Private Express Trust - Essay Example

Private Express Trust – An Analysis Private Express Trust – An Analysis College Question A private express trust is one where its objects are declared or defined in unambiguous terms for specific or identified purposes, and it might be in a written document or by an oral declaration. In McPhail v Doulton (1971), it was held that there should be certainty of object, and the trustee can be able to decide whether any given individual is a beneficiary or not. For a trust to be held a valid, there should be conceptual certainty, which needs an exact recognition of beneficiaries. Wilberforce observed in the above case, a trust established for ‘all the residents of Greater London’ would not be enforceable as it is impossible to define the class of beneficiaries administratively (Moffat, 2005, p.534). In Brown v Gould (1972), it was held that the phrases “old friends” did not offer exact definition and hence, it was difficult to arrive at nature of disposition by the trustees. “Re Barlow’s Will Trusts [1979]”, it was held that the term old friends were found to be ambiguous (Penner, 2012, p.195). In Re Tuck’s Settlement Trusts case, Lord Denning permitted the trustees to consult the Chief Rabbi of London about a main issue within the testator’s of Jewish origin when if any doubts arise as regards to the disposition (Penner, 2012, p.198). An express trust is established purposely by the settlor for the benefit of a beneficiary, and it arises due to the declaration of trust by the settlor. The settlor must recognise the beneficiary or class of beneficiaries while establishing a private trust. As held in Ivin v Blake (1995), disposition is not only related to equitable interest in land but also relate to equitable interest in personality. (Penner, 2012, p.149). Where there is a class of beneficiaries in a private express trust , it is first necessary to define the nature of the disposition as held in Brown v Gould (1972), Re Barlow’s Will Trusts, Re Tuck’s Settlement Trusts case else the trust may fail. Question 2 As per Knight v Knight [1840], there must be certainty of object for the creation of a private trust. However, the magnitude of certainty of object may vary footing upon the type of the trust as held in Morice v Bishop of Durham (1805). In case of fixed private trust, the trust deed should specify the portions of each and every beneficiary in the trust property and hence, each beneficiary’s interest would be fixed. In discretionary trust, the designated class of beneficiaries as described by the settlor will be selected by the trustees. Discretionary trust may be either exhaustive or non-exhaustive where the trustees have the authority to decide whether to pay whole or part of the income (Moffat, 2005.p.903). In IRC Broadway Cottages Trust (1955), there should an all-inclusive list of every entitled beneficiary so that it would be easy for trustee to distribute the trust income or property. The decision in Broadway Cottages Trust was overruled by McPhail v Doulton (1971) with litmus test for certainty of object for discretionary trusts by answering the following question, “can it be ascertained with some certainty whether any given beneficiary is or not member of a class, and this is called as ‘individual ascertainability’ test or ‘given postulant ‘test (Davies & Virgo, 2013, p.87). It is to be noted that there exist differences between trust power (discretionary trust) and fiduciary power of a trust as held in McPhail v Doulton case. For instance, the distinction is so significant, but it does not involve in the test but it lies in the comparison of the different duties of the trustees as detailed in: McPhail. It is necessary to make such distinction as it seems to lie in the extent of the survey which the trustee is required to carry out: If the trustee has to distribute the whole of funds income, he must necessarily make a wider and more systematic survey than if his duty is expressed in terms of a power to make grants. However, in the case of a power, it is possible to underestimate the fiduciary obligation of the trustee to whom it is given so. In the case of a trust power, the danger lies in overstating what the trustee requires to know or to inquire into before he can properly execute his duty under the trust. The difference may be one of the degree rather than of principle." This was also emphasized in Re Baden Duties of Trustees: to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty. In R v. District Auditor, ex p West Yorkshire Metropolitan County Council [1986] 26 RVR 24, the WYMCC established a discretionary trust “for the advantage of any or all or some of the inhabitants of the County of West Yorkshire.” In this case, the court held that the purported gift was void, as the trust was intended, which was administratively unworkable. Further, a number of duties are inflicted upon the trustees which have been listed out by Megarry VC in Re Hay’s Settlement Trust. The duties of a trustee which are specific to a mere power appear to be threefold namely a) to deliberate occasionally whether or not he can exercise the power , b) to evaluate the range of objects of the power and c) to evaluate the aptness of individual appointments. Re Baden Deed Trusts (No 2) helps to understand the certainty of object with the help of evidential and conceptual uncertainty. From the above, we can come to understanding that for a private express trust, there should be certainty of objectives. In the Re Baden (No 2) case, the term “dependents and relatives” were abstractly certain enough to fulfil the class test, and it was observed by the court that the trustees should act impartially to exercise their authority and to function sensibly and to avoid the inclusion of distant and remote relatives in the list (Davies & Virgo, 2013, p.104). Re Baden (No 2) applied the “ is or not” litmus test as held in Re Gulbenkian and in McPhail v Doulton cases to validate a discretionary trust from the angle of certainty of objects. In Re Manisty’s Settlement case, Templeman J observed that the trustees were not required to be aware of the exact span of the beneficiaries. Before McPhail v Doulton case, a trust would have declared void for uncertainty of objects as a whole list of all ‘dependents and relatives‘could not be listed out. However, in McPhail case, the House of Lords reshaped the test and held that “can it be decided with certainty that any given beneficiary is or is not, a member of a class? which is now called as a class test. In McPhail case, Lord Wilberforce emphasised that it must be identified with certainty that any beneficiary is within or out of the class for the test to be fulfilled, which is known as ‘ any given postulant test’. (Davies & Virgo, 2013, p.87). In Re Baden (No 2), it was held that the probable beneficiary must be able to demonstrate that he is within the class, and if he is unable to demonstrate the same, then he may not be in it. From McPhail, Stamp LJ applied in Re Baden (No 2) case the strict test and under this, every probable beneficiary, whether or not they fit into the class has to be included. Stamp arrived at his decision by applying a narrow view of relatives as he considered them as being legal next of kin. (Davies & Virgo, 2013, p.104). Megaw LJ and Sachs applied a much wider approach to the phrase “relative,” explaining as anyone sharing an ancestor. However, this elucidation is challenging as it is very arduous for the court to test the claim. Megaw LJJ and Sachs tried to resolve this issue by emphasising the onus on the person claiming to be an ancestor to demonstrate it. Sachs LJ observed that the class of those to whom a trustee can distribute the benefit of beneficiary’s right should be “conceptually certain.” (Davies & Virgo, 2013, p.104). As per Megaw LJ, a discretionary trust can be said to be legal if there is a “vast number “of beneficiaries who are falling well within the class to whom a trustee can divide the benefit of trustee’s right. The additional conditions inflicted by Megaw LJJ and Sachs did not help in adhering the objective of the “ any given person” test thereby paving the court to direct whether the trustee distributes the benefit of the right to an individual outside the permitted class. Hence, Re Baden No (2) is different from McPhail test as it was more narrow and strict. Though Stamp opinion was of minority in nature, which was in tandem with findings in McPhail, but he was outstripped in his thinking. Sachs LJ test resolved many issues, by footing upon conceptual certainty and has eluded the challenging area of evidential certainty by retreating the accountability. (Davies & Virgo, 2013, p.104). In Re Baden (No2), Sachs LJ footed his test on conceptual certainty, while Megaw LJ avoided the use of evidential certainty with his test where Stamp LJ employed “complete list” found to be beneficial. Megaw LJ “any given person” test is regarded to be too artificial and will validate discretionary trusts that have no basis. Stamp LJ’s test centred upon the conceptual certainty. However, the test proposed by the above judges have to follow and mirror the contemporary doctrine of discretionary trusts. Though, three judges in Re Baden had varied views towards the application of the test, nonetheless, the trust was found to be within the legal frame work as the judges had the obligation to find a trust so that the beneficiaries can derive advantages from the trust. (Davies & Virgo, 2013, p.104). References Davies P S & Virgo G. (2013). Equity & Trusts, Cases, Materials and Texts. Oxford: Oxford University Press. Dennis, Hower R & Kahn P. (2011). Wills, Trusts and Estates Administration. New York: Cengage Learning. Moffatt, G. (2005). Trust Law, Cases and Materials. Cambridge: Cambridge University Press. Penner, J. (2012). The Law of Trusts. Oxford: Oxford University Press. Routledge. (2014). Equity and Trusts Lawcards 2012-2013. London: Routledge. List of Case Laws Brown v Gould [1972] Ch. 53; [1971] 3 W.L.R. 334; [1971] 2 All E.R. 1505 IRC Broadway Cottages Trust [1955] Ch. 20 (CA) Ivin v Blake [1995] 1 FLR 70 Knight v Knight (1840) 49 ER 58 McPhail v Doulton [1971] AC 424, [1970] UKHL 1 Morice v Bishop of Durham [1805] EWHC Ch J80 R v. District Auditor, ex p West Yorkshire Metropolitan County Council [1986] 26 RVR 24 Re Baden Deed Trusts (No 2) [1972] EWCA Civ 10 Re Barlow’s Will Trusts  [1979] 1 All ER 296 Re Hay’s Settlement Trust [1982] 1 WLR 202 at 210 Re Manisty’s Settlement [1974] Ch 17 Re Tuck’s Settlement Trusts [1978] 1 All ER 1047 (CA) Read More