The Applicant applied to the Court to have an Employee Benefit Trust ("EBT") set aside and all the monies held by the trustees to be returned to the Applicant. The EBT had been set up to provide the Applicant's employees with incentive and pension benefits. While the EBT was not driven by tax mitigation purposes, the Applicant had believed that it would be entitled to claim a deduction for corporate tax purposes. However, following a letter from HMRC that the Applicant would not be able to claim tax deductions and following the decision of Gresh v RBC Trust Company (Guernsey) Limited and HMRC (16th September 2009), the Applicant sought to have the EBT deed set aside based on an error contained in one of the clauses.
The first issue the Court considered is whether it should have contacted any of the beneficiaries of the EBT who were entitled to receive benefits under Letters of Allocation. The Court, in applying the Jersey cases of Re DLS Remuneration Trust [2009] JRC 164A, Re the R Remuneration Trust [2009] JRC 164A and the Guernsey case of H Sossen 1969 Settlement (24th May 2004, Royal Court), considered this to be unnecessary since the nine named beneficiaries had consented to the application. There was also a class of beneficiaries that included former employees and their relatives which the Court further held to be too numerous to obtain consent and in any event would be bound by the Court's decision pursuant to Rule 35 of the Royal Court Civil Rules 2007.
The Court also declared jurisdiction over the EBT pursuant to s.4 (1)(b) of the Trusts (Guernsey) Law, 2007 and the EBT Deed. Nonetheless the EBT Deed also declared the proper law to be that of England and Wales so the Court considered the application of the principle in Gibbon v Mitchell [1990] 1 WLR 1304 which holds that a voluntary deed which confers an interest on a party that becomes frustrated may be set aside on the grounds of mistake. Accordingly the Court applied the principle in Gibbon, being satisfied that a fundamental error in the drafting of the EBT deed prevented the purpose of the EBT from being effective.
This was confirmed by the Jurats who unanimously agreed that had the Appellant known of the error in the EBT deed he would not have executed it. The Jurats further rejected the Respondent's submission that a new trust should be set up to preserve the interests of the beneficiaries as the Jurats believed that the beneficiaries were in a position to safeguard the beneficial interests they had held previously in the trust fund.
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