Public Trustee v Harrison & Ors

In construing a unilateral trust instrument, the court must focus on the instrument’s wording. External material concerning the settlor’s intentions, subsequent dealings or later communications is inadmissible where it cannot properly constitute a relevant factual matrix.

Where a trust instrument incorporates earlier provisions by reference, defined terms such as “shares” and “sub-shares” must be given their meaning within the scheme of the instrument. A provision directing how a deceased beneficiary’s interest accrues must then be applied according to the character of that interest.

The Public Trustee sought directions under CPR 64.2(a) concerning the distribution of a share in the Appointed Fund under the Charles Willis Harrison 1924 Settlement. The Settlement comprised an indenture dated 6 March 1925, as varied by a scheme approved on 9 December 1953.

David Harrison held the disputed share and died without issue. His brother, Jeffery Harrison, was also dead but left two children, the First and Second Defendants. The wider class of beneficiaries included other descendants of the settlor’s brother. The central question was whether David’s interest accrued to Jeffery’s interest, for transmission to Jeffery’s children, or instead accrued among the wider class.

1. Construction. The court applied the approach in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Arnold v Britton [2015] UKSC 36. That approach applied to the unilateral indenture as well as to the scheme.
2. In the case of a unilateral instrument, the trustee and future beneficiaries are entitled to rely on its wording. The court was not persuaded that there was any relevant external context. The settlor’s presumed intentions, previous treatment of property, legitimate expectations and communications arising during the dispute did not assist construction.
3. Clause 18(ii) of the indenture empowered appointments within the specified class of the settlor’s nephews and nieces and their issue, but did not determine the terms on which an appointed interest was to be held. Proviso (B) directed attention to the trusts applicable in default of appointment. Clause 20 supplied those trusts by incorporating clauses 10 to 17, with necessary verbal alterations.
4. Within the scheme of the indenture, a “share” denoted the interest of a child of Jeannette Harrison, a “sub-share” denoted the interest of a grandchild, and a “share of a sub-share” denoted the relevant substituted great-grandchild interest. Clause 20 transposed those concepts to the descendants of the settlor’s nephews and nieces.
5. Accordingly, Jeffery and David held “sub-shares”. On David’s death without issue, clause 16(i) applied. His sub-share accrued to Jeffery’s sub-share and was distributable to Jeffery’s children. The Public Trustee was therefore directed to apply the disputed share in accordance with clause 16(i) of the indenture.