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English High Court gives clarification on variation of trusts

In Duke of Somerset v Fitzgerald, the English High Court gave useful guidance on its jurisdiction under the Variation of Trusts Act 1958 (the 1958 Act). Master Teverson approved an application by the Duke of Somerset to vary the trusts of a settlement established under the Settled Land Act 1925 (the 1925 Act) in order to enlarge the trustees' administrative powers, widen the beneficial class to include same-sex spouses and civil partners, and disapply the 1925 Act.

In particular, the Court clarified the circumstances in which an application under the 1958 Act is appropriate. Where the sole purpose of an application is to alter the trustees' powers, without any variation of the beneficial interests, the better practice is to apply under section 57 of the Trustee Act 1925. Where, however, the applicant seeks both to vary the beneficial trusts and to enlarge the trustees' powers of management and administration, the application must be made under the 1958 Act.

The Court found that the fact that the trust would cease to be governed by the 1925 Act did not mean that the proposed variations amounted to a resettlement, as the substratum, or "beneficial core" of the trust remained the same. It also confirmed (relying on Bathurst v Bathurst that the Court's power to vary trusts under section 1(1) of the 1958 Act extends to variations restricting trustees' powers, despite the fact that that section refers only to "enlarging the powers of the trustees". In the circumstances, the Court approved the proposed arrangement without the need for any supplemental application under section 64 of the 1925 Act.

The decision is also potentially of interest to trust practitioners within the offshore sphere. Section 1 of the Variation of Trusts Act 1958 is reproduced in both section 72 of the Cayman Islands' Trusts Law (2018 Revision) and section 58 of the BVI Trusts Ordinance Cap 303. It is worth noting that the scope of BVI's section 58 is drafted to be slightly wider than its English equivalent. Arrangements that restrict or remove trustees' powers, or that add to or replace the trusts, are expressly allowed. The English requirement that any proposed arrangement be "for the benefit of" a beneficiary is also replaced with a negative provision that the Court shall not approve an arrangement that is "detrimental to" such a person. Section 57 of the English Trustee Act 1925, which was also considered in this decision, is likewise mirrored in section 63 of the Cayman Trusts Law and section 59 of the BVI Trusts Ordinance.

English High Court gives clarification on variation of trusts

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