• To Join or Not Join: The Role of Trustees in Family Proceedings
  • November 2, 2016 | Authors: Claire Blakemore; Paola Fudakowska
  • Law Firm: Withers Bergman LLP - London Office
  • We are seeing a growing number of financial cases where the dispute potentially affects third parties such as beneficiaries, trustees, parents, or commercial partners. The Family Procedure Rules in England make provision for third parties to be joined to the proceedings if their joinder will assist with resolving the issues in dispute.

    Joinder of trustees is relevant either to an application that the trust is a resource of either party which can be taken into account or, more usually, in the context of an application to vary the terms of the trust to make provision for one or both of the spouses. The purpose of joining the trustees is often to assist with disclosure or, potentially, to assist with enforcement.

    However, there is an important distinction between joinder to the proceedings and submission to the English court's jurisdiction. By being joined to the proceedings, offshore trustees are not bound by any decision of the English court unless they submit to its jurisdiction by participating in the proceedings, or confirming that they will be bound by the court's decision.

    Offshore trustees may find themselves in a quandary when faced with an application that they be joined to proceedings as they have to balance the interests of at least one of the two spouses against their duties to the other beneficiaries. This may become particularly difficult in the context of requests for disclosure of information about the trust which need to be balanced with the trustee's duty of confidentiality to the other beneficiaries. Often it may be sensible for the trustees to seek directions from their local court about joinder and/or submission, as well as specific issues such as disclosure of information. This inevitably incurs costs and delay.

    The issue of joinder of trustees has been addressed in a number of judgments with the most recent being TM v AH [2016] EWHC 572 (Fam) which concerned two trusts, one based in the BVI and the other in Switzerland. Both were settled by the husband. Although both the husband and wife were beneficiaries in the past, they had subsequently been excluded irrevocably. The wife applied to vary both trusts on the basis that they were 'nuptial settlements'.

    The court concluded that the matter could not be resolved without the trustees being able to participate in the proceedings and so they should be joined. The court's decision disagrees with that of Mr Justice Mostyn in DR v GR [2013] EWHC 1196 in which he held that joinder of overseas trustees was 'not required' and that the rules only require that 'notice of the application be given.'
    In TM v AH the court said that, in line with Article 6 of the European Convention of Human Rights (i.e. the right to a fair trial) trustees should be joined before a court varies a trust, so that the trustees can have their say.

    The court also referred to Mr Justice Munby's decision in A v A [2007] EWHC 1810 (Fam) where he had said in argument, though not in the published judgment, that trustees had to be joined for any orders to be binding upon them.

    This judgment may put more pressure on trustees to make decisions at an early stage of a case on whether or not they will participate. Withers have had extensive experience in dealing with these issues and have represented parties in BJ v MJ (Financial Remedy: Overseas Trusts) [2011] EWHC 2708 (Fam) and Tchenguiz v Imerman [2012] EWHC 4277 (Fam) where the issues of joinder and disclosure by third parties were addressed. The questions of joinder, submission and/or participation are key tactical decisions that should be made in a way that balances the potentially competing interests of the beneficiaries and in the context of the issues in the case. There is no uniform approach which applies. We are mindful that a strategy needs to be formulated by assessing immediate issues that may arise whilst not losing sight of the big picture.