Swan & Ors v Gibbs & Ors

Under the Variation of Trusts Act 1958, the court may approve arrangements that vary existing trusts but may not approve a complete resettlement. The removal of contingent absolute interests, replacement with life interests, extension of the perpetuity period and addition of administrative powers may remain a variation where the existing trust structure is preserved. The question must be assessed in the context of the trusts as a whole. A new perpetuity period, or deletion of a contingent capital remainder, does not of itself create a resettlement. Proposed administrative powers should be subject to appropriate professional advice that their exercise is expedient for the trust as a whole.

Two applications concerned family trusts established under the wills of Sir August Cayzer and Lady Cayzer. The proposed arrangements would extend the perpetuity period to 125 years, remove contingent absolute interests held by current beneficiaries, replace them with continuing life interests and extend administrative powers.

The court was asked whether the arrangements were within the jurisdiction conferred by the Variation of Trusts Act 1958, or instead amounted to resettlements for trust or tax purposes. It also considered whether the arrangements would benefit unborn and unascertained beneficiaries.

1. The court approved the proposed variations, subject to one amendment concerning the exercise of added administrative powers.
2. The statutory jurisdiction permits the court to supply consent on behalf of beneficiaries unable to consent, but does not extend to approval of a complete resettlement. The court must consider whether the arrangement benefits the relevant beneficiaries in a practical and business-like manner.
3. The distinction between variation and resettlement depends on the arrangement viewed in the context of the existing trust structure. The adoption of a new perpetuity period is consistent with preserving and extending that structure. Deleting a contingent capital trust in remainder does not, by itself, create a resettlement.
4. Applying the guidance in Roome v Edwards and the approach in Wyndham v Baroness Egremont & Others, the Baronetcy Trust arrangement preserved the existing structure and therefore operated as a variation. The same conclusion followed for the Lady Cayzer Will Trust, proceeding on the basis that the earlier 2002 Advancement Deed had not created a new settlement.
5. The court was satisfied that the arrangements benefited the unborn and unascertained beneficiaries. Their interests were varied rather than eliminated, and the wider advantages of the arrangements outweighed the disadvantages of removing contingent absolute interests.
6. In accordance with Duke of Somerset v Fitzgerald, the additional power to add administrative powers was approved only subject to the trustees first obtaining appropriate professional advice and satisfying themselves that its exercise was expedient for the trust as a whole. Re Portman Estate was distinguished.