News | July 11, 2022

In Trust – A modern twist on older trusts

The recent case of Goodrich v AB provides welcome guidance on how terms in older trust deeds should be read, applying the general principles of construction and human rights legislation. The case will be relevant for clients and trustees of long-running trusts.

The case concerned two large employee benefit trusts which had been established in 1990 by the founder of Walker Books Limited, shortly before Mr Walker’s death. Following a significant share sale in 2020, the trustees needed to consider how to distribute the proceeds and, crucially to understand who made up the discretionary class of beneficiaries which included “the spouses, children and remoter issue of … present and future officers or employees or retired officers and employees”. The trustees therefore asked the Court to confirm how certain words including “spouse” and “child” should be interpreted.

The Court decided that the term “spouse” included a civil partner (same or opposite sex) or a person in a same-sex marriage because the Human Rights Act 1998 (“HRA 1998“) requires the Court to read the definition of spouse in accordance with the rights guaranteed under the European Convention on Human Rights (“the Convention“). Accordingly, the Marriage (Same-Sex Couples) Act 2013, which excludes same-sex couples when interpreting references to marriage in documents drafted before HRA 1998, should be read to be compliant with the Convention.

The Court also found that the definition of “children” did not include step-children but does include legitimate, illegitimate, legitimated and adopted children. Step-children were not expressly provided for in the trust documents and applying the general principle that the meaning of words should be ascertained by taking the whole of the words used against their documentary and factual context, there was nothing to indicate that “children” should be defined more widely to include step-children.

The Court’s decision also applies to Wills and family trusts established in the settlor’s lifetime. Lay executors and trustees should be aware that the terms “spouse” and “child” may be radically different to the meanings of those words when the document was drafted and should seek advice if there is any ambiguity. It is hoped that this judicial clarity will reduce the number of Wills and trusts that need to be referred to the Court for construction or variation in order to protect decisions made by executors or trustees, whilst ensuring that historic documents can be read with modern families in mind.