Summary Express Purpose Trusts tutorial notes

Tutorial 3
Express private trusts (2)


Essential reading


Virgo pp 85-100


Re Gulbenkian’s [1970] AC 508 (HL) (especially Lord Reid)
McPhail v Doulton [1971] AC 424 (HL) (especially Lord Wilberforce)
Re Baden’s (No. 2) [1973] Ch 9 (CA) (all 3 judgments)
Re Tuck’s [1978] Ch 49 (CA)
Re Barlow’s [1979] 1 WLR 278
Re Hay’s [1982] 1 WLR 202
R v District Auditor, ex p West Yorkshire County Council [2001] WTLR 785


Recommended extended reading

Webb & Akkouh ch 3


---------


NOTES ON Virgo - 3.7.8 + 4.3-4.4


Powers
 Trusts = impose obligations that must be performed
 Powers = discretionary, so they may be performed
 Significance of the distinction between trusts and powers is illustrated by reference to
the distribution of trust property to objects of the trust


Fixed trust
 Under this, a duty to distribute trust property to the beneficiaries must be discharged
 If not = court will ensure duty is performed


Discretionary trust
 Discretion of a discretionary trust can be characterized as a power
 = trustee can choose who is to benefit
 = power must be exercised so it’s a trust
 Trust → there’s an obligation to appoint
 Power → the trustee has a discretion regarding who is to benefit from the
appointment of trust property and by how much
 Trustee
 Subject to a duty to survey the class of beneficiaries
 + to exercise their discretion in favour of one or more members of that class
 If trustee fails to do so

,  Trust power will be executed by the court
 1. Making order for equal division among beneficiaries
 OR 2. What’s appropriate in the circumstances


Power coupled with a trust
 Power trust?
 Power to make an appointment → but trust arises if appointment isn’t made
 If power not exercised before trustee dies = it’ll lapse and be replaced with a trust
obligation in favour of the objects of the power
 Burrough v Philcox
 *page 67, (iv)*
 Justifiable cause the testator was considered to have a general intention to
benefit the class of nephews and nieces as a whole → but this was subject to
particular intention for his surviving child to have a discretion to select from
that class
Mere powers
 Powers given to people who are not trustees or in a fiduciary relationship
 Trustee may be given a mere power if the power is given to them in a personal
capacity, rather than as a trustee


Determining whether a trust or power has been created
 Whether settlor or testator created a trust obligation or a discretionary power
depends on their intent
 Mandatory language
 Suggests trust obligation
 E.g. ‘to be distributed’
 Discretionary language
 Suggests fiduciary power
 McPhail v Doulton
 *page 68, (vi)*
 HL held that a trust power had been created → rather than a fiduciary power
 Cause of the use of the words ‘shall distribute’
 Lord Wilberforce recognized that the distinction between trust and power was
narrow and artificial
 Breadner v Granville-Grossman
 Park J illustrated the distinction between trusts and powers by reference to a
trust for the distribution of income
 If trust power = trustees bound to distribute the income
 But would have discretion as to how it should be divided between the
objects
 If fiduciary power → trustees would have 2 discretions
 1. Whether or not to distribute the income
 2. If they decide to exercise that discretion = how the income should
be divided between the beneficiaries
 Typically there’s a default trust that applies if the trustees were not to exercise
their discretion to distribute the income


Re Gulbenkian’s [1970] AC 508 (HL)