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Trustee’s decision-making process: What details does the Court require to approve a momentous decision?

Trustees in Jersey have a duty under the Trust (Jersey) Law 1984 (the “Trust Law”) to act with due diligence, as a prudent person would and to the best of their ability and skill. This is important to the extent that trustees are often required to take essential decisions and must always act in accordance with such duties when doing so.

It may be difficult in certain instances to decide what is the right course of action and trustees are able to seek the Court’s approval when taking momentous decisions under Article 51 of the Trust Law. However, one may wonder how much background information the Court requires regarding a trustees’ decision-making process in order to make its decision.

Advocate Rebecca Morley-Kirk of Viberts’ Trust Team appeared in the Court of Appeal case of Rep of Otto Poon Trust [2015] JCA109 in connection with an appeal against the Royal Court’s approval of a trustee’s momentous decision. In that case, the Court helpfully provided some guidance regarding the level of detailed evidence required to consider a trustee’s decision.

Mrs Kan Lai Kwan Kay (the “Appellant”) sought to overturn the Royal Court’s approval that she should be excluded as a beneficiary of the Otto Poon Trust on the basis that HSBC International Trustee Limited (the “Trustee”) had not provided sufficient evidence to the Court in relation to the making of its decision.

The legal test to be applied in order for the Court to approve a trustee’s momentous decision, as explained in Re S Settlement [2001] JLR N 37 and re-confirmed in this case, is for the Court to satisfy itself that:

• the trustee’s decision has been formed in good faith;
• the decision is one which a reasonable trustee properly instructed could have reached; and
• the decision has not been vitiated by any actual or potential conflict of interest.

One particular issue that was considered during the appeal hearing was the Royal Court’s reliance on the Trustee’s skeleton argument to explain the Trustee’s rationale in making the decision rather than requiring a further affidavit or affirmation. It was the Royal Court’s decision that, in this instance, this requirement was a pointless formality given that that the Court had considered the Trustee’s proposal as being ‘obvious good sense’.

Moreover, the Court of Appeal clarified that the degree of detail required for the Court to consider a trustee’s momentous decision will depend on the specific circumstances of each case. It may not be necessary to provide significant details in circumstances where the situation is known to the interested parties. However, trustees will likely be required to provide more details to the Court in situations which are unfamiliar to the interested parties. 

The Appellant lost her appeal in this case on the basis that the Trustee’s decision related to a matter which did not require the Trustee to provide any further disclosure than that it had already disclosed.

The Viberts’ Trust Team can advise trustees who might find themselves in a situation similar to this, or any dispute regarding trusts. Please call 01534 888666 for any and all inquiries.