SwissIndependent Trustees SA v Robert Sofer & Ors

Where trustees seek the court’s blessing for a particularly momentous decision within their powers, the court does not surrender the trustees’ discretion or decide what it would have done itself. It must be satisfied that the trustees formed the relevant opinion, that a reasonable body of properly instructed trustees could have reached it, and that the decision was not vitiated by a conflict of interest. The court should act cautiously because approval may deprive beneficiaries of a later opportunity to challenge the exercise as a breach of trust. The court’s function is to determine whether the proposed exercise is lawful and proper, rather than whether an arrangement benefits the relevant class under the Variation of Trusts Act 1958.

The claimant trustee sought approval under a CPR Part 8 claim form for a proposal to wind up three beneficiary trusts and distribute the remaining assets immediately to the specified beneficiaries. The proposal would terminate the interests of existing minor and unborn discretionary beneficiaries. The adult beneficiaries did not oppose the application, while the sixth defendant represented the minor and unborn beneficiaries and did not oppose it.

The central issue was whether the proposal was a lawful and proper exercise of the trustee’s existing powers warranting the court’s blessing, rather than an arrangement requiring approval under the Variation of Trusts Act 1958.

1. The application fell within the second category identified in Public Trustee v Cooper [2001] WTLR 901: the trustee had decided how to exercise powers which were not in doubt, but the decision was sufficiently momentous to justify seeking the court’s blessing.

2. Applying the approach endorsed in Cotton v Brudenell-Bruce [2015] WTLR 39, the court had to be satisfied that the trustee had formed the relevant opinion; that a reasonable body of trustees, properly instructed as to the trust provisions, could properly have reached it; and that the opinion was not vitiated by a conflict of interest.

3. The court also acted cautiously because, as explained in Richard v Mackay [2008] WTLR 1667, authorisation could deprive beneficiaries of an opportunity to allege breach of trust and seek compensation. The court was nevertheless not required to decide whether the proposal was beneficial to the beneficiary class, as it would have been under the Variation of Trusts Act 1958.

4. The evidence established that the claimant had formed the relevant opinion, that a reasonable and properly instructed trustee could have reached it, and that no conflict of interest affected the decision. The trustee retained its discretion. The proposal was therefore a lawful exercise of the trustee’s powers and the court gave it its blessing.