Abacus Trust Company (Isle of Man) v Barr

JurisdictionEngland & Wales
Judgment Date06 February 2003
Neutral Citation[2003] EWHC 114 (Ch)
Date06 February 2003
CourtChancery Division
Chancery Division Abacus Trust Co (Isle of Man) and another v Barr and others [2003] EWHC 114 (Ch) 2003 Jan 21, 22; Feb 6 Lightman J

Trusts - Trustee - Duty of trustee - Settlor wishing trustee to exercise power of appointment to create discretionary trusts - Trustee's representative misinterpreting detail of settlor's intentions - Trustee executing deed of appointment not according with settlor's wishes - Whether appointment open to challenge - Whether trustee in breach of fiduciary duty - Whether appointment void or voidable

Under a settlement the settlor was entitled to a life interest in the property settled subject to an overriding power of appointment by the trustee, with the consent of the protector, in respect of capital and income in favour of any of the discretionary objects, which included the settlor's children. The settlor wished the trustee to exercise a power of appointment conferred on him under the trust to create discretionary trusts in respect of 40% of the trust fund for the benefit of the settlor's two sons to the exclusion of any interest of himself or any wife he might have. He asked the trustee's representative to inform the trustee of his wishes. The trustee's representative misunderstood or misinterpreted the settlor's instructions and informed the trustee and the trustee's solicitors that the settlor wished to appoint 60% of the trust fund on the discretionary trusts. The trustee and protector consequently executed a deed of appointment to this effect. Nine years later the trustee was advised that the appointment was open to challenge on the ground that the trustee would not have made the appointment in the terms it did if in exercising its discretion to make the appointment it had not taken into account irrelevant considerations and failed to take into account relevant considerations. The trustee and the protector applied to the court for a determination of the validity of the appointment.

On the application—

Held, that a court would interfere with a trustee's exercise of his discretion if it was clear that he would or might have acted differently had he not failed to take all relevant considerations into account; that it was not a requirement that the relevant consideration unconsidered by the trustee should make a fundamental difference between the facts as perceived by the trustee and the facts as they should have been perceived, merely that it would or might have affected the trustee's decision; that it was not sufficient that the trustee had made a mistake but it had to be established that the trustee had failed to consider what he was under a duty to consider or was in breach of duty in relying and acting on information supplied to him; that where a trustee's decision was successfully challenged on those grounds it was voidable and not void; that the trustee had failed in its fiduciary duty to ascertain the true wishes of the settlor and would certainly have executed a different deed of appointment had it not so failed; and that, accordingly, the appointment was voidable and the question whether it should or should not be avoided would be adjourned (post paras 21–25, 27, 32–34).

In re Hastings-Bass, decd [1975] Ch 25, CA applied.

The following cases are referred to in the judgment:

Anker-Petersen v Christensen [2002] WTLR 313

Breadner v Granville-Grossman [2001] Ch 523; [2001] 2 WLR 593; [2001] 4 All ER 705

Cloutte v Storey [1911] 1 Ch 18, CA

Edge v Pensions Ombudsman [2000] Ch 602; [2000] 3 WLR 79; [1999] 4 All ER 546, CA

Gibbon v Mitchell [1990] 1 WLR 1304; [1990] 3 All ER 338

Hastings-Bass, decd, In re [1975] Ch 25; [1974] 2 WLR 904; [1974] 2 All ER 193, CA

Hearn v Younger [2002] EWHC 963 (Ch)

Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587; [1991] 2 All ER 513

Saunders v Anglia Building Society [1971] AC 1004; [1970] 3 WLR 1078; sub nom Gallie v Lee [1970] 3 All ER 961, HL(E)

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705

Stannard v Fisons Pension Trust Ltd [1991] PLR 225, CA

Turner v Turner [1984] Ch 100; [1983] 3 WLR 896; [1983] 2 All ER 745

The following additional cases were cited in argument:

AMP (UK) plc v Barker [2001] PLR 77

Abacus Trust Co (Isle of Man) Ltd v National Society for the Prevention of Cruelty to Children [2001] STC 1344

Gisborne v Gisborne (1877) 2 App Cas 300, HL(E)

Green v Cobham [2002] STC 820

The following additional case, although not cited, was referred to in the skeleton argument:

Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374; [1984] 3 WLR 1174; [1984] 3 All ER 935, HL(E)

APPLICATION

By a claim form dated 7 March 2002 Abacus Trust Co (Isle of Man), the first claimant, and Colyb Ltd, the second claimant, made an application under CPR r 8.2(1) in their representative capacities as trustee and protector respectively of a settlement known as the AB 1992 Trust settled on 13 April 1992 by the settlor Andrew Barr, the first defendant, for directions as to whether a deed of appointment executed on 22 April 1992 was or was not void. Brian J Barr and Russell Barr, the second and third defendants, were sons of the settlor, and together with others, beneficiaries of the trusts of the settlement. The claimants made their application on the grounds that they were concerned that when executing the deed of appointment they took into account considerations which they should not have taken into account and/or failed to take into account considerations which they ought to have taken into account, and that had they not done so they would not have executed the deed. By an order of Master Price dated 12 September 2002 the second and third defendants were appointed to represent all persons including unborn persons who were or might be entitled to an interest in the trust fund.

The facts are stated in the judgment.

Thomas Dumont for the claimants.

Nicholas Warren QC and Emily Campbell for the settlor.

Gilead Cooper for the sons.

Cur adv vult

6 February. LIGHTMAN J handed down the following judgment.

Introduction

1 I have before me an application by the claimants Abacus Trust Co (Isle of Man) (“the trustee”) and Colyb Ltd (“the protector”) who are respectively the trustee of and protector under a settlement dated 13 April 1992 (“the settlement”) made between the first defendant Andrew Barr (“the settlor”) and the trustee. By this application the trustee and protector seek the determination by the court of the validity of a deed of appointment dated 22 April 1992 (“the appointment”) made between the trustee and the settlor in purported exercise of a power of appointment conferred by the settlement.

2 The application raises important and unresolved questions as to the ambit and application of what is known as the rule in Hastings-Bass (“the rule”) governing the validity of the exercise of powers by trustees laid down by the Court of Appeal in In re Hastings-Bass, decd [1975] Ch 25. In a word, the rule requires that a trustee when exercising a power, for example, of appointment or of advancement shall take into account all relevant considerations and refrain from taking into account any irrelevant consideration, and opens his decision to challenge if he fails to do as so required. The two primary issues raised on this application are: (1) whether the trustee's decision is open to challenge when the failure to take a consideration into account is not attributable to a breach of fiduciary duty on the part of the trustee; and (2) whether, where a decision is open to challenge on the ground that the trustee failed to take a factor into account, the decision is void or voidable. On both issues I have received assistance of the highest quality from all counsel involved.

Facts

3 The Isle of Man firm of Coopers & Lybrand (“C & L Isle of Man”) has traded as such on the Isle of Man since 1984. In 1984 C & L Isle of Man incorporated the trustee to act as corporate trustee of settlements administered by C & L Isle of Man. In 1996 C & L Isle of Man transferred its fiduciary services business to a new company Abacus Ltd which thereafter carried out the administration, but excluding the exercise of any trusts, powers or discretions, of all settlements of which the trustee is trustee.

4 The United Kingdom firm of Coopers & Lybrand (“C & L”) and C & L Isle of Man are separate firms, but in practice have at all times had a close relationship with each other. In particular C & L has provided C & L Isle of Man and the trustee with tax advice and other assistance in the administration and management of trusts and referred business to them.

5 In 1992 the settlor and his fellow directors of Aerostructures Hamble Ltd (“AHL”) were engaged in a management buy-out and retained C & L in respect of that buy-out and tax issues. Mr Graham Ward-Thompson of C & L was their main contact. The directors incorporated as the management buy-out vehicle Aerostructures (Hamble) Holdings Ltd (“AHHL”). Mr Ward-Thompson advised the settlor that it would be advantageous principally for capital gains tax reasons to set up an Isle of Man company limited by guarantee to receive and hold his shares in AHHL and to use an Isle of Man resident trust to own all the shares in the Isle of Man company. The settlor accepted the advice and C & L on his behalf through C & L Isle of Man incorporated Andrew Barr Investments Ltd (“ABIL”) to acquire 15%, being his share, of the capital of AHHL and established the settlement. Accordingly on completion of the management buy-out on 23 April 1992 the position had been established that AHHL held all the shares in AHL, ABIL held 15% of the share capital of AHHL, and the settlement held the entire capital of ABIL.

6 Under the settlement the settlor was entitled to a life interest in the property settled (“the trust fund”) but this life interest was subject to an overriding power of appointment by the trustee with the consent of the protector in...

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1 books & journal articles
  • Trust Parties’ Uniquely Easy Access to Rescission: Analysis, Critique and Reform
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