C v C (Ancillary Relief: Trust Fund)

JurisdictionEngland & Wales
JudgeMr Justice Munby
Judgment Date25 June 2009
Neutral Citation[2009] EWHC 1491 (Fam)
Docket NumberCase No: FD09D01273
CourtFamily Division
Date25 June 2009
Between
PJC
Petitioner
and
ADC
Respondent
and
(1) VJW
(2) DJH
(3) Stephen Howard Woolfe
(4) Philip James Tostevin
Interveners

[2009] EWHC 1491 (Fam)

Before:

MR Justice Munby

Case No: FD09D01273

IN THE HIGH COURT OF JUSTICE

FAMILY DIVISION

(In Private)

Royal Courts of Justice

Strand, London, WC2A 2LL

Miss Kate Mather (instructed by Langleys) for the Petitioner (wife)

Mr Timothy Clark (instructed by Woolley & Co) for the Respondent (husband)

Mr Stephen Woolfe (of Harvey Ingram LLP) for the Third and Fourth Interveners

The First Intervener (the husband's sister) appeared in person

The Second Intervener (the wife's step-mother) was neither present nor represented

Hearing date: 12 June 2009

Mr Justice Munby

Mr Justice Munby :

1

These are ancillary relief proceedings. The single largest relevant asset is a trust fund in which the husband has an interest. One of the questions which arises is whether, and if so to what extent, the husband's interest under the trust is, within the meaning of section 25(2)(a) of the Matrimonial Causes Act 1973, a “financial resource” which he “has or is likely to have in the foreseeable future.”

2

The issue having arisen, the District Judge in the County Court where the litigation was proceeding transferred the case to the High Court on 20 January 2009 – a step which he appropriately took in the light of Baron J's observations in Re C (Divorce: Financial Relief) [2007] EWHC 1911 (Fam), [2008] 1 FLR 625, at para [17].

3

By an order dated 31 March 2009, Roderic Wood J directed that the matter be adjourned for a contested hearing before a judge of the Division in respect of whether the husband's interest under the trust is a resource of the husband's for the purposes of section 25(2)(a). The order also invited the trustees to “intervene and attend” and gave them permission to file a statement. The trustees – who are Mr Stephen Howard Woolfe, senior partner of Harvey Ingram LLP, solicitors, and Mr Philip James Tostevin, senior partner of Hardcastle Burton, chartered accountants, both appointed as trustees on 21 May 2008 – have responded promptly and helpfully, as one would have expected, They have submitted a written statement dated 13 May 2009, to which I must refer in due course. And Mr Woolfe attended court, both to give oral evidence if that was desired – as it was – and, generally, to assist, constructively and frankly, in any way he could.

4

I am grateful – as I hope everyone else is – for the assistance we have received from the trustees. They have behaved in all respects as trustees should in assisting the court. And Mr Woolfe (I have not seen Mr Tostevin, which is why I say nothing about him) is a solicitor with, as he told me, well over thirty years of experience of dealing with trusts who, if he will allow me to say it, is not merely highly experienced in such matters but is also, as shone though his evidence, scrupulous, sensible, sensitive and pragmatic but appropriately cautious in exercising his responsibilities as a trustee – responsibilities which he clearly understands very well and which he would, I am quite satisfied, always perform as conscientiously and impartially as he would carry them out skilfully.

5

The trust arises under the will dated 10 July 1973 of the husband's late father, RBC, who died in February 1976 in a hunting accident. He was born in November 1912 and was thus 63 years old when he died. His widow – his second wife – was born in December 1934 and was thus much younger than him: she was only 41 when he died. She is still alive, now aged 74. The deceased had four children, two by his first wife and two by his second wife. All survived him and all are still alive. The husband (the Respondent) and the First Intervener are his children by his first marriage. The husband was born in June 1957 and was only 18 when his father died. He is now 52 years old, that is, 22 years younger than his step-mother.

6

The trust fund consists of (i) quoted securities worth £220,139 on 5 April 2009, (ii) chattels and (iii) a landed estate consisting of (a) the main S estate, including various buildings within the curtilage, (b) two cottages located at the entrance to the S estate, (c) another cottage and (d) a farm at D. Quite understandably in the circumstances, not all the land has been recently re-valued and the balance sheet values are not all up-to-date. It suffices for present purposes to indicate that the trust fund is currently worth in all – views differ – perhaps as much as (say) £6 million, though probably less, not least in the light of recent and current economic events. The wife puts its value at about £6.2 million, the husband at about £4 million. Whatever its value, either now or when the reversion falls in, it needs to be borne in mind that there is likely to be a 40% charge to Inheritance Tax on the widow's death.

7

The will was in a form conventional for its time. After the usual preliminaries, which I need not rehearse for they were in familiar form, the testator in clauses 9(v)-(vi) made the following provisions in relation to the trust fund:

“(v) My Trustees shall pay the income of the Trust Fund to my said wife during her life.

(vi) Subject thereto my Trustees shall stand possessed of the capital and future income of the Trust Fund UPON TRUST for all or any my children or child who attain the age of Thirty years and if more than one as tenants in common in equal shares PROVIDED ALWAYS that if any child of mine shall have died in my lifetime leaving issue living at my death such issue attaining the age of Twenty one years shall take by substitution if more than one as tenants in common in equal shares the share in the Trust Fund which such deceased child of mine would have taken under the trusts in that behalf hereinbefore declared had he or she survived me and attained a vested interest but so that no issue remoter than a child of such deceased child shall take except in the case of the death of his her or their parent before me and in the place of such parent.”

8

In clauses 10 and 12 the trustees were given conventional powers of investment and management, including power to invest, power to purchase a dwellinghouse for use as a residence and power to carry on the testator's farming business.

9

Clause 13 was in the following terms:

“Notwithstanding anything to the contrary herein contained or implied my Trustees (other than my said wife if she is for the time being a Trustee hereof and not being less than two in number exclusive of my said wife if she is such trustee) may at any time or times at their uncontrolled discretion raise and pay the whole or any part or parts of the capital of the Trust Fund to my said wife for her own use and free from any trust or apply the same for or towards her support or otherwise for her benefit in such manner as they think fit AND I DECLARE that in deciding whether or not to exercise this present power my Trustees shall be entitled to regard only the well being of my said wife and to disregard the interests of all other persons interested in the Trust Fund PROVIDED ALWAYS that my Trustees may with consent in writing of my said wife release the whole or any part or parts of the Trust Fund from the future exercise of this present power.”

10

Upon the true construction of the will and in the events which have happened there is and can be no doubt as to the beneficial interests. Each of the testator's children, as I have said, survived him, so the substitutional provisions set out in the proviso to clause 9(vi) did not and cannot now take effect. The children have all attained the relevant age of thirty years, so they all have vested interests under clause 9(vi). And since they hold as tenants in common, not as joint tenants, there is no survivorship.

11

In short, the trust fund is held upon trust for the testator's widow for life and on her death for the four children as tenants in common in equal shares.

12

If any of the children die during the widow's lifetime then they do not lose their interest under clause 9(vi), nor does that interest pass by substitution to their children; it merely falls into their estate, to be dealt with (as the case may be) upon their intestacy or in accordance with their will. But their interests are, of course, all at risk of being reduced, potentially to nothing, by an exercise or by repeated exercises by the trustees of their power under clause 13 – not that this power has in fact yet been exercised.

13

It is important – for present purposes vital – to note that the trustees are given by the expressed terms of the will no power either to vary the beneficial interests of any of the beneficiaries or to pay, apply or appoint anything to or for the benefit of any of the children. So far as concerns the beneficial interests under the trust, the only powers the trustees have are:

i) the power conferred on them by clause 13 of the will, to pay the whole or any part of the trust fund to the widow; and

ii) the power of advancement conferred on them by section 32 of the Trustee Act 1925; but as Mr Woolfe correctly pointed out, proviso (c) to section 32, prevents any exercise of this power in favour of any of the children unless the widow consents in writing to it.

14

In addition, the trusts are necessarily, in accordance with the rule in Saunders v Vautier (1841) 4 Beav 115, Cr & Ph 240, amenable to variation if, but only if, all the beneficiaries agree unanimously: see Berry v Geen [1938] AC 575. This, as we will see, has happened once in the recent past and once in the more distant past.

15

I should add that although the powers vested in the trustees are plainly fiduciary powers which have to be exercised in a fiduciary manner, the ability of the widow to give or withhold her consent, whether it be to a proposed exercise by the trustees of their powers under section 32 or to a...

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