Re Pilkington's Will Trusts

JurisdictionEngland & Wales
JudgeLord Reid,Viscount Radcliffe,Lord Hodson
Judgment Date08 October 1962
Judgment citation (vLex)[1962] UKHL J1008-2
Date08 October 1962
CourtHouse of Lords
Pilkington and Another
and
Commissioners of Inland Revenue and Others

[1962] UKHL J1008-2

Lord Reid

Viscount Radcliffe

Lord Jenkins

Lord Hodson

Lord Devlin

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause Pilkington and another against Commissioners of Inland Revenue and others, that the Committee had heard Counsel, as well on Monday the 9th, as on Tuesday the 10th and Wednesday the 11th, days of July last, upon the Petition and Appeal of Richard Godfrey Pilkington and Penelope Margaret Pilkington (spinster and an infant), both of 45 Barnes Court Road, London, W.14, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 24th of March 1961, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of the Commissioners of Inland Revenue; and also upon the Case of Guy Reginald Pilkington, Leonard Norman Winder, David Frost Pilkington and Clifford Pearson, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 24th day of March 1961, in part complained of in the said Appeal, be, and the same is hereby, Discharged except as to Costs: And it is hereby Declared, That the application of the capital proposed by the said Respondents Guy Reginald Pilkington, Leonard Norman Winder, David Frost Pilkington and Clifford Pearson, as Trustees of the Will of William Norman Pilkington, deceased, would be improper and unauthorised because the trusts of the new settlement if contained in the said Will would be void for perpetuity: And it is further Ordered, That the Respondents the Commissioners of Inland Revenue, do pay, or cause to be paid, to the said Appellants the Costs incurred by them in respect of the said Appeal to this House, such Costs to be taxed as between Solicitor and Client and the amount thereof to be certified by the Clerk of the Parliaments: And it is further Ordered, That the Costs incurred by the said Respondents Guy Reginald Pilkington, Leonard Norman Winder, David Frost Pilkington and Clifford Pearson in respect of the said Appeal to this House be paid out of the estate of the said testator William Norman Pilkington, deceased, such Costs to be taxed as between Solicitor and Client and the amount thereof to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Lord Reid

My Lords,

1

I have had the advantage of reading the speech about to be delivered by my noble and learned friend, Lord Radcliffe. I entirely agree with what he says about the application of the rule against perpetuities; but I am only reluctantly persuaded by his reasoning to agree that section 32 of the Trustee Act, 1925, can be applied to the present case. I do not think that it is disputed that the main purpose of the Appellants' scheme and its main benefit to the infant Penelope is avoidance of death duties and surtax. This is to be achieved by taking funds out of the testator's estate and resettling them on Penelope and any family she may have by means of a new trust with trust purposes different from those provided by the testator. It may be that one is driven step by step to hold that the power conferred by section 32 to "pay or apply any capital money subject to a trust, for the advancement or benefit … of any person entitled to the capital of the trust property or of any share thereof, whether absolutely or contingently …" must be interpreted as including power to resettle such money on an infant in such a way as will probably confer considerable financial benefit on her many years hence if she survives. But that certainly seems to me far removed from the apparent purpose of the section and considerably beyond anything which it has hitherto been held to cover.

2

Nevertheless I am compelled to recognise that there is no logical stopping place short of that result. You cannot say that financial benefit from avoidance of taxation is not a benefit within the meaning of the section. Nor can you say that the section only authorises payments for some particular or immediate purpose or that the benefit must be immediate and certain and not future or problematical. And again you cannot say that the beneficiary must consent to the course which the trustees have decided is for his benefit, for that would rule out all payments where the beneficiary is under age.

3

I have more difficulty about the resettlement. My difficulty does not arise from the rule delegatus non potest delegare, for if the section authorises the creation of a new trust it must do so by writing in to the testator's will authority to his trustees to do this: and new trust purposes almost inevitably mean that in certain events certain persons will take benefit who were not beneficiaries under the testator's will. But I think that the cases shew that it is too late now to say that this power can never authorise trustees to convey funds to new trustees to hold for new trust purposes: to say that might endanger past transactions done on the faith of these authorities.

4

If that be so, then I must hold that, if trustees genuinely and reasonably believe that it is for the benefit of a beneficiary contingently entitled to a share of capital to resettle a sum not exceeding half of his prospective share, they are empowered to do so in ways which do not infringe the rule against perpetuities. To draw a line between one class of case and another would be legislating and not proceeding on an interpretation of the existing statutory power.

5

I realise that this case opens a wide door and that many other trustees may seek to take advantage of it. But if it is thought that the power which Parliament has conferred is likely to be used in ways of which Parliament does not approve, then it is for Parliament to devise appropriate restrictions of the power.

6

I agree that this appeal must be allowed.

Viscount Radcliffe

My Lords,

7

This is a difficult case, and at first impression I would not have expected to find it so hard to return a certain answer to a question concerned with the time-honoured and much used power of advancement, long inserted in settlements of personalty and now applied to all such settlements made since 1925 by virtue of section 32 of the Trustee Act of that year.

8

Fortunately, the facts themselves are of contrasting simplicity. Here we have one of the two Appellants, Miss Penelope Pilkington, spinster and an infant still only of some 5 1/2 years of age, who belongs evidently to a family of some substance and is entitled to a contingent reversionary interest in a Trust Fund set up by the Will of her father's uncle, William Norman Pilkington. Her father, Richard Godfrey Pilkington, the other Appellant, is entitled during his life to the income of a share of that Trust Fund (the share is said to be worth some £90,000) and after his death, subject to the possible exercise of certain powers to which I will refer in a moment, his share is to be held in trust for his children attaining 21 or, if female, marrying under that age and, if more than one, in equal shares. The father is, I believe, now about 43 years of age and is married, and Miss Penelope has at present a small sister and a small brother, both presumptively entitled to a portion of his share when it falls into possession and, of course, other children may come into existence to add to the number of possible inheritors.

9

It is obvious, I think, that as things stand today and are likely to stand for some time to come, Miss Penelope is very far from having any certain or assured rights to any part of this Trust Fund. If she were to die under 21 unmarried she would take nothing, except in the contingency of her father having previously exercised his special power of appointment in her favour. On the other hand, since this power of appointment extends to all the children or issue of his marriage, an exercise of it by him at any time might exclude her from any interest in his share of the fund or alternatively might reduce her interest to any extent. Powers of appointment apart, her presumptive one-third of his share is variable according to the number of her brothers and sisters, existing or born hereafter, who may ultimately become entitled to divide her father's share with her. There is a separate contingency that this share may never descend to his children at all, because under a special clause of the testator's Will (Clause 13 (J)) his Trustees have power to revoke the trusts affecting the share and transfer it outright to the father for his own absolute use. This would cut out Miss Penelope altogether. Her title to any capital in the Trust Fund is therefore both contingent and defeasible. So far as concerns rights to derive any income from it, nothing can come to her so long as her father is alive (unless he forfeits his interest and so brings into operation a discretionary trust, under which she might receive some payments) and even after his death her right to income may be further deferred if he appoints a life interest, as he has power to do, to a surviving wife.

10

Now, what the trustees of the testator's Will, the second Respondents, are proposing to do, if they...

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