HM Attorney General v Zedra Fiduciary Services (UK) Ltd

Hearing date: 12 December 2019

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The ‘National Fund’ (“the Charity”) is a charity registered under the Charities Act 2011. By virtue of section 37(1) of that Act, it is “for all purposes other than rectification of the register, conclusively presumed to be and to have been a charity at any time when it is … on the register.”

The Charity was created following the deposit of approximately £500,000 in cash and securities with Barings Brothers & Co. Limited (“Barings”) in November 1927 and by Barings executing a deed (“the Deed”) on 9 January 1928 setting up the Charity with its initial funding. The funds were provided on the basis that the identity of the benefactor was to remain private and the name has remained out of the public domain.

This claim is brought by HM Attorney General seeking directions about whether the court has jurisdiction to make a scheme altering the trusts contained in the Deed, either under its administrative jurisdiction concerning charities or under the cy-pres jurisdiction, and consequential directions. The defendant (“Zedra”) is the current trustee of the Charity.

The Part 8 claim was issued on 22 May 2018 and on 22 January 2019 directions were given to enable the claim to be heard by a High Court Judge. The disposal hearing was fixed for a 5 day window commencing on 18 November 2019. On 11 November 2019 the Applicant applied for an order joining him as an additional party to the claim and for an order that he should be appointed to represent a class of persons with a similar interest in the claim. It is accepted that the Applicant is a relative of the benefactor and will be entitled to a portion of his residuary estate if the original gift fails. The application was opposed by HM Attorney General. It was neither supported nor opposed by Zedra.

In view of the proximity of the disposal hearing, an order was made on 13 November 2019 vacating the date of the disposal hearing and fixing a date for the hearing of the application. In the event, the application was re-listed and heard on 12 December 2019 and judgment was reserved. The disposal hearing of the claim will now take place in October 2020.

Joinder

Under CPR 19.2(2) the court has power to add a person to a claim if:

“(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or

(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings and it is desirable to add the new party so that the court can resolve that issue.”

Four points arise concerning the jurisdiction under CPR 19.2(2):

(1) The term “in dispute” should be read widely so as to include ‘in issue’: see In Re Pablo Star Limited [2017] EWCA Civ 1768 at [50] – [51] per Sir Terence Etherton MR.

(2) The Master of the Rolls also observed in In Re Pablo Star Limited at [60] that when a court considers an application for joinder “… two lodestars are the public policy objective of enabling parties to be heard if their rights may be affected by a decision in the case and the Overriding Objective in CPR Part 1”.

(3) The parties are agreed that the Applicant must be able to demonstrate that the issue in dispute that forms the basis for joinder must be an issue that has adequate prospects of success. Mr Richardson who appeared for the Applicant submitted that the ‘real prospect of success’ test should be applied. Mr Henderson, who appeared for HM Attorney General submitted, against himself, that the test under CPR 3.4(2)(a) should be applied. If the “no reasonable grounds” test is applied in the way it has been construed in Hughes v Colin Richards & Co [2004] EWCA Civ 266 and other cases, the Applicant need only show that the issue has some prospect of success or, put the other way around, that it is not bound to fail.

(4) The thrust of both limbs of CPR 19(2) concerns the desirability of all the parties involved in or affected by a dispute being before the court. This avoids a multiplicity of proceedings 1 and has the benefit of all relevant parties being bound by the court's determination.

The test as it is set out in the rule is rather wider than considering whether there is an issue in dispute. The court must be satisfied that it is desirable to join the additional party. Those two elements need to be considered together. Here the Applicant says it is desirable for him to be joined because, as the claim is currently proceeding, the interests of those who wish to assert that the original gift failed may not be adequately represented. The Applicant has a strong motivation for pursuing that issue in light of the size of the Charity's current assets.

It seems to me that Mr Henderson's approach to whether or not there is an issue between the Applicant and the existing parties is the right one in this case. The Applicant seeks to be joined because he wishes to benefit from the possibility of a substantial addition to the residuary estate of the benefactor. It should not be necessary for the Applicant to show that he has a real prospect of success. Rather he must show he has an arguable case, a case that has some prospect of success, and that it is desirable he should be joined as a party.

Background

The Charity was set up in the following way:

(1) On 10 November 1927 cash and securities with an approximate value of £500,000 were deposited in an account with Baring Brothers & Co. Limited (“Barings”) by the benefactor. It need hardly be said that in 1927 £500,000 was an enormous sum of money.

(2) At around the time of making the deposit, the benefactor wrote a letter to Barings explaining the reason for making the gift:

“Gifts to the Nation of historic sites, buildings and works of art, are happily frequent; gifts to repay debt comparatively rare, this last being a dull objective but bringing its accomplishment certain comforts of its own. To repay the National Debt may be thought to be beyond the reach of individual effort, but as a beginning towards this end I am placing at your disposal, as Trustees for the Nation, some £500,000 as the nucleus of a fund to accumulate in your hands, and to be applied eventually to this object.

I am entrusting this fund to your house in order to secure the benefit of your long experience in finance: and in the hope that others may from time to time be prompted to add to it, or on similar lines to set up funds of their own, citizens and City uniting in an attempt to free their country from debt.”

(3) On 22 December 1927 the Superannuation and Other Trusts (Validation) Act 1927 (“the 1927 Act”) received the Royal Assent and came into immediate effect.

(4) On 9 January 1928 Barings executed the Deed.

(5) On 26 January 1928 Lord Revelstoke, who was then the Chairman of Barings, wrote to Winston Churchill as Chancellor of the Exchequer to formalise earlier communications about the Charity and to convey the terms of the benefactor's letter.

(6) The Chancellor of the Exchequer then made a public announcement in which he acknowledged the government's gratitude for the gift and expressing regret that he could not thank the benefactor by name. In describing the National Fund, he said:

“The capital is to accumulate at compound interest over a long period of years. Ultimately, with all its accrued proceeds swelling progressively with the passage of time, it is to be applied to the reduction of the National Debt. In order to facilitate this gift Parliament was invited last session to make an exception to the law forbidding Perpetuities and to declare long accumulations lawful when they had this especial object in view.”

The last sentence of the announcement is a reference to section 9(1) of the 1927 Act which, including the general heading that precedes it, provides:

“Provisions as to Funds for the reduction of the National Debt

9 Validation of trust funds for the reduction of the National Debt

(1) Where by any instrument directions are given for any property being held upon trust and the income thereof being wholly accumulated … for any period to be determined under the provisions of the instrument, and for the property and accumulations being transferred at or before the expiration of that period to the National Debt Commissioners to be applied by them in reduction of the National Debt, then unless the Treasury within three months after they receive notice of the taking effect of the instrument disclaim the interest of the National Debt Commissioners under the said directions, notwithstanding any Act or rule of law to the contrary, the directions shall be valid and effective and no person shall be entitled to require the transfer of any part of the property, income or accumulations otherwise than in accordance with the provisions of the instrument.”

The long title to the 1927 Act is:

“An Act to amend the law relating to perpetuities and accumulations, as respects certain benefit funds and as respects trust funds for the reduction of the National Debt.”

Sections 1 to 8 of the 1927 Act provide a scheme for the registration of trusts of a type that are...