McPhail v Doulton
A discretionary trust is valid if it can be said with certainty that any given individual is or is not a member of the class, the same test as for powers.
Facts
Bertram Baden set up a fund for the benefit of the staff of a company, Matthew Hall & Co. The trust deed gave the trustees a discretion to apply the income in making grants to or for the benefit of any of the officers and employees or ex officers or ex employees of the company, or to any relatives or dependants of any such persons, in such amounts and on such conditions as they thought fit. It was impossible to draw up a complete list of all the relatives and dependants. The question was whether the clause created a trust or a power, and whether it was void for uncertainty.
Legal principle
The House of Lords held that the clause created a discretionary trust, not a power, and that the test for certainty of objects for discretionary trusts should be the same as for powers. Lord Wilberforce said that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class, overruling IRC v Broadway Cottages Trust. If the trustees fail to act, the court can execute the trust in various ways, such as appointing new trustees or directing a scheme of distribution, and need not divide the fund equally. Lord Wilberforce added that a trust might still fail if the definition of the class was so hopelessly wide as not to form anything like a class, that is, administratively unworkable. The case was sent back to decide whether the trust satisfied the test.
Related cases on certainty of objects and discretionary trusts
- Re Baden's Deed Trusts (No 2) [1973] Ch 9
- Re Barlow's Will Trusts [1979] 1 WLR 278
- Breakspear v Ackland [2008] EWHC 220 (Ch), [2009] Ch 32
- Re Gulbenkian's Settlements [1970] AC 508
- Re Hay's Settlement Trusts [1982] 1 WLR 202
- IRC v Broadway Cottages Trust [1955] Ch 20
- Re Londonderry's Settlement [1965] Ch 918
- Re Manisty's Settlement [1974] Ch 17
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