The trustees of a 1948 settlement had advanced funds in 1957 by way of a new settlement, the terms of which did not comply with the rule against perpetuities. Not all the terms of the 1957 settlement would infringe the rule against perpetuities, but the effect of the rule was extensive. For example a child had a life interest subject to protective trusts. The effect of the rule was that the life interest was valid but that the discretionary trusts arising on forfeiture would be invalid, so that, upon a forfeiture, the property would be held on the trusts of the original 1948 settlement. The argument in favour of holding the advancement wholly void was advanced by the Inland Revenue.
Held: The revenue succeeded.
Cross J said: ‘The power which the trustees purported to exercise by setting up Carole’s fund (to take her as an example) and declaring the trusts of it which are contained in the 1957 settlement was a power exercisable for the benefit of Carole, and for nobody else. The various other persons to whom the settlement purported to give benefits were not objects of that power of advancement. The position was that the trustees had a discretion as to the manner in which they would benefit Carole, and they considered that an appropriate way to benefit her would be to create this settlement under which beneficial interests were given to other members of her family besides herself. If one looks at the matter in that way, it seems to me reasonable to hold that the effect of the invalidity of some of the limitations in the settlement by reason of the rule against perpetuities may not be the same as it would have been had the settlement been created by the exercise of a special power of appointment under which all the supposed beneficiaries were objects. It is one thing to say that if a trustee has power to appoint a fund to all or any of a class of objects and he appoints a life interest to one object which is not void for perpetuity and remainders to other objects which are void, then the life interest survives the invalidity of the remainders; but it is another thing to say that if a trustee has power to benefit A. in a number of different ways and he chooses to benefit him by making a settlement on him for life with remainders to his issue, which remainders are void for perpetuity, then A can claim to obtain that part of the benefit intended for him which is represented by the life interest. The interests given to separate objects of an ordinary special power are separate interests, but all the interests created in Carole’s fund were intended as part and parcel of a single benefit to her.’ and
‘Of course, it may well be that, if the invalidity caused by the operation of the rule against perpetuities is quite small as compared with the parts of the settlement which are unaffected by the rule, the court might be prepared to say that the valid parts of the settlement would survive intact. Thus Lord Evershed MR held in the Vestey case that the exercise of the discretion there could be upheld notwithstanding the fact that the trustees were to some extent under a misapprehension as to what its effect would be. But here there is no doubt that the effect of the operation of the rule is wholly to alter the character of the settlement. In my judgment the result of that must be that there never was a valid exercise by the trustees of the power of advancement.’
Judges:
Cross J
Citations:
[1969] 1 Ch 463
Jurisdiction:
England and Wales
Cited by:
Cited – Re Hastings-Bass; Hastings v Inland Revenue CA 14-Mar-1974
Trustees of a settlement had exercised their power of advancement under the section, in order to save estate duty by transferring investments to be held on the trusts of a later settlement. However the actual effect of the advancement was that the . .
Lists of cited by and citing cases may be incomplete.
Trusts
Updated: 23 June 2022; Ref: scu.402929