We have, once again, successfully defended Grampian Trust Company Ltd (Grampian) with the Privy Council having unanimously dismissed the appeal of Mrs Dawson-Damer in respect of what is undoubtedly one of the largest trust cases to have been pursued in the Bahamas and appealed up to the Privy Council.
The Board has upheld the overall decisions of Winder J (as he was then, now Chief Justice Sir Ian Winder) and the Court of Appeal and has rejected Mrs Dawson-Damer's appeal in full. This welcome decision comes 10 years after these proceedings were issued.
Supreme Court
The heart of the case centred on whether two trust appointments made by our client in 2006 and 2009, and now worth in excess of US$500 million, should be set aside as a breach of trust. The Supreme Court of the Bahamas had to consider the Settlor’s wishes or intentions for the trust; whether the trustee treated Mrs Dawson-Damer fairly and acted honestly and in good faith when making the 2006 and 2009 appointments; and whether their deliberations when making the 2006 and 2009 appointments were adequate and, in the event they were not, would or might it have made a difference to the trustee’s decisions. The Court found that the Settlor’s intention for the trust was for it to be a long term accumulating trust primarily for the benefit of next generation beneficiaries and that the trustee had acted fairly, honestly and in good faith in keeping with the Settlor’s wishes. In considering the trustee’s exercise of its discretion relative to the 2006 and 2009 appointments, whilst Winder J found that the trustee did not give adequate deliberation to Mrs Dawson-Damer's financial circumstances at the time, when considering her fabulous wealth, age and the primary purpose of the trust being for the next generation, he found that it could not be said that the trustee or any reasonable trustee would not have made the appointments even if it had given adequate deliberation. Accordingly, the inadequate deliberation did not amount to a breach of trust that would warrant a setting aside of the appointments or removal of the trustee. The Court Appeal upheld Winder J's decisions in full.
The Privy Council
Mrs Dawson-Damer appealed two points to the Privy Council.
Issue one: The Settlor's intentions
Mrs Dawson-Damer argued that it was wrong for the judge at first instance to have held that the Settlor's intention was that the trust would be a “long term accumulating trust primarily for the benefit of next generation beneficiaries” (ie not Mrs Dawson-Damer and her generation). The Settlor was a corporate settlor and Mrs Dawson-Damer argued that that intention could not, as a matter of law, be attributed to the Settlor.
Issue two: No serious or material inadequate deliberation
The judge at first instance had found that Grampian had not given adequate consideration to Mrs Dawson-Damer’s needs and wishes but that this failure was not sufficiently serious to amount to a breach of trust because, in view of Mrs Dawson-Damer's circumstances at the time of the appointments “it could not be said that [the trustee] or a reasonable trustee would not have made the appointments had it given adequate deliberation to [her] circumstances.” Mrs Dawson-Damer challenged this on the basis that the judge had imposed an unjustified condition on a beneficiary in such a claim. She argued that the correct approach was to first identify the breach and then, on the question of whether the Court should set aside the exercise of the discretion, the Court should ask itself the relevant but not decisive question as to whether a reasonable trustee would or might have acted differently, had adequate consideration been given. Mrs Dawson-Damer argued that if one standard needs to be applied, it would be the might test and not the would test.
The Board's Findings
In a detailed consideration of the test for corporate attribution (which was not disputed between the parties) and the application of that to the first instance judge's finding, the Board was fully satisfied that he was entitled to make that finding of fact and he had applied the correct legal test when reaching that conclusion.
In respect of issue two, the Board took a slightly different view to the first instance judge's assessment of whether the inadequate consideration was sufficient to amount of a breach of trust, determining that the failure did amount to a breach of trust, but the Board turned to the crucial question in this case being the effect of that breach. Winder J had taken the view that, even if the trustee had given proper consideration to Mrs Dawson-Damer's circumstances, it could not be said that this trustee or a reasonable trustee would not have made the appointments. The Board agreed with that finding, but in view of Mrs Dawson-Damer's position that one should apply the might test, and in a show of complete support for the decisions that the trustee took, to make the 2006 and 2009 appointments, went even further. The Board determined that once one accepted (as the Board had on issue one) that the wishes and intentions of the Settlor were that this trust was primarily for the benefit of the next generation, it was clear that Mrs Dawson- Damer could not show that the decision would have been, or even might have been, different had there been no breach of duty. The Board, therefore, held that the appointments were valid.
This case provides a helpful reminder as to the law of inadequate deliberation as laid down in Pitt v Holt reconfirming that the court’s intervention, on the basis of inadequate deliberation was dependent on there having been a “breach of fiduciary duty”. Once a breach of duty is established, it is a matter for the court’s discretion whether to set aside the disposition. The Board confirmed that there are two separate stages: breach of fiduciary duty; and the consequences of that breach. In considering whether the court should set aside the disposition, the Board considered Lord Walker's discussion in Pitt v Holt as to whether the Court should do so if it were satisfied that the trustees would have made a different decision, but for the breach of fiduciary duty, or whether the court should set aside the transaction if satisfied that the trustees might have made a different decision but for that breach. There has been some commentary in the market as to the appropriate test but in the circumstances of this case, it was unnecessary for the Board to give a view as Mrs Dawson-Damer could not show her case met either threshold.
Finally, and for the avoidance of any doubt, the Board confirmed, as was agreed between the parties, that a trustee does not have a duty to consult with a potential beneficiary in respect of a trust appointment.
The proceedings have a very long history and have raised issues concerning the intentions on the establishment and operation of the trust dating back decades. The substantive trial culminated in a five-week trial before the Supreme Court between November 2020 and February 2021, with the trial itself being unprecedented, conducted remotely in the midst of the COVID pandemic with evidence given by invigilated witnesses from three different jurisdictions and time-zones (Bahamas, England, Australia).
We are delighted at the result for our client and the efficiency with which the Privy Council reached its decision to reject the appeal.
Commenting on the decision lead partner Kirstie McGuigan noted:
"I am delighted with this result for our client. This represents the culmination of extensive legal proceedings in which we have consistently and successfully defended our client's position at each stage of the litigation.
We are also very grateful for the efficiency at which the Privy Council reached its decision to reject the appeal.
Behind every successful result is a successful team. It has been an absolute privilege to work with my fellow partner Caroline Tayler and senior associate Sacha Somerston, along with our distinguished Counsel team, Penny Reed KC, Simon Taube KC and James MacDougald and our Bahamian colleagues Sean Moree KC and Vanessa Smith (McKinney Bancroft & Hughes).
I thank them all for their fantastic commitment, collaboration and meticulous approach throughout. Their dedication and exceptional insight were instrumental in navigating this complex legal matter, contributing significantly to our successful outcome."
Led by Kirstie McGuigan, Partner within Private Client, the team advising Grampian included Partner Caroline Tayler, Senior Associate Sacha Somerston and Trainee Solicitor Dominic Boost.
