The England and Wales High Court (Chancery Division) (‘High Court’) in Grosskopf v Grosskopf  has determined that, where parties have agreed to arbitration, a claim for a court-appointed trustee is arbitrable. This is the first English case on the issue. However, it reflects an emerging trend of alternative dispute resolution (‘ADR’) for trust disputes, both overseas and in New Zealand.   

Background to the case

The claimant is a beneficiary under a discretionary family trust. Two of his brothers are the present trustees. The class of income beneficiaries is vested and comprises the seven children of the late settlor (their father). The class of discretionary beneficiaries for distributions of capital is extensive and remains open. Although the assets of the trust are worth GBP16 million or more, the net income distribution to each income beneficiary was around GBP15,000. Following the settlor’s death, the claimant sought financial information about the trust, which led to the parties entering into an arbitration agreement for their disputes to be determined by the Beth Din of the Federation of Synagogues (the Beth Din is a Jewish rabbinical court which offers arbitration by tribunal as an alternative to court proceedings). 

Following several awards by the Federation Beth Din and a High Court decision, the claimant issued a claim in the High Court for appointment of a Judicial Trustee (a statutory court-appointed trustee), alleging breach of trust and dishonesty by the present trustees. The present trustees sought a stay of proceedings under section 9 of the Arbitration Act 1996 (United Kingdom) (‘Act’) (equivalent to section 8 of Schedule 1 of the Arbitration Act 1996 (New Zealand)), on the ground that the matters in issue were within the scope of the arbitration agreement. The claimant resisted the stay, arguing that appointing a Judicial Trustee was not a remedy available to the Federation Beth Din. 

The High Court found that the claim was capable of being determined by arbitration

The High Court considered that the claims were, in general, complaints about the trust administration. It found that both the Court and the adjudicating tribunal had previously determined that the matters in issue were within the scope of the arbitration agreement and, therefore, the claimant was estopped (prevented) from alleging that his claim fell outside the arbitration’s scope, by section 9 of the Act. 

Although it was not required to do so, the Court noted that the grounds of the claim were ‘clearly suitable for resolution by arbitration’ and the arbitrating tribunal had the power to make enforceable directions. While the arbitration agreement prevented the claimant from accessing remedies available under the High Court’s supervisory jurisdiction, such as appointing a Judicial Trustee, other remedies were available to him from the Federation Beth Din.

We expect to see more ADR for trust matters in New Zealand 

This case reflects the support by courts for ADR options, including arbitration and mediation, as a means for parties to resolve disputes, in appropriate matters. The new Trusts Act 2019 (New Zealand) contains specific provisions governing ADR for trusts. 

ADR can be attractive in the context of family trusts as it allows disputes between trustees and beneficiaries, or trustees and third parties, to be resolved expeditiously and, potentially, at a lower cost than court. Further, and significantly in the context of family matters, the proceedings must generally be held in private and the parties are generally prohibited from disclosing confidential information from the proceedings. This makes ADR a helpful tool for families seeking to maintain their privacy and reputation.