Benjamin pushed too far

Trustees of the ABC Trust v W, X, Y and Z is an anonymised decision subject to confidentiality orders that relates to an application by the trustees of the ABC Trust (the Trust) for directions that they can enter into a transaction (the Proposed Transaction) whereby the trustees would sell down part the Trust’s company shareholding to a minority shareholder and a new investor, such that the Trust would no longer be the company’s majority shareholding. Against this backdrop W has filed proceedings under the Property (Relationships) Act 1976 and has sought a declaration that some of the shares are held on constructive trust for W. W is a secondary beneficiary of the Trust, which was settled in 2021 and the settlor’s widow (noting that W separated from the Trust’s settlor (who died in 2024) in 2010, notwithstanding which they remained married).

Specifically the trustees have sought orders pursuant to section 133 of the Trusts Act 2019 and / or the Court’s inherent jurisdiction that:

• the trustees can enter into the Proposed Transaction (or any variation of it) with the current minority shareholder and the proposed incoming investor
• continue to make monthly distributions to beneficiaries of the Trust; and
• continuing to authorise payment of expenses from the Trust including legal and professional fees.

As set out at [3]:

“The Trustees’ position is that W’s claims are not seriously arguable. Despite that, they are acting with caution to seek directions before dealing with the Trust property. The Trustees consider there is an established line of authority based on an English decision in Re Benjamin permitting directions being made to deal with trust property notwithstanding unresolved claims by third parties.“

W’s position is that the trustees are “… in substance attempting to obtain advance judicial endorsement of a course of action that might defeat W’s claims.”

Other interested parties have varying positions on the matter.

The application was denied on the basis that:

• the directions sought would go well beyond those considered in the Re Benjamin line of authority. The original Benjamin order allowed a trustee to distribute trust assets in circumstances where a beneficiary was missing or could not be identified. Therefore, the Court allowed the trustee to act on a directed factual footing. While the jurisdiction has developed to authorise distribution despite an adverse claim to trust assets from a third-party Lewin on Trusts considers as suitable cases for a Benjamin order being those in which the identity of a potential claimant is unknown or where the possibility of a claim appears to be remote or speculative.
• W’s claims (and proposed claims) are not wholly without merit
• The application is aimed at obtaining a direction that the Trustees may proceed down their path of entering into the Proposed Transaction with EFG, L and an incoming investor. They have now a preferred party who would become the [redacted] shareholder in the principal asset of the Trust and the Trust would cease to be the majority shareholder. Although the Trustees have not yet committed to the Proposed Transaction, matters appear to be well advanced. Therefore, directions confirming they may continue on that path to its conclusion would appear to me as having the potential to effectively pre-empt or give judicial endorsement to the second stage of applying to the Court to “bless” the sale. The draft orders sought, provided at my request, reinforce this view. The permitted activities would enable the trustees to complete all of the steps necessary to complete the Proposed Transaction. By that point it would seem likely to make it more difficult for the Trustees to exit the sale process under the Proposed Transaction, with a consequent (and significant) influence on the court’s consideration of whether to bless it at stage two [36]
• a claim must only be “reasonably arguable” to prevent Benjamin orders
• no authority was provided to support the grant of Benjamin orders in a fact scenario in line with the matter at hand
• the Trustees submit that, even if W’s claims succeeded, they would nevertheless retain a [redacted] shareholding and they should be expected to be able to deal with that shareholding. It is a fair point, but it does not remove the issue that a sale of a percentage of the Trust’s shareholding to enable the Proposed Transaction to proceed, and contemplated changes in governance, would fundamentally change the structure of the company. W’s claim is concerned with a shareholding and rights in the current form, where the Trust and the Family control the company [42]

Costs were ordered to be met by the Trust and existing confidentiality orders were continued.

See Re Benjamin for further background to Benjamin orders.

References:

• Re Benjamin [1902] 1 Ch 723
• Trustees of the ABC Trust v W, X, Y and Z [2026] NZHC 1296