The High Court was faced with a tricky situation in which a settlor though he had two biological children but it turns out one of the children was a stepchild. The Court had to decide whether a stepchild could qualify, for the purpose of the trust, as a child of the settlor and fall within the beneficial class.

Background:

Stuart Marcus was a successful businessman who founded a family toy business. To protect his interest, he created, in 2003, a discretionary trust in favour of his ‘children and remoter issue’ which held shares in the family business, worth approximately £14.5 million. Patricia, Stuart’s wife, created a similar settlement in parallel.

Stuart and Patricia Marcus married in September 1973 and had two children; Edward Marcus- who is the defendant- and Jonathan Marcus- who is the claimant. Stuart Marcus died in 2020 believing that both Edward and Jonathan were his biological children. However, in 2010, Patricia told Edward that she had an affair during her marriage and Stuart was not his biological father.

In 2023, Jonathan learnt of Patricia’s affair and brought a claim in the High Court disputing Edward’s entitlement to the trust assets on grounds that he was not a biological child of Stuart. Edward defended that when considering the context in which Stuart made the trust and his intention to provide for both children, he still qualified as a beneficiary. 

Decision: 

The High Court had to first decide if it was satisfied on the balance of probabilities that Edward was not Stuart’s biological son which it did. Consequently, the Court had to determine the meaning of ‘children’ in the trust deed and whether it could be interpreted as including non-biological children. The Judge applied a strict test of construction by assessing the issue from the point of view of a reasonable person. 

Master Marsh noted that the term "children" in a trust deed would not normally include stepchildren unless the context indicated otherwise. After conducting a throughout analysis of the context, the Judge came to the conclusion that the “circumstances point overwhelmingly in favour of a wider meaning than biological child being adopted.” Indeed, a reasonable person would have “readily conclude that when using “children” Stuart intended this word to be understood as meaning Edward and Jonathan; and not “Edward and Jonathan provided they are in fact my biological sons.”” Consequently, Edward is a beneficiary of the trust.  

Implications:

This case demonstrates that the law does not always catch up with the practice of the society. As Master Marsh made clear, the term “children” does not usually include stepchildren. Instead, any party drafting a trust or will must make sure that a reference to both biological children and stepchildren is made. This decision also turns heavily on the context, the stability of the marriage, but above all the lack of knowledge of the settlor that one of the children was not biologically his. This case also provides a useful summary of the principles of trust construction.

Interestingly, in this case, Stuart had gotten legal advice while setting up the trust but yet the matter still went to court due to a family secret. The key takeaway is that courts will look at the settlor intention to achieve and the understanding of a reasonable person.