England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE LADDIE)
IN THE MATTER of the trusts of the Will dated 25th March 1994
of Violet Louise Froud deceased ("the Will")

		Royal Courts of Justice Strand London WC2
		10 December 1996

LORD JUSTICE BUTLER-SLOSS: I will ask Mummery LJ to give the first judgment.

LORD JUSTICE MUMMERY: This is an urgent and unusual appeal against the refusal of approval by the court to an arrangement proposed under the Variation of Trusts Act 1958 for the variation of the trusts of the will of the late Mrs Violet Froud. It is urgent because the two year period allowed after a person's death for a fiscally effective variation of dispositions comprised in the estate will expire on 15 December, less than a week away, (see section 142(1) of the Inheritance Tax Act 1984). It is unusual in that it is rare for a proposed arrangement negotiated and drafted on skilled, professional legal and actuarial advice not to receive the approval of the court when, as is indisputably the case here, it is for the benefit of the class of persons on whose behalf the court is empowered to approve the arrangement.

On 7 November 1996 the Judge delivered a fully reasoned judgment, refusing to approve the arrangement on behalf of the unborn great grandchildren of Mrs. Froud. On 21 November the Judge delivered a second reasoned judgment, explaining his refusal to approve a modified form of the arrangement. His reason for refusing approval of the modified arrangement was essentially the same as that for refusing to approve the original arrangement. His only reason for withholding approval was that he was satisfied by affidavit evidence filed by the executors and trustees of Mrs Froud that it would be "clearly contrary to the firm intentions of Mrs Froud" and would "offend the settlor's firm wishes" to vary the trusts of her will in the manner specified in the two alternative forms of proposed arrangement. The appellants, who are the only adult beneficiaries under the will and seek approval of the arrangement, were given leave to appeal. They served a Notice of Appeal on 26 November. They were represented by Mr. Brian Green of counsel. We are greatly indebted to him for his excellent submissions. The trustees (Mr. John James, a chartered accountant, Mr Peter Daniel, a solicitor and senior partner in Boyes Turner and Burrows of Reading) adopted the same position on the appeal as before the Judge. They neither supported nor opposed the proposed arrangement. They sought to perform what they conceived to be their duty in laying before the court evidence indicating that the arrangement is directly contrary to the wishes and instructions of Mrs Froud and in ensuring that the argument is put to the court that Mrs Froud's intentions and wishes are relevant considerations to be taken into account by the court in the exercise of discretion under section 1 of the 1958 Act.

The Trusts of the Will

Mrs Froud died on 16 December 1994. She was survived by her only child, Mrs June Goulding, now aged 59, and married for the last thirty three years to Mr. Kenneth Goulding, and by her only grandchild, Mr. Marcus Goulding, now aged 32, married to an American wife and living in an artistic community in Nantucket, New England, but as yet without children. Mrs Froud's net estate, valued for probate at £1.14 million, devolved in accordance with the trusts of the will made by her on 25 March 1994, revoking an earlier will of 27 February 1992. Under the 1992 will the residuary estate was divided equally between Mrs June Goulding and her husband. Under the trusts of the residuary estate in the 1994 will, Mrs June Goulding was given only a life interest, followed by an absolute gift of the residuary estate to Mr. Marcus Goulding on his attaining the age of 40. The will provided for the eventuality of Mr. Marcus Goulding dying before his mother or dying before attaining the age of 40, in which case the residuary estate is left to such of Mrs Froud's great grandchildren as should be living at the date of the death of Mr. Marcus Goulding. The trustees have power to transfer capital of the residuary estate to or for the benefit of Mr. Marcus Goulding if he survives his mother, but has not yet attained the age of 40.

The Proposed Arrangement

The original arrangement proposed is simple. The trusts of the will are to be varied so that the residuary estate will be deemed to have devolved since the date of Mrs Froud's death as if 45% of the residuary estate were held for Mrs June Goulding absolutely, 45% for Mr. Marcus Goulding absolutely and the remaining 10% on the trusts of a Grandchildren's Trust Fund. The evidence filed shows that the current actuarial valuation of the contingent interest of the future born children of Mr. Marcus Goulding is 1.85% of the residuary estate. It is common ground, and was accepted by the Judge, that the provision to be made for the future born children of Mr. Marcus Goulding is considerably more generous than the current value of their interest in residue and that the proposed variation is for their benefit.

The alternative form of arrangement, proposed only after the Judge had refused his approval to the original arrangement, is no less beneficial to the future born children of Mr. Marcus Goulding. It is unnecessary to examine the detailed differences between the two forms of arrangement because, as the Judge held, the effect of both of them is to put 90% of the residuary estate under the control of Mrs June Goulding and Mr. Marcus Goulding, so that they could between them bring the trusts to an end. That, he held, was against the firm intentions and wishes of Mrs Froud that Mrs Goulding (and her husband) should have no access to the capital of her estate.

The Judgments

The Judge's reason for refusing to approve the arrangement is trenchantly expressed in his two judgments. According to the evidence reviewed by the Judge, Mrs Froud's intention was that Mrs June Goulding should not be able to touch the capital of the estate at any time. Mrs Froud deeply distrusted her son-in-law. She had made allegations against her daughter and son-in-law to Mr. Daniel and members of his staff. She had revoked her 1992 will and made the 1994 will, giving her daughter only a life interest and excluding her son-in-law from all benefit. There was also evidence of Mrs. Froud's wishes to postpone the interest of Mr. Marcus Goulding until he was 40, because she considered him to be "free spirit", who had not yet settled down. The Judge's approach was based on his understanding of the decision of the Court of Appeal in Re Steed's Will Trusts [1960] Ch 407, the main authority cited to him by counsel. In rejecting the proposed arrangement, the Judge held that (1) he had a wide discretion whether or not to approve the arrangement and (2) in the exercise of that discretion the authorities established that it was appropriate for him to take into account the intentions of the testatrix. After summarising the rival submissions of the parties on the relevance of the evidence of Mrs Froud's intentions, he concluded as follows in the last two paragraphs of his first judgment:

"I think it was not disputed here that that part of the variation which sets aside 10% of the estate for putative grandchildren was seen as the price that June and Marcus were prepared to pay to override the restrictions in Mrs Froud's will designed to prevent the former having access to any capital and the latter from benefitting before he was 40. Had the variation only been concerned to overcome the restriction on Marcus, I probably would have had little trouble in giving approval. But that is not the case here.

It seems to me that what the plaintiffs wish to do in major part is put in place an arrangement which is the complete opposite of what was provided for under the will and the settled intention of Mrs Froud. Since I have a discretion to exercise, I shall exercise it. I have come to the conclusion that this is a case in which it would not be appropriate to give approval to the variation sought and I will dismiss the application."

In his second judgment, at page 2C, the Judge referred to his first judgment and stated:

"I also concluded for reasons set out in the judgment that that was so clearly contrary to the firm intention of Mrs Froud that, in the circumstances of this case, it would be appropriate to exercise my discretion against the variation proposed."

On the alternative form of arrangement the Judge said in his second judgment at page 3E to 4A:

"In exercising the discretion which I have under the Variation of Trusts Act, it seems to me that it is not enough for me to look only at the formalities; I must look at the practical consequences. The proposal which Mr. Green has put before me today seems to me to offend against the settlors' firm wishes to the same extent as the one which I would not sanction last week. In saying this, I accept Mr Green's submission, which he made last time this matter was before the court, that the settlors' intentions do not represent a binding fetter on the court; they merely represent a factor, and perhaps an important factor, which the court can take into consideration when exercising the discretion. So, I approach this in the same way as I approached the first variation proposed by Mr. Green and, for the reasons I gave in my first judgment, I am not prepared to sanction this variation either."

The Evidence

It is important to appreciate, though not necessary to examine in detail, the nature, source and quality of the evidence about Mrs Froud's intentions, wishes and motives. The executors filed five affidavits on this point. Mr. John James deposed to Mrs Froud's expression of increasing dislike and distrust of her son-in-law over the last two years of her life and her wish that Mrs June Goulding should only have a life interest under her new will, with no chance of her son-in-law acquiring any part of her estate, directly or indirectly.

Mr. Peter Daniel's affidavit gave an account of the instructions taken for the earlier will in 1992. Miss Angela Johnson, a solicitor employed in Mr Daniel's firm, swore an affidavit about the instructions taken by her from Mrs Froud for the 1994 will and gave an account of Mrs Froud's allegations against Mrs June Goulding and her husband and her wish that her son-in-law should be cut out of the will and be denied access to capital.

Two other affidavits were sworn by employees in Mr. James's firm about telephone conversations in June 1994, concerning the involvement of Mrs June Goulding and her husband in the attempted execution of a new will by Mrs Froud. In filing these five affidavits, the trustees explained that they took a neutral position on the arrangement and were acting in accordance with their conscience in bringing these matters to the attention of the court. There has never been any suggestion that this evidence would support a case for the rectification of Mrs Froud's will or a case against its validity. Even if there were such evidence, it would not be appropriate to raise this issue in proceedings under the 1958 Act to vary trusts, not to strike them down or to rectify them.

Mrs June Goulding swore two affidavits in which she said that the evidence filed by the trustees was not accepted by her, but that she had been advised that it was not relevant to the application before the court. After the final rejection of the application for approval she swore a third affidavit for the purpose of correcting any misunderstanding that may have arisen from leaving the detail of the trustees' evidence unanswered. This court gave leave to adduce that further evidence on the appeal, without prejudice to Mr Green's contention that Mrs Froud's intentions and wishes were irrelevant to the decision of the appeal. It was accepted by Mr Green that this new evidence does not comply with the requirements for adducing new evidence on appeal laid down in Ladd v Marshall [1954] 1 WLR 1489. The view taken by this court is that the principles of Ladd v Marshall do not apply with the same strictness in a case where the court is exercising a protective and administrative jurisdiction, involving the interests of those who are not in a position to consent or care for their own interests, such as minors, and unborn and unascertained persons (see Volume 1 of the Supreme Court Practice 59/10/8, page 1003). Mr Halpern, on behalf of the trustees, did not oppose the application to file Mrs Goulding's third affidavit. This affidavit gives a general account of the family situation and of her relationship with her mother during the last year of her life. It is unnecessary to set out the detail. It is sufficient to say that, if this evidence is relevant, it indicates that there are conflicts of fact about Mrs Froud's relationship with members of her family towards the end of her life. As a result of the understandable reluctance of Mrs Froud and her advisors to file evidence on a sensitive issue which they had always contended was irrelevant, the Judge did not have the benefit of reading and considering this fresh evidence.

I leave consideration of the evidence with this comment. Trustees and those advising them should, before filing extrinsic evidence of a testator's or settlor's intentions, wishes and motives in relation to an application under the 1958 Act, take particular care to consider its relevance, quality and cogency. If in doubt, Trustees can outline the nature of such evidence to the court and seek directions as to whether more detailed evidence should be filed. Unless special care is taken with such evidence, there is a risk that irrelevant, and possibly inflammatory, collateral issues will be raised, thereby adding unnecessarily to the costs of the case.

The 1958 Act

In Chapman v Chapman [1954] AC 429, the House of Lords rejected the submission that:

"A judge of the Chancery Division of the High Court of Justice has an inherent jurisdiction, in the execution of the trusts of a settlement, to sanction, on behalf of infant beneficiaries and unborn persons, a rearrangement of the trusts of that settlement for no other purpose than to secure an adventitious benefit, which may be and in the present case, is that estate duty, payable in a certain event as things now stand, will, in consequence of the rearrangement, not be payable in respect of the trust funds."

In rejecting that submission, Lord Simonds, the Lord Chancellor, said this (at page 446):

"It is not the function of the court to alter a trust because alteration is thought to be advantageous to an infant beneficiary. It was, I thought, significant that counsel was driven to the admission that since the benefit of the infant was the test, the court had the power, though in its discretion it might not use it, to override the wishes of a living and expostulating settlor, if it assumed to know better than he what was beneficial for the infant. This would appear to me a strange way for a court of conscience to execute a trust. If, then, the court has not, as I hold it has not, power to alter or rearrange the trusts of a trust instrument, except within the limits which I have defined, I am unable to see how that jurisdiction can be conferred by pleading that the alteration is but a little one."

The decision in Chapman v Chapman did not affect the right of beneficiaries, if they were all sui juris and together absolutely entitled, to determine a trust or to resettle the trust property upon altered trusts. It did not affect the jurisdiction of the court to sanction a compromise of rights under a settlement or will which were the subject of doubt or dispute. The court had no jurisdiction, however, to give its sanction in reference to rights which were not in dispute.

It is common ground that the 1958 Act was enacted to give effect to the recommendations of the Sixth Report of the Law Reform Committee 1957 and to meet the mischief identified in Chapman v Chapman on the limits of the court's inherent jurisdiction to authorise departures from the terms of a trust in cases where there are beneficiaries unable to consent by reason of their being minors or by reason of their being unborn or unascertained. Section 1 of the 1958 Act conferred on the court jurisdiction "to vary trusts in the interests of beneficiaries".

"1. (1) Where property, whether real or personal, is held on trusts arising, whether before or after the passing of this Act, under any will, settlement or other disposition, the court may if it thinks fit by order approve on behalf of-

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting, or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the court, or

(c) any person unborn, or

(d) any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined,

any arrangement (by whomsoever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts:

Provided that except by virtue of paragraph (d) of this subsection the court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person."

The 1958 Act was described by Lord Evershed MR in Re Steed's Will Trusts [1960] Ch 407 at 421 as conferring "a revolutionary discretion". Although the 1958 Act makes no mention of the settlor or testator, rules of court were made requiring the joinder of the settlor, if living, as a defendant to an application under the Act.

Order 93 rule 6(2) provides:

In addition to any other persons who are necessary and proper defendants to the originating summons by which an application under the said section 1 is made, the settlor and any other person who provided property for the purposes of the trusts to which the application relates must, if still alive and not the plaintiff, be made a defendant unless the Court for some special reason otherwise directs."

The Authorities

For a jurisdiction invoked thousands of times over almost forty years there are remarkably few reported cases on its construction. An important point about the nature of the court's jurisdiction has been established by the highest authority. In Re Holmden's Settlement Trusts [1968] AC 685 at 701E, a Revenue case not cited to the Judge, Lord Reid said at page 701:

"Under the Variation of Trusts Act the court does not itself amend or vary the trusts of the original settlement. The beneficiaries are not bound by variations because the court has made the variation. Each beneficiary is bound because he has consented to the variation. If he was not of full age when the arrangement was made he is bound because the court was authorised by the Act to approve of it on his behalf and did so by making an order. If he was of full age and did not in fact consent he is not affected by the order of the court and he is not bound. So the arrangement must be regarded as an arrangement made by the beneficiaries themselves. The court merely acted on behalf of or as representing those beneficiaries who were not in a position to give their own consent and approval.

So we have an alteration of the settlement which was not made by the settlor or by the court as being empowered to make it, but which was made by the beneficiaries quite independently of the settlor or of any power, express or implied given or deemed to have been given by him."

See also what Lord Guest said at page 710H to 711A:

"Section 1 of the Act enabled the court to give approval to an arrangement on behalf of such persons as were unable by incapacity or otherwise to give their approval. The court thus supplied the capacity which the incapax lacked."

Finally, Lord Wilberforce said at page 713C:

"If all the beneficiaries under the settlement had been sui juris, they could, in my opinion, have joined together with the trustees and declared different trusts which would supersede those originally contained in the settlement. Those new trusts would operate proprio vigore, by virtue of a self-contained instrument - namely, the deed of arrangement or variation. The original settlement would have lost any force or relevance. The effect of an order made under the Variation of Trusts Act, 1958, is to make good by act of the court any want of capacity to enter into a binding arrangement of any beneficiary not capable of binding himself and of any beneficiary unborn: the nature and effect of any arrangement so sanctioned is the same as that I have described."

Mr Green also relied on passages to similar effect in three judgments of Megarry J: Re Holt's Settlement [1969] 1 Ch. 100 at 120C-D; Re Ball's Settlement Trusts [1968] 1 WLR 899 at 905E and Spens v Inland Revenue Commissioners [1970] 1 WLR 1173 at 1184A-D. The effect of Megarry J's observations in those decisions is this. First, what varies the trust is not the court, but the agreement or consensus of the beneficiaries. Secondly, there is no real difference in principle in the rearrangement of the trusts between the case where the court is exercising its jurisdiction on behalf of the specified class under the 1958 Act and the case where the resettlement is made by virtue of the doctrine in Saunders v Vautier by all the adult beneficiaries joining together. Thirdly, the court is merely contributing on behalf of infants and unborn and unascertained persons the binding assents to the arrangement which they, unlike an adult beneficiary, cannot give. The 1958 Act has thus been viewed by the courts as a statutory extension of the consent principle embodied in the rule in Saunders v Vautier. The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor, to subject property to the continuing trusts, powers and limitations of a will or trust instrument.

The role of the court is not to stand in as, or for, a settlor in varying the trusts. As Mr Green emphasised, the court acts "on behalf of" the specified class and, in appropriate cases, supplies consent for persons incapable of consenting. The court does not, in Mr Green's submission, simply approve an arrangement; it approves an arrangement "on behalf of" a specified class. Mr. Green accepted that, in so acting, the court has a discretion. The court may, if it thinks fit, by order, approve on behalf of the specified beneficiaries. He pointed, however, to the proviso in section 1(1) of the 1958 Act, which highlights "benefit" as a mandatory factor in the exercise of discretion. Except in paragraph (d) cases, the court is directed not to approve an arrangement on behalf of any persons, unless the carrying out thereof would be for the benefit of that person. Although Mr Green accepted that in some cases, such as Re Steed's Will Trusts, the intentions, wishes and motives of the settlor or testator may be relevant and weighty, in this case he contended that they are not relevant, because they do not relate to the class of persons for whom the court approves the arrangement. Alternatively, if they are relevant, it is not a proper exercise of the discretion in this case to allow extrinsic evidence of Mrs Froud's wishes to outweigh the undoubted benefit to be conferred on her great grandchildren, on whose behalf the court is empowered to act.

The Submissions of the Trustees

On behalf of the trustees, Mr Halpern, though not opposing the appeal, deployed the arguments that found favour with the Judge. In summary the arguments advanced for rejecting the arrangement are these: (1) Although there was nothing in the will to indicate that Mrs Froud would have opposed the application to vary the trusts of the will, had she been alive, there was extrinsic evidence that she did not want Mrs June Goulding to have any capital and that she had marked aversion to her son-in-law; (2) The testatrix had power to dispose of her property as she wanted, subject to statutory restrictions which did not apply in this case; (3) As made clear in Chapman v Chapman, the court's inherent jurisdiction to vary trusts only applies to certain limited cases, which do not include altering the terms of the will because the court considers it beneficial to do so; (4) The 1958 Act did not confer on the court a jurisdiction to ride roughshod over a testator's intentions. The court is given a discretion, which it can refuse to exercise, even if the arrangement is for the benefit of a specified class of persons incapable of consenting. This is a modest extension of the limited categories of case identified in Chapman as falling within the jurisdiction of the court to authorise departures from a trust; (5) The importance of the intention of the settlor was emphasised by the provisions of Order 93, rule 6(2) of the Rules of the Supreme Court requiring a living settlor to be joined, Mr Halpern said, plainly for the purpose of giving him a chance to express his views which must have been regarded as relevant; (6) In Re Steed's Will Trusts the Court of Appeal recognised the importance of a testator's intentions, when it upheld a refusal to approve a variation and did so on the basis that the proposed variation was contrary to the testator's clear intentions. The case showed that the court had an unfettered discretion, which it could refuse to exercise if the arrangement was contrary to the testator's wishes. That case is binding on this court and is indistinguishable from the present case, although Mr Halpern accepted that the arrangement in this case is beneficial to the unborn great grandchildren of Mrs Froud; (7) The decision in Re Steed has not been questioned in later cases. Mr Halpern referred to Re Burney's Settlement Trusts [1961] 1 WLR 545, another protective trust case, in which Wilberforce J gave approval. In Re Remnant [1970] Ch. 560 Pennycuick J said that the testator's intention would be defeated by an arrangement which involved the deletion of the forfeiture provision and he added: "That was serious but by no means a conclusive consideration". Pennycuick J went on, however, to approve the variation, because it was beneficial to all concerned.

If these submissions are correct, Mr Halpern submitted that the Judge was bound to have regard to the evidence of Mrs Froud's intentions. He was right to weigh that evidence against the benefits for the unborn. He properly exercised his discretion. The Court of Appeal is not entitled to interfere with the exercise of his discretion, as it was not plainly wrong and was not vitiated by a misdirection on the law.

Conclusion

I have given Mr Halpern's submissions careful consideration,

but I would have no hesitation in allowing this appeal and approving the original arrangement, set out in the draft order proffered by Mr Green, on behalf of the unborn great grandchildren of Mrs Froud. In my judgment, the legal position is as follows: (1) The court has a discretion whether or not to approve a proposed arrangement. (2) That discretion is fettered by only one express restriction. The proviso to section 1 prohibits the court from approving an arrangement which is not for the benefit of the classes referred to in (a), (b) or (c). The approval of this arrangement is not prevented by that proviso, since it is plainly the case that it is greatly for the benefit of the class specified in section 1(1)(c)(3). It does not follow from the fact of benefit to unborns that the arrangement must be approved. In Re Van Gruisen's Will Trusts [1964] 1 WLR 449 and 450 Ungoed-Thomas J said:

"It is shown that actuarially the provisions for the infants and unborn persons are more beneficial for them under the arrangement than under the present trusts of the will. But that does not conclude the case. The court is not merely concerned with this actuarial calculation, even assuming that it satisfies the statutory requirement that the arrangement must be for the benefit of the infants and unborn persons. The court is also concerned whether the arrangement as a whole, in all the circumstances, is such that it is proper to approve it. The court's concern involves, inter alia, a practical and businesslike consideration of the arrangement, including the total amounts of the advantages which the various parties obtain, and their bargaining strength."

(4) That overall discretion described by Ungoed-Thomas J is to be exercised with regard to all relevant factors properly considered in the statutory context. The context is that the court is empowered to approve an arrangement "on behalf of" the members of a specified class. As Lord Denning M.R. said in Re Weston's Settlement Trusts [1969] 1 Ch. 223 at 245B:

"In exercising its discretion, the function of the court is to protect those who cannot protect themselves."

In relation to the members of the specified class who cannot act for themselves, the court is almost in the position of a "statutory attorney", a striking expression used by Mr. E. I. Goulding QC in his illuminating submissions to the Court of Appeal in Re Weston's Settlement [1969] Ch. 223 at 236E. The court is not in the position of a statutory attorney for the settlor or for the adult beneficiaries and the court is not, as made clear in Re Holmden's Settlement, in the position of a statutory settlor. (5) Viewed in that context, an important factor in this case is that Mrs June Goulding and Mr. Marcus Goulding are sui juris and Mrs Froud's intentions and wishes related to their beneficial interests under the testamentary trusts rather than to the contingent interests of her unborn great grandchildren whom the court is concerned to protect. Mr Halpern did not dispute that Mrs June Goulding and Mr. Marcus Goulding are legally entitled to do what they want with their beneficial interests in the residuary estate. Mrs June Goulding, for example, is entitled, contrary to the firmest of intentions expressed by her late mother, to assign her life interest to her husband or to dispose of it for a capital sum and give that capital sum to her husband. Mrs Froud's contrary non-testamentary wishes could not inhibit Mrs June Goulding's proprietary rights, as a person beneficially entitled to the life interest in residue. (6) In these circumstances the critical question is what relevance, if any, can Mrs Froud's intentions and wishes with regard to the interests in residue taken under the will by her daughter and grandson and with regard to the exclusion of her son-in-law from direct or indirect benefit, have to the exercise of the court's jurisdiction on behalf of unborn great grandchildren of Mrs Froud?

On this crucial question the Judge was impressed by Mr. Halpern's submission that Mrs Froud's intentions and wishes are important and should be taken into account on the authority of the Court of Appeal's decision in Re Steed's Will Trusts. I do not accept Mr Halpern's submission that the Court of Appeal in that case laid down any rule, principle or guideline of general application on the importance of the intentions and wishes of a settlor or testator to applications to approve arrangements under the 1958 Act. (7) A close examination of the facts and reasoning in Re Steed reveals two significant special features of that case: (a) The applicant in that case, unlike Mrs June Goulding, had only a protected life interest held on the protective trusts in section 33 of the Trustee Act 1925. After exercising a power of appointment the protected life tenant applied to the court to lift the protective trusts, so that she would become absolutely entitled to a farm and legacy settled on those trusts. The applicant in that case did not have the same beneficial rights as Mrs June Goulding had in relation to her life interest. (b) Very different considerations affected the court's discretion in Re Steed. The court was asked to approve the arrangement proposed by the protected life tenant on behalf of the person or persons specified in section 1(1)(d) of the 1958 Act, that is "any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined." The proviso as regards benefit does not apply to that paragraph, so that the court may approve an arrangement, the carrying out of which would not be for the benefit of that person. The court may consider whether or not there is benefit as a discretionary factor, but lack of benefit for such a person is no barrier to the approval of the court. The relevant paragraph (d) person in Re Steed, where the applicant was unmarried and past the age of childbearing, was the applicant's "spectral husband", as he was described. In deciding whether or not to approve on his behalf, the court was not in the position (which exists here) of having to balance mandatory benefit to a specified paragraph (c) class against other discretionary factors, such as the intentions and wishes of the testator.

The central fact in Re Steed was that the testator had manifested in the terms of his will a particular purpose in creating a protective trust; that was to protect the life tenant from improvident dealings with property in favour of certain members of her family. The Court of Appeal was satisfied that the testator's purpose, evidenced in the will, was still justified at the time of the application to vary. That was a view also shared by the trustees, who opposed the application by the protected life tenant. In those circumstances there was an overwhelming reason for the continuation of the protective trusts and in the continuance of the interest of the paragraph (d) class of person. That explained and justified the court's refusal of approval. The court in that case was not engaged in the exercise demanded in this case of deciding whether a mandatory benefit, bargained on behalf of a specified class, is outweighed by some other countervailing discretionary factor, such as the purpose of the trust or the intention of the testatrix in making it.

The core passage in the judgment of Lord Evershed M.R. in Re Steed is at page 422 where he said:

"After all, if the court is asked to approve this proposal on behalf of a spectral spouse (if I may revert to that phrase) it must ask, I take it, why is the spectral spouse there at all under the trust? If one asks that question, nearly everything else, as it seems to me, follows. There is no doubt why the spectral spouse is there. It was part of the testator's scheme, made as I think manifest by the language which I have read from the clauses in the will, that it was the intention and the desire of the testator that this trust should be available for the plaintiff so that she would have proper provision made for her throughout her life, and would not be exposed to the risk that she might, if she had been handed the money, part with it in favour of another individual about whom the testator felt apprehension, which apprehension is plainly shared by the trustees."

(8) The fact that the rules of court require a living settlor to be joined as a party to proceedings under the 1958 Act does not mean that the court attaches any overbearing or special significance to the wishes of a settlor. Mr Halpern accepted that the nature of the jurisdiction under the 1958 Act is such that even the most carefully planned and meticulously drafted intentions of a settlor or testator are liable to be overridden by an arrangement agreed between sui juris beneficiaries and by the sanction of the court under the 1958 Act.

Mr Halpern also accepted that even the most determined settlor or testator cannot exclude the jurisdiction of the court under the 1958 Act. The court has a discretion to approve an arrangement under the Act, even though the settlement or will may make it crystal clear that the settlor or testator does not want any departure from any of the strict terms of the trust.

In Re Remnant's Settlement Trusts [1970] Ch. 560 at 567 Pennycuick J had to consider a forfeiture provision relating to a beneficiary being a practising Roman Catholic. The forfeiture provision plainly expressed a strongly held wish on the part of the testator as to who should not benefit under his will. The court nevertheless approved an arrangement deleting that forfeiture provision and thereby defeated the testator's clear intentions. The court did so because Pennycuick J was of the view that it was for the benefit of all concerned to delete that provision; he was satisfied that the arrangement was a fair and proper one.

It may be also worthy of note that in Re Weston [1969] 1 Ch. 223 at 226, it was the settlor himself who applied for the approval of an arrangement for the export of his trust to Jersey, where he had gone to live. But he was unable to persuade either Stamp J or the Court of Appeal to approve the arrangement. They held that it was not for the benefit of the specified class and refused to approve it.

To sum up. The flaw in the Judge's refusal to approve the arrangement is that, in reliance on the supposed scope of the decision in Re Steed's Will Trusts, he allowed extrinsic evidence of the subjective wishes of Mrs Froud as regards her daughter,

son-in-law and grandson to outweigh considerations of objective and substantial benefit to the class on whose behalf the court is empowered to act. If the Judge had adopted the correct approach to the exercise of his discretion, he could only have come to the conclusion that the intentions and wishes of Mrs Froud, expressed externally to her will in relation to the adult beneficiaries and an adult non-beneficiary, had little, if any, relevance or weight to the issue of approval on behalf of the future unborn great grandchildren, whose interest in residue was multiplied five-fold under the proposed arrangement.

For all these reasons, I would allow this appeal. I would also approve the proposed arrangement set out in the draft Minute of order.

SIR RALPH GIBSON: I agree with the judgment of Mummery LJ. I add very little.

Where there is an application under the Variation of Trusts Act 1958 for approval of an arrangement agreed by the beneficiaries, capable of giving assent, it is not clear to me why evidence of the intention of the testator can be of any relevance whatever if it does no more than explain why the testator gave the interests set out in the will and the nature and degree of feeling with which such provisions were selected. If the arrangement agreed by the beneficiaries is to do no more with their interests than the beneficiaries are able in law to do in accordance with the provisions of the will, I can see no relevance in evidence which shows no more than the original intention or motivation of the testator. The fact that a testator would not have approved or would have disapproved very strongly does not alter the fact that the beneficiaries are entitled in law to do it and if it be proved that the arrangement is for the benefit of the unborn. If of course it can be shown that the arrangement put forward constitutes, for example, a dishonest or inequitable or otherwise improper act on the part of one or more of the beneficiaries, then such evidence would clearly be relevant to the question whether the court would "think fit" to approve it on behalf of minor or unborn persons. In this case the evidence of intention of this testatrix seems to me to have been of no relevance.

LORD JUSTICE BUTLER-SLOSS: I agree with the judgment of Mummery LJ and that this appeal should be allowed. The order that we make in respect of the costs of the trustees (the respondents) is that they should have under paragraph (a) of the proposed draft minute of order the costs of and incidental to the preparation, swearing and service of one of the five affidavits served by the respondents. So probably the best way of doing it is to say it should be one fifth of the cost of the affidavits, to be taxed, of course, on the trustee basis. We do not propose to make the second order, subparagraph (b), in relation to the costs of the action after 7 November. Those will be the trustees in the ordinary way.

Our reasons for this decision, we think in the unusual position of this case, you ought to be entitled to receive. We propose to send you those. We will write them out and send them to you so there need be no further attendance of counsel, otherwise that is unduly expensive.

Order: leave to adduce further evidence granted; appeal allowed; respondents (trustees) to have one fifth of the costs of and incidental to the preparation, swearing and service of affidavits, to be taxed on trustee basis.