Martha Virginia Allfrey v Jack Merlin Samuel Allfrey (a child by his litigation friend Alexander Peter Allfrey) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Jeremy Cousins QC |
| Judgment Date | 23 June 2015 |
| Neutral Citation | [2015] EWHC 1717 (Ch) |
| Date | 23 June 2015 |
| Court | Chancery Division |
| Docket Number | Claim No: HC-2015000270 |
[2015] EWHC 1717 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Rolls Building,
Fetter Lane, LONDON EC4A 1NL
Mr Jeremy Cousins Qc,
SITTING AS A DEPUTY JUDGE OF THE CHANCERY DIVISION
Claim No: HC-2015000270
Mr Francis Barlow QC (instructed by Messrs Lester Aldridge LLP, of 70, Chancery Lane, LONDON WC2A 1AF) for the Claimant
Mr William Massey QC (instructed by Messrs Lester Aldridge LLP, of 70, Chancery Lane, LONDON WC2A 1AF) for the First, Second, Third, Fourth, Fifth and Seventh Defendants
Mr James Rivett (instructed by Messrs Lester Aldridge LLP, of 70, Chancery Lane, LONDON WC2A 1AF) for the Sixth and Eighth Defendants
Miss Georgia Bedworth (instructed by Messrs Lester Aldridge LLP, of 70, Chancery Lane, LONDON WC2A 1AF) for the Ninth and Tenth Defendants
Hearing dates: 9th March 2015
On 9th March 2015, I made an order pursuant to the provisions of s1 of the Variation of Trusts Act 1958 ("the 1958 Act") whereby the court approved an arrangement for the variation of the trusts of a settlement known as "Sir Adrian Swire's Grandchildren's Trust" ("the Settlement") which was created by a deed dated 24th July 1986. The principal changes effected by the arrangement were to incorporate a power to accumulate income to meet future periodic inheritance tax changes, and to extend the trust period. The sixth and eighth defendants ("Merlin" and "Samuel"), by their counsel, Mr James Rivett, assented to the arrangement. Having considered the evidence before me, and after hearing counsel's submissions, I was satisfied that the arrangement was for the benefit of the first to fifth and seventh defendants ("the Minor Defendants") and of all unborn persons who might become interested under the trusts affecting the trust fund subject to the Settlement. It is not necessary for me in this judgment to say anything further in that regard. However, at the invitation of all counsel, I agreed that I would, at a later date, briefly state my reasons as to why I was also satisfied that the arrangement does not give rise to a resettlement of the fund or any part or share thereof. This judgment is concerned with that issue.
The family
Sir Adrian and his wife, the tenth defendant ("Lady Judith"), have three children; the claimant ("Martha"), Merlin and Samuel, born respectively on 12th May 1972, 4th December 1973, and 12th March 1980. Martha and her husband, Mr Alexander Peter Allfrey ("Mr Allfrey"), have five children, and they are the first to fifth defendants, Mr Allfrey being their litigation friend. They are aged fifteen, thirteen, ten, seven, and one respectively. Merlin's wife is Laura Caroline Swire, and they have a baby girl, the eighth defendant, Anna, who was born on 21st December 2014. Samuel is unmarried and has no children.
The settlement
The settlement was made by the ninth defendant, Sir Adrian Swire. It was an accumulation and maintenance trust for IHT purposes for the benefit of Sir Adrian's children, a class which is now closed. It incorporated an 80 year perpetuity period, and defined the "Vesting Day" as the day upon which that period should expire, although there was a power for the Trustees to accelerate that day. It declared an initial trust for Sir Adrian's children at 25 in equal shares, but included a provision that each child's share should be retained and held on engrafted trusts which have since been superseded. There was a wide power of appointment in favour of the three children, their spouses, and issue, subject to restrictions to preserve the IHT status of the trusts. The Settlement declared an ultimate trust in favour of Sir Adrian's two nephews.
It is not necessary for me to refer to the various intermediate deeds which are referred to in the evidence before me; the trust fund is now governed by the trusts appointed by a Deed of Appointment dated 2nd December 2014 ("the December 2014 Deed") whereby the Trustees exercised powers of revocation and re-appointment under one of the intermediate deeds, so that the entire trust fund was resettled on discretionary trusts for the benefit of any existing children and future children of Martha, Merlin and Samuel, with a stirpital default trust in favour of their issue living on the Vesting Day, and an ultimate trust in favour of Martha, Merlin and Samuel, or their respective estates. The December 2014 Deed reserved a power of revocation, subject to a power to release it.
The present trustees of the Settlement are Sir Adrian and Lady Judith, Merlin, and Samuel. Martha will become a trustee in the event of any vacancy.
The trust fund consists of holdings of ordinary and preference shares in John Swire & Sons Limited, the holding company of Swire Group, which qualify either wholly, or in part, for Business Property Relief ("BPR"). There are also holdings in an open—ended investment company which is effectively a family unit trust, but these do not qualify for BPR at all. The fund has a very substantial value, and commensurate income. There are substantial unrealised gains within the fund.
Background to the application
Until 6th April 2008, the trusts of the Settlement qualified as accumulation and maintenance trusts and the trust was therefore exempt from charges to IHT. However, since that time the entire fund has constituted relevant property, and attracts the decennial charge to IHT. Such a charge will arise on 24th July 2016, being the next ten-year anniversary. Whilst, plainly, it would be desirable for there to be a power to accumulate income so as to meet such periodic charges, thereby avoiding the need to sell assets, the Settlement confers no general power to accumulate income. It is to address the absence of such a power that the arrangement was proposed, and since it required an application to the court to give effect thereto, it was considered that this afforded an opportunity to take advantage of the provisions of the perpetuity period as extended by s5(1) of the Perpetuities and Accumulations Act 2009.
I was satisfied that I had jurisdiction to extend the trust period, having been referred to Re Holt's Settlement [1969] 1 Ch 100, IRC v Holmden [1968] AC 685, HL, and Wyndham v Egremont [2009] WTLR 1473. An extension of the trust period can be relevant to the issue of whether a proposed arrangement might be regarded as a resettlement; see per Blackburne J in Wyndham v Egremont at para 21, a point to which I shall return below.
With regard to the principal features of the arrangement to which the application relates, save for the extension of the trust period, it was proposed that:
(1) The trusts appointed by the December 2014 Deed be modified (i) by enlarging the power of appointment conferred by clause 3 so as expressly to authorise the accumulation of income during the extended trust period, and (ii) by adding to the default discretionary income trust, in clause 5, a power to accumulate income during the extended trust period.
(2) It be ensured that a reserve share of 25 per cent of the trust fund should be held on the varied trusts but for the exclusive benefit of grandchildren and remoter issue of Sir Adrian born during the current 80-year trust period.
(3) The trustees, as a condition of the arrangement's coming into...
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