In the Matter of the X Trusts

BERMUDA

SUPREME COURT

APPLICATION BY CORPORATE TRUSTEES FOR DIRECTIONS AS TO WHETHER THEY SHOULD REMAIN IN OFFICE – SUBMISSION BY CERTAIN BENEFICIARIES THAT DIRECTORS OF CORPORATE TRUSTEES SHOULD BE REMOVED – TEST FOR REMOVAL – WHETHER COURT HAS JURISDICTION TO COMPEL DIRECTORS TO RESIGN – WHETHER REQUIREMENTS FOR REMOVAL MADE OUT

The Trustees of the X Trusts sought direction in relation to various matters relating to the administration of the X Trusts. The present judgment relates to their application for directions as to “whether they should remain as trustees of the X trusts or retire”.

The Trustees are private trust companies which have for some years been responsible for managing the Trusts which control underlying assets worth billions of dollars. The beneficiaries may for present purposes be described as falling into two family branches, the Y branch which contends that the Trustees are liable to be removed and the Z branch which contends that they are not. The Trustees adopted an essentially neutral position although their counsel firmly challenged any suggestion of wrongdoing on their part.

The need for the directions arose in the following way. Following meetings between the Trustees and beneficiaries, the Trustees produced a ‘Proposed Plan’ for the future of the X Trusts. The Y branch expressed shock and dismay at certain aspects of the Proposed Plan, in particular the fact that the Trustees had reached firm decisions to usher in “epochal” changes to the trust structure without adequately consulting the Y branch. It was complained that it was no longer possible for the Y branch to have any confidence in the ability of the Trustees to manage the proposed restructuring in a fair manner.

The following questions arose for determination:

1. what was the legal test for removal of a trustee?


2. did the Court have the power to require directors of a corporate trustee to resign as opposed to removing the corporate trustee where a case for removal was made out?


3. since the directors of the Trustee had offered their resignations in the event that the Court determined it was appropriate for them to resign, should the Court signify that resignation is appropriate in respect of some or all of the directors?

The Trustees formally adopted a neutral position allowing the case for and against removal to be argued by the senior limb (supported by a junior limb) of the Y branch and by the senior Z branch respectively.

 

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