John Michael Wythe & Ors v Andrea Zavos

On a blessing application under the second category in Public Trustee v Cooper, the court does not substitute its own view for that of the trustees. It asks whether a reasonable body of trustees, correctly instructed as to their powers, could properly have reached the decision.

The court must also examine the decision-making process, including the adequacy of professional advice, consideration of relevant risks and benefits, consultation, disclosure and the management of actual or potential conflicts of duty. Where a trust instrument may not confer a sufficient power, Trustee Act 1925, section 57 may be used to confer the necessary power if the transaction is expedient.

The trustees of various Portman Estate funds sought approval of a proposed restructuring. Partnership assets and businesses would be transferred to a single company in exchange for shares and, in one case, cash consideration. The restructuring would reduce the trustees’ direct control, alter income and tax consequences, and affect present, minor and unborn beneficiaries.

The claim was brought under the court’s supervisory jurisdiction because the decision was exceptionally momentous and because the same trustees owed duties to beneficiaries of different funds. The trustees also sought an order under section 57 of the Trustee Act 1925 conferring a power on the trustees of Fund 24 to participate in the proposed company structure.

1. The court approved the trustees’ decision to implement the restructuring. The relevant question was whether the decision was one which a reasonable body of trustees, correctly instructed as to their powers, could properly have reached. The court was not required to decide whether it was the best decision.

2. The trustees had made full disclosure and had obtained extensive, relevant and regularly updated professional advice. They had considered the commercial, financial and tax consequences, including the immediate costs and the different effects on beneficiaries.

3. The potential conflict arising from the trustees’ duties to beneficiaries of different funds had been appropriately managed. The trustees had identified the competing interests, obtained independent advice, consulted the principal beneficiaries and provided for corporate safeguards, including an independent director and enhanced voting requirements.

4. The court accepted that the decision to retain the Estate as a unified investment, rather than diversify, was rational. The informed support of the principal beneficiaries was relevant, but did not displace the trustees’ independent decision-making responsibilities.

5. The trustees of Funds 3, 21, 22, 23 and 58 possessed sufficient powers to implement the Proposal. The relevant powers permitted business to be carried on through a company and trust assets to be transferred to a company for shares or other consideration.

6. It was arguably doubtful whether the power in the 1983 Trust Deed for Fund 24 extended to a company in which the trustees held only a minority interest. It was unnecessary to determine that construction point. Under section 57 of the Trustee Act 1925, the court could confer the necessary power where the transaction was expedient. It was expedient to align Fund 24’s powers with those of the other funds and to enable the approved restructuring. The court therefore varied the relevant power to permit a company owned wholly or in part by the trustees.

First-instance decision. The court approved the trustees’ decision and granted the section 57 relief sought.