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Summary Express Purpose Trusts tutorial notes
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Tutorial 3Express 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
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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)
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