A trend has emerged in recent years whereby trustees seek court approval when faced with difficult or momentous decisions. It is clear that when making an application to the court the relevant jurisdiction’s processes and procedures must be followed. This blog examines the impact that the trustee’s actions, or lack of action, when making a momentous decision can have on the court’s ruling.
It is accepted that trustee’s should maintain a high standard of record keeping as a matter of course. In 2014, the Royal Court of Guernsey in the matter of the [AAA] Children’s Trust (Royal Court, 8 January 2014, Sir Richard John Collas, Esq, Bailiff) highlighted the documentation that the Court would expect the trustee to have produced when making a momentous decision.
In short, the trustee sought the Court’s blessing regarding its decision to sell property, which comprised a significant part of the trust fund. The settlor’s wishes, which were laid out in a schedule to the Trust Deed, directed that the property should only be sold in exceptional circumstances and at an appropriately extraordinary price. The trustee decided to sell the property and its decision was opposed by all the family members and an advocate representing the children, and unborn and unascertained beneficiaries.
Issues For The Court
A major issue for the Court was that the trustee’s decision process was not documented properly. In fact the Court could not even be satisfied that a definite decision had been made by the trustee to accept the offer of purchase. The trustee did not produce detailed minutes of a meeting where the momentous decision had been made. The minutes which the trustee did refer to did not include the sale as a specific agenda item and did not provide evidence of the trustee’s deliberations. Apart from emails and telephone discussions around the subject, it appeared that the trustee had not actually taken and documented the momentous decision. Furthermore, regardless of the number of times the trustee was pressed to provide full disclosure, the trustee did not disclose all of its notes and records.
The Court’s Decision
The Court decided that it could not bless the transaction. The Court found that without a clear indication of the main issues surrounding the trustee’s deliberations and without the relevant documentation to support the decision, it could not find sufficient evidence that the trustee actually made a decision. In addition, the Court found it unforgivable that the trustee had not been full and frank with the Court and opposing parties.
Guidance For Trustees
When making decisions, trustees should always ensure that they properly document their decisions and the factors that they considered in reaching those decision. This is particularly important when making momentous decisions. A meeting should always be held to properly consider the matter and the following guidelines should be adhered to:
- Trustees should consider whether it is necessary to obtain independent professional advice and if necessary, should obtain said advice prior to making the decision;
- The trustees should convene a meeting to specifically consider the momentous decision;
- The trustees should prepare and circulate an agenda for the meeting together with all relevant supporting documentation, in advance of the meeting, providing sufficient time for the attendees to study the content;
- Detailed minutes should be taken at the meeting, with specific attention made to the decision making process, the trustees’ deliberations and the decision taken at the meeting;
- Full and frank disclosure should be made to the Court.
The above guidelines help trustees ensure that documentary evidence is produced before applying to the court for blessing on a momentous decision. However, it is important that trustees, especially professional trustees, should demonstrate a high level of record keeping in all areas of trust management.