The trustees of a large settlement made by Lord Vestey and his brother Sir Edmund Vestey exercised their discretion over the allocation of income with the apparent intention of income being accumulated during the minorities of a number of beneficiaries. They set out to do this by a sort of ‘framework’ resolution that income should ‘belong’ to the minor beneficiaries in specified shares, followed by further half-yearly resolutions to the effect that income was not required for the beneficiaries’ maintenance, and should therefore be accumulated under section 31 of the 1925 Act. The difficulty was that the language of section 31 did not really fit such a situation. The infant beneficiaries appealed against a finding that the resolutions were ineffective.
Held: The allocation of the balance of the income to the infant beneficiaries was valid under the power in the settlement, as an application of the income for their benefit, but that this made the income the absolute property of the relevant beneficiaries, and the power to accumulate under section 31 therefore did not apply. That then raised the question whether, because of the erroneous belief that the income would fall to be accumulated, the allocation of the income to the infant beneficiaries was valid and effective at all.
Sir Raymond Evershed MR said that the issue was whether the court should hold: ‘that there has been no effective exercise of the discretion on the ground that the trustees intended to undertake this operation on the footing that they were producing a specific result, and that, if they produced a wholly different result, it would not be right to say that they had exercised their discretion.’
Shortly after that he said that the question had to be decided having regard to the terms of the resolutions as a whole. His conclusion was that the allocation of funds to the infant beneficiaries was the essence of the operation, and that the reference to accumulation was no more than setting out ‘the mechanical results which had to be applied’. He said: ‘I do not think that it can or ought to be said that if, as I hold, the trustees wrongly thought that section 31 would operate, then a result is produced substantially or essentially different from that which was intended.’
Sir Raymond Evershed MR, Asquith and Jenkins LJJ
[1951] Ch 220
Trustee Act 1925 31
England and Wales
Citing:
Appeal from – In Re Vestey’s Settlement ChD 1950
The income of a fund was to be held on trust for the support or benefit of the members of a class as the trustees might decide in their discretion. The trustees resolved in each of three successive periods to distribute part of the income to certain . .
Cited by:
Cited – Futter and Another v Revenue and Customs; Pitt v Same SC 9-May-2013
Application of Hastings-Bass Rule
F had created two settlements. Distributions were made, but overlooking the effect of section 2(4) of the 2002 Act, creating a large tax liability. P had taken advice on the investment of the proceeds of a damages claim and created a discretionary . .
Lists of cited by and citing cases may be incomplete.
Updated: 29 July 2021; Ref: scu.509127
