Flexibility of BI (Variation of Trusts)

Question 1

Re Downshire’s Settlement Estate

Answer 1

‘A court will not rewrite a trust’ - give effect to the intention of the trust. Is a high water mark of judicial reluctance.

Question 2

Reasons to challenge intention of settlor

Answer 2

→ Tax → if one B already is wealthy, need to distribute it more fairly? Does this conflict with settlor’s intention?
→ ‘Dead hand’ analogy → must balance equitable prop rights. Dead cannot come to court, dead hand should not rule the living. Like inalienability of capital - wealth should be able to move freely

Question 3

Modes of varying trusts

Answer 3

1) Rule in Saunders v Vautier - B’s of trust, all adult and competent, can end or vary trust (living owners have power)
2) Variation of Trusts Act 1958 - Consent to vary for B’s who can’t consent
3) s57(1) Trustee Act 1925 - Administrative variation - where you would like to do something (sale/lease) but you don’t have the power

Question 4

Southgate v Sutton (2014)

Answer 4

Possibility of ‘incidental’ variation of BI → COA made order under S57 TA 1925 to create a sub-trust for benefit of US-Residents. Allows court to authorise trustees to carry out transaction in management/administration of trust property where such transactions are ‘expedient’ (convenient/advantageous)

Question 5

Other statutory variations

Answer 5

1) S24 Matrimonial Causes Act 1973 - marriage/divorce
2) Mental Capacity Act 2005 - change if lack competence
3) S20(1) Administration of Justice Act 1982 - need power to change trust otherwise unjust situation

Question 6

Re New

Answer 6

‘Salvage’ and ‘Emergency’

→ Where circs have arisen which settlor of trust had not foreseen/made provision for, court will vary

Question 7

Chapman v Chapman (1954)

Answer 7

PRIOR to Variation act - dubious jurisdiction to ‘vary trusts’
Trusts could not be changed unless B’s were competent adults, but some B’s were unborn, so could not say. Meant trust could not be varied. Lawyers would come to court and pretend to have a fight over the form of the trust - FAKE - way to try change the trust

Question 8

S53 Trustee Act 1925

Answer 8

Trust may be varied for maintenance, education or benefit of an infant B
→ effected by making conveyance of sale of B’s interest. Capital proceeds would then go towards the maintenance of the B

Question 9

Variation of Trust Act 1958 → S1(A-D)

Answer 9

S1(a) infancy or incapacity
S1(b) consent for anyone who MAY have an interest on happening of a future event BUT does not include anyone who is of that description
S1(c) any person unborn
S1(d) protective trust - court consent to any person who would have an interest under a discretionary trust, springing on determination of life interest

Question 10

What does Variation Act do?

Answer 10

Enables remoulding of beneficial interest and incidental changes of administration for B’s who are unable to consent.
Court ‘MAY’ do this - under no requirement to do so.

Question 11

Benefit requirement

Answer 11

S1(A-C) - NOT D - consent to vary must be for the benefit of the B’s

Question 12

Re Druce’s ST

Answer 12

Application should be made by adult B, and not made unless variation will benefit all B’s
Settlor should join as defendant where variation of inter vivos trust is proposed and settlor still alive

Question 13

How does variation occur?

Answer 13

Variation occurs through CONSENT of adults or the court → Re Holt’s Settlement

Question 14

Exception?

Answer 14

S53(1)(c) LPA 1925 - no consent/permission to vary where for specific purpose

Question 15

Re Suffert’s Settlement (1960)

Answer 15

S1(b) Mere Expectations - do cousins fall within category?
Mrs S, spinster with 3 adult cousins. 1 consented to varying trust, 2 didn’t. Mrs S went to court and said would like to vary. Court said yes, consent of 1 cousin and her consent - no unborn children likely.
Other adults do not need to consent - no interest. However, when Mrs S dies, will go to next of kin. Who is next of kin? No one currently has interest - Cousins MAY have interest as next of kin if she dies. Can court consent for them? Court said yes, because fall under s1(b), BUT if she were to die today, although they may not be next of kin, they would be if she died today. SO court could not give consent for them, the cousins had to give consent to vary trust.

Question 16

Re Moncrieff’s ST (1962)

Answer 16

Would 4 infant grandchildren be ‘next of kin’?
Mrs P adopted infant son, Alan. Had 4 infant grandchildren. Would all come under S1(a) as minors. But - they did not fall under this as they did NOT have a current interest. Held they MAY have an interest in the future so would come under S1(b). Court said they would consent for Alan, and she can consent for herself. But what about the grandchildren - they MAY be entitled too if Alan dies before them - court said yes, may be entitled, but what if it happens TODAY? → Would be Alan who is entitled. Court Held: Grandchildren are too remote

Question 17

Financial benefits

Answer 17

Re Duke of Norfolk’s WT - B saved £550,000 in taxes because of variation

Question 18

Social and moral benefits

Answer 18

Re Weston’s Settlement - benefits of stability and perceived benefits of an English upbringing deemed more important than financial proceeds of tax avoidance scheme.
Denning: Despite this, did not deny that financial benefits are allowed

Question 19

Benefit by deferral

Answer 19

→ By varying a trust or exercising power of advancement
Re T’s Settlement Trust - Vary trust in favour of child to restrict from getting her full entitlement upon age 21 because she was ‘immature and irresponsible’ with money. Court deferred the vesting and imposed protective trust in the interim.
Wilberforce: meaning of ‘benefit’ is wide - not restricted to material benefit

Question 20

Benefit of familial harmony

Answer 20

Re Tinker’s Settlement - not allowed because would remove advantage of daughter’s unborn children over their unborn cousins

Question 21

Benefit of familial harmony

Answer 21

Re Remnant’s ST - 2 sisters to benefit from trust from father. Forfeiture clause if became Roman Catholic, forfeit their interest. 1 sister became a RC, and disliked the clause so applied to have it varied after father’s death. Court APPROVED.

Question 22

Re Cohen’s Will Trust

Answer 22

Risk of detriment?
Approved - benefits all B’s, but certain potential B’s may suffer more of a detriment than a benefit - court must take the risk that adult would make on their own behalf

Question 23

Resettlement or variation?

Answer 23

Risk that it will be so varied that it cannot be said to be original trust at all, but something wholly different

Question 24

Re T’s Settlement - Resettlement or variation?

Answer 24

Where it is in truth a complete new settlement, it will not be approved

Question 25

Settlor’s intention - Re Remnant’s ST

Answer 25

Settlor’s intentions belong to the moment he wrote the trust - may have changed over time. They should be regarded as serious but by no means conclusive consideration

Question 26

Goulding v James (1997)

Answer 26

Settlor’s intention vs. Variation
Held: 1) It is the consensus of B’s that varies the trust, not the court. 2) No real difference between the 1958 Act and Saunders v Vautier. 3) Court merely contributed on behalf of B’s who cannot give consent → Act is an extension of Saunders v Vautier. Principle recognises rights of B’s who are sui juris and absolutely entitled to trust property to exercise their property rights

Question 27

Power of advancement

Answer 27

S32 Trustee Act 1925 → pay/apply money in trust or transfer property that is part of the capital of trust for advancement of B - whether they are infant or adult

Question 28

Maintenance of minor B

Answer 28

S31 Trustee Act 1925