In Grand View PTC v Wong, the Judicial Committee of the Privy Council has considered a number of important questions of trusts law concerning (among other things) the scope of powers of amendment, the application of the proper purpose rule and the operation of the rule against remoteness of vesting in the context of a disposition to a non-charitable purpose trust (albeit that this last issue did not in the event need to be decided).
The case arose out of a discretionary trust, known as the GRT, declared on 10 May 2001. The ‘economic settlors’ of the GRT (as the Board described them) were two brothers, referred to in the judgments as the Founders, who had built one of the largest business conglomerates in Taiwan. The GRT Trust Deed contained a power of appointment exercisable during the trust period of 100 years. The objects of this power were originally identified as the children and remoter issue of the two brothers, but clause 8 of the trust deed gave the Trustee a power to add to or exclude from this class of objects ‘any person or class or description of persons’.
In 2005, the Trustee exercised the power under clause 8 to add the trustee of a purpose trust, the WFT, as an object. It then distributed the entirety of the trust fund to the WFT. Some of the children challenged the exercise of this power on the ground that it was beyond the scope of clause 8 or contrary to its purpose or void because the interest did not or might not vest in the WFT within the perpetuity period. The challenge succeeded at first instance but failed in the Bermuda Court of Appeal (Sir Christopher Clarke P giving the leading judgment).
On this further appeal, the Judicial Committee rejected the appellants’ contention that the Trustee’s decision was beyond the scope of clause 8, concluding that a power to add ‘any person’ normally includes a power to add purposes (and therefore a power to add the trustee of a purpose trust, even if that is not expressly specified): [70]. The Board also held that there is, contrary to the appellants’ case and dicta in certain authorities, no absolute ‘substratum rule’, namely a rule that a power of amendment, whatever its terms, may not be used to alter the substratum of a trust: [99], [104]. There is, at most, a ‘strong presumption’ that a power of amendment may not be used to alter the overall purpose of a trust, if there is one: [108].
However, the Board went on to conclude that the GRT Trust Deed as a whole and the context in which it was established showed that it was a family trust established for the benefit of the direct descendants of the Founders. Accordingly, the purpose of clause 8 was to benefit those descendants (e.g. by enabling the addition of their relatives), not to exclude them. The appeal was therefore allowed. The Board observed that the ‘family nature’ of the trust was emphasised in the trust deed ‘to a degree which may be unusual in the world of discretionary trusts’ and that there is no rule that a power of addition must always be exercised in the interests of the beneficiaries or objects originally named in the trust deed: [80], [121].
The remoteness of vesting issue was decided in the respondents’ favour as a matter of construction. That meant that the Board did not need to decide how the rule against remoteness of vesting actually operates in relation to a disposition to a non-charitable purpose trust, an issue the Board described as ‘recondite and not without difficulty’: [127].
The judgment is available here.
Niranjan Venkatesan (led by Mark Howard KC and Jonathan Adkin KC) acted for the respondents, instructed by Skadden.