Analysis
The first claimant was the executor of the will of the late Laura Jeffreys. He and the second and third claimants were the trustees of the trusts declared by the will. The first to fifteenth defendants were the deceased’s nieces and nephews. The seventeenth defendant was appointed to represent the interests of the deceased’s unborn nieces and nephews of the whole blood. The claim against the sixteenth defendant was discontinued.
Clause 5 of the will created a discretionary trust. The beneficiaries of the trust were defined as the deceased’s son (who predeceased her), any issue of the deceased (of which there were none), any spouse of the deceased or any widow or widower of any issue of the deceased who predeceased her (of which there were none), and any persons whom the trustees might by deed appoint as additional beneficiaries. In default of appointment, the trustees were to apply the income for the benefit of the beneficiaries during the 80-year trust period (subject to a power to accumulate for 21 years). On the expiry of the trust period, the trustees were to hold on trust for the deceased’s issue. Clause 5(c)(iii) then provided:
‘… if at any time the trusts declared by the foregoing provisions of this Will in respect of the Trust Fund fail then from the date of their failure my Trustees shall hold the Trust Fund ON TRUST absolutely for such of the issue of my brothers and sisters living on that date or born afterwards (at any time during the lifetime of my brother or sister whose issue they are) as reach the age of 18 or marry under that age if more than one in equal shares but through all degrees according to their stocks and so that no issue shall take whose parent is alive and so capable of taking PROVIDED that the share in the Trust Fund of any issue who has attained a vested interest shall not be diminished by the birth or marriage of or the attainment of 18 by any further issue’.
The claimants brought proceedings to determine whether or not the power to add further beneficiaries remained exercisable.
Such of the defendants as were represented argued that the power was not exercisable. They argued that clause 5 created two trusts, with the trust in clause 5(c)(iii) separate from the trust created by the other parts which took effect only when the other trusts failed. Since the deceased died without issue, it was argued that the primary trust (including the power to add beneficiaries) had failed for lack of beneficiaries, so that the trust in clause 5(c)(iii) had taken effect.
The claimants formally took a neutral stance, but their counsel presented the argument for finding that the power was exercisable. They argued that the trusts in clause 5 were a single composite trust of which the beneficiaries under clause 5(c)(iii) were the ultimate default beneficiary. The trust therefore did not fail for uncertainty, and the power therefore remained exercisable. They argued in the alternative that the language of the will was ambiguous so that extraneous evidence was admissible under s21(2) Administration of Justice Act 1982.
Held:
The will was to be construed in light of the surrounding circumstances, but the circumstances threw no light on the question before the court.
The will was in clear terms, distinguishing the trust in clause 5(c)(iii) from the preceding trusts, described as ‘the trusts declared by the foregoing provisions’, with the trust in clause 5(c)(iii) only arising if the preceding trusts fail. There was therefore no room to treat the beneficiaries under it as ultimate default beneficiaries so as to resurrect the power to add beneficiaries.
Several factors supported this result. First, the will was professionally prepared and the formula in clause 5(c)(iii) is of a technical nature, the words of which should be interpreted according to their established legal meaning. The power to add beneficiaries was only contained in the definition of ‘beneficiaries’, which definition was not used in the clause 5(c)(iii) trust. ‘Failure’ of a trust is a well-known legal concept which classically occurs where the trust is void for lack of a beneficiary. If clause 5(c)(iii) was construed as creating a class of ultimate default beneficiaries, it would resurrect a power which is limited to the trusts which failed as a precondition of the operation of clause 5(c)(iii) itself, which lacked logic. Construing clause 5(c)(iii) in this way would also raise unanswered questions in relation to issues such as the application of income and the extent to which the powers could be used to divest vested interests.
Secondly, construing clause 5(c)(iii) as a separate trust would eliminate uncertainty as to whether ‘absolutely’ should be read as meaning ‘indefeasibly’ or as connoting entire ownership of an asset at a point in time, and whether clause 5(c)(iii) was intended to make automatic default provision or to ‘plug gaps’ to ensure the trustees’ powers were preserved during the trust period.
Thirdly, this interpretation enabled a clear and logical scheme to be discerned from clause 5 as a whole. The trust for issue was the default trust. The trust in clause 5(c)(iii) was a separate trust arising on failure of the other trusts, not being a discretionary trust and incorporating a separate class of beneficiaries who were not beneficiaries of the antecedent trust. When operative, the intermediate income is available for application under clause 5(c)(iii) and s31 Trustee Act 1925. Conversely, if clause 5(c)(iii) had resurrected the discretionary trusts, the intermediate income would not be available for the beneficiaries in clause 5(c)(iii).
The language of the will has a clear and coherent meaning and has neither patent nor latent ambiguity. Extraneous evidence was therefore not admissible under s21 Administration of Justice Act 1982. Even if this had not been the case, there was no evidence of any discussion about what was to happen to the power to add beneficiaries in the event that the discretionary trust failed.
JUDGMENT HHJ HALLIWELL: Introduction [1] The claimants are the personal representatives and trustees of the will dated 27 October 2009 (the Will) of the late Laura Jeffreys (Laura). By these proceedings, they seek an order determining whether their power, in the Will, to appoint additional beneficiaries is exercisable. If not, Laura’s residuary estate is held …Continue reading "Jeffreys & ors v Scruton & ors [2020] WTLR 575"