Letters Of Wishes: Adequate Deliberations

Introduction

In Roman mythology, Janus is the god of beginnings and endings. He is usually depicted as having two faces, one looking to the past and one to the future. Janus is said to have presided over the beginning and the end of wars: the doors to his temple were open in times of war, closed in times of peace. Trustees reading Stephen Moverley Smith QC and Andrew Holden's article, 'Too many cooks: Letters of wishes and the ongoing role of the settlor'1 could be forgiven for thinking that the doors of Janus' temple should remain permanently open. The authors describe as the 'orthodox position' that the settlor's status as the previous owner of trust property gives the settlor no more right to influence how that property is used than any other previous owner of property gifted to another. If it is correct that trustees should have no regard to the wishes of the settlor expressed from time to time after the date of settlement, then this would be a radical departure from current practice and would likely result in considerable conflict between settlors and trustees. This is, perhaps, especially so in the offshore world where letters of wishes are commonplace, frequently updated and are viewed by trustees as an important 'companion' to the trust deed.2 This article will argue that trustees, like Janus, must look to the past and the future, the settlor and the beneficial class, if they are to discharge their fiduciary duty. Letters of wishes (updated from time to time) are relevant considerations to which trustees should have regard and the question for trustees is to assess the proper weight to be attached to them. However, the very fact that the law of trusts has developed a concept of 'relevant considerations' is an indication of an era of more intense judicial review of trustee decision-making.

Categorization

Before delving into the argument as to the status of letters of wishes, it is important to acknowledge the debate that rages about different 'types' of letters of wishes. The clearest articulation of categorization is that found in Underhill and Hayton.3 The authors distinguish between 'legally binding', 'legally significant' and 'morally binding' letters of wishes.4 The first category is, as Moverley Smith and Holden note, 'effectively part of the terms of the trust'5 and there is a good argument that we should not further be concerned with this category. After all, a 'wish' is an expression of desire, not obligation.6 It is also doubtful that there is any real distinction between the categories of 'legally significant' and 'morally binding' letters. If the trustee has an obligation to take the settlors' wishes into account in decision-making, it does not seem to matter that the settlor has expressed those wishes as only 'morally binding'. The question for the trustee in each case is whether their decisionmaking is open to attack if they fail to take into account the expressed wishes of the settlor. How the settlor has expressed the wish may be relevant to the question of the proper weight to be attached to such an expression but seems to have little to do with whether or not there is an obligation to take it into account.

Relevant considerations

It is now firmly entrenched in authority that a trustee has a duty when making a decision to take into account relevant (and not irrelevant) considerations.7 This is so whatever the nature of the decision and therefore the question of what are, and what are not, 'relevant considerations' is equally important to the exercise of a dispositive discretion as it is, eg, to a decision as to investment. A decision taken in breach of this duty will be capable of attack. The language of 'relevant considerations' is a relatively recent addition to the judicial analysis of the duties of trustees in the English law of trusts and to the case law dealing with the scope of judicial review of trustees' decisionmaking. If we consider the articulation of trustees' duties in 1965 in Re Londonderry's Settlement,8 we see that Salmon LJ, in deciding that a trustee was not bound to disclose reasons for the...