Analysis
An application was made on 16 February 2016 to vary the trusts of the will of a testator (will) and of a settlement made by reference to the will (settlement) by the testator’s brother (settlor) pursuant to the Variation of Trusts Act 1958. The claimants included the eldest surviving son and eldest grandson of the settlor. The defendants included the trustees of the will and the settlement (trustees) as well as a class of the settlor’s descendants and their respective spouses who were beneficiaries under the will and the settlement.
The trust funds of the will and the settlement were divided into three sub-funds known as the 1983 fund, the grandchildren’s fund and the appointed fund, but the perpetuity period was, for the most part, limited to a period of lives in being plus 20 years from the death of the testator and it was likely that this would expire in the 2040s or 2050s. The principal objective of the proposed variation was to extend the perpetuity period in relation to all the trust funds so that it would not now terminate until 1 January 2141, taking advantage of a new perpetuity period of 125 years from the date of the order. Approval of this arrangement was required so as to bind a specified class of unborn and unascertained persons, being descendants of the narrower class of beneficiaries, who were not party to these proceedings. Even so, there were many people, being potential beneficiaries under the will and the settlement, who were not members of the specified class or party to the application, including living individuals (both adult and minor) as well as unborn and unascertained persons and charitable entities or purposes, who were highly unlikely to benefit under the trusts except in the event of some family catastrophe. Ordinarily, in an application of this nature, the arrangement would need to be agreed to by or on behalf of all members of this wider class of beneficiaries. However, given the extremely remote interest which such persons had, none of the parties considered it sensible or proportionate to involve them in discussions about the future of the trusts, let alone join them as parties to the proceedings. A method of eliminating the need for their involvement was identified and, for this purpose only, a written judgment would be warranted beside the usual brief oral statement of reasons for approving the arrangement.
Held (approving the arrangement)
The method of eliminating the need to involve the wider class of beneficiaries operated by precluding any objection or challenge to the arrangement being made by those potential, but very remote, beneficiaries who were not party to or represented in the proceedings. It involved the execution by the trustees of three deeds, one in relation to each of the sub-funds, and the arrangement itself would only take effect conditional on the execution of those deeds. Under those deeds, the trustees would release their powers of appointment, revocation and release but only to the extent that it deprived the members of the wider class who were not members of the narrower class of any right which they might otherwise have to challenge the arrangement. Its effect would be to make the powers to benefit the wider class before the arrangement coincident with what those powers would be after the arrangement. Another way of viewing this release was that it removed such persons as potential beneficiaries for the instant before the arrangement took place, so that neither consent to nor approval of the arrangement on their behalf was required, but to reinstate them immediately after the arrangement took effect according to the terms of the varied trusts.
A similar procedure had been adopted in a previous case involving certain objects of a power of appointment in a marriage settlement. The position in the present case was different in that the powers concerned were fiduciary. Whereas the donee of a special power could release or restrict it at will, the trustees of fiduciary powers could only release or restrict the exercise of those powers for a proper purpose. Whether that is seen as a partial release, or as a total release subject to reinstatement, the trustees’ exercise of their powers should properly be regarded as powers to benefit the core beneficiaries and no fraud on a power was involved. Moreover, it was strongly arguable that the arrangement, including the partial releases, was for the benefit of the wider class, preserving as it would the trust assets for the future and the value to them in the remote circumstance of their ever benefitting. Accordingly, this method of dispensing with the need for representation of the wider class could not be seen other than fully effective as well as being a sensible and practical approach to the application.
WARREN J: Introduction [1] I had before me on 16 February 2016, an application under the Variation of Trusts Act 1958 (the VTA) to vary the trusts of the will of a testator (the will and T) and also of a settlement (the settlement) made by reference to the will by T’s brother (H), approval …Continue reading "A v B [2016] EWHC 340 (Ch)"