Sieff v Fox

JurisdictionEngland & Wales
JudgeLord Justice Lloyd,LORD JUSTICE LLOYD
Judgment Date23 June 2005
Neutral Citation[2005] EWHC 1312 (Ch)
Docket NumberCase No: 4MA70282
CourtChancery Division
Date23 June 2005
Between
(1) The Honourable Sir David Daniel Sieff
(2) The Right Honourable David Baron Wolfson of Sunningdale
(3) The Honourable Charles Cayzer
Claimants
and
(1) David Hamilton Fox
(2) The Most Noble andrew Ian Henry Duke of Bedford
(3) John Benjamin Agnew Wallace
(4) Katya Scott-Barrett (A Child by Karen Diana Scott-Barrett Her Litigation Friend)
Defendants

[2005] EWHC 1312 (Ch)

Before

Lord Justice Lloyd

(Sitting as a Judge of the Chancery Division)

Case No: 4MA70282

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

MANCHESTER DISTRICT REGISTRY

Royal Courts of Justice

Strand, London, WC2A 2LL

Hearing dates: 21 to 23 March 2005 (in Manchester)

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.

LORD JUSTICE LLOYD Lord Justice Lloyd

Lord Justice Lloyd

1

This case concerns an appointment made in 2001 under the trusts of a settlement dated 23 August 1971 and made by the late Marquess of Tavistock, who afterwards became the Fourteenth Duke of Bedford. By the combined effect of the appointment and an assignment made a few days later by the Marquess' son, Lord Howland, on the face of them, the property which was the subject of the appointment is now held on the trusts of a later settlement, dated 26 March 1987, made by the present Duke, the Fifteenth, then Lord Howland, who is the Second Defendant in these proceedings. The property affected by the appointment, if it was valid, is a valuable collection of chattels at Woburn Abbey and a reversionary lease of the Woburn Estate. The question is whether the appointment was valid and effective or not. If it was not, then nothing passed by the assignment. It is not suggested that the appointment could be valid and the assignment invalid.

2

The present trustees of the 1971 settlement are the Claimants. At the time of the 2001 appointment, the Third Defendant was also a trustee. The present trustees of the 1987 settlement are the Claimants and the First Defendant. The Fourth Defendant is a beneficiary of the 1987 settlement and cannot benefit under the 1971 settlement. She is joined to represent the interests of those who would benefit if the 2001 appointment and the assignment are valid and effective.

The facts

3

The trusts arising under the 1971 settlement are complex, as is their history. Not all of this needs to be considered for the purposes of this claim. I will first set out what needs to be said about the family. The Thirteenth Duke held the title from 1953 until his death on 25 October 2002. The Duke's heir is known by courtesy as the Marquess of Tavistock, and the Marquess' heir as Lord Howland. On the death of the Thirteenth Duke in 2002, his son succeeded to the title, but he died on 13 June 2003. In turn his son inherited, and holds, the title as the Fifteenth Duke. At the time of all relevant dealings, the present Duke was Lord Howland and his father was the Marquess of Tavistock. They are respectively so referred to in the trust documents of the time. For that reason, I will refer to them by those titles in this judgment. The Fourth Defendant is a daughter of a daughter of Lord Hugh Russell, a younger brother of the Thirteenth Duke. She was born on 4 May 1991 and is therefore not of full age.

4

The 1971 settlement, made by the Marquess of Tavistock, created separate trusts of several different funds, among them the Peerage Fund and the Chattels Fund. The Peerage Fund is governed by clauses 11 to 13, of which clause 11 confers on the trustees a general discretionary power of appointment, but the class for whose benefit the power may be exercised is exclusively male. Similar, but not identical, provisions govern the Chattels Fund, under clause 19. The Peerage Fund included the Woburn Estate (including Woburn Abbey), the London Estate and some chattels. The Chattels Fund included the rest of the settled chattels. Some but not all of the relevant chattels were subject to conditional exemption from estate duty or exempted from capital gains tax. The non-exempt chattels are of great value. The power under clause 11 is exercisable only with the written consent of the Marquess of Tavistock and Lord Howland during their lives.

5

Between 1971 and 1987 the trustees of the 1971 settlement exercised their powers of appointment on a number of occasions. In 1982 they executed a long lease of the Woburn estate in favour of a nominee of theirs, and then made an appointment of the benefit of the lease on accumulation and maintenance trusts for the male issue of the Marquess of Tavistock.

6

Lord Howland was due to attain the age of 25 on 30 March 1987. Under the trusts then in effect, he would have attained an interest in possession on that date. If he had died thereafter, while entitled to an interest in possession, there would have been a very large charge to inheritance tax. In order to prevent this risk arising, a series of transactions were undertaken.

i) Lord Howland first created the 1987 settlement, on 26 March 1987.

ii) On the following day the trustees of the 1971 settlement advanced substantial assets to Lord Howland, including the 1982 lease.

iii) He then created a sub-lease of the private apartments of Woburn Abbey in favour of his parents, the Marquess and Marchioness of Tavistock, for a term of 55 years. This is known as the Abbey Sub-lease. It demises to the tenants not only the private apartments, for their exclusive use, but also other parts of the Abbey, known as the shared areas, in respect of which the landlord reserves rights of access, which are in fact used to allow access for the public as part of the business of opening the Abbey to the public.

iv) On 6 April 1987 Lord Howland then resettled a substantial part of the property which had been advanced to him, on the terms of the 1987 settlement. The property so resettled included the 1982 lease, and some chattels.

7

The 1987 settlement confers on its trustees a wide power of appointment, exercisable with the consent of Lord Howland while he is alive. The class of objects of this power is wider than under the 1971 settlement, not least because it is not limited to males. It includes all grandchildren and remoter issue of the Marquess of Tavistock, and all other issue of the Twelfth Duke living at or born after the date of the settlement, except the Thirteenth Duke, the Marquess of Tavistock and Lord Howland, and also spouses or former spouses of any such issue, other than spouses of the Thirteenth Duke, the Marquess of Tavistock and Lord Howland. Subject to any such appointment, the settlement declares trusts for the first or only son of Lord Howland or of other male members of the family, and then for other descendants of the Marquess of Tavistock. At clause 47(c) it has a provision excluding Lord Howland and his wife from any benefit from the settled funds. This is a provision relevant both to income tax and to the then new rules (under the Finance Act 1986) in respect of inheritance tax as regards potentially exempt transfers and reservation of benefit. Clause 1(k) defines "the excluded persons" as Lord Howland and his wife for the time being. Clause 47(c) is in the following terms:

"Notwithstanding anything to the contrary herein expressed or implied:

…………

(c) No discretion or power conferred on the trustees or any other person by this settlement and no provision of this settlement shall operate so as to cause or permit any part of the income or capital of the trust fund to be lent to or become payable to or applicable for the benefit of any of the excluded persons."

8

By virtue of the exercise by the trustees of their powers, the 1987 settlement trust funds are now held on accumulation and maintenance trusts for a class of beneficiaries which includes all descendants of the Marquess of Tavistock born after a given date, and other members of the family, but these trusts are revocable.

9

So far as concerns the relevant assets which remained in the 1971 settlement after the 1987 operations, most of them were still held on discretionary trusts in 2001. Earlier in 1987 the trustees had appointed the whole body of chattels (those originally held in the Chattels Fund and in the Peerage Fund) on discretionary trusts, but subject to a power to revoke the appointment. In 1992, when the accumulation period under the 1971 settlement was about to expire, the trustees made a revocable appointment of the reversion to the 1982 lease on discretionary trusts.

10

In the period 1997 to 2000 three outlying parcels of land on the Woburn Estate were appointed out of the 1971 settlement and transferred into the 1987 settlement. The method by which this was done was this. The 1971 trustees made an appointment to Lord Howland contingently on his being alive on a date some weeks in the future. Then Lord Howland, before that date, assigned to the 1987 trustees his contingent interest in the relevant property. Nothing turns on these transactions, but they provided a precedent for what was done later.

11

Lord Howland married in 2000. It was then decided that his parents should move out of Woburn Abbey and that he and Lady Howland should move in, he buying from his parents, for full value, the residue of the Abbey Sub-lease. This came to pass in 2002, having been the subject of a good deal of planning both from the practical point of view and as regards the necessary legal arrangements. By the end of 2000 the family's advisers were aware of this being intended.

12

Many of the chattels on display to the public at the...

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