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Bermudian Court validates a trustee’s defective appointment

In a recent decision of the Supreme Court of Bermuda (In the Matter of the C Trust), Chief Justice Hargun provides helpful guidance on the approach a Court may take to resolve defective appointments of trustees and also makes clear that the potential scope of the exercise of a Court’s inherent jurisdiction to intervene in the administration of a trust is not exhaustive and may be engaged in appropriate circumstances.

The brief facts relevant to the application were that the trustee was advised by its legal advisers that its appointment in 2015 was likely to be invalid or ineffective or void in circumstances where the power of appointing new trustees of the C Trust was given solely to the two Protectors specified in the trust instrument acting jointly, but the trustee’s appointment was in fact made with the consent of a sole successor protector appointed in 1997 (and the validity of the sole successor Protector’s own appointment was in doubt).

The Court granted the trustee’s application (supported by the adult beneficiaries and guardian ad litem) for orders that (1) the trustee be appointed from the date of the order as the sole trustee of the C Trust under the statutory jurisdiction of the Court to appoint trustees, and (2) exercising the inherent jurisdiction of the Court, the trustee be at liberty to continue to manage the assets of the C Trust on the basis that it had been validly appointed as trustee of the C Trust by a 2015 deed.

In granting the orders sought, the Court considered both its statutory jurisdiction and inherent jurisdiction, including the cases of Re New [1901], Chapman v Chapman [1954], Schmidt v Rosewood Trust Ltd [2003] and In the Matter of the Z Settlement [2016] and found that these cases “provide support for the proposition that the Court may, exercising its inherent jurisdiction, order that the current trustees leave undisturbed the acts or omissions of previous trustees, the validity of whose appointment may be in issue, so that the trust is administered on the same footing as though those acts or omissions has been validly done with the authority of the duly constituted trustees.

The Court’s orders were a pragmatic and sensible response to a situation which arose through no fault of the trustee or beneficiaries and was in the best interests of the C Trust, as opposed to the impossible and expensive task of re-constituting the records of the C Trust over the last 20 years.

Bermudian Court validates a trustee’s defective appointment

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