Walbrook Trustees (Jersey) Ltd & Ors v Fattal & Ors

A trustee who holds property as nominee or bare trustee must comply with the trust instrument’s express directions. Where the instrument requires effect to be given to each beneficiary’s directions concerning that beneficiary’s share, disagreement cannot be resolved by allowing a dissenting beneficiary a veto. In the absence of an express limitation, the court exercising its trust-administration jurisdiction may appropriate separate parts of the fund to beneficiaries and direct changes needed to give effect to the trust. A valid appropriation binds all beneficiaries, whether or not they consent. The principle applicable to shares in a company limited by shares can apply in principle to membership rights in a company limited by guarantee. A related joint venture or previous practical control does not imply a continuing unanimity requirement where the later trust deed contains no such restriction.

This was an appeal by the first to third defendants from an order of Blackburne J made in administration proceedings concerning the BSL Trust. The High Court’s decision is reported at [2009] EWHC 1446 (Ch).

The trust concerned membership rights in a company limited by guarantee. Two members held those rights as bare trustees for four family trusts in stated proportions. The non-Fattal parties sought an order requiring the admission of two additional members, so that each 25 per cent interest could be represented separately and the trustees could comply with the beneficiaries’ written directions. The Fattal Parties argued that this would alter the trust and required unanimous consent. The central issue was whether the court could divide the membership rights and direct the appointment of additional nominee members in execution of the trust.

Appeal dismissed. Lord Justice Patten gave the judgment, with Lady Justice Arden and Mr Justice Briggs agreeing.

1. Jurisdiction. Part 64 of the Civil Procedure Rules 1998 enables the court to determine questions arising in the execution of a trust and to direct its execution. The order sought was therefore within the type of trust-administration jurisdiction identified in the rule.
2. General position of trustees. Trustees of a fund held for several beneficiaries must consider the beneficiaries’ views on a proposed course concerning the trust assets, but must ultimately decide whether the course benefits the trust as a whole. In the ordinary case, an individual beneficiary has no veto.
3. Effect of the express trust terms. The BSL Trust made Walbrook (Jersey) and Witco nominees or bare trustees. Clause 2 required them to act on the written directions of each relevant owner concerning that owner’s proportion of the membership rights. Resolving disagreement by doing nothing would give the dissenting minority a veto and would contradict the clause. The trust instrument contained no requirement of unanimity.
4. Division and appropriation. Unless the trust instrument expressly limits the power, the court and trustees may divide the trust fund by appropriating specific parts to individual beneficiaries. A valid appropriation binds all beneficiaries, whether or not they consent. The principle applied to shares in a company limited by shares in Re Marshall [1914] 1 Ch 192, and there was no reason in principle why it should not apply to BSL’s membership rights in a company limited by guarantee.
5. Related arrangements. The court did not decide whether the JVA continued to bind the parties. It nevertheless held that neither the JVA nor the Fattal Parties’ former de facto control over a sale of BCIL could be translated into an implied unanimity requirement under the BSL Trust. Any such restriction would have needed to be expressed in the trust instrument. The order requiring the admission of additional members was therefore upheld.

• Court of Appeal (Civil Division) dismissed the appeal from the High Court order: [2010] EWCA Civ 408.
• High Court, Chancery Division (Blackburne J) made the order requiring steps to admit additional members of BSL in execution of the BSL Trust: [2009] EWHC 1446 (Ch).