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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Duxbury's Settlement Trusts, Re [1994] EWCA Civ 21 (21 November 1994)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1994/21.html
Cite as: [1994] EWCA Civ 21, [1995] 3 All ER 145

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JISCBAILII_CASE_TRUSTS

BAILII Citation Number: [1994] EWCA Civ 21
LTA 94/5708/B

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
21st November 1994

B e f o r e :

LORD JUSTICE NOURSE
LORD JUSTICE HENRY
and
SIR JOHN MEGAW
____________________

RE DUXBURY'S SETTLEMENT TRUSTS
THE PUBLIC TRUSTEE
Plaintiff
-v-
(1) KATHLEEN MARY BENJUMEA
(2) BETTY CONSTANCE INGLE
(3) MATTHEW INGLE
(4) JOHN THOMAS DUXBURY
(5) NICHOLAS JAMES DUXBURY
(6) JONATHAN MARK DUXBURY
(7) SARRA JANE RAPER
(8) CHARLES EDWARD ILLINGWORTH
(9) BARCLAYS BANK TRUST COMPANY LIMITED
Defendants

____________________

(Computer Aided Transcript of the Palantype Notes of
John Larking, Chancery House, Chancery Lane, London WC2A 1QX
Telephone No. 071-404-7464
Official Shorthand Writers to the Court)

____________________

MR. E. NUGEE QC and MR. D. JACKSON (instructed by Messrs. Penningtons, London EC2) appeared on behalf of the Plaintiff/Appellant.
MR. C.R. SEMKEN (instructed by Messrs. Ford & Warren, Leeds) appeared on behalf of the Fifth Defendant/Representative Respondent.
____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    LORD JUSTICE NOURSE: In In re Moxon [1916] 2 Ch. 595 Sargant J, following the decision of Eve J in In re Leslie's Hassop Estates [1911] 1 Ch 611 (a case where the appointment was made by the court), held that under the statutory power of appointing new trustees the Public Trustee may be appointed to be the sole trustee of a trust, even where the trust instrument expressly provides that upon any such appointment the number of trustees is not to be reduced below three. The analogous question here is whether the Public Trustee, as the sole trustee of a trust, may exercise the discretions and discretionary powers conferred on the trustees where the trust instrument expressly provides that they shall not be exercisable at any time when there are less than two trustees.

    The question arises in relation to a settlement made on 12th August 1959 by Mr. John Duxbury, since deceased, being a discretionary settlement for the benefit of his children and issue in a form familiar at that time. Clause 16 of the settlement is in these terms:

    "PROVIDED ALWAYS and IT IS HEREBY EXPRESSLY DECLARED that notwithstanding anything hereinbefore contained no discretion or discretionary power hereby or by law conferred on the Trustees (other than the statutory power of appointing new trustees applicable hereto) shall be exercisable at any time when there are less than two Trustees of whom at least one is not a Discretionary Object."

    Clause 18(1) contains a limited power to remove trustees and clause 18(2) provides that in all other respects the statutory power of appointing new trustees shall apply. There is no express bar to the appointment of a trust corporation as the sole trustee of the settlement.

    The original trustees were three individuals. In 1978 they retired in favour of Barclays Bank Trust Company Limited ("Barclays"), which they appointed to be the sole trustee in their place. By a deed of appointment made on 5th December 1984 Barclays retired from the trusteeship and appointed the Public Trustee to be the sole trustee in its place. More recently, doubts having been expressed in the light of clause 16 both as to the validity of an appointment of a sole trustee and as to his capacity to exercise the relevant discretions and discretionary powers, the Public Trustee issued an originating summons in the Chancery Division seeking the determination of the questions, first and second, whether Barclays and the Public Trustee respectively had been validly appointed and, third, whether the Public Trustee, if validly appointed, could validly exercise the discretions and discretionary powers in question.

    The summons came before Rattee J, who answered the first and second questions in the affirmative and the third in the negative. In other words, he held that both trustees had been validly appointed, but that the Public Trustee could not validly exercise the discretions and discretionary powers on his own. The basis of the judge's determination of the first two questions was that he declined to extend the rule or principle, if such it is, in In re Hastings-Bass, decd. [1975] Ch. 25 to an appointment made under section 36 of the Trustee Act 1925. That rule or principle, which had been stated originally in negative form, was restated by Warner J in positive form in Mettoy Pension Trustees Ltd. v. Evans [1990] 1 WLR 1587 at 1621:

    "where a trustee acts under a discretion given to him by the terms of the trust, the court will interfere with his action if it is clear that he would not have acted as he did had he not failed to take into account considerations which he ought to have taken into account."

    Before Rattee J it was argued by Mr. Semken, on behalf of the representative defendant, that, since the original trustees, in purporting to appoint Barclays, had clearly failed to take account of the effect of clause 16 on its capacity to act effectively as sole trustee, the appointment cannot have been a proper exercise of the statutory power. Likewise with the appointment of the Public Trustee, who could not in any event have been validly appointed if Barclays' appointment was invalid. The judge effectively held that it did not matter that the respective appointors had failed to take account of the effect of clause 16.

    The Public Trustee now appeals against the judge's decision of the third question. His decision of the first and second questions is not in dispute. The third question depends on the true construction and effect of section 5(1) of the Public Trustee Act 1906 which, so far as material, provides:

    "The public trustee may ... be appointed to be trustee of any will or settlement or other instrument creating a trust ... and either as an original or as a new trustee, or as an additional trustee, in the same cases, and in the same manner, and by the same persons or court, as if he were a private trustee, with this addition, that, though the trustees originally appointed were two or more, the public trustee may be appointed sole trustee."

    On behalf of the Public Trustee Mr. Nugee QC submits, with some justification, that there is an inherent conflict between the judge's decision of the first and second questions and his decision of the third. He has held that the Public Trustee was validly appointed and, at the same time, that his appointment is valueless. It is probable, although it is not, I think, certain, that the discretions and discretionary powers referred to in clause 16 do not include mere administrative powers, for example the power to invest and vary investments, and are limited to the discretions and powers to determine the distribution of the income and capital of the trust assets. But suppose that the Public Trustee can exercise mere administrative powers. What is the value in having a trustee of a discretionary trust who cannot exercise the discretions and discretionary powers over income or capital?

    The judge's decision cannot be criticised simply because it produces an impasse if and so long as the Public Trustee remains the sole trustee. Undoubtedly it would be possible to reconstitute the trusteeship in such a way as to overcome the difficulty. But nobody wants to do that unless it is necessary. So the first thing we have to do is to ascertain the true effect of section 5(1).

    In In re Moxon [1916] 2 Ch. 595, at page 599, Sargant J said:

    "It seems to me that s. 5 of the Public Trustee Act, 1906, is not merely by way of addition to the statutory powers, but is a positive and independent enactment enabling the appointment of the Public Trustee on every occasion on which a private trustee could be appointed."

    At page 600, he said:

    "... I am inclined to adopt the broad general view suggested by [counsel], that ... sub-s. 1 enables the Public Trustee to be appointed in all cases of appointment as the sole trustee ..."

    The judge held that the effect of the addition to section 5(1) was to override a requirement in the trust instrument that upon an appointment of a new trustee under the statutory power the number of trustees should not be reduced below three. Although, for reasons into which I need not go, Mr. Semken has very properly not felt able to advance an argument to the contrary in this court, I am satisfied that In re Moxon was correctly decided. In particular, I agree with Sargant J that section 5 is a positive and independent enactment enabling the appointment of the Public Trustee on every occasion on which a private trustee could be appointed.

    In re Moxon, by deciding that the Public Trustee can be appointed as sole trustee, is necessarily authority for the proposition that he can act as a sole trustee, notwithstanding a requirement that the number of trustees shall not be reduced below some larger number. It would be idle to appoint a trustee who was unable to act. Appointment and action are for this purpose inseparable. Here the prohibition, although expressed as one against the sole exercise of discretions and discretionary powers, is effectively a prohibition against acting as a sole trustee. Why should that prohibition be any the less susceptible to being overridden by the addition to section 5(1) than a prohibition against appointment as a sole trustee? I can see no answer to that question. The point is as simple as it is short.

    For these reasons, which are substantially those advanced by Mr. Nugee, I think that the judge's decision of the third question was wrong. I would answer it in the affirmative and allow the appeal accordingly.

    LORD JUSTICE HENRY: I agree.

    SIR JOHN MEGAW: I also agree.

    Order:appeal allowed; order made by the judge in answer to question 3 discharged and replaced by an affirmative answer to question 3; costs of all parties to proceedings to be raised and retained or paid out of the capital of the funds not comprised in the 1963 settlement; taxation of costs both here and below on the indemnity basis; question whether the Public Trustee should have been represented by two counsel in this court to be dealt with by the taxing master in the usual way.

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