T & N Asbestos Trustee Company Ltd, Re

Where trustees seek the court’s blessing for a momentous decision within their powers, the court does not substitute its own judgment for that of the trustees. It must be satisfied that the proposed exercise is lawful, within the scope of the powers, and consistent with the conduct of ordinary, reasonable and prudent trustees. The trustees must have formed the view that the proposal benefits the beneficiaries or trust estate, while disregarding irrelevant, improper or irrational considerations and any collateral purpose. The court acts cautiously and may withhold approval if the evidence leaves genuine doubt about the proposal’s propriety. Broad trust powers may extend to transactions adapting trust assets over time where that is consistent with the trust’s overall purpose.

The claimant, the sole trustee of the UK Asbestos Trust, sought approval under a Part 8 claim to enter into an agreement with the Federal-Mogul Asbestos Personal Injury Trust and to amend the Trust Deed and Trust Distribution Procedures. The proposed arrangements would reorganise Hercules recoveries, transfer certain reversionary interests, and enable an expected surplus in the Chester Street Fund to be used for the benefit of trust claimants.

The proceedings were notified to a wide class of interested parties. No person gave notice of an intention to participate, and the application proceeded unopposed. The central issues were whether the Trustee had power to enter into the transaction and make the amendments, and whether the proposed exercise of those powers warranted the court’s approval.

1. Application granted. The Trustee was authorised to enter into the proposed transaction with the US Asbestos Trust and to make the related amendments to the Trust Deed and Trust Distribution Procedures.
2. In a momentous-decision application where the trustees retain their discretion, the court’s function is limited. It must determine whether the proposed exercise is lawful and within the trustees’ powers, whether the trustees have acted as ordinary, reasonable and prudent trustees, and whether irrelevant, improper or irrational considerations or a collateral purpose have affected the decision. The trustees must have formed the view that the transaction is for the benefit of the beneficiaries or trust estate. The court does not refuse approval merely because it would have exercised the power differently, but it acts cautiously because approval may prevent later challenge by beneficiaries. Approval should be withheld if the evidence leaves doubt as to the proposal’s propriety.
3. The Trust Deed conferred sufficiently broad powers. Clause 6.1.1 gave the Trustee all powers necessary to implement the Trust and permitted such powers as the Trustee thought fit. Clause 6.2.13 permitted changes to or variations of property forming part of the Fund Assets. Clauses 6.2.20 and 7.2.1 and 7.2.4 provided further relevant powers concerning commutation, acquisition of interests, and contractual dealings. Those powers were not confined to the assets in their original form. The Trust’s structure contemplated that the nature of the assets might change during its anticipated lifespan.
4. Clause 19.1 of the Trust Distribution Procedures permitted amendments appearing to be in the best interests of beneficiaries, subject to maintaining the Core Objective in clause 1.3. The proposed arrangements preserved that objective because they promoted fair and proportionate payments, while allowing surplus assets to be used immediately and efficiently.
5. The Trustee had obtained actuarial advice, assessed the risks, and properly concluded that the arrangements were in the interests of trust claimants. Adequate notification had been given to interested parties.

First-instance decision. No appellate history is stated in the judgment.