Southgate & Anor v Sutton & Ors

Section 57(1) of the Trustee Act 1925 permits the court to confer missing trustee powers for a transaction concerning the management or administration of trust property where the transaction is expedient in the interests of the trust as a whole.

The jurisdiction does not permit the court to rewrite beneficial interests. It may, however, authorise appropriation or partition where the effect on those interests is merely incidental. A power of advancement may also be exercised by a properly structured re-settlement of trust property under section 32.

The trustees sought powers under section 57(1) of the Trustee Act 1925 to appropriate and partition trust property into a sub-fund for beneficiaries resident in the United States. They also sought a declaration concerning advancement under section 32 of the Act.

Mann J refused both aspects of the application, holding that the proposals altered beneficial interests rather than dealing with trust property. His judgment was reported at [2009] EWHC 3270 (Ch). The beneficiaries appealed, supported by the trustees. The central questions were whether the proposed partition fell within section 57(1), and whether the re-drafted advancement resolution was valid.

1. Disposition. The appeal was unanimously allowed. The court approved an agreed order giving effect to the appropriation, partition and re-drafted advancement proposal.
2. Section 57(1). The jurisdiction requires the requested power to be needed for a transaction in the management or administration of property vested in trustees, and the transaction to be expedient in the interests of the trust as a whole. The broad expressions used in the section remain confined by that context.
3. Appropriation and partition. The court must distinguish an impermissible re-writing or re-arrangement of beneficial interests from a dealing with trust property whose effect on those interests is incidental. Re Freeston’s Charity [1978] 1 WLR 741 was binding as to its ratio, but its observations on section 57 were obiter and did not establish that every partition is outside the jurisdiction. That case involved unusual circumstances and no management or administration difficulty. Re Thomas [1930] 1 Ch 194 supported the availability of partition in an appropriate case. The reasoning in MEP v Rothschild Trust Cayman Limited Cause Nos 128 of 2009 and 576 of 2005, concerning an equivalent jurisdiction and an incidental effect on beneficial interests, was entitled to respect and supported the application. On the facts, the proposed sub-fund addressed genuine administrative difficulties and had only an incidental impact on beneficial interests.
4. Advancement. Section 32 permits the payment or application of capital money subject to a trust for the advancement or benefit of a person entitled to capital, subject to the statutory limit. The original resolution merely altered beneficial interests and was defective. The re-drafted resolution instead applied capital by way of re-settlement, varying only the trusts applicable to specified contingent interests. Following Pilkington v IRC [1964] AC 612, the court accepted that structure as a valid exercise of the power.
5. Because the application was substantially unopposed, the concurring parties bore a special responsibility to assist the court on jurisdiction and discretion. The fresh evidence and re-drafted resolution enabled the court to make the requested order.

• Court of Appeal (Civil Division) — unanimously allowed the appeal and approved the agreed order.
• High Court of Justice, Chancery Division — Mann J refused the applications under sections 57(1) and 32 of the Trustee Act 1925. The judgment was reported at [2009] EWHC 3270 (Ch), with the order dated 2 March 2010.