Report No. 17
Duties and Liabilities of Trustees
22. Section 11.-
The first paragraph of section 11 authorises a modification of the trust with the consent of all the beneficiaries who are competent to contract. If all the beneficiaries are competent to contract, the matter does not create any difficulty, for, they, being the beneficiaries entitled to the property, have the power to modify or vary the trust in any manner they please. The trouble arises only when some or all of the beneficiaries are not competent to contract, in which event it is provided in the second paragraph of the section that consent in such cases may be given by a principal civil court of original jurisdiction on behalf of the persons who are not capable of contracting.
The section, however, is silent regarding the principles which should guide the discretion of the court in giving or refusing such a consent. It has been suggested that we should embody the principles established by decisions for guidance of the courts and also extend the protection to unborn beneficiaries. It has been held in Rajagopala Gramani v. Baggiammall, 56 Mad 508 (510, 511) that the section is based on the well recognised principles of English Law. There is a sharp divergence of opinion in the English courts on the subject whether the court has unlimited inherent jurisdiction to modify or vary trusts where such modification or variation is clearly shown to be for the benefit of all persons interested who are not sui juris, including unborn persons.
The House of Lords had occasion recently to examine the question in Chapman v. Chapman, (1954) 1 All ER 798, which is an appeal against the judgment of the Court of Appeal in that case.1 A perusal of these two decisions would enable one to assess the extent to which the divergence of opinion exists. One view is that the jurisdiction is not unlimited but is confined only to exceptional cases, the exceptions having been enumerated in the judgment of the House of Lords.
The other view found favour with Denning L.J., who in his dissenting judgment in the Court of Appeal, traced the history of the jurisdiction from the time of Lord Hardwick and concluded that if the proposed modification or variation of trust is beneficial to the beneficiaries who are not sui juris, the court has the power and duty to approve the modification or variation, as the case may be. The rule, as stated by Denning L.J., has simplicity in its favour while an examination of the other views expressed in the courts of England from 1901 onwards would show that the judges were striving from time to time to introduce exceptions which cover a wide field.
We think it unnecessary to follow the majority opinion of the English courts and embody the complicated rules recognised by them. It would simplify the law if we adopt the principle laid down by Denning L.J., in his dissenting judgment in the Court of Appeal vesting in the court a wider discretion. The limitation suggested by Denning L.J., would be sufficient to safeguard the interests of the beneficiaries who are not sui juris or are unborn.
Whenever a minor's interests are involved, the test applied is to consider whether the proposed action of the guardian is for the benefit of the minor or not, and that test may equally be applied here. We, therefore, suggest that in granting permission the court should take all the circumstances into consideration and decide whether the proposed modification or variation is beneficial to the interests of the beneficiaries concerned. This principle may be embodied in the second paragraph of, section 11.
While extending the section to unborn persons, the word "consent" should be substituted by "approval" which is more appropriate with reference to unborn persons (Compare the English Act also on this point).
The decision of the House of Lords in Chapman v. Chapman, (1954) 1 All ER 798, provoked criticism, and the Lord Chancellor invited the Law Reform Committee "to consider whether any alteration is desirable in the powers of the court to sanction a variation in the trust or a settlement in the interests of beneficiaries under disability and unborn persons, with particular reference to the decision in Chapman v. Chapman", Chapman v. Chapman, (1954) 1 All ER 798. On the recommendation of the Committee that the view of Denning L.J. should be preferred to that of the majority, the Act known as the Variation of Trusts Act, 1958, was passed, giving effect to the dissenting judgment of Denning L.J. The Act of 1958 has thus set at rest the sharp divergence of opinion which obtained in England till then. Our view accords with the existing law in England.
1. (1953) 1 All ER 103.
23. It is perhaps more convenient to notice one other aspect of the matter. Section 57 of the (English) Trustee Act, 1925, conferred upon the court jurisdiction to sanction certain powers to the trustees which are necessitated in the course of the administration or management of a trust and a corresponding provision is also made in the Settled Land Act, 1925.1 The substance of both the sections is more or less the same. These sections, as observed by the Court of Appeal in the decision already referred to (Chapman v. Chapman, See para. 22, supra,) do not purport to codify the entire jurisdiction of the courts of equity to alter or modify the terms of the trust, but are intended merely to empower the courts to give directions to the trustee even though not found in the instrument of the trust, on the ground of expediency and in the interests of better administration. -A similar principle may be embodied at the appropriate place, preferably after section 34.
1. Section 64.