The claimant applied under the Variation of Trusts Act 1958 to vary the trusts of four family settlements and for the compromise of an issue as to the validity of the two most recent of those settlements. Three of the settlements, one made in 1932 and two in 1996, were governed by English law. The fourth settlement, made in 1950, was governed by Kenyan law. The 1932 and 1950 settlements were made by the first defendant’s late father. The 1996 settlements were discretionary settlements made by the first defendant.
The claimant and defendants were each trustees and/or beneficiaries of some or all of the settlements. All six defendants filed (or in the case of minors, had filed on their behalf) acknowledgments of service indicating their intention not to contest the proceedings.
The court’s approval to the variation and compromise was required on behalf of the minor defendants and any unborn or unascertained beneficiaries. The evidence included opinions from counsel that they were of the view that the proposed variation and compromise was for the benefit of minors and in the interests of any unborn or unascertained beneficiaries.
A novel point of jurisdiction arose as to the court’s jurisdiction to approve a variation of the 1950 settlement due to the fact it was governed by the law of Kenya as a result of the Hague Convention on Trusts which was scheduled to the Recognition of Trusts Act 1987, passed to enable the UK to ratify the Convention on the law applicable to trusts and on their recognition. Article 1 of the Schedule to the 1987 Act provided that the Convention specifies the law applicable to trusts and governs their recognition. Article 7 provided that a trust was to be governed by the law with which it was most closely connected and article 8 that that applicable law was to govern the variation of the trust. It was common ground that the applicable law so far as the 1950 settlement was concerned was the law of Kenya.
There was evidence before the court from a lawyer and advocate based in Kenya that s62 of the Kenyan Trustee Act, enacted in 1929, gave the court the power to approve variations of trusts in terms which were virtually identical to the 1958 Act and that, in his view, the Kenyan courts would follow English decisions on the virtually identical provisions and that if English courts were to assume jurisdiction to vary the trusts of the Kenyan settlement the Kenyan courts would recognise and enforce the order of the English courts.
Held, approving the terms of the compromise and the proposed variation of the settlements on behalf of all minor defendants and all such unborn and unascertained beneficiaries and directing that the terms would be binding upon them and that the trustees should carry the terms of the compromise into effect:
- 1) The terms of the compromise and proposed variation were approved, the court being satisfied they were for the benefit of the minor defendants and all such unborn and unascertained beneficiaries.
- 2) The court retained the power under the 1958 Act to vary a trust governed by foreign law with two limitations. First, where there were substantial foreign elements in the case, the court should proceed with caution in deciding whether to assume jurisdiction in such a case. Secondly, in exercising the jurisdiction under the 1958 Act the court, in making a variation, should apply the substantive law of the country governing the trust by reference to the convention. If the law governing the trust did not permit variation, then the jurisdiction under the 1958 Act should not be exercised. In exercising the power to vary trusts governed by foreign law in the 1958 Act an English court was applying its own law which it could not do unless the foreign law contained a comparable provision and that provision was treated as giving the English court the power to do so. If the foreign law was expressed to confer a power to vary on the court it could be read as referring only to the foreign court but if the English court were to decide on that ground that it could not exercise the foreign power, it would be applying only a truncated form of the foreign law, not the whole of it, as prescribed by the convention. Therefore a foreign power to vary trusts was in principle to be available to the English court.
- 3) Further an English court should not be deterred from varying a settlement governed by a foreign law provided that the substantive conditions of the applicable law for varying the trust were met.
- 4) Accordingly, in the present case it was open to the English court to exercise its jurisdiction to vary a trust under the 1958 Act provided that the law of the country applied to the trust had a similar power vested in its own courts. Since a Kenyan court would have the power to vary the trusts of the 1950 settlement under its legislation, the English court similarly has jurisdiction under the 1958 Act.
- 5) Further, it was appropriate for the court to exercise that jurisdiction in the present case. The variation of the trusts created by the 1950 settlement was intimately associated with the variation application in relation to the other three settlements which were governed by English law. It would be wholly unreasonable and disproportionate to require a separate application to be made to the Kenyan courts.