Womble Bond Dickinson (Trust Corporation) Ltd v Sarah Glenn
| Jurisdiction | England & Wales |
| Judge | Master Clark |
| Judgment Date | 24 March 2021 |
| Neutral Citation | [2021] EWHC 624 (Ch) |
| Date | 24 March 2021 |
| Docket Number | Case No: PT-2020-000524 |
| Court | Chancery Division |
[2021] EWHC 624 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Master Clark
Case No: PT-2020-000524
Penelope Reed QC (instructed by Payne Hicks Beach) for the Claimant
Elizabeth Weaver (instructed by Womble Bond Dickinson (UK) LLP) for the Defendant
Hearing date: 6 January 2021
Approved Judgment
I direct that this approved judgment, sent to the parties by email on 24 March 2021, shall deemed to be handed down on that date, and copies of this version as handed down may be treated as authentic.
This is an application by Pt 8 claim form dated 8 July 2020 by the trustees (“the Trustees”) of a trust created by a settlement dated 6 March 1992 (“the Trust Deed”). They seek directions as to whether they can advance capital to certain beneficiaries pursuant to their power under section 32 of the Trustee Act 1925 (as varied by clause 11(2) of the Trust Deed) (“the Power”).
The Trustees make the application as they wish to use the Power in order to bring the trust to an end. Their stated reasons for doing so are that the trust fund will otherwise be eroded by future administration costs and IHT charges.
The application is made under two of four categories of jurisdiction identified in Public Trustee v Cooper [2001] WTLR 901 at 923 and is:
(1) for determination of whether, as a matter of construction, the proposed advances are within the Power, and can be made by the Trustees (category 1); and
(2) if so, for approval of the decision to make the advances, on the basis that it is momentous (category 2).
Background
The settlor of the trust was James Lowther, the 7 th Earl of Lonsdale. The Trust Deed established a trust fund (divided into 5 parts) for the benefit of his children and remoter issue. This application concerns the part called “the Remaining Fund” (cl.2(g)).
Clause 9(2) of the Trust Deed, so far as relevant, provides:
“the Trustees shall hold the Remaining Fund and the income thereof in trust for all or any one or more of the Beneficiaries who shall attain the age of twenty five years or shall be living and under that age at the end of the Trust Period in such shares as the Trustees shall at any time or times during the Trust Period … by any deed or deeds revocable or irrevocable appoint…”
“The Beneficiaries” are defined to include the settlor's present and future grandchildren.
Clause 10 of the Trust Deed (as varied by an arrangement approved by the order dated 29 March 2001 of Patten J), so far as relevant, provides:
“Provided always that the share (hereinafter called “the Allotted Share”) taken by any of the Beneficiaries (in this clause referred to individually as “the Beneficiary”) under the trusts declared by Clause 9 … shall not vest in him or her absolutely but shall be retained by the Trustees and held on the following trusts:
(1) The Trustees shall hold the Allotted Share and the income thereof in trust for the Beneficiary during his or her life
(2) Subject as aforesaid, the Trustees shall hold the Allotted Share and the income thereof … upon trust—
(a) for the first and other sons of the Beneficiary successively according to seniority in tail male with remainder
(b) for the first and other sons of the Beneficiary successively according to seniority in tail with remainder
(c) for the Beneficiary absolutely.
(3) Notwithstanding the foregoing trusts and powers if in any such appointment the Trustees so declare the Allotted Share shall be held upon trust for such period or periods (and so that different periods [may] be declared for different Beneficiaries) as shall be specified in such appointment upon the following trusts—
(a) Upon trust to hold the income of the Allotted Share on trust for the Beneficiary absolutely and the provisions of Section 31 of the Trustee Act 1925 shall not apply to such income
(b) Subject as aforesaid upon the trusts set out in sub-clauses (1) and (2) of this Clause”
Clause 11(2) provides that section 32 of the Trustee Act shall apply to the trusts of the Trust Deed, but is varied to permit the advancement of the whole of the beneficiary's presumptive or vested share. (This is the Power referred to above.)
Section 32 provides (in its unamended form 1), so far as relevant:
“Trustees may at any time or times pay or apply any capital money subject to a trust, for the advancement or benefit, in such manner as they may, in their absolute discretion, think fit, of any person entitled to the capital of the trust property or of any share thereof, whether absolutely or contingently on his attaining any specified age or on the occurrence of any other event, or subject to a gift over on his death under any specified age or on the occurrence of any other event, and whether in possession or in remainder or reversion, and such payment or application may be made notwithstanding that the interest of such person is liable to be defeated by the exercise of a power
of appointment or revocation, or to be diminished by the increase of the class to which he belongs:Provided that—
(a) the money so paid or applied for the advancement or benefit of any person shall not exceed altogether in amount one-half of the presumptive or vested share or interest of that person in the trust property [amended by Clause 11(2)]; and
…
(c) no such payment or application shall be made so as to prejudice any person entitled to a prior life or other interest, whether vested or contingent, in the money paid or applied unless such person is in existence and of full age and consents in writing to such payment or application.”
(emphasis added)
Clause 17 of the Trust Deed empowers the trustee to appropriate property in or towards satisfaction of any share of the Trust Fund with binding effect on all the beneficiaries.
By a deed dated 6 April 2001 (“the 2001 Appointment”) the Trustees exercised their powers under clauses 9 and 17 of the Trust Deed to appoint certain property to form a fund called “the Grandchildren's Fund”, the income from which was declared to be held on trust (in the events that have happened) for 12 named grandchildren of the settlor. The first to ninth defendants in this claim are 9 of those 12 grandchildren. They consent to the claim.
By a deed dated 18 July 2007 (“the 2007 deed”), the Trustees partially revoked the 2001 appointment to let in a further grandchild, Flynn Lowther, the 10 th defendant. He is a minor and acts by his mother as his litigation friend. He does not oppose the claim. I refer to the first to 10 th defendants individually as a “Grandchild” and collectively as “the Grandchildren”.
The Trust Period ended in 2007 (when the eldest grandson, George attained 25 years of age), so no further appointments can be made by the Trustees.
The eleventh defendant (who is a solicitor) has been joined as a party on the basis that an order is sought that he represent the interests of and advance arguments on behalf of the unborn beneficiaries of the trusts in question, namely the unborn sons and remoter issue of the first to 10 th defendants (“the Unborns”). I granted the representation order at the hearing.
Issues
In these circumstances, the Trustees ask the court to determine four issues:
(1) Whether the Trustees can exercise the Power, on the basis that there are no beneficiaries with prior interests whose consent is required;
(2) If the consent of the Unborns is required before the Power is exercised, whether the court has power to dispense with that requirement;
(3) If the court has power to dispense with the requirement, whether it should it do so in these circumstances;
(4) If the Power can be exercised, either without any consents being required or if the court has power to and does dispense with consents, whether the court should approve the proposed exercise of the Power under the Public Trustee v Cooper jurisdiction.
Issue 1
On the facts of this case, this issue can be reformulated as 3 linked issues:
(1) whether, on the proper construction of the Trust Deed, the rule in Hancock v Watson applies: whether
(i) the Grandchildren are absolutely entitled to their Allotted Shares, albeit that their interest is defeasible on the birth of the persons entitled in tail; or
(ii) the interest of the Grandchildren is not absolute, but subject to the entailed interests;
(2) If the relevant provisions in the Trust Deed do engage the rule, whether the Grandchildren have an interest in capital within the meaning of section 32;
(3) If so, whether the interests of the Unborns are “prior interests” (within the meaning of section 32) to those of the Grandchildren.
The general principles of interpretation of lifetime trusts are found in Marley v Rawlings [2015] AC 129 at [19] – [22]. In construing the Trust Deed, therefore, the court is seeking to ascertain the expressed intentions of the settlor by interpreting the words in their documentary, factual and practical context, reading the document as a whole.
In this case, the argument focussed on the nature and scope of the rule in Hancock v Watson [1902] AC 14, in which Lord Davey (at p22) stated it to be:
“Where there is an absolute gift to a legatee in...
To continue reading
Request your trial
-
New World Order For Trusts?: The Meaning Of 'Prior Interest' In Section 32 (Video)
...that person is in existence and of full age and consents in writing to the advance. In Womble Bond Dickinson Trust Corporation v Glenn [2021] EWHC 624 (Ch) Master Clark had to consider how that last restriction applied to a trust in Hancock v Watson [1902] AC 14 form, that is to say a trust......