On 25 March 2025, the Royal Court of Jersey (the "Court") handed down its judgment in Representation of R & H Trust Co (Jersey) Limited re Tomato Trust [2025] JRC 082. The case concerned an application under Article 47 of the Trusts (Jersey) Law 1984 (the "Law") to vary the terms of two Jersey discretionary trusts — Tomato Trust Fund 1 and Tomato Trust Fund 2. Under Article 47 of the Law, the Court may approve variations on behalf of (amongst others) minors, unborns or unascertained beneficiaries only if the variation is for their benefit.
In this case, the trustee sought to vary the trusts by reversing the irrevocable exclusion of F (the settlor) from the class of beneficiaries, appointing F as a beneficiary, and distributing the trust assets to him, effectively terminating the trusts. The trustee also sought approval under Article 51 of the Law for its in-principle decision to appoint F and distribute the assets.
The application was prompted by impending UK tax changes, effective from 6 April 2025, which would impose significant tax liabilities on the current beneficiaries (F's daughters, L and N), even if they did not receive any benefit from the trusts. The application was supported by all adult beneficiaries of the trusts.
The Court reaffirmed the findings in Re DDD Settlements [2012] (1) JLR (Note 8); [2011] JRC 243 and IQEQ (Jersey) Limited re B Trust [2024] JRC 210, confirming that the word "benefit" has been given a wide meaning by the Court and includes tax mitigation for the beneficiaries.
The Court concluded that the proposed variation and the trustee's decisions were for the benefit of the relevant beneficiaries and approved the application.
It is notable that a person who had been irrevocably excluded by the trust deed was given ownership of the trust assets. If the exclusion had been revocable, the trustee could have revoked it without needing a variation. However, a trustee needs a full variation to reverse an irrevocable exclusion in the trust deed. The case highlights that an irrevocable exclusion is not absolute in the world of offshore trusts.
If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.
Location: Jersey
Related Services: Litigation & Dispute Resolution | Contentious Trusts & Probate
