BVI Trusts: Powers of appointment and exclusion of beneficiaries

ROYAL FIDUCIARY GROUP LIMITED (In the Matter of the New Huerto Trust) BVIHCMAP2013/0022

It is generally accepted in offshore jurisdictions, as in England, that powers of appointment under a trust deed can allow trustees to make important changes to settlements, including the exclusion of beneficiaries, where the relevant trust instrument lacks an explicit power to make such changes. The leading authority supporting this proposition is the decision of the English Court of Appeal in Blausten v Inland Revenue Commissioners [1971] 1 WLR 1696.

In 2013, Justice Edward Bannister QC, who was then the BVI Commercial Court judge, was faced with an application by a trustee, Royal Fiduciary Group Limited, which intended to exercise its power of appointment in order to exclude the settlor as a beneficiary of the trust. The motivation behind this was to prevent a freezing order obtained against the settlor in English matrimonial proceedings from applying to the trust’s assets. For various reasons, the settlor did not wish to remain a beneficiary under the trust in any event. The judge refused to sanction the trustee’s proposed appointment, holding that the power in question entitled the trustee to appoint capital and income to one or more beneficiaries, not to settle the assets on new discretionary trusts for different beneficiaries. He also expressed the view that the Blausten decision was “obviously wrong” (and pointed out that he was not bound by decisions of the English Court of Appeal in any event).

This decision has now been overturned by the Court of Appeal in a judgment handed down at the end of October.

Justice of Appeal Michel saw “no reason in principle” why the power of appointment could not be exercised as proposed, and noted that Halsbury’s Laws of England referred to Blausten as the leading authority on this point. Michel JA went on to say that "decisions of the English Court of Appeal… although not binding precedents, have always been treated as persuasive authorities in the British Overseas Territory of the Virgin Islands and ought in my view to be so treated on the point in issue in this case.

The decision is welcome in that it not only confirms that the law and practice relating to the scope of powers of appointment is in effect the same as that in England and other offshore trust jurisdictions, but also implies that English authority on trust administration issues generally should be followed, except where the BVI statutory regime dictates otherwise. This is a helpful statement in circumstances where reported decisions on trust administration issues from the BVI Courts are few and far between.

That sounds like a very useful decision - where can we get a copy of the judgment?

Yes of course:

First instance: