Jasmine Trustees Ltd & Ors v Wells & Hind (A Firm) & Anor

In the pre-1996 version of section 37(1)(c) of the Trustee Act 1925, “individuals” means natural persons and does not include corporations. Legislative anomalies do not justify departing from the natural meaning where the wording was deliberately chosen to distinguish individuals from persons and corporations.

A trustee de son tort may be liable as a trustee and may hold particular trust property on trust, but is not thereby a trustee of the settlement or entitled to exercise powers conferred on properly appointed trustees. For capital gains tax purposes, acts of such a person may be attributed to the properly appointed trustees under section 60 of the Taxation of Chargeable Gains Act 1992, while residence is determined by reference to the actual trustees of the settlement.

The claimants brought professional negligence proceedings against two firms of solicitors concerning a series of trust appointments and dispositions. Preliminary issues were ordered concerning the validity of the 1982 retirement and appointment of trustees, the residence of the trustees for capital gains tax purposes, and the validity of later appointments.

The central questions were whether “individuals” in section 37(1)(c) of the Trustee Act 1925 included a body corporate, whether persons invalidly appointed but acting as trustees were trustees of the settlement for the purposes of the capital gains tax legislation, and whether they could validly exercise the settlement’s dispositive powers.

1. Construction of section 37(1)(c). The natural legal meaning of “individual” is a natural person. The surrounding provisions distinguish “individuals”, “persons” and “corporations”. The legislative history showed a deliberate substitution of “individuals” for wording using “persons”. The reference to individuals in the Bodies Corporate (Joint Tenancy) Act 1899 also supported that construction. The court therefore answered issue (b)(i) “No”.

2. The resulting anomalies, including the possibility of a corporate trustee acting with one natural person, were insufficient to override the natural and apparently deliberate language. The absence of an obvious policy reason for the result did not justify giving the word a strained meaning.

3. Trustees de son tort and capital gains tax. The persons who acted after the ineffective 1982 retirement were trustees de son tort. That status principally concerns duties and liabilities. It does not make them trustees of the settlement for the purpose of section 69 of the Taxation of Chargeable Gains Act 1992. That expression naturally refers to the properly appointed trustees.

4. Section 60 of the 1992 Act provides a coherent scheme. A trustee de son tort holding property must transfer it to the actual trustees and is therefore treated as holding it for them. Disposals by the de facto trustees are attributed to the actual trustees, but the residence of the settlement under section 69 is determined by reference to the actual trustees. The court answered issue (b)(ii) “No” under both the 1979 and 1992 legislation, and issue (a) “No”.

5. Exercise of trust powers. A trustee de son tort may incur liability as if properly appointed, but does not acquire the powers conferred by the settlement. The settlement’s reference to “the Trustees” meant properly appointed trustees. The later appointments of trust property were therefore made by the wrong persons and issue (c) was answered “No”.