Belen Clarisa Velutini Perez v Equiom Trust Corporation (UK) Limited & Anor

A declaration is discretionary. The court should grant one where it has real utility, is grounded in concrete facts, and is the most effective way to resolve the issue and prevent future disputes.

A trustee’s retention must be based on reasonable, but not fanciful, assumptions about prospective or contingent liabilities. The trustee must make proper enquiries and provide an evidential basis for the sum retained.

A trustee’s statutory indemnity may be curtailed for misconduct construed broadly to include unreasonable conduct. In guidance proceedings, trustees should act neutrally and in the interests of the trust. Where misconduct cannot be allocated precisely to particular costs, a percentage reduction may be appropriate.

The claimant, aged 98, revoked a revocable English-law trust and established a new irrevocable trust on substantially similar terms. The defendants, former trustees, initially questioned the validity of the revocation but later accepted it and agreed that the trust assets should be transferred to the new trustees.

The claimant sought a declaration confirming the revocation, an order requiring transfer of the assets, directions concerning the former trustees’ retention for prospective liabilities and costs, and a ruling on their entitlement to rely on their indemnity.

The central issues were whether declaratory relief remained useful despite the defendants’ acceptance of the revocation, what amount could properly be retained, and whether the defendants’ conduct justified curtailment of their indemnity.

1. Declaration. Applying the principles in Rolls-Royce v Unite the Union [2009] EWCA Civ 387, [2010] 1 WLR 318, the court held that declaratory relief was discretionary and that the relevant touchstone was utility. The history of the defendants’ doubts and the risk of future satellite disputes meant that a declaration confirming the validity of the revocation was useful and proportionate. The declaration was granted.
2. Transfer. The delays were not wholly attributable to one side, but insufficient progress had been made. The claimant and former trustees were ordered to take, or procure the taking of, the necessary steps to complete the transfer within 28 days of hand-down, with witness statements identifying outstanding matters and a further hearing if required.
3. Retention. The applicable approach was that a trustee may retain sufficient assets to meet the worst case based on reasonable but not fanciful assumptions, after proper enquiries. Following Concord Trust v The Law Debenture Corpn plc [2005] 1 WLR 1591, the risk of a liability had to be reasonably arguable. The approach in White Willow (Trustees) Limited v Trilogy Management Limited [2022] JRC 120, treating any minimal risk as non-fanciful, was not accepted. The alleged risk arising from the PMA Arbitration was entirely fanciful and unsupported by evidence, so no retention was allowed for it. On the limited evidence, US$500,000 was allowed as a combined retention for handover and litigation costs. The balance was to be released, and the retention was limited to 12 months.
4. Indemnity. Under section 31(1) of the Trustee Act 2000, the former trustees’ indemnity depended on whether expenses were properly incurred and incurred when acting on behalf of the trust. Following Price v Saundry [2019] EWCA Civ, misconduct included unreasonable conduct, not merely dishonesty. The proceedings were guidance proceedings in the Re Buckton sense, but the former trustees had acted aggressively, partially and unreasonably, causing unnecessary costs. Their indemnity was therefore curtailed to 70% for the proceedings and asset transfer. The retention remained US$500,000.