You are on page 1of 15

Page 1

3 of 98 DOCUMENTS

Re JOEL'S WILL TRUSTS, ROGERSON AND OTHERS v. BRUDENELL-BRUCE AND OTHERS. CHANCERY DIVISION [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209 HEARING-DATES: 23, 24, 25 February 1966 25 February 1966 CATCHWORDS: Accumulation -- Income of fund held on trust for grandchildren at twenty-one -- Statutory power of maintenance -Accumulation of surplus income -- Destination of accumulations -- Trustee Act, 1925 (15 & 16 Geo. 5 c. 19), s. 31 (2). Apportionment -- Income -- Apportionment in respect of time -- Class gift -- Trust for grandchildren contingent on attaining twenty-one -- Whether income of trust fund to be apportioned on birth of additional grandchild -- Application of accumulations of income to which grandchild contingently entitled but dying without obtaining vested interest -Apportionment Act, 1870 (33 & 34 Vict. c. 35), s. 2. HEADNOTE: Under a will, an order of court, and a deed of appointment dated in and between the years 1930 and 1959, a fund was held in trust for a class of grandchildren of the testator contingently on their attaining twenty-one years of age. The interest was in possession and carried the intermediate income. Section 31 of the Trustee Act, 1925, was applicable. Five grandchildren were living at the date of the deed of appointment in 1959 and three were born subsequently. Held: (i) when a member of the class of grandchildren died under twenty-one or another potential member of the class was born there was a change of interest of the other members of the class to which the Apportionment Act, 1870, s. 2, applied, with the consequence that the income of the trust ought to be apportioned so that each member enjoyed only that portion attributable to the time when he was alive; and outgoings ought likewise to be apportioned equitably (see p. 485, letter I, p. 487, letter C, and p. 490, letter F, post). Donaldson v. Donaldson ((1870), L.R. 10 Eq. 635) applied; Clive v. Clive ((1872), 7 Ch. App. 433) considered. Re Gourju's Will Trusts ([1942] 2 All E.R. 605) distinguished. Bishop of Rochester v. Le Fanu ([1906] 2 Ch. 513) followed. (ii) the investments representing accumulations of income belonging contingently to a grandchild dying before

Page 2 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

attaining a vested interest ought to be added to and thereafter dealt with as part of the entire capital of the trust fund (see p. 491, letter A, p. 495, letters E and G, and p. 496, letter G, post). Re King, Public Trustee v. Aldridge ([1927] All E.R. Rep. 214) not followed. NOTES: As to apportionment in respect of time, see 32 HALSBURY'S LAWS (3rd Edn.) 567, 568, paras. 973, 974. As to gifts carrying intermediate income to a class, see 39 ibid., p. 1042, para. 1563; and for case on the subject, see 44 DIGEST 786-788, 6428-6447. For the Apportionment Act, 1870, s. 2, s. 7, see 13 HALSBURY'S STATUTES (2nd Edn.) 867, 869. CASES-REF-TO: Clive v. Clive, (1872), 7 Ch. App. 433; 41 L.J.Ch. 389; 26 L.T. 409; 20 Digest (Repl.) 302, 442. Donaldson v. Donaldson, (1870), L.R. 10 Eq. 635; 40 L.J.Ch. 64; 23 L.T. 550; 31 Digest (Repl.) 283, 4180. Gourju's Will Trusts, Re, Starling v. Custodian of Enemy Property, [1942] 2 All E.R. 605; [1943] Ch. 24; 112 L.J.Ch. 75; 168 L.T. 1; 2 Digest (Repl.) 239, 418. Holford, Re, Holford v. Holford, [1894] 3 Ch. 30; 63 L.J.Ch. 637; 70 L.T. 777; 23 Digest (Repl.) 469, 5411. Howell, Re, Ex p. Mandleberg & Co., [1895] 1 Q.B. 844; 64 L.J.Q.B. 454; 72 L.T. 472; 5 Digest (Repl.) 1030, 8337. Jeffrey, Re, Burt v. Arnold, [1891] 1 Ch. 671; 60 L.J.Ch. 470; 64 L.T. 622; 23 Digest (Repl.) 469, 5409. King, Re, Public Trustee v. Aldridge, [1927] All E.R. Rep. 214; [1928] Ch. 330; 97 L.J.Ch. 172; 138 L.T. 641; 40 Digest (Repl.) 618, 1129. Lysaght, Re, Lysaght v. Lysaght, [1898] 1 Ch. 115; 67 L.J.Ch. 65; 77 L.T. 637; 9 Digest (Repl.) 634, 4227. Mills v. Norris, (1800), 5 Ves. 335; 31 E.R. 617; 44 Digest 774, 6318. Rochester (Bishop of) v. Le Fanu, [1906] 2 Ch. 513; 75 L.J.Ch. 743; 95 L.T. 602; 19 Digest (Repl.) 553, 3947. Scott v. Earl of Scarborough, (1838), 1 Beav. 154; 8 L.J.Ch. 65; 48 E.R. 898; 44 Digest 786, 6430. Shipperdson v. Tower, (1844), 3 L.T.O.S. 199; S Jur. 485; 20 Digest (Repl.) 299, 415. Swansea Bank v. Thomas, (1879), 4 Ex.D. 94; 48 L.J.Q.B. 344; 40 L.T. 558; 43 J.P. 494; 5 Digest (Repl.) 1022, 8263. Tyrrell v. Clark, (1854), 2 Drew. 86; 23 L.J.Ch. 283; 22 L.T.O.S. 313; 61 E.R. 651; 20 Digest (Repl.) 300, 423. Wilson, Re, Ex p. Hastings (Lord), (1893), 62 L.J.Q.B. 623; 10 Morr. 219; 4 Digest (Repl.) 428, 3800. INTRODUCTION: Adjourned summons. This was an application by the plaintiffs, Frank Leslie John Rogerson, Robert Montgomery and Charles Gordon Johnston, the existing trustees of the trusts constituted by the will, dated Oct. 22, 1930, of Solomon Barnato Joel, deceased, who died on May 22, 1931, an order dated Dec. 18, 1958, under the Variation of Trusts Act, 1958, approving an arrangement to vary the trusts of the will, and an appointment dated Mar. 28, 1959, by Stanhope Henry Joel, made in exercise of a power of appointment given to him by the will and the arrangement. The plaintiffs sought the determination of the following questions, among others: 1. Whether in their accounts of the grandchildren's fund representing the sum of 420,000 appointed by the above-mentioned appointment dated Mar. 28, 1959, the plaintiffs ought to keep a separate account of the income of the contingent share of each grandchild of Stanhope Henry Joel (hereinafter called "Mr. Joel") who is from time to time living showing how much income is applied for the maintenance education or benefit of such grandchild or accumulated as an addition to the capital of such share and to prepare such accounts with rests at: -- (a) the birth of each further grandchild of Mr. Joel born after Mar. 28, 1959, and (b) the death of each grandchild of Mr. Joel who dies. 2. Whether for the purpose of adjusting the said accounts on the birth of each grandchild beyond those living at the date of the said appointment the plaintiffs ought: -- (a) to apportion in accordance with the provisions of the

Page 3 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

Apportionment Act, 1870, all income received and all outgoings paid thereout (whether before or after the birth of that grandchild as the case may be) in respect of the grandchildren's fund or (b) to allocate to the older grandchildren (excluding the newly born grandchild) all income actually received and all outgoings actually paid or provided for thereout before the birth of such grandchild and to allocate to such newly born grandchild equally with the older grandchildren all income actually received and all outgoings actually paid or providef for after the birth of such grandchild without regard to the period in respect of which such income accrued or such liabilities arose. 4. Whether the plaintiffs ought for the purpose of enabling accumulations of income to be re-allocated on the death of a grandchild before attaining a vested interest to segregate on the birth of each additional grandchild of Mr. Joel the fund of investments representing the accumulations of income of the share of each older grandchild made since the birth of the last to be born of the older grandchildren then living. 5. If question 4 is answered in the affirmative whether the income arising from each such segregated fund ought to be accumulated as an addition to that fund or dealt with as income of the original share of the grandchild to whom it contingently belongs. 6. If question 4 is answered in the affirmative whether on the death of a grandchild of Mr. Joel before attaining a vested interest the accumulations of income belonging contingently to such grandchild ought to be re-allocated to the accumulation accounts of the other grandchildren who are then living or have previously died after attaining a vested interest by dividing each fund of investments segregated in respect of the period immediately preceding any rest in the plaintiffs' accounts equally between the other funds segregated in respect of the same period for the benefit of such other children or in some other and if so what manner. 7. If question 4 is answered in the negative whether on the death of a grandchild of Mr. Joel before attaining a vested interest the investments representing accumulations of income belonging contingently to such grandchild ought to be re-allocated to the accumulation accounts of the other grandchildren who are then living or have previously died after attaining a vested interest by: -- (a) ascertaining the respective amounts credited to the accumulations account of the deceased child in each period between two rests in the plaintiffs' accounts; (b) dividing the said investments into separate proportionate in value to the amounts so ascertained and dividing each such separate fund equally between the respective accumulation accounts for the same period of the other grandchildren who were living during that period and have survived the deceased grandchild or predeceased him after attaining a vested interest; or in some other and if so what manner. By amendment made, by leave, on the hearing, a further question was raised: whether on the death of a grandchild of Mr. Joel before obtaining a vested interest the investments representing accumulations of income applying contingently to such grandchild ought to be added to and thereafter dealt with as part of the entire capital of the grandchildren's fund (see p. 491, letter A, post). The defendants, each of whom was an infant and a grandchild of Mr. Joel and had a contingent interest in the capital and income of the grandchildren's fund, were (i) Andrew Robert Joel Brudenell-Bruce; (ii) Diana Elizabeth Solna Thomson Jones; (iii) Christopher Thomson Jones; (iv) Joanna Dana Brudenell-Bruce; (v) Timothy Thomson Jones; (vi) Sara Vivien Brudenell-Bruce; (vii) Nicholas William Joel Jones; and (viii) Patrick WalterJoel Jones. The first five defendants were born before Mar. 28, 1959 (the date of the appointment). COUNSEL: E. W. Griffith for the plaintiffs, the trustees. E. F. R. Whitehead for the first five defendants. J. W. Brunyate for the sixth, seventh and eighth defendants. PANEL: Goff, J.

Page 4 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

JUDGMENTBY-1: GOFF, J. JUDGMENT-1: GOFF, J.: This summons raises a number of somewhat complicated questions concerning the duty of trustees in administration and rights of the beneficiaries where there is a gift to a class, the shares being contingent and the class being capable of increase by the birth of further members, or of decrease by the death of a potential member without obtaining a vested interest. By the joint effect of the will dated Oct. 22, 1930, of Solomon Barnato Joel, who died on May 22, 1931, an arrangement under the Variation of Trusts Act, 1958, sanctioned by this court, by an order dated Dec. 18, 1958, and an appointment dated Mar. 28, 1959, by Mr. Stanhope Henry Joel, in exercise of a power of appointment given to him by the will and the arrangement, a fund is held by trustees in trust for a class of grandchildren contingently on their attaining twenty-one years of age. The interest is in possession and carries the intermediate income. There are five grandchildren who were in esse at the date of the appointment, and three grandchildren born subsequently, namely, the sixth, seventh and eighth defendants. The summons asks that these defendants may be appointed to represent all unborn grandchildren who may become entitled to beneficial interests in the fund. For the purposes of this hearing, at all events, their interests are identical. The first question which is raised on the summons is whether the Apportionment Act, 1870, applies, and, in my judgment, it does, for the following reasons. The first of those reasons is that, as counsel on behalf of the first five defendants says, the words of the Act of 1870 are general and unqualified and the cases show that the Act of 1870 is only to be excluded by express words or necessary implication, not by any general inference. The words of the important section, s. 2, are: "... all rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly." Section 7 provides: "The provisions of this Act shall not extend to any case in which it is or shall be expressly stipulated that no apportionment shall take place." It was held, in Tyrrell v. Clark n(1), under the earlier Act n(2), and by the Court of Appeal in Re Lysaght, Lysaght v. Lysaght n(3), in effect that that section meant what it said, and that the Act of 1870 could be excluded only by words expressly so stating, or requiring that conclusion by necessary implication. n(1) (1854), 2 Drew. 86. n(2) The Apportionment Act, 1834; see s. 3 thereof, 13 HALSBURY'S STATUTES (2nd Edn.) 855. n(3) [1898] 1 Ch. 115. The second reason for the conclusion which I have reached is that even the former Act, which referred to death or other termination of interest, was held to apply to a change in interest. I refer to Donaldson v. Donaldson n(4), where BACON, V.C., said n(5): n(4) (1870), L.R. 10 Eq. 635. n(5) (1870), L.R. 10 Eq. at p. 639. "In substance the decision came to this: that wherever a person is in receipt of rents and profits, and any change takes place whereby that person's interest ceases or is altered, and another interest begins, or a change of interest takes place, then an apportionment must be made."

Page 5 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

Now it is true that if the class changes by a person dropping out through failure to obtain a vested interest, or by some other person being born, the other members of the class still take under the same title, but, in my judgment, there is a change of interest, because they take a different presumptive share of capital. A larger or smaller share is then available, held in trust for them contingently and, of course they become entitled, subject to the provisions of s. 31 of the Trustee Act, 1925, to a different share of income. In my judgment, when a person dies or another potential member is born, there is inevitably a change of interest of the other members or potential members of the class and, accordingly, on the principle there stated, the Act of 1870 should apply. I also derive some support for this conclusion from the case of Clive v. Clive n(6). The headnote reads as follows: n(6) (1872), 7 Ch. App. 433. "A testator gave his residuary personal estate, with the accumulations thereof, to his trustees in trust for his two granddaughters C. and P., as tenants in common, their shares to be vested at twenty-one or marriage, the income to be applied for their benefit during minority, and the surplus accumulated. And the testator directed that in case either granddaughter married under twenty-one the trustees should settle her share for her life for her separate use, with remainder to her children. Both the granddaughters married under twenty-one, C. in 1867, and P. in 1870, which was after the passing of the Apportionment Act... Held, that in both cases the income of the granddaughter's share was apportionable up to the time of her marriage..." The judgment of JAMES, L.J., is quite short. His Lordship said n(7): n(7) (1872), 7 Ch. App. at p. 437. "We think that it is too late to raise the question as to apportionment after the cases which have been decided in this court. One of them -- Shipperdson v. Tower n(8) -- was decided as long ago as 1844, and no attempt has been made to shake or question it. We must, therefore, take it to be the cursus curiae, and also the settled understanding of conveyancers, that the Apportionment Act did apply to cases of this kind. The new Act n(9) of 33 & 34 Vict. c. 35, extended the principle of the Act n(10) of 4 & 5 Will. 4, c. 22, in the same direction, so as to make it applicable to every form of reservation of income, which was in all cases to be treated as if it were interest accruing de die in diem, so that there might be no more questions on this subject. Therefore the authorities dispose of the question as regards Mrs. Clive's settlement, and the recent Act disposes of the question as regards Lady Peyton's settlement. There must be an apportionment of the income in each case up to the date of the lady's marriage." n8 (1844), 3 L.T.O.S. 199. n(9) The Apportionment Act, 1870. n(10) The Apportionment Act, 1834. Counsel for the sixth, seventh and eighth defendants has argued that the case is distinguishable because there was a change of interest in as much as until twenty-one the relevant trust was to apply income maintenance and accumulate surplus and on marriage under twenty-one a new trust arose, namely, a trust to settle the share on the granddaughter for life, with remainders over. It may be that that is a stronger case, but it seems to me to be very much akin to the problem which I have to consider, because here one does have a change in the nature of the relevant trust occurring in the event of a death or birth which affects the composition of the class. Counsel has argued that this conclusion is not right because the members of the class and potential members for the time being are not really entitled to the income at all. It should be accumulated for the benefit of the class when ascertained. Only the statute allows application for maintenance, and expressly provides for the destination of the accumulations, and it is only a rule of convenience to ignore the possibility of future children and to divide the income from time to time between the children for the time being existing and, of course, the legal representatives of those dying after obtaining a vested interest. Therefore, he

Page 6 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

said, if another child is born during any year that child has as much right to income received in that year as the older ones. That seems to me to be inconsistent with the terms of s. 31 itself and with the decision in Re Holford, Holford v. Holford n(11), where it was clearly decided that the possible future rights of persons not yet born are not existing rights. LINDLEY, L.J., said n(12):

n(11) [1894] 3 Ch. 30. n(12) [1894] 3 Ch. at p. 46. "There is good sense in saying that the income of property given contingently to a class of persons belongs to its members for the time being, as against persons who are only entitled if and when the class ceases to exist; but there is no sense in saying that one of a class takes the whole income, in which other persons belonging to the same class have already a contingent interest which may become absolute. In Mills v. Norris n(13) and Scott v. Earl of Scarborough n(14), the question for decision was whether some members of a class were entitled to the income of property given to them and others of the same class who were not yet born, and the answer was 'Yes'. The decision was obviously reasonable and just. To treat the future possible rights of unborn persons as existing rights, even if only contingent, would have been to depart from sound principles with no sufficient justification." n(13) (1800), 5 Ves. 335. n(14) (1838), 1 Beav. 154. Therefore, a child, until he is born, cannot, in my judgment, have any right to or interest in the accruing income and on principle it ought to be apportioned so that he participates in the portion attributable to the time when he is alive and not to the time when he was not yet born. LINDLEY, L.J., also said n(15):

n(15) [1894] 3 Ch. at p. 47. "I come, therefore, to the conclusion that the infant children are contingently entitled to five-sixths of the residue with which we have to deal, and that neither the whole capital nor the whole income of such residue is during their minority vested in or payable to the child who has attained twenty-one. If this be so, it is plain that the Conveyancing Act, 1881 (44 & 45 Vict. c. 41), s. 43, authorises the trustees to apply the infants' contingent shares of income towards their maintenance." Later LINDLEY, L.J., said n(15): n(15) [1894] 3 Ch. at p. 47. "So although if those children who are still under ago should die under twenty-one, the child who has attained twenty-one will take their shares, still the Act authorises the application for their maintenance of the income of their contingent shares, for that income contingently belongs to them." It seems to me that one has to approach this on the footing that one is dealing with income of the contingent shares and that income can only belong to a person who is living at the time when it accrues, which necessarily, in my judgment, lets in the Apportionment Act, 1870. Again, s. 31 of the Trustee Act, 1925, which is the Act which applies to the present case, says: "(1) Where any property is held by trustees in trust for any person for any interest whatsoever, whether vested or contingent... (i) during the infancy of any such person, if his interest so long continues, the trustees may, at their sole

Page 7 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

discretion, pay to his parent or guardian, if any, or otherwise apply for or towards his maintenance, education, or benefit, the whole or such part, if any, of the income of that property as may, in all the circumstances, be reasonable..." Then there are provisions about what one does with the income of that property when the child attains twenty-one and with the accumulations if the child either does or does not acquire a vested interest in the capital. It is more directly relevant to the later question, but there again what the statute is dealing with is the income of the share. It is a fluctuating share and the income which it carries at any given time may be in greater or less proportion than the share which is ultimately taken, but one is dealing with the income of the share, and I can see no real reason why, when the change occurs which entitles the child to a larger share of income, or deprives him of part of the share and reduces it to a smaller one, there should not be an apportionment. Counsel for the sixth, seventh and eighth defendants has instanced the hardship if a child attains twenty-one and has not then a vested interest, because if the income is apportioned, then he loses the part attributed to the period before he attained twenty-one, because it is then too late for the trustees to exercise their power of maintenance, which is only given to them during his infancy. Of course, in the case of Clive v. Clive n(16), the same hardship presented itself, because the income prior to the period of the daughter marrying was added to capital instead of being paid to her as income under her settlement. Certainly, in my judgment, any such considerations of hardship are not sufficient to amount to an express exclusion or an exclusion by necessary implication. When I asked counsel to formulate exactly how he submitted the Act of 1870 was excluded, he said that his main argument was that the Act of 1870 does not apply because s. 31 is a rule for allocating trust income, and the proper rule for that purpose is to deal with income received and not income accruing and, if necessary, as an alternative, that s. 31 of the Act of 1925 cannot have intended that the Act of 1870 should apply. Indeed, counsel said that really the section could not be made to fit. If a child attains twenty-one during the year, one cannot apply the part of the income apportioned to the time before he attained twenty-one for maintenance because the power has expired and one cannot accumulate it in the terms of the section because the trust to accumulate the balance is again during the infancy of any such person. That is s. 31 (2) of the Act of 1925: n(16) (1872), 7 Ch. App. 433. "During the infancy of any such person, if his interest so long continues, the trustees shall accumulate all the residue of that income..." One can, however, add the balance attributed to the time before the child attained twenty-one to capital. That is simple accumulation; it is in respect of the period of infancy; it is not very far removed from the precise wording of the section. Indeed, it is the inevitable consequence of not being able to exercise the power of maintenance. Any consideration of that sort, again, in my judgment, cannot be regarded as an express provision excluding the Apportionment Act, 1870, which would otherwise apply, and I do not accept the proposition that this is merely allocating trust income. In my judgment, it is ascertaining what is the income of the property which is held on trust for the infant. He is entitled to have income applied for his maintenance (otherwise accumulated) because the section applies where property, which includes his contingent share, is held in trust for a person, whether his interest be vested or contingent. Therefore, what one has to do is not to allocate but to ascertain what is truly the income of that share. Therefore, I do not accept either the main way of putting it or the alternative. I have also been referred to the case of Re Gourju's Will Trusts, Starling v. Custodian of Enemy Property n(17). That was a case of a forfeiture clause and it was held that where income was accruing at the time of the forfeiture there was no apportionment and the whole of the income when it became due passed under the trusts taking effect after forfeiture and was not payable to the person who would have taken but for the forfeiture. In my judgment that is a very different type of case. The decision followed older cases, where the trust was to pay the income to a certain person if no event causing forfeiture had happened. The words of s. 33 of the Trustee Act, 1925, are not quite as strong as that because they are to hold it on trust for the principal beneficiary, but it was held that the same principle applied, and made the moment of time when the instalment of income reached the trustees' hands or became payable the relevant time at which to apply the forfeiture clause.

Page 8 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

n(17) [1942] 2 All E.R. 605; [1943] Ch. 24. It was a decision of SIMONDS, J., who said n(18): n(18) [1942] 2 All E.R. at p. 609; [1943] Ch. at p. 33. The passage is a citation from the judgment of SARGANT, J., in Re Jenkins, [1915] 1 Ch. at p. 51. "The effect of the clause, I think, is to prevent the destination of the income being finally determined until the time it has actually accrued due, or, in other words, become payable, and to direct the trustees, when dealing with the income, to fix their attention upon the moment of time when the instalment of income has either reached their hands or become payable. I do not think that an instalment or a sum which, if the Apportionment Act, 1870 had been applied, would have been ultimately payable to the tenant for life is an instalment or a payment of income to which the terms of this clause apply." That, in my judgment, is entirely different from the problem which arises where income is payable to a class of beneficiaries which changes its character during the year in which the income is accruing. There is nothing there to direct one's mind to the moment when the income has accrued as being the relevant time for determining anything. In my judgment, it is entirely different from a forfeiture clause and does not exclude the Act of 1870. I should add that, in my judgment, apportionment is not of the trust income as a whole, but of the items of which it consists. There may, of course, be nonapportionable income. I should also like to deal with another submission by counsel for the first five defendants where he said that there were really two stages. There is apportionment under the Act to ascertain what the income is, and then one deals with the income. Therefore, he said, one could deal with the whole income which is finally attributable to any given share according to the position which obtains when the income in fact becomes payable. So if by then a beneficiary is twenty-one one can pay the whole income to him including income which is attributed to his share by virtue of apportionment in respect of the period before he was twenty-one. I think that one cannot have it both ways. When the income has been apportioned, one must deal with the apportioned part according to the state of affairs which obtained during the period in respect of which the income has been apportioned. If that be the period of infancy, it follows that the income cannot be applied for maintenance, because the trustees cannot exercise their discretion in advance so as to affect the income when it is received, and they cannot apply it in arrear, because the infancy will have ceased. That is, to a small extent, perhaps an unfortunate result of applying the Act, but, in my judgment, it is the right conclusion and certainly does not exclude the Act of 1870. In my judgment, therefore, for these reasons the Act of 1870 in its nature applies and there is nothing to exclude it. There is the further question what, in those circumstances, is to be done with outgoings. It is to be observed that the Apportionment Act, 1870, does not, in terms, speak of outgoings except in one section and in a somewhat parenthetical way, where, in s. 4, giving remedies, it is provided: "All persons and their respective heirs, executors, administrators, and assigns, and also the executors, administrators and assigns respectively of persons whose interests determine with their own deaths, shall have such or the same remedies at law and in equity for recovering such apportioned parts as aforesaid when payable (allowing proportionate parts of all just allowances)..." There is that parenthetical reference. Otherwise, the Act of 1870 does not, in terms, speak of outgoings. The words of s. 2, as I have said, are "... all rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money lent, be considered as accruing from day to day." In Bishop of Rochester v. Le Fanu n(19), however, to which counsel for the plaintiffs drew my attention, it was held that the Act of 1870 did apply to outgoings. The headnote is n(19):

Page 9 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

n(19) [1906] 2 Ch. 513. "The Apportionment Act, 1870, apportions liabilities as well as rights... The annual sums payable by a bishop in commutation of first fruits and tenths are 'periodical payments in the nature of income' within s. 2, and therefore apportionable between successive bishops inter se; but, though now collected and administered by the Governors of Queen Anne's Bounty, they are still in fact Crown debts..." The headnote then went on to another point. The relevant part of the judgment, which was the judgment of SWINFEN EADY, J., was as follows n(20): n(20) [1906] 2 Ch. at p. 521. "But it was contended that the Apportionment Act, 1870, was only intended to affect the rights of the persons entitled to receive the income, and not to apportion, in respect of time, any liability to pay it. There are, however, four decisions to the contrary upon the interpretation of the Act." Then his lordship reviewed these, and said n(21): n(21) [1906] 2 Ch. at p. 522. "Again, in Re Howell, Ex p. Mandleberg & Co. n(22) it was held that by virtue of the Apportionment Act rent for the first two months of a quarter 'accrued due' from day to day, although not payable until the end of a quarter. VAUGHAN WILLIAMS, J., said n(23): 'This was the view which I took in Re Wilson, Ex p. Lord Hastings n(24), where I held, following the decision of the Exchequer Division in Swansea Bank v. Thomas n(25), that the Apportionment Act was intended not merely to affect the rights of the recipients of the rent inter se, but also to apportion the liability to pay the rent between the different occupiers of the premises during the currency of the quarter'. Although dicta may be found in other cases at variance with these decisions, there is not any direct authority of the Court of Appeal the other way, and, in accordance with these cases, I decide that, as against the defendant the Right Rev. Edward Stuart Talbot, as the late Bishop of Rochester, the annual payments are to be treated as accruing due from day to day, and are apportionable between the incoming and the outgoing bishop, and that the said defendant, as the late Bishop of Rochester, is liable for so much of the sums falling due on Dec. 25, 1905, as accrued due during his tenancy of the said see, that is to say, the period between Dec. 25, 1904, and May 24, 1905." n22 [1895] 1 Q.B. 844. n(23) [1895] 1 Q.B. at p. 847. n(24) (1893), 62 L.J.Q.B. 628. n(25) (1879), 4 Ex.D. 94. Even apart from that, in my judgment, if income be apportioned the trustees must have the right and duty to make all proper apportionments on an equitable basis with regard to the outgoings in respect of that income. On the second half of the summons, as postulated, there are a number of questions designed to give effect to the decision in Re King, Public Trustee v. Aldridge (26), a decision of ROMER, J. It was felt that there was a difficulty because in that decision ROMER, J., said that if a person failed to attain a vested interest, then the accounts had to be re-opened and the income from past years had to be re-distributed as if that person had never existed although originally it had been apportioned on the footing that a vested interest would be attained. It was appreciated that there were practical difficulties in the way of giving effect to that, apart from complications of accounts, because it did not remain simply income, which, as it were, could be taken out of a pocket and handed to somebody else; it would have been invested and accumulated. The accumulations might have appreciated or depreciated in value and there might have

Page 10 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

been bonus issues; therefore, if that principle were the right one, it was felt that there was difficulty in knowing exactly how to give effect to it. Accordingly the plaintiffs made a number of suggestions, and finished, not unnaturally, by asking whether the accumulations should be divided in some other, and if so, what, manner. Counsel for the sixth, seventh and eighth defendants has challenged the whole basis of that and has sought to simplify the matter by saying that Re King n(26) was wrongly decided and that I ought not to follow it. Counsel submits that the accumulations of income of the infants who fail to obtain a vested interest should be added to capital. In view of that I allowed the summons to be amended by raising a new question, whether on the death of a grandchild of the testator before attaining a vested interest the investments representing accumulations of income applying contingently to such grandchild ought to be added to and thereafter dealt with as part of the entire capital of the grandchildren's fund. As the other questions will not arise if that be right, that question has been separately argued and I have now to decide it. n(26) [1927] All E.R. Rep. 214; [1928] Ch. 330. I hesitate to differ from ROMER, J.; and I hesitate to reach a different conclusion in respect of a case which was decided as long ago as 1927, that being a case where a child had died and therefore the express point was argued, but it was not a decision on s. 31 of the Trustee Act, 1925. It was a decision on s. 43 of the Conveyancing Act, 1881, and there are some differences in the form of s. 31, and, indeed, in the precise language which deals with these particular accumulations. Section 43 (2) provided: "The trustees shall accumulate all the residue of that income in the way of compound interest, by investing the same and the resulting income thereof from time to time on securities on which they are by the settlement, if any, or by law, authorised to invest trust money, and shall hold those accumulations for the benefit of the person who ultimately becomes entitled to the property from which the same arise; but so that the trustees may at any time, if they think fit, apply those accumulations, or any part thereof, as if the same were income arising in the then current year." Section 31 of the Trustee Act, 1925, on the other hand, says this: "(2) During the infancy of any such person, if his interest so long continues, the trustees shall accumulate all the residue of that income in the way of compound interest by investing the same and the resulting income therof from time to time in authorised investments, and shall hold those accumulations as follows: (i) If any such person -- (a) attains the age of twenty-one years, or marries under that age, and his interest in such income during his infancy or until his marriage is a vested interest; or (b) on attaining the age of twenty-one years or on marriage under that age becomes entitled to the property from which such income arose in fee simple, absolute or determinable, or absolutely, or for an entailed interest; the trustees shall hold the accumulations in trust for such person absolutely...; and (ii) In any other case [which raises the present case] the trustees shall, notwithstanding that such person had a vested interest in such income, hold the accumulations as an accretion to the capital of the property from which such accumulations arose, and as one fund with such capital for all purposes..." The section is necessarily different because s. 31 of the Act of 1925 widened the ambit of s. 43 of the Act of 1881 and applied it not only where the contingency was infancy but to other contingencies and, therefore, it was necessary to make express provision what was to happen if the beneficiary attained twenty-one but his interest did not vest until some time subsequently. That accounts largely, if not entirely, for the addition of the express provisions that the person concerned shall take the accumulations in certain events specified in sub-s. (2)(i), (a) and (b), but it does not account for the change in language in para. (ii), where the subsection no longer says "for the benefit of the person who ultimately becomes entitled to the property". It uses stronger language "... hold the accumulations as an accretion to the capital of the property from which such accumulations arose and as one fund with such capital for all purposes." Counsel for the sixth, seventh and eighth defendants has pointed out that the principle of re-allocation adopted in Re King n(27) could not be applied after the beneficiary had attained twenty-one if his interest had not then vested and,

Page 11 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

therefore, it would be hard if it applied during the earlier part of the contingency short of his attaining twenty-one. It may be that Re King n(27) can be distinguished and supported as an authority on s. 43, but if it applies to s. 31, in my respectful judgment, it was wrongly decided, and I think that arose from the fact that two problems were considered at the same time and the learned judge, having decided the first, slipped into the second which he said logically followed, whereas, in my respectful judgment, it did not logically follow, because the problem was a problem of a different character. The first problem which was being canvassed, the decision on which took up the greater part of the judgment, was this: could a person who had obtained a vested share maintain that he was for the time being the only member of this class and, therefore, was entitled to the whole income until somebody else got a vested interest, notwithstanding that there were other potential beneficiaries in being, or were those potential beneficiaries entitled to a share? It was held that one had to allocate the income to all persons who had a vested interest and all potential members, according to the number for the time being in existence. Then ROMER, J., dealt with the income, in the case of the person who had obtained a vested interest, obviously by having it paid to him, and, in the case of a person who had not, the statute came into operation and the income could be applied under the statute for the maintenance of such person and, if not so applied, it would have to be accumulated. ROMER, J., said n(28): n(27) [1927] All E.R. Rep. 214; [1928] Ch. 330. n(28) [1927] All E.R. Rep. at pp. 216, 217; [1928] Ch. at pp. 335, 336. "It has long since been laid down by the Court of Appeal, differing from a view which NORTH, J., had expressed in the case of Re Jeffery, Burt v. Arnold n(29), that, in a case of that sort, each member of the class as he attains twenty-one is entitled to receive such part of the income as he would be entitled to receive if the class were then closed, that is to say, supposing at the time the eldest of the class attains the age of twenty-one there are only six members of that class in existence, as from the time he attains twenty-one he is entitled to receive one-sixth of the income notwithstanding that the class is capable of increase. Should the class increase later by the birth of a seventh member, as from that time the member of the class who has attained twenty-one would only receive one-seventh of the income assuming that the other members of the class are still in existence. That is very well settled as regards the income of members of the class who have attained the age of twenty-one years. Now what about the members of the class who have not attained, for the time being, the age of twenty-one years? I think it is equally well settled that the same thing is done provisionally, that is to say, if there are six members of the class, of whom one only has attained twenty-one, one-sixth of the income ought to be provisionally allocated to each of the other five members. If and when another member comes into existence so that there are seven members of the class there will thenceforth be allocated to each of the six minors a seventh share of the income." n(29) [1891] 1 Ch. 671. Counsel for the sixth, seventh and eighth defendants has pointed out that it is not clear in precisely what sense ROMER, J., used the word "provisionally", whether he meant provisionally merely because the beneficiary might ultimately not get a share of income or because at a later stage he would get a larger or smaller share of the income. It does not really touch the problem if he meant provisionally in the sense that one could allocate, and then have to see later on whether the allocation was right or wrong, for then it would be impossible to operate the section because the trustees could not apply under their maintenance powers income which at the time they did not know for certain was the income of the infant. Counsel forcibly illustrated that by saying that if the trustees recovered, as I believe has happened in this case, some American tax, they might provisionally allocate that as income of a given year, but they could not then distribute it or apply it so long as it was merely a provisional allocation. They would have to hold it in suspense until they knew what the position really was. Then ROMER, J., continued n(30):

n(30) [1927] All E.R. Rep. at p. 217; [1928] Ch. at p. 336.

Page 12 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

"What is to happen to the income so provisionally assigned to an infant member of a class? In general, that, I think would be governed by s. 31 of the Trustee Act, 1925, replacing s. 43 of the Conveyancing Act, 1881..." Of course, that was obiter, because in his own case it would be governed by s. 43 of the Conveyancing Act, 1881. ROMER, J., continued n(30): n(30) [1927] All E.R. Rep. at p. 217; [1928] Ch. at p. 336. "... and under that section the trustees would, in my opinion, be justified in treating the income so provisionally assigned to the infant member of the class as the income produced by property to which that infant was contingently entitled and would be justified in applying that income for the maintenance, education and benefit of the infant. So far as not so applied the balance of the income would have to be accumulated under sub-s. (2) of the section. Now as a matter of fact this is exactly what is expressly provided for by cl. 13 of the settlement..." That clause is then set out. It ends with these words n(31): n(31) [1927] All E.R. Rep. at p. 215, letter H; [1928] Ch. at p. 337. "... 'and shall pay or apply or deal with the income of the share of the settled fund to which any grandchild who is for the time being living and has not attained a vested interest is for the time being contingently and presumptively entitled as aforesaid in the same manner as it is by s. 43 of the Conveyancing Act, 1881, directed that the trustees shall pay or apply or deal with income to which that section relates'." ROMER, J., then continued n(32): "So far there does not seem much difficulty about the matter." That clause referred back to the section and the case cannot have gone off on any consideration that there was some different provision in the settlement from that which obtained under the relevant statutory provision. Then his lordship said n(32): n(32) [1927] All E.R. Rep. at p. 217; [1928] Ch. at p. 337. "But what are the trustees to do with the accumulations of the income provisionally allotted to the members of the class who have not attained twenty-one, that is, that part of the income which has not been applied in maintenance and education of the infant? Let me again take the case of there being six members of the class in existence, five of whom are infants. The trustees provisionally allocate to each of the five infants a sixth part of the income. So far as that sixth part of the income is not applied in maintaining the particular infant for whose benefit it has been provisionally apportioned, it will have to be accumulated." I ask myself why? I answer that question this way. It will have to be accumulated because that is what the section says. Having got this share of income dealt with by the section, one has got the power of maintenance. If one does not exercise it, the section directs one to accumulate. ROMER, J., continued n(33): n(33) [1927] All E.R. Rep. at p. 217; [1928] Ch. at pp. 337, 338. "But supposing by the time the infant attains the age of twenty-one years the class has increased to seven, what is to be done with the accumulations made at a time when the class only consisted of six members? In other words, what is the property from which those accumulations arose, for according to the Act the accumulations only go to the infant on attaining twenty-one if he becomes entitled to that property. In my opinion the property from which the accumulated income arose is the share to which the infant becomes ultimately entitled, even though that share may be considerably smaller than a sixth by reason of other members of the class coming into existence. For it appears to me that in each year in which there are only six members of the class the income of the ultimate share of each member of that class, whatever it may be, is one-sixth of the income of the trust fund, in other words, that, during the time that there are only six members of the class, the ultimate share of each member is earning income and the ultimate shares of persons who are not at that time members of the class are not earning income. The result of that will be that, as each member of the

Page 13 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

class attains twenty-one he will be entitled to be paid all accumulations of income provisionally assigned to him in the way that I have mentioned before, because that income so provisionally assigned to him is to be regarded as the income of the property to which he ultimately becomes entitled." So in the case of the child attaining a vested interest, what ROMER, J., is saying is that the property for the purposes of s. 43 of the Act of 1881 (and I think that it must be the same under s. 31 of the Act of 1925), the property held by trustees for the infant which is producing income, is the share to which the infant ultimately becomes entitled. It produces income so long as the infant is there, but it does not necessarily produce a share of income which is the same size as the share of capital to which the infant ultimately becomes entitled. According to events the shares may at the time be carrying a larger share of income than the shares ultimately would of themselves warrant, and it may carry a smaller share, but the infant is entitled to property, namely his presumptive share which is producing income, and then he takes the income of that share notwithstanding, as I have said, that it may be larger or smaller than the same proportion of income as the capital share. Then ROMER, J., had to turn to a different problem. In the first place, he had got an infant who ultimately took a share and all that he was doing war marrying up with that share the income which it produced. Next he had to deal with an infant who did not in the end get a share at all. HIS LORDSHIP said n(34): n(34) [1927] All E.R. Rep. at pp. 217, 218; [1928] Ch. at p. 338. "What is to be done supposing, as has happened in this case, one of the members of the class to whom a share has been provisionally assigned dies under the age of twenty-one years? It seems to me that logically the trustee ought to treat the share so provisionally assigned, so far as, of course, it is not applied in maintenance of the child, as not having been properly assigned, and then to reassign the income accruing while that infant was a member of the class amongst the others who were at that time members of the class." With the greatest respect, I cannot see that it logically follows that because in the end the infant does not get a share of capital income having been treated as the income of that share while he had a contingent interest in it which income falls to be dealt with by the statute as to its whole life because the statute deals with maintenance and accumulation and what has to happen to the accumulations, one ought to come back and say that it was originally wrong to have treated that income as income of that share. ROMER, J., was bound to except, and did except, income which has been applied for the maintenance of the child, but if in truth one had to go back and say, "Well, in the end we find the apportionment was wrong, because we thought there were five children but it turned out there were only four", moneys applied for maintenance would have been wrongly applied, because the power was to apply the income of that share for the maintenance of the infant. If one ultimately decides that there was not any such income, one could not properly have applied it for maintenance. ROMER, J., then continued n(35): n(35) [1927] All E.R. Rep. at p. 218; [1928] Ch. at p. 338. "While there are six members, for instance, the income will be divided into six parts: those who are adults will receive their sixth; for those who are minors there will be provisionally allotted their sixth. When another member of the class comes into existence the income will be divided and provisionally alloted into sevenths. [I do not quarrel with that.] Supposing before another member of the class comes into existence one of the seven dies an infant, then it appears to me that the trustee must go back and, if that infant was one of those originally entitled to one-sixth, he must, during the period that he was dividing and provisionally assigning the income in sixths, divide and provisionally assign it in fifths and as from the time that the seventh grandchild was born, instead of dividing and provisionally assigning it in sevenths he must divide and provisionally assign it into sixths. This is a mere matter of book-keeping and should not be difficult to apply in practice." With respect, I do not see why the trustee should go back. It seems to me that he ought to go forward, through the provisions of the section. Having started with the premise that the contingent interest of the infant is property and that

Page 14 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

that property produces income while the infant is in existence, he gets income of that property. Having got it, it can be applied under the power of maintenance. If that is not done, the trustee is bound to accumulate and then what he has got is a fund of accumulations properly made, not, in my respectful judgment, a fund representing some income improperly or provisionally apportioned. Then when some event happens to the infant, he looks at the section to see what he has got to do with the accumulations and sub-s. (2) tells him in all circumstances. If the infant attains twenty-one or marries and he had a vested interest in the income during his infancy or until marriage, then the trustee holds the accumulations for that infant. Alternatively, if the infant attains twenty-one or marries under that age, and he becomes, in effect, absolutely entitled to the property, then also he holds the accumulations for that infant. In any other case, which includes the case of the infant failing to attain twenty-one at all and also attaining twenty-one but not having had a vested interest during his infancy and not acquiring a vested interest at twenty-one, the trustees shall notwithstanding that such person had a vested interest in such income hold the accumulations as an accretion to the capital of the property from which such accumulations arose. The question then is: what was the property from which the accumulations arose? Surely, just as in the case of an infant who gets an interest in capital, it is the share that he ultimately obtains, so here the income arose from the share to which the infant was contingently entitled and none the less so because in the event the infant did not take it at all. That share goes to the other shares because the infant falls out of the class and it goes with the accumulations which are added to it. It seems to me by a logical train of reasoning from the premise from which ROMER, J., started, the logical conclusion is that accumulations go back into a common fund of capital. The same result I think is achieved if one says that the property from which it arose was the whole capital of the trust fund. In my judgment, however, the true position is that each infant in existence must be treated as having, according to the circumstances, either a vested or contingent share of capital. That share, whether it be vested or contingent, carries income and the income of that share goes in the way prescribed by the statute. The infant may ultimately have no share of capital in which case the income is not, in my judgment, re-allocated as having been wrongly allocated, but goes under s. 31 (2), (ii), which appears to me to cover the case exactly. It was argued by counsel for the first five defendants that such a conclusion would fly in the teeth of a well known settled rule of law, that the rights of persons not yet born cannot be treated as existing rights, which was laid down or referred to in the case of Re Holford n(36), which I have already mentioned. In my judgment, however, there is nothing in this conclusion which flies in the teeth of that decision at all. So long as an infant has not been born he has not got a share which is carrying any income at all and, therefore, the income goes to the other members of the class, and a person unborn gets no share of that income at all. If and insofar, however, as the income is accumulated and added to capital pursuant to the Act of 1925, and, the unborn infant having come into existence, in fact acquires an interest in the capital, there is no reason at all why he should not take his share of the accretion to capital due to income which arose before he was born. It is not that his share has produced income when he was not alive. It is not that he has received income accruing while he was not alive, but, by virtue of the statute, income which accrued while he was not alive has become capital, and there are indeed many cases of accumulations, either express or implied, whereby income is added to capital and the capital ultimately vests in a person who was not living when the income accrued. In my judgment, there is nothing in that argument. n(36) [1894] 3 Ch. 30. Various calculations have been laid before me in an attempt to show that one conclusion may be more fair than another. I think that it is reasonably certain that in most cases there will not be absolute equality. It is based on a number of factors, such as the time when children are born and what the trustees apply for maintenance; but I do not think that I can really adopt considerations of that sort. I can proceed only on the basis of the relevant statutory provisions, and I see nothing unfair in principle in a person who ultimately takes a vested interest participating in income which arose before he was born. After all, he takes the share in capital and prima facie ought to have the income which is added to it, and if in the result, because it has not been applied for maintenance of some other infant but has been accumulated and added to capital, it comes back to him, I see nothing unfair. I do not think that one can

Page 15 [1967] Ch 14, [1966] 2 All ER 482, [1966] 3 WLR 209

weigh considerations of that sort. One cannot be certain how it will work out. I simply construe the Act of 1925 and it appears to me to be reasonably plain that the presumptive share of the infant carries a proper share of income which if not applied for maintenance is accumulated and if he dies under twenty-one is then part of the general capital. If I turn to Re King n(37), the premise on which it proceeds produces the same result because ROMER, J., accepts that one has to look to the presumptive share of the infant as the property, and that that property while he is alive produces income, and that that has to be dealt with under the section and only at the final stage does His Lordship depart from my conclusion by coming back to re-opening all that was done. In my respectful judgment, I cannot agree with that. In my view, it does not logically follow. On the contrary, the opposite logically follows. ROMER, J., should in my view have carried his argument to its logical conclusion and arrived at the result at which I have arrived. Therefore, in my judgment, with the very greatest respect to ROMER, J., I think that that was wrongly decided. I shall, accordingly, not follow it and I answer question 4 in the sense proposed by counsel for the sixth, seventh and eighth defendants. n(37) [1927] All E.R. Rep. 214; [1928] Ch. 330. DISPOSITION: Declarations accordingly. SOLICITORS: Ashurst, Morris, Crisp & Co. (for all parties).