Le Marchant & Anor v Denby & Ors

A trust appointment expressed as absolute may remain defeasible where the instrument reserves a power of revocation. The power must be exercised in the manner specified by the trust instruments, ordinarily by deed. A later deed will not be construed as removing an existing power of revocation unless its language clearly produces that result. Extrinsic tax correspondence, accounts and administrative descriptions cannot establish that the power was released where the deeds provide otherwise.

This Part 8 claim concerned the construction and continuing effect of deeds governing a family trust. The issue was whether an appointment made in 1974, under which the first defendant was to take the A Fund contingently on attaining 60, had become irrevocable before a 1992 deed revoked and reappointed the fund.

The first defendant relied principally on clause 9 of a 1976 deed, arguing that it removed the operative provisions of the original settlement and thereby extinguished the power of revocation. The court also considered whether correspondence, accounts and tax treatment evidenced an earlier release of that power.

1. The 1974 appointment remained revocable. It appointed the A Fund to the first defendant contingently on attaining 60, expressly subject to the trustees’ power under clause 2 to revoke or vary the trusts and make fresh authorised trusts. The power was required to be exercised by deed. No deed releasing or exercising that power before 1992 was proved.
2. The 1976 deed did not extinguish the power. Clause 9 was not reasonably construed as removing the substratum of the power in clause 2 of the 1974 deed. Clause 4(iii), which preserved the power in relation to other sub-funds, supported that conclusion. Clearer words would have been required before a deed concerned principally with sub-funds B and C could destroy the power affecting sub-fund A.
3. The alternative construction reached the same result. The reference in clause 2 of the 1974 deed to trusts authorised by clause 4 of the settlement was construed by reference to the power as it stood when the 1974 deed was executed. The default provisions also had to remain available if an appointment were revoked without a replacement appointment.
4. Correspondence with the Revenue, the accounts, the name of the fund account and the payment of tax did not evidence any release of the power. The effect of the deeds governed the parties’ rights. The 1992 revocation and reappointment was therefore effective.
5. In light of the breakdown in the relationship between the beneficiary and the trustees, and the proposed retirement of a trustee, St Andrew Trustees Limited was substituted as trustee. The claim was otherwise resolved in accordance with these conclusions, with costs to be addressed separately.

First instance decision. No prior appellate decision is stated in the judgment.