Mere Powers of Appointment and Trust Powers of Appointment - Assignment Example

A. One of the situations where it is important to distinguish between mere powers of appointment and trust powers of appointment is when there is nota breach of trust. If a trustee has mere powers, then the trustee is free to exercise the power to distribute the trust corpus or not - he is not compelled to do so. However, he is compelled to at least consider exercising the trust.1 Traditionally, objects of mere powers of appointment did not have the right to disbursements from the trust, but they did have the right to seek removal of a trustee who is not giving 電ue consideration to an exercise of...fiduciary power.”2 The exception is apparently when there is a breach of trust, such as when the trustees make speculative investments that destroy the corpus of the trust. In that case, the objects of the mere power of appointment does have locus standi to apply for relief from the trustee, even when it is a mere power of appointment. 3 Therefore, when there is a breach of trust by the trustees, there is really no difference between mere powers of appointment and trust powers of appointment. However, this is the only case where there is no difference between these two powers of appointment. In every other case, there is an important distinction with trust powers, there is a duty to administer the trust corpus to the beneficiaries, whereas, with mere powers of appointment, there is not. Even when there is a breach of trust, that is still no guarantee that the trustee must use his powers to appoint, for this is approached on a case by case basis. Therefore, there is still a large difference between the two powers of appointment in almost every case but where there is a breach of trust, and even then, the cases are decided on the facts, not a bright line rule. B. Answer: In considering whether a valid trust was formed, there must be three certainties: certainty of intention, certainty of subject-matter and certainty of object.4 Under the first prong, certainty of intention, it must be clear that Carthy intended to create a trust. The facts are that he provided the bequest as a part of a will, but appointed trustees to carry out the bequest. In Re Hamilton5 states that a will must be construed by its four corners, and that there must not be an assumption that a trust was formed. However, the courts have liberalized this over the years, and the current trend is for courts to assume that trust documents be interpreted to validate a will as opposed to voiding it.6 In this case, the facts are a bit unclear. While the bequest was made a part of a will, he apparently appointed trustees to carry out his intentions, as opposed to this bequest being carried out by an executor. Therefore, considering that courts are more willing to construe documents to effectuate a trust when there is a question of intention, there probably was an intention to create a trust, and the certainty of intention is probably satisfied. The next question is whether there is certainty of subject matter. The subject matter of the trust, which is what is being bequeathed or entrusted, must be clear and separated from other property. The trust will not be valid if there is not a clear separation.7 In this case, there is a clear delineation of property Carthy bequeathed f30,000 to the trustees. Therefore, the second prong of the analysis is satisfied. The third question is the more tricky of the three. This question is whether or not there is a certainty of objects. The first part of this analysis hinges on what type of trust this particular trust is fixed, mere powers or discretionary? If the trust is fixed, then there must be a specific group of individuals who will benefit from the trust. The test for this is whether the trustee can name every beneficiary, and make a complete list of the beneficiaries.8 Is this the case here? It might be, as the trust made the safeguard that Eliza or David will make the call as to who is the beneficiary of this trust. However, therein lies the rub either Eliza or David has final say on who is considered to be a musician in Leicester. The mere fact that there are two different people who might have two different opinions as to who is in this class, and the document does not show a preference for either of them might invalidate the trust, or, at the very minimum, exclude the trust as being a fixed trust. By its very nature, the trustee will not be able to name every beneficiary of this trust because, as stated, Eliza and David might each have very different opinions as to who constitutes a musician in Leicester. Eliza is a folk singer she might want only other folk singers to benefit from this trust, and state that only other folk singers constitute a musician in Leicester. She could well do this if she wanted to, for the trust document does not preclude this. David is a conductor of an orchestra - maybe he doesnt consider rock musicians to be musicians, and only classical musicians are 鍍ruemusicians. Again, the document does not preclude him making that assessment. Therefore, the trust document provides that either of these two individuals, who might have widely different interpretations on who is and is not a musician, will be deciding who will get this gift. Since the trust document does not discriminate, and states that either would be as acceptable as the other, then it would be impossible to ascertain who will be a part of the class by that clause alone. However, the trust might be fixed if the trustees can decide for themselves who is a part of the class, and be able to name them. This is tricky, because there is more than one trustee, but it is less tricky than allowing distinct musicians to decide who is a part of the class or is not. There could very well be wide disagreements even between the trustees themselves as to who constitutes a musician perhaps one trustee states that a musician is anybody who is part of music-making singers, instrument players, etc. Another trustee might say that musicians are only those who play an instrument. Etc. Add to this the near impossibility that the trustees can find every single musician in the town, and name them, and it seems as if this is not a fixed trust at all. Moreover, the trustees are able to disburse the money as they see fit which means that some musicians might get money, others may not, and the trust can conceivably be disbursed to only two musicians, as the trustees can use their discretion on who gets the trust money. The only limitation appears to be that more than one musician benefits from the bequest, as the term is 杜usiciansas opposed to 杜usician. Is the trust a 杜ere powerstrust? This is when the trustee is under no obligation to make any kind of disbursement, and this is usually denoted by the word 杜ay,as in the trustees 杜ay apply the income and the capital of the fund to make such grants as they think fit...9In other words, the trustee does not have to make any kind of disbursements, although he does have to consider exercising his power. The court can force the trustee to consider exercising his power, but the court cannot force him to actually exercise it.10 In this case, it is pretty clear that the document at hand is not a mere powers document, as it states that the trustees shall apply the income, not may. Therefore, the trustees in this case do not have the discretion as to whether or not they exercise their powers - they must make disbursements. So, the trust is not a mere powers document. Which leaves the analysis to whether or not the trust is discretionary. This is where the trustees must exercise their powers, but are allowed discretion in how to do this. Since the wording of the trust states that the trustees have discretion on how to disburse the gift, it becomes clear that this is a discretionary trust. However, the analysis does not end there. There are any number of tests that determine if the certainty of objects is satisfied under a discretionary trust. The traditional rule was that, even in discretionary trusts, the trustee must be able to name every beneficiary.11 However, this rule was replaced in McPhail v. Doulton12. The McPhail rule is that, if the trustee can look at any individual and state with certainty that this individual is a part of the class, then this prong of certainty is satisfied. 13 Added to the confusion is the decision in Re Baden14 in which three different judges put forth three different tests that attempted to clarify the McPhail rule. One judge stated that the facts speak for themselves, and essentially did not clarify or add to the McPhail rule; another judge stated that it was the burden of the beneficiaries to prove that they were a part of the class, not on the trustee to prove that they were or were not; a third judge stated that if there were a 田ore numberof beneficiaries who were certain, the trust is valid even if there were other beneficiaries who were uncertain.15 Therefore, there is considerable confusion on this point. If the McPhail rule prevails, which is also the rule chosen by Stamp LJ in Baden, then the trustees must be able to look at the individuals in the town of Leicester and decide if each individual is or is not a member of the class. This would be difficult, but not necessarily impossible, but there are questions that are seemingly unanswered. Do the musicians have to live in Leicester, or is it enough that they merely perform in Leicester? How about the opposite a musician lives in Leicester, but his regular gig is in Liverpool? It would seem not to matter if the musician is a professional or an amateur, as long as they are a musician, and it would seem not to matter whether the person plays music for only his own enjoyment or performs it for others, so the second question is seemingly answered by the facts, but not the first does the musician have to live in Leicester, or is it enough that he only performs there? This is not really answered adequately by the wording of the trust. The difficulties in using either David or Eliza to decide has already been discussed above, but it bears repeating since either of these individuals can choose who fits into the class of musician, then it would be impossible to ascertain who would be in the class if one is to use this clause as a guide as to whom is a part of the class. Therefore, the trustees must be able to decide for themselves who is a part of the class, and, since the trust document does not specify if the musician has to live in Leicester, or if it would be adequate just to perform there and live elsewhere, it would seem as if it would be impossible for the trustees to decide if any one individual in Leicester fits the definition of the class using strict a strict McPhail analysis. Under the other analyses, the trust would be valid. For instance, if it were up to the beneficiaries to prove that they are a part of the class, this would be easy enough to do every musician could come forth, and show that he or she is a musician, and they become a part of the class. The difficulty would be if there was a musician who does not live in Leicester, but only performs there, but it would seem as if the trustee would have discretion to go ahead and include that individual, under this analysis but not on the McPhail analysis, for the reasons stated above. And, the third analyses is even easier as long as a 都ubstantial numberof beneficiaries can be ascertained, then the trust is valid. Since the trustees could no doubt find a substantial number of musicians to be a part of this class, then this analysis would validate the trust. Thus, any analyses, aside from that of McPhail would validate the trust, the the McPhail trust would invalidate it. The other caveat is that it might be administratively impossible to carry out the trust, in which case the trust would be invalidated under R v. District Auditor.16 This is a possibility, as the city of Leicester is a fairly large city and the sheer number of musicians in the city would possibly make this trust unworkable. SOURCES USED Freeman v. Ansbacher Trustees Limited [2009] JR C003. Hudson, A., Equity and Trusts (6th Ed.), London: Routledge-Cavendish. IRC v. Broadway Cottages [1955] Ch 20. In Re Hamilton [1895] 2 Ch 370. In Re Hays St [1981] 3 All ER 786. Knight v. Knight (1840) 3 Beav 148. McPhail v. Doulton [1971] AC 424. Mowbray, J., Lewin on Trusts, 18th Ed., London: Sweet & Maxwell. Regina v. District Auditor, ex p W Yorks [1986] RVR 24 Re Baden [1973] Ch 9. Re Gestetner Settlement [1953] Ch 672. Re Goldcorp Exchange Ltd. [1994] 2 All ER 806. Read More