Analysis
The trustee of a Jersey trust known as the May Trust made a Public Trustee v Cooper Category 2 application for a ‘blessing’ of its decision to make a distribution to a beneficiary (B). The primary purpose of the distribution was to allow B to benefit a charity, which was also a beneficiary of the trust. The application was uncontentious.
The trust had been declared in 2000 by a deed of appointment. The appointing trust had been settled by B’s father in Cayman in 1982. The governing law of the May Trust was changed from Cayman law to Jersey law. The assets of the appointing trust were derived from the business activities of the settlor and earlier generations of B’s family, which now operated globally and continued to enjoy financial success.
The May Trust was a discretionary trust and B had been treated as the principal beneficiary. The other beneficiaries of the trust included B’s children (all adults), grandchildren (all minors) and remoter issue. A charitable foundation (the Foundation) was also a beneficiary. B and B’s wife were trustees of the Foundation, an incorporated English charity.
The assets of the May Trust were about £150m and it was likely to receive further assets from the appointing trust of about £1.5m a year. Distributions of about £8m had previously been made from the May Trust to charities, which had been added as beneficiaries so as to be able to be benefited and then removed. Only relatively small amounts had been distributed to non-charity beneficiaries.
The trustee sought approval of a decision in principle to distribute £75m to B, for onward transfer to the Foundation. The trustee also anticipated making distributions to B’s adult children, following which, if the trustee’s proposal was approved and implemented, the remaining assets of the trust would be worth about £50m. The trustee anticipated receiving a further request for a distribution of £30m to charitable causes selected by B’s children. All adult beneficiaries subscribed to a consistent charitable ethos and pursuant to that ethos supported the work of the Foundation and the proposed distribution to B.
Unusually, B had requested that the distribution of £75m be made to him, rather than to the Foundation directly, so that he should be liable to pay UK tax at 45% on a portion of the sum distributed to him, which portion would be donated to the Foundation net of tax paid. It was intended that the Foundation would not be able to reclaim the tax paid by way of Gift Aid in respect to this portion, but would do so on the remainder. B would determine the size of the portion to be subject to tax. The adult beneficiaries believed UK tax should be paid on at least a part of the distribution to B, on the basis that the payment of tax enables government to provide a broader social benefit. The anticipated result was that the Foundation would receive 75% of the distribution, with the balance (about £18.75m) being retained by the UK government as tax due from B.
Held:
The court approved the trustee’s decision.
When considering whether a distribution was of benefit to a beneficiary, benefit was to be given a wider meaning than financial benefit. The trustee must find that objectively the distribution would confer benefit and should take into account the subjective views of the beneficiary when considering that issue. Where a distribution was intended to be used for a charitable purpose, the court was not required to find that it would relieve the beneficiary from a moral obligation that they would otherwise wish to meet from their own resources, X v Y [2006] not followed. In this case, particularly as the Foundation was itself a beneficiary of the trust, there was little doubt that enabling payments to be made to it via B was of benefit to B and the family beneficiaries more widely. In view of B’s social views, it was of benefit to B to make a distribution on the basis that B may opt to pay tax on part of it before making donations to the Foundation. On the facts of the case, the size of the proposed distribution to B would not amount to an unreasonable exercise of the trustee’s powers.
JUDGMENT THE COMMISSIONER: [1] The Representor presented a Representation to the Royal Court on 5th February 2021, as a result of which the Court made orders that the Representation should be heard in private until further order and that the Respondents should be convened for 10am on 3rd March 2021 when the Representation would receive …Continue reading "Re May Trust [2022] WTLR 637"