For the first time, in its recent judgment In the Matter of A Trust and B Trust, the Jersey Court deployed its Article 51 discretion to bless a momentous decision by a guardian ad litem acting for minor, unborn or unascertained beneficiaries of a Jersey trust.
In considering whether to bless the guardian's proposed course of action to agree to the terms of a settlement agreement compromising claims brought by beneficiaries against the A Trust and B Trust, the Court took the same approach as to a decision made by trustees.
The case provides helpful general guidance regarding the role of a court-appointed guardian, the supervisory role that the Court plays and underlines the fiduciary duties that a guardian owes to the beneficiaries it represents.
The role of Guardian ad litem
The Jersey Court may appoint a guardian to represent a minor, unborn or unascertained individual in litigation under Royal Court Rule 4/2. This provision allows, in a similar way to equivalent provisions in other recognised trust jurisdictions, for duly appointed guardians to commence, prosecute, defend, intervene in or make any an application in proceedings before the Jersey Courts (RCR 4/2(1)).
In practice, it is often the case that guardians adopt a neutral role in trusts litigation, where the interests of minor, unborn and unascertained beneficiaries are often peripheral and are otherwise aligned to the interests of other beneficiaries who are able to take an active part in the proceedings afoot.
Article 51 of the Trusts (Jersey) Law 1984
The nature of the Jersey Court's jurisdiction under Article 51 of the Trusts Law is well-known by virtue of the frequency with which it is deployed.
Article 51(2) provides the Court with extensive jurisdiction to make orders concerning the execution or the administration of a trust, a trustee (including the exercise of its powers or its appointment or removal), a beneficiary and/or any person having a connection with the trust, or indeed the validity and/or enforceability of the trust, among other things.
Furthermore, Article 51(3) provides that an application for such an order or declaration may be brought by an extensive class of potential applicants, including the Attorney General, a trustee, a trust enforcer or beneficiary, as well as any other person, with appropriate leave of the Court. However, the practical reality is that such applications are typically the reserve of a trustee.
The blessing of a momentous decision is the second category of Article 51 application identified in the case of Re S Settlement, which derives from the principle in Public Trustee v Cooper. This category concerns circumstances where there is no real doubt as to the nature of the applicant's powers but the proposed course of action is particularly momentous such that the applicant wishes to obtain the blessing of the Court to confirm that it represents a proper exercise of such power.
Such an application is distinct from the surrendering of an applicant's discretion in that the applicant is not presenting itself to the Court as unable, for example on the grounds of conflict, of making the decision required.
In assessing whether to bless a momentous decision, the Court will ask itself three questions:
- Is it satisfied that the decision maker has in fact formed the opinion in good faith that the circumstances of the case render it desirable and proper for it to carry out the action in question?
- Is it satisfied that the opinion which the decision maker has formed is one at which a reasonable decision maker could have arrived?
- Is it satisfied that the opinion at which the decision maker has arrived has not been vitiated by any actual or potential conflict of interest which has or might have affected its decision?
To be clear, the Court in these cases is not substituting its own discretion for that of the decision maker. The Court is not concerned with whether it would have reached a different decision to the decision maker. It is solely concerned with the correctness of the decision maker's decision by reference to the above questions.
Background to the Court's decision In the Matter of A Trust and B Trust
Mr and Mrs H had established both the Jersey law governed A Trust and the Guernsey law governed B Trust in December 1996. Both trusts were discretionary trusts. Mr and Mrs H died in 2003 and 2005 respectively.
By 2012, following trust reorganisation, the beneficial class of each trust was identical, comprising primarily of Mr and Mrs H's children, save that the spouses of the siblings and remoter issue of the settlors were not beneficiaries of the A Trust whereas they were beneficiaries of the B Trust.
Subsequently Mr and Mrs H's children raised the possibility that some of the assets of the A Trust had not been validly settled due to Mr H's potential lack of capacity. This led to certain beneficiaries filing Particulars of Claim on behalf of the estates of the deceased settlors in 2015.
The Court decided that, in the absence of anyone defending the transfers, the guardian, a Jersey Advocate, acting for the minor and unborn beneficiaries, should defend the transfers to the trusts, with the predecessors of the First Respondent and the Second Respondent (respective current trustees of the B Trust and the A Trust) remaining neutral.
The Court acknowledged that the guardian's role was not one normally undertaken by an appointed representative of minor and unborn beneficiaries of a trust.
The parties established the outline of a settlement in 2019 whereby the trusts would each respectively pay a significant sum to the respective estates of the settlors.
Consequently, the trustees brought an application to the Court for a Benjamin order, further to which the Court directed the trustees to retain certain sums of cash but granted liberty for the trustees to administer the balance of the trust assets free of claims.
Understandably, the guardian, finding himself in the unusual situation of having taken the lead in defending the interests of the trusts against claims made on behalf of the estates of the deceased settlors, desired the additional comfort and security that the Court's blessing under Article 51 could provide to him. He applied under Article 51 for such a blessing. The key question for the Court was whether it had jurisdiction to grant the same.
The blessing of a guardian's momentous decision
The Court was satisfied of its inherent jurisdiction to bless the momentous decision of a duly appointed guardian for the following reasons:
- Article 51 and the Court's inherent jurisdiction to supervise Jersey trusts extends not only to trustees but also other persons such as protectors or settlors to the extent they have fiduciary powers.
- A duly appointed guardian owes a fiduciary duty to act solely in the best interests of those whom he represents and should therefore be able to seek the Court's blessing where appropriate in the same way as a trustee.
- A guardian can seek the Court's approval to any proposed settlement when acting on behalf of a minor in respect of a personal injury claim. This provides finality for the guardian and protects him from potential claims when the minor reaches the age of majority. The scenario is analogous.
- A delegate appointed under the Capacity and Self-Determination (Jersey) Law 2016 can apply to the Court for the blessing of a decision such as to settle litigation brought on behalf of a person lacking capacity. This fact was established by decided case law even though the 2016 Law makes no explicit provision. Again, the scenario is analogous.
Having concluded that it did have jurisdiction, the Court then considered the merits of the settlement agreement and agreed that the guardian's proposed course of action was entirely reasonable before blessing the decision accordingly.
In the Matter of A Trust and B Trust confirms, for the first time, that the Court does have jurisdiction to bless a guardian's decision. In most cases, of course, given the neutral role of the guardian, this jurisdiction will not be exercised.
However, this case demonstrates that where the role of the guardian is an active one, particularly if he or she has been directed by the Court to take certain steps which could expose him to risk, the Court can and will exercise that jurisdiction to bless his decisions.
This flexibility in how the Court supervises trusts is an important development for trusts in Jersey.
Quis custodiet ipsos custodes?
The Royal Court of Jersey, of course…