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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> W. -v- M. & Anor [2010] IEHC 505 (30 July 2010) URL: http://www.bailii.org/ie/cases/IEHC/2010/H505.html Cite as: [2011] 2 IR 204, [2010] IEHC 505 |
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Judgment Title: W. -v- M. & Anor Composition of Court: Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation Number: [2010] IEHC 505 THE HIGH COURT 2010 376 SP IN THE MATTER OF AN APPLICATION UNDER THE LAND AND CONVEYANCING LAW REFORM ACT 2009 BETWEEN W PLAINTIFF AND
M AND D DEFENDANTS Judgment of Miss Justice Laffoy delivered on the 30th day of July, 2010.
1. The proceedings 1.2 Section 24 of the Act of 2009 is contained in Part 5, which is headed “Variation of Trusts”. There are only two sections in Part 5, s. 23, which is the interpretation section, and s. 24, which sets out the jurisdiction of the Court to vary trusts. In broad terms, Part 5 implements the recommendations of the Law Reform Commission in its report on The Variation of Trusts published in December 2000 (LRC 63 – 2000), although the Oireachtas departed from the recommendations in certain instances. Part 5 confers a novel jurisdiction on the Court. As far as I am aware, this is the first application to come before the High Court under Part 5. 1.3 Section 24 envisages the manner in which an application is brought to this Court being regulated by rules of court. For instance, subs. (2) provides that the Court shall not hear an application made to it under subs. (1) unless it is satisfied that the applicant has given notice in writing of the application, inter alia, “to such persons as may be prescribed by rules of court” at least two weeks before the hearing of the application. The only provision which has been made in the Rules of the Superior Courts (the Rules) regulating applications under s. 24 is the provision in the Rules of the Superior Courts (Land and Conveyancing Law Reform Act 2009) 2010 (S.I. No. 149 of 2010) that an application for an order under s. 24 may be brought by way of special summons. There is no specific provision prescribing the giving of notice. The plaintiff in these proceedings has utilised the special summons procedure. Therefore, the application has been properly brought in accordance with Order 3(11B) of the Rules. By way of general observation, notwithstanding the difficulties which the application raises, the plaintiff’s legal advisers are to be commended in relation to the comprehensive manner in which the matter has been presented to the Court.
2. Section 24 in outline
(a) is not a relevant person, (b) is beneficially interested in the trust, and (c) is capable of assenting to the arrangement.”
(a) varying, revoking or resettling the trust, or (b) varying, enlarging, adding to or restricting the powers of the trustees under the trust to manage or administer the property the subject of the trust.”
(b) an unborn person, (c) a person whose identity, existence or whereabouts cannot be established by taking reasonable measures, or (d) a person who has a contingent interest under the trust but who does not fall within paragraph (a).” 2.3 By virtue of subs. (4) of s. 24 the Court has two options as to the manner in which it shall determine the application, which are set out as follows:
(i) the relevant person specified in the application, and (ii) any other relevant person, (b) by refusing to make such an order in any case where – (i) the court is not satisfied as referred to in paragraph (a), or (ii) the Revenue Commissioners have satisfied the court that the application is substantially motivated by a desire to avoid, or reduce the incidence of, tax.”
3. The policy and the trust document 3.2 The trust document was based on a standard form issued by Irish Progressive, which I note was designated a “Flexible Trust Dual or Joint Life”. I also note that it contained a disclaimer that, while every care had been taken in its drafting, Irish Progressive did not accept any responsibility for its suitability in any case, and that, in case of doubt, the policyholders should consult their professional adviser. The problem which has arisen in this case might have been avoided if they had done so. 3.3 At the commencement of the trust document, the father and the mother are referred to as “the Settlors” and there is reference to the policy. The operative part provides as follows:
3.4 In segment I, the trustee or trustees for the time being are referred to as “the Trustee” and the monies payable under the policy are referred to as “the Trust Fund”. In segment I, insofar as is relevant in the events which have happened, it is provided that the Trustee shall hold the Trust Fund –
3.5 Segment II is a proviso which regulates the exercise of the power of appointment, for example, by stipulating that no appointment shall be made nor any power of revocation exercised after the death of the survivor of the settlors, which seems to me to be stating the obvious. 3.6 Segment III is crucial in the context of the problem which arises in this case and it provides as follows:
C as to 50% of the Trust Fund, D as to 50% of the Trust Fund.” In the margin opposite that segment there is an instruction: “Insert initial beneficiaries and their share of policy proceeds”. The names and the percentages which appear in segment III were entered in manuscript. 3.7 Segment IV is another proviso in the following terms:
3.8 Segment V contains yet another proviso, which is in the following terms:
4. The problem 4.2 The father died on 7th February, 1998. He was survived by the mother. The power of appointment contained in the trust document has not been exercised. The evidence before the Court, in the form of a medical report of a Consultant Psychiatrist, is that the mother has a diagnosis of dementia and that, as a result, she does not have the capacity to understand the problem which these proceedings are intended to redress and the solution proposed. Her lack of capacity is likely to remain permanent. Accordingly, I think it is reasonable to infer that the power of appointment will never be exercised. 4.3 C died at the age of 42 on 29th October, 2003. He was survived by his widow, the plaintiff, and by two children, who are now aged 11 and just under 9. C died intestate and letters of administration to his estate have been extracted by the plaintiff. 4.4 During the lifetime of C, the premiums payable under the policy were discharged by C and D in equal shares, as had been the intention when the policy was taken out. Since the death of C the premiums have been discharged by D and the plaintiff in equal shares. It has been a source of hardship to the plaintiff to bear a half share of the yearly premium. 4.5 After the death of C, the plaintiff and her then legal adviser sought to clarify the ultimate destination of the 50% of the proceeds of the policy opposite C’s name in segment III of clause 1 of the trust document. The proceeds of the policy will become payable on the death of the mother. The evidence before the Court indicates that from the outset in 1997 the intention of the parties was that C and D would fund the premiums equally and that they would become entitled to the proceeds of the policy equally in due course. However, following inquiries in the first half of 2004, Irish Life Assurance Plc. (Irish Life), the successor of Irish Progressive, on the basis of external legal advice, indicated that, under the terms of the trust document, where a beneficiary predeceased a settlor, that beneficiary’s share “reverts to the estate of the Settlor”. Therefore, the position adopted was that the 50% of the trust fund opposite the name of C in segment III has reverted to the surviving settlor, the mother, or, more correctly, her estate. The definitive position of Irish Life was that on the death of the mother that 50% of the proceeds of the policy will go to a trustee appointed by the nominee referred to in clause 2 of the trust document upon trust for the estate of the mother. 4.6 The problem, accordingly, as identified in the middle of 2004 was that, in default of appointment, 50% of the proceeds of the policy would go to the estate of the mother on her death and would not go to the plaintiff and her two children, who are entitled to the estate of C on his death intestate. From mid-2004 onwards various solutions to rectify the problem were canvassed and it appears from the documentation before the Court that the mother was agreeable to “amend” the trust document so that the 50% share which it was understood would go to C could go to his estate in due course. I do not consider it necessary or appropriate to comment on the various advices given by lawyers and accountants for the various parties involved in relation to the solution of the problem. However, it is necessary that I should attempt to construe the trust document in the light of the events which have happened and, in particular, to identify the ultimate destination of the proceeds of the policy. Before doing so, I propose to outline how the arrangement proposed by the plaintiff is designed to rectify the problem.
5. The proposed solution/variation
(b) that there be inserted in segment III after the name of C “or the personal representatives or estate of C” and after the name of D “or the personal representatives or estate of D”. (c) that there be deleted from segment V the words “survivor of the Settlors” and that there be substituted therefor the words “estate of the deceased beneficiary”.
(b) D; (c) B, who is prepared to assent on behalf of the mother, as well as on her own behalf; and (d) A. 5.3 What is not evidentially clear is who would become beneficially entitled to 50% of the proceeds of the policy in the event that it formed part of the estate of the mother following her death, although I note that the plaintiff has averred in her affidavit that “all non-minor family beneficiaries of [the mother’s] estate” are parties to the arrangement, and counsel in his submissions referred to a will. In other words, the evidence does not establish whether the mother will die testate and, if so, who will be the beneficiaries of her estate under her will, or, alternatively, whether she will die intestate. If the mother dies intestate, on the evidence before the Court, her estate will devolve on her children, B, D, and A as to one fourth each and the remaining one fourth will devolve on the children of C equally, assuming all of those persons are alive at the date of her death. However, even if the family members of the mother are aware that she made a will and its terms are known, an issue must arise as to whether it could be definitively determined that it will be the last will and testament of the mother, and whether the beneficiaries thereunder are identifiable at this point in time.
6. Conclusions on construction/variation of the trust document 6.2 As regards the default position, the inclusion of the respective personal representatives and estates of C and D as regards the 50% of the trust fund to which each is entitled under the default provision is definitely a meaningful variation. Moreover, it seems to represent what was the intention of the settlors and of C and D from the outset and would recognise that C and, since his death, his estate and D have equally discharged the premiums due under the policy from the outset. 6.3 Under the arrangement as presented to the Court no amendment is proposed to segment IV. As to its proper construction, the first question which arises is the identity of “any of the said beneficiaries”. It must mean more than a potential beneficiary because the purpose of the proviso is to deal with “that beneficiary’s share”. Looking at clause 1 as a whole, I would construe “beneficiaries” as including not only the default beneficiaries named in segment III, but also beneficiaries as a result of the exercise of an appointment under Segment I. What I cannot understand is why there should be provision that the share of a beneficiary who predeceased the surviving settlor should be held on trust for the personal representative of the surviving settlor in the circumstances which were intended to prevail, and have prevailed, in this case, namely, that the policy was to be funded by the named default beneficiaries, C and D. 6.4 There are two distinct scenarios covered by the proviso in segment V. It seems to me that neither has arisen, nor can arise, in the events which have happened. The first limb relates to “any benefit which has become payable under the policy in consequence of the death of the first to die of the Settlors”. As I understand it, under the policy no benefit arose on the death of the first to die, that is to say, the father. Accordingly, it seems to me that the variation proposed to the first limb of segment V is unnecessary. In relation to the second limb, it relates to “any benefit which shall become payable otherwise than in consequence of the death of either or both of the Settlors”. Again, as I understand the position, the only benefit which becomes payable under the policy is the death benefit which arises on the last death, that is to say, in the events which have happened, the death of the mother. 6.5 The objective of the variations proposed to clause 1 is to ensure that, on the death of the mother, 50% of the proceeds of the policy will go to the plaintiff to be distributed as part of the estate of C in accordance with the provisions of the Succession Act 1965. I am doubtful as to whether the amendments which have been assented to in writing by the plaintiff, B, D and A, will achieve that objective. As I have indicated earlier, I do not think that the amendment proposed to segment I advances matters at all. The amendment proposed to segment III, if it was not inconsistent with any other provision of clause 1 as varied, would certainly achieve the objective. However, it seems to me that if the arrangement as proposed was approved by the Court, there would be an inconsistency between segment III, as varied, and segment IV. As I have already indicated the variation to segment V is superfluous, because neither limb of that proviso has any application. What I do think would achieve the objective of the assenting parties would be the proposed variation of segment III coupled with a variation of segment IV which substituted for the words “of such one of the Settlors” at the end of that segment the following words: “of such beneficiary”.
7. Application of s. 24 7.2 In her capacity as personal representative of C, I consider that the plaintiff is an appropriate person to bring an application under s. 24. 7.3 At the hearing of the application, counsel for the plaintiff made it clear that the “relevant person” for whose benefit the plaintiff is seeking to have the arrangement approved is the mother. That is not specified in the application, as required by subs. (1) of s. 24. Where the special summons procedure is utilised in accordance with the Rules in relation to applications under s. 24, I would suggest that the special endorsement of claim on the special summons should, in the narrative, specify the relevant person. In this case, the special summons would require to be amended to specify the “relevant person”. 7.4 The difficult issue in this matter is whether a variation of the trust created by the trust document to provide that 50% of the proceeds of the policy will be held on trust after the death of the mother for the estate of C can be shown to be for the benefit of the mother. In essence, the submission made by counsel for the plaintiff was that the arrangement is for the benefit of the mother, in that it gives effect to the intentions of the father and the mother in executing the declaration of trust and it reverses the unintended difficult consequence to which the trust document in its existing form gives rise. In other words, the plaintiff’s position is that the mother was prepared to rectify the trust document if she could, but in the current circumstances she does not have the capacity to do so. I express no view on whether, while she had capacity, she could have done so validly and it is not to be inferred that I consider she could have. 7.5 Counsel for the plaintiff referred the Court to one authority of the High Court of England and Wales in support of the submission that the proposed arrangement is for the benefit of the mother within the meaning of s. 24: In re C.L. [1969] 1 Ch. 587. Before considering the decision of Cross J. in the C.L. case it is instructive to consider the jurisdiction conferred on the English courts by the Variation of Trusts Act 1958 as outlined in Snell’s Equity (31st Ed., 2005). In dealing with the concept of “benefit”, the editors state (at p. 662):
‘Benefit’ is not confined to financial benefit, e.g. where the beneficiary is an irresponsible minor. Thus a provision forfeiting benefits on ‘practising Roman Catholicism’ has been removed. It may also be a benefit to a mentally incapable person to give away his property where the gift is one which he would have made if of sound mind. But it is not for A’s benefit to take from him property mistakenly given to him and give it to B, even if B is a member of the same family.” 7.6 In the C.L. case (at p. 598) Cross J. quoted from the headnote of the report of the Tinker case, which summarised the facts and the decision as follows:
7.8 In the C.L. case the substantive issue under the Act of 1958 concerned the estate of a widow who was subject to the jurisdiction of the Court of Protection. The estate comprised, inter alia, a protected life interest in a trust fund settled by her husband, which, on her death, would be added to a fund settled by him on their two adopted daughters, and in certain events, to the daughters’ children, with an ultimate trust to the widow. The adopted daughters sought approval of an arrangement by which the widow gave up for no consideration her protected life interest in the settlement made to her and her contingent interest in remainder in the settlement, in each case in favour of the adopted daughters. In relation to the factual situation, Cross J. commented on the widow’s assets and her income and noted that she had to pay very large sums by way of income tax and surtax, but even so her spending income was substantially in excess of her requirements. He also noted that the ultimate trust in her favour was highly unlikely ever to take effect. As regards the effect of the proposed variations, he stated (at p. 593):
8. Determination 8.2 However, I do not propose to make a determination under subs. (4)(b) of s. 24 refusing to approve the arrangement at this juncture, so as to afford the plaintiff’s legal advisers an opportunity to consider whether they wish to apply to amend the application. 9. Observations 9.2 The first relates to the incapacity of the mother and the fact that she is not a ward of court and does not have a committee. As I read Part 5 of the Act of 2009, it is intended that the High Court should have jurisdiction where an adult is incapable of assenting to an arrangement by reason of absence of mental capacity, notwithstanding that the adult has not been taken into wardship. 9.3 Secondly, the Oireachtas gave the Revenue Commissioners an important role in relation to s. 24 applications. In this case, while I am satisfied that the plaintiff gave notice to the Revenue Commissioners in accordance with the requirements of s. 24, there is no evidence before the Court of the attitude of the Revenue Commissioners, although counsel informed the Court that his instructing solicitor was aware from a telephone conversation with an official of the Revenue Commissioners that they had received the notice and that they had no formal objection to the application. However, it seems to me that on applications under s. 24 the Revenue Commissioners should apprise the Court in some way, although not necessarily by appearing on the application, of their attitude to the application. The solicitor for the plaintiff should furnish the Revenue Commissioners with a copy of this judgment. 9.4 Finally, in the special endorsement of claim an order has been sought providing that the mother shall cease to be a trustee of the trust established by the trust document and substituting B as trustee in her place. However, I note that in the final affidavit sworn in the matter by D, it is suggested that the person nominated to appoint new trustees in clause 2 of the trust document, N, be appointed a trustee with immediate effect. The plaintiff will have to clarify for the Court which order is sought. An affidavit of fitness of the proposed new trustee sworn by an independent person should be filed.
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