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Goodrich v AB - the meaning of "spouse" and "children" in trusts

Posted on 15 February 2022

On 21 January 2022, in Goodrich & Ors v AB & Ors [2022] EWHC 81 (Ch) (21) ("Goodrich"), the High Court shed light on the construction and interpretation of older trust deeds in light of the Human rights Act 1998 ("the HRA"), with particular significance for modern families.

Background

The matter concerned two employee trusts associated with international publisher, Walker Books Limited, and in particular a construction application in relation to the Walker Books Employee Trust ("the WBET").

When the employing company (in which the trust held shares) was sold, the trustees intended to distribute the proceeds of sale to the respective beneficiaries. Before doing so, they sought directions from the court on the scope and interpretation of two beneficial classes of the trusts, namely (i) children and (ii) spouses.

Decision

Chief Master Shuman found that stepchildren were not beneficiaries of class (i). Although legislative intervention means that "child" now encompasses illegitimate and adopted children, she noted that the term does not include stepchildren, and that this position, subject to exceptions like express provision, is mirrored at common law. In this case, stepchildren were not expressly provided for by the trust deed and absent any other factual context in favour of a wider definition of children, they could therefore not be held to fall within (i).

In relation to (ii), it was decided that same-sex spouses and civil partners were within the beneficial class. In reaching her verdict on the expansiveness of (ii), in particular in relation to same-sex couples, as well as citing traditional construction principles, Chief Master Shuman relied on section 3(1) of the HRA, construing the definition of the beneficial class of "spouse" through the lens of rights protected by the European Convention on Human Rights, Re Hand's Will Trust [2017], followed. Using the approach mandated by the HRA, the Chief Master overcame the discriminatory effect of Schedule 4 of the Marriage (Same-Sex Couples) Act 2013 ("the MSSCA"); ordinarily, the effect of Schedule 4 is to exclude same-sex couples when interpreting references to marriage made in instruments prior to the MSSCA's passing. Deploying section 3 of the HRA allowed Chief Master Shuman to conclude that same-sex spouses could be included in class (ii) of the beneficiaries in the present case.

Discussing civil partners, also through the lens of ordinary construction principles, Chief Master Shuman observed that at the date of the WBET trust deed, there was no such legal concept. In this context, she cited Ghaidan v Godin-Mendoza [2004], in particular the expansive approach to "spouse" taken (namely, one that encompassed persons living with the relevant party as if they were his or her husband). It followed that Shuman accepted submissions that marriage and civil partnerships fall within 'a similar set of spousal rights', in alignment with the analysis by the House of Lords in R (on the application of Steinfeld and Keidan v Secretary of State for International Development [2018]). Although textually, it was acknowledged that "spouse" could be read narrowly, Chief Master Shuman cited the commercial context of the WBET's creation (namely, the incentivising of employees), which she used to permit a more expansive interpretation.

Key takeaways

The reasoning and verdict in Goodrich is of great significance for settlors, trustees and practitioners. For the latter category in particular, the judgment has functioned to clarify the HRA's reach in the context of trust construction. As the pervasiveness of the nuclear family model has lessened over the course of recent decades, the instrumentalisation of the HRA in recognising this is largely unsurprising and a logical consequence of both the Act itself and the aforementioned family paradigm shift.

Nonetheless, Chief Master Shuman cautioned that her construction was "fact sensitive" to the case. In particular, in contrast to a family trust, the WBET was a "living and breathing" long-term employee trust, which had the purpose of rewarding employees for past contributions.

Related Coverage

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