Christopher Southgate & Anor v Peter Sutton & Ors (2011)
The court had jurisdiction to confer power on the trustees of a family trust to carry out a proposed transaction to appropriate and partition trust property to create a sub-fund as it was "administration of any property vested in the trustees" within the Trustee Act 1925 s.57(1).
The appellant trust beneficiaries (B) appealed against the refusal of an application under the Trustee Act 1925 s.57(1) for the conferral of powers on the trustees (T) in order to carry out a transaction. Although T appeared as respondents they supported the appeal. B, who were United States' residents, were beneficiaries of a family trust together with beneficiaries resident in the United Kingdom. For tax purposes T wished to create a sub-fund, to be administered by US trustees, under which B would be entitled to beneficial interests in the whole income and capital of the trust property appropriated to the sub-fund. T sought a power of appropriation and partition in order to create the sub-fund, and a power under s.32 to make an advancement by way of re-settlement. The judge was satisfied that the proposed transaction was expedient, but held that it would be an alteration of the beneficial interests under the trust, which fell outside the court's jurisdiction under s.57(1). The judge refused to permit the advancement because it proposed an advancement of a contingent interest under the trust, rather than an advancement of property subject to the trust.
(1) The court had jurisdiction to grant the appropriation and partition application as one relating to the "administration of any property vested in the trustees" within s.57(1). The impact of the proposal on the beneficial interests was incidental only, and there was no legal precedent or other obstacle to granting the application. Freeston's Charity, Re (1978) 1 WLR 741 CA (Civ Div) was not authority for an unqualified proposition that the partition of a trust fund was always a variation or re-arrangement of the beneficial interests in it, or always had more than an incidental impact on the beneficial interests in it, Freeston distinguished. The proposed appropriation and partition was clearly expedient in the interest of the trust as a whole (see paras 37-38, 41 of judgment). (2) The form of advancement proposed had been restructured to take account of the judge's distinction between an interest in the trust and the trust property itself, and would be a valid exercise of the power of advancement in s.32 (see para.45).