A & Ors v B & Ors

Trustees exercising fiduciary powers may partially release or restrict those powers to facilitate a variation of trust under the Variation of Trusts Act 1958, where the exercise is properly directed to benefiting the core beneficiaries. The release is not a fraud on the power merely because it avoids the need to join or represent remote potential beneficiaries, provided the trustees are acting for a proper purpose.

A partial release may be analysed either as a limited release of the existing power or as a total release followed by reinstatement of a modified power. The court retains discretion over representation under the Act and may approve a practical arrangement where the remote class is adequately protected.

The claimants applied under the Variation of Trusts Act 1958 for approval of an arrangement varying trusts arising under a will and a settlement. The proposed variation extended the trust period, authorised accumulation and made various administrative changes.

Numerous potential beneficiaries were not parties, including unborn and unascertained members of a wider class. The trustees proposed releasing their powers to the extent necessary to prevent those persons challenging the arrangement, while preserving the powers in modified form and retaining the possibility of future benefit. The central issue was whether that mechanism was legally effective and whether representation of the wider class was required.

1. The arrangement had already been approved. The written judgment addressed whether partial releases by the trustees validly dispensed with the need to join or represent remote potential beneficiaries.

2. A special power may be released wholly or partially so far as necessary to permit a trust variation to take effect. The same result may be expressed as a total release followed by reinstatement of a modified power. The conceptual description makes no practical difference.

3. The relevant powers were fiduciary powers, so the trustees could exercise them only for proper purposes. Nevertheless, restricting the interests of the wider class could properly be regarded as a means of benefiting the core beneficiaries, because the variation was intended to preserve and extend the trust assets for their benefit. The trustees did not intend permanently to exclude the wider class, since the modified powers preserved the possibility of future benefit in exceptional circumstances.

4. The reasoning in Christie Miller's Marriage Settlement Trusts [1961] 1 All ER 855 (Note) supported the use of a release limited to what was necessary to make the arrangement binding. Re Lansdowne's Will Trusts [1967] Ch 603 provided a helpful analogy: removing remote interests to facilitate a variation benefiting the relevant beneficiary was capable of being a proper exercise of power.

5. The court had a discretion to require representation of the wider class as a condition of approval. It was unnecessary to do so here. There was no sustainable objection that the trustees were acting improperly, and the arrangement arguably preserved valuable assets and the prospect of benefit for the wider class. The method was technically effective, sensible and practical.