In a recent decision of the Deputy Bailiff, In Re Blackberry Trust [2023] JRC156 the Royal Court of Jersey has taken the relatively unusual step of depriving a professional trustee of a significant portion of its costs incurred in relation to an application for rectification of its actions while a trustee de son tort.
Background
This decision follows the earlier decision (reported at [2022] JRC 179) in which the Royal Court held that an instrument dated 31 January 2020, purporting to appoint Appledore Trustees Limited as professional trustee of the Blackberry Trust, had been ineffective.
The result of that finding was that Appledore had administered the Blackberry Trust as a trustee de son tort (i.e. a person who assumes to act as trustee without having been properly appointed as one) for a period of nearly two and half years. It had undertaken numerous transactions and made significant distributions to or for the benefit of beneficiaries, purportedly as the validly appointed trustee. This included its conduct of the proceedings in which it attempted first to remedy its defective appointment and then to seek ratification of its actions.
A year had passed between the decision declaring Appledore's appointment as trustee void and the hearing approving ratification.
The issues for the court were:
- Whether, and if so, the basis upon which Appledore's various actions could be ratified; and
- Whether Appledore's conduct of the proceedings was such as to justify a deprivation of its ability to recover all of its costs relating to those proceedings.
The decision does not involve any revision or novel development of the fundamental principles of ratification but it is a useful guide for trustees de son tort to understand what is expected of them if they seek ratification.
Principles applicable to ratification
The Royal Court, in earlier litigation, had laid down the principles applicable to ratification (i.e. sanction and confirmation) of actions taken by a trustee de son tort. The fundamental need for ratification arises because a trustee de son tort, while purporting to exercise the powers of a properly appointed trustee, is not properly constituted as the trustee. As between itself and the beneficiaries (and in some circumstances between itself and third parties), because the purported exercise of its powers are not rooted in the trust instrument, its actions are formally without any proper basis.
As the Royal Court observed BB Trust [2011 JLR 672] ratification is the mechanism to avoid "the havoc that may ensue from any attempt to unscramble what was purportedly done by the trustee de son tort".
The court in Appledore's case directed the parties, in advance of the final hearing, to attempt to agree which of Appledore's actions as trustee de son tort were capable of ratification and the basis of such ratification, applying the 'Tucker Categories' identified in the earlier Z Trust litigation Z Trust [2016] (1) JLR 132. In summary, those categories are:
- Confirmation by perfection of an imperfect act or transaction. "Category 1" i.e., a confirmation of a voidable transaction (e.g. one made by an agent without authority from its principal).
- Confirmation by replacement of a tainted or doubtful act or transaction by an effective one with a similar effect. "Category 2" i.e., the replacement of acts or transactions undertaking by the trustee de son tort with an act or transaction in the same terms by the de jure trustee.
- Confirmation by non-intervention "Category 3" i.e., a court direction to the de jure trustee that the acts or omissions of the trustee de son tort remain undisturbed and the trusts are accordingly administered on the same footing as if those acts or omissions had been done with the authority of de jure trustees.
It is conceptually possible for the actions of a trustee de son tort not to be capable of ratification, if for example, Appledore purported to exercise powers that were beyond even what a properly constituted de jure trustee could do e.g. by making distributions to a non-beneficiary.
The parties agreed that all but one of Appledore's actions as trustee de son tort were capable of ratification under Category 3 (i.e. a direction to the de jure trustees not to intervene). The remaining transaction was a loan that the parties agreed could be remedied by means of a Category 2 ratification. The court observed that while there is a conceptual distinction between the three 'Tucker categories' the practical distinction between them is slight. For all intends and practical purposes, they lead to the same place – the actions of the trustee de son tort stand.
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