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Discretionary Trusts

Q: Explain how the debate over the conceptual certainty of the term 'relatives' in McPhail v Doulton was interpreted in Re Baden's Deed Trust (No2) ? What is the summary of the majority judgment on the conceptual certainty of the word 'relatives'?

The first two judges Sachs and Megaw LJJ accepted that the terms 'relatives' were conceptually certain and meant descendants from a common ancestor. The burden was on the claimant to prove he was in the class of objects, and if he could not, then he fell into the 'is not' part.

5 important questions on Discretionary Trusts

How can we ascertain the person's intention to create a power or a discretionary trust from the words used?

If the words suggest there is a duty to select a beneficiary = discretionary trust

If there is no duty to select = power of appointment. E.g., by including a gift in default of appointment, the person did not intend to impose a duty on the trustees to select a child as they recognised the possibility that the trustees might not select a child.

Explain the 'given postulant test' that is used for certainty of objects for powers of appointment? What are the case authorities to support this?

The test for certainty of objects for powers of appointment is the 'given postulant test'/ 'is or is not test'. A power is valid if it can be said with certainty whether any given individual is or is not a member of the class of objects (Re Gestetner's Settlement; Re Gulbenkian's Settlement).

For there to be certainty of objects in a discretionary trust, the description of the objects must satisfy which test? Which case authority is this test laid down in?

For certainty of objects in a discretionary trust, the description of the objects must satisfy the given 'postulant test'. It must be ascertainable whether any given individual is or is not a member of the class of objects. Only conceptual or linguistic certainty is required. (McPhail v Doulton).

Explain how the debate over the conceptual certainty of the term 'relatives' in McPhail v Doulton was interpreted in Re Baden's Deed Trust (No2)? What is the summary of the majority judgment on the conceptual certainty of the word 'relatives'?

The first two judges Sachs and Megaw LJJ accepted that the terms 'relatives' were conceptually certain and meant descendants from a common ancestor. The burden was on the claimant to prove he was in the class of objects, and if he could not, then he fell into the 'is not' part.

Explain why a conceptually and evidentially certain trust can still fail due to capriciousness (irrationality)? What is the main authority for this?

Capriciousness will render both discretionary trusts and powers void. Templeman J said that capriciousness 'negatives a sensible consideration by the trustees of the exercise of the power' (Re Manistry's Settlement).

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WS3 Certainty of Objects and the Beneficiary Principle

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