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WHO ARE THE TRUSTEES?
Who are the trustees of your trust? Are you sure? Might you still be a trustee of a trust, from which you thought that you had resigned many years ago? If so, might you be liable for the acts of subsequent trustees? You almost certainly will not have sought an indemnity against such liabilities as you would not have known that it existed.
The decision of the High Court last January in Jasmine Trustees Ltd and Others v Wells & Hind and others could affect a great many trusts that were originally set up in the UK and were subsequently exported to a tax haven. The case is a professional negligence claim against two firms of solicitors and is a decision on a preliminary point only. But it is a point of general importance.
The trust in that case was created in 1968. The original trustees were Major-General and Mrs Coaker. In 1982 Major-General and Mrs Coaker appointed The Investment Bank of Ireland (IOM) Ltd (“IBI”) and a Mr Thornton to be trustees and then resigned. Or, at least, purported to resign!
Section 37(1)(c) of the Trustee Act 1925 provides that “On the appointment of a trust for the whole or any part of trust property … it shall not be obligatory, save as hereinafter provided, to appoint more than one trustee … but … a trustee shall not be discharged from his trust unless there will be either a trust corporation or at least two individuals to act as trustees to perform the trust”.
A trust corporation is defined in the Act as the Public trustee or a corporation either appointed by the court in any particular case to be a trustee, or entitled by rules made under section 4 of the Public Trustees Act 1906 to act as custodian trustee. Where a trust is exported it would be very unusual to apply to the Courts to appoint the offshore trustee, so in practice a company needs to meet the Public Trustee Act definition, which is contained in Rule 30 of the Public Trustee Rules 1912. This requires a trust corporation, amongst other things, to be incorporated in the UK or an EC Member State. An offshore company cannot meet this test. Therefore IBI is not a trust corporation – and nor is any other tax haven company likely to be one either.
The Defendant in the Jasmine Trustees case sought to claim that IBI is an “individual” for the purpose of the rules, but this was dismissed by Mr Justice Mann.
Accordingly section 37(1)(c) prohibited Major-General and Mrs Coaker from resigning. They were therefore still trustees. Major-General Coaker died in 1983 and Mr Thornton died in 1989. Mrs Coaker died in 1996. IBI resigned in 1987.
Where did this leave the trust? Answer: without any trustees. Worse, because trustees must act unanimously except where the trust deed specifies otherwise, and Mrs Coaker was not involved in any decisions made since her purported resignation, all such decisions – in particular the subsequent decisions to appoint different trustees on a number of occasions - were invalid. This meant that none of the subsequent trustees were trustees of the settlement (although they had the liabilities of trustees for having meddled with the trust assets).
It followed from this that at no time were the majority of the trustees of the settlement resident outside the UK (apart from the short period from 1983 when Major-General Coaker died to December 1987 when IBI resigned). Accordingly the trust remained throughout within the scope of UK CGT.
Robert W Maas
WHO ARE THE TRUSTEES?
Who are the trustees of your trust? Are you sure? Might you still be a trustee of a trust, from which you thought that you had resigned many years ago? If so, might you be liable for the acts of subsequent trustees? You almost certainly will not have sought an indemnity against such liabilities as you would not have known that it existed.
The decision of the High Court last January in Jasmine Trustees Ltd and Others v Wells & Hind and others could affect a great many trusts that were originally set up in the UK and were subsequently exported to a tax haven. The case is a professional negligence claim against two firms of solicitors and is a decision on a preliminary point only. But it is a point of general importance.
The trust in that case was created in 1968. The original trustees were Major-General and Mrs Coaker. In 1982 Major-General and Mrs Coaker appointed The Investment Bank of Ireland (IOM) Ltd (“IBI”) and a Mr Thornton to be trustees and then resigned. Or, at least, purported to resign!
Section 37(1)(c) of the Trustee Act 1925 provides that “On the appointment of a trust for the whole or any part of trust property … it shall not be obligatory, save as hereinafter provided, to appoint more than one trustee … but … a trustee shall not be discharged from his trust unless there will be either a trust corporation or at least two individuals to act as trustees to perform the trust”.
A trust corporation is defined in the Act as the Public trustee or a corporation either appointed by the court in any particular case to be a trustee, or entitled by rules made under section 4 of the Public Trustees Act 1906 to act as custodian trustee. Where a trust is exported it would be very unusual to apply to the Courts to appoint the offshore trustee, so in practice a company needs to meet the Public Trustee Act definition, which is contained in Rule 30 of the Public Trustee Rules 1912. This requires a trust corporation, amongst other things, to be incorporated in the UK or an EC Member State. An offshore company cannot meet this test. Therefore IBI is not a trust corporation – and nor is any other tax haven company likely to be one either.
The Defendant in the Jasmine Trustees case sought to claim that IBI is an “individual” for the purpose of the rules, but this was dismissed by Mr Justice Mann.
Accordingly section 37(1)(c) prohibited Major-General and Mrs Coaker from resigning. They were therefore still trustees. Major-General Coaker died in 1983 and Mr Thornton died in 1989. Mrs Coaker died in 1996. IBI resigned in 1987.
Where did this leave the trust? Answer: without any trustees. Worse, because trustees must act unanimously except where the trust deed specifies otherwise, and Mrs Coaker was not involved in any decisions made since her purported resignation, all such decisions – in particular the subsequent decisions to appoint different trustees on a number of occasions - were invalid. This meant that none of the subsequent trustees were trustees of the settlement (although they had the liabilities of trustees for having meddled with the trust assets).
It followed from this that at no time were the majority of the trustees of the settlement resident outside the UK (apart from the short period from 1983 when Major-General Coaker died to December 1987 when IBI resigned). Accordingly the trust remained throughout within the scope of UK CGT.
Robert W Maas
posted by CBW at 2:20 am
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