The High Court had to decide whether to approve a complex restructuring proposal for an estate. 

Background:

The Portman Estate comprises various trusts and funds holding partnership interests in assorted businesses and real estate assets. There are presently four principal beneficiaries of the funds, namely the current 10th Viscount Portman and his three sons, Luke, Matthew and Daniel. Although the sons do not currently have any children, some future progeny might fall within the class of beneficiaries of some of the trusts, as such classes of beneficiaries may remain open for about 40 years.

Each of the funds has pooled some or all of its assets with those of other funds, continuing to conduct business in partnership with those other funds. The three partnerships are Taunton One Partnership, which comprises assets in Funds 3 and 21, and an investment from a smaller fund, specifically Fund 37, the Berkeley Two Partnership, which comprises assets of Fund 22, in which Luke currently has a 1000/1012 share and his brothers and ten other minor beneficiaries each have a 1/1012 share, notwithstanding an investment from a smaller fund, Fund 38. Finally, the Bryanston Three Partnership, comprises assets held in Funds 23, 24 and 58, in which Luke, Matthew and Daniel each have a substantial share, while Viscount Portman has a share in Fund 58 only, and Piers Portman has a smaller share (in Fund 23 only), and an investment from a smaller fund, Fund 39. Some of the assets of Funds 3, 21, 22, 23, 24 and 58 are "left out", as they are not held within the partnership yet are retained by the fund as separate assets controlled solely by its trustees or else are pooled with other assets of one or more funds but not partnership assets. 

The structure of the various funds and the beneficial interests held within them are a little complex. As a result, the trustee asked for the approval of a restructuring of the partnership assets into a single limited company in exchange for shares issued to the funds. This restructuring aims to keep the estate intact while providing greater flexibility in distributing profits and securing potential tax and other commercial benefits. Extensive professional advice was obtained on structuring the proposal and its implications.

All principal beneficiaries consented to the proposal after being consulted and taking independent advice. The defendant was appointed to represent the interests of any as yet unborn beneficiaries. 

Decision: 

The High Court approved the restructuring, as the proposal to restructure the partnership’s assets into a single limited company was deemed to be one which a reasonable body of trustees if properly advised, could arrive at and is not vitiated by any conflict of duties. Indeed, one of the trustees’ concerns was the potential conflicts of duties owed to different beneficiaries. 

Justice Fancourt ruled that the trustees of Funds 3, 21, 22, 23 and 58 have the necessary powers under the trust instruments to carry out the proposed restructuring and incorporation, with one exception regarding Fund 24. Regarding Fund 24, the Court analysed Section 57 of the Trustee Act 1925 and noted that the power to incorporate a company in which the trustees have a minority interest falls within the scope of that provision. The Judge ruled that it was necessary to confer power on the trustees of Fund 24 under Section 57 of the Trustee Act 1925 to allow them to participate in the restructuring.

Implications:

This decision, based on very specific and complex facts, highlights the importance of receiving adequate consultation, as it weighed on the Judge’s decision. Another key takeaway is that the trustees properly managed any potential conflicts of duties owed to different beneficiaries. The restructuration was also in line with the beneficiaries' wishes while keeping the estate intact. 

Regarding Section 57 of the Trustee Act 1925, this judgement made it clear that the power to incorporate a company falls within that provision. Conferring a wider power on the trustees of one fund was expedient to give effect to the restructuring.