Ludlow Trust Company Limited v John Homfray [2026] EWHC 1107 (Ch)

[2026] EWHC 1107 (Ch)Case No PT-2024-BRS-000018IN THE HIGH COURT OF JUSTICEVenue BUSINESS AND PROPERTY COURTS IN BRISTOLPROPERTY TRUSTS AND PROBATE LIST (ChD)Venue Bristol Civil Justice Centre, 2 Redcliff Street, Bristol, BS1 6GRDate 13 May 2026
Before
HHJ PAUL MATTHEWS(sitting as a Judge of the High Court)
Between
LUDLOW TRUST COMPANY LIMITEDClaimantJOHN HOMFRAYDefendant
Christopher Jones (instructed by Hugh James) for ClaimantSarah Haren KC (instructed by Howells Solicitors) for DefendantHearing Hearing date: 28 April 2026
This judgment was handed down remotely at 10:30 am on 13 May 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archive.HHJ Paul Matthews :

Introduction

[1]This is my judgment on the trial of a claim under CPR Part 8, whereby the claimant trustee of a settlement created in 1945 originally sought permission to distribute a trust fund on the footing of counsel’s opinion. However, by the time it reached me, the claim instead sought a decision on the true construction of provisions in that settlement. The claim form was issued on 29 January 2024, and was supported by the witness statement of Julian Doughty, an associate director of the claimant trust company, dated 25 January 2024. This exhibits the various trust documents, and also the opinion of Christopher Jones of counsel, together with a copy of his instructions. On 15 March 2024 the defendant, John Homfray, a grandson of the settlor of the trust, made a witness statement exhibiting an opinion of Sarah Haren KC, which expressed a different view to that of Mr Jones about the relevant construction matters. Further evidence is given in the witness statement of Laith Khatib (Mr Homfray’s solicitor) and of Martin Gibson (another grandson of the settlor), both dated 7 April 2024.[2]There is also a second question before the court, concerning permission for the trustee to administer the settlement on the footing that an elderly beneficiary will have no further children. This was not a contested issue, and I will deal with it in due course. The main issue argued before me was the construction of the settlement.

The 1945 settlement

[3]The settlement was created on 3 September 1945, between George Cock Gibson, as settlor, of the first part, and National Provincial Bank Ltd and the settlor, as trustees, of the second part. It was professionally drafted by a well-known firm of City solicitors (who in those days still did such things) and was in conventional form for the time. The settlor by then had three children of his own, to whom I refer, without meaning any disrespect, as David, Simon and Angela, and one adopted son, William. David, Simon and Angela were then aged 20, 18 and 14 years respectively. William was just 7 years old. At that stage the settlor had no grandchildren. The settlement was intended to make provision for David, Simon and Angela, but not (except on the failure of the earlier trusts) for William. The assets settled were divided into three equal Funds, each held for one of the children and their issue.[4]In relation to David’s Fund, clause 3 provided as follows:
“THE Trustees may either retain the investments included in David’s Fund or may at any time or times at their discretion sell call in or convert into money the same and shall at the like discretion invest the moneys produced thereby and all other moneys now or at any time forming part of David’s Fund in the names of the Trustees and shall until David attains the age of twenty-one years or previously dies accumulate the income of David’s Fund at compound interest by investing the same and the resulting income thereof in any investment hereby authorised with power from time to time to vary such investments at discretion and shall after the termination of the accumulation period hold and apply the accumulated fund as part of the capital of David’s Fund and if David lives to attain the age of twenty-one years the trustees shall hold the income of David’s Fund upon the protective trusts specified in Section 33 of the Trustee Act 1925 for David during his life and subject to the trusts aforesaid the Trustees shall hold David’s Fund UPON TRUST for such of the children of David as shall be living at his death (whether he dies before or after attaining the age of twenty-one years) and the issue then living of any then deceased child of his who whether children or more remote issue attain the age of twenty-one years or marry under that age in equal shares per stirpes.”
[5]The clause accordingly contains(i) a power to invest and to vary the investment of the capital of David’s Fund,(ii) a trust to accumulate the income of David’s Fund until David reaches the age of 21,(iii) a protected life interest for David from the age of 21, and(iv) a gift over for such of David’s children as are living at his death together with the then living issue of any deceased child, and if more than one in equal shares per stirpes. By clause 4, exactly the same trusts apply to Simon’s Fund, as if the trusts of David’s Fund were repeated, but with the substitution of Simon for David. And then, by clause 5, exactly the same trusts apply to Angela’s Fund, as if the trusts of David’s Fund were repeated, but with the substitution of Angela for David.[6]The trust instrument then goes on to provide for what should happen if(i) the trusts of any of David’s, Simon’s and Angela’s Funds should “fail or determine”, and(ii) all of such trusts should “fail or determine”. Clause 6 deals with the first situation, and clause 7 with the second. Clause 6 reads as follows:
“IF the trusts hereinbefore declared and contained concerning David’s Fund Simon’s Fund or Angela’s Fund shall fail or determine then subject to the trusts powers and provisions hereinbefore declared and contained and to the powers by law vested in the Trustees and to every and any exercise of such powers the fund as to which such failure or determination shall occur and any other fund or part of a fund which may have accrued or been added thereto by virtue of this present provision shall go and accrue by way of addition to the others or other of the said three funds in respect of which trusts are subsisting at the time of such failure or determination and if more than one in equal shares and so that the trust premises which shall so accrue and be added to such other funds or fund shall be held upon the trusts and subject to the powers and provisions herein declared and contained concerning such other funds respectively or such other fund (including this present provision as to accruer) or as near thereto as circumstances admit.”
This kind of clause is usually known to will and trust lawyers as a “cross-accruer” clause.[7]And clause 7 provides: “IF all the trusts hereinbefore declared and contained concerning David’s Fund Simon’s Fund and Angela’s Fund respectively shall fail or determine then subject to the trusts powers and provisions hereinbefore declared and contained and to the powers by law vested in the Trustees and to every or any exercise of such powers the Trustees shall hold the Aggregate Fund upon the like trusts and subject to the like powers and provisions in favour of the settlor’s adopted son William James Gibson his children and issue as are declared and contained in Clause 3 hereof concerning David’s Fund and the income thereof in the same manner in all respects as if such trusts powers and provisions were herein repeated with the substitution of the name William James Gibson for the name David And if the trusts in this clause hereinbefore declared concerning the Aggregate Fund shall fail or determine then subject thereto and the powers hereby and by law vested in the Trustees and to every or any exercise of such powers the Trustees shall hold the Aggregate Fund upon trust for John Herbert Cory and Christopher Gordon Cory (the sons of the Settlor’s sister-in-law Cecil Mary Cory) in equal shares absolutely.” (By clause 1 of the settlement, which also defined David’s Fund, Simon’s Fund and Angela’s Fund, the Aggregate Fund means “all the investments property and money for the time being constituting the said three funds”.) Subsequent events Further assets

Subsequent events

[8]It appears that, on 22 January 1946, the settlor executed a further deed of settlement, in effect adding further assets to the Aggregate Fund the subject of the 1945 settlement. But this did not effect any change in the terms of the trusts themselves. It simply enlarged the trust fund.

The beneficiaries

[9]Thereafter, both David and Angela had children, born between 1953 and 1970, and each of those children (the settlor’s grandchildren) now also has children (the settlor’s great grandchildren). However, Simon never had any children. David died in 1998, and Simon in 2021. Angela is still alive. The main issue in these proceedings arises from the facts stated in the last three sentences. Given that Simon has died without issue, what are the next limitations applicable to his Fund (currently worth about £3.1 million)? Are they the limitations applicable to both David’s Fund and Angela’s Fund (so that half of Simon’s Fund is held on the trusts of David’s Fund, and the other half on the trusts of Angela’s Fund), or are they the limitations applicable to Angela’s Fund alone (so that the whole of Simon’s Fund is now held on the trusts of Angela’s Fund)? However, before I can deal with that question, I first need to complete the history of this settlement.

Change of trustee

[10]In 1968, the National Provincial Bank Ltd merged with the Westminster Bank Ltd, becoming the National Westminster Bank Ltd (later National Westminster Bank plc), which began to trade as such on 1 January 1970. That merged bank took over as trustee of this settlement in place of the National Provincial Bank.

The first variation application

[11]Later in 1970, an application was made under the Variation of Trusts Act 1958 for the approval of a scheme to vary the trusts of the settlement in relation to David’s Fund and Angela’s Fund. The idea in each case was to abandon the protected life interests for David and Angela, and to divide the fund in question into three distinct parts:(i) a capital sum (equal to 60% of the Fund) for the life tenant absolutely,(ii) a small sum (£5000), to be held for the benefit of William (the adopted son) and his children as compensation for loss of the chance that a greater interest might fall into possession, and(iii) a capital sum (equal to 40% of the fund, less the £5000) to be held on trust for the grandchildren of the settlor, free of their parent’s life interest and of the power to advance capital to that parent, to be paid out to the grandchildren after accumulating the income for 21 years. The capital sum under (iii) was to be known as the Homfray Reversionary Share in relation to Angela’s Fund, and the Gibson Reversionary Share in relation to David’s Fund. The order approving that arrangement was made by Foster J on 21 June 1971. The arrangement and the order had no effect on the trusts affecting Simon’s Fund.[12]Paragraphs 4(5) and 5(5) of the Schedule to that order should be specifically mentioned. Paragraph 4(5) relates to Angela’s Fund, and paragraph 5(5) relates to David’s Fund. Paragraph 4(5) reads:
“The contingent reversionary protected life interest of Angela in David’s Fund and Simon’s Fund respectively shall be determined and any part of David’s Fund or Simon’s Fund that shall accrue to Angela’s Fund under the provisions of the Settlements shall be held by the Trustees upon the trusts for the time being applicable to the Homfray Reversionary Share and as one fund therewith for all purposes”
. Paragraph 5(5) is in the same terms, except that the references to Angela are changed to David and the references to David are changed to Angela, and the reference to the Homfray Reversionary Share is changed to one to the Gibson Reversionary Share.

The second variation application

[13]In 1977, a further application was made under the 1958 Act for an order approving a further arrangement varying the trusts again. This time the focus was on further subdividing the Homfray Reversionary Share and the Gibson Reversionary Share. Again, each of the reversionary shares was subdivided into three parts. The first part consisted of small sums raised from each Share and held(a) in a new “Collaterals Fund” for the benefit of any issue that Simon might have in the future (he still being childless) and for the children of William, and(b) as an addition to the Compensation Fund created by the 1971 order, for the benefit of William’s children. The second part consisted of 85% of the Homfray Reversionary Share and 90% of the Gibson Reversionary Share, and was to be held for the benefit of the children of the principal beneficiary who attained the age of 25 years. These funds were called the Homfray Main Fund and the Gibson Main Fund respectively. Thirdly, the balance of the reversionary share was held for the benefit of such of the grandchildren of the principal beneficiary (ie great-grandchildren of the settlor) and also William’s children, who were living the death of the principal beneficiary and who attained the age of 21 years or married under that age. Each of these funds was called the “(Homfray or Gibson) Grandchildren’s Immediate Fund”.[14]However, the 1977 arrangement also dealt with the trusts which would be applicable to any assets which formed part of Simon’s Fund, and on his death without issue fell into either the Homfray Reversionary Share or the Gibson Reversionary Share. These assets were known as the Homfray Deferred Share and the Gibson Deferred Share respectively. The arrangement provided that 75% of the Deferred Share should be held on the trusts of the (Homfray or Gibson) Main Fund, and as to 25% on the trusts of what was called the (Homfray or Gibson) Grandchildren’s Deferred Fund. These trusts were for the benefit of the grandchildren of the principal beneficiary living at the death of such beneficiary, who attained the age of 21 years or married under that age (with certain substitution provisions). The order approving the arrangement was made by Walton J on 24 March 1977.

Further changes of trustees

[15]On 12 November 1980, the settlor and the National Westminster Bank Ltd executed a deed by which they both retired from the trusteeship of the Gibson funds, and David and Robert Digby Taylor, a chartered accountant, were appointed as trustees in their place. The settlor and the National Westminster Bank Ltd continued as trustees of the other funds part of the settlement, including the Homfray funds and Simon’s Fund. On 20 March 1989, the settlor died. On 3 March 1998 David himself died. On 6 April 2021, the National Westminster Bank plc (as it by then had become) as sole surviving trustee of the non-Gibson funds, by deed appointed the claimant, Ludlow Trust Co Ltd, as trustee in its place, and retired. On 3 May 2021, Simon died. And on 5 January 2024 the sole surviving trustee of the Gibson funds, Robert Digby Taylor, died.[16]It does not appear that Mr Taylor’s executor has ever appointed a new trustee of the Gibson funds. However, by paragraph 7 of the order of District Judge Wales, sealed on 3 December 2025, the defendant (who is in fact a beneficiary of the Homfray funds) was appointed to represent those interested in the Gibson funds. This means that the beneficiaries of the Gibson funds will be bound by the decision in this case even though Mr Taylor’s executor is not a party. The beneficiaries of the non-Gibson funds will be bound precisely because their trustee (the claimant) is a party: see CPR rule 19.10(2). Paragraph 3 of the order of District Judge Wales specifically required the claimant to present arguments to the court on behalf of the minor and unborn beneficiaries interested in Angela’s Fund. The claimant was at pains to make clear that, subject to the district judge’s order, it took a neutral position.

Distributions

[17]There are few disputes of fact between the parties. Mr Martin Gibson (the son of David) in his witness statement dated 7 April 2025 says that in about November 1999 he received the sum of £330,459.33, and that his siblings received the same or similar amounts. He goes on to say that he understood the trustee at the time to be distributing all the funds he was holding to the beneficiaries, and that he (Martin) is not aware of any ongoing administration concerning the trust since about November 1999. There is no evidence of any trustee meetings having taken place, annual trust accounts being prepared or the filing of any trust tax returns.[18]On the other hand, Mr Martin Gibson also wrote a letter to his solicitors dated 22 April 2026, in which he confirmed that his own children had not received any payment “from the George Gibson Settlements, or more specifically The Gibson Grandchildren’s Immediate Fund”. This is confirmed by a letter dated the same day from Alicia Gibson, one of Martin’s children. The evidence makes it more likely than not that the Gibson Main Fund was distributed in 1999, but that the Gibson Grandchildren’s Immediate Fund has still not been distributed, and I so find. There is some suggestion that the Collaterals Fund was distributed to its beneficiaries in 2017-18. But there is no solid evidence of this, and I am not persuaded that it is so. I proceed therefore on the basis that it is still in existence. Interpretation Generally

Interpretation

[19]In Armstrong v Armstrong [2019] EWHC 2259 (Ch), I said:
“21. … There can be no doubt that the principles of interpretation for commercial documents set out in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912-3, and developed in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, also apply to trusts and wills: see for example Staden v Jones [2009] EWCA Civ 936 (construction of agreement alleged to create a trust for the daughter of a divorcing couple); Marley v Rawlings [2015] AC 129 (construction of a will); Millar v Millar [2018] EWHC 1926 (Ch) (construction of a family trust).”
[20]Nevertheless, the court must select the appropriate interpretative tools to construe a will or a trust. In Barnardo's v Buckinghamshire [2019] ICR 495, in the Supreme Court, Lord Hodge (with whom Lady Hale, Lords Wilson, Sumption and Briggs agreed) said this in the context of construing a pension scheme:
“13. In the trilogy of cases, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Arnold v Britton [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] AC 1173, this court has given guidance on the general approach to the construction of contracts and other instruments, drawing on modern case law of the House of Lords since Prenn v Simmonds [1971] 1 WLR 1381. That guidance, which the parties did not contest in this appeal, does not need to be repeated. In deciding which interpretative tools will best assist in ascertaining the meaning of an instrument, and the weight to be given to each of the relevant interpretative tools, the court must have regard to the nature and circumstances of the particular instrument. 14. A pension scheme, such as the one in issue on this appeal, has several distinctive characteristics which are relevant to the court's selection of the appropriate interpretative tools. First, it is a formal legal document which has been prepared by skilled and specialist legal draftsmen. Secondly, unlike many commercial contracts, it is not the product of commercial negotiation between parties who may have conflicting interests and who may conclude their agreement under considerable pressure of time, leaving loose ends to be sorted out in future. Thirdly, it is an instrument which is designed to operate in the long term, defining people's rights long after the economic and other circumstances, which existed at the time when it was signed, may have ceased to exist. Fourthly, the scheme confers important rights on parties, the members of the pension scheme, who were not parties to the instrument and who may have joined the scheme many years after it was initiated. Fifthly, members of a pension scheme may not have easy access to expert legal advice or be able readily to ascertain the circumstances which existed when the scheme was established. 15. Judges have recognised that these characteristics make it appropriate for the court to give weight to textual analysis, by concentrating on the words which the draftsman has chosen to use and by attaching less weight to the background factual matrix than might be appropriate in certain commercial contracts … ”
[21]I have said this before, but it seems to me that much of what Lord Hodge says about pension schemes is equally true of wills and settlements. Contracts operate only between the parties, and usually in the short to medium term. The parties know about the circumstances in which the contracts came about, They are often drafted under time pressure, and by non-lawyers. On the other hand, wills and trusts are property transactions having effect in relation to third parties, over the medium to long term, and are nearly always drafted, after careful reflection, by specialist lawyers. Those who benefit under them, perhaps years later, are unlikely to know much about their genesis. Textual analysis is therefore of greater importance in such cases than in commercial contracts.

The effect of the variations

[22]I should add one further point on interpretation. It is common ground, first, that the meanings of provisions in the settlement are to be ascertained in the light of the settlement as a whole, and, second, that the effect of the 1971 and 1977 schemes of arrangement sanctioned by the orders under the Variation of Trusts Act 1958 is to change the terms of the settlement from the time of each such arrangement. Accordingly, it is possible that the construction of the settlement might alter on the occasion of each variation, so that a term used in the original version of the settlement conceivably might bear a different meaning after the 1971 scheme was sanctioned, and again after the 1977 scheme was sanctioned.

The issues arising

[23]There is a preliminary issue, which is whether the words “shall accrue” in paragraphs 4(5) and 5(5) of the 1971 order can be said to have varied the original settlement. The main issue which arises is the meaning of the word “subsisting” in the phrase “in respect of which trusts are subsisting at the time of such failure or determination” in clause 6 of the settlement. Having ascertained that meaning, the third issue is whether the trusts of David’s Fund were indeed “subsisting” at the date of Simon’s death within the meaning of that clause. But before I embark on consideration of those questions, I will set out some basic propositions of English trust law. When is a trust? Commencement

When is a trust?

[24]Under the general English law, a trust arises at the moment when a trust obligation for the first time engages the conscience of the owner of an asset, whether real or personal, tangible or intangible. There can be no trust obligation, and thus no trust, unless there is first an asset whose owner’s conscience can be burdened by that obligation. The rule is: no asset, no trust; see eg Re Goldcorp Ltd [1995] 1 AC 74, 91D-92C. (Consistently with this, where the trust is to affect future property, and the trustee promises for value to hold the asset on trust when it reaches his or her hands, a trust will arise when the asset does so, but not before: Collyer v Isaacs (1881) 19 Ch D 342, 351.) Coupled with the effect of beneficial interests on third parties, this means that that, whatever the theoretical position, trust law is for all practical purposes a branch of property law.[25]The trust obligation may arise voluntarily, either because the owner of the asset undertakes the obligation by declaring that he or she holds the asset on trust for another or others, or because such owner accepts a transfer of the asset to him- or herself on trust for another or others: see Milroy v Lord (1862) 2 De G F & J 264. Or it may arise compulsorily, because the law imposes a trust obligation on the owner of the asset, without the owner’s undertaking it: see eg Keech v Sandford (1726) Sel Cas King 61. Then, during the life of the trust, the asset or assets covered by it may change in identity or quantity during the life of the trust. This may take place, either by virtue of the exercise of powers conferred on the trustee (eg the powers of investment of the trust capital), or by natural increase or decrease in the trust assets (as with, say, a flock of sheep), or by virtue of some rule of law, such as the doctrine of equitable tracing: see eg Re Hallett’s Estate (1880) 13 Ch D 696.

Termination

[26]Conversely, the trust of an asset ceases when the trust obligation comes to an end in relation to that asset. Broadly speaking, there are two ways that this might occur. The first way is that the trust asset ceases to belong to the trustee in circumstances where the trust obligation is satisfied. This may be because the asset is wholly transferred by the trustee to a beneficiary or beneficiaries absolutely entitled to it (including by exercise of a power of appointment in the trust to that effect, or under the so-called rule in Saunders v Vautier (1841) 4 Beav 115, Cr & Ph 240). Or it may be because it is alienated by the trustee to a third party under a power to do so conferred by the terms of the trust, or even in breach of trust, as long as the transferee is a good faith purchaser for value of the legal estate without notice: see eg Pilcher v Rawlins (1872) LR 7 Ch App 250. Such an alienation may for example be a sale for consideration, in which case the consideration usually becomes trust property in place of the asset (eg where powers of investment are exercised). Or it may be the price properly paid for some service rendered or other consumable supplied to the trustee as such trustee. Thus, at the point where all the trust assets have been lawfully alienated or correctly distributed to those entitled, and there is no longer any asset whose owner’s conscience can be burdened by a trust obligation, there can be, and is, no longer a trust. It has come to an end. Once again, no asset, no trust. In principio finis.[27]Of course, if a trust asset is distributed to a person not beneficially entitled to it, even by innocent mistake, and whether or not the transferee knows of the mistake, the trust obligation does not cease in relation to it. In principle, the transferee holds it as trustee for the person or persons beneficially entitled. Similarly if an asset is “sold” to a person who is not a good faith purchaser for value of the legal estate without notice. Even if the asset disappears, as where it is destroyed or consumed without other surviving exchange product, the circumstances may be such as to create a cause of action against someone in respect of that disappearance (see egBishopsgate Investment Management Ltd v Maxwell [1994] 1 All ER 261, CA), and that cause of action will normally be trust property. So the “trust” in that case still survives, though in relation to a different (and usually more problematic) form of property.[28]The second way in which the trust obligation can come to an end in relation to an asset is where the asset remains in the hands of the trustee, but the trust obligation nonetheless ceases. This may be because there is no longer any person with any equity to bind the conscience of the legal owner (the hitherto trustee). The lack of a beneficiary in such a case means that there can be no trust, and the legal owner in effect becomes the beneficial owner too: cf for example Burgess v Wheate (1759) 1 Wm Bl 123, 1 Eden 177; Re Lashmar [1891] 1 Ch 259, CA.

General law conclusion

[29]It can therefore be said that, under the general law, a trust “subsists” from(a) the moment that the trust obligation comes into existence in relation to some asset, to(b) the moment when it ceases in relation to any surviving asset derived from the original. That does not of course mean that the word “subsist” and its cognates, where they are found in a trust instrument, must necessarily be construed in that sense. Everything depends on context. Subject to public policy limits, a settlor is entitled to settle property as he or she chooses. So, the words used in a particular trust instrument must be construed in the light of the particular instrument as a whole. I must therefore consider the meaning of the word “subsisting” in clause 6 of the settlement in this case.

Dooneen Ltd v Mond

[30]Before I do so, however, I should record that I was referred to the fairly recent decision of the Supreme Court in the Scottish case of Dooneen Ltd v Mond [2019] 1 All ER 895, 21 ITELR 473, [2019] BPIR 160. This was not only not an English case (being instead a Scottish one), but it was also an insolvency case. In 2006, the debtor had (in accordance with Scottish law, derived from the Roman procedure known as cessio bonorum) executed a deed of conveyance of his assets to a trustee (Mond) for the benefit of his creditors, in order to avoid the otherwise usual Scottish bankruptcy process of sequestration. The creditors’ claims exceeded the known estate. The final payment to creditors took place in 2010, at the rate of 22.41 pence in the pound, and a few days later the trustee received his discharge, which was later registered in the Register of Insolvencies.[31]Lord Reed (with whom all the Justices agreed) explained the problem thus:
“ … after the debtor’s estate so far as known had been distributed in partial payment of his debts, and he and his trustee had received their discharges, additional property was discovered, of which his trustee had not previously been aware. There is no suggestion that it had been concealed, or that the debtor was even aware of its existence. The question raised in the appeal is whether the trustee (or former trustee, depending on the view one takes) is entitled to the property, and can distribute it among the creditors (or former creditors) in further payment of the debts (or former debts). As will appear, the form in which the case has been brought presents the court with a narrow issue, and it has been unable to consider wider aspects of the question which it might otherwise have addressed.”
[32]The additional property which came to light was a sum of £56,000 payable as compensation in respect of the mis-selling to the debtor by his lender (the Bank of Scotland) of payment protection insurance. No-one had thought of this at the time of the deed of 2006, or of the administration in 2010. In 2015, the debtor had appointed Dooneen his agent for making a claim against the bank, in return for 30% of any compensation paid. Later that year, the compensation was paid to the trustee (Mond), who claimed it as part of the debtor’s estate, and distributed it to creditors. Dooneen and the debtor subsequently pursued Mond for a declarator (in English terms, declaration) that the compensation did not fall within the debtor’s estate assigned to Mond, and accordingly for repayment to themselves.[33]The Court held that the answer to the problem lay in the construction of the particular trust deed by which the debtor conveyed his property to the trustee. Clause 11 provided that the trust deed would terminate on the earliest of the following events:
“(i) An award of sequestration of my Estate ... (ii) The final distribution of my Estate (which shall for the avoidance of doubt include a nil distribution) by my Trustee in accordance with this Trust Deed. (iii) The acceptance by my creditors of any composition offered by me.”
[34]The pursuers succeeded at first instance and on first appeal, on the basis that the trust deed provided for a composition between the debtor and the acceding creditors, conditional on a “final distribution” decided on by the trustee under the provisions of the deed. The Supreme Court affirmed this decision. Lord Reed said:
“21. … a decision that a distribution is final, taken by the trustee under the present trust deed in accordance with his fiduciary duty, must be regarded as definitive, subject to the possibility, discussed below, of its being reduced (ie set aside). It follows, in the present case, that the trust came to an end on 5 November 2010, that the debtor was then discharged of his debts, and that the former trustee, discharged later the same month, has no entitlement to the asset discovered in 2015. The appeal should therefore be dismissed.”
[35]Perhaps regrettably, this decision is of no assistance to me in considering either the general law or in deciding the present case. Not only is this a decision under Scottish law, but it is also one under the law of insolvency, and not the general law of trusts. The Supreme Court in effect decided that the trustee under the terms of the trust deed in that case had the power to terminate the trust, and had done so in 2010. So the trust had come to an end then, and the former trustee had no entitlement to the asset later discovered to exist. The court recorded expressly in a postscript to its judgment (at [23]) that it had sought discussion from the parties as to the effect of mistake on the exercise of that power (and hence the reference at [21] to possible “reduction”), but that the parties had declined to provide any. The decision accordingly stopped there. A preliminary point: the words “shall accrue” in paragraph 4(5) and 5(5) of the 1971 order[36]Before I turn to consider whether the trusts of David’s Fund were “still subsisting”, I must deal with a preliminary point. When the claimant’s counsel (Mr Jones) was originally instructed, a question was raised by the claimant as to the meaning of the phrase “shall accrue” in paragraphs 4(5) and 5(5) of the 1971[37]I turn to clause 6 of the settlement, already set out above. The parties agree that the phrase “trusts … subsisting” in that clause is the converse of the phrase “trusts [which] fail or determine” to be found earlier in that clause. The two phrases are used in opposition to each other. Thus, to the extent that trusts of David’s Fund have not failed or determined, they are subsisting. However, the two sides then part company. The claimant trustee says that, as assets of David’s Fund have been distributed to those absolutely beneficially entitled to them, those trusts have “determined” within the meaning of clause 6. As Mr Jones puts it in his skeleton argument, “Without any assets to hold, the trust could not realistically be said to be subsisting”. In argument, the trustee added that the trustees of David’s Fund had nothing to do.[38]On the other side, the defendant says that clause 6 as it is drafted is concerned with assets which have not vested absolutely in a beneficiary. It is concerned with the case where the trusts fail or determine, not for want of assets, but for some other reason, such as want of beneficiaries. Each of the three Funds is held on trusts for a named child of the settlor and then for the issue of that child, but subject to that by way of a cross-accruer to the other Funds, ie on the trusts of those other Funds. So, the phrase “trusts … subsisting” refers to trusts of a share which has not been subject to a cross-accruer.[39]The claimant trustee says that “any interest which Angela[’s] and David’s Fund[s] may have in the assets of Simon’s Fund under clause 6, is a future unascertained interest which is not capable of amounting to an asset capable of being settled in trust other than by contract”. I do not agree. The interest of the beneficiaries of Angela’s and David’s Funds in Simon’s Fund is not “unascertained”. It is a future contingent interest in capital, just as a trust for A for life with remainder to A’s children absolutely, but if A dies without children then for B absolutely, gives B a future contingent interest. The fact that A may live to be 90 years old, and that it may take several decades after the making of the settlement before it is known that the contingency for B is satisfied is irrelevant. The interest of the beneficiaries of Angela’s and David’s Funds in the assets of Simon’s Fund has been exactly the same all the way along, a contingent interest in remainder (as indeed it is referred to in the 1958 Act orders), until it fell into possession on Simon’s death without issue.

Decision

[40]In my judgment the defendant’s construction is to be preferred. The scheme adopted by the settlor in creating his settlement was to treat his three biological children equally. In principle each child and its issue would benefit from a one third share of the trust fund. But if a child died without issue, or with issue that died out, at a time when another child or children, or its or their issue, was or were still alive, the assets of the deceased child’s Fund would then be held – by virtue of the so-called cross-accruer clause – on trust for that or those other child or children, or its or their issue, as the case might be. The cross-accruer clause is simply a short way of describing the trusts applicable to a particular Fund without the need to set them out in full.[41]By virtue of such a clause, the whole trust fund might end up being held on trust for one line of descent, or ultimately even for one person in that line of descent. The trusts of the Fund of a child (“A”) who died without issue would “fail or determine” within the meaning of clause 6, because there were no more beneficiaries of A’s Fund, but the trusts of the Fund of a child (“B”) who at that time had not died, or who had died but left issue still alive, would still be “subsisting” within the meaning of clause 6, and even though the capital of B’s Fund had by then been entirely distributed. The trusts of B’s Fund would be still “subsisting”, because there were assets held by the trustees (ie the assets in A’s Fund) still subject to those trusts.[42]The claimant may be right to say that the trustees of David’s Fund have had nothing to do. But, if so, that is because the trusteeship of the three Funds has become separated. The trustees of Simon’s Fund were still doing their job, investing funds and paying income to Simon. There is no “dormant” interest “finding its way back” to David’s Fund after 22 years. It is all about the assets, and the trusts affecting them from time to time. And the assets of Simon’s Fund have not been dormant at all. If there had been no separate appointment of trustees of David’s Fund, there would only be one set of trustees, who would not be doing nothing. And the fact of the separation of the trusteeship of the Funds cannot affect the question of construction of clause 6. As I have said, and the parties agree, I must construe the settlement as a whole.

Were the trusts of David’s Fund “subsisting” at the date of Simon’s death?

[43]In the sense in which I have understood the phrase “trusts … subsisting” in clause 6, on Simon’s death without issue, when the trusts of his Fund failed, the trusts of both David’s and Angela’s Funds were still “subsisting”, even though at least some (and, indeed, even if all) of the beneficiaries of David’s Fund had already received their full entitlement to assets originally in David’s Fund. Thus, in my judgment, since Simon’s death the assets of Simon’s Fund have been held on the trusts of Angela’s and David’s Funds equally.[44]In these circumstances, it is not necessary for me to deal with the defendant’s arguments based on the existence of small funds originally part of David’s Fund which I have held have not yet been distributed to those entitled. However, if I were wrong, and the question whether the trusts of David’s Fund were still subsisting at the date of Simon’s death somehow depended on whether there were still any assets derived from David’s Fund held on trust and not yet distributed to those entitled, the answer would be Yes. The Gibson Grandchildren’s Immediate Fund and the Collaterals Fund, so far as derived from David’s Fund, have not yet been distributed. Hence, on that basis, the trusts in relation to David’s Fund would be still “subsisting”. But I do not rely on this. The subsidiary question The trustee’s application

The subsidiary question

[45]There is finally the question of permission for the trustee to administer the settlement on the footing that the settlor’s daughter Angela, born in October 1930, and now aged 95 years, will have no further children. This is a kind of “Beddoe” application (from Re Beddoe [1893] 1 Ch 547, CA), where the court is asked to sanction the administration of a trust, and the distribution of its benefits, on a certain factual basis, although in reality there is uncertainty about whether this is actually true. If made, the order protects the trustee from personal liability for later claims for breach of trust, whilst not affecting the rights of any beneficiary who, contrary to the hypothesis on which the order is made, subsequently comes forward to claim a benefit under the trust from those to whom it has in the meantime been distributed. As Wilberforce J put it in a similar case, Re Westminster Bank Ltd.'s Declaration of Trusts [1963] 1 WLR 820, 823, “The only result of the order I make is to affect the trustees and not to extinguish any right that any future child might have.”

Re Pettifor’s WT

[46]I was however specifically referred to Re Pettifor’s WT [1966] Ch 257. In this case, a fund was held on trust for the testator’s daughter for life, with remainder absolutely to three named beneficiaries and any further children that the daughter might have who attained the age of 21 years, and if more than one in equal shares absolutely. The daughter was now aged 78, and a remainderman sought an order under the 1958 Act to vary the trusts so as to exclude further children of the daughter, having arranged insurance to cover the eventuality of the daughter’s in fact having further children (so that such children if born should be compensated).[47]Pennycuick J held that it was inappropriate to proceed under the 1958 Act at all for this purpose. However, he permitted the applicant to amend the application, so that it became one for an order that the trustees be at liberty to deal with the trust fund on the footing that no child would thereafter be born to daughter.

The judge then made that order, though he also said this (at 260C):

“In the case of a woman in the seventies, not only would trustees be authorised to distribute a fund on that footing without any doubt or question, but the court would, I think, normally consider it an unnecessary waste of money for the trustees to come to the court and ask for leave so to distribute.”

Application to this case

[48]Here, Angela is now more than 95 years old. I have no medical evidence, but frankly I do not need any in relation to a lady of that age. I can take judicial notice that nature is what it is. Even in the 21st century, female human beings do not have natural children at 95. I accept that, in theory, a person may adopt a child at any age, but the possibility of a lady of this age now adopting a child seems to me to be utterly fanciful. There is no serious possibility that, given the costs involved in an application to court, a judge would hereafter consider it a breach of trust on the part of a trustee to deal with the trust fund on the footing that there would be no further children, even without such an order’s being sought and obtained. As Pennycuick J said in Re Pettifor’s WT, sixty years ago (at 260D), “Trustees can with complete safety and propriety deal with their funds on the basis that a woman of 70 will not have a further child.”[49]So, if this order had been the only point of this application, I would indeed have thought it a waste of the beneficiaries’ money. Happily, here it has simply been tacked on to a more substantial question which in any event needed to be resolved after adversarial argument. The cost of the additional application is therefore marginal, at worst. Moreover, the defendant did not oppose the claimant’s application, or criticise the trustee’s use of trust resources. In these circumstances, I will therefore deal with the application made, and make the order sought. But this should not be taken as licence in the future to seek sanction for obviously lawful actions to be taken and implemented by trustees. Trustees do take on onerous responsibilities, but they cannot simply shuffle them off onto the court for no good reason.

Overall conclusion

[50]For the reasons given above, I will declare that(i) the assets of Simon’s Fund are since Simon’s death held on the trusts of Angela’s and David’s Funds equally, and(ii) the claimant may deal with the assets of Angela’s Fund on the footing that Angela will not have any more children. I should be grateful to receive a minute of order to give effect to this judgment, preferably agreed.

Order

“any part of David’s Fund or Simon’s Fund that shall accrue to Angela’s Fund … shall be held … ” (and vice versa). In particular, the claimant was concerned to know whether this phrase was imperative so as (potentially) to have the effect of altering the effect of the cross-accruer clause. Mr Jones’s view was that it did not do so. I agree with him. Although the word “shall” is often used to denote an imperative, in the particular context in which it is used here it indicates conditionality, ie “if any part of David’s Fund or Simon’s Fund should accrue to Angela’s Fund then it shall be held … ” In my judgment the use of the phrase “shall accrue” does not of itself alter the effect of the cross-accruer clause. “Subsisting” in clause 6 of the settlement Submissions