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General

Beneficiaries rule

In Heylen v Keene  all actual and potential beneficiaries signed an “amended direction” directing the executors of the estate of Paul Heylen to distribute the estate, not in accordance with his will, but as directed by the beneficiaries (in accordance with the rule in Saunders v Vautier.

Although the parameters of rule in  Saunders v Vautier are generally well understood, the two professional executors were reluctant to implement the directions without the protection of a Court order.   As a result the third executor applied for a direction that the executors were required to distribute the estate in accordance with the amended direction.

The terms of the will in question that lead to the need for a compromise between the actual and potential beneficiaries are complex.  By contrast, the Rule in Saunders v Vautier is relatively simple and can be summarised as follows:

  • when the holders of the entirety of the beneficial interests in any particular trust fund are all sui juris and acting together, they are entitled to direct the trustees as to how the trust fund is to be dealt with
  • while the beneficiaries can override a pre-existing trust they cannot do so and maintain the trust
  • the beneficiaries can call up the trust, but cannot direct how the trustees are to invest or otherwise deal with the trust fund
  • the rights of the beneficial holders are always subject to the rights of the trustees to be fully protected against taxes, costs and outgoings

In Heylen v Keene the court was of the view that the amended direction was a sensible pragmatic compromise in circumstances where there was uncertainty that was addressed through the amended direction.  The concerns of the two “dissenting executors” was considered but addressed by reference to the indemnities provided and the over-riding view that the rule in Saunders v Vautier essentially provided a complete answer due to the totality of the beneficial interests that were represented notwithstanding the uncertainty regarding all of the interests – the court sagely noting that either all the beneficiaries were a party, or if they weren’t all beneficiaries, all of the beneficiaries were a party to the amended direction.

In conclusion orders were made pursuant to s 66 of the Trustee Act that the executors and trustees were required to distribute the estate in accordance with the amended direction.

Woolford J’s approach in Heylen v Keene appears to be in part pragmatism in light of the costs that any alternative approach could entail and a considered response to the application of the rule in Saunders v Vautier.

References:

  • Heylen v Keene [2018] NZHC 2203
  • Saunders v Vautier (1841) 4 Beav 115
  • Stephenson (Inspector of Taxes) v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 (Ch)

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