The Gazette 1987

GAZETTE

SEPTEMBER 1987

discretionary trusts for the benefit of Mrs. D and her children. Mrs. D and not B is the "disponer" in rela- tion to these trusts: A. G. -v- Baker 4 H & N 19. "The deed proceeded on a claim of right on (Mrs. D's) part. The arrangement embodied in the deed was one of which she was the head, and not (B). If I were called upon to decide the question I should say that (Mrs. D) was the settlor": 30 per Pollock CB. Example (4) A child actress, A, is awarded a part in a major film. On the advice of her father's accountants, a com- pany is incorporated which enters into a contract with the film studio to provide her services for an agreed consideration. At the same time a discretionary trust fund is established with an initial trust fund of £100, provided by A's father, B, who is named in the trust instrument as the settlor. The trustees apply the initial trust fund of £ 100 in taking up 100 shares of £1 in the capital of the company. No further shares are issued. The effect of the arrangement is to divert A's earnings from herself personally to the company, the

shares in which increase in value as payments are made to it by the studio. Before carrying the scheme into effect, B's accountants endeavour to explain its effect to A, who is totally uninterested and signs the relevant documents without even reading them. The property "subject t o" the trust is clearly the 100 shares of £ 1 in the capital of the company. What is less easy to identify is the "disposition" under or in conse- quence of which the shares became subject to the trust, and the "disponer" in relation to that "disposition". On the one hand, it is arguable that the "disposition" under or in consequence of which the shares became subject to the trust could only be the trust instrument itself, in relation to which B and not A is clearly the "disponer". Authority for this view is to be found in Chamberlain -v- C/R 25 TC 317. On the other hand, it is equally well arguable that the shares became subject to the trust under or in consequence of an "arrange- ment" in relation to which A and not B was the disponer. Support for this latter view is to be found in the

extended meaning given to the word "disposition" by s.2(1) CATA 1976, which in para, (b) of the definition of "disposition" defines it to include an "arrange- ment, whether made by a single operation or by associated opera- tion". It is accordingly arguable that the "disponer" in relation to a disposition which is an "arrange- ment" is the person who "directly or indirectly" provides the proper- ty "comprised in" the arrange- ment, and which as part of that arrangement "becomes subject t o " the trust. Authority for this alternative view is to be found in Mills -v- CIR 49 TC 367 in which it was held that by entering into the arrangement A had " . . . secured that what she earned by her acting should be paid to Sussex Produc- tions and so she indirectly provid- ed funds for the trust": 408 per Viscount Dilhorne. The general definition of "disponer" in s.2(1) CATA 1976 is supplemented by four para- graphs which identify the "disponer" in specific instances. Paras (a) (b) and (c) of the defini- tion provide that the "disponer" in relation to a will or other testamen-

J . & E. DAVY STOCKBROKERS Personal Investment Division For SPECIALISED INVESTMENT ADVICE UNIT LINKED INVESTMENTS GUARANTEED BONDS

6 0 / 3 D AWSON STREET, DUBL IN 2.

Phone: 7 7 2 4 1 6 .

307