Variation of Trusts Flashcards
Re Weston’s Settlement [1969] 1 Ch 223
Case: Wanted to transfer interest to a different jurisdiction; W’s family comprised of a number of individuals (always look at characteristics of a number of individuals in PQs!) - wife, son, son’s wife, son’s child aged 2, son’s child aged 19 (minor at this time); said that they ultimately intended to make Jersey their home
Decision: Stamp J refused at first instance as he wasn’t persuaded that this application was anything more than a cheap exercise in tax avoidance (appeal dismissed); it would not benefit the child to be uprooted when the fortune was already big; also suspicious that children would move back (only 3 months living in Jersey)
Rule: Tax avoidance is legitimate but the court must assess the determent beyond the financial benefit
Quote: “Two propositions are clear: (i) in exercising its discretion, the function of the court is to protect those who cannot protect themselves [purpose of variation of trusts act]. It must do what is truly for their benefit; (ii) it can give its consent to a scheme to avoid death duties or other taxes.
I think it necessary, however, to add this third proposition: (iii) the court should not consider merely the financial benefit to the infants or unborn children, but also their educational and social benefit.” per Stamp J
Re Cohen’s Will Trusts [1959] 1 WLR 865
Rule: When evaluating the risk that there may be detriment not a benefit, the court must take the sort of risk (on behalf of persons for whom it was providing consent) that an adult beneficiary might be prepared to take on his or her own behalf
Re Tinker’s Settlement [1960] 1 WLR 1011
Case: Fund on trust for the settlor’s son and daughter in equal shares; Daughter share contingent on attaining the age of 30 (failing which to pass to her issue or, if no issue, to her brother); Brother’s share contingent on attaining 30 (but no gift over to his issue - condition missing on the brother’s side; instead share to pass to his sister and ultimately his children would end up missing out); nothing intention on this, merely a mistake in drafting the settlement; application to vary for the benefit of unborn under s.1(1)(C)
Decision: To remedy the error, to allow the brother’s children to obtain an interest if he were to die before reaching the age of 30 and court refused to granted hits variation; No financial benefit to daughter’s unborn children
Rule: Family harmony is not a benefit in itself
cf Re Remnant
(seems, therefore that Re Remnant ‘benefit’ should be the accelerated trust)
Re Cohen’s Settlement Trusts [1965] 1 WLR 1229
Decision: The court refused to approve an arrangement, in this particular case the likely prospects of one of the unborn beneficiaries was said to be “hopeless in any event” for them to have any entitlement so no point approving consent on their behalf
Re Remnant’s Settlement Trusts [1970] Ch 560
Case: Children of D and M (sisters) are contingent beneficiaries of 2 funds; forfeiture clause (with accrue i.e. if the money forfeited it would go to the others) in respect of any of the C’s who - practised Roman Catholicism or were married to a Roman Catholic at time of vesting; Application to (1) delete forfeiture clause (2) provide 10K set aside on accelerated trusts for each of the sister’s children
Decision: Even though not for the benefit of D’s children as they would get all the money in forfeiture, the court approved by taking a broad view of what is meant by “benefit” (accelerated interest); non-financial considerations seem to be large in the case such as forfeiture provision causing dissension between the families of the two sisters
Contrast with Tinker’s Settlement
Re Steed [1960] Ch 407 (CA)
Case: Protective trust for housekeeper, ‘spectral spouse’ - contingent discretionary B under s.1(1)(d) so no requirement to consider benefit
Decision: Would undermine the ‘intention and desire of testator’ and housekeep should not be exposed to risk of being ‘sponged upon’
Goulding v James [1997] 2 All ER 239 (CA)
Case: F left residuary estate to daughter (J) for life (did not trust daughter’s husband and thought grandson was a free spirit and may waste the money while young); Remainder to F’s grandson (M) aged 32); estate to devolve to F’s great grandchildren if M (1) predeceases J or (2) dies before 40; J and M propose 10% of residuary estate to be put into a trust fund for GCs; Balance to split immediately into equal capital payments for J and M
Decision: Court approved (CA) as “If the judge had adopted the correct approach to the exercise of hid discretion, he could only have come to the conclusion that the intentions and wishes of Mrs Froud, expressed externally to her will in relation to the adult beneficiaries and an adult non-beneficiary, had little, if any, relevance or weight to the issue of approval on behalf of [those beneficiaries] whose interest in residue was multiplied five-fold under the proposed arrangement”; ultimately benefit unborn GGC
Rule: Court is to act almost as a ‘statutory attorney’; Intentions and wishes of testatrix have little if any weight if interest is to be multiplied five fold by the arrangement…
Quote: “First, what varies the trust is not the court, but the agreement or consensus of the beneficiaries. Secondly, there is no real difference in principle in the rearrangement of the trusts between the case where the court is exercising its jurisdiction on behalf of the specified class under the 1958 Act and the case where the resettlement is made by virtue of the doctrine in Saunders v. Vautier (1841) 4 Beav 115, and by all the adult beneficiaries joining together. Thirdly, the court is merely contributing on behalf of infants and unborn and unascertained persons the binding assents to the arrangement which they, unlike an adult beneficiary, cannot give.” per Mummery LJ
Knocker v Youle [1986] 1 WLR 934
Case: Income her on trust for Settlor’s daughter’s will; in default of appointment - gift over to settlor’s son; if settlor’s son was dead - to settlor’s four sisters; if settlor’s sisters were dead - to their issue (provided attained 21); sister were dead; Settlor’s son and daughter sought a variation of the trust
Decision: Under s.1(1)(b) “may” become entitled - “[…] it is not strictly accurate to describe the cousins as persons ‘who may become entitled […] to an interest under the trusts’. There is no doubt of course that they are members of a ‘specified class’. Each of them is, however, entitled now to an interest under the trusts, albeit a contingent one […] and albeit also that it is an interest that is defeasible on the exercise of the general testamentary powers of appointment vested in [the settlor’s son and daughter]. Nonetheless, it is properly described in legal language as an interest, and it seems to me plain that in this Act the word ‘interest’ is used in its technical, legal sense. Otherwise, the words ‘whether vested or contingent’ in section 1(1)(a) would be out of place […] It seems to me […] that a person who has an actual interest directly conferred upon him or her by a settlement, albeit a remote interest, cannot properly be described as one who ‘may become’ entitled to an interest” per Warner J
Quote: “[…] it is trite law that the prospective or presumptive next-of-kin of a living person do not have an interest. They have only a spes successionis, a hope of succeeding, and quite certainly they are the typical category of persons who fall within section 1(1)(b). Another familiar example of a person falling within that provision is a potential future spouse […]” per Warner J
Suffert’s Settlement [1961] Ch 1
Case: Trust established for E Suffert; life interest under protective trust; power to appoint capital to such of her children as she might select; default appointment to next of kin; E Suffert unmarried and only ascertainable relations are 3 cousins; E Suffert and one cousin applied for variation
Decision: The arrangement was on which it would be proper to approve on behalf of any persons who might become entitled under the trust of the settlement who were not in existence; but the court could not approve the arrangement on behalf of the two first cousins who were not parties to the summons, for although the persons who would take in default of appointment were statutory next-of-kin of the applicant and were a specified persons who might become entitled to an interest under the trusts at a future date within section 1(1)(b) of the Act of 1958, the exception in the para required the hypothesis that the future date had fallen on the day on which the originated summons was issued, and, on the hypothesis that the applicant had died on that date, the first cousins would be ascertained and acquire their interest at that date, thus fitting the description in the exception in section 1(1)(b)
Re New [1901] 2 Ch 534
Rule: Court order strict compliance with terms of the trust
Quote: “As a rule, the court has no jurisdiction to give, and will not give, its sanction to the performance by trustees of acts with reference to the trust estate which are not, on the face of the instrument creating the trust, authorised by its terms” per Romer LJ at 544
GENERAL RULE… but exceptions…
Saunders v Vautier (1841) 4 Beav 115
Decision: Interest had vested in beneficiary at 21 so could instruct trustees to transfer interest (not contingent on attaining 25)
Re Nelson [1928] Ch 920
Rule: It is possible to treat beneficiaries together as one person
Berry v Green [1938] AC 575
Limits to S v V - “the rule has no operation unless all the persons who have present or contingent interest in the property are sui juris and consent.” per Lord Maugham Does not apply to beneficiaries who are: • Under age • Unborn • Lack capacity • Not ascertained
Society of Lloyd’s v Robinson [1999] 1 WLR 756
Rule: Trust may itself give the trustees the power to amend the trust i.e. express powers of variation
(begin with this?)
Re Downshire Settled Estates [1953] Ch 218
On section 57(1): “to ensure that trust property should be managed as advantageously as possible in the interests of the beneficiaries […] but it was no part of the legislative aim to disturb the rule that a court will not re-write a trust […]” per Evershed MR
