Court cases involving family trusts might be presumed to be rather dry. Not so. Many family-related disputes involve an unavoidable amount of dirty linen being washed in public as each side seeks to gain the advantage. In Marcus v Marcus, a new level of intimate detail was revealed as the court had to consider if the alleged illegitimacy one of the parties precluded them from benefiting from a Settlement Trust.
The question of how the word ‘child’ or children’ should be interpreted within a trust document was central in this case in which the younger brother, Jonathan Marcus, claimed that his elder brother, Edward, was not entitled to benefit from a discretionary trust set up by their father because he was not biologically related. The case hinged on the interpretation of the term ‘children’ used in the trust document – a term that is generally used to describe biological children rather than stepchildren (who have to be specifically named as the term ‘stepchildren’ has no natural meaning in law).
Question of paternity leading to the dispute
Stuart and Patricia Marcus, having built up a successful business, had each set up Settlement Trusts in 2003 in favour of their two sons as a means of postponing the payment of Capital Gains Tax. In 2020, Stuart died leaving assets worth around £14.5m in his Settlement Trust in which the main beneficiaries were named as the ‘children and remoter issue of the settlor’. In 2023 Patricia told Jonathan what she had already told Edward in 2010, namely that Edward’s father was not Stuart – has he had always assumed - but a Norwich lawyer with whom she had had an affair. The brothers had already fallen out in the interim, with Edward trying to remove Jonathan as a trustee from both parents’ trusts, so this revelation served to fuel the dispute. In court, Jonathan claimed that Edward could not be a beneficiary to the trust because he was not Stuart’s biological son and thus not a ‘child’ of the settlor.
Half-brother or full sibling?
The court was asked to resolve eight issues, but Master Marsh determined that just two were critical to determining the outcome: was Edward Stuart’s biological son or not; and, if he was not, did the use of the word ‘children’ in the Settlement Trust document mean to include stepchildren too? It was only if both issues were determined in favour of Jonathan that the remaining issues would need to be considered. To help determine the first issue, that of Edward’s paternity, DNA evidence was submitted. Despite the report prepared by the company carrying out the DNA test failing to comply with certain formatting requirements, the court accepted its conclusion that Edward was unlikely to share the same father as Jonathan. It did caveat its conclusion by noting that it only provided an ‘indication’ of the relationship as sibling analysis was not as conclusive as that between a parent and child. Evidence was also heard from Patricia as she recollected the details of the affair. The court decided that, on the balance of probabilities, Edward was not Stuart’s biological son.
The wording of the Settlement Trust document
The second issue to be decided was the interpretation of the word ‘children’ in the document. Master Marsh described the court’s task as ascertaining ‘the objective meaning of the language which the parties have chosen to express their agreement’. Quoting an earlier case heard by Lord Neuberger (Marley v Rawlings) he noted that a court is ‘required to consider what a reasonable person, having all the background knowledge which would have been available to the settlor at the date of execution, would have understood the words used by the settlor to mean.’ In other words, does it pass the duck test? If it walks like a duck, quacks like a duck then it probably is a duck.
Stuart Marcus’ Settlement did not mention either Edward or Jonathan by name, referring instead to a ‘class of beneficiaries’, namely ‘children’, a term that in a legal context is generally understood to refer to biological offspring and does not include stepchildren. However, Master Marsh was concerned with the context of the Settlement as a whole rather than the use of the term ‘children’. As such, he determined that the circumstances of the Settlement pointed ‘overwhelmingly in favour of a wider meaning than biological child being adopted.’ He considered that Stuart’s use of the word ‘children’ meant Edward and Jonathan and not “Edward and Jonathan provided they are in fact my biological sons” and that there was no indication that he intended to treat them unequally.
Precise wording required to avoid disputes
Given how complicated many modern family structures have become, the finding of the High Court that a non-biological child could still be deemed a “child” for the purposes of benefiting from a trust, is an important judgment for those wishing to create (or draft) any form of discretionary trust. The key point is that courts will look at what the settlor (the person creating a Settlement Trust) really intended to achieve. In this case, Edward was born within wedlock (and thus deemed ‘legitimate’), Stuart was named as his father on his birth certificate, and he had been raised as his biological son. As Stuart died without knowing that Edward’s paternity was in doubt, we will never know if that knowledge might have prompted him to change the Settlement. Nonetheless, where complex family relationships exist, considerable care needs to be exercised when drafting wills, trusts and other legal documents in order to minimise the likelihood of a dispute arising because of imprecise wording.
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