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PQ & Anor v RS & Ors [2019] EWHC 1643 (Ch)

Application by trustees of a discretionary settlement created in 1968 seeking the Court’s confirmation and approval that they have the power to execute a Deed of Appointment to include a child born out of wedlock (who otherwise may not be a beneficiary due to common law rules of construction) as a beneficiary of the trust. Application granted.

The claimants are trustees of a discretionary settlement executed by the Settlor made on 11 March 1968. In 1979, the trustees exercised their powers under the Settlement to appoint that the trust fund was held under certain trusts. The governing deed was the Appointment made in 1987 that created trusts under which the trust fund was to be held to pay income for the Settlor's grandchildren (RS and TU) and on their deaths the shares would vest absolutely in their children.

TU has no children. RS has three children, one of whom, V, was born out of wedlock, one month before her parents married. The question was whether V is a beneficiary under the current trusts; the issue being whether she falls into the definition of "children of the grandchildren". If the Court accepted that her status was uncertain, the Court was invited to approve an appointment by the trustees that would include her in the class of beneficiaries.

The Chief Master recorded that according to the common law rules of construction, a child is legitimate only if the child is born or conceived in wedlock. The Family Law Reform Act 1969 changed the law insofar as it related to dispositions made after that date and this was subsequently amended by later statutes (including the Legitimacy Act 1979), but again only prospectively. The Court held that although subsequent Appointments in 1979 and 1987 were made after the Legitimacy Act 1976 came into force, they were not "dispositions" within the the meaning of the Act (i.e. the statutory rules of construction did not apply). The relevant "disposition" was therefore the 1968 settlement.

The decision in Re Hand's Will Trust [2017] Ch 449 provided some authority that V is, arguably, entitled to benefit from the future exercise of powers under the Settlement, but the Chief Master stated that it was a controversial decision and he concluded that there was appreciable uncertainty about whether the decision will be followed. The corollary being that there is uncertainty as to whether V is a beneficiary under the current trusts.

The alternative course of action proposed by the trustees was to execute a Deed of Appointment to remove any doubt about whether V is a beneficiary. The position was "strongly supported" by RS and TU and there was evidence that the Settlor, who had died, also wished V to benefit from the trusts.

As to whether the trustees had the power to make the Appointment, having been referred to various authorities, the Chief Master held that the issue was not dependent on authority but rather on the proper construction of the relevant clause. The Court's conclusion was that the power given to the trustees in the Settlement is a very wide one and they are expressly permitted to exercise it by creating new trusts. Provided that the Appointment is for the benefit of RS and TU, the trustees had the power to make it.

All parties (including V's sisters) contended that the proposed Appointment is for the benefit of RS and TU and a would be a proper use of the power. The Chief Master considered the competing arguments at paragraphs 38 and 39 of the Judgment and agreed that the Appointment would be a proper use of the trustees power.

The Chief Master therefore concluded that he was satisfied that the trustees had the power to execute the proposed appointment and that to do so would be a proper exercise of their power.

The Judgment concludes with a section regarding confidentiality. RS had expressed concerns about V becoming aware of court proceedings concerning her 'illegitimacy' in an uncontextualized fashion as well as all three children becoming aware of financial details of the Settlement. The Chief Master found the evidence in support of the confidentiality order to be cogent and found this to be a case where it was appropriate, on the facts, for the proceedings to be anonymised. The Judge concluded that he did not consider that the decision in the Court of Appeal in MN v OP [2019] EWCA Civ 679, decided after the hearing in this case, would have compelled him to reach a different conclusion as to confidentiality.

Summary by Oliver Woolley, barrister, 1GC Family Law 

You can read the full judgment of PQ & Anor v RS & Ors [2019] EWHC 1643 (Ch) on BAILII