Trusts 14: Appointment, Retirement & Removal of Trustees Cases

Terms in this set (10)

Where some trustees intend to undertake the trust or continue as trustees, but some refuse or intend to retire, respectively, the appointment of new trustees by the continuing trustees without the concurrence of a refusing or retiring trustee will make the appointment invalid if shown that the latter was competent & willing to act.

On a summons under the Vendor and Purchaser Act, 1874, an objection was taken by a purchaser from trustees that an appointment of one of their number, under the power given by sect. 31 of the Conveyancing Act, 1881, in the place of a trustee who had been abroad for more than twelve months, was invalid because that trustee had not joined in making the appointment:—

Held, that, there being no evidence that the absent trustee was either willing or competent to join in making the appointment, the objection could not be sustained.

The instrument creating a trust cannot be taken to have expressed a contrary intention within sub-s. 7 of sect. 31 of the Conveyancing Act, 1881, merely because it does not provide for filling up a vacancy in the number of the trustees upon the happening of an event not contemplated by the parties to that instrument.

Semble, that if a trust deed contained a power to appoint new trustees expressed in the same words as sub-s. 1 of sect. 31, without anything more, it would not be necessary that a retiring trustee should join in the appointment of his successor. In such a case the words "continuing trustee" would mean only a trustee who is to continue to act in the trusts after the completion of the appointment.
The power to appoint new trustees must be exercised either according to the express power of appointing new trustees contained in the trust instrument or, if there is no such power, by the continuing or surviving trustee under s.36(1)(b) of the Trustee Act, 1925. The power of nominating a new trustee is a discretionary power, and the beneficiaries cannot arrogate to themselves or control the exercise of such discretionary power. If they are all sui juris they might put an end to the trust and establish a new settlement which repeats the former trusts, but such transaction might inter alia (a) attract ad valorem stamp duty, and (b) lose them the benefit of the exemption from estate duty given by the Finance Act, 1894, s.5(2), and the Finance Act, 1914, s.14(a).

A testator by his will settled his residuary estate in trust for his widow for her life and after her death for his children. W and the defendant were the trustees of the will. W wished to retire and the widow and children desired that a bank should be appointed trustee. The defendant was unwilling to join in exercising the statutory power of appointment vested in himself and W and to appoint the bank, and the widow and children asked that the defendant might he directed to concur with W in making the appointment.

Held, dismissing the summons, that beneficiaries who are together absolutely entitled to trust property are not entitled to control the exercise by their trustees of the fiduciary power of appointing new trustees. Either such beneficiaries must keep the trust on foot, in which case the trusts must continue to be executed by trustees duly appointed pursuant to the original instrument or to the power conferred by s. 36 of the Trustee Act, 1925 and not by trustees arbitrarily selected by themselves; or such beneficiaries must put an end to the trusts.
By his will the testator appointed the taxpayer company as executors and trustees and disposed of his residuary estate, which included shares, by making provision for annuities to be paid out of the income to his daughters during widowhood and subject thereto on trust to accumulate the income for a period of 21 years from his death, and then on trust for all his grandchildren living at his death who should attain the age of 21 years in equal shares. When the accumulation period ended, his three daughters were widows and his two grandchildren had attained the age of 21. On January 27, 1969, a deed of family arrangement was made by which a fund was appropriated to the annuities and the remainder of the estate and the trustees were released from all claims by the annuitants. The trustees did not transfer the estate to the grandchildren. The revenue assessed the trustees to capital gains tax for the year 1969-69. The special commissioners, on the trustees' appeal, discharged the assessment, holding that, since the trustees continued to have power in dealing with the trust which the grandchildren beneficiaries could not over-ride, the grandchildren were not absolutely entitled as against the trustees, within the meaning of section 22 (5) of the Finance Act 1965 1. and paragraph 9 of Schedule 19 to the Finance Act 1969, 2. so that there was no deemed disposal of the estate, under section 25 (3) of the Act of 1965, by the trustees to the grandchildren.

On appeal by the Crown: — Held, allowing the appeal, (1) that in the context of paragraph 9 of Schedule 19 to the Finance Act 1969 "outgoings" could not include the charge on the income of the residuary estate of the annuities; that, therefore, the annuitants' interest in the estate could not be excluded and the grandchildren were not persons absolutely entitled against the trustees, within the meaning of that paragraph and section 22 (5) of the Act of 1965, as at April 13, 19S5, when the younger grandchild attained the age of 21 and, accordingly, section 25 (3) of the Act of 1965 could not apply and there had been no deemed disposal of the assets at that date.

(2) That, on the execution of the deed of family arrangement, the grandchildren became absolutely entitled as against the trustees to the assets of the residuary estate not appropriated to the daughters' annuities, within the meaning of section 22 (5) of the Finance Act 1965 and paragraph 9 of Schedule 19 to the Act of 1969; that "a person" in section 25 (3) of the Act of 1965 included the plural and, accordingly, the trustees were deemed by virtue of the subsection to have disposed of the remaining residuary estate to the two grandchildren and capital gains tax was chargeable.

(3) That, although paragraph 2 (1) of Schedule 7 to the Finance Act 1965 provided that the shares forming part of the residuary estate and held by the trustees were to be regarded as a single asset, that sub-paragraph dealt with the computation of tax and could not be construed so as to produce the result that the shares remained a single entity and could not be divided between the grandchildren for the purposes of section 25 (3); that accordingly, so much of the residuary estate as consisted of shares was to be deemed disposed of to the grandchildren.
The objects of a discretionary trust do not have an "interest" in the trust fund, let alone an "interest in possession" within the meaning of the Finance Act 1940 s.43 .

By his will, made in 1934, the testator gave a fourth share of the residue of his estate to trustees to hold on trust as follows: (1) to apply the income of the fund at their discretion for the maintenance or benefit of all or any of his son, his son's wife or children (if any), and to accumulate surplus income as an addition to capital with power at any time to resort to the accumulations and to apply them as current income, and (2) after the son's death, to hold the capital, income, and accumulations upon trust for such of the son's children as being male attained 21 or being female attained that age or married, and if more than one equally. He gave power to the trustees to advance at any time to a grandchild of his sums of up to one-half of the presumptive or vested share of that grandchild in the fund.

The testator died on January 8, 1941; in 1942 the son married and, in 1945, twin sons were born; there were no other children. On January 2, 1962, the trustees exercised their power of advancement in favour of the testator's grandsons. They declared that they held investments and the income thereof on trust for each grandson should he attain 21 years; the investments formed part of the original capital of the testator's son's share, and represented less than one-quarter of it. The testator's son died in May, 1963, and the Crown claimed estate duty on the two funds advanced in 1962. The trustees contested this claim on the grounds that (1) before the power of advancement was exercised in 1962 neither the discretionary objects nor the accumulation beneficiaries had an "interest in possession" or, indeed, any "interest" at all in the trust fund, within the meaning of section 43 of the Finance Act, 1940 ; and (2) even if there was an interest in possession, it was not of a measurable amount as required by section 2 (1) (b) and section 7 (7) of the Finance Act, 1894 :-

Held, that the only right of an object of a discretionary trust, of income is to require the trustees to consider from time to time whether or not to apply the whole or some part of the income for his benefit, and this right is not an interest in the whole fund or any part of it within the meaning of section 43 of the Finance Act, 1940.

An "interest in possession" must mean that the person's interest enables him to claim whatever may be the subject of the interest. A right to require trustees to consider whether they will pay him something does not enable him to claim anything.

Per Lord Wilberforce: As regards the accumulations, there was no "interest in possession" because the whole income was being validly accumulated for the benefit of persons with contingent interests and accordingly section 43 did not attach.