This article examines what are called "trustee blessing applications" in terms of what they are, and why they matter.

Here is another article – part of a series – from Roman Kubiak, who is partner and head of private wealth disputes at Hugh James, a law firm. He looks at blessing applications, as they are called, as they apply in various jurisdictions. (See the first  and second and third articles in this series.) The editors are pleased to share these views; the usual disclaimers apply. Email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

Trustee blessing applications, also known as "Public Trustee v Cooper" applications after the 2001 case of the same name, are a significant aspect of trust administration in both UK and offshore jurisdictions. As many will know, these are applications made to the court by trustees seeking judicial approval or "blessing" for a momentous decision they propose to make.

Such blessing then, it is generally accepted, protects trustees from future claims of breach of trust and provides certainty and clarity for all parties involved.

They are generally used for particularly complex or contentious decisions, when the proposed action is outside the trustees' express powers, in cases involving substantial trust assets or when there is potential conflict between different classes of beneficiaries.

As such, they differ from so-called “Hastings-Bass” type claims, named after the eponymous 1975 case, which are used to set aside transactions, as they don’t seek to resolve any problems but rather protect trustees from any potential problems.

In Public Trustee v Cooper, the court listed four situations when it might be appropriate for it to provide its blessing:

1. Where the issue is whether some proposed action is within the trustees’ powers; 
2. Where the issue is whether the proposed course of action is a “momentous” one, for instance a large disposal or share sale in a family company; 
3. A surrender of a discretion where there is a good reason, for instance because of a conflict of interests or a trustee deadlock; and 
4. Retrospectively i.e. where trustees have actually taken action, and that action is attacked as being either outside their powers or an improper exercise of their powers. 

In England and Wales, provision to apply for such applications is found in rule 64.2(a)(ii) of the Civil Procedure Rules which confirms the court’s power “to determine any question arising in the execution of a trust.”

Such applications are seen as providing immunity to trustees, but in the recent decision of Denaxe Ltd v Cooper & Anor [2023] EWCA Civ 752, Lord Justice Snowden commented that “approval does not confer blanket immunity: each case depends on its own facts" and so the key message to trustees is to ensure that:

1. all relevant parties are joined to the application; and
2. all relevant facts and issues are before the court in any such application. 

While these are relatively common in England and Wales, it’s in the offshore trusts world where they have really gained popularity and usually under the second “Cooper category,” with a number of jurisdictions codifying the process in statute.

Blessing in Jersey
In Jersey this is found in Article 51 of the Trusts (Jersey) Law 1984, subsection 1 of which confirms that:

“A trustee may apply to the court for direction concerning the manner in which the trustee may or should act in connection with any matter concerning the trust and the court may make such order, if any, as it thinks fit.”

In the Jersey decision in Re S Settlement [2001] JLR N 37 the court said that it had three issues to consider under the second category, being:

1. Is it satisfied that the trustee 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 steps proposed? 
2. Is the court satisfied that the opinion which the trustee has formed is one at which a reasonable trustee properly instructed could have arrived? 
3. Is the court satisfied that the opinion at which the trustee has arrived has not been vitiated by any actual or potential conflict of interest which has or might have affected its decision?

This decision was recently followed in Representation of J Trustee Limited re Z Trust [2023] JRC006 which was an application by the trustee for approval of their decision to:

-- account to two of the beneficiaries for foregone capital distributions;
-- distribute the assets of the Z Trust equally among the 6 beneficiaries; and 
-- terminate the trust.

It followed a breakdown in family relations after which the settlors requested that the trustee cease distributions to two of the six sibling beneficiaries. However, the trustee subsequently decided to reinstate those distributions. It consulted the beneficiaries, who generally supported distributing the trust fund and terminating the trust, but disagreed on how it should be allocated. The trustee therefore proposed splitting the fund, valued at ÂŁ4.7 million ($5.92 billion), equally among the six siblings, but subject first to compensating the two beneficiaries for the previously foregone distributions.

The court applied the three stage test of whether: 

1. the trustee made the decision in good faith; 
2. it was a decision a reasonable trustee could make; and 
3. there was a conflict of interest.

The court ultimately approved and "blessed" the trustee's decision to distribute the fund equally, subject to accounting for the foregone distributions, and to terminate the trust.

However, trustees should take care as the court won’t always sanction a decision. In Re the V, W, X and Y Trusts [2021] JRC 208 the trustees sought "blessing" for a momentous decision regarding four trusts.

The trustees' prospective decision included irrevocably excluding spouses, widows and widowers of the settlors' children and remoter issue from the trusts' beneficial class, while creating a new, smaller trust including them.

Again, the court applied the three-part test when considering whether to bless the decision. Despite the trustees' careful consideration and support from the beneficiaries, the court declined to bless the decision.

Its main concerns were:

1. the disproportionate focus on reducing litigation risks;
2. questions about how the new trust would work in practice;
3. the sweeping nature of the exclusion, including widows and widowers; and
4. the artificial basis of the exclusion.

The case reinforces the importance of the court's supervisory role in trust matters and demonstrates that the court does not simply rubber stamp trustee decisions and why it is vital for trustees to be meticulous in preparing for such applications and to address potential concerns thoroughly and early on in the process.

Blessing in Guernsey
Guernsey has similarly adopted the use of such applications and largely followed the position of Jersey. The ability to apply for directions is set out in section 68 of the Trusts (Guernsey) Law 2007 which provides that:

“A trustee may apply to the Royal Court for directions as to how he should or might act in any of the affairs of the trust, and the court may make such order as it thinks fit.”

In the 2016 case of In the matter of the LKM Discretionary Trust, the trustee was asked to make a substantial distribution from trust assets to enable a beneficiary to satisfy the terms of (1) a deferred prosecution agreement, and (2) a settlement agreement, both negotiated with foreign authorities to resolve proceedings involving alleged fraudulent misrepresentations and omissions regarding certain investments.

In considering if the decision was sufficiently “momentous” it looked at the key cases of Kan v HSBC International Trustee Limited [2015] JCA 109 and In Re F [32/2013] which suggested that if a decision is "of insufficient moment" the court can refuse to entertain the application.

In considering if the decision was “momentous,” and echoing the approach in Jersey, the court outlined a four-part test:

1. Does the trustee have the power to make the decision?
2. Has the trustee formed the opinion in good faith that the decision is desirable and proper?
3. Is the opinion one at which a reasonable trustee could have arrived?
4. Has the trustee's opinion been affected by any actual or potential conflict of interests?

The court also affirmed its role that it should exercise caution and not act as a “rubber stamp” nor substitute its own view for that of the trustee.

The case emphasised the need for trustees to provide detailed evidence of their decision-making process, including comprehensive minutes of meetings or written resolutions.

However, in a more recent trend, trustees are now more often seeking, and the courts in offshore trust jurisdictions providing, “non-binding guidance” as opposed to active directions or blessings. A good example of that was the recent Jersey Court of Appeal decision in Representation of SG Kleinwort Hambros Trust (CI) Limited and Others [2023] JCA088.

This was an appeal against case management directions given by the Royal Court in trust restructuring proceedings. The proceedings were initiated by the trustees in the context of strained family relations, removal proceedings against the protector in Jersey, and parallel proceedings in Guernsey concerning related trusts. The Royal Court had previously encouraged a 'holistic' restructuring of all the trusts involved.

The Royal Court ordered a three-day hearing in June 2023 to consider the trustees' outline restructuring proposals, during which the court could provide "non-binding observations and views." This order was appealed by the settlor’s widow and children.

The main issues in the appeal were:

1. whether the Royal Court had jurisdiction to make such an order;
2. whether the order violated the “non-intervention principle,” namely the principle in trusts law that “the court does not intervene in the exercise by a fiduciary of a discretion” to quote Lady Arden in the UK Supreme Court decision of Lehtimäki and others v Cooper [2020] UKSC 33; and
3. whether the Royal Court's exercise of discretion was plainly wrong.

The Court of Appeal dismissed the appeal, holding that:

1. the Royal Court had jurisdiction under its case management powers to make the order;
2. giving non-binding guidance does not necessarily breach the non-intervention principle; and
3. the order was not plainly wrong or an erroneous exercise of discretion.

The Court of Appeal emphasised the importance of the non-intervention principle but noted it isn’t inflexible. It cautioned against courts expressing provisional views on substantive matters before a full trial but recognised that some level of court intervention might be appropriate in exceptional circumstances.

Blessing in the Cayman Islands
Over in the Cayman Islands, likewise, the ability to seek court blessing is enshrined in legislation under section 48 of the Trusts Act (2021 Revision) which states:

“Any trustee or personal representative shall be at liberty, without the institution of suit, to apply to the Court for an opinion, advice or direction on any question respecting the management or administration of the trust money or the assets of any testator or intestate, such application to be served upon, or the hearing thereof to be attended by, all persons interested in such application, or such of them as the Court shall think expedient; and the trustee or personal representative acting upon the opinion, advice or direction given by the Court shall be deemed, so far as regards that person’s own responsibility, to have discharged that person’s duty as such trustee or personal representative in the subject matter of the said application: Provided, that this shall not indemnify any trustee or personal representative in respect of any act done in accordance with such opinion, advice or direction as aforesaid, if such trustee or personal representative shall have been found to have committed any fraud, wilful concealment or misrepresentation in obtaining such opinion, advice or direction, and the costs of such application as aforesaid shall be in the discretion of the Court.”

In In the matter of the A Trust; AA v JTC (Cayman) Limited FSD 12 of 2024 (IKJ), in a first of its kind, it was a STAR trust enforcer who brought an application to make a “momentous decision,” namely to exercise his power to direct the trustees to exercise certain rights relating to shares held by the trustees. He did so by also relying on section 102(b) of the Trusts Act (2021) Revision which provides that:

“…an enforcer has the rights of a trustee of an ordinary trust to protection and indemnity and to make applications to the court for an opinion, advice or direction or for relief from personal liability.” This case confirms that enforcers of STAR trusts have standing to, and can, apply for blessing applications, directions and advice from the court.

Blessing in the Isle of Man
Similarly, in the Isle of Man, section 61 of the Trustee Act 1961 also provides ability for trustees to seek direction from the court:

“Any trustee shall be at liberty, without the institution of a suit, to apply, by petition, to the court, or by summons, upon a written statement, to the court at chambers, for the opinion, advice, or direction of the court on any question respecting the management or administration of the trust property, or the assets of any testator or intestate, such application to be served upon, or the hearing thereof to be attended by, all persons interested in such application, or such of them as the court shall think expedient; and the trustee, acting upon the opinion, advice, or direction given by the said judge, shall be deemed, so far as regards his own responsibility, to have discharged his duty as such trustee, in the subject matter of the said application: Provided, nevertheless, that this Act shall not extend to indemnify any trustee in respect of any act done in accordance with such opinion, advice, or direction as aforesaid, if such trustee shall have been guilty of any fraud or wilful concealment or misrepresentation in obtaining such opinion, advice, or direction; and the costs of such application as aforesaid shall be in the discretion of the court.” 

Conclusion 
As case law and statute in these various trust jurisdictions confirm, the courts and legislatures are willing to support trustees who find themselves faced with difficult or “momentous” decisions and trustees (as well as those with appropriate legal standing) are now regularly utilising these avenues to protect themselves. However, it is also clear that the courts won’t simply “rubber stamp” any decision and so trustees are well advised to ensure that any proposed application is detailed, thorough and names all relevant parties in the proceedings.