and the Settlor did wish each branch head to be consulted in relation to the administration of his branch. It was determined that some weight ought to be attached to these views, though they alone were not determinative of the Protector's position.
(iii) It was noted that MJ had expressed a clear wish which he justified by reference to both the cultural preference for sons and the preference for those working in the family businesses. It was also noted that the Company must assess for itself the validity of the justification which MJ advanced. It was determined that some weight could be attached to MJ's views.
(iv) It was noted that cultural traditions were a relevant consideration to the extent to which they informed the views of the Settlor and MJ and the expectations of the beneficiaries. It was noted that MJ was influenced by cultural traditions, though the expectations to which they gave rise in the beneficiaries are perhaps less certain. It was determined that some weight could be attached to the cultural traditions, but only to the extent that they held any importance to the relevant persons.
(v) It was determined that the beneficiaries' contributions to the family businesses was a relevant factor, though it was noted that it was not possible to be certain how to quantify those contributions or whether they had been suitably remunerated. Overall, some weight could be attached to such considerations though it was noted that more detail would have been helpful.
(vi) It was noted that K had received less from family assets (whether from the Trusts or otherwise) than her brothers and this was relevant. It was also noted that none of the beneficiaries claimed any financial hardship or had expressed any plans that would require the trustee to assist financially in future.
(vii) It was determined that deadlock was undesirable and that there was therefore some weight to be attached to the Company reaching a conclusion that avoided deadlock. This was not a determinative factor but was relevant.
(viii) Issues of discrimination were relevant to the Court, but not the trustee or the Company. No weight would be attached to such factors so far as they might impact the Company's obligations.
88. It is clear that the Protector was influenced by views that had previously been expressed by the late F, the father of the director of Turicum who took the decision.
89. In an email sent on 29 August 2018 by F to Mr Haynes of the Trustee, in response to "a request for recommendations in the distribution of JLS Trust assets to MJ branch", F said:
"I have been humbled by the faith and trust placed in me by JLS and it is of paramount importance to me that his wishes are followed. Having regard to the above, I am firmly of the view, and it is strong recommendation that the trust assets should be distributed within each branch according to the wishes of the respective head of the branch. In the case of the MJ branch, it should follow the wishes of MJ, which he has conveyed via his letter of wishes dated 01 July 2015, attached. To do so any other way would be contrary to the wishes of the Settlor and my room for discretionary decisions is non-existent where the head of a branch has specifically expressed his wishes."
90. F would appear, in using the words "my room for discretionary decisions is non-existent", to have felt that he had no option other than to follow the wishes of the Settlor and, after his death, those of the Settlor's son, MJ. There was no suggestion in that email that he recognised that he had any form of review function in respect of the Trustee's decision nor that he was prepared to take into consideration any other matters that might be relevant to the Trustee's decision.
91. The note of the Protector's meeting of 4 April 2024 (albeit a meeting of just one of the two directors of the Protector), suggests that it had directed its mind to issues in addition to the wishes of the Settlor and MJ although it is to be noted that all the factors to which it ascribed "some weight", save for K's lack of benefit from the trusts and the importance of avoiding deadlock, were in effect various iterations of those wishes as they understood them to be. Having ascribed "some weight" to a number of considerations, the Protector concluded that there were "marginally more factors weighing in favour of an uneven split than there were weighing in favour of an even split".
92. There was little indication that the Protector was conscious of the need to review the decision of the Trustee rather than taking its own decision: the marginal nature of the Protector's view of the merits of an unequal split would clearly have been relevant in relation to the former. Indeed, the note of the meeting suggests that the Protector was in effect deciding how it would have exercised the trustee's power had it been the trustee, stating "[i]t was decided that the MJ Branch assets should be split unevenly, with [K] receiving less than each of [H] and [J]".
93. F's view of the Protector's role, whilst possibly a misunderstanding, no doubt arose from the fact that he was the Settlor's adviser on banking matters rather than being a professional protector. It is clear that he regarded his role as that of simply carrying out the wishes of the settlor or at least those wishes as he understood them to be.
94. In a letter dated 8 December 2023 from Advocate Pinel, on behalf of Turicum , to Advocate Dann on behalf of the Trustee, Advocate Pinel stated: "Turicum confirms and re-states the position articulated by [F], as former protector to the Trust and then former owner/director of Turicum, namely that Turicum believes that the distribution of assets within the MJ branch of the family should be made in accordance with MJ's wishes. As such, the Protector is not able to give its consent to the Determination".
95. Whilst that letter pre-dates the meeting held by a director of the Protector at which the Protector's decision was reached, it supports the view that the decision was heavily influenced by the views expressed by the director's father and that a sense of family loyalty may have obscured the need to reconsider the role of the Protector. In saying that, we mean no disrespect to the directors of the Protector. Protectors are often chosen for their connection to the settlor rather than for their professional experience in acting as a protector. The office of protector is far less developed in terms of case law than that of the trustee and protectors often take on the role with little guidance as to how it is to be discharged. As the debate over the role of a protector in the X Trust case demonstrates, the protector's role is still the matter of some judicial debate. Nevertheless, we regard the Protector's consent as subsidiary to a decision by the Trustee and the Protector should not therefore regard itself as a co-trustee, which it would seem, the Protector did in this case.
96. We recognise that we have not been asked to make a finding on the validity of the Protector's decision, but we would hope that our comments may be of some assistance to the Protector should it decide to reconsider its decision.
97. For the reasons set out above, we accordingly bless the decision of the Trustee as set out in the Determination. Subject to there being no objection from any of the other parties within fourteen days of the formal handing down of this judgment, we order that the Trustee shall have its costs of this application on the trustee indemnity basis, and the costs of the parties otherwise be reserved.
Authorities
Trusts (Jersey) Law 1984.
Representation of Otto Poon Trust [2015] JCA 109.
M v W Ltd and Ors, re the L Trust [2017] JRC 168A.
Re X Trusts [2023] CA (Bda) 4 Civ.