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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Breadner & Ors v Granville-Grossman & Ors [2000] EWHC Ch 224 (28 June 2000) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2000/224.html Cite as: [2000] EWHC Ch 224, [2001] 2 WLR 593, [2001] Ch 523, [2000] WTLR 829, [2001] 1 Ch 523, [2000] 4 All ER 705 |
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CHANCERY DIVISION
London |
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B e f o r e :
BETWEEN
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1) Roger Lester BREADNER 2) Stewart Henderson FLEMING 3) ABACUS TRUST COMPANY (ISLE OF MAN) LIMITED |
Claimants |
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-v- |
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(1) Jonathan GRANVILLE-GROSSMAN (2) Deborah LANSING (3) David GRANVILLE-GROSSMAN (4) Helen ILES |
Defendants |
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Charles Turnbull instructed by Taylor Joynson Garrett of EC4Y ODX for Defendant (1).
Brian Green QC and Judith Bryant instructed by Dawson & Co of WC2A 3RZ for Defendants (2 -(4).
Hearing date:15-18 May 2000
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Crown Copyright ©
Abbreviations
The settlor | Mr Leonard Granville-Grossman |
Jonathan | Jonathan Granville-Grossman, the son of the settlor |
The cousins | Jonathan's three cousins, the children of the settlor's brother |
The settlement | A discretionary settlement made by the settlor on 27 December 1973 |
The 1976 appointment | An appointment made by the trustees of the settlement on 29 March 1976 |
The 1976 power | A power of appointment contained in the 1976 appointment |
The 1989 deed | A deed executed by the trustees of the settlement on 2 August 1989 |
CTT | Capital Transfer Tax (now retitled Inheritance Tax) |
Overview
The trustees had an overriding power of appointment. By the 1976 appointment they appointed trusts in favour of Jonathan and the cousins in four equal shares. (At least that is what on the face of it they did, although there are arguments, which I will consider later, that the 1976 appointment failed to have any effect.) The 1976 appointment itself contained a further power of appointment under which it was open to the trustees, among other things, to reappoint the fund in favour of Jonathan alone. This was the 1976 power. By the 1989 deed the trustees sought to exercise the 1976 power, and to appoint the whole fund in favour of Jonathan and his children However, the 1976 appointment provided that the 1976 power had to be exercised before a date, which in the event was 2 August 1989. The trustees purported to exercise the power on the date, that is on 2 August 1989. To initial appearances this was a day too late.
The facts in detail
one or more persons (in this paragraph referred to as beneficiaries) will, on or before attaining a specified age not exceeding twenty-five, become entitled to, or to an interest in possession in, the settled property ...
The paradigm case of a para 15 trust was one where the fund was held on trust for a beneficiary contingently on his or her attaining an age of up to 25. At 25 (or at an earlier age if the trust specified one) the beneficiary either had to become entitled to the trust fund absolutely or had to become entitled to an interest in possession in it. I have used the words 'had to' deliberately. They correspond to 'will' in the statute, and in Inglewood v IRC [1983] STC 133, the Court of Appeal confirmed that 'will' meant 'will', and did not mean 'may' or 'will as matters now stand'.
the day being one day before the day on which the first of the Principal Beneficiaries ... to attain the age of twenty five years shall attain that age ...
The oldest beneficiary was one of the cousins. If she survived she would become 25 on 3 August 1989. She did survive, so as matters turned out the Closing Date was 2 August 1989, the day before her birthday. The age of 25 referred to in the definition was obviously chosen because of the conditions for para 15 trusts. In order to comply with para 15 it would have been satisfactory for the Closing Date to have been the day on which the beneficiary attained 25, but the draftsman chose to specify the day before that day. He was presumably being cautious, but in the events that happened later his caution caused problems rather than avoided them. This use of the word 'before' is not the one which directly caused the major problem in this case, but it was, I think, a step towards the problem.
The Trustees shall stand possessed of the Trust Fund and the income thereof UPON TRUST for the Principal Beneficiaries or any one of more of them exclusive of the other or others in such shares as the Trustees shall from time to time by deed or deeds revocable or irrevocable executed before the Closing Date and not revocable thereafter appoint.
Clause 4 then elaborates on the kinds of trusts which may be created under the 1976 power. I need not go into the clause in detail. It was plainly drafted with Schedule 5 para 15 in mind, and it attempted -successfully as far as I can see - to give the trustees a modicum of flexibility while ensuring that any trusts which they might appoint would have to be para !5 trusts.
The arguments
'Before' or 'on or before'?
' .... the 'rule' that words should be given their 'natural and ordinary meaning' reflects the common-sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents ... '
It is of course true that Lord Hoffman was mainly concerned to bring out that there are circumstances where it is appropriate to depart from the natural and ordinary meaning of words, but he had particularly in mind cases where it was realistic to acknowledge that the draftsman had made a linguistic mistake.' In this case, for reasons which I will enlarge on in the next few paragraphs, I do not think that the draftsman of the 1976 appointment made a linguistic mistake. He said what he intended to say. So why should not the 'natural and ordinary meaning' of his words be adopted? There is only one natural and ordinary meaning of the words used in clause 3. Something which has to happen 'before' a date cannot happen 'on' the date. It simply is not the case that 2 August 1989 was before 2 August 1989. 1 August 1989 was, but 2 August 1989 was not. That may seem a platitude, and indeed Mr Warren does not dispute it as a generalisation. It nevertheless bears saying, because it brings out the difficulty of the conclusion for which Mr Warren contends.
Do the trusts in (he 1989 deed nevertheless take effect in equity?
In those circumstances, the appropriate remedy is for the trustees to be directed to hold the trust fund on trusts reflecting those intended to be created by the [1989 deed].
... whereby the terms of a trust ... a trustee is given a discretion as to some matter under which he acts in good faith, the court should not interfere with his action notwithstanding that it does not have the full effect which he intended, unless (1) ... or (2) it is clear that he would not have acted as he did (a) had he not taken into account considerations which he ought no! to have taken into account, or (b) had he not faded to take into account considerations which he ought to have taken into account.
The court declined to apply the principle in the Hastings-Bass case itself, as is implicit in the negative formulation ('the court should not interfere ... unless'). In Mettoy Pension Trustees v Evans [1990] 1 WLR 1587 at 1621 et seq, Warner J recognised that the principle existed, reformulating it in positive terms ("the court will interfere if ... '). However, he too declined to apply the principle, since he considered on the facts that the trustees would still have done the same thing anyway. That is, the condition which, in my formulation in paragraph 58 above, I have expressed in (3) was not satisfied.
Equitable relief against the defective execution of a power
If the execution of a power is invalid at law through failure to comply with all the requirements of the power, equity will in certain cases aid the execution. The principle is that whenever a person who has power over an estate, whether or not a power of ownership, shows an intention to execute the power in discharge of some moral or natural obligation, equity will act on the conscience of those entitled in default of appointment and compel them to perfect the intention.
The argument is that the execution by the trustees of the 1989 deed was an execution by them of the 1976 power, but was invalid at law through failure to comply with the requirement that the power had to be exercised before the Closing Date. This (so the argument continues) is one of the 'certain cases' where equity will aid the execution. It will act on the consciences of the cousins and compel them to perfect the intention of the trustees to exercise the power.
Non-execution of a power is where nothing is done: detective execution is where [here has been an intention to execute sufficiently declared; but the act declaring the intention is not an execution in the form prescribed.
The two most recent cases in which the doctrine has been applied illustrate the point. In Kennard v Kennard (1872) 8 Ch App 227, the power was expressed to be exercisable by deed or will. The holder of the power sought to exercise it by a signed but unsealed document. That was neither a deed nor a will, but equity relieved against the defect of form and held that the power had been effectively exercised. In re Walker [1908] Ch 560, the power was expressed to be exercisable 'by her last will and testament in writing ... signed in the presence of and attested by two or more witnesses.' The testatrix was domiciled in Scotland where a holograph wi!l was valid and did not requite to be attested by witnesses. She attempted to exercise the power by a will in that form, and the exercise, though defective in form (because the will was not attested by two witnesses), was upheld by reason of equity relieving against the defect.
Was the 1976 appointment itself invalid?
... UPON TRUST trust during their respective lives to the children of the Settlor or the Settlor's brother now living or hereinafter bom or adopted before the Closing Date in equal shares ...
There are associated provisions which cause shares of capita! to follow shares of income to the children of the Settlor or his brother or to the children of such children. The key point is the attempted inclusion in the class of default beneficiaries of 'children hereinafter adopted.' The problem is that such adopted children were not beneficiaries of the original settlement, which defined the beneficiaries simply to include 'any child' of the Settlor or of his brother or of his sister-in-law. That expression included any child who was already adopted, and thus included Jonathan. But by the relevant terms of the Adoption Act it did not include any child who might be adopted in future. The result of this was that the inclusion by the 1976 appointment of future adopted children in the clause 5 default trusts was outside the power contained in the original settlement.
Conclusion