Geoff Kertesz and Judith Swinhoe-Standen recently recorded a webinar for MBL examining Public Trustee v Cooper applications. They gave an overview of the categories of application before outlining some practical considerations.
You can view the webinar in full here (a subscription is required). Read on for a trailer and a summary of the key themes explored.
What is a Public Trustee v Cooper application?
Public Trustee v Cooper is a mechanism for trustees to seek the court’s guidance or approval on a matter relating to the trust. Its purpose is for the trustees to protect themselves from future allegations of breach of trust.
Categories of application
There are four categories of Public Trustee v Cooper application:
- Category 1: seeking guidance as to whether a proposed action is within the trustees’ powers (ultimately a question of construction of the trust instrument)
- Category 2: seeking the court’s blessing of a momentous decision the trustees propose to take
- Category 3: cases where the trustees wish to surrender their discretion to the court
- Category 4: cases where the trustees have already undertaken an action and are being attacked for it by the beneficiaries or a successor trustee.
There is very little legal commentary on applications under either category 1 (which are often unreported – they have no general applicability, as each trust instrument is different) or category 4 (which appear to be tantamount to a retrospective category 1 or 2 application). Geoff and Judith therefore focused on categories 2 and 3.
Role of the court
The court’s role in a Public Trustee v Cooper application is supervisory and relatively narrow. It has a general principle of non-intervention and therefore expects the trustees to exercise their powers actively.
Re S Settlement [2001] JRC 154 and XYZ Trusts [2022] SC (Bda) 10 Civ provide useful guidance on the court’s role, particularly in a category 2 application. In short, it is limited to deciding whether the proposed decision is within the trustee’s powers and, if so, satisfying itself that it is not one which no reasonable trustee would have reached (a test in the negative). Its role is not one of substituted judgment; it does not express opinions on the proposal or withhold its approval simply because it would not itself exercise the power in the way proposed.
Most recently, Grand View PTC v Wong [2022] UKPC 47 encourages trustees to seek guidance from the court if they are in genuine doubt about the propriety of their contemplated course of action. Stewarts, MJM Ltd (Bermuda), and Richard Wilson KC, James Weale and Charlotte Beynon of Serle Court, instructed by Baker McKenzie Taipei, including Anna Hwang, Chien-Hung Lai and Robert Lee, acted for the successful Appellant, Tony Wang (王文堯, “Tony”), as supported by his family.
Even when the court is invited to accept a surrender of discretion in a category 3 application, it is not obliged to accept it. Courts are conscious that the trustees know the trust best and were appointed specifically by the settlor to carry out their role. Accordingly, the trustees must convince the court there is a compelling reason for it to intervene, for example, deadlock between the trustees or that a conflict of interest disables them from acting.
If the trustees do successfully surrender their discretion to the court, the court will step into the trustee’s shoes and act as a reasonable trustee would be expected to act having regard to all the material circumstances.
Role of trustees
In a category 2 application, the trustee must formulate a feasible proposal and demonstrate to the court that it is rational and honest. It must be decisive rather than a mere idea. In fact, trustees are actively discouraged from bringing hypothetical, academic or abstract questions to the court. In Berman v SPF CDO I Limited [2011] 13 ITELR 831, the court said that the Public Trustee v Cooper jurisdiction “is not an invitation for a trustee to ‘test drive’ factual scenarios in order to assess how to carry out his duties”.
To demonstrate their proposals are rational and honest, the trustees should consider gathering supportive evidence, for example valuations or tax advice from relevant jurisdictions. They should also seek the beneficiaries’ initial views on the proposed course of action. They might then wish to undertake a formal consultation process with the beneficiaries, especially where the decision is complex.
In a category 3 application, before the court accepts a surrender of discretion, it expects the trustees to have provided it with all relevant material to enable it to make a decision on the trustees’ behalf. A surrender should be a last resort, and the court should normally only accept this where no sensible alternative exists. Again, the trustees must be able to demonstrate this.
Process
As the industry has seen a recent rise in contentious trust restructuring applications, which fall under category 2 as a momentous decision, Geoff and Judith focused on Re Piedmont Trust and the Riviera Trust [2021] JRC 248 as an illustration of the process of obtaining approval for a restructuring.
The trustee undertook a lengthy consultation process with the beneficiaries before formulating a proposal, then consulted further with them before seeking a blessing of that decision. The whole process took two years and eight months.
The case also highlights that the court is not prepared to bless decisions that have not been fully formulated, as it insisted that the trustee obtain further tax advice before it would bless the decision.
Judith described the background to Re Piedmont further in the webinar.
Are blessing applications ever refused?
It is rare for the court to refuse its blessing if the trustees have properly consulted with the beneficiaries and formulated developed proposals, but Geoff discussed three recent cases where the court did withhold its approval:
- AAA Childrens’ Trust (8 January 2014) [2015] WTLR 683L, where the trustees had failed to provide sufficient evidence to the court of the reasons for their proposal.
- Representation of Hawksford (Jersey) Limited [2018] JRC 171, where the court declined to bless the trustee’s proposal to sell the trust’s sole asset as this would have been principally to settle the trustee’s unpaid fees from the sale proceeds.
- Re the V, W, X and Y Trusts [2021] JRC 208, where the adult beneficiaries agreed with the trustees’ proposal but counsel for the unborn and unascertained beneficiaries raised some concerns which the court shared.
Case in focus – Brown v New Quadrant Trust Corporation Limited and another [2021] EWHC 1731 (Ch)
Brown provides useful guidance on procedural aspects of Public Trustee v Cooper applications. The trustee proposed to sell an asset of the trust (some shares), but the beneficiary alleged this would be a breach of trust. He sought (i) an injunction preventing the trustee from selling the shares and (ii) the trustee’s removal and replacement. The trustee denied the beneficiary’s claims and counterclaimed for a blessing of its decision to sell the shares.
The beneficiary resisted the applications being heard together, arguing that it was procedurally irregular. The court rejected this and held that it was entirely proper to bring the blessing as a counterclaim and that to start a new claim would have been duplicative, given the “intrinsic connection” between the counterclaim and the claim.
The court rejected the beneficiary’s breach of trust, removal and injunction claim, and granted the trustee’s blessing application.
Brown is useful in informing the procedural aspects of a more complex blessing application. In particular, it shows that a blessing application can be (i) brought as a counterclaim and/or (ii) granted even if the trustee is facing a breach of trust or removal claim.
A downside of this approach is that a counterclaim is likely to prolong the litigation, so trustees should consider whether this is worthwhile in the context of the length of the litigation as a whole. In addition, trustees in a similar situation to Brown should ensure they are able to demonstrate an “intrinsic connection” between the claim and the counterclaim, as the court was persuaded by this to hear the applications together.
Conclusion and summary
Geoff and Judith identified five key takeaway points:
- In category 2 and category 3 applications, the trustees must do the legwork. The court will expect them to have considered the available options and whether they are viable, before formulating a concrete proposal.
- The court will not willingly entertain hypothetical or speculative proposals.
- A surrender of discretion should be a last resort.
- The court’s role is limited to satisfying itself that the proposal is rational and honest. If it is not satisfied, it can ask the trustees to reformulate their proposal and/or seek specific advice to inform all or part of its proposal.
- There is no single way to navigate a Public Trustee v Cooper application. The proposal, and the steps the parties will need to take, must be circumstance-specific.
You can find further information regarding our expertise, experience and team on our Trust and Probate Litigation page.
If you require assistance from our team, please contact us.
Subscribe – In order to receive our news straight to your inbox, subscribe here. Our newsletters are sent no more than once a month.
