MM v S G Hambros Trust Company and AM [2010] JRC 037

The Royal Court declines to overturn the decision of a trustee.

In this case MM, entitled as remainderman under the K Trust, sought an order overturning the decision of the trustee to sell a trust asset, a substantial London  property, pursuant to Article 51 Trust (Jersey) Law 1984 as amended. Article 51 provides that a trustee or other interested party may apply to the court for direction concerning the manner in which the trustee should act in connection with any matter concerning a trust and the court may make such order, if any, as it thinks fit.

It is not uncommon for a trustee to make application to the Royal Court in relation to one of its decisions. Indeed it is one of the key weapons in the armoury of a trustee. An application might typically be made if for some reason the trustee finds itself in a position of conflict; or where the trustee has made a decision with which it is content, but recognises that the decision is of a ‘momentous’ character, and seeks the sanction of the Court in relation to that decision.

This case was slightly unusual in that it was an application by an affected party seeking an order that a decision made by the trustee should be overturned by the Royal Court.

The Representor faced a high hurdle, as in the absence of a conflict, the Court will not lightly interfere with a trustee fulfilling its role. The Royal Court referred to the established Jersey authority of S v L and Bedell Cristin Trustees Limited [2005] JRC109:

‘The Court cannot overturn a decision of a trustee [in these circumstances] merely because the Court would have reached a different decision. It may only intervene where the decision is one which no reasonable trustee could arrive at.’

Applying that test, the Court considered the options open to the trustee, and the steps which the trustee had taken in order to find an alternative, once the objections of MM were made known. Having done so, the Court declined to overturn the trustee’s decision, which it stated to be 'eminently reasonable'.

Comment

It is not particularly common for a beneficiary to seek to overturn the decision of a trustee through the Royal Court, precisely because the burden is so high. The Settlor does not chose the Court as a trustee. The Court does of course exercise a supervisory role in relation to the conduct of trustees, and Article 51 is a flexible tool for the purpose of enabling it to do so. However, the Court’s role is to ensure that a trustee’s conduct is reasonable and lawful, not to substitute its own discretion for that of the properly appointed trustee.