Clause 9.4.2 of the STEP provisions does not require an Independent Trustee to be in post if the trustees are or include those originally appointed. Clause 9.4 applies to dispositive and administrative powers in contrast to Clause 9.3.
So it seems they can add themselves but the subsequent exercise of other powers in their favour must follow the general rules related to such exercise e.g. they must consider fairly and actively the interests of all beneficiaries within scope. If they appoint the trust property exclusively to one or both of themselves it would be prudent to record that they have in fact done that. It may not be strictly required to do that as regards the exercise of the power to add itself; it would seem unlikely that they have any duty to survey the field for someone more deserving than themselves to add.
If there is a Default Clause benefiting someone not in the original class they might be too happy if they were excluded altogether, especially if a named charity, and it might be unwise to fail to inform them of their remote expectancy. There is very little if any case law on whether a power to add has been validly exercised, though it has been established that the power itself is not void for uncertainty just because anybody at all can be added.
Is there no Letter of Wishes? It is unusual for a clause to be intended for use in this way because often the original trustees if not professionals e.g. family members will be in the original class of eligible beneficiaries. This type of power is usually intended for use if the class has died out or may do so or to add someone the settlor does not wish to name or otherwise identify (making a LOW very desirable).
Jack thank you for your detailed reply and patience, covering Step 2 Provisions and I believe the Fiduciary duties of a Trustee. It does appear the Step 2 provisions will not hinder if the followings scenario, happened in practice.
If two Original trustee-beneficiaries A and B wish to add a new beneficiary X
Looking at the provision
“6.1.5 Any Person or class of Persons added to the class of Beneficiariesby the Trustees by
deed with the consent in writing of two Beneficiaries .”
My concern is that A and B not only provide the
beneficiary consent to add X but also
A and B as trustees are exercising the trustee power to add X
I have not seen the entire trust instrument but if it contains nothing to the contrary then on the face of it the trustees are entitled to appoint X by giving their consent.
The Settlor has it in his own hands with advice to draft the rules and has enormous latitude to override what would otherwise be the strict legal position. He and his advisers cannot foresee every future event and the conferring of flexible powers on trustees is a means of handling such events, albeit with the risks attached to delegating wide discretions.
The key issue at the start is therefore the careful choice of trustees and possibly of the mechanism for their succession. In a lifetime trust the Settlor can make his consent a requirement for exercise of the power to add (as Mr Kessler’s precedents do). After his death or in a Will trust that consent can be required from someone else. Similar constraints can be placed on the power to appoint trustees. In a non-resident trust, where the choice of trustees is limited by their non-resident status, the appointment of a Protector and elaborate succession provisions are almost de rigueur but rare in a resident trust unless the Settlor is paranoid. I always made changes to clause 9 if I wished to use the STEP provisions.
The fact that your settlor has not done any of these things means that he must be taken to have contemplated that such a situation as yours might occur, and trusted his chosen trustees to handle it, even though it probably did not occur to him at all. Whether it ought to have occurred to his adviser to explain the possibility is a moot point.
The power to add is still a fiduciary power since conferred on the two individuals as trustees. Amongst other things they must act in good faith. As beneficiaries their power to consent is purely personal and so can be given totally selfishly, so for them X could be Mr Putin. Hence the conflict but one who is conflicted has three choices. To act in good faith and judiciously appoint X; to decline to act altogether; or to add a new trustee (if the power is available) who is Independent in the terms of clause 9 so all three can then add X, assuming they are required to act unanimously. A trustee who declines to act is unlikely to be exposed to action by an existing beneficiary, who in theory could try to have him removed (good luck with that), a fate normally preferable to committing breach of trust. Resigning is fraught with the risk of being found to have done so to facilitate breach of trust.
Without knowing the other terms of the trust and the background it is not possible to say whether the two present trustees could act safely in adding (or indeed refusing to add) X and whether they could shore up their position by getting other beneficiaries to consent under s61TA 1925. Are there no other beneficiaries who could consent? What is the motivation behind the trustees’ acting at all, who is X, who is driving the deal and why? What will happen if the trustees do nothing?
An interesting case is the Privy Council decision in Grand View Private Trust Co Ltd and another (Respondents) v Wen-Young Wong and others (Appellants) (Bermuda) [2022] UKPC 47 https://www.bailii.org/uk/cases/UKPC/2022/47.html
A power to add was held to have been exercised for an improper purpose. The parties accepted that the effect was to render the exercise void but the question of whether it is rendered void or voidable in principle was regarded as unsettled:para 122
Hello Jack
Thank you for all your helpful feedback, and explaining depending on the individual detail, it is possible to be both the person providing the consent to use a power and the exerciser of the power. I wanted to find out if trust law generally or if a step 2 provisions would prevent it from ever being allowed.
I had come across several articles online discussing Grand View, but due to my limited knowledge had not taken in any of its significance, me thinking, as it was offshore/Bermuda, it was not relevant to trust law in the UK.
Neil