Re Safe Hands Plans Limited (in administration)

A trust deed may confer a broad discretionary power to appoint trust funds even after the company becomes insolvent and the trust’s insolvency distribution provision is engaged, where the drafting does not exclude that power. A proviso protecting plan holders’ entitlements during solvency does not necessarily apply to the insolvency regime.

When asked to bless a trustee’s decision, the court examines whether the proposed exercise is lawful, within power, rational and honest. It does not substitute its own decision for that of the trustees. Approval may be given where a reasonable body of properly instructed trustees could have reached the decision, having considered relevant matters and avoided conflicts.

Safe Hands Plans Limited operated a pre-arranged funeral-plan business. Customer funds were held in a collective trust. After the company entered administration, the trust assets were insufficient to meet plan holders’ contractual entitlements in full.

The administrators entered into a conditional agreement with Dignity Funerals Limited. Dignity provided 416 funerals during an interim period at agreed cost-based rates. Payment from the trust fund was conditional on court approval or sanction.

The court had to determine whether the trust deed empowered the administrators, acting under delegated trustee powers, to enter into the agreement and, if so, whether the proposed exercise of that power should be blessed.

1. Construction of the trust deed. Sub-clause 4.8 conferred a wide discretionary power to appoint all or part of the trust fund for the benefit of plan holders. It applied when the company was insolvent and sub-clause 4.6 was engaged. The proviso to sub-clause 4.8, which protected interests under sub-clauses 4.1–4.5, deliberately omitted sub-clause 4.6. The omission permitted an appointment in an insolvency context, including to meet funeral costs during the period of uncertainty following insolvency (paras 31–43).
2. Nature of the court’s approval. Applying The Public Trustee and another v Paul Cooper [2001] WTLR 901, the application concerned the court’s blessing of an exercise within the trustees’ powers, rather than a surrender of discretion. The court’s role was limited. It had to be satisfied that the proposed exercise was lawful, within power, rational and honest; that the trustees had formed the relevant opinion; that a reasonable body of properly instructed trustees could have reached it; and that no conflict vitiated the decision (paras 46–51).
3. The administrators could seek approval although they had entered the conditional agreement as agents for SHPL without consciously exercising the delegated trustee power. The power would be exercised upon payment, and the administrators could ratify their decision if necessary (para 50).
4. The administrators’ decision was a proper exercise of power. The agreement secured funeral provision during the period needed to investigate and realise the trust assets and to arrange replacement plans. It provided continuing effective funeral protection for all plan holders during that period and was commercially sensible and prudent. The objections concerning unequal benefit, pari passu distribution, Dignity’s commercial interests, possible profit and proof in the administration did not show that a reasonable body of trustees could not properly have reached the decision (paras 52–59).
5. The court therefore granted its blessing. It was unnecessary to decide the alternative Berkeley Applegate issue, because payment was authorised by the trust deed itself (paras 59–62).