Womble Bond Dickinson (Trust Corporation) Ltd & ors v Glenn & ors [2021] WTLR 737

WTLR Issue: Summer 2021 #183

1. WOMBLE BOND DICKINSON (TRUST CORPORATION) LIMITED

2. SIR CHARLES JOHN PATRICK LAWSON

3. MIRANDA LOWTHER

4. PATRICK HUGH PETER DE PELET

5. ESME CHARLES HARLOWE LOWE

6. NEIL ELLIOTT BRAITHWAITE

7. THE HONOURABLE JAMES NICHOLAS LOWTHER

8. CHARLES ANDREW HUNTINGTON WHITELEY

V

1. SARAH GLENN

2. GEORGE STEPHEN HUNT

3. TESS LAWSON

4. JACK WILLIAM TREYMAYNE LAWSON

5. THOMAS CHARLES LANCELOT LAWSON

6. RALPH HUGH ARTHUR LAWSON

7. MATILDA GRACE LOWTHER

8. ISHBEL LOWTHER

9. JAMES WILLIAM LANCELOT LAWSON

10. FLYNN LOWTHER (a minor by his litigation friend)

11. RICHARD PIKE

Analysis

The trustees of a settlement sought directions as to whether they could advance capital to certain beneficiaries pursuant to their powers under s32 Trustee Act 1925, as varied by a clause of the trust deed, so as to bring the trust to an end. They sought a declaration as to whether the proposed advancements were within the power as a matter of construction, (ie whether there were beneficiaries with interests prior to those of the beneficiaries in whose favour the advancements were to be made, whose consent was required), and, presuming that they were within that power, the court’s approval of those advances.

The trust deed provided that the trustees would hold the portion of the fund to which this case related for the settlor’s present and future grandchildren (the grandchildren). However it also stated in the immediately following clause ‘Provided always that the share… taken by any of the Beneficiaries… shall not vest in him or her absolutely but shall be retained by the trustees and held on the following trusts’, those engrafted trusts being specified so as to grant the grandchildren life interests, subject to which the share and its income would be held on trust for the first and other sons of the relevant beneficiary, and in default of that for the beneficiary absolutely. No children had yet been born to any of the grandchildren. Consequently, the possible children of the grandchildren were referred to as ‘the unborns’.

As to whether the proposed advances of capital were within the scope of the s32 power, this was determined by (1) whether the grandchildren had an absolute interest in their allotted shares pursuant to the rule in Hancock v Watson; (2) assuming their interest was absolute, whether the grandchildren had an interest in capital within the meaning of s32; and (3) assuming the grandchildren had an absolute interest in capital, whether the interests of the unborns were yet still ‘prior’ to those of the grandchildren within the meaning of s32.

Held:

The rule in Hancock v Watson is not only engaged when engrafted trusts fail, since events subsequent to the execution of a trust deed cannot be relevant to its construction. Nor did that rule apply only where engrafted trusts do not exhaust the beneficial interest in the trust property. Here the rule applied with the consequence that the grandchildren had absolute interests for a number of reasons. The language of the relevant clause was apt to create an absolute gift: the use of the phrase ‘Provided always that’ in introducing the engrafted trusts embodied the very structure identified in case law as often indicative of an absolute interest, and the use of the phrases ‘the share’ and ‘the Allotted Share’ similarly indicated that the beneficiaries were intended to own the share. Furthermore, the relevant provisions were of a conspicuously contrasting structure to other clauses in the deed which had been intended to grant only a life interest and not an absolute interest.

The fact that an interest in capital was liable to be defeated on the bringing into effect of an engrafted trust by eg the birth of a child, did not prevent it from being an interest in capital, unless and until the defeasance occurred. The word ‘prior’ in the phrase ‘prior interest’ refers to the order in which trust property is enjoyed and hence the consent of persons with interests subsequent to the capital beneficiary is not required by s32(c) Trustee Act 1925. The trustees are not entitled to disregard the interests of people with subsequent interests, but provided the trustees have considered those interests and made a balanced decision, they may exercise the power under s32. Here, the interests of the unborns, even were they to come into existence, would merely convert the otherwise absolute interest of their parents into a life interest. Since the parents’ life interests would be enjoyed before the interests of their children, and hence would still be prior to those of their children in the sense set out above, the consent of the unborns was not required for the exercise of the power. Thus the grandchildren has an absolute interest in capital, not subject to any prior interest, and hence the proposed advances were within the scope of the s32 power, and did not require the consent of the unborns.

The proposed exercises of the power were approved as being for the benefit of the beneficiaries, in assisting them to buy properties in which to live and to protect the assets against erosion owing to professional fees and inheritance tax charges.

JUDGMENT MASTER CLARK: [1] This is an application by Pt 8 claim form dated 8 July 2020 by the trustees (‘the Trustees’) of a trust created by a settlement dated 6 March 1992 (‘the Trust Deed’). They seek directions as to whether they can advance capital to certain beneficiaries pursuant to their power under s32 …
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Counsel Details

Penelope Reed QC (5 Stone Buildings, Lincoln’s Inn, London WC2A 3XT, tel 020 7242 6201, e-mail clerks@5sblaw.com), instructed by Payne Hicks Beach (10 New Square, Lincoln’s Inn, London WC2A 3QG, tel 020 7465 4300, e-mail enquiries@phb.co.uk) for the claimant.

Elizabeth Weaver (XXIV Old Buildings, Lincoln’s Inn, London WC2A 3UP, tel 020 7691 2424, e-mail clerks@xxiv.co.uk), instructed by Womble Bond Dickinson (UK) LLP (4 More London Riverside, London SE1 2AU, tel 0345 415 0000, e-mail law@ wbd-uk.com) for the defendant.

Cases Referenced

  • Attorney General v Lloyds Bank [1935] AC 382
  • Chinachem Charitable Foundation Ltd v The Secretary for Justice & ors [2015] HKCFA 35
  • Fyfe v Irwin [1939] 2 All ER 271
  • Hancock v Watson [1902] AC 14
  • IRC v Bernstein [1961] Ch 399
  • Lassence v Tierney (1849) 1 Mac & G 551; [1843-60] All ER Rep 47
  • Marley v Rawlings & anr [2014] UKSC 2; [2014] WTLR 299 SC
  • Public Trustee v Cooper [2001] WTLR 901 ChD
  • Re Burton's Settlement Trusts, Public Trustee v Montefiore [1955] 1 All ER 433; [1955] Ch 348
  • Re Goold's Will Trusts, Lloyd's Bank Ltd v Goold [1967] 3 All ER 652
  • Re Johnson's Settlement Trusts, McClure v Johnson [1943] 2 All ER 499; [1943] Ch 341
  • Re Litt's Will Trusts, Parry v Cooper [1946] All ER 314; [1946] Ch 154
  • Re Norton, Wyatt v Bain [1949] WN 23
  • Rucker v Scholefield (1862) 1 Hem & M 36, 71 ER 16
  • Schumacher & anr v Clarke [2020] EWHC 3381 (Ch); [2021] WTLR 361 ChD
  • Watson v Holland [1985] 1 All ER 290

Legislation Referenced

  • CPR 8
  • Trustee Act 1925, s32