Discretionary trusts containing AXA offshore bonds were valid even though AXA later refused to recognize them due to a string of documentation defects, the England and Wales High Court (EWHC) has ruled.
Michael and Ann Bowack paid a financial planner to establish the Isle of Man trusts in early 2014, each putting in GBP325,000 for the issue of the bond. They both executed standard form declarations of trust appointing themselves and their daughter Claire Saxton as trustees, with the latter as principal beneficiary.
However, when the documents were forwarded to AXA Isle of Man, it noted that Claire's signature on the trust forms had not been witnessed by an independent person. It also turned out that the declarations of trust as executed left the effective date blank and failed to identify the trust property as the two bonds. Even so, AXA cashed the two cheques it had received in payment for the bonds, and duly issued the bonds, which were subject to Manx law and only assignable with the company's agreement.
A long correspondence ensued to try to set matters right. Ultimately, in the face of AXA's resistance, the Bowacks resorted to the courts, formally suing their own daughter to establish the validity of their estate plan. The case was heard by Matthews J, who, although criticising the handling of the paperwork, decided that none of the defects destroyed the arrangement.
Failure to include an effective date was not fatal, as it was clear on the facts when the settlors intended their trusts to come into effect. Similarly, the failure to specify the trust property in the trust instrument did not matter, as it could be identified from the circumstances.
'On the evidence it is clear that the claimants were not making a gift of the money to [AXA], and neither were they paying it with a view to that money being held on trust by that company for their intended beneficiaries', commented Matthews.
Moreover, the lack of a witness to the third trustee's signature did not prevent the beneficial owners declaring a trust of them in English and Welsh law.
Matthew accordingly declared that valid trusts had thus come into existence at the point they were issued, and there were simultaneous valid and effective assignments of those bonds to the three trustees in each case (Bowack v Saxton, 2020 EWHC 1049 Ch).
Aidan Briggs TEP, Barrister at New Square Chambers, noted that paperwork of the kind seen in this case will be familiar to private client practitioners. However, as here, he said, ‘it will often be possible to glean a valid trust even from the most inept documentation'.
News Source：【STEP 2020/06/01】
