Cator & Ors v Thynn & Anor case update: representation of beneficiaries in trustee 'blessing' applications

In the case of Cator & Ors v Thynn & Anor , the court considered an application made by the trustees of several family settlements to join an independent solicitor as a representative defendant. The purpose was to ensure that beneficiaries who could be adversely affected by the trustees’ action would be properly represented in the underlying substantive claim, in light of the Court of Appeal's major changes to trustee approval law in the case of Denaxe Ltd v Cooper .

This article looks at how the court approached beneficiary representation following the case of Denaxe v Cooper, and specifically the decision to appoint an independent solicitor.

What is the underlying substantive issue and what does the judgment address?

The underlying substantive claim, which is still to be determined, concerned the trustees’ proposal to use a power of advancement to permit the inclusion of the Marquess of Bath’s second son Henry, who was born via surrogacy in the USA, into the beneficial class of certain family trusts. Currently, the common-law position is that the status of a child born by surrogacy would not be considered a legitimate child of the intended parents. In this case, this would mean that the child concerned could not benefit from the Marquess of Bath’s family trust. 

This judgment deals only with the procedural question of whether to appoint a non-beneficiary as a representative on behalf of the potentially affected beneficiaries, and not the larger question of determining whether a surrogate-born child is a legitimate child for trust and inheritance purposes.

The problem: how should beneficiaries be represented?

If approved, the trustees’ proposed use of the power of advancement could prejudice all existing or potential beneficiaries by expanding the class of beneficiaries; which was already significant, not yet closed and included minors. Further, the class already included the Marquess's elder son and any future children.

Before the case of Denaxe v Cooper, trustees could bring such applications with few or no defendants provided their evidence was full and frank, and the court’s approval protected the trustees. However, the judgment in the case of Denaxe v Cooper has changed that.

Impact of the earlier Denaxe Ltd v Cooper case

The Court of Appeal held that the immunity that trustees receive after obtaining court approval is not derived from approval itself but from ‘issue estoppel’. This means that:

• trustees must create a genuine issue between themselves and at least one opposing party,
• that party must be joined as a defendant, or represented through a representation order, and
• without an opposing party, there can be no ‘estoppel’, and therefore no protection.

This presents a major shift in trustee approval law and the judge noted several practical consequences:

1. Trustees always need at least one defendant - even if the old practice allowed undefended applications, this is no longer safe.
2. Full and frank initial disclosure may be less central - traditionally this was critical, but if issues must be formally contested then disclosure might instead arise through adversarial processes.
3. Applications will become slower and more expensive - representation must be arranged and evidence exchanged.
4. Trustees might decide to avoid applying for approval – because delay could make court approval impractical when urgent decisions are needed.

The solution: a representation order

Under the Civil Procedure Rules , the court has broad powers to appoint a representative for person(s) who:

1. are unborn,
2. cannot be found,
3. cannot easily be ascertained, or
4. are a class of persons who have the same interest in a claim and
   
   1. one or more members of that class are within sub-paragraphs (a), (b) or (c), or 
   2. to appoint a representative would further the overriding objective.

Given the number of potentially affected beneficiaries and the impossibility to identify a suitable adult beneficiary without a conflict of interest in the proposed application, the judge accepted the trustees’ proposal to appoint an independent and suitably qualified solicitor to represent all beneficiaries potentially disadvantaged by the trustees’ proposed use of the advancement power. 

Conclusion

The judgment in the case of Cator & Ors v Thynn & Anor confirms that, following the case of Denaxe v Cooper, beneficiary representation is not optional but essential for trustees whenever they seek protective blessing from the court.

For further information, please contact the disputed wills and trusts team.