Unforeseen market conditions have helped an employee of a benefit trust to overrule the provisions of the trust deed.
An offer was made to buy the entire share capital of the trust in 2017. After researching the seller, the trustee leaned in favour of the sale as it would significantly benefit the members of the trust.
Following the offer, the trustee sought legal advice from a financial advisor and a range of legal consultations. Deeming that the offer was in the best interests of the trusts members, the trustee facilitated the holding of the shares by the beneficiaries.
Clauses 5 and 7 of the trust deeds, gave the trustee discretion to apply capital or income from the assets to benefit the beneficiaries.
Because the trustee had no control in issuing the sale, it could only be legally effected by the court exercising its discretion.
Viewing that the trustee had sought professional and trustworthy advice from both a legal and financial standpoint, the court viewed the sale as ‘management and administration of property,’ ruling in favour of the trustee and permitting the sale.
As the sale was beneficial and lucrative to the trustees, the court concluded that the trust had therefore fulfilled its express objective in helping the people it was set up for.
The court granted the trustee power to complete the sale and that the requirements of section 57(1), Trustee Act 1925, were satisfied.
The court also considered the current market conditions. Because the Trustee had considered a range of implications, both financial and social, the court were confident that the poor current market conditions could not outweigh the benefits that the sale would offer the beneficiaries.
This case could be considered momentous to some holding trusts. The case was determined on the unique facts expressed to the court and was reliant on the changing and unpredictable market conditions.
It should therefore open a range of cases whereby market conditions, which could not be predicted when the trust was set up, should consider whether a court application could also be beneficial.
