In the matter of F Trust –

WTLR Issue: June 2016 #160





The applicants, three trustees of the F Trust and the A Settlement (the trusts), applied, pursuant to s47A of the Trustee Act 1975 and/or the inherent jurisdiction of the Court, to set aside deeds of appointment and retirement of trustees executed in 2005 and 2008, respectively, to the extent that they appointed the first defendant as a trustee.

The F Trust and the A Settlement were established in Bermuda with the same corporate trustee in 1958 and 1968 respectively. Individual trustees were subsequently appointed. The first defendant, a British resident, was appointed in 2005 (by the first and second applicants) and in 2008 (by the settlor) as a trustee of the F Trust and the A settlement respectively. Despite some anxiety about the UK tax implications of such appointment neither UK tax advice nor legal advice was sought.

As regards the F Trust, the immediate adverse tax implications only regarded income tax. However two years after appointment, in 2007, there were also Capital Gains Tax (CGT) consequences due to tax changes, which had been the subject of public consultations in the UK at the time of the appointment. Had tax advice been taken at the time of appointment, the appointment of the first defendant would not have been made as any reasonably competent tax adviser would have pointed out that the first defendant would be likely to be caught by the new legislation at some point when the legislative proposals were brought into force. As regards the A Settlement appointment in 2008, the adverse tax consequences were immediate.

The trustees subsequently made voluntary disclosure to HMRC and met the assessed UK tax liabilities. However they wished to return the Trusts to their original tax status outside of the ambit of the UK regime. HMRC were given notice of the application but chose not to intervene.

Held, setting aside the flawed exercise of the powers of appointment in relation to the appointment of the first defendant in respect of the trusts:

      1. 1) The applicants, as trustees, had standing to make the application.
      2. 2) The statutory jurisdiction under s47A could be engaged in respect of fiduciary powers, whether conferred or exercised before, on or after the commencement of s47A.
      3. 3) The relevant power of appointment of trustees in each case was fiduciary in character in the requisite statutory sense. Accordingly any flawed exercise of this power was eligible for relief.
      4. 4) The grounds for exercising the jurisdiction conferred by s47A were clearly met in that there was evidence of a failure to take into account financially significant factual and legal considerations which were relevant to the exercise of the power, namely the tax implications of the first defendant’s residence for the Trusts and the power would not have been exercised or would have been exercised in a different manner if appropriate advice had been sought and received.


Section 47A

    conferred an unfettered discretion upon the Court to grant relief provided the threshold requirements were met. Its application should not be trammelled by the imposition of any particular test but should be applied to the facts of each case. In the present case it was appropriate to exercise that discretion.
Introduction [1] By Originating Summonses issued on 8 June 2015 in each of the two related actions by the same Plaintiffs, three Trustees of the F Trust and the A Settlement (the Trusts) sought Orders setting aside Deeds of Appointment and Retirement of Trustees executed in 2005 and 2008, respectively, to the extent that they …
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Counsel Details

Mr Keith Robinson, Appleby (Bermuda) Limited (Canon’s Court, 22 Victoria Street,  PO Box HM 1179, Hamilton HM EX, tel +1 441 295 2244, email for the plaintiffs.

Mr Craig Rothwell, Cox Hallett Wilkinson Limited (Cumberland House, 9th Floor,  1 Victoria Street, P.O. Box HM 1561, Hamilton HM FX, tel +1 441 295 4630, email for the second and third defendants.

The first defendant did not appear.


Cases Referenced

Legislation Referenced

  • Trustee Act 1975, s47A
  • Trustee Amendment Act 2014
  • Trusts (Special Provisions) Act 1989, s12B(J)