Factual and Procedural Background
This action concerns defective execution of Deeds of Appointment relating to three Settlements of shares in a company called Thunder Investments Limited. The Settlements were made by June, who was both settlor and trustee, for the benefit of her three children, the claimants. The Deeds, executed on 8 March 1999, were intended to give the children an interest in possession for tax purposes but were ineffective because only three of four trustees signed, omitting June's signature. The error was discovered only after June's death. The claimants seek relief to remedy the defective execution of these Deeds. The defendants include the current trustees and a fourth defendant appointed to represent other beneficiaries under the Settlements.
Legal Issues Presented
- Whether the court can grant relief to remedy the defective execution of the Deeds of Appointment signed by only three of four trustees.
- Whether a proprietary estoppel arises binding the trustees to act consistently with the intended effect of the Deeds despite defective execution.
- Whether estoppel can operate to bind trustees in relation to non-claimant beneficiaries and third parties such as HMRC.
- The scope and applicability of the equitable doctrine aiding defective execution of powers in the modern context.
Arguments of the Parties
Claimants' Arguments
- The trustees represented that the Deeds had been properly executed, and the claimants relied on this to their detriment by paying tax on the basis of an interest in possession.
- Proprietary estoppel applies beyond land and can bind trustees in relation to beneficiaries under a trust.
- Alternatively, there was an estoppel by convention arising from mutual consent between trustees and claimants that the Deeds were validly executed.
- The failure to obtain June's signature was a breach of the trustees' unanimous action rule, not a breach of the formal execution requirements under the Law of Property (Miscellaneous Provisions) Act 1989.
- The equitable doctrine dating back to Tollet v Tollet allows the court to remedy defective execution of powers where there was an attempted exercise and intention to exercise the power.
- Case law such as HR Trustees Ltd v Wembley plc supports the correction of administrative errors in trustee actions.
- Estoppel should be considered to bind the trust itself, including successor trustees, and not just individual trustees.
Defendants' Arguments
- The failure of one trustee to sign rendered the Deeds invalid under s.1(3) of the 1989 Act, and estoppel cannot be used to circumvent statutory requirements (citing Briggs v Gleeds).
- The claimants suffered no detriment because they were financially better off under the purported arrangements and had not shown evidence of any actual or contingent detriment.
- Estoppel cannot bind trustees in relation to beneficiaries who were not represented, nor can it bind third parties such as HMRC.
- The equitable jurisdiction to remedy defective execution of powers is greatly confined and falling into disuse, especially where there is no enforceable obligation or the beneficiaries are volunteers.
- Recent pension scheme cases relied upon by claimants differ from the present facts, and the claimants are not in the position of non-volunteers entitled to specific performance.
- Binding only some beneficiaries by estoppel at the expense of others is problematic and may conflict with trustees’ duties (citing Steria Ltd v Hutchison and Redrow Plc v Pedley).
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Briggs v Gleeds [2014] EWHC 1178 (Ch); [2015] Ch 212 |
Estoppel cannot circumvent statutory formalities under s.1(3) of the 1989 Act. |
Cited by defendants to argue estoppel is not available to validate defective execution under statutory requirements; court agreed the defect was not a breach of s.1(3) but a failure of unanimous trustee action. |
| Fielden v Christie-Miller |
Estoppel can bind trustees in relation to dispositive powers and protect a claimant’s equity arising from representations by trustees. |
Claimants relied on it to argue estoppel binds trustees including in relation to other beneficiaries; court found the principle fact-sensitive and not absolute. |
| Catchpole v The Trustees of the Alitalia Airlines Pension Scheme [2010] EWHC 1809 (Ch) |
Estoppel by representation can bind pension scheme trustees and successors to provide benefits as represented. |
Cited to support claim that estoppel binds the trust itself; court expressed doubt about its applicability outside pension schemes and noted unresolved issues regarding third parties. |
| Steria Ltd v Hutchison [2006] EWCA Civ 1551; [2006] Pens. L.R. 291 |
Estoppel should not favour some pension scheme members over others, as it may conflict with trustees' statutory duties and the trust’s terms. |
Used by defendants to argue against estoppel binding trustees to favour claimants at expense of other beneficiaries. |
| Redrow Plc v Pedley [2002] PLR 339 |
Estoppel requires clear evidence of intention or positive conduct to bind all members of a trust or scheme. |
Supported the cautionary approach to estoppel in collective trusts and pension schemes, reinforcing Steria’s reasoning. |
| Tollet v Tollet (1728) 2 Peere Williams 489 |
Equity aids defective execution of powers where there was an attempted exercise and intention, distinguishing from non-execution. |
Formed the basis for the court’s acceptance that the trustees attempted to exercise the power despite defective execution. |
| HR Trustees Ltd v Wembley plc [2011] EWHC 2974 (Ch) |
Equity can correct administrative errors in trustee actions where all trustees intended to exercise a power but formalities were imperfectly observed. |
Supported the claimants’ argument that equity should remedy the defective execution of the Deeds as an administrative error. |
| Breadner v Granville-Grossman [2001] Ch 523 |
Suggested that the equitable jurisdiction to aid defective execution is falling into disuse in modern trust practice. |
Defendants relied on this to argue the doctrine is narrow and not applicable; court acknowledged but did not regard the doctrine as obsolete. |
| Bas Trust Corporation Ltd v MF [2012] JRC 081 (Re Shinorvic Trust) |
Summarized modern conditions for equitable relief for defective exercise of powers, including intention, attempted execution, formal defect, proper exercise, and categories of persons entitled. |
Court adopted this summary as authoritative, applying it to the facts and finding an attempted exercise by trustees despite defective signature. |
| Sneed v Sneed (1747) Ambler 64; Bruce v Bruce (1870-1871) LR 11 Eq 371; Kennard v Kennard (1872) 8 Ch App 227; In Re Walker [1908] 1 Ch 560 |
Older authorities supporting equitable relief for defective execution without requirement of enforceability or non-volunteer status. |
Supported the court’s view that the older line of authority remains valid and applicable to the present case. |
Court's Reasoning and Analysis
The court began by distinguishing the nature of the defect in the Deeds: it was not a failure to comply with the formal statutory requirements under s.1(3) of the 1989 Act, but a failure of unanimous trustee action as required by trust law. The court accepted the claimants’ submission that all four trustees intended to exercise their power to amend the Settlements, constituting an attempted exercise; the absence of June's signature rendered the exercise defective but not void.
Regarding estoppel, the court found that although proprietary estoppel can extend beyond land and bind trustees, the claimants failed to establish actual detriment. The claimants were inferred to be better off financially due to the tax arrangements, and the evidence did not support contingent or unconscious detriment. Furthermore, the estoppel sought would bind trustees in relation to other beneficiaries and third parties (including HMRC), raising conceptual and practical difficulties. The court found the claim for estoppel binding all parties, including strangers to the trust, to be unsustainable.
The court considered relevant authorities on estoppel in trust contexts, including Fielden and Catchpole, acknowledging their principles but noting their fact sensitivity and limited applicability. The court also relied on Steria and Redrow to emphasize the risks of estoppel favouring some beneficiaries at the expense of others and the need for caution.
Turning to the equitable doctrine aiding defective execution of powers, the court accepted the continued validity of the older line of authority exemplified by Tollet v Tollet and subsequent cases. It held that the trustees’ failure to obtain June’s signature amounted to a defective execution of the power which equity may remedy, provided certain conditions are met, including intention and proper exercise. The court found these conditions satisfied here, as all trustees intended to exercise the power and the defect was formal rather than substantive.
The court distinguished recent pension scheme cases, noting that the claimants were volunteers and lacked enforceable rights, but found that these cases do not displace the older equitable principles applicable here.
Holding and Implications
The court rejected the claimants' proprietary estoppel claim due to lack of detriment and because the estoppel sought would improperly bind non-parties to the trust.
However, the court accepted that the Deeds of Appointment, although defectively executed, were intended to be validly executed by all trustees, including June, and that equity will remedy the defective execution pursuant to the longstanding doctrine aiding defective exercise of powers.
The direct effect is that the claimants are entitled to the interests in possession under the Settlements as intended by the Deeds. No new precedent is established beyond reaffirming the applicability of the equitable doctrine to remedy defective execution of trustee powers where there is an attempted exercise and intention to exercise the power.