Goulding & Anor v James & Anor

Under the Variation of Trusts Act 1958, the court represents beneficiaries who cannot consent. It does not act as a settlor or preserve the settlor’s wishes. The court must refuse approval unless the arrangement benefits the relevant minor, unborn or unascertained beneficiaries, but satisfaction of that condition does not make approval automatic. The court retains an overall discretion, exercised in the statutory and practical context. Extrinsic evidence of a testator’s hostility towards adult beneficiaries ordinarily has little or no weight where those beneficiaries could themselves override the testamentary restrictions. Such evidence may remain relevant if it demonstrates dishonesty, inequity or other impropriety, or if the trust’s protective purpose directly concerns the represented class.

Mrs Froud’s will gave her daughter a life interest, postponed her grandson’s absolute interest until he reached 40, and provided for future great-grandchildren in default. After her death, the adult beneficiaries proposed varying the trusts so that 45% would pass absolutely to each of them and 10% would be held in a grandchildren’s trust. The arrangement substantially improved the actuarial value of the unborn beneficiaries’ interests.

Mr Justice Laddie refused approval twice. He relied on evidence that the arrangement conflicted with the testatrix’s firm wishes, including her wish to prevent her daughter and son-in-law obtaining capital and to delay her grandson’s benefit. The appeal concerned the relevance and weight of those wishes in an application made on behalf of unborn beneficiaries.

Appeal allowed. Mummery LJ gave the leading judgment, with Butler-Sloss LJ and Sir Ralph Gibson agreeing. The original arrangement was approved on behalf of the unborn great-grandchildren.

1. The court has a discretion under section 1 of the Variation of Trusts Act 1958. For persons within paragraphs (a) to (c), the statutory proviso makes benefit a necessary condition of approval. Benefit does not, however, compel approval. The court must consider whether the arrangement as a whole is proper in all the circumstances, including its practical and businesslike features, the advantages obtained and the parties’ bargaining strength, as explained in Re Van Gruisen’s Will Trusts [1964] 1 WLR 449.
2. The jurisdiction is a statutory extension of the consent principle. The court supplies the assent which an incapable or unborn beneficiary cannot give; it does not itself amend the trust or act as a statutory settlor. This accords with Re Holmden’s Settlement Trusts [1968] AC 685 and the related authorities concerning beneficiary consensus.
3. The court’s function is to protect the class it represents. The adult beneficiaries were legally entitled to deal with their own interests and could defeat the testatrix’s restrictions. Her extrinsic wishes concerning her daughter, grandson and son-in-law therefore had little, if any, relevance or weight when set against the substantial objective benefit to the unborn great-grandchildren.
4. Re Steed’s Will Trusts [1960] Ch 407 did not establish a general rule that a settlor’s intentions should prevail. It concerned protective trusts, a paragraph (d) beneficiary and a trust purpose directly aimed at protecting the life tenant. Those features distinguished it from the present application. The joinder of a living settlor under the rules of court did not give the settlor’s wishes special or overriding significance.
5. Sir Ralph Gibson LJ added that evidence of intention could be relevant if it showed that the proposed arrangement was dishonest, inequitable or otherwise improper. The trustees were also cautioned to consider the relevance and quality of extrinsic evidence carefully before filing it.
6. The court admitted the further affidavit. The principles in Ladd v Marshall [1954] 1 WLR 1489 did not apply with the same strictness in this protective and administrative jurisdiction.

Leave to adduce further evidence was granted. The appeal was allowed. The trustees were awarded one fifth of the costs of preparing, swearing and serving the affidavits, to be taxed on the trustee basis, with the remaining costs dealt with in the ordinary way.

• Court of Appeal (Civil Division) allowed the appeal, admitted further evidence and approved the original variation arrangement.
• High Court, Chancery Division Mr Justice Laddie refused approval in reasoned judgments dated 7 and 21 November 1996.