HM Attorney General v Zedra Fiduciary Services (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli |
| Judgment Date | 17 April 2023 |
| Neutral Citation | [2023] EWHC 838 (Ch) |
| Docket Number | Case No: PT-2018-000391 |
| Court | Chancery Division |
[2023] EWHC 838 (Ch)
Mr Justice Zacaroli
Case No: PT-2018-000391
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS AND PROBATE LIST (ChD)
Rolls Building
7 Fetter Lane
London EC4A 1NL
William Henderson (instructed by Government Legal Department) for the Claimant
Robert Pearce KC and Daniel Burton (instructed by Macfarlanes LLP) for the Defendant
Hearing date: 4 April 2023
Introduction
In a judgment handed down on 21 January 2022 ( [2022] EWHC 65 (Ch)), I directed that the charitable trust fund referred to as the “National Fund” be applied cy-près by being transferred to the National Debt Commissioners, as opposed to the scheme proposed by the defendant trustee (the “Trustee”). The background to this case is fully described in that judgment.
The Trustee sought permission to appeal, which I refused for reasons contained in a judgment dated 19 December 2022 ( [2022] EWCH 3357 (Ch)).
The Trustee now makes an application for directions as to whether it should apply for permission to appeal to the Court of Appeal, and as to whether it is entitled to be indemnified out of the trust assets in respect of that application and any subsequent appeal. The Trustee has made it clear that it will pursue an application for permission to appeal only if it is entitled to be so indemnified.
The Law
In proceedings concerning the administration of a trust, a trustee should ordinarily accept the decision of the court at first instance, so that if it chooses to appeal it does so at its own risk as to costs. There is, however, no inflexible rule to that effect, and if the court is satisfied that the trustee is acting in the interests of the trust as a whole, then the trustee is entitled to be indemnified in respect of its costs of the appeal and any adverse costs: Lewin on Trusts, 20 th ed., at §48–048. The paradigm example of such an appeal would be where the decision under appeal created significant uncertainty as to the operation of the trust.
The authorities on this point were reviewed by Arnold J in Airways Pension Scheme Trustee Ltd v Fielder [2018] EWHC 29 (Ch), at §42–76. At §76, he said that he did not wish to cast doubt on the proposition that, in most cases, the trustee should accept the decision at first instance, but noted that where the appeal would be in the interests of the trust as a whole, the trustee ought not to be deterred from appealing by the risk of an adverse costs order.
The skeleton arguments in relation to this application contained detailed arguments as to whether the Trustee was surrendering its discretion to the Court, or asking the Court to review the decision it had already reached that it was in the interests of the trust. Since Mr Pearce KC, who appears for the Trustee, accepted that this was merely another potential route to arrive at the question Arnold J identified as the pertinent question in Fielder, it is unnecessary to address these arguments.
Mr Pearce nevertheless submitted that a relevant factor to take into account is that the Trustee has itself decided that it is in the interest of the trust to pursue an appeal. I reject that submission. The question whether it is in the interests of the trust to pursue an appeal is one for the Court. In reaching its decision the Court is assisted by submissions from the Trustee, but the fact that the Trustee has formed its own view that an appeal would be in the interests of the trust is in my judgment neither here nor there.
It is therefore unnecessary to consider the various arguments advanced on behalf of the Trustee and the Attorney-General as to whether – if I was being asked to review the Trustee's decision, or if it was relevant to take into account the fact that the Trustee had reached the view that an appeal was in the interests of the trust – I should discount the Trustee's decision because of its conflict of interest (arising from the fact that it currently earns a not insubstantial amount by way of fees from administering the National Fund, and from the fact that it would stand to benefit in a similar way, if only indirectly, from its proposed scheme).
Application to the facts of this case
In the case of a private trust, with identifiable beneficiaries, it is likely to be relatively straightforward to determine whether a proposed course of action is in the interests of the trust. While each case turns on its own facts, the reasons given by Arnold J why it was in the interest of the trustee in that case to pursue an appeal to the Supreme Court provide some guidance as to what might be meant by the interests of the trust. He identified a number of factors. First, the appeal had real prospects of success (where the Court of Appeal differed from the first instance judge, and was itself split 2:1). Second, success on appeal would benefit the vast majority by value of the scheme members, in excess of 90% of whom stood to benefit from a successful appeal; moreover, that success would not come at the expense of other beneficiaries of the scheme. Third, the amount in issue was significant. Fourth, Arnold J considered that the decision of the majority in the Court of Appeal did not make clear the limits on the trustee's power of amendment, and it was reasonable to believe that the Supreme Court would provide greater clarity. Fifth, the trustee was realistically the only party capable of appealing, having conducted the litigation for five years. Sixth, the proceedings were initiated and pursued to the Court of Appeal by BA for its own commercial interests. Seventh, a recent settlement proposal from BA favoured pursuit of an appeal.
Where the trust is a charitable trust, however, it is rather more difficult, particularly where the question is whether to appeal a decision which starts from the (unappealable) premise that the original purposes have failed so that the trust assets have to be applied cy-près.
I agree with Mr Pearce that the interests of the trust cannot be equated with the interests of the particular charity established by the original trust, because that trust has failed. I also accept that they cannot be equated with the interests of the charity as defined by the cy-près scheme ordered by the Court, because it would...
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