Trustees making a distribution who cannot locate a beneficiary have a number of possible alternatives; protection by advertising, missing beneficiary insurance, a re Benjamin order or a payment into court. The trustee of a unit trust who cannot locate a unitholder is, however, in a difficult position.
The missing unitholder (or if he is deceased, his estate) is absolutely entitled to the amount of his distribution, and there is no one else who might take in default. If the trust deed provides that a distribution not claimed within 12 years shall be forfeited, then it may be proper after that time to pay an unclaimed amount to the other unitholders, but in other cases how is the trustee to obtain a discharge? There is no protection by advertising, since the trustee is aware of the missing unitholder's entitlement. A re Benjamin order authorising a distribution of the unclaimed amount to the other unitholders would not be appropriate in a situation where the missing unitholder's entitlement is undoubted. A payment into court would be ideal, however payments in are generally discouraged by the courts.
Such was the situation which faced the trustee in re the British Convertibles Trust1. The unit trust was terminated in 1988 and the assets distributed to approximately 100 unit trust holders. Unexpectedly over the next 20 years the trustee received realisations from assets which had been thought to be valueless, and the trustee was left with funds payable to 71 unit holders who, despite significant efforts over several years, had not been located.
The trustee wished to pay the funds into court. Lewin on Trusts 18th edition (the edition then current) stated that in practice a payment into court can seldom be justified except in a case where trust money is held in trust for a beneficiary from whom a sufficient discharge cannot be obtained, for example "because he cannot be found". This example was precisely the situation faced by the trustee, and appeared to justify a payment in. The problem was, however, that the cases cited in Lewin did not involve a situation in which a beneficiary absolutely entitled could not be found, and it was therefore not certain that a payment into court would be justified. Given the risks associated with an unjustified payment into court, the trustee applied to court for approval of the payment in. The court approved the payment in, and gave useful authority in relation to the "because he cannot be found" situation.
The court noted that Sir R Malins VC in Re Elliot's Trusts2 stated: "... at the time when the trustees were uncertain whether he was living or dead, they might with propriety have paid the money into court ..." and "[t]he circumstances would have justified them in doing so if they had done it long ago, and then they would have had their costs, but when they were informed that the man was alive and coming home [from Australia], common sense and prudence should have dictated that they should have retained the fund until his arrival ..."
The court also noted Sir R T Kindersley VC in Re Waring3 where after referring to an Act of Parliament which enabled trustees or executors to pay a sum of money into court he stated: "... it was for the relief of trustees from the awkward position of having in their hands trust funds which they did not know what to do with, as in the case of a legacy, where the legatee is not to be found ...; he may then relieve himself by paying the money into court ..." The court also referred to Re Gulbenkian's Settlement Trusts (No 1)4 where Lord Upjohn commented: "... if the class is sufficiently defined by the donor the fact that it may be difficult to ascertain the whereabouts or continued existence of some of the members at the relevant time matters not. The trustees can apply to the court for directions or pay a share into court."
The court considered that reasonable steps had been taken to locate the missing unitholders, they could not be found, that none of the other possible ways of proceeding were appropriate, and that as matters stood the trustee could not obtain a valid receipt and discharge. The court concluded that a payment into court was justified.
The case is now cited in the 19th edition of Lewin on Trusts as authority in relation to the "because he cannot be found" situation.
1. Isle of Man High Court judgment delivered September 5 2014.
2. 1873) L.R. 15 Eq 194 at 197 and 198.
3. (1852) 16 Jur. 652 at 653.
4.  AC 508 at 524.
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