England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2
		4th October 2001

MR JUSTICE DAVIS:

1. In these proceedings the claimants seek to set aside two deeds of assignment made by the first and second claimants respectively, and dated 5th April 1997, in favour of the defendants as trustees of certain Jersey Trusts constituted by Declarations of Trust dated 4th and 5th April 1997 respectively.
2. The matter arises in this way. Karl Gustav Anker-Petersen died on 20th November 1956. He had been a successful businessman based in England (although himself born in Denmark), being a director of a company called the British Ratin Company Ltd, which later became known as Rentokil Group Plc. He had been married twice. His first wife was Madeleine Anker-Petersen. There was one child of that marriage, Eric, who was born on 25th December 1934. Eric married but there were no children of his marriage. Second, Mr Anker-Petersen married Asta Annalise Anker-Petersen. There were children of that marriage: first, Peter, who married and had three children; second, Jane, who married and had two children; third, Robert (sometimes known as Robin) who married and had two children; and fourth, Christopher, who married. He has since remarried and although currently he has no children I understand that a child is expected shortly.
3. Eric, the child of the first marriage, was resident and domiciled in the United Kingdom. Jane, Peter and Christopher were all resident and domiciled in Denmark. Robin resides in Scotland but it is understood that he may be domiciled in Denmark.
4. By his will dated 10th February 1954 the testator, Karl Gustav Anker-Petersen, made the following provisions, amongst others. By Clause 8 he bequeathed to his Trustees all shares and stock registered in his name, or to which he may be entitled at the time of his death, in British Ratin Company Ltd, upon certain trusts, but essentially to be held in accordance with the provisions applicable to his residuary estate. By Clause 11 it was provided that his residuary estate was to be held upon trust to the effect that the income of one equal moiety was to be paid to his former wife (Madeleine) and as to the other equal moiety to his surviving widow, Asta Annalise, during their respective lives; and after their deaths, in effect, to the extent that the residuary trust fund should not have been paid out under any power it should be held on trust for all or any one or more exclusively of the issue which he had. It is not necessary to go into the trusts set out under the will in any detail.
5. The principal asset in the estate of the testator was in fact his holding in the British Ratin Company Ltd. That was then worth some £23,306.
6. A year or two thereafter the view was taken that it was appropriate to seek to vary the will trust created by the will, resort being had to the then newly enacted Variation of Trusts Act 1958. A scheme of variation came before Danckwerts J on 17th December 1959 and was approved by him. The essential terms of the scheme were as follows. The trust powers and provision contained in Clauses 8 and 11 of the will were to be varied, and the Trustees were, as it was provided, to stand possessed of the shares in the British Ratin Co Ltd on trust to make certain dispositions with the consent of the respondents, Madeline Anker-Petersen and Asta Annalise Anker-Petersen during their joint lives, and so on. Then by Clause 2 of the arrangement it was provided:

"The Trustees shall pay the income of the trust fund as to one moiety to Madeline during her life, and as to the other moiety to the respondent, Annalise Anker-Petersen, during her life."

It then went on in Clause 3:

"Subject to the aforesaid the Trustees shall appropriate one equal fifth part of the trust fund for each of the respondents Eric John Noel Anker-Petersen, Peter John Anker-Petersen, Jane Lisa Anker-Petersen, Robert Bryan Anker-Petersen and Christopher Neil Anker-Petersen [the five children] and shall hold the same on the trust and with and subject to the powers and provisions following, that is to say (a) the part of the trust fund directed to be appropriated and aforesaid is hereinafter referred to as the settled share, and the respondent whom the same is directed to be appropriated as aforesaid is hereinafter referred to as the beneficiary; (b) the trustees shall hold the settled share upon trust to pay the income thereof to the beneficiary during his or her life; (c) after the beneficiary's death the trustees shall hold the settled share in trust for all or any one or more exclusively of the others or other of the issue of the beneficiary at such time and in such shares and subject to such provisions as the beneficiary shall by deed revocable or irrevocable or by will or codicil point; (d) in default of and subject to any such appointment the trustees shall hold the settled share in trust for all or any of the children or child of the beneficiary who attain the age of 21 years or being female marry under that age and if more than one in equal shares; (e) so long as the beneficiary is alive and under the age of 21 years the Trustees may at their discretion pay all or any parts of the income the settled share to the beneficiary for his or her own absolute use and benefit and... (f) notwithstanding anything herein before contained the Trustees may at their absolute discretion without being liable to account for the exercise of such discretion by writing appoint for settled share to the beneficiary at any time after the beneficiary shall have attained the age of 25 years and shall thereupon transfer the settled share to him or her."

In sub-clause (g) there was a cross-accruer clause of a conventional kind.

7. The effect of this variation, in summary, was that on the death of the former wife and of the widow the trust fund was split into five separate shares for each of the testator's children, whereby they became indefeasibly entitled to the income of such share for their respective lives, and thereafter such share went to such of their issue as they should appoint or, in default of appointment, to their children as the case may be. A further variation to the will trust thereafter occurred, an order being made in the County Palatine of Lancaster on 22nd March 1971. It is not necessary to refer in detail to this variation. It is sufficient to say that in essence the overall effect was to enable Eric's one-fifth share to be hived off and held for the benefit of Eric and such issue as he might have. By this time the value of the trust fund comprising essentially shares in the Rentokil Group which had increased in number, by reason no doubt of various scrip issues was £3,211,000.
8. The testator's first wife, Madeleine, died on 28th November 1975. At that time the trust holding was then worth £3,863,760. The testator's widow died on 26th May 1981 when the trust fund holding was worth £12,550,119. On 12th April 1988 each of Peter, Jane, Robin and Christopher entered into revocable deeds of appointment; essentially appointing their respective shares after their death in favour of children and grandchildren and great-grandchildren, on not unconventional trusts and powers. The motivation for this seems, in part at least, to have been tax-driven. By this time the value of the holding in Rentokil Group held by the trust had become very substantial indeed. At 5th April 1990 the holding was worth £50,948,478. It can thus be seen that the Trustees' decision to stay with the shares had proved to be extremely successful. Jane, in her evidence before me, acknowledged that thanks were due to the Trustees in that regard, although, as she also pointed out, there was reason to be grateful also to the then management of Rentokil Group.
9. At all events, and no doubt in part because of the size of the holding, the Trustees applied for an order seeking wider powers of investment than had been conferred under the will itself. An order to this effect was made by Hoffmann J on 6th February 1991. From that time the investment of the trust funds was substantially delegated to professional fund managers, and considerable diversification away from the holding in Rentokil Group was undertaken. So large had the fund become, moreover, that the Trustees became particularly exercised by tax concerns and more particularly by concerns as to the potential impact of English Inheritance Tax. In fact, by 5th April 1996 the net assets of the fund were worth £181,883,250.
10. At this time the Trustees were Mr Burgin, who had been a partner in the firm then called Denton Hall; Mr Christensen and Mr Moller, who were partners in a large Danish legal firm; and a Mr Werdelin, a director of a substantial Danish company: experienced and reputable trustees. They are the defendants to these proceedings. Mr Burgin having retired as a partner, the legal affairs of the Trust from an English legal viewpoint were looked after by Mr Catherall, then a partner of and subsequently, before he retired altogether, a consultant to Denton Hall.
11. The Trustees took expert legal advice from highly experienced tax and trust counsel, Mr David Goldberg QC, and Mr Robert Ham. A very lengthy opinion was given by Mr Goldberg on 24th November 1994 and this was supplemented thereafter by various further opinions and advices of Mr Goldberg and Mr Ham. As the proposals evolved the idea was to transfer the trust assets to overseas companies the shares in which were to be held by the Trustees on trusts established abroad. In short, the trusts were, to use the common word, to be exported.
12. At this stage it may be convenient briefly to say something about the historic relationship between the Trustees and the beneficiaries. I was told by Jane and Christopher in evidence that trusts as such are not known in Denmark. They themselves, though clearly highly intelligent and with an excellent command of the English language, are not lawyers, and they are not versed in English legal matters. In their evidence before me they stated that they (and Peter and Robin) were throughout, in effect, treated by the Trustees as children. Their only real contact in later years with the Trustees was with Mr Christensen whom they met on average about once a year; and they also received the occasional letter. They said that the trust was, in effect, run in a high-handed way and in an atmosphere of secrecy. It was impressed upon them by Mr Christensen, in particular, that it was better that they should not know too much. With this approach they themselves, not knowing any better, were prepared to go along; after all, the trust fund was doing spectacularly well. But it is clear on their evidence (which I accept) that they were kept in the dark about the operation of the trust which was very much run in a rather autocratic and secretive way by the Trustees, albeit doubtless for what the Trustees themselves considered to be good reasons.
13. In consequence of this, by the beginning of 1997 the children had not really been told of the details of the then proposals, and had not, for example, been provided with copies of Mr Goldberg's opinions. At all events the upshot of the extensive legal and tax deliberations by the professional advisors was that a further application was made to court under the Variation of Trusts Act 1958, the originating summons in that regard being issued on 19th December 1996. The named plaintiffs were Peter, Jane, Robin and Christopher. There were numerous defendants representing those interested or potentially interested under the will trust (as varied), and these defendants of course included the Trustees themselves. In those proceedings Peter, Jane, Robin and Christopher were represented by Denton Hall, as were the Trustees. At this time there was sent to Peter by Mr Christensen a letter dated 23rd December 1996 which had been prepared by Mr Catherall of Denton Hall. This sought to summarise the steps that were then proposed to be taken. It set out a summary of what form the proceedings would take, and a discussion of who the parties would be. It referred to the proposed structure to be adopted, and this was described as (1) acquiring three investment holding companies; (2) creating three new settlements for Peter, Jane, and Christopher, their children and remoter issue; (3) preparing all documentation necessary to transfer assets from the settled shares of Peter, Jane and Christopher to the Trustees of the new settlements as soon as the court order referred to was available, and in any event before 5th April 1997. Those steps, it was said, should ideally be done prior to the grant of the order. The letter then concluded in this way:

"The end result of taking the steps referred to above is that all the assets at present comprised within the main fund valued at £190m but less £1m charity fund will for the future be outside the scope of UK inheritance tax, both inter vivos and on death, which is exactly the same aim that one has endeavoured to achieve."

14. After one or two further letters there was in due course a meeting on 4th March 1997 in Copenhagen. Present were the Trustees (save for Mr Burgin), Mr Catherall, Peter, Jane, Robin and Christopher, and another person as guardian ad litem for certain of the issue who were involved potentially. Notes of this meeting were made by Jane and, rather more extensively, by Mr Catherall. The meeting so far as concerned Peter, Jane, Robin and Christopher lasted about two-and-a-half hours. It would seem that it thereafter continued only as between the Trustees and the professional advisors. At lunch time of that day Peter went to the British Embassy to swear an affidavit which was for use in the Variation of Trusts proceedings and the meeting thereafter continued in the absence of him and his sister and brothers. In that affidavit which Peter swore on 4th March 1997, Peter said this in paragraph 13:

"I am advised that as matters stand the whole of the principal fund is potentially subject to United Kingdom inheritance tax on the death of each life tenant on the capital of his or her settled share, notwithstanding that with the exception of Robert who is resident in the United Kingdom none of us is either resident or domiciled in the UK. The Trustees have taken advice on whether, and if so how, it is possible to avoid this potential IHT liability without causing potential Danish tax problems. We are advised that this can be done if (a) the Trust property is transferred to companies incorporated and resident outside the UK for UK tax purposes; and (b) contingent interests of their settled shares in favour of the life tenants who resettle the assets appointed to them on trusts similar to those under the current trusts. However the Trustees are further advised that in order to carry out these proposals it would be necessary to extend their powers: hence this application."

That, I think, neatly summarises the proposal; and I draw attention to Peter's use of the adjective "similar" with regards to the Trust proposed to be set up.

15. Mr Catherall himself swore an affidavit in support of the originating summons, as indeed did Mr Burgin. In the affidavit which Mr Catherall swore (on 5th March 1997) he made reference to the details of the advice that had been received from Mr Goldberg QC and from Mr Robert Ham, who was by this time also a QC. He summarised the scheme in paragraph 3, and in the course of that paragraph, he said this:

"The difficulty has been to devise a scheme which would secure the objective without causing Danish fiscal problems. Eventually what has been recommended in relation to the settled shares, other than Robert Anker-Petersen's settled share, is that the Trustees, having transferred the trust property to foreign companies, should make contingent appointments of their respective settled shares in favour of the life tenant with a view to their resettling the interest appointed to them on trusts corresponding to those under the current trusts."

Again it is to be noted that the word used by Mr Catherall in this context is "corresponding."

16. I find on the evidence that in representing the trusts which were proposed to be established outside the United Kingdom as "similar" or "corresponding to the then existing trusts", there was reflected what Peter and his siblings had been led to believe. They at this stage had not been told by Mr Christensen or Mr Catherall or anyone else, whether at the meeting on 4th March 1997 or otherwise, that the new Trusts proposed to be set up abroad would differ in any significant way from the Trust as it then stood. As Jane said to me in evidence (and I accept) she and her siblings had no reason to think that the new Trusts to be set up would not be the same as the existing Trust as heretofore varied. As she put it, the variation was presented to them as one which was necessary to be done for tax reasons, and she thought that there was, in effect, no other choice. The matter proceeded accordingly, Peter, Jane, Robin and Christopher assuming that in substance the Trust was simply to be exported to Jersey.
17. The scheme that was to be put before the court came before Robert Walker J (as he then was) who made an order approving the scheme on 7th March 1997. The scheme in essence was as follows. After the usual form of proposed recitals to the order, the arrangement was annexed thereto. The definitions included in the arrangement included a definition of "the New Settlement", which meant a declaration of trust in the form of a draft set out in the appendix to the arrangement; and the "New Trustees" were defined to mean the persons named in the draft as the Trustees (those are the present Trustees, the defendants). There was also a definition of the phrase "the Reserved Portions", which meant the sum of £12m each. By Clause 3 of the arrangement it was provided that certain dispositions should take place, essentially being a payment of a fund in favour of Eric of £1m, and payment to Peter, Jane and Christopher of the Reserved Portions, that is to say £12m each. Clause 4 of the Scheme provided as follows:

"If the new Trustees execute the new settlement the Trustees shall have power from time to time until 5th April 1997 to transfer the balance of the settled shares of Peter, Lisa [which was another name for Jane] and Christopher after making the appropriations referred to above to the new Trustees to hold upon and with and subject to the trusts powers and provisions of the new settlement freed and discharged from the trusts powers and provisions of the will as varied."

It then provided that the Reserved Portions of the settled shares of Peter, Lisa [Jane] and Christopher should continue to be held upon and with and subject to the trusts, powers and provisions set out in the 1959 arrangement, but as if Eric had released his life interest thereunder. There were various other provisions in the scheme including a widening of the investment powers to enable offshore companies to be set up, and for managed trust funds.

18. The appendix to that arrangement comprised what was called "the New Resettlement", which has also been called before me "the Intermediate Settlement". It was a declaration of trust made by Mr Burgin, Mr Christensen, Mr Werdelin and Mr Muller. By Clause 2 of that draft declaration of trust it was provided that the Trustees would hold Peter's share upon trust as to capital and income for Peter and his assigns absolutely, if Peter (1) was living on 9th April 1997, and (2) before that date irrevocably assigned the interest thereby created to (a) any of his children, or (b) the trustees of any settlement in any part of the world for the benefit of himself and some one or more of his children and remoter issue whether or not other persons were interested thereunder under which he had an initial interest in possession, to hold upon and with and subject to the trusts, powers and provisions of such other settlement.
19. By Clause 3 it was provided as follows:

"Subject as aforesaid the Trustees shall hold Peter's Share upon and with and subject to the following trusts powers and provisions, that is to say: -

(1) The Trustees shall pay the income of Peter's

Share to Peter for life

(2) After Peter's death the Trustees shall hold

Peter's Share in trust for all or any one or

more exclusively of the others or other of

the issue of Peter at such time and in such

shares and subject to such provisions as

Peter may by deed revocable or irrevocable or

by Will or codicil appoint

(3) In default of and subject to any such

appointment the Trustees shall hold the

capital and income (including intermediate

income) of Peter's Share upon trust for such

of the children of Peter as are living at the

death of Peter and either have attained or

thereafter attain the age of eighteen years

and if more than one in equal share..."

- with a proviso for substitution.

In sub-clause (4) there was provision to this effect:

"The share (in this sub-clause called ("the Grandchild's Share") of a child (in this sub-clause called "the Grandchild") of Peter who attains a vested interest in a share of Peter's Share under the last sub-clause shall not vest in the grandchild absolutely but shall be retained by the Trustees upon and with and subject to the following trusts powers and provisions..."

- which were then set out.

Then in sub-clause (5)

"Notwithstanding anything hereinbefore contained the Trustees may at their absolute discretion without being liable to account for the exercise of such discretion by writing appoint Peter's Share to Peter and shall thereupon transfer Peter's Share to him in such manner as they in their absolute discretion think fit."

20. It can be seen that the scheme of this declaration of trust was that in the event that no assignment had been made pursuant to Clause 2 the trusts that would then subsist were, very broadly, corresponding to the then existing will trust as varied by the order of Danckwerts J. There were some differences, for example a reduction in the age of the children of Peter to 18 from 21; but in essence the scheme was broadly similar. Clause 4 of the declaration of trust went on to say that the Trustees should hold Lisa's (Jane's) share and Christopher's share upon and with and subject to the like trusts powers and provision as set out above concerning Peter's share as if they were repeated in full for Lisa and for Christopher as the case may be. Then there were various other powers and provisions set out in some detail.
21. Three points may in addition be noted. First, as is apparent from what I have said, it had been agreed that each of the children should in fact receive a distribution of £12m, such sums being paid to Peter, Jane and Christopher; second, Eric, who still had some residual potential interest under the will trust as varied, was to be paid as he directed the sum of £1m to recompense him, as it were, for giving up his potential interest; third, it is apparent from the arrangement that Robin was treated rather differently in that the entirety of his share was distributed to him outright. The children were told that this was for tax reasons (Robin, unlike Peter, Jane and Christopher being resident in Scotland, whereas they were resident and domiciled in Denmark). In fact Peter, Jane and Christopher had previously asked whether distribution of the entirety of their shares might be made to them but they had been told, without elaboration, that that was not possible. But at all events, it does appear from the evidence that - rightly or wrongly, it matters not - it was apprehended that there would be Danish fiscal problems were there to be an entire distribution of their respective shares to Peter, Jane and Christopher.
22. What was not before Robert Walker J was the form of the proposed new Jersey Trust to which it was contemplated that each of the shares of Peter, Jane and Christopher would be transferred. Robert Walker J in fact made some reference to this in a judgment which he delivered on 7th March 1997 approving the variation. Very often where a court approves a variation under the Variation of Trusts Act 1958 the court does not think it necessary or appropriate to give detailed reasons for its approval. In this case, and understandably, Robert Walker J thought it appropriate to give a judgment, first, because on any view the provisions of the Intermediate Settlement were highly unusual; and second, because, very obviously, the entire motivation for what was being done was tax and tax alone. In the course of his judgment, Robert Walker J said this:

"In particular as regards any preordained character of the arrangement and other transactions likely to happen within the same short time" -

Robert Walker J was of course dealing with the potential tax problem that can arise in situations such as this-

"I have been told candidly of what is proposed, that is the release to the third plaintiff of the entirety of his share absolutely. That is indeed now referred to indirectly in a recent alteration to the arrangement."

He then went on.

"The other matter likely to occur is of course the making of new settlements by the other plaintiffs. But the form of those settlements is, as I understand it, not yet finally settled, although it would be surprising if a good deal of thought has not already been given to the subject."

The evidence indicates that drafts of such settlements were on the stocks, as it were, at around this time. It may be that drafts had not at this stage proceeded to finalisation, perhaps in part because of lack of time, perhaps in part because of a concern as to whether such a step might give rise to or encourage an argument that there was indeed a preordained series of transactions. Nevertheless, the trust deeds were duly prepared, based, so it would appear on the evidence, on Jersey trust precedents. Mr Ham advised certain modifications in around the middle of March 1997 to such drafts, including the widening of the proposed class of beneficiaries thereunder. The evidence clearly indicates, and I find, that none of Peter, Jane or Christopher was taken through these draft trust deeds or advised as to their contents.

23. At around the beginning of April 1997 a junior employee of Mr Christensen's firm flew to Aarhus Airport and obtained Jane's and Christopher's signature to proposed deeds of assignment of their interest under the Intermediate Settlement to the Trustees as the Trustees of the proposed Jersey Trusts (this being in accordance with what was contemplated by Clause 2 of the draft Intermediate Settlement produced before Robert Walker J). That employee gave no explanation of those deeds to them. Indeed, it seems that he was in a hurry to get a return flight to Copenhagen, and the matter was dealt with at the airport in just a few minutes. The purported witness to their signatures, a Danish lawyer in Mr Christensen's firm, was not present. I infer that she appended her signature as witness at a later stage.
24. On 4th April 1997 the Trustees declared themselves Trustees of Peter, Jane and Christopher's shares under the terms of the Intermediate Settlement, this being in the form approved by Robert Walker J. In addition, on 4th April 1997 the Jersey Trust in respect of Jane's share was constituted by a declaration of trust made by the Trustees on that date, the trust being called KGAP No.2 Trust. On 5th April 1997 a similar declaration of trust was made in respect of Christopher's share, this being called the KGAP No.3 Trust. I assume that at around this time a similar declaration of trust was also made in respect of Peter's share.
25. Also on 5th April 1997 each of Jane and Christopher assigned their interests under the Intermediate Settlement to the new Trustees under the Jersey Trusts, these being the forms of assignment which they had signed at Aarhus Airport and which were now given a date of 5th April 1997. On 8th April 1997 the arrangements were completed by the Trustees transferring the assets of Jane's fund to a Jersey company called Labret Ltd and the assets of Christopher's fund to a Jersey company called Kringle Ltd (and I infer that at this time a similar transfer was effected in the case of Peter). The shares of each such company were owned by the Trustees as Trustees of the KGAP No.2 Trust and KGAP No.3 Trust respectively.
26. The terms of the Jersey declarations of trust are of the greatest importance for present purposes. They were identical in terms in the case of each of Peter, Jane and Christopher, and it is necessary for me to read some of those terms. Taking the version which was undertaken in respect of Jane's share, which, as I have said, was a declaration of trust made on 4th April 1997, recital (a) stated that it was anticipated that property would be transferred to the Trustees to hold upon and with and subject to the trusts and powers included in this declaration of trust; and that of course is absolutely right, and in due course the following day there was assigned by Jane her interest under the Intermediate Settlement to those Trustees. In the definitions the Trust Period was defined as the period ending on the earlier of the last of the period 100 years from the date of the settlement, or such date as the Trustees should by deed at any time or times specify. "The Beneficiaries" were defined as meaning the principal beneficiary, that is to say in this case, Jane, the children and remoter issue of the principal beneficiary, the brothers of the principal beneficiary, the children and remoter issues of such brothers, and the spouses, widows and widowers of any of the persons referred to in above.
27. By Clause 3.1 under the heading "Power to add to the Beneficiaries" it was provided that the Trustees may at any time during the trust period, but only, during the lifetime of the principal beneficiary, with the consent of the principal beneficiary, add to the beneficiaries such one or more objects or persons or classes of persons as the Trustees should, subject to the application of the rule against perpetuity, determine and no beneficiary may prevent the nomination of new beneficiaries under this settlement.
28. By Clause 5 under the heading "Power of Appointment" it was provided as follows:

"The Trustees shall hold the capital and income of the Trust Fund upon such trusts in favour or for the benefit of all or such one or more of the Beneficiaries exclusive of the other or others of them in such shares or proportions if more than one and with and subject to such powers and provisions for their respective maintenance education or other benefit or for the accumulation of income (including administrative powers and provisions and discretionary trusts and powers to be executed or exercised by any person or persons whether or not being or including the Trustees or any of them) and so that the exercise of this power of appointment may be delegated to any extent and in such manner generally as the Trustees (subject to the application (if any) of the rule against perpetuities) by any deed or deeds revocable during the Trust Period or irrevocable and executed during the Trust Period shall appoint..."

- with a proviso that I need not read. Then Clause 5.2.:

"Notwithstanding Clause 15 of the Schedule the Trustees may not release or restrict this power during the lifetime of the Principal Beneficiary without the written consent of the Principal Beneficiary."

By Clause 6, under heading "Trusts in Default of Appointment", it is provided as follows:

"Subject to and in default of any appointment under Clause 5

(a) The Trustees shall pay the income of the Trust Fund to the Principal Beneficiary for life

(b) The Trustees may at any time or times during the Trust Period as to the whole or any part of the Trust Fund to the income of which the Principal Beneficiary is for the time being entitled transfer or raise and pay the same to or for the absolute use and benefit of the Principal Beneficiary or raise and pay or apply the same for the advancement or otherwise for the benefit of the Principal Beneficiary in such manner as the Trustees shall in their absolute discretion think fit

(c) Subject thereto the Trustees shall during the Trust Period pay or apply the whole or such part or parts of the income of the Trust Fund as the Trustees may in their absolute discretion think fit to or for the benefit of all or any one or more of the Beneficiaries in such proportions and in such manner as the Trustees may in their absolute discretion think fit and shall accumulate any income of the Trust Fund not so paid or applied..."

(d) Notwithstanding the provisions of sub-clause (c) hereof the Trustees may at any time or times during the Trust Period in their absolute discretion pay transfer apply or deal with the whole or any part of the capital of the Trust Fund to or in any manner which is in their opinion for the benefit of all or any one or more of the Beneficiaries

(e) Subject as above and if and so far as not wholly disposed of for any reason whatever by the above provisions the capital and income of the Trust Fund shall be held in trust for such of the Beneficiaries as shall be in existence at the end of the Trust Period and if more than one then in equal shares absolutely."

29. Clause 13 conferred on the principal beneficiary during the lifetime of the principal beneficiary the power of appointing trustees; although I note that a corresponding power to remove trustees is not so conferred. It was also provided that the law of such trust was to be that of Jersey, and that the courts of Jersey were to be the forum for the administration of the trust. Included in various powers and provisions set out in the appendix there was at paragraph 32 included this provision under the heading "Non-disclosure":

"Subject to an order of any competent court the Trustees shall not be bound to disclose to any person any document or other matter relating to the Settlement."

30. So far as the deeds of assignment which Jane and Christopher (and, I infer, Peter also) executed, they also were in identical form and were relatively short documents. In essence, the effect of each of these was that each of Jane and Christopher and Peter assigned to the Trustees all their interest in their respective shares to the defendants as trustees of the relevant Jersey Trust.
31. Quite shortly after all this took place Peter, Jane and Christopher became dissatisfied. They were becoming concerned at what was going on, as to much of which they were ignorant. They were also shaken to be told that the Trustees were now minded to accumulate the income in the Jersey Trusts in order, so it was said, to replenish the capital distributions of £12m in respect of each of them which had occurred. This was a completely new departure from what had happened before: previously, of course, they had been entitled to the income from the Trust. They decided to take independent advice and pressed for documentation. Ultimately such documentation was forthcoming. On 8th October 1998 Peter, Jane and Christopher wrote a long letter, probably drafted by Peter, who is an accountant, querying the provisions of the new Jersey Trusts and asking why they had not been told of the details of those Trusts and of the changes to their previous entitlements.
32. On 25th November 1998 Mr Catherall wrote a long memorandum in response. Such memorandum did not suggest that Peter, Jane and Christopher had been made aware of the contents of the Declarations of Trust relating to the Jersey Trusts, and in particular did not suggest that they had not been made aware of the changes to the previous will trust as varied by the orders of Danckwerts J, the County Palatine Court and Hoffmann J. Nor was any reason given as to why the provisions of the new Jersey Trusts differed from the previous trusts and provisions.
33. Jane and Christopher ultimately took the view that they had entered into the arrangement without any proper appreciation of its true effect and these proceedings were eventually commenced on 15th June 2001. I should add that Peter, who had been party to the original complaint, died in 1999. I was told that his estate had been informed of these proceedings but that his personal representatives had elected not to become a party to them.
34. Mr Steinfeld QC appeared with Mr Dumont for the claimants. He submitted that in the circumstances the deeds of assignment made by Jane and Christopher should be set aside. Mr Steinfeld drew attention to the terms of the Jersey Trusts which he in opening said were "radically different", and in reply were "importantly" or "significantly" different, to the terms of the original trust as heretofore varied. The particular differences which Mr Steinfeld identified were these. Under the terms of the Jersey settlement, he said, first, the interest of the life tenant could be taken away from him or her by use of the unfettered overriding power of appointment vested in the Trustees. Second, the life tenant's power of appointment over capital is removed altogether, as are the trusts in favour of his or her children taking effect in default of appointment. Instead, subject to the Trustees' overriding power of appointment, the disposition of income and capital after the death of the principal beneficiary is left entirely to the unfettered discretion of the Trustees. Third, the class of beneficiaries capable of taking after the life tenant's death is no longer confined to the children and remoter issue of the life tenant but is widened to include not only the spouses, widows and widowers of such issue, but also the life tenant's siblings, their issue and their respective widows and widowers, and, moreover, further persons who might be added to the class of beneficiaries pursuant to a power to add beneficiaries exercisable by the Trustees, the exercise of which after the death of the principal beneficiary is unfettered. Fourth, the Jersey Trusts had a trust period of 100 years from 1997 during the whole of which period the Trustees had power, effective under Jersey law, to accumulate the income. Acknowledging that the Trustees might assert that the power did not entitle them to accumulate income while Jane or Christopher were still alive, it was nevertheless open, submitted Mr Steinfeld, to the Trustees to give themselves such entitlement by exercising their overriding power of appointment, and in practice they could, as they had previously sought to do, simply do so by withholding distributions from the offshore companies. Fifth, under the Jersey settlement the beneficiaries, including Jane and Christopher, no longer had any right to any disclosure of any document or other matter relating to the settlement unless a court order was made (this being a reference to paragraph 32 of the schedule).
35. Mr Steinfeld said that Jane and Christopher were mistaken as to the effect of the declarations of trust. They had no advice, he submitted, on their provisions, and on the contrary they have been led to believe that these declarations of trust were the same as, or at least substantially similar to, the existing Will Trust as varied. It was Mr Steinfeld's position (which was not disputed) that in the circumstances rectification could not be an available remedy, if only because neither Jane nor Christopher was party to the relevant Declaration of Trust. But Mr Steinfeld invoked the longstanding equitable jurisdiction enunciated in such cases as Meadows v Meadows [1863] 16 Beav at 501, and Phillips v Mullings [1872] 7 Ch App Cas at 244. Phillips v Mullings was a decision of the Lord Chancellor, Lord Hatherley. In that case a young man, who was described as being of improvident habits, had entered into a particular deed and sought to have it set aside on the ground that, in short, he had not understood its effect. In the course of his judgment, Lord Hatherley said this:

"This case is somewhat remarkable in its circumstances, and as to the authorities which have been cited, I must observe that cases of this description must depend upon the facts, though certain principles, no doubt, are laid down for the guidance of those who may be minded to deal with their property as this young man dealt with his, and of those who have to give them advice.

These principles rest on a broad basis established by a series of decisions. It is clear, for instance, that any one taking any advantage under a voluntary deed, and setting it up against the donor, must show that he thoroughly understood what he was doing, or, at all events, was protected by independent advice.

Again it is clear that a solicitor, who advises a client for his own protection to take a particular step of this nature, does assume a very responsible duty; and where a person is induced to execute such a deed, it must, in order to support the deed, be shown that the nature of the deed was thoroughly understood by the person executing it."

This illustrates the general principle which is indeed a long-standing one. There are, however, I think two particular observations which I would wish to make with regard to Lord Hatherley's statements. First, all depends on the facts of the particular case, as he said: and this must be right. Second, however, the language of Lord Hatherley perhaps suggests that the burden of proof in this context is on the person who takes the benefit of the voluntary transaction, and Lord Hatherley perhaps suggests that it is that person who must show that the donor thoroughly understood what he was doing or, at the very least, had independent advice. If Lord Hatherley was stating that as a general rule with regard to the burden of proof in this context then I must respectfully disagree. It seems to me that, at all events in the case of a voluntary transaction effected through a deed, a deed is a solemn act on the face of it, intended to be binding on the person who executes it. In my view as a matter of general approach one would expect that it is the person seeking to set aside his own deed who is obliged to adduce convincing evidence as to why that should be done.

36. Moreover, it is clear that this equitable jurisdiction is analogous to the equitable jurisdiction as to rectification. It has always been the law that where a person seeks to rectify an instrument the burden of proof is upon the person seeking so to rectify. Indeed it is commonly said that cogent evidence needs to be adduced before rectification will be granted. Accordingly in my view the burden in this case is upon the claimants to show why the deeds of assignment should be set aside and to show that they had not understood the effect of the deed into which each of them had entered.
37. I was also referred by Mr Steinfeld to the decision of Millett J in the case of Gibbon v Mitchell and Others [1990] 1 WLR at 1304. In that case the plaintiff consulted solicitors with a view to taking steps to reduce the potential effects of inheritance tax in connection with a settlement. As a result of their advice he executed a deed in December 1987 by which he purported to surrender a life interest under settlement which he had in favour of his two children. The plaintiff was not advised that the effect of the deed would be to occasion a forfeiture of his life interest by reason of the fact that such life interest was a protected life interest. Application was made to set aside that deed; that application came before Millett J and was successful. Millett J in the course of his judgment and after an extensive view of the authorities said this at page 1309D:

"In my judgment, these cases show that, wherever there is a voluntary transaction by which one party intends to confer a bounty on another, the deed will be set aside if the court is satisfied that the disponor did not intend the transaction to have the effect which it did. It will be set aside for mistake whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it. The proposition that equity will never relieve against mistakes of law is clearly too widely stated."

That, if I may respectfully say so, is a very clear exposition of the basic principle.

38. It will be noted that a distinction is to be drawn between the effect of a transaction and the consequences of a transaction. In some cases that may be a rather difficult distinction to draw. Indeed, in the Shorter Oxford English Dictionary one of the definitions of "effect" is given as "consequence". Nevertheless, I think one can see what is behind the distinction. An example in this context might be tax. If a party enters into a deed (with a view to saving tax) on terms which are fully understood and where the effect of such terms is fully appreciated and if for whatever reason the anticipated desirable tax consequences thereafter do not flow, it would really not be open, in the ordinary way at least, to such person to seek to set aside that deed on the ground that he had not understood its nature or effect. I say this appreciating that possibly the position may be different in a case of the exercise of a power or of a discretion by a fiduciary: it may be - and I say no more than that it may be - that the adverse and unexpected tax consequences of the exercise of the power or discretion may be invoked to set aside the exercise of that particular power or discretion. But I think the position is entirely different where what is sought to be set aside is a deed entered into by way of voluntary transaction.
39. Clearly, if a person does not understand the nature of the deed which he enters into, then the court may, in appropriate circumstances, set the transaction aside. Equally, if a person does not understand the effect of what he is entering into the court may also, in appropriate circumstances, set the transaction aside. The mistake or misapprehension in my view does not necessarily have to be as to the direct terms or direct effect of the document in question; it may also be as to the indirect effect of the document in question. Examples of this can be found in the authorities. For example in Lady Hood of Avalon v Mackinnon 1909 1 Ch at 476, a decision of Eve J, an appointment was made, in entire forgetfulness on the part of the appointor and in entire ignorance on the part of the solicitor of an earlier appointment to the same person: when the whole motivation for making the later appointment was to achieve equality as to monetary gifts with the sister of the proposed appointee: which purpose would be defeated if the later appointment stood. In the course of his judgment in dealing with this point Eve J (at page 480), after reviewing the facts, said this:

"That was the first time the plaintiff's solicitor had any knowledge that such earlier appointment had been executed, and he, of course, at once appreciated that his want of knowledge of the existence of the earlier appointment had led him into preparing a deed, namely, the deed poll of August, 1904, the effect of which not to carry out the real intentions of his client Lady Hood, but to bring about a state of things which was inconsistent with her declared intention, and which would also create difficulty in that, if that appointment became operative, the donees of the power of appointment had purported to appoint sums of money considerably in excess of the whole trust funds."

He then went on to say at a slightly later stage in the judgment:

"Now the question is whether, in that state of facts, I can, consistently with the law, say that such a mistake on the part of the appointor entitles her to have the deed rescinded. I accept Mr Lawrence's argument that whether it is recission or whether it is rectification is only a question of degree. If the Court come to the conclusion that the plaintiff is entitled to relief, then whether the proper relief be reformation [sic] or recission is really immaterial, because whatever is the proper and necessary relief the Court is bound to give it."

He then went on, on the facts of that case, to set aside the deed, concluding towards the end of his judgment that it was obviously a mistake because the effect of the execution of that deed was to bring about that which Lady Hood never intended and never contemplated.

40. in the present case, says Mr Steinfeld, the effect of the transaction was that there simply was a transaction which Jane and Christopher had not understood. They had given no instruction that the original will trust as previously varied should be departed from in this way, and the differences which he identified were, he said, of such significance and potentially had such a major impact on Jane and Christopher that they cannot now stand: since they were entirely ignorant of those differences.
41. Mr Mowschenson QC appeared with Mr Tennet on behalf the defendant Trustees. Mr Mowschenson very properly indicated that he regarded his role as being to advance argument on behalf of those interested, or potentially interested, under the Jersey Trusts. Mr Mowschenson was not disposed to concede that the changes in the Jersey Trust as compared to the previous Trust were of substance or importance, albeit that he was disposed to accept that the Trust created by the relevant declarations of trusts could, in this context, hardly be said to be "similar" or "corresponding" to the original will trust as varied. I queried with Mr Mowschenson whether the deeds of assignment could be set aside since there was no evidence or suggestion that Jane and Christopher did not at least appreciate the nature and affect of the deeds of assignment themselves as assigning their respective interests to the Trustees as Trustees of the Jersey Trusts whatever their lack of appreciation of the terms of the Jersey Trusts themselves. Mr Mowschenson very fairly stated that he did not feel able to take such a point. The deeds of assignment could not (he said) be divorced from the Jersey Trusts. Indeed, the assignments were to the Trustees in their capacity as Trustees of the Jersey Trusts and solely because they were Trustees of those trusts. In my view Mr Mowschenson was right to take that stance. As Mr Steinfeld further pointed out in reply, the assignments were machinery, the substance of the matter being that Jane and Christopher were resettling their interests on the Jersey Trustees: and indeed the whole could perhaps have been achieved in one overall deed of assignment and trust.
42. Mr Mowschenson also, inevitably as it seems to me in the light of the evidence, did not feel able to challenge the statements of Jane and Christopher that they had not had explained to them the differences in the Jersey Trusts as compared to the previous Trusts. In her witness statement, having referred to the background, and having dealt at some length with what she said was the reality about the Trustees, namely that they never at any stage had been forthcoming with the beneficiaries, and having dealt with the various documents and the meeting of 4th March 1997 and the circumstances in which she signed her deed of assignment, Jane said this in paragraph 29:

"Although this whole procedure left me rather puzzled I still had no reason to doubt the advisers were dealing with things as I understood them. My understanding was that we were simply moving the Trust to Jersey with a Jersey company but the same trust as previously in the 1959 arrangement and that this was the only way to avoid the English inheritance tax. That is what I thought I was doing or helping to do by signing the assignment. No one told me that the Jersey trust would be different from the will trust. What I knew would be different was the tax situation and the use of a Jersey company to hold the investments. Everything else would be the same."

In paragraph 38 of her witness statement she concluded by saying this:

"Be all of the above as it may, what did occur left me feeling astounded and upset once my advisers - and I engaged my present English advisers early in 1998 - had explained it to me. Tax saving is all very well but freedom of control and security are important too. According to the terms of the Jersey settlement neither I nor my children have interests either in income or capital that can in any way be described as secure. The defendants are free to accumulate income. My interest can be taken away from me. My children have no more than a hope that they will receive anything, and anybody anywhere in the world can be added to the list of beneficiaries, nor is any beneficiary entitled to any information in the absence of a court order. As far as my and my family share is concerned the KGA Anker-Petersen will trust has been changed to the KGAP No.2 settlement. I had no idea in April 1997 that I was assigning my share of the fund to a trust which differed at all from the previous trust let alone a trust which differed so importantly. I had no intention of doing that whatsoever. What I thought I was doing was simply moving or helping to move the trust to Jersey. If the terms of Jersey trust the KGAP No.2 settlement had been explained to me and if I had been told that I had a choice I would never have signed the assignment."

In his witness statement (and his witness statement was very much similar in effect to that of Jane's) Christopher stated that none of the differences in the Jersey Trusts came to his knowledge until later, and he assumed that the Jersey Trusts would be the same as the will trust. He concluded his witness statement in these words:

"In conclusion I think I have been on the receiving end of considerable injustice. I am not envious of my brother, Robin, or the fact that he received 100 per cent. What makes me so cross is that one way and one way only of dealing with the matter was pursued to the bitter end. We were not advised of alternative methods of procedure, and tax, whether English or Danish, was allowed, in my opinion quite wrongly, to dominate the entire saga. Moreover and more importantly, it was always my belief that the Jersey settlement was similar or identical to the will trust as affected by the various orders made after it. That simply did not happen."

43. The defendants put in one witness statement, that of Mr Catherall. He has entirely retired from Denton Hall and now resides in France. He made clear that in making this witness statement he had not had the benefit of looking at his old files. In the course of his witness statement he explained that the declarations of trust which ultimately were executed were based on forms provided to him by Jersey advocates and solicitors. In paragraph 12 of his witness statement, he said this:

"Roberts Ham QC advised on the terms of the new trust on 3rd February 1997. Copies of the new trust then accompanied notes prepared by me for circulation at a meeting on 4th March 1997 attended by myself, the Danish Trustees and Peter, Jane and Christopher. In accordance with the established mode of consultation with Peter, Jane and Christopher, the notes and draft new trust was sent to Steen Christensen for further distribution of Peter, Jane and Christopher. Drafts for the new Trusts were I believe shown to Peter, Jane and Christopher at the meeting."

That does not, I observe, seem to be the recollection of Jane or Christopher. He goes on:

"I recall being asked for confirmation that they would be entitled to the income of their respective trust funds for life and thereafter income and capital would be held upon trust for their children and remoter issue. That confirmation I gave without going into detail. I do not recall specifically advising or being asked to advise on the differences between the new trust and the will trust. Given the time constraints imposed by a very full agenda of the meeting advice would have only been given in the most general terms."

Two points arise from that. First, it seems clear that Mr Catherall is accepting that he was not asked to advise and did not advise on the differences between the new trust and the original trust; and second, his statement, when asked, that they would be entitled to the income of their respective trust funds for life with capital and income thereafter held on trust for their children and remoter issue, was, with respect, a very great gloss on the true position as one can see when one looks at the terms of the Jersey Trusts.

44. I accept Mr Steinfeld's submissions that the differences were of importance and that Jane and Christopher's ignorance of these new provisions meant that they were ignorant of the true effect of the assignments. They had been led to believe that the new trusts were the same as or at least similar to the existing will trust, when in truth they were profoundly different. I feel unable to accept Mr Mowschenson's suggestion that the differences were not differences of substance.
45. The essential scheme of the Jersey Trusts is that the trusts are now in the nature of discretionary trusts. An overriding power is conferred on the Trustees. Moreover, the Trustees themselves were the original Trustees. No choice of trustees was conferred on Peter, Jane or Christopher, and indeed these particular trustees were trustees who, although they did not mistrust them, were certainly trustees with whom they had had no close association at all, and indeed who, in their perception, were trustees who would not readily listen to their wishes.
46. I would be inclined to think that insofar as objection is taken to the provision of paragraph 32 in the schedule relating to disclosure of documents that that is not of very great importance in this context, and even if Jane and Christopher were ignorant of that provision it could hardly be said that they did not understand the effect of the Trust. Likewise, it seems to me that the fact that a new perpetuity period to the extent of 100 years is included is not perhaps of very profound significance, albeit it is of some significance.
47. It seems to me the other matters identified by Mr Steinfeld, however, are very significant indeed. In particular, under the new trusts each of Peter, Jane and Christopher lost their indefeasible right to income for life. Their entitlement to income was entirely dependent on the overriding power of the Trustees to allocate income as they saw fit. Furthermore, upon death each of the children lost the right to appoint as they saw fit, and moreover this was in the context where in addition it had been thought appropriate to give the Trustees, not the children, the power significantly to widen out the class of beneficiaries. Indeed the class of beneficiaries had already been widened so as to include siblings and siblings' widows, for example: provisions which never existed under the original Will Trust. In those circumstances it is hardly surprising that Jane and Christopher were emphatic in their evidence that had those points been drawn to their attention they would not have agreed to them.
48. Mr Mowschenson, however, submitted - and really this was his primary submission - that Jane and Christopher would still have consented to the transaction had the matter been fully explained to them, accepting, as Mr Mowschenson did, that the matter had not been fully explained to them. Mr Mowschenson put to each of them what he said was the increased flexibility which the new trusts and provisions provided, and suggested that such flexibility and such provisions were eminently desirable. Mr Mowschenson also submitted that it is for Jane and Christopher to prove that they would not have entered into the deeds of assignment had they been properly advised.
49. In my view that approach does not avail the defendants in this case. I say this for two particular reasons. First, the authorities do not state that it must invariably be shown that, even accepting that a claimant has entered into a voluntary deed under a misapprehension as to its effect, he must also show that he would not have entered into such a deed had he been properly advised. An example may be found in Dutton v Thompson (1883) 23 Ch 275. It seems to me that in the ordinary way where a person does not understand the nature or effect of a deed (which he thereafter challenges) it often can be inferred that it is either against his interest or it is one that he would not have entered into had he been properly advised. It seems to me that questions of causation really come into the matter in two main ways. First, if it is shown that a person would have entered into a voluntary deed had he or she been properly advised then that might well suggest that the lack of apprehension was not of a very significant matter or it might well suggest that in substance he or she did appreciate the nature and effect of the deed in question. Second, causation might also come into the matter in this way. Even if the court were to accept that a person had entered into a voluntary deed under a misapprehension as to its nature or effect, if the court were, on the evidence, to conclude that the person would still have entered into the deed had that person known the true position, then the court might well in its discretion decline to exercise the equitable remedy. But quite apart from that, in this case it seems to me that the evidence indicates quite clearly that they would not have consented to the making of the Jersey Trusts and to the deeds of assignment had they been advised as to what these new terms were. I accept Jane's and Christopher's evidence in this regard, and in particular I would say that I found them both to be reliable witnesses, whose evidence impressed me. Moreover, it is noticeable that as soon as they realised that the Jersey Trust contained these new provisions they immediately protested, and I am bound to say that it is scarcely surprising that they had and have such strong objections, given what seems to me to be very radical departures from the previous trusts, powers and provisions under the original Will Trust as varied by the orders of Danckwerts J and other court orders.
50. As to the alleged flexibility which Mr Mowschenson relied upon, it seems to me that is only presenting one side of the coin. It may well be that the discretionary trusts give flexibility, but the very significant other side to the coin, if I can put it that way, is that the conferring of overriding powers and discretions on Trustees involves removing entitlements of the beneficiaries which they otherwise had. That seems to me, in the circumstances of this case, to be potentially a major departure which required informed consent.
51. For these reasons in my judgment this claim succeeds, and I propose to set aside the deeds of assignment. I would add this. There was sought in the particulars of claim an order that the present Trustees be removed as Trustees. That has not been pursued before me. I would simply record that I was told that in the event that I found that the deeds of assignment should be set aside (as I have) the defendants proposed to retire as Trustees.