Crowe v Appleby [1976] 51 TC 457 is a CGT case but one which was decided on a judicial analysis and application of the underlying property law. It concerned a class gift and the issue was whether the first class member to become entitled to a share could call for the transfer to them by the trustees of a corresponding part of the underlying trust property.
The decision was that it depends on the nature of that property. It was land and if the Court had ordered a transfer of a part to the beneficiary they and the trustees would end up each owning a part interest the combined values of which would be less than the value of the whole. The Court decided that no one would become “absolutely entitled” for CGT until the last eligible class member did so. This meant that there would be no CGT disposal by the trustees until that future event occurred. Of course the disappointed beneficiary would be entitled to a share of any income from the asset and could dispose of their share by gift and by sale if they could find a buyer.
“Absolute entitlement” is almost synonymous with Saunders v Vautier (other than it extends to a person who would be so entitled but for being a minor).
The concept extends to any indivisible asset. The case itself referred obiter to a mortgage and a controlling holding in an unlisted company, the latter actually followed in Lloyds Bank plc v Duker [1987] 1 WLR 1324. So it might extend to artwork, jewellery, other key holdings in an unlisted company like 75.01% or 25.01% or a golden share, but perhaps not a racehorse or a ship since part shares in those may not be worth less than a corresponding fraction of the value of the entirety.
Of course, one must always parse the precise interests conferred by the trust. Saunders v Vautier cannot apply to a contingent interest, or a class gift where the class is not closed at the relevant time unless it can only increase the share in question. It cannot apply to a defeasible interest such as an interest in default of appointment.
An object of a power of appointment and of a discretionary trust has no proprietary interest in anything but if the class is defined so that it is or becomes so narrow as to encompass only a finite class of one person (or persons?) who is an adult with capacity and exhaustively identifiable as solely eligible they may come within the rule.
A DT will rarely permit this as the class will be widely delineated but it does seem to be so if only one possible member of the class remains. The same must be so, I assume, if there remains only one possible object of a power and no default beneficiary.
It is not clear that a plurality of such qualifying beneficiaries or objects would suffice but they could presumably contract for value with just one of their number to sell their respective expectancy: Tailby v Official Receiver [1888] 13 App Cas 523.
Now that the maximum perpetuity period is 125 or 80 years, unless shortened by the instrument, the vesting of property subject to a special power of appointment whose exercise was seriously delayed could well run out of eligible objects. The defined identity of those, and of any entitled in default, may cause the donor of the power to come under actionable pressure to exercise it at an earlier date or risk liability to those thereby disappointed. This was not such a likely scenario when the perpetuity period was lives in being plus 21 years. Drafters should consider whether a special power with a limited range of objects should have a smaller window for exercise.
Jack Harper