Understanding Equity and Trusts - Essay Example

The paper "Understanding Equity and Trusts" is an outstanding example of an essay on law. Sometimes the characteristics of the trust might be impracticable such that the trustee is unable to do according to the settler’s wishes. When the trust becomes administratively unworkable, then it becomes invalid. The importance of the trust workability is explained by Lord Eldon as follows: the effecting of the trust shall be under the management of the court and its nature must allow it to be under that control; the court under this circumstance shall be able to review the trust administratively or execute it, the trust can be reformed in case of maladministration and an outstanding administration directed.

A trust may fail on the basis of administrative unworkability. This occurs when the words in the trust are clear in their meaning but the definition of the beneficiaries is very wide such that it becomes practically impossible to determine the real beneficiaries (In Brief n.d., p1).   

The meaning of administrative unworkability can be found in the case of McPhail v Doulton presided over by Lord Wilberforce. Lord Wilberforce invalidates a discretional trust and asserts that it is an extension of the evidential ambiguity criterion. Hardcastle reviews the arguments that supported and rejected the workability criterion. He raises queries whether the size of objects alone is enough to make a trust invalid. He further suggests that the Lord Wilberforce ruling is based on the possibly large number of beneficiaries and lack of proof in the definitional criteria. Hardcastle further asserts that administrative unworkability is also applicable to fixed trusts (Ramjohn 2008, p111). He further questions whether the same notion is applied to the powers of appointment.

Lord Wilberforce failed to give enough reasons as to why the discretional trust should be annulled on that account. McKay in the (1974) 38 Conv 269 suggested that Lord Wilberforce was not justified to view the basis on either judicial execution or administrative viability. Despite the reservations, in this case, the concept of administrative unworkability was adopted in the R v District Auditor ex p West Yorkshire Metropolitan CC (1986); Lloyd J declared that the trust in favor of all, some or any of the West Yorkshire inhabitants were invalid on that basis, that is, it was administratively unworkable (Iwobi 2001, p23).           

According to Lord Wilberforce, a court must be able to control the trust. The judicial execution must take into consideration the limits within which the trust has been defined. These are the parameters in which the court gets a guide to reserve its own rulings for that of the trustees. The primary objective of the court is to execute the trust in the most practical way; the one intended to fulfill the settler’s intentions. The court is left with several options and the difficulty lies within the determination of the barriers to the judicial execution (Ramjohn 2008, p111).       

The trust should be drafted in a way that its objects are certain and can enable the administration of the trust by the court. The court should be able to judge whether or not the administration of the trust was carried out in the right way. The extent of the trust may make it difficult for it to be executed, that is, it may become administratively unworkable and in such a situation the trust is declared invalid (Hudson 2009, p146). The nature of the trustees from case to case (that is, the identity and capacity) may influence the administrative workability of the trust power. If the trust requirements make it difficult for the trustee to do their legal duties, then the trust becomes invalidated (Hudson 2009, p147).

There are cases where the court is ultimately required to execute the trust and not the power. An example is the County of West Yorkshire which numbered around 2.5 million people; the trust in the case R v District Auditors ex p West Yorkshire CC was declared by the court to be administratively impracticable (unworkable). The trustees were unable to make legal obligations because of the terms of the trust (Wilson 2007, p113). The trustees were required to distribute the property to all the inhabitants of West Yorkshire but it was held unworkable for the trustees and thus invalidation of the trust (Hudson 2008, p39).

Controversy in the Application of Administrative Unworkability in Trusts

The concept of administrative unworkability has been faced with controversy, especially in its application to the execution of trusts. The McPhail v Doulton case was taken to the High Court to determine whether the test for certainty was enough with respect to the trust powers. The High Court ruling favored the validity of the trust. The same decision was confirmed by the Court of Appeal in the Re Baden’s Deed Trusts (No 2) [1973] Ch 9. The issue addressed was whether the terms dependants and relatives were certain in relation to linguistics.

The Court of Appeal ruled that the certainty test was capable of giving a narrower definition of the expressions dependants and relatives.  The test applied depends on the type of trust; discretional or a fixed trust. For a fixed trust, the Ascertainability test is applied. Fro the discretional test, the Individual Ascertainability test is applicable (In Brief n.d., p1). Each Lord Justice of the Court of Appeal had a different approach to the certainty test. Five approaches were at least adopted; the question of fact approach, the substantial number approach, the strict approach, and the dictionary approach (Ramjohn 2004, p129).

The Re Hay’s Settlement Trusts give two propositions; (a) that the criterion of administrative unworkability is applicable to discretional trusts but not too sheer powers, (b) and that there may be a criterion of unreliability that will invalidate the special judicial powers but not the intermediate judicial powers. This means that if the administrative unworkability basis is on justiciability rather than an administrative inconvenience, then it becomes very difficult to differentiate it from unreliability. From these propositions, it becomes difficult to know the problems in the execution or administration (Bean, Dewar and Moffat 2005 p230).