Pilkington and Another v Commissioners of Inland Revenue and Others
| Jurisdiction | England & Wales |
| Judgment Date | 08 October 1962 |
| Date | 08 October 1962 |
| Court | Chancery Division |
HIGH COURT OF JUSTICE (CHANCERY DIVISION)-
COURT OF APPEAL-
HOUSE OF LORDS-
Trusts - Will settlement - Infant beneficiary with contingent interest - Statutory power of advancement - Whether exercisable by resettlement on new trusts - Rule against perpetuities - Whether new trusts to be treated as if contained in original settlement - Trustee Act, 1925 (15 & 16 Geo. V, c.19), Section 32.
By the will of a testator, who died in 1935, a fund was bequeathed in trust in equal shares for his nephews and nieces (therein called the "beneficiaries") living at his death who attained 21 or being female married under that age, for life, with remainder as to each share to the children or remoter issue of the beneficiary as he or she should appoint, and in default of appointment to those children on attaining 21 or marriage. A beneficiary was empowered to appoint in favour of a surviving spouse, and the trustees were empowered to revoke the trusts of a share, or part of a share, of a male beneficiary and pay it to him absolutely. The power of advancement under Section 32, Trustee Act, 1925, was applicable.
In 1959 the trustees of the will issued an originating summons to determine whether they were entitled to advance part of the share of one nephew, with his consent, to his danghter born in 1956, by paying it to the trustees of a new settlement to be created for the purpose. Under the trusts of the new settlement the income until the daughter attained 21 was to be applicable for her maintenance, education and benefit and the balance accumulated, and thereafter it was to be paid to her until she attained 30. At 30 she was to be entitled to the fund absolutely, but if she died before that age leaving children it was to be held in trust for them equally at 21.
The Chancery Division approved the proposed exercise of the power of advancement. Subsequently, in order to clarify the position for the purpose of adjudication of Stamp Duty, the Commissioners of Inland Revenue were, with their consent, joined as Defendants and were given leave to appeal. The grounds of their appeal were, inter alia, (a) that the proposed transaction was a resettlement of the relevant capital upon trusts and with powers not contemplated by the will and not authorised by Section 32, and it was irrelevant that the trustees thought them to be for the daughter's benefit; and (b) that the trusts declared by the proposed new settlement would have been void for remoteness if contained in the testator's will.
Held, (1) that the trustees were entitled to exercise the power of advancement in favour of the daughter by applying money to form a trust the provisions of which they thought to be for her benefit; but
(2) that for the purpose of the rule against perpetuities the power of advancement was analogous to a special power of appointment, so that the trusts of the proposed settlement must be treated as if contained in the testator's will and some of them were accordingly void as violating the rule.
By originating summons the trustees sought a declaration that they could lawfully exercise the power of advancement conferred by Section 32, Trustee Act, 1925, by advancing part of a beneficiary's expectant interest in the testator's residuary trust fund subject to new trusts created by a new settlement. Danckwerts, J., in the Chancery Division on 14th May, 1959, approved the proposed power of advancement and settlement. The costs of both parties were ordered to be paid from the capital of the residuary trust fund.
Danckwerts, J.-This is a case on which the authorities seem to me far from clear. It depends basically on the will, dated 14th December, 1934, of William Norman Pilkington, who died on 8th February, 1935. The will dealt with the residuary estate held on trusts under which the fund was to be held
in equal shares if more than one for all or any my nephews and nieces
being children of his brothers and their wives, whom he names, living at his death
who attain the age of 21 years or being female marry under that age and for all or any of the children living at my death who attain the age of 21 years or being female marry under that age of any such nephew or niece as aforesaid.
The shares are settled, and I am concerned only with the share of the one nephew who survived the testator. Clause 13 of the will provides:
The share of the Trust Fund hereinbefore given to a Beneficiary as hereinbefore defined shall not vest absolutely in such Beneficiary but shall be retained by my Trustees and held by them upon the trusts hereinafter declared concerning the same (A) So long as such Beneficiary being male is under the age of 25 years or being female is under the age of 25 years and has not married under that age Upon Trust to pay all or such part (if any) as my Trustees in their absolute discretion shall think fit of the income of such share to or apply the same for the maintenance education or personal support or benefit…of such Beneficiary [and then follows a trust to accumulate the balance] as an accretion…to the capital of the share in the Trust Fund of such Beneficiary… Provided Always that the trusts powers and provisions in this sub-clause contained shall determine at the expiration of 21 years from my death.
Sub-clause (B) states that subject as aforesaid the trustees are to hold the income of such share on express protective trusts for the benefit of the beneficiary during his or her life with a provision that any consent to the exercise of any applicable form of advancement shall not cause a forfeiture of his or her life interest. Then there are provisions as to when the trust may be determined. I turn to sub-clause (F):
After the death of such Beneficiary my Trustees shall stand possessed of the capital and future income of such share In Trust for all or such one or more exclusively of the other or others of the children or remoter issue of such Beneficiary at such age or time or respective ages or times if more than one in such shares and with such trusts for their respective benefit and such provisions for their respective advancement (either during the life of such Beneficiary with the consent of such Beneficiary or after the death of such Beneficiary) and maintenance and education at the discretion of my Trustees or any other person or persons as such Beneficiary shall from time to time by any deed or deeds revocable or irrevocable or by Will or Codicil without transgressing the rule against perpetuities appoint And in default of and subject to any appointment as aforesaid In Trust for all or any the children or child of such Beneficiary who shall be living at my death or born afterwards and who being male attain the age of 21 years or being female attain that age or marry and if more than one in equal shares.
There is a power under sub-clause (I) to a beneficiary to appoint in favour of a spouse, and there is power in sub-clause (J) to permit the trustees
to revoke the trusts of the whole or any part of the share of such Beneficiary being a male and pay or transfer the portion of such share in respect of which such revocation takes effect to such Beneficiary absolutely.
That provision, however, does not affect the issue in the present case. There is no reference to any power of advancement, but the power of advancement under Section 32 of the Trustee Act, 1925, is applicable.
A settlement is proposed to be executed by Colonel Pilkington (the settlor), by his son (the testator's nephew), and by the present trustees of the testator's will, which settlement will recite that the settlor desires to make some provision
for the benefit of Penelope Margaret Pilkington (hereinafter called "Penelope") who was born on the 29th day of December 1956 and who is a daughter of Richard Godfrey Pilkington who is a son of the Settlor.
In pursuance of that desire, the settlor settles £10 in cash on trusts of the settlement which are thereinafter declared. I need not refer to the administrative provisions of the settlement. Clause 5 is the one which is important. It is as follows:
(i) Until Penelope shall attain the age of 21 years or die under that age the Trustees shall have power at their discretion to pay or apply the whole or any part of the income of the Trust Fund to or for the maintenance education or benefit of Penelope in such manner as they may think fit and may either themselves so apply the same or pay the same to the parent or guardian of Penelope without seeing to the application thereof and in so doing shall not be bound to consider whether there is any other income available or any person bound by law to provide for her maintenance or education and shall accumulate all the residue of such income by investing the same and the resulting income thereof in some form of investment hereby authorised as an addition to the capital of the Trust Fund with power from time to time to apply all or any part of such accumulations as if they were income of the current year (ii) If Penelope shall attain the age of 21 years then until she shall attain the age of 30 years or die under that age the Trustees shall pay the income of the Trust Fund to her (iii) The Trustees shall hold the capital of the Trust Fund Upon Trust for Penelope if she shall attain the age of 30 years absolutely (iv) If Penelope shall die under the age of 30 years leaving children or a child living at her death the Trustees shall hold the Trust Fund and the income thereof in trust for all or any her children or child who shall attain the age of 21 years and if more than one in equal shares and in such event the provisions of paragraph(i) of this clause shall apply mutatis mutandis to any such child and the income of his or her expectant share of the Trust Fund.
Clause 6 provides:
Subject as aforesaid the Trustees shall hold the Trust Fund in trust for all or any the children or child of the said Richard Godfrey...
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