Bathurst & Anor v Bathurst & Ors (Rev 1)

When varying a trust, the court may approve a change to the appointment of trustees where the arrangement, viewed as a whole, benefits minor and unborn beneficiaries. A power to nominate trustees, including one held by a principal beneficiary, is fiduciary where exercised in the context of the trust. A trustee’s concern that a beneficiary may appoint unsuitable or compliant trustees does not justify rejecting the arrangement without evidence that the proposed power will be misused. Where the competing alternatives are both acceptable, the court may approve the version proposed as part of the wider arrangement. The balance must weigh considerably against that version before the court can reject the arrangement because of that isolated feature.

The claimants applied under the Variation of Trusts Act 1958 for approval of a trust arrangement affecting minor and unborn beneficiaries. One part of the arrangement would change the power to appoint new trustees. The original settlor had retained that power during his lifetime, but he had died, so the statutory power under section 36 of the Trustee Act 1925 applied.

The proposed arrangement gave the principal beneficiary for the time being power to nominate new trustees, subject to the written consent of the trustees. All adult beneficiaries and three of the four trustees supported the proposal. The fourth trustee preferred that the trustees should nominate, subject to the principal beneficiary’s veto. The issue was whether the proposed appointment provision was sufficiently beneficial to justify approval of the arrangement.

1. The arrangement was approved. The proposed change was not a radical departure from the original settlement because the settlor had initially reserved the appointment power to himself, rather than entrusting it to the existing trustees.
2. Both competing versions involved nomination by one side and a veto by the other. Neither created an unfettered power of appointment. The difference was principally which side nominated the candidate.
3. The power to nominate trustees in this context was fiduciary: Re Skeats’ Settlement (1889) 42 Ch D 522. The trustees’ veto was likewise fiduciary because it was conferred on them as trustees. The court saw no reason to assume that the principal beneficiary would fail to take the responsibility seriously, consistently with the approach reflected in Schroeder v IRC [1983] STC 480.
4. The concern that beneficiaries might appoint unsuitable, partisan or compliant trustees was insufficient. The court had no evidence that trustees were necessarily better placed than the principal beneficiary to identify candidates, and the trustees’ experience and contacts could still inform the beneficiary’s decision through prior discussion. If a fiduciary power were misused, the courts could intervene.
5. The principal beneficiary was at least as well placed as anyone, and better placed than most, to assess the qualities required in a trustee given the settlement’s purposes, the interests of the extended family and the beneficiary’s long relationship with the trust assets.
6. Even if the two alternatives were equally balanced, the proposed version formed part of an arrangement otherwise beneficial to the protected beneficiaries. The court could not reject the arrangement merely because this feature was neutral, or because the balance marginally favoured the alternative. The balance would have to weigh considerably against the proposed version before it could outweigh the benefit of the scheme as a whole.