X and Another v A and Others
| Jurisdiction | England & Wales |
| Judgment Date | 29 November 2005 |
| Neutral Citation | [2005] EWHC 2706 (Ch) |
| Date | 29 November 2005 |
| Docket Number | Case No: HC04C00472 |
| Court | Chancery Division |
[2005] EWHC 2706 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Hart
Case No: HC04C00472
Mr Nicholas Le Poidevin (instructed by Brabners Chaffe Street, of Liverpool) for the Claimants.
The First Defendant appeared in person.
Mr Mark Hubbard (instructed by Paris Smith & Randall LLP, of Southampton) for the Third to Seventh Defendants
Hearing dates: 15 th, 16 th November 2005
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.
Mr Justice Hart
This is an application by trustees of a marriage settlement dated 31 st March 1964 for directions as to whether it is open to them to exercise their powers of revocation and re-appointment in such a way as to release a very substantial part of the trust capital to the life tenant who is the wife ("the wife") of the settlor for the purpose of enabling her to devote it to charitable causes, alternatively to appoint it direct to those causes, and at the same time to make out of the remaining fund provision for members of her family some of whom, for one reason or another, were not eligible to benefit under the settlement trusts as originally constituted.
I directed the application to be heard in private without any objection from those who appeared before me. The evidence raised a number of issues concerning the family relationships and individual circumstances which merited that privacy. I propose to hand down this judgment in open court and have therefore anonymised all relevant references.
The trusts of the marriage settlement were in a not uncommon form for the period. It identified as "Primary Beneficiaries" the wife, the children and the remoter issue of the then intended marriage, and their respective spouses widows and widowers. It identified as "Secondary Beneficiaries" any future wife or widow of the settlor and the children and remoter issue (and their spouses etc.) of the hypothetical second marriage. The Appointed Class, as defined, consisted of both these classes.
The trustees were given a general power of appointment exercisable during the trust period (defined by reference to royal lives) among the Appointed Class. The wording relevant for present purposes directed them to hold capital and income
"on such trusts for all or any to the exclusion of the others or other of the members of the Appointed Class…with such trusts for their respective benefit and such provisions for their respective… benefit…in such manner in all respects as the Trustees…in their absolute and uncontrolled discretion may at any time or times and from time to time….by deed or deeds revocable or irrevocable…."
That power was then subject to restrictions in the case of the Secondary Beneficiaries which can be ignored for present purposes.
Subject thereto the wife had a life interest in income and after her death the capital and income was to be held for the children and remoter issue of the settlor and the wife as they or the survivor should by deed or will appoint and in default of such appointment for such of the children of the settlor and the wife as should attain the age of 21 if more than one in equal shares.
The current state of the family is as follows:
Children
The settlor and his wife had two daughters A and B born respectively in 1965 and 1966 and in January 1969 adopted a son, C, who had been born in 1968. It is common ground that C does not fall within the class of Primary Beneficiaries.
Grandchildren
A has had one child, a son D, who was born in 1983 and is thus aged 22. It is common ground that D is not eligible to benefit as a Primary Beneficiary, his mother not having been married to his father.
B has been married twice. She has three children by her first marriage (E, F & G) the oldest of whom is 17 and the youngest nearly 15, and two children by her second marriage (H & I), aged 4 and 2 respectively. By her second marriage (which has broken down since the inception of the proceedings) she also acquired a stepson, J, whom she wished to be treated equally with her own children so far as practicable.
C has had one child, a daughter K, who is aged 12. It is common ground that K is not eligible as a Primary Beneficiary.
The 1984 Appointment
In 1984 the trustees made a revocable appointment, expressed to be for the benefit of the wife in assisting her to discharge the moral obligation she felt to provide for C (the adopted son) and D (the illegitimate grandson) on an equal footing with her other children and issue. That divided the trust fund into 2 moieties in relation to one of which the Discretionary Beneficiaries were defined as the Appointed Class (as defined in the settlement plus C and D and their respective children and issue (and spouses etc) and in relation to the other of which the Discretionary Beneficiaries were the Appointed Class.
The trusts then declared in relation to each moiety were
(1) a trust to pay the income to the wife
"with power for the Trustees (being at least two in number) at any time or times during the life of [the wife] to pay transfer or apply the whole or any part or parts of the capital thereof to or for the benefit of [the wife] in such manner as they may from time to time in their discretion by resolution (and without the necessity for any deed or formal appointment) determine"
(2) subject thereto the trustees had a power of appointment in favour of the Discretionary Beneficiaries in similar terms to that contained in the settlement and
(3) subject thereto a discretionary trust of income in favour of the Discretionary Beneficiaries with a power to accumulate during minorities.
The value of the Trust Fund has increased very substantially over time no doubt in part as a result of the flotation of the family company from which the settlor's fortune largely originated. By October 2003 its value was some £2.5m. In the intervening two years it has again grown substantially and is now worth some £3.21m.
The trustees have previously exercised the power to advance capital to the wife conferred on them by the 1984 Appointment on two occasions, namely by advancing £350,000 in 1996 and a further £500,000 in 2000. In both cases the reason why the advance was requested seems to have been to enable the wife to give money to charity. At any rate that is the use she made of the advances.
In 2001 the wife, who was at that time herself a trustee, requested that her co- trustee make an advance to her of the whole trust fund in order to enable her to make a gift of it to charity. Doubts as to the ability of the trustees to consider and make such an advance while she was herself a trustee led to her retiring as a trustee in December 2002 and the appointment in her place of the second claimant ("Mr Y"). She has since modified her original request so as now to propose that a fund of £750,000 be retained for the benefit of herself and a class of beneficiaries wide enough to include C, D and K. That is a proposal which the trustees wish to implement subject to this court being of the view that it is a course which they may properly take.
The particular vehicle by which charity is to be advanced is by advance into a charitable trust ("the Charity") originally established and funded by the settlor and wife and of which they are currently two out of the three trustees. It currently has assets of £4m or so, and operates by making annual grants out of income to other charities. No one has suggested that the causes thus supported are not thoroughly worthy of that support and will not remain such in the future.
The present trustees of the settlement are a solicitor Mr X and Mr Y, who is an accountant. In his witness statement in support of the application, Mr X deposes as follows
"27. The Settlor is in holy orders in the Church of England. He and [the wife] are rich by most standards but, as Christians, believe that it is their moral obligation to use their wealth for the benefit of others. As a matter of choice they maintain a modest standard of living based upon a pension income received from the Church, the Settlor now being retired. They give effect to their beliefs principally through the Charity. [The wife] donates the predominant part of her income from the Settlement to the Charity."
He then describes the Charity, records the fact that the wife has free assets of some £1.1m and that the settlor and his wife own a home which cost £125,000 in 1997, and then goes on to describe the resources of the children and the reasons behind the present proposal in the following terms:
"32. The children of the Settlor and [the wife] have significant resources apart from the Settlement.
33. The children are interested in various other settlements, under some of which they have fixed interests and under others of which they have discretionary interests. A list of those settlements appears in the exhibit (p.43–44). Each of the children is in receipt of income from the settlements of at least £50,000 a year after tax, as appears from a schedule of income payments for the year ended 5 th April 2002 (p.45). The settlement described as [the settlor's] 1996 Children's Settlement, with assets of about £639,530 as at 30 th January 2003, was created by the Settlor from his own free assets.
34. The Settlor has also made provision for the children through various endowment policies, a schedule of which and their future maturity values is included in the exhibit (p.46)."
That exhibit shows that from those policies A and B can each expect about £130,000 in 2007, and C some £77,000.
"35. The Claimants believe that the interests of the...
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