Analysis
The sole trustee of the X Foundation Trust, a Bahamas trust, applied to the court for directions pending the determination of two sets of proceedings before a foreign court (the foreign court proceedings), with respect to the mental capacity of the settlor of the trust (the settlor).
The trust was a discretionary trust whose class of beneficiaries included the settlor and members of his family, as well as companies which received distributions from the trust to pursue charitable activities. The trust instrument provided for a protector, termed an appointor, with power to appoint and remove trustees. A number of the trustee’s powers could only be validly exercised after giving notice to the appointor and compliance with further procedural steps provided for in the trust instrument. The settlor was the original appointor.
By a deed of appointment dated 6 October 2003 (the 2003 deed of appointment), the settlor purportedly appointed one of his daughters (Daughter A) to be the successor appointor of the trust with such appointment to take effect ‘upon the Settlor’s resignation, disability or death’. By a deed of appointment dated 1 March 2004 (the 2004 deed of appointment), the settlor purportedly appointed his only son (the Son) second successor appointor, to hold office after Daughter A.
In September 2018 the settlor suffered a subdural haemorrhage. Between April and July 2019 the settlor purportedly executed documents with a view to investing the Son with the rights and powers of the appointor (the 2019 documents).
On 3 July 2019, the trustee declared the settlor to be incapacitated and took the view that Daughter A thereupon became the appointor, in accordance with the 2003 deed of appointment. A dispute then arose between Daughter A on the one hand and on the other the Son and other family members, who supported the Son’s position that he was the appointor based on the 2019 documents.
In 2019 Daughter A commenced proceedings in the courts of the settlor’s jurisdiction of residence as to the settlor’s current mental capacity (the MH proceedings). The trustee was not a party to the MH proceedings. The Son also commenced proceedings in that foreign court (the historic capacity proceedings) seeking to uphold the validity of the 2019 documents, through a declaration of the settlor’s mental capacity at the time. Daughter A applied to stay the historic capacity proceedings on jurisdictional grounds, relying in part on an argument that the trust instrument conferred exclusive jurisdiction on the courts of the Bahamas. That stay application was to be heard by the foreign court within days of the judgment in this case.
Against that background the trustee sought directions for the interim management of the trust pending the outcome of the foreign court proceedings. The directions sought were as to:
- (i) the steps, if any, the trustee should take in relation to the foreign court proceedings;
- (ii) the interim measures that should be put in place to secure the safe administration of the trust;
- (iii) the disclosure of trust documents in the interim to the settlor and/or the Son; and
- (iv) how the trustee should treat the final outcome of the foreign court proceedings.
Held:
When hearing an application by a trustee for directions under s77 of the Trustee Act, 1998 the court was essentially engaged solely in determining what ought to be done in the best interests of the beneficiaries and not in determining the rights of adversarial parties.
In respect to the directions sought:
- (i) As was common ground, the trustee should take no steps in relation to the foreign court proceedings.
- (ii) Having reviewed the evidence to be presented in the foreign court proceedings on a preliminary basis, the trustee may administer the trust in the interim on the footing that Daughter A was the appointor, as this represented the status quo.
- (iii) The trustee should not disclose trust documents to the settlor unless he directly made the request. Otherwise, they might fall into the wrong hands. The trustee ought not to disclose any trust documents to the Son until the appointorship issue was resolved.
- (iv) It was premature to give directions with respect to the outcome of the foreign court proceedings before that outcome was known.
The trustee and the other parties were entitled to be indemnified for their costs of the application from the trust fund.
JUDGMENT CHARLES J: Introduction [1] Pursuant to s77(1) of the Trustee Act, 1998 (‘the Act’), Cititrust (Bahamas) Limited (‘the Trustee’) seeks the Court’s ‘opinion, advice and/or directions’ in relation to certain matters to ensure the orderly and safe administration of the X Foundation Trust (‘the Trust’) pending the determination of two sets of proceedings before …Continue reading "Re X Foundation Trust [2022] WTLR 1165"