Charles Antony Elliott Braithwaite & Anor v Sir Benjamin Slade, Bt & Anor

A trust deed must be construed objectively, by reference to the natural and ordinary meaning of its words, its overall purpose, its other provisions, the relevant background known to the parties, and common sense. Subjective intentions are excluded.

Where a trust deed gives a beneficiary a power to direct the sale of trust property and separately provides that sale proceeds may be used to acquire substitute accommodation, the powers need not be conjoined. A direction to sell may operate without a direction to purchase a replacement property. The trustees must then invest the net proceeds and apply the resulting income according to the trust.

The claimants were trustees of a settlement created in 1994 by Sir Benjamin Slade for the benefit of his former wife, Lady Pauline Slade. The trust property included a house in which Lady Slade had a right to reside rent-free and an investment fund producing income.

Lady Slade had moved out and directed the trustees to sell the house, invest the proceeds, and use the resulting income for her benefit. Sir Benjamin disputed that the direction was effective unless accompanied by a direction to purchase a replacement property. The trustees sought determination of the preliminary construction issue.

1. Objective construction. The deed was to be construed objectively. The court applied the principles stated in Marley v Rawlings [2015] AC 129, as applied to a family settlement in Millar v Millar [2018] EWHC 1926 (Ch). Subjective evidence of the settlor’s intention was inadmissible.
2. Purpose and structure of the trust. The overall purpose was to provide Lady Slade with income during her lifetime from the whole Trust Fund. The Trust Fund included the property and any money or investments representing it. The deed gave the trustees broad powers of sale and investment and contemplated that the property could become an income-producing asset if Lady Slade no longer occupied it.
3. Construction of clause 4(3). The mandatory obligation to sell on Lady Slade’s written direction was distinct from the power to direct the application of all or part of the net proceeds towards a replacement dwelling. The words permitting that application did not require a corresponding direction to purchase. If no replacement property was directed, the trustees were required to invest the net proceeds, with the income payable for Lady Slade’s benefit.
4. Independent trustee power. In any event, the trustees could exercise their general power under clause 1 to sell, provided Lady Slade gave the written consent required by clause 4(2). They were then obliged under clause 5 to invest the net proceeds and pay the income from that investment to Lady Slade. The appropriate form of order was reserved for further submissions.