Analysis
The claimants and two of the defendants were all grandsons of the 11th Duke of Marlborough and beneficiaries of a settlement made on 13 October 1981. The trustees of the 1981 settlement are a Guernsey foundation and one of its council members. The foundation was not a trust corporation within the meaning of s68(18) Trustee Act 1925.
Amongst the trust assets were 166 acres of land at Woodstock, Oxfordshire which in 2018 was granted planning permission for residential development, subject to a condition that the trustees give a binding covenant to make a heritage contribution of 70% of the enhanced value of the land to a charity concerned with the conservation, maintenance and restoration of the Blenheim Palace World Heritage Site. Blenheim Palace remains the ancestral seat of the Duke of Marlborough, having been granted by letters patent in 1705, and was entailed by parliamentary settlement and act of Parliament upon the male heirs to the dukedom.
The terms of the 1981 settlement granted limited powers to the trustees, and would not permit the contemplated covenant. Sections 36-40 Trustee Act 1925 did not permit (i) the appointment of a sole trustee to act in place of the current trustees or (ii) the retirement of one or more trustees leaving a sole trustee and the vesting of the trust property in a sole trustee.
Section 57(1) Trustee Act 1925 provides that “Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, expenditure, or other transaction, is in the opinion of the court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument, if any, or by law, the court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, if any, as the court may think fit and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income.’
The trustees applied to the Court for the grant of two new powers pursuant to:
1. Authorising them to pay part of the proceeds of sale of the Woodstock land to the Blenheim Palace charity; and
2. Modifying the powers in sections 36-40 Trustee Act 1925 so as to permit the exercise of trustees’ powers of appointment and retirement even where they would result in there being only a single trustee, whether or not it is a trust corporation.
The trustees submitted that the proposed transaction was expedient because (a) it was the only means by which the development potential of the land could be unlocked; (b) it would allow the trustees to generate a large cash fund for the benefit of the beneficiaries; (c) the successive life tenants under the 1981 settlement were likely to be the tenants in tail in possession under the parliamentary settlement, and so benefit from the conservation, maintenance and restoration of Blenheim Palace; and (d) the beneficiaries felt a moral obligation to support Blenheim Palace as an asset of the nation. Counsel’s advice was provided to the effect that no negative tax consequences would arise from the order being made. HMRC declined to be joined to the proceedings.
The defendants consented to the application.
Held
1) To grant additional powers under s57, the Court must be satisfied that (a) The trustees lack the proposed power; (b) The proposed power relates to the management or administration of the trust property; (c) The proposed power will authorise the trustees to effect a disposition or other transaction of the type contemplated by the section; (d) The proposed disposition or transaction is in the opinion of the court ‘expedient’; (e) the exercise of the power will not amount to a re-writing of the trust; and (f) It is appropriate for the court to exercise its discretion to apply the section. [7-14]
2) In order to be ‘expedient’ a disposition or transaction must be for the benefit of the beneficiaries as a whole. It need not be expedient for every beneficiary and may benefit some more than others. It may even be disadvantageous for some beneficiaries, or bring a mixture of benefits and disbenefits for all beneficiaries. Any effect on the trust’s liability to tax is likely to be an important factor. Reference was made to Lewin on Trusts (19th ed.) at 45–23. [12-13]
3) In relation to the Woodstock land, the giving of the covenant in question was not presently within the trustees’ power, and would arise during the course of the administration of the trust. It was one of the type contemplated by s57. The transaction was ‘expedient’ for the reasons put forward by the trustees. There was no evidence that a better deal might soon be forthcoming and the trustees were entitled to take advantage of the position as they found it. There was also a close alignment of interests between the 1981 settlement and the parliamentary settlement. [40-42]
4) In relation to the ‘sole trustee’ issue, when considering whether the powers sought by the trustees fall within the class of transaction contemplated by s.57, the description of the event (e.g. retirement of a trustee) may mask what the event involves. The appointment or retirement of a trustee necessarily involves control of the trust assets moving from one person to another. That is an essential element of what takes place and is sufficient to engage the court’s jurisdiction under s.57. HSBC International Trustees Ltd v Registrar of Trusts [2008] C.I.L.R. N5 (Cayman) followed.
5) The proposed change was also expedient: There are sound reasons for having trustees domiciled abroad and there are real difficulties finding suitably qualified natural persons to be appointed as trustee. Two possible disadvantages, namely the restrictions in s.27(2) Law of Property Act 1925 on sales of land by sole trustees and the minimum capital requirements of trust corporations, were both relatively minor and/or surmountable.
Order accordingly.
JUDGMENT MASTER MARSH: [1] This Part 8 claim came before me on 6 August 2018 at a disposal hearing when I made an order in the terms sought by the parties. This judgment provides my reasons for doing so. [2] The claim concerns the Marlborough 1981 Settlement (‘the 1981 Settlement’) which was made on 13 …Continue reading "Gelber & anr v The Sutherland Foundation & ors [2019] WTLR 29"