The decision avoided the ridiculous prospect that such potential beneficiaries could prostrate themselves before a court emphasising their attachment to the settlor in order to enrich themselves. In McPhail v Dalton, Lord Wilberforce gave the example of the residents of Greater London. Where this prevents the trustees carrying out their duties, the trust will be declared invalid, and not applied.[38]. persons/purposes that could be the object of an appointment. the four children of D1 and D3, and the two children of D1 s late sister). 0000009387 00000 n term of the settlement, D owned 950 out of 1,000 issued shares in Moss Electrical Co Ltd, D declared that he held 5% of issued share capital (1000) on trust for C. Shares never implemented due to change of mind, tax reasons, etc. Figure 6.1 Classification of private trusts and types of discretions. 0000006718 00000 n entitled to the trust fund on the expiration of 21 years from the date of the settlement (ie on 7 _ ,v On the other hand, in Re Weekess Settlement [1897] 1 Ch 289, the court, on construction of the instrument, concluded that a mere power was created. Beneficiary Principle Cases | Digestible Notes Trustees must not act for reasons which are irrational, perverse or contrary to any sensible expectation of the settler (see Re Manistys Settlement [1974] Ch 17 at 26), and there is no reason why the views of the settle should not be obtained and considered, but a trustee must exercise his independent judgment as to what is in the best interests of the trust and the beneficiaries as a whole even if this means going against the settlors wishes. Following the expiration of 21 years from the date of the original settlement the trustees shares were all identical. With regard to charitable trusts, the Law Commissions recommendation for a modification of the accumulation period was enacted in s 14 of the Perpetuities and Accumulations Act 2009. This rule is of strict application. The holder of a mere power is therefore free to do what he wants with the property he holds; if he fails to consider his exercise of the power, the courts may force him to do so. The second is whether the trustees as a body may delegate to one or some of their number or to a third party the exercise of their powers and the discharge of their duties as trustees. Thus, each beneficiary is entitled to sell, exchange or gift away his interest, subject to provisions to the contrary as detailed in the trust instrument. In the case of the latter, it is of the essence of the power that the trustees do prefer some beneficiaries over others. In Blausten v IRC [1972] Ch 256, the settlement gave the trustees the power to introduce any person other than the settlor as a member of a class of objects, but subject to the written consent of the settlor. If this clause is inserted, the objects under the gift over take the property unless the donee of the power validly exercises the power. These are where a person is granted the power (the ability) to exercise a trust-like power, but without any obligation to do so, such as "the trustee may give 1,000 to X", or "the trustee can, at his discretion, give 1,000 to X" as opposed to "the trustee shall give 1,000 to X". That is why without the express authority of the trust deed, the consent of the beneficiaries or an order of the court, even a professional trustee could not charge. The settlor may nominate himself as one of the trustees and, even if he does not, he may still be entitled to exercise some influence over the trustees. Dishonesty in this situation is not restrained to deceit. It is clarified that he meant unjust to an opposing trustee who on practical grounds favoured a retention of the requirement of unanimity. living at the date of the settlement. Historically the property must have been segregated from non-trust property; more recently, the courts have drawn a line between tangible and intangible assets, holding that with intangible assets there is not always a need for segregation. In the cast of trust of land, liberal powers of delegation by power of attorney are available. Langdale MR, hearing the case, held that this was not specific enough to create a valid trust;[2] furthermore, to be held as valid, trust instruments would have to have: Note: The 'Three certainties' rule is not novel to Knight v Knight. The upshot is a sensible and pragmatic approach, which one hopes will continue into the twenty-first century. Although he did not decide the point, he considered that to override the reasonable opposition of the part of a blameless trustee to suit the wishes of the settlor who, or whose advisers, have ex hypothesi, fallen into error might well be thought unjust. This means that the court applies a so-called complete list test, to fulfil which it must be able to draw up a complete list of the beneficiaries. I I The terminology was adopted by Emery (1982) 98 LQR 55 1 . It is the duty of trustees to take control of the trust assets and subsequently take proper steps to safeguard them. In Re Kayford, the company involved took actions to protect its customers by moving their funds into a separate bank account. In the case of settled land the duty is imposed on the life tenant as well as the trustees. Indeed, the Court of Appeal confirmed in the case of IRC v Broadway Cottages that in fixed trusts linguistic and evidential certainty as to beneficiaries are both essential. Discretionary Trust: Trust where the trustees have the discretion to choose which, of a defined class or group, they choose to apply the income or property of the trust to. Where a settlor wishes to make a present disposition on trust but is uncertain as to future events and would like the trustees to react to changed circumstances and the needs of the potential beneficiaries, he may create a discretionary trust. Sachs LJ took the approach that the burden of proof was on the claimants to prove they were beneficiaries, not on the trustees to prove the trust was valid. The court considered a discretionary distribution power given to trustees. Certainty of subject matter: it must be clear what property is part of the trust and property, including sum of money, cannot be separated. appointees might be ascertained in the future. PDF Hay's Settlement Trusts, Re In the event of the trustees failing to distribute any part of the income to the relatives, Mr X will be entitled to the same. The exception to this rule is found in Hunter v Moss,[19] which concerned 50 shares meant to be transferred to an employee out of a total holding of 950. In Re Wynn a judge refused to enforce an arrangement purporting to give the trustees the power to overrule any objection that might be raised by the beneficiaries in a dispute between the two entities. The Law Commission analysed the policy behind the rule against excessive accumulations and decided that the application of the current principles were disproportionate and unnecessarily complex, and ought to be abolished, except for charitable purposes, where the period ought to be modified. On the other hand, if the donee of the power fails to make an appointment, the property is held on resulting trust for the settlor or his estate. In Re Hay's ST,[26] Megarry VC said that: A mere power is very different [from an ordinary trust obligation]. If W makes a valid appointment in favour of the objects they become beneficiaries in respect of the amount of property distributed in their favour. discretion to or for 'any niece or nephew of the settlor' or any charitable object. shares: Rimer QC held that since the shares were all identical, the lack of AB was a professional trustee of two discretionary trusts created by the late parents of D1, a Will Trust for the benefit of their issue, and a Grandchildren 's Trust for the benefit of their grandchildren (i.e. the four children of D1 and D3, and the two children of D1 's late sister). When a trustee exercises a dispositive power (whether in the nature of a mere power or trust power or a hybrid power) he must do it in a responsible manner and not capriciously. The testators children died without issue and without any appointment having been made by the survivor. In case there is absolute deadlock, on application of one or other of the trustees or a beneficiary, the intervention of the court may be the only way to break the deadlock: Luke v South Kensington Hotel Co (1879) 11 Ch D 121. "Ascertainability" is where a beneficiary cannot be found, while "administrative unworkability" is where the nature of the trust is such that it cannot realistically be carried out. However, it should be noted that the restrictions in section 164 do not apply to accumulations directed in trusts created by a company as opposed to an individual. 0000002606 00000 n [32] Megaw LJ's stand reflects the current position. persons to whom the appointment was to be made, but had merely provided the mechanism The difference was that before any appointment the trustees were to hold the trust fund on Mrs Oughtred obtained the ownership in equity by virtue of the agreement, and this view has been supported by later cases (see Re Hay's Settlement Trusts [1982]). trust to pay the income thereof to 'any person or persons whatsoever' or any charity as they and more. The trustees are required to distribute the income each year as it arises, but have a discretion regarding the persons who may actually benefit. [29] The courts attempted to mitigate this test in Re Badens Deed Trusts (no 2);[30] however, all three judges of the Court of Appeal gave separate reasons. It was held that a hybrid power of appointment was created. Re Gulbenkian's Settlements Trusts [1970] AC 508 - Law Case Summaries [22] X#KB2*BWgYkh61aLs-khg;>\\9gK6X-}.htE,3uP aU`7a1QV:Bn?J~zO64k*95DSqe) In IRC v Blackwell Minors Trustees (1925) 10 TC 235, the accumulation of undistributed surplus income at the discretion of the trustees was treated as capital of the beneficiary, and not liable to income tax. Therefore, the question was one of conceptual rather than evidential uncertainty.