Analysis
Applications under the Variation of Trusts Act 1958 were made in respect of will trusts referred to as ‘the Baronetcy Trust’, under which property was held in two funds known as ‘James’s Fund’ and ‘James’s Children’s Fund’, and ‘the Lady Cayzer Will Trust’ in relation to property termed ‘the Molly & Lily Shares’. The primary beneficiaries of the relevant trusts were James Cayzer-Colvin and his two daughters, Molly (aka Mollie) and Lily. At the time of the applications James was 55, Mollie 24 and Lily 21. There were no minor beneficiaries of the trusts but persons unborn or unascertained might become beneficiaries, including any unborn child of James.
The purpose of the proposed variations were in the case of each trust to:
- (a) extend the applicable perpetuity period to 125 years from the date of the order approving the variation;
- (b) enable powers of revocation, appointment and application in relation to the trust property to be exercised throughout the new 125-year period;
- (c) replace existing absolute trusts for the benefit of the current principal beneficiaries, if they are living at the end of the current perpetuity periods or, in the case of the Molly & Lily Shares, on their earlier attainment of the age of 50 years, with continuing life interests for those principal beneficiaries and continuing powers of application for their benefit;
- (d) allow the extended powers of revocation, appointment and application to be exercised to make provision for the accumulation of income of the trust property throughout the new trust period of 125 years; and
- (e) widen the administrative powers available to the trustees on the lines of the standard form of administrative powers used in relation to new trusts, including by the addition of a power to add further administrative powers.
The Baronetcy Trust, in existence since 1943, was currently subject to the terms of a deed made on 5 March 1999 and the relevant perpetuity period was thought likely to end in 2050. The current trusts declared relating to Lady Cayzer’s Will Trust were contained in a deed made in 2002.
Held: approving the variations sought with one amendment
When making an application under the 1958 Act it is important that the principal trust documents are put before the court (and not merely summaries of them).
The court may approve a proposed variation if it is satisfied that it would be for the benefit of the persons on whose behalf it is being asked for approval, thereby supplying its consent to the arrangement on behalf of beneficiaries who are incapable of consenting. The court needs to consider in a practical and business-like manner whether the arrangement is beneficial to each beneficiary or group of beneficiaries for whom the court is concerned. Wider benefit to the beneficiaries as a whole, while relevant, will of itself not normally suffice.
Deferring absolute vesting and extension of the life of existing trust structures via the variation of the perpetuity period sought was intended to achieve well-known tax benefits. The trust funds in question were largely represented by shares in family-controlled companies and a purpose of the variations was to make it less likely that a sale of an interest in those companies would prove necessary (to the benefit of the wider family). The proposed removal of contingent absolute interests for James, Mollie and Lily was beneficial to unborns and unascertained persons in general. A theoretical unborn child of James, if born before the first of his children turned 25, likely to have been on 30 September 2020, would have (and under the proposals would lose) an equivalent contingent absolute interest to those benefitting Mollie and Lily. Showing benefit to such a person required further consideration. The court was however satisfied, looking at the proposed variations together and in the round and taking into account the approach of the principal beneficiaries and trustees, that it was.
While the court has the power to approve a variation varying or revoking any of the trusts, it may not approve a complete resettlement. The court has generally taken a wide or benign view of where to draw the line between variation and resettlement. The adoption of a new perpetuity period was consistent with the framework of the existing trusts being preserved and extended. The proposed removal of contingent absolute interests would not of itself necessarily amount to a resettlement and would not do so here. This was on the footing, in the case of Lady Cayzer’s Will Trust, that the 2002 deed of appointment had not itself effected a resettlement.
A variation to confer a power on the trustees to add administrative powers was to be allowed, provided it was made subject to a provision that, before exercising any added administrative power, the trustees should first satisfy themselves with the benefit of appropriate professional advice that the proposed exercise of the power is expedient for the trust as a whole.
JUDGMENT MASTER TEVERSON: [1] I have before me two applications under the Variation of Trusts Act 1958 (‘the 1958 Act’) relating to the same family. The first application [PT-2020-000016] concerns the trusts of the will of Sir August Cayzer (‘the Baronetcy Trust’) under which property is held in two funds known as ‘James’s Fund’ and …Continue reading "Swan & ors v Gibbs & ors [2020] WTLR 1109"