Will And Estate Disputes Update - December 2018

In this issue:

Section 57(1) of the Trustee Act 1925 - an alternative to VTA applications? What does it take to prove undue influence? Reform of the Deprivation of Liberty Safeguards - Bill Update Cohabitee 1975 Act Claims: Life interest or Lump sum payment? Sole beneficiary loses appeal against claim for financial provision by adult children The Court grants permission under Section 57(1) of the Trustee Act 1925

In the case of South Downs Trustees Limited -v- GH, the High Court has recently considered an application under section 57(1) of the Trustee Act 1925. This section allows a trustee to apply to Court for permission to carry out a sale, disposition or other transaction in connection with a trust which they would otherwise be unable to perform, either because of a law in force, or because of the absence of a power to do so in the trust instrument itself. The purpose of section 57(1) is to allow the Court to authorise specific dealings with trust property to ensure that it is managed in the best way possible and in the interests of the beneficiaries but, crucially, not to rewrite the trust. Section 57 applications are not common, but this case highlights their usefulness.

In this case, the Court was asked to determine whether a trustee could sell the trust's entire interest in a holding company, thereby bringing the trust to an end. The object of the trust was to facilitate the holding of shares by the beneficiaries, or for their benefit. The relevant clauses of the trust instrument gave the trustee the power to apply income and capital of the trust for the benefit of the beneficiaries but restricted his power to dispose of the trust's Lucinda Brown Partner Tiffany Wiggett Associate beneficial interest in any shares if that resulted in a loss of control of the holding company.

The Court considered the elements of the section 57(1) test in turn. Firstly, it was clear that the fist condition was satisfied, as the trustee had no express power to carry out the proposed transaction. The Court then had to determine whether it was expedient for the trustee to dispose of the shares. In doing so, the Master weighed the overall financial advantages and disadvantages of the proposed sale and concluded that there were significant benefits from the sale which were far greater than any possible risk or other consideration. Lastly, the Court had to consider the exercise of its discretion in order to confer the additional power on the trustee. This decision was a 'momentous' one given that it would result in the trust being wound up and represented a significant change in approach to the original purpose of the trust. However, the Court's view was that the trustee was right to adopt a different approach in light of what was expected to be a less beneficial financial era on the horizon. The trustee's decision to sell the shareholdings was not an unreasonable one and there were no conflicts of interest to be concerned with.

This case should be of interest to trustees faced with...

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