The Jersey case Representation of BOS Trustee Limited [2024] JRC 124 distinguished between an application by a trustee for a blessing under the Public Trustee v Cooper principle and an application by a trustee for leave to distribute trust assets despite a third party claim to trust assets. Importantly, the Royal Court (the Court) clarified that leave to distribute will only be granted if the Court is satisfied that the third party claim can be safely disregarded by the trustee as ‘unarguable or specious’.
Blessing Applications
The Court explained that blessing applications are concerned with the relations between a trustee and beneficiaries. Such blessings are designed to protect the trustee against a complaint by a beneficiary after it has exercised a power, where the exercise may be in breach of duty. As a consequence of obtaining the Court’s prior approval, a trustee enjoys protection from claims of this nature. The Court commented that the burden a trustee needs to discharge on such an application is not necessarily always high, as a range of reasonable decisions may be available to a trustee within a situation and the Court will not withhold its approval, so long as the conditions established by caselaw are met.
Third Party Claims
However, in an application to grant a trustee leave to distribute trust assets, where there exists an adverse third party claim, the Court highlighted an important difference. In such an application, the third party to the trust should not be prejudiced without being given an opportunity to object. In this case, objections to a planned distribution were made and the Court was presented with a detailed draft pleading by the third party in question. The role of the Court, in such situation, is to see whether the claim has merit.
The Applicable Test
The Court explained that it is not a matter of determining whether or not a trustee has acted reasonably and in good faith in making the application. Instead, the Court must consider whether the claim could be safely disregarded by the trustee, on the footing that it is unarguable or specious.
The Court’s view was that the detail contained within the pleadings of the third party represented material changes in circumstance, which the trustee could not have taken into account when it decided whether to make a distribution to the beneficiary.
The Guardian Trust Principle: Not Free From Doubt
The Court stated that the position as to when the Guardian Trust principle would apply was not "free from doubt". It went on to say that the Guardian Trust principle only applies to reasonably arguable claims and not ones that are specious and which have no arguable foundation.
Application in the Isle of Man
Whilst Jersey case law is persuasive, rather than binding precedent for the Courts of the Isle of Man, we consider that it is likely that our Courts would follow this judgment. It is a clear and well-reasoned decision. Furthermore, trust judgments from fellow Crown Dependency, Jersey, are often considered by our Courts. In addition, Sir William Bailhache, a Judge of Appeal in Jersey, sits as a Judge of Appeal in the Isle of Man Staff of Government Division on trust litigation. On occasion, Deemsters from the Isle of Man also sit as Judges of Appeal in Jersey.
For further information on how Maher Law’s specialist dispute resolution team can assist in relation to trust litigation, please contact Tom Maher at tom@maher.im.
10 February 2025
