Momentous decisions for trustees – Public Trustee v Cooper Applications in the BVI
As in many onshore jurisdictions, applications regularly at the forefront of the offshore trust landscape are blessing applications made by trustees under the jurisdiction arising from the English case of Public Trustee v Cooper.
In Public Trustee v Cooper the Court held that there are four categories under which the Court’s jurisdiction can be engaged by trustees seeking directions. The most common is category two, where the trustee considers it has the requisite power but seeks the Court’s blessing in advance of what it considers to be a particularly momentous decision for the trust.
The Court will take into account the following considerations when blessing trustee decisions:
- Whether the step to be taken is momentous
- Whether that step is within the trustee’s powers and for a proper purpose
- Whether the step is one which a prudent trustee would take; and
- There must be full and frank disclosure to the Court of all relevant factors
Trustees are often keen to obtain the Court’s blessing because having a decision blessed means that the beneficiaries cannot subsequently seek to challenge the step or decision or seek to have it set aside. The trustee will also protect him or herself from personal liability. Where the Court does not provide its blessing, the trustee can still proceed but it will not have the benefit of protection from any claims arising subsequently from it having taken the step.
Whilst blessing applications tend to be heard in private, notice of the application is generally given to beneficiaries so that any objections can be addressed by the court at that time. Indeed, giving the beneficiaries the opportunity to object provides additional protection for the trustee.
As a result of the protection afforded to a trustee by obtaining a court blessing, there is sometimes a tendency for trustees to seek blessings where a decision is not truly momentous or it is not otherwise appropriate. This is what led the Jersey court in the recent case of In the Matter of H Trust to decline to bless a trustee decision. In this case, the trustee wanted to sell a property and use the proceeds to wind up the trust and pay creditors and this course was opposed by the beneficiaries. The Court, however, declined to bless the decision as it considered (1) that there was a conflict of interest because the trustee was also a creditor of the trust, (2) the trustee had failed to take tax advice and therefore did not take into account a relevant consideration, and (3) the trustee had failed to pursue other options. Generally, however, the BVI court will be sympathetic to trustees who consider that they need the Court’s blessing.
The BVI court regularly deals with blessing applications from trustees (filed by way of a fixed date claim form). These are generally filed under seal and the sealing application is usually dealt with on paper. The usual position in such applications is for the matter to be dealt with in private. Although it is usual when a claim is filed by way of a fixed date claim form, for the first hearing just to deal with directions, in appropriate cases where there are no significant issues and/or where time is of the essence, it is possible (as happened in a recent case) for the whole matter to be dealt with at the first hearing. In many cases trustees can therefore obtain blessings of their decisions in the BVI in a quick and efficient manner.
