For any Trustees of Group company schemes wanting to retire as Trustees they should be aware of the recent ruling in the Jersey Royal Court regarding a Jersey based trust (the “Trust”) and the Trustee’s desire to retire as Trustee.
RBC Trustees (Guernsey) Limited (the “Representor”) were appointed as Trustees of the Trust by an Isle of Man company (the “Company”) in 2001, the primary function was that of an EBT and established for the benefit of some 180 beneficiaries (employees, former employees of the Company and their family members).
The Representor, in accordance with the terms of Trust, provided notice to the Company of their wish to retire as trustee in January 2015. Prior to the Representor providing notice to the Company, they had sought advice which confirmed that, in despite of their written resignation, unless another trustee was appointed then the Representor would continue to be responsible for holding the Trust assets but would be unable to exercise any powers under the terms of the Trust.
Despite the Representor reminding the Company, no replacement trustee was found when the Company was dissolved in September 2016, leaving the Representor in the difficult position of retaining fiduciary responsibilities for the assets without having any power or discretion under the terms of the Trust. To make matters worse, it was the Company (now dissolved) who retained power to appoint new trustees. Whilst the beneficiaries had been made aware of the Representor’s retirement, they continued to liaise with the Representor in respect of distributions, closure etc. concerning their sub-trusts.
The Trustees had no alternative than to seek advice from English chancery counsel (“Counsel”) and an application was made by the Trustee for the Court to exercise its power under Article 51(2) of the Trusts (Law) 1984 to (re)appoint the Trustee as Trustee of the Trust.
Fortunately for the Trustees, and following clear arguments from Counsel, the Court had “no hesitation” in exercising its said power to (re)appoint the Representor as trustee of the Trust.
The case focuses upon the distinction between a trustee’s fiduciary responsibilities and its powers and discretions that can be exercised under the terms of a trust and highlights a genuine issue that a retired trustee may be faced with.
Whilst the end result was no doubt a relief to the Representor, we can only assume that the Representor may have then had the arduous task of making consequential amendments to the terms of the Trust, possibly in the absence of a replacement company.
This case highlights the importance as to what happens in the event of the death of a settlor (where a settlor reserves power of appointment) or the liquidation of a settlor company.
In light of the current news surrounding EBT’s it is certainly worth giving thought to the above to ensure that other trustees are not faced with a similar, unfortunate and no doubt costly predicament.
By Joanne Manser, Client Service Director
If you would like to discuss this article, please contact Joanne Manser, Client Service Director.