The Privy Council Considers The Purpose Of A Trust Is Of Central Importance When Considering Exercise Of Trustee Power

• Published date: 06 January 2023
• Subject Matter: Wealth Management, Litigation, Mediation & Arbitration, Criminal Law, Wealth & Asset Management, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Herbert Smith Freehills
• Author: Mr Richard Norridge and Hussein Mithani
• topic: Trust Law,Civil Procedure

Summary

The Privy Council has recently considered the proper scope of a trustee's power. In short, the Privy Council held that the exercise of a trustee's power must be within the proper purpose of that particular power.

In its ruling the Privy Council did not consider there was an absolute substratum rule (i.e. a rule that a trust's underlying character could never be altered) and they criticised the use of the term "fraud on a power". Instead the Privy Council considered that the better test is whether the exercise of the trustee's power was in accordance with the purpose for which their powers were conferred.

Another interesting point is that the Privy Council explained that there is no overriding principle that the powers in a trust must be exercised in the interest of beneficiaries. Whether or not they should be will depend on the facts of each case.

Hussein Mithani, an associate in our disputes and private wealth team, considers the decision in more detail below.

Background

The dispute in Wong Wen-Young & Ors v. Grand View Private Trust Company Ltd [2022] UKPC 47 concerned two trusts: the Global Resource Trust ("GRT") and the Wang Family Trust ("WFT"). These were Bermuda trusts set up by two brothers, Wang Yung-Ching and Wang Yung-Tsai.

The GRT was a...