Fiduciary Obligations & Trusts – The old adage of “hard cases make bad law” was averted late last year following the Supreme Court handing down its long-awaited decision in A, B and C v D and E Limited as Trustees of the Z Trust, but for many, it will feel that it has left a moral and equitable void.

 

The facts of the case make very difficult reading but revolved around a father who had historically abused his children (who are now adults) and then added further misery to their situation by cutting them out of any financial claim against his Estate by moving his assets into a Trust.

 

The crux of the case revolved around whether there was a fiduciary duty owed by a parent to a child, which included a duty not to alienate assets so as to defeat a claim against a parent’s Estate under the Family Protection Act 1955. If such duty was found to exist at the time the assets were transferred to the Trust, then the transfer of those assets could be unwound.

 

As the case wound through the High Court, the Court of Appeal and then to the Supreme Court, it was clear that even the judiciary were split, with some very strong dissenting opinions.

 

Whilst the Supreme Court was highly sympathetic to the situation and acknowledged the incalculable and ongoing harm that had been caused, they found that whilst a fiduciary relationship existed when the children were minors, that fiduciary relationship ended when the children became adults. They could not “read equity backwards” as to do so would result in “great uncertainty in the law”. As such, there was no fiduciary duty owed at the time the assets were transferred to the Trust.

 

Whilst purely based on the facts of the case many people may consider the outcome as unsatisfactory, the case did maintain the strength of having a Trust. It has, however, highlighted the potential need for a review of the Family Protection Act 1955 and the inclusion of anti-avoidance measures. The Law Commission already made recommendations on that issue in back in 2021, which were broadly accepted by the Government in 2022, so watch this space.

 

Have any further questions? Get in touch with our team today!