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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> CD (a minor) v O [2004] EWHC 1036 (Ch) (07 May 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/1036.html Cite as: [2004] 3 FCR 195, [2004] 3 All ER 780, [2004] EWHC 1036 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		7 May 2004

Mr Justice Lloyd:

1. This is an edited version of a judgment given on an application made in writing and dealt with on paper without a hearing, though with the benefit of written submissions from Mr Simon Taube Q.C. on behalf of the Claimant, and treated as having been heard in private. This version may be disclosed and published, whereas the full version is subject to embargo. This version is limited, as regards summary of the facts and discussion of the law, to the point which may be of interest beyond the particular parties.

2. The proceedings relate to part of the proceeds of two life insurance policies. It is sufficient for present purposes to say that the proceeds are, in the events which have happened, held on trust in equal shares for three persons all of whom are under age, one of whom is the Claimant, C. Under the trusts, which were set out in deeds of assignment of the policies, the trustee had certain powers of appointment, but those powers were not exercised. Subject to and in default of any such appointment the fund was to be held on trust for the three minors equally. In practice, though the fund representing the proceeds of the policies has not yet been divided, it is treated, for reasons which do not matter, as if there were separate funds for each beneficiary. This application is concerned with C's Fund.

1. The income of C's Fund has in fact been applied to meet her school bills, but it is already inadequate. Part of the capital has also been advanced, under section 32 of the Trustee Act 1925, to be used for the same purposes.
2. The application is intended to secure that, if necessary, the whole capital can be applied for this purpose.
3. I have come to the conclusion that I should approve the extension of the statutory power of advancement as being for C's benefit. This point does, however, raise legal issues which may be of some wider interest and on which different views have been expressed. It is for that reason that, unusually on a paper application, I am giving reasons for my order.
4. The trusts applying to the policies incorporate a number of provisions such as a wide investment clause, but nothing that bears on the application of the income or capital. There is an express power to revoke, vary or add administrative provisions of the trusts. The power of advancement is not an administrative power and the desired result cannot be achieved by using this power.
5. C is absolutely entitled to her Fund and, but for her being under age, she could call for it, give the trustee a good receipt for it and spend it as she chooses. Since she is only 12 years old she cannot do so. Section 31 of the Trustee Act 1925 applies to the fund and enables the income to be applied for her maintenance education or benefit even though she cannot give a receipt for it. That section applies "where any property is held by trustees in trust for any person for any interest whatsoever", which clearly includes property held on trust for a minor absolutely.
6. Section 32 of the 1925 Act is in different terms. It authorises trustees to apply "any capital money subject to a trust" for the advancement or benefit of any person entitled to the capital of the trust property or any share thereof, including, expressly, an absolute entitlement. The provisos include, not surprisingly, one, (b), whereby, if the person for whose benefit the fund is advanced "is or becomes absolutely and indefeasibly entitled to a share in the trust property" the money so applied is treated as paid on account of his share. The references to the use of the power in relation to a beneficiary who is already absolutely entitled leave me in no doubt that the section applies to the present trusts of the proceeds of the policies.
7. In Re Kehr deceased [1952] Ch 26 a minor was absolutely entitled to a share of a deceased's intestate estate, the deceased having died domiciled in Germany but having also left property in England in relation to which an English grant of letters of administration had been issued. Danckwerts J held that the English personal representatives could appoint trustees in respect of the minor's share of the estate situated in England, and that those trustees would be able to exercise in respect of that share powers under the Trustee Act 1925 including the powers conferred by sections 31 and 32. That is consistent with my conclusion, though the point at issue there was different.
8. However, by virtue of proviso (a) to section 32(1), no more than half of the presumptive or vested share or interest of the beneficiary may be paid or applied by way of advancement. That limit is commonly relaxed in modern trust deeds, but there is nothing to that effect in the documents in the present case.
9. On the evidence I am satisfied that it would be for C's benefit for the limit imposed by section 32 on the application of the capital of the fund for her education to be lifted. The question is whether and on what basis the court has power to achieve this result. There are two possible sources of jurisdiction.
10. The Court of Chancery had an ancient jurisdiction to authorise the application of income and, in more limited circumstances, capital, for the maintenance of a minor even if this was not authorised by the terms of the trust. This jurisdiction is recognised in the speeches in Chapman v. Chapman [1954] AC 429: see in particular Lord Morton of Henryton at pages 455-6 and Lord Asquith of Bishopstone at 469. As to the application of capital, Lewin on Trusts, 17^th ed., refers to a number of cases at paragraph 32-06. One of them, in which specific reference was made to the court's ability to authorise the expenditure of capital to which a minor was absolutely entitled for his or her maintenance, is Worthington v. M'Craer (1856) 23 Beav 81. It seems to me that this would be a possible basis on which the court could proceed in the present circumstances.
11. However, since the decision in Chapman v. Chapman, the relevant area of law has been transformed by the Variation of Trusts Act 1958. While this Act does not take away any jurisdiction that the court already had, it seems to me that it would be more appropriate to proceed under the Act if that is possible.
12. The 1958 Act applies "where property ... is held on trusts arising ... under any will settlement or other disposition". On the face of it, the proceeds of the insurance policies are held on trusts arising under a settlement, albeit that they are held for the three children in equal shares absolutely. The idea of varying a bare trust might perhaps seem a little odd, and but for the beneficiary not being of full legal capacity it is difficult to imagine how the question could arise. Given that lack of capacity, and the constraints on the extent of the statutory provisions which do authorise the trustees to act in certain ways, it does not seem to me so surprising that the Act should apply to property held on a bare trust, at least for a minor.
13. A similar point, though in relation to a fund of a very different kind, was argued before Eveleigh J in the Queen's Bench Division, in Allen v. Distillers Company (Biochemicals) Ltd [1974] QB 384. That concerned the funds to be received pursuant to the compromise of the thalidomide litigation, and the desire of many of the parents of children affected to ensure that the sums held for their children should not become their absolute property at the age of 18. The judge held that he did have power to achieve that, but he rejected the argument that he could do so under the 1958 Act. He was shown authority under the 1958 Act for the proposition that the Act could be used to defer the vesting of property in a beneficiary, if it would be for that person's benefit to do so. He did not dispute that, but he held that the Act did not apply to the money to be paid pursuant to the compromise. At page 394 he said this:

"I do not think that the payment out to the trustees in the first instance gives rise to the kind of trust contemplated by the Act. As a common lawyer struggling with this problem I am reminded of the first sentence in the chapter on trusts contained in Snell's Principles of Equity 25^th edition: "No one has yet succeeded in giving an entirely satisfactory definition of a trust". An agent may hold and deal with property of his principal in such circumstances as to constitute him a trustee for his principal but leaving aside the manner in which the trust is created, no one would contemplate the possibility of there being a trust of the kind referred to in the Act. The Act contemplates the situation where a beneficial interest is created which did not previously exist and probably one which is related to at least one other beneficial interest. Moreover the Act is designed to deal with the situation where the original disposition was intended to endure according to its terms but which in the light of changed attitudes and circumstances it is fair and reasonable to vary. In any event I do not think that the so-called variation would be a variation at all. It would be a new trust made on behalf of an absolute owner."

14. Eveleigh J was not considering the sort of case of absolute entitlement with which I am concerned. In the case before him there was no prior trust of any kind. Despite the potential width of the word "disposition", it would be difficult to conclude that money paid by an alleged tortfeasor by way of compensation for injury to a minor was "property ... held on trusts arising ... under any will settlement or other disposition". Accordingly I would not venture to disagree with his conclusion that the 1958 Act did not apply to the fund that he was concerned with.
15. His observation that the Act is concerned with a trust where there is more than one beneficial interest was not necessary to his decision. If it were right the Act could not apply to C's Fund, at any rate once it is split off from the rest of the fund. In my judgment it is not correct. Whether it could be appropriate in any circumstances to exercise the power conferred by the 1958 Act in relation to a fund held for a minor absolutely so as to reduce his or her entitlement in any respect, for example as was sought in the Allen case by deferring the date when the person in question can call for the fund, I do not need to decide. What is proposed in the present case would have the effect, in a sense, of accelerating the benefit for C, by allowing the whole of the fund to be used for her benefit while she is still under age. In other circumstances it may be possible to use the power under section 32 in such a way that the trust property does not become vested in the beneficiary: see Re Pilkington's Will Trusts [1964] AC 612. On the present and foreseeable facts of this case this is no more than theoretical. It could not be for C's benefit to divert any part of the fund from her.
16. In my judgment both the whole trust fund, and C's Fund separately, are "property ... held on trusts arising ... under any will settlement or other disposition". It is therefore open to the court to exercise the powers conferred by the 1958 Act in relation to the funds, so long as it is satisfied that the proposed variation of the trusts is for the benefit of the relevant beneficiary. I am satisfied that it is for C's benefit to vary the trusts applying to her fund so that the whole fund, not merely one half, may be applied pursuant to section 32 of the Trustee Act 1925. I have therefore approved on her behalf a variation of the trusts applying to C's Fund so as to permit the powers under section 32 to be exercised in relation to the whole, not only half, of the fund.