Susan Mary Harvey v Pamela Van Hoorn
| Jurisdiction | England & Wales |
| Judge | Paul Matthews |
| Judgment Date | 31 May 2023 |
| Neutral Citation | [2023] EWHC 1298 (Ch) |
| Court | Chancery Division |
| Year | 2023 |
| Docket Number | Case No: PT-2022-BRS-000056 |
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: PT-2022-BRS-000056
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
PROPERTY TRUSTS AND PROBATE LIST (ChD)
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
Alex Troup and Oliver Wooding (instructed by GA Solicitors) for the Claimants
Michael Clarke (instructed by GA Solicitors) for the Defendant
Hearing date: 15 December 2022
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.
This judgment will be handed down by the Judge remotely by circulation to the parties or representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30 am on 31 May 2023
Introduction
On 15 December 2022 I heard this CPR Part 8 Claim for (i) an order under the Variation of Trusts Act 1958, or alternatively (ii) a direction that the trustees of a settlement be at liberty to implement an arrangement involving the release and reimposition of certain powers, as discussed by Warren J in A v B[2016] EWHC 340 (Ch). The order under the 1958 Act would be to approve an arrangement on behalf of minors and unborns as being for their benefit. But there was a threshold question as to whether the court had jurisdiction, in the circumstances of this case, to do so. At the end of the hearing I announced that I was satisfied, first, that the court had such jurisdiction, and second, that the arrangement was for the benefit of the minors and unborns in question. In the exercise of my discretion I therefore approved the arrangement and made the order under the 1958 Act. I therefore did not need to decide the alternative question. But I said that I would give short reasons in writing for my decision on the jurisdiction point. These are those reasons. I am sorry for the delay in completing them, but I have had other lengthy judgments to prepare first.
The settlement
The settlement was made in 1989. The settlor and the trustees were then non-UK resident. Subject to an overriding power of appointment in clause 5 (to which I shall return), by clause 6 it provided for the income to be paid to the settlor during his life, with a power for the trustees to advance capital to him during his life, subject thereto upon trust to pay the income to his widow for her life, subject thereto to hold the capital and income on trust for such of the settlor's children as attain the age of 21, and if more than one in equal shares. Subject to that, clause 7 contains a gift over to charity. The settlor died in 2001.
The first claimant is his widow, and the second claimant is his only child, now aged 52. He is unmarried and has no children. Since a deed of retirement and appointment of new trustees made in 2003, the claimants have been the only trustees, and are UK resident. The claimants are concerned about the capital gains tax consequences of the second claimant becoming absolutely entitled to the capital of the trust find upon the death of his mother, the first claimant. Accordingly they have promoted a scheme of arrangement to prevent the second claimant becoming so absolutely entitled. The proposed arrangement would convert the second claimant's interest in remainder to a life interest with remainders over, and also extend the perpetuity period to 125 years.
The problem is the overriding power of appointment. This provides as follows:
“5(a) THE Trustees shall hold the Trust Fund and the income thereof upon such trusts in favour or for the benefit of all or such one or more of the Appointed Class exclusive of the other or others of them and with and subject to such powers and provisions for their respective maintenance education or other benefit or for the accumulation of income (including if thought fit administrative powers and provisions) and including also discretionary trusts and powers to be executed or exercised by any persons or person whether or not being or including the Trustees or any of them and so that the exercise of this power of appointment may be delegated to any extent and if more than one in such shares or proportions and in such manner generally as the Trustees (subject to the application (if any) of the rule against perpetuities) by any deed or deeds revocable not later than the Perpetuity Date or irrevocable and executed not later than the Perpetuity Date shall with the written consent of the Settlor during the Settlor's lifetime but otherwise in their absolute discretion appoint PROVIDED ALWAYS that no exercise of the foregoing power shall invalidate any prior payment or application of the Trust Fund all the income thereof or any part or parts thereof made under any other power or powers conferred by this Settlement or by law”.
This is followed by trusts in default of appointment in clause 6, which I have already summarised. The existence of these trusts in default of appointment makes clear that the power of appointment in clause 5 is a mere power rather than a trust power (or discretionary trust): Re Mills [1930] 1 Ch 654, CA. At the same time, I point out that the power, being conferred on trustees as such, is clearly a fiduciary rather than personal power. Accordingly, in this judgment, I am not dealing with the position of the object of a purely personal power.
By clause 1(b),
“‘the perpetuity date’ shall mean the earlier of
(i) the last day of the period of 80 years from the date of this Settlement which period of 80 years (instead of any other) shall be the perpetuity period applicable hereto
(ii) such date as the Trustees shall by deed specify (not being a date earlier than the date of execution of such deed)”.
By clause 1(c),
“‘the Appointed Class’ shall mean the following objects and persons (whether now living or born hereafter but before the Perpetuity Date)
(i) the children and remote issue of the Settlor's parents (including the Settlor)
(ii) the spouses widows and widowers (whether or not such widows or widowers shall have remarried) of the persons in subclause above
(iii) such other objects or persons as are added in pursuance of the power to that effect conferred by clause 3”.
The reference to “the power … conferred by clause 3” is one to a power contained in that clause of the settlement to add or remove persons from the Appointed Class. I was told that this power has not been exercised.
The objects of the power
The Settlor's parents had five children, including the Settlor. All five had at least one child and, with the exception of the second claimant, all the Settlor's parents' grandchildren have also had children. What this means is that there are a considerable number of objects of the power of appointment in clause 5 who are in existence, some of whom are adult and some of whom are minors. There is also the possibility of further members of the class coming into existence before the Perpetuity Date, which under the existing settlement would fall in 2069. The claimant obtained the written consent of the adult members of the class to the proposed arrangement, but needed the court to give its consent on behalf of the minor and unborn objects. HM Revenue and Customs was notified of the claim, but did not respond to it.
Before me Mr Troup represented the claimants generally. But Mr Wooding was instructed (by the claimants) to advise them on the position of unborn persons who might benefit under the settlement. He wrote an opinion which I have had the advantage of reading. And Mr Clarke was instructed by the defendant, who is the litigation friend for the minors who might benefit under the settlement.
There is no problem about the jurisdiction of the court to approve the arrangement on behalf of unborn objects of a power.Section 1(1)(c) of the 1958 Act provides that the court may approve the arrangement on behalf of “any person unborn”. Instead, the problem lies with the minor objects of the power.Section 1(1)(a) of the 1958 Act provides that the court may approve the arrangement on behalf of
“any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting”.
The question which arises in this case is whether the minor objects of the (mere, though fiduciary) power of appointment contained in clause 5 fall within the scope of section 1(1)(a). In particular, the question is whether such an object has an “interest … under the trusts”.
Construction and context
As is well known, in construing a statute, context is all important: see egArgentum Exploration Ltd v The Silver[2023] 2 WLR 209, [92], per Popplewell LJ. In the context of trust and property concepts, in Melville v IRC[2000] STC 628, Lightman J decided that a general power of appointment retained by the settlor of a settlement over the assets of the settlement was “property” within section 272 of the Inheritance Tax Act 1984. That section provided that “except where the context otherwise requires … ‘property’ includes rights and interests of any description”. In the course of his judgment, he referred (at [11]–[12]) to a number of earlier decided cases which either held or at least admitted the possibility that (in particular taxation contexts) the object of a discretionary trust had an “interest” for the purposes of the statutory context in question. The Court of Appeal affirmed his decision on the construction of section 272 and therefore on the status of the general power: see [2002] 1 WLR 407. So, whether the object of a fiduciary power such as we have here has an “interest” depends on the statutory context, that...
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