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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Re Baden (No 1) McPhail v Doulton [1970] UKHL 1 (06 May 1970)
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Cite as: [1970] UKHL 1, [1970] 2 All ER 228, [1971] AC 424

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JISCBAILII_CASE_TRUSTS

    Parliamentary Archives,
    HL/PO/JU/4/3/1193

    HOUSE OF LORDS

    McPHAIL and Others

    v.
    DOULTON and Others

    Lord Reid
    Lord Hodson
    Lord Guest
    Viscount Dilhorne
    Lord Wilberforce

    Lord Reid

    MY LORDS,

    For the reasons given by my noble and learned friend, Lord Wilberforce,
    I would allow this appeal and make the Order which he suggests.

    Lord Hodson

    MY LORDS,

    The question under appeal is whether on its true construction the provisions
    of Clause 9(a) of a Deed dated 17th July, 1941, by which one Bertram
    Baden established a fund to provide benefits for the staff of Matthew Hall &
    Co. Ltd., and their relatives and dependants, constitutes a trust binding
    the Trustees to distribute income in accordance with its provisions or is
    a mere power not imposing any such duty. Clause 9 provided :

    " (a) The trustees shall apply the net income of the fund in making
    " at their absolute discretion grants ... in such amounts at such
    " times and on such conditions (if any) as they think fit. ...

    " (b) The trustees shall not be bound to exhaust the income of any
    " year or other period in making such grants . . . and any income not
    " so applied shall be ... [placed in a bank or invested].

    " (c) The trustees may realise any investments representing accumula-
    " lions of income and apply the proceeds as though the same were
    " income of the fund and may also ... at any time prior to the
    " liquidation of the fund realise any other part of the capital of the
    " fund ... in order to provide benefits for which the current income
    " of the fund is insufficient."

    Clause 10 provided that all benefits being at the discretion of the trustees,
    no person had any interest in the fund otherwise than pursuant to the
    exercise of that discretion.

    Of the preceding clauses, Clause 6(a) provided that all moneys in the hands
    of the trustees and not required for the immediate service of the fund may
    be placed in a deposit or current account with any bank or banking house
    in the name of the trustees or may be invested as hereinafter provided ;
    Clause 7 dealt with the trustees' power of investment.

    The settlor died in April, 1960, and his executors, the present Appellants,
    claim that, the deed being wholly void, payment of the fund is due to
    the settlor's estate. This claim is resisted by those whose interest it is to
    establish that, whether there is a trust or a mere power under which they
    may benefit, in neither case is the provision which they seek to support void
    for uncertainty.

    The importance to the parties of the particular question under appeal lies
    in the circumstance that as the law stands on the authorities it appears at
    least probable that the prospect of success for the Appellants upon the
    question whether the deed is void for uncertainty are considerably greater
    if the effect of Clause 9 is to constitute a trust that if, on the other hand,
    it only has the effect of giving to the Trustees a mere power not amounting
    to a trust.

    At first instance Goff J. held that nothing more than a power imposing
    no duty was contained in the provision contained in Clause 9. On appeal
    the majority of the Court of Appeal sustained his judgment without being

    2

    able to find any certainty in their conclusion, in view of the even balance,
    as it seemed to them, of the arguments presented. The majority felt able
    to sustain the judgment by relying on the doctrine ut res magis valeat quam
    pereat
    in order that the terms of the deed might have a chance of being
    effective since, without flying in the teeth of its provisions, the view of the
    trial judge might prevail thus giving a better opportunity to those upon whom
    the testator wished to confer benefit.

    There is no doubt that the primary trust here is expressed in a mandatory
    form. True that this is not necessarily conclusive, cf. In re Main's Settlement
    [1961] 1 W.L.R. 440 per Lord Evershed M.R. at page 443, but it is powerful
    foundation for the argument that a trust so created in its inception is not
    converted into a power by the mere addition in a later clause of a power
    to accumulate surplus income. Notwithstanding the different views expressed
    by the learned judges who have considered the matter in the Courts, I cannot
    for myself resist the conclusion reached by Russell L.J. that Clause 9 is
    a provision for the distribution of the whole with power to accumulate.
    There is a complete disposition with a primary duty to distribute, a trust
    for the whale period of its existence with a power to carry forward from
    year to year.

    Clause 10 is relied upon by the Respondents as showing that no member
    of the class was to be entitled to benefit from the fund otherwise than by
    the exercise of the discretion of the Trustees. So it is said that there cannot
    be a trust of the income but only a power over it. I do not accept this.
    I agree with Russell L.J. that Clause 10 correctly recites the effect of
    Clause 9 viz. that all benefits are at the discretion of the Trustees. The
    remainder of the clause states the legal result. If this makes Clause 10
    superfluous it does not justify, in my opinion, the conclusion that it produces
    a resulting trust to the settlor of income over which the Trustees might
    not exercise their discretion in the event of accumulation being no longer
    permissible. On the face of it, Clause 9(b) is no more than a provision
    for retention of monies unexpended during the lifetime of the trust and as
    Russell L.J. pointed out it has no other function. True that the language
    of Clause 9(c) using the word " accumulation " which often has a technical
    significance, denoting capital, followed by the permission to apply the
    proceeds as though the same were income and the succeeding reference to
    any other part of the capital of the fund suggest and lend support to the
    contrary conclusion. I am, I admit, unable to account for this language
    except on the footing of attributing to the draftsman a failure to give accurate
    expression to the intention of the Settlor. I am, however, satisfied after
    construing this deed as a whole that the Appellants are right in their first
    contention viz. that Clause 9(a) constitutes a trust or power coupled with a
    duly under which the Trustees are bound to distribute the whole estate.
    Clause 9(a) and (b) together are mandatory, the latter being assisted by
    administrative proviso including provision for the retention and investment
    of unexhausted income. Clause 9(c), notwithstanding its references to capital,
    is concerned only with those investments which it is to be noted can be realised
    only with the consent of all the Trustees. This treatment is in contrast
    with powers given to two (or more) trustees as to the trust fund generally
    (see Clause 6(b)). For these reasons I am of opinion that the order of the
    Court of Appeal should be reversed in so far as it affirmed that part of the
    order of Goff J. dated 12th July, 1967, which declared that the provisions
    of Clause 9(a) constitute a power and not a trust. Unfortunately this does
    not settle the dispute between the parties.

    Goff J. had in addition held that the power was valid and was not void
    for uncertainty, and on that footing had held that an amending Deed
    dated 21st December, 1962, was also valid. This additional holding was
    discharged by the Court of Appeal which ordered remission to the Chancery
    Division for further hearing of the question whether upon the true construction
    of the Deed of the 17th July, 1941, the provision for the benefit of officers
    and employees and ex-employees of the company and relatives or dependents
    of such persons are (a) valid or (b) void for uncertainty or for any other
    reason.

    3

    This latter part of the order of the Court of Appeal should stand together
    with a declaration that the provisions of Clause 9(a) constitute a trust, not
    a power.

    There remains the vexed question, much canvassed before your Lordships
    not only in this case but in Whishaw and Another v. Stephens and Others
    [1968] 3 WLR 1127, as to the distinction, if any, between trusts and bare
    powers in favour of a class of persons when the Court has to consider
    whether a disposition fails by reason of uncertainty.

    Of late years a number of dispositions have been considered by the Courts
    in which donors have sought to make elaborate provisions in favour of
    beneficiaries including such persons as the employees of limited companies
    and their wives and widows. Such a case was the Broadway Cottages case
    decided in the Court of Appeal and reported in [1955] Ch 20. It was there
    recognised that the accepted test of the validity of a trust was that it must
    be such as the Court can control. The authority for this proposition is to
    be found in Morice v. Bishop of Durham (1805) 10 Ves 522 as stated by
    Lord Eldon at page 540 where he said : " As it is a maxim, that the execution
    " of a trust shall be under the control of the Court, it must be of such a
    " nature, that it can be under that control; so that the administration of it
    " can be reviewed by the Court; or, if the trustee dies, the Court itself
    " can execute the trust; a trust therefore, which, in case of mal-administration
    " could be reformed ; and a due administration directed ; and then, unless
    " the subject and the objects can be ascertained, upon principles, familiar
    " in other cases, it must be decided, that the Court can neither reform mal-
    " administration, nor direct a due administration." In a sentence there is
    no trust over which the Court cannot assume control. If the inability arises
    from inability to ascertain the objects of the alleged trust, it is said to be
    void for uncertainty.

    The language used on this topic may have varied from time to time but
    is, I think, consistent with that used in the Broadway Cottages case where,
    in holding that the trusts of income were not such as the Court could enforce,
    the Court based itself upon the judgment of Lord Tomlin (sitting at first
    instance) in In re Ogden [1933] Ch. 678 who held that a trust for such
    members of a given class of objects as the trustees shall select is void for
    uncertainty, unless the whole range of objects eligible for selection is ascer-
    tanied or capable of ascertainment.

    I adhere to the view expressed in the Court of Appeal in the Broadway
    case, that this proposition is based on sound reasoning. The Broadway Trust
    ease has stood for many years. Disquiet has, however, now arisen about a
    strict adherence to the requirement of certainty there propounded. This
    disquiet is due to the narrow distinction between trust, on the one hand,
    where certainty is required and mere powers, on the other hand, where
    something less is needed. This matter was discussed before your Lordships
    in Whishaw v. Stephens (supra) (usually called the Gulbenkian case) and
    disquiet at the effect of the Broadway Trust decision is, I think, to be
    discerned in the speech of my noble and learned friend, Lord Reid, in the
    Gulbenkian case; and was clearly expressed by the two learned Lords
    Justices, both experienced equity lawyers, in the Court of Appeal in this
    case. The observations upon the distinction to which I have referred were
    not strictly necessary to the discussion in the Gulbenkian ease but the matter
    does become of crucial importance in the instant case in view of the ratio
    decidendi
    which prevailed in the Court of Appeal.

    The problem itself is not new. I may. I hope, be forgiven for referring
    to the leading case of Brown v. Higgs twice heard before the Rolls Court
    by Sir Richard Arden and finally in your Lordships' House by Lord Eldon
    (see 4 Ves. Jun. 709, 5 Ves. Jun. 495 and 8 Ves. 562). At the rehearing
    at page 505 Sir Richard is reported as admitting that the distinction between
    trust and power was very nice. He illustrated the nicety by reference to the
    case of the Duke of Marlborough v. Lord Godolphin 2 Ves. Jun. page 61.

    The distinction between a trust and a mere power can be stated shortly
    although the short statement will require some explanation. It is that where
    there is a trust there is a duty imposed upon the trustees who can be

    4

    controlled if necessary in the exercise of their duty. Whether the trust is
    discretionary or not the Court must be in a position to control its execution
    in the interests of the objects of the trust. Where there is a mere power
    entirely different considerations arise. The objects have no right to complain.
    Where by the instrument creating the power the discretion is made absolute
    and uncontrolable the Court cannot interfere (Gisborne v. Gisborne 2 App.
    Cas. 300). The trust in default controls and he to whom the trust results
    in default of exercise of the power is in practice the only one competent to
    object to a wrongful exercise of the power by the donee. Counsel did not
    profess to know of any successful application to the Court by a person
    claiming to be an apparent object of a bare power. I exclude from considera-
    tion cases in which bad faith may be alleged.

    I do not deny that what I have said about powers is, so to speak, blurred
    at the edges by cases in which powers of donees who refuse to exercise
    their discretion have been treated by the Courts as trusts. These powers
    have been described as intermediate between trusts and powers and are
    described in detail in Farwell on Powers 2nd edition page 468 where he
    cites from the judgment of Lord Eldon in Brown v. Higgs (supra) the
    following passage:

    " Where there is a mere power of disposing and it is not executed.
    " the Court cannot execute it; but wherever a trust is created and the
    " execution of that trust fails by the death of the trustee or by accident,
    " the Court will execute the trust. But there arc not only a mere
    " trust and a mere power, but there is also known to the Court
    " a power which the party to whom it is given is intrusted and required
    " to execute; and with regard to that species of power, the Court
    " considers it as partaking so much of the nature and qualities of a trust,
    " that if the person who has that duty imposed on him does not discharge
    " it, the Court will to a certain extent discharge the duty in his room
    " and place. The principle is that if the power is one which it is the
    " duty of the donee to execute, made his duty by the requisition of
    " the will, put upon him as such by the testator, who has given him an
    " interest intensive enough to enable him to discharge it, he is a trustee
    " for the exercise of the power, and has a discretion whether he will
    " exercise it or not. The Court adopts the principle as to trusts, and
    " will not permit his negligence, accident, or other circumstances to
    " disappoint the interests of those for whose benefit he is called upon to
    " execute it."

    This passage as quoted by the learned author is to the same effect but not
    verbatim the same as that which appears in the report of Vesey Junior.
    It does, however, show that where powers of a fiduciary character, as
    opposed to being mere powers not coupled with a duty, are concerned the
    Court's position differs in no way from that which it occupies in the case of
    trusts generally. Lord Eldon in the same case at page 576 of the report in
    8 Vesey said that it was difficult to reconcile all the cases.

    Examples of interference by the Court are to be found in such cases as
    Gower v. Mainwaring 2 Ves. Sen. 87 which shows that the Court, where a
    rule has been laid down for the guidance of donees of powers, will act upon
    it in the same way as the donees might have done. If trustees disclaim the
    power, the Court may execute it—see Hewall v. Hewell 2 Eden 332. In In
    re Hodges, Davey
    v. Warr 7 Ch.D. 759 the Court interfered where trustees
    were considered to be acting capriciously. Where duty and power are
    coupled the Court can compel the trustees to perform the duty—see
    Gisborne v. Gisborne (supra) and Tempest v. Lord Camoys 21 Ch.D. 571.

    In the Gulbenkian case (supra) the majority of your Lordships held the
    view that where there is a valid gift over in default of appointment a mere
    or bare power of appointment among classes is valid if it can be said with
    certainty whether any given individual is or is not a member of a class
    and that the power did not fail simply because of the impossibility of
    determining every member of the class.

    5

    In my opinion a mere power is a different animal from a trust and the
    test of certainty in the case of trusts which stems from Morice v. Bishop
    of Durham
    (supra) is valid and should not readily yield to the test which
    is sufficient in the case of mere powers.

    The unhappy results which may follow from incompetent drafting may
    be, in the case of an instrument held to impose a trust, that it is so much
    waste paper whereas in the case of an instrument differing perhaps on the
    face of it very little from the invalid trust instrument a good gift of a power
    to benefit objects may emerge. Thus it is said in order to avoid fine
    distinctions the test should be the same for both.

    One persuasive argument used is that, in applying the principle that where
    there is a trust the Court must be in a position to exercise it, the Court cannot
    exercise the trustees' discretion in the event of their failing to do so. The
    discretion being conferred on and exercisable by the trustees alone the
    Court cannot do other than authorise a distribution in equal shares. This,
    in cases comparable with the present, must lead to a result tending towards
    absurdity and makes the strict test of certainty open to serious criticism.
    This disability of the Courts to exercise the discretion reposed in trustees
    was referred to in the recitation of the argument for the Crown in the
    judgment of the Court in the Broadway case (supra) at page 30. It was
    not referred to specifically in the conclusion reached by the Court although
    it would be fair to say that the arguments of the Crown set out in the
    judgment were implicitly accepted. For myself I do not deny that there
    is force in the argument based on the absurdity of an equal division
    especially as it has not always been accepted.

    In what are called the relations cases, Moseley v. Moseley (1673) Rep.
    Temp. Finch 53, Clarke v. Turner (1694) 2 Freeman 198 and Warburton v.
    Warburton (1702) 4 Bro. P.C.1, the Court did exercise its own discretionary
    judgment against equal division. Similarly, in a different context the same
    principle was applied in the case of Richardson v. Chapman (1760) 7 Bro.
    P.C.318 where it appears from the reported argument that the Court
    decreed the proper act to be done not by referring the matter to the trustee's
    discretion but by directing him to perform as a mere instrument the thing
    decreed (pages 726-7). These cases may be explained as cases where there
    were indications which acted as pointers or guides to the trustees and enabled
    the Court to substitute its own discretion for that of the trustees.

    This practice, however, has fallen into desuetude and the modern, less
    flexible, practice has it appears been followed since 1801 when Sir R. Arden
    MR. in Warburton v. Warburton 5 Ves. 849 stated that the Court now
    disclaims the right to execute a power and gives the fund equally. The basis
    of this change of policy appears to be that the Court has not the same freedom
    of action as a trustee and must act judicially according to some principle or
    rule and not make a selection giving no reason as the trustees can. The
    Court, it is said, is driven in the end to the principle that equity is equality
    unless, as in the relations cases, the Court finds something to aid it. Where
    there is no guide given the Court, it is said, has no right to substitute its own
    discretion for that of the designated trustees.

    I regret that the Court is driven to adopt a non possumus attitude in cases
    where trustees fail to exercise a trust power. In this connection it is perhaps
    not irrelevant to note that the Court has not shown itself helpless in cases of
    failure and uncertainty where an order has been made to distribute part and
    pay the balance into Court (see Re Benjamin [1902] 1 Ch 723. Difficulties
    of fact in these cases must often arise especially after the passage of time when
    it is not known what has happened to members of a class who have gone
    abroad or disappeared and should be capable of solution. Certainty of
    description, however, if required, must be required at the moment when a
    trust instrument operates.

    I have had the advantage of reading the speech which has been prepared
    by my noble and learned friend Lord Wilberforce whose opinion particularly
    on this topic is of very strong persuasive power. I cannot, however, bridge

    6

    the gulf which still I think yawns between us. If one bases oneself, as I do,
    on the passage from Lord Eldon's judgment in Morice v. Bishop of Durham
    (supra) as defining the features of a trust, it is, in my opinion, impermissible
    to sanction, in the case of an uncertain disposition in the sense of the passage
    quoted, the authorisation by the Court of a scheme of distribution such as
    he suggests. I cannot accept that this is justified by stating that a wider
    range "of enquiry is called for in the case of trust powers than in the case of
    powers (meaning " mere " as opposed to " trust powers "). To adopt this
    solution is I think to do the very thing which the Court cannot do. As was
    pointed out by my noble and learned friend Lord Upjohn in the Gulbenkian
    case (at page 1139)—

    " The trustees have a duty to select the donees of the donor's bounty
    " from among the class designated by the donor; he has not entrusted
    " them with any power to select the donees merely from among claimants
    " who are within the class, for that is constituting a narrower class and
    " the donor has given them no power to do this ".

    I have read and re-read the speech of my noble and learned friend, Lord
    Wilberforce, with, I hope, a readiness to change my mind and to temper
    logic with convenience, but have given the best consideration I can to the
    problem I still adhere to the view I have previously expressed in the Broadway
    Cottages
    case and in the Gulbenkian case as to the requirements for certainty
    in the case of the objects of a trust.

    I agree with Russell L.J. that the appeal should be allowed and declare
    that the provision of clause 9 (a) constitute a trust, and remit the case to the
    Chancery Division for determination whether clause 9 is (subject to the effects
    of section 164 of the Law of Property Act, 1925), valid or void for uncertainty.

    Lord Guest

    MY LORDS,

    I have had the advantage of reading the speech of my noble and learned
    friend, Lord Hodson. I agree with it. I only make a few observations of
    my own.

    Upon the question of construction I have no doubt, in agreement with
    Russell L.J. in the Court of Appeal, that this is a trust and must be so
    construed. Clause 9 (a) is mandatory and provides that the Trustees shall
    apply the net income of the Fund in making at their absolute discretion
    grants to or for the benefit of certain persons. By clause 9 (b) they are not
    bound to exhaust the income of any one year or period in making such
    grants. Any income not so applied is to be dealt with according to clause
    6 (c) which provides that moneys in the hands of the Trustees not required
    for the immediate service of the Fund are to be placed on deposit or current
    account or invested. There is a distinction made between the Fund as
    defined by clause 1 and consisting of the capital of the Fund and the income
    which according to clause 9 (a) is to be distributed among the beneficiaries.
    It was argued for the Respondents that the terms of the deed imported an
    accumulation of income with power to distribute. I prefer the Appellants'
    description as a direction to distribute income with a power to withhold
    income.

    There is, in my view, a complete answer to the argument that clause 9 (c)
    contains a mere power and not a trust in that if it was a power the Trustees
    would not be bound to distribute one penny of the income. This is quite
    which according to clause 9 (a) is to be distributed among the beneficiaries,
    should be distributed with a power to withhold.

    If I understand English law correctly there is a basic distinction between
    a deed containing a power and a deed containing a trust. The distinction
    may be difficult to draw, but once drawn the effect is different. In the
    former case there is a resulting trust in favour of the Settlor upon failure
    to exercise the power or in the case of an invalid exercise. In the case of a

    7

    trust the beneficiaries are the objects of the trustee's bounty. The trustees
    are acting in a fiduciary capacity. If the trustees fail to exercise their dis-
    cretion, the Court can compel them to exercise the trust. This distinction
    has been recognised in the authorities over the years (see Gisborne v. Gisborne
    2
    App. Cas. 300) and finally confirmed by a majority of your Lordships
    in Whishaw v. Stephens [1968] 3 WLR 1127. In that case the deed
    admittedly contained a power and the test accordingly was whether in the
    case of any individual the trustees could safely say that he did or did not
    come within the category of objects of the power and it was held that the
    deed was valid (see Lord Upjohn at page 1113). But my noble and learned
    friend Lord Upjohn having dealt with the question of a mere power pro-
    ceeded to make some general observations upon the question where there
    was a trust and not a power. The distinction between a power and a trust
    was clearly recognised in those observations albeit obiter by Lord Upjohn.
    My noble and learned friend, Lord Hodson, and I concurred in his opinion.
    But I do not detect in the opinions of the other noble Lords in that case any
    disagreement with the distinction.

    Upon the assumption that this is a deed containing a trust power and not
    a mere power—as I understand all your Lordships agree—the question then
    arises what test is to be applied in order to determine the validity of the
    trust. Up till the present day the test in each case has been different. In
    the case of a power it is only necessary for the trustees to know whether a
    particular individual does or does not come within the ambit of the power.
    (Whishaw v. Stephens (sup. cit.) In the case of a trust power it is necessary
    for the validity of the trust that the class among whom the trustees are to
    exercise their discretion must be ascertainable. This is the result of the
    decisions in In re Ogden [1933] Ch. 678 (a decision of Lord Tomlin) and
    latterly in Broadway Cottages Trust [1955] Ch 20 as confirmed in the
    opinions of the majority of your Lordships in Gulbenkian's case sub. nom.
    Whishaw v. Stephens
    [1968] 3 W.L.R. 1117.

    It is now suggested for the first time that so far as the test of validity is
    concerned a mere power and a trust power can be assimilated. It is worth
    observing at the outset that this is a change of direction from the opinion
    expressed by the majority as recently as 1968. This is justified not upon
    the ground that the arguments in the previous case were not fully canvassed
    nor upon the ground that the previous decision was plainly wrong, but upon
    the basis of expediency.

    I will now attempt to analyse the basis of the view of those who consider
    that there should be an assimilation of the tests for validity. As I have
    already said, the distinction between a mere power and a trust power is funda-
    mental. The Court, apart from a mala fide exercise of a mere power has
    no control over the exercise of the power by the donee or trustees as the
    ease may be. If it is not exercised or fails for invalidity the fund goes to
    those entitled in default, under the settlement or on a resulting trust as the
    ease may be. It is very different in the case of a trust power. There the
    trustees are under a fiduciary duty to exercise the power. The beneficiaries
    can compel the trustees to exercise the power by application to the Court
    if necessary. If the beneficiaries agreed among themselves to equal divisions
    they could compel the trustees to distribute the whole fund. (See Harman
    L.J. in in re Gestetner [1953] Ch. 672 at page 686.) One of the reasons
    which, it is said, requires complete ascertainment of the class of objects is
    that if the Court has to administer the trust then, as it is only the trustees
    who have discretionary powers, the Court can only make an equal division.
    " Equity is equality ". This basic conception is challenged by reference to
    what is known as the " relation " cases. It is said that the Court in these
    eases has, instead of making an equal division, made a selection in the
    exercise of its discretion. This shows, it is said, that the principle of equal
    division is not a necessary result of the exercise of a trust power by the
    Court. I regard the " relation " cases as special for this reason, that in all
    of them some guide or pointer was given to the trustees as to the manner in
    which that discretion was to be exercised. The settlor entrusted a discretion
    to his trustee with certain guide lines and in these circumstances the Court

    8

    did not find it difficult to exercise its own discretion in accordance with the
    supposed intention of the settlor. For example in Clarke v. Turner 2 Free 198
    the devise was to " such of the relations as he should think fit, most
    reputable for his family". The Court chose the heir-at-law as the most
    reputable. In Warburton v. Warburton (1702) 4 Bro. P.C.I "a most
    extraordinary case " as described by the Master of the Rolls in Kemp v.
    Kemp (infra cit.) the discretion was among the executors, brothers and sisters
    according to their needs. The Court gave a double share to the heir.
    Richardson (1760) 7 Bro. P.C. 318 was not a "relation" case but depended
    on its own very special facts. Granted that the Court did not in these
    cases direct an equal division, it by no means follows that in a non-relation
    case where the trustees are given the discretion to distribute amongst a wide
    class of objects with no guide lines the Court would exercise a power of
    selection. The Court has no discretion and is given no guide lines upon
    which to exercise a discretion. It is on the trustees that the settlor has
    conferred the discretion. The Court can in these circumstances only order
    an equal division. I consider that the reliance on the "relation" cases is
    based upon an insecure foundation. Moreover in none of those cases was
    it ever suggested that the class of objects was not ascertainable. The test
    of validity never therefore arose.

    A more fundamental objection, however, to the reliance on these cases
    as a basis for a change in the law is not only their great antiquity—all in
    the eighteenth century—but also that they were all decided before Kemp v.
    Kemp
    (1801) 5 Ves. Jun. 849 and Morice v. Bishop of Durham (1805)
    10 Ves. Jun. 522 where the principle of equality was firmly established and
    has, so far as my researches go, never been questioned since. In Kemp
    the relation cases were cited but were not thought of sufficient importance
    to alter the practice. I do not re-quote the passage from Lord Eldon's
    judgment in Morice v. Bishop of Durham referred to in the speech of my
    noble and learned friend Lord Hodson.

    It Would be presumptuous on my part to attempt to improve upon the
    language of my noble and learned friend Lord Upjohn in Gulbenkian
    (supcit).
    I agree with the conclusions he expresses in that part of his
    speech which has been correctly described as obiter dictum. It seems to be
    as plain as can be that if all the objects are not ascertainable then to
    distribute amongst the known objects is -to take a narrower class than the
    settlor has directed and so to conflict with his intention.

    It has been suggested that it is not in conformity with the Court's duty
    to administer a trust that the settlor's intentions are to be defeated by this
    " narrow distinction " between mere power and trust power. As I have
    already said I regard the distinction as basic. It is also suggested that it
    is in the public interest that trusts of the nature of the present should be
    saved, if possible, because of the great benefit conferred on the beneficiaries.
    I agree, but if this is desirable the remedy is by legislation and not by
    judicial reform.

    For these reasons, I adhere to my concurrence with the whole of the
    opinion of my noble and learned friend, Lord Upjohn, in Gulbenkian.

    I would allow the appeal.

    Viscount Dilhorne

    MY LORDS,

    I have had the advantage of reading the opinion of my noble and learned
    friend, Lord Wilberforce. I agree with it. For the reasons he gives in my
    opinion the provisions of Clause 9(a) of the Deed constitute a trust and I
    entirely agree with his observations as to the tests to be applied to determine
    the validity of a trust.

    I too, would allow the appeal and make the orders he proposes.


    9

    Lord Wilberforce

    MY LORDS,

    This appeal is concerned with the validity of a Trust Deed dated 17th July,
    1941, by which Mr. Bertram Baden established a fund for the benefit, broadly,
    of the staff of the Respondent company Matthew Hall & Co. Ltd. Mr. Baden
    died in 1960 and the Appellants are the executors of his will. They claim
    that the Trust Deed is invalid and that the assets transferred to the Trustees
    by their Testator revert to his estate. The Trusts established by the Deed
    are of a general type which has recently become common, the beneficiaries
    including a wide class of persons among whom the Trustees are given
    discretionary powers or duties of distribution. It is the width of the class
    which in this, and in other cases before the Courts, has given rise to
    difficulty and to the contention that the trusts are too indefinite to be upheld.

    The Trust Deed begins with a recital that the Settlor desired to establish
    a fund for providing benefits for the staff of the Company and their relatives
    or dependants. The critical clauses are as follows:

    " 9. (a) THE Trustees shall apply the net income of the Fund in
    " making at their absolute discretion grants to or for benefit of any of
    " the officers and employees or ex-officers or ex-employees of the Com-
    " pany or to any relatives or dependants of any such persons in such
    " amounts at such times and on such conditions (if any) as they think
    " fit and any such grant may at their discretion be made by payment to
    " the beneficiary or to any institution or person to be applied for his
    " or her benefit and in the latter case the Trustees shall be under no
    " obligation to see to the application of the money.

    " (b) The Trustees shall not be bound to exhaust the income of any
    " year or other period in making such grants as aforesaid and any
    " income not so applied shall be dealt with as provided by Clause 6 (a)
    "
    hereof.

    " [Clause 6 (a) -All moneys in the hands of the Trustees and not
    " required for the immediate service of the Fund may be placed in a
    " deposit or current account with any Bank or Banking House in
    " the name of the Trustees or may be invested as hereinafter provided.]

    " (c) The Trustees may realise any investments representing accumula-
    " tions of income and apply the proceeds as though the same were
    " income of the Fund and may also (but only with the consent of all
    " the Trustees) at any time prior to the liquidation of the Fund realise
    " any other part of the capital of the Fund which in the opinion of the
    ' Trustees it is desirable to realise in order to provide benefits for which
    " the current income of the Fund is insufficient.

    " 10. ALL benefits being at the absolute discretion of the Trustees,
    " no person shall have any right title or interest in the Fund otherwise
    " than pursuant to the exercise of such discretion, and nothing herein
    " contained shall prejudice the right of the Company to determine the
    " employment of any officer or employee."

    Clause 11 defines a perpetuity period within which the trusts are, in any
    event, to come to an end and Clause 12 provides for the termination of the
    Fund. On this event the Trustees are directed to apply the Fund in their
    discretion in one or more of certain specified ways of which one is in making
    grants as if they were grants under Clause 9 (a). There are certain other
    provisions in the Deed upon which arguments have been based, but these
    are of a subsidiary character and citation of them is unnecessary.

    The present proceedings were started in 1963 by an Originating Summons
    taken out in the Chancery Division by the Trustees of the Deed seeking the
    decision of the Court upon various questions, including that of the validity
    or otherwise of the trusts of the Deed. It came before Goff J. in 1967.
    He first decided that the references in Clauses 9 and 12 to employees of
    the Company were not limited to the " staff" but comprised all the officers
    and employees of the Company. There was no appeal against this.


    10

    On the main question of validity, the learned judge was, it seems invited
    first to decide whether the provisions of Clause 9 (a) constitute a Trust or a
    power. This was on the basis that certain decided cases (which I shall
    examine) established a different test of invalidity for trusts on the one hand
    and powers on the other. He decided in favour of a power, and further
    that on this footing Clause 9 (a) was valid. On appeal, the Court of Appeal
    by a majority upheld the decision in favour of a power, but held also that
    the learned judge had applied the wrong test for the validity of powers,
    the correct test being that stated (subsequent to the hearing before Goff J.)
    by this House in re Gulbenkian's Settlement, Whishaw v. Stevens [1968]
    3 W.L.R. 1127. The Court of Appeal therefore remitted the case to the
    Chancery Division to reconsider the validity of Clause 9 (a) as a power.

    In this House, the Appellants contend, and this is the first question for
    consideration, that the provisions of Clause 9 (a) constitute a trust and not a
    power. If that is held to be the correct result, both sides agree that the
    case must return to the Chancery Division for consideration, on this footing,
    whether this trust is valid. But here comes a complication. In the present
    suite of authority, the decision as to validity would turn on the question
    whether a complete list (or on another view a list complete for practical
    purposes can be drawn up of all possible beneficiaries. This follows from
    the Court of Appeal's decision in In re Broadway Collages Trust [1955]
    Ch. 20 as applied in later cases by which, unless this House decides other-
    wise, the Court of Chancery would be bound. The Respondents invite your
    Lordships to review this decision and challenge its correctness. So the
    second issue which arises, if Clause 9 (a) amounts to a trust, is whether the
    existing test for its validity is right in law and if not, what the test ought
    to be.

    Before dealing with these two questions some general observations, or
    reflections, may be permissible. It is striking how narrow and in a sense
    artificial is the distinction, in cases such as the present, between trusts or as
    the particular type of trust is called, trust powers, and powers. It is
    only necessary to read the learned judgments in the Court of Appeal to see
    that what to one mind may appear as a power of distribution coupled with
    a trust to dispose of the undistributed surplus, by accumulation or otherwise,
    may to another appear as a trust for distribution coupled with a power to
    withhold a portion and accumulate or otherwise dispose of it. A layman
    and, I suspect, also a logician, would find it hard to understand what
    difference there is.

    It does not seem satisfactory that the entire validity of a disposition should
    depend on such delicate shading. And if one considers how in practice
    reasonable and competent trustees would act, and ought to act, in the two
    cases, surely a matter very relevant to the question of validity, the distinction
    appears even less significant. To say that there is no obligation to exercise
    a mere power and that no court will intervene to compel it whereas a trust is
    mandatory and its execution may be compelled may be legally correct enough
    but the proposition does not contain an exhaustive comparison of the duties
    of persons who are trustees in the two cases. A trustee of an employees'
    benefit fund, whether given a power or a trust power, is still a trustee and he
    would surely consider in cither case that he has a fiduciary duty: he is most
    likely to have been selected as a suitable person to administer it from his
    knowledge and experience, and would consider he has a responsibility to do
    so according to its purpose. It would be a complete misdescription of his
    position to say that if what he has is a power unaccompanied by an imperative
    trust to distribute he cannot be controlled by the Court if he exercised it
    capriciously, or outside the field permitted by the trust, c.f. Farwell on Powers
    3rd ed. p. 524. Any trustee would surely make it his duty to know what is
    the permissible area of selection and then consider responsibly, in individual
    cases, whether a contemplated beneficiary was within his powers and whether,
    in relation to other possible claimants, a particular grant was appropriate.

    Correspondingly a trustee with a duty to distribute, and particularly among
    a potentially very large class, would surely never require the preparation of
    a complete list of names, which anyhow would tell him little that he needs to

    11

    know. He would examine the field, by class and category; might indeed
    make diligent and careful enquiries, depending on how much money he had
    to give away and the means at his disposal, as to the composition and needs
    of particular categories and of individuals within them ; decide upon certain
    priorities or proportions, and then select individuals according to their needs
    or qualifications. If he acts in this manner, can it really be said that he is
    not carrying out the trust?

    Differences there certainly are between trusts (trust powers) and powers,
    but as regards validity should they be so great as that in one case complete,
    or practically complete ascertainment is needed, but not in the other? Such
    distinction as there is would seem to lie in the extent of the survey which the
    trustee is required to carry out: if he has to distribute the whole of a fund's
    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. But just as, 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 (trust power), the
    danger lies in overstating what the trustee requires to know or to enquire into
    before he can properly execute his trust. The difference may be one of
    degree rather than of principle: in the well-known words of Wilmot C. J.
    (Wilmot p. 23) trusts and powers are often blended, and the mixture may vary
    in its ingredients.

    With this background I now consider whether the provisions of Clause
    9 (a) constitute a trust or a power. I do so briefly because this is not a matter
    on which I or, I understand, any of your Lordships have any doubt. Indeed,
    a reading of the judgments of Goff J. and of the majority in the Court of
    Appeal leave the strong impression that if it had not been for their leaning
    in favour of possible validity and the state of the authorities, these learned
    judges would have found in favour of a trust. Naturally read, the intention
    of the Deed seems to me clear: Clause 9 (a), whose language is mandatory
    (" shall "), creates, together with a power of selection, a trust for distribution
    of the income, the strictness of which is qualified by Clause 9 (b) which allows
    the income of any one year to be held up and (under Clause 6 (a)) either
    placed, for the time, with a Bank, or, if thought fit, invested. Whether there
    is, in any technical sense, an accumulation, seems to me in the present context
    a jejune enquiry: what is relevant is that Clause 9 (c) marks the difference
    between " accumulations " of income and the capital of the fund: the former
    can be distributed by a majority of the trustees, the latter cannot. As to
    Clause 10, I do not find in it any decisive indication. If anything, it seems
    to point in favour of a trust, but both this and other points of detail, are
    insignificant in the face of the clearly expressed scheme of Clause 9. I there-
    fore agree with Russell L. J. and would to that extent allow the appeal, declare
    that the provisions of Clause 9 (a) constitute a trust and remit the case to the
    Chancery Division for determination whether on this basis Clause 9 is (subject
    to the effects of section 164 of the Law of Property Act 1925) valid or void
    tor uncertainty.

    This makes it necessary to consider whether, in so doing, the Court should
    proceed on the basis that the relevant test is that laid down in In re Broadway
    Cottages Trust
    (u.s.) or some other test.

    That decision gave the authority of the Court of Appeal to the distinction
    between cases where trustees are given a power of selection and those where
    they are bound by a trust for selection. In the former case the position, as
    decided by this House, is that the power is valid if it can be said with
    certainty whether any given individual is or is not a member of the class and
    does not fail simply because it is impossible to ascertain every member of
    the class. (In re Gulbenkian's Settlement (u.s.).) But in the latter case it
    is said to be necessary, for the trust to be valid, that the whole range of
    objects (I use the language of the Court of Appeal) should be ascertained or
    capable of ascertainment.

    The Respondents invited your Lordships to assimilate the validity test for
    trusts to that which applies to powers. Alternatively they contended that in
    any event the test laid down in the Broadway Cottages case was too rigid,

    12

    and that a trust should be upheld if there is sufficient practical certainty in
    its definition for it to be carried out, if necessary with the administrative
    assistance of the Court, according to the expressed intention of the settlor.
    I would agree with this, but this does not dispense from examination of the
    wider argument. The basis for the Broadway Cottages principle is stated
    to be that a trust cannot be valid unless, if need be, it can be executed by the
    Court, and (though it is not quite clear from the judgment where argument
    ends and decision begins) that the Court can only execute it by ordering
    an equal distribution in which every beneficiary shares. So it is necessary
    to examine the authority and reason for this supposed rule as to the execution
    of trusts by the Court.

    Assuming, as I am prepared to do for present purposes, that the test of
    validity is whether the trust can be executed by the court, it does not follow
    that execution is impossible unless there can be equal division.

    As a matter of reason, to hold that a principle of equal division applies
    to trusts such as the present is certainly paradoxical. Equal division is surely
    the last thing the settlor ever intended: equal division among all may, prob-
    ably would, produce a result beneficial to none. Why suppose that the Court
    would lend itself to a whimsical execution? And as regards authority, I do
    not find that the nature of the trust, and of the Court's powers over trusts,
    calls for any such rigid rule. Equal division may be sensible and has been
    decreed, in cases of family trusts for a limited class, here there is life in the
    maxim " equality is equity", but the cases provide numerous examples
    where this has not been so, and a different type of execution has been
    ordered, appropriate to the circumstances.

    Moseley v. Moseley (1673) Rep. Temp. Finch 53 is an early example, from
    the time of equity's architect, where the Court assumed power (if the executors
    did not act) to nominate from the sons of a named person as [it] should think
    fit and most worthy and hopeful, the testator's intention being that the estate
    should not be divided. In Clarke v. Turner (1694) 2 Freeman 198, on a
    discretionary trust for relations, the Court decreed conveyance to the heir
    at law judging it " most reputable for the family that the heir at law should
    "have it". In Warburton v. Warburton (1702) & Bro. P.C.1 on a dis-
    cretionary trust to distribute between a number of the testator's children, the
    House of Lords affirmed a decree of Lord Keeper Wright that the eldest son
    and heir, regarded as necessitous, should have a double share, the Court
    exercising its own discretionary judgment against equal division.

    These are examples of family trusts but in Richardson v. Chapman (1760)
    7 Bro. P.C. 318 the same principle is shown working in a different field. There
    was a discretionary trust of the testator's " options " (viz. rights of presentation
    to benefices or dignities in the Church) between a number of named or
    specified persons, including present and a former chaplains and other
    domestics; also " my worthy friends and acquaintance, particularly the Rev.
    " Dr. Richardson ". The House of Lords (reversing Lord Keeper Henley)
    set aside a " corrupt" presentation and ordered the trustees to present Dr.
    Richardson as the most suitable person. The grounds of decision in this
    House, in accordance with the prevailing practice, were not reported, but
    it may be supposed that the reported argument was accepted that where the
    Court sets aside the act of the trustee, it can at the same time decree the
    proper act to be done, not by referring the matter to the trustee's discretion,
    but by directing him to perform as a mere instrument the thing decreed
    (I.c. pages 726-7). This shows that the Court can in a suitable case execute
    a discretionary trust according to the perceived intention of the truster. It
    is interesting also to see that it does not seem to have been contended that
    the trust was void because of the uncertainty of the words " my worthy
    " friends and acquaintance". There was no doubt that Dr. Richardson
    came within the designation.

    In the time of Lord Eldon, the Court of Chancery adopted a less flexible
    practice: in Kemp v. Kemp (1801) 5 Ves. 849 Sir R. Arden, M.R. com-
    menting on Warburton v. Warburton (" a very extraordinary case ") said that
    the Court now disclaims the right to execute a power (i.e. a trust power) and

    13

    gives the fund equally. But I do not think that this change of attitude, or
    practice, affects the principle that a discretionary trust can, in a suitable case,
    be executed according to its merits and otherwise than by equal division.
    I prefer not to suppose that the great masters of equity, if faced with the
    modern trust for employees, would have failed to adapt their creation to its
    practical and commercial character. Lord Eldon himself, in Morice v.
    Bishop of Durham (1805) 10 Ves 522 laid down clearly enough that a trust
    fails if the object is insufficiently described or if it cannot be carried out,
    but these principles may be fully applied to trust powers without requiring
    a complete ascertainment of all possible objects. His earlier judgment in
    the leading, and much litigated, case of Brown v. Higgs (1801) 8 Ves. 561,
    shows that he was far from fastening any rigid test of validity upon trust
    powers. After stating the distinction, which has ever since been followed,
    between powers, which the Court will not require the donee to execute, and
    powers in the nature of a trust, or trust powers, he says of the latter that
    if the trustee does not discharge it, the Court will, to a certain extent,
    discharge the duty in his room and place. To support this, he cites Harding
    v. Glyn (1739 1 Atk. 469) an early case where the Court executed a discretion-
    ary trust for " relations " by distributing to the next of kin.

    I dwell for a moment upon this point because, not only was Harding v.
    Glyn described by Lord Eldon as having been treated as a clear authority
    in his experience for a long period, but the principle of it was adopted in
    several nineteenth century authorities. When the Broadway Cottages Trust
    case came to be decided in 1955, these cases were put aside as anomalous
    (see [1955] Ch. pages 33, 35) but I think they illustrate the flexible manner
    in which the Court, if called on, executes trust powers for a class. At
    least they seem to prove that the supposed rule as to equal division does
    not rest on any principle inherent in the nature of a trust. They prompt
    one to ask why a practice, or rule, which has been long followed and found
    useful in " relations " cases, should not also serve in regard to " employees ",
    or " employees and their relatives ", and whether a decision which says the
    contrary is acceptable.

    I now consider the modern English authorities, particularly those relied
    on to show that complete ascertainment of the class must be possible before
    it can be said that a discretionary trust is valid.

    In re Ogden [1933] Ch. 678 is not a case which I find of great assistance.
    The argument seems to have turned mainly on the question whether the
    trust was a purpose trust or a trust for ascertained objects. The latter
    was held to be the case and the Court then held that all the objects of the
    discretionary gift could be ascertained. It is weak authority for the require-
    ment of complete ascertainment.

    The modern shape of the rule derives from In re Gestetner [1953] Ch. 672
    where the judgment of Harman J., to his later regret, established the
    distinction between discretionary powers and discretionary trusts. The focus
    of this case was upon powers. The judgment first establishes a distinction
    between, on the one hand, a power collateral, or appurtenant, or other
    powers " which do not impose a trust on the conscience of the donee " and
    on the other hand a trust imposing a duty to distribute. As to the first, the
    learned judge said: " I do not think it can be the law that it is necessary
    " to know of all the objects in order to appoint to any one of them ". As
    to the latter he uses these words: " It seems to me there is much to be said
    " for the view that he must be able to review the whole field in order to
    " exercise his judgment properly". He then considers authority on the
    validity of powers, the main stumbling block in the way of his own view
    being some words used by Fry J. in Blight v. Hartnoll (1881) 19 Ch. D. 294,
    301, which had been adversely commented on in Farwell on Powers, and I
    think it worth while quoting the words of his conclusion. He says:

    " The settlor had good reason, I have no doubt, to trust the persons
    " whom he appointed trustees ; but I cannot see here that there is such

    14

    " a duty as makes it essential for these trustees, before parting with any
    " income or capital, to survey the whole field, and to consider whether A
    " is more deserving of bounty than B. That is a task which was and
    " which must have been known to the settlor to be impossible, having
    " regard to the ramifications of the persons who might become members
    " of this class.

    " If, therefore, there be no duty to distribute, but only a duty to
    " consider, it does not seem to me that there is any authority binding
    " on me to say that this whole trust is bad. In fact, there is no
    " difficulty, as has been admitted, in ascertaining whether any given
    " postulant is a member of the specified class. Of course, if that could
    " not be ascertained the matter would be quite different, but of John
    " Doe or Richard Roe it can be postulated easily enough whether he
    " is or is not eligible to receive the settlor's bounty. There being no
    " uncertainty in that sense, I am reluctant to introduce a notion of
    " uncertainly in the other sense, by saying that the trustees must worry
    " their heads to survey the world from China to Peru, when there are
    " perfectly good objects of the class in England."

    Subject to one point which was cleared up in this House in Re Gulbenkian's
    Settlement
    all of this, if I may say so, seems impeccably good sense, and I
    do not understand the learned judge to have later repented of it. If the
    judgment was in any way the cause of future difficulties, it was in the
    indication given—not by way of decision, for the point did not arise—that
    there was a distinction between the kind of certainty required for powers
    and that required for trusts. There is a difference perhaps but the difference
    is a narrow one, and if one is looking to reality one could hardly find better
    words than those I have just quoted to described what trustees, in either case,
    ought to know. A second look at this case, while fully justifying the decision,
    suggests to me that it does not discourage the application of a similar test for
    the validity of trusts.

    So I come to I.R.C. v. Broadway Cottages Trust [1955] Ch 20. This was
    certainly a case of trust, and it proceeded on the basis of an admission, in the
    words of the judgment, " that the class of ' beneficiaries " is incapable of ascer-
    " tainment ". In addition to the discretionary trust of income, there was a
    trusl of capital for all the beneficiaries living or existing at the terminal date.
    This necessarily involved equal division and it seems to have been accepted
    that it was void for uncertainty since there cannot be equal division among a
    class unless all the members of the class are known. The Court of Appeal
    applied this proposition to the discretionary trust of income, on the basis that
    execution by the Court was only possible on the same basis of equal division.
    They rejected the argument that the trust could be executed by changing the
    trusteeship, and found the relations cases of no assistance as being in a class
    by themselves. The Court could not create an arbitrarily restricted trust to
    take effect in default of distribution by the trustees. Finally they rejected the
    submission that the trust could take effect as a power: a valid power could
    not be spelt out of an invalid trust.

    My Lords, it will have become apparent that there is much in this which
    I find out of line with principle and authority but before I come to a con-
    clusion on it, I must examine the decision of this House in Re Gulbenkian's
    Settlement
    (u.s.) on which the Appellants placed much reliance as amounting
    to an endorsement of the Broadway Cottages case. But is this really so?
    That case was concerned with a power of appointment coupled with a gift
    over in default of appointment. The possible objects of the power were
    numerous and were defined in such wide terms that it could certainly be said
    that the class was unascertainable. The decision of this House was that the
    power was valid if it could be said with certainty whether any given individual
    was or was not a member of the class and did not fail simply because it was
    impossible to ascertain every member of the class. In so deciding their
    Lordships rejected an alternative submission, to which countenance had been
    given in the Court of Appeal, that it was enough that one person should
    certainly be within the class. So, as a matter of decision, the question now

    15

    before us did not arise or nearly arise. However the opinions given were
    relied on, and strongly, as amounting to an endorsement of the " complete
    " ascertainment" test as laid down in the Broadway Cottages case.

    My Lords, I comment on this submission with diffidence, because three of
    those who were party to the decision are present here today, and will express
    their own views. But with their assistance, and with respect for their views,
    I must endeavour to appraise the Appellants' argument. My noble and
    learned friend Lord Reid's opinion can hardly be read as an endorsement of
    the Broadway Cottages case. It is really the opinion of my noble and learned
    friend Lord Upjohn which has to be considered. Undoubtedly the main part
    of that opinion, as one would expect, was concerned to deal with the clause
    in question, which required careful construction, and with the law as to
    powers of appointment among a numerous and widely defined class. But
    having dealt with these matters the opinion continues with some general
    observations. I have considered these with great care and interest: I have
    also had the advantage of considering a detailed report of the argument from
    counsel on both sides who were eminent in this field. I do not find that it
    was contended on either side that the Broadway Cottages Trust case was open
    to criticism—neither had any need to do so. The only direct reliance upon it
    appears to have been to the extent of the fifth proposition appearing on
    page 31 of the report, which was relevant as referring to powers, but does
    not touch this case. It is consequently not surprising that my noble and
    learned friend Lord Upjohn nowhere expresses his approval of this decision
    and indeed only cites it, in the earlier portion, in so far as it supports a proposi-
    tion as to powers. Whatever dicta therefore the opinion were found to
    contain, I could not, in a case where a direct and fully argued attack has been
    made on the Broadway Cottages case, regard them as an endorsement of it
    and I am sure that my noble and learned friend, had he been present here,
    would have regarded the case as at any rate open to review. In fact I doubt
    very much whether anything his Lordship said was really directed to the
    present problem. I read his remarks as dealing with the suggestion that trust
    powers ought to be entirely assimilated to conditions precedent and powers
    collateral. The key passage is at page 1139 where he says:

    " Again the basic difference between a mere power and a trust power
    " is that in the first case trustees owe no duty to exercise it and the
    " relevant fund or income falls to be dealt with in accordance with the
    " trusts in default of its exercise, whereas in the second case the trustees
    " must exercise the power and in default the court will. It is briefly
    " summarised in 30 Halsbury's Laws (3rd edn.) page 241, para. 445:

    " '. . . the court will not . . . compel trustees to exercise a purely
    " ' discretionary power given to them ; but will restrain the trustees
    " ' from exercising the power improperly, and if it is coupled with a
    " ' duty . . . can compel the trustees to perform their duty ' ".

    "It is a matter of construction whether the power is a mere power
    " or a trust power and the use of inappropriate language is not decisive
    " (Wilson v. Turner (1833) 22 Ch. D. 521 at p. 525)."

    " So, with all respect to the contrary view, I cannot myself see how,
    " consistently with principle, it is possible to apply to the execution
    " of a trust power the principles applicable to the permissible exercise
    " by the donees (even if trustees) of mere powers: that would defeat the
    " intention of donors completely.

    " But with respect to mere powers, while the court cannot compel
    " the trustees to exercise their powers, yet those entitled to the fund in
    " default must clearly be entitled to restrain the trustees from exercising
    " it save among those within the power. So the trustees, or the court,
    " must be able to say with certainty who is within and who is without
    " the power. It is for this reason that I find myself unable to accept
    " the broader proposition advanced by Lord Denning M.R., and Winn
    " L.J., mentioned earlier, and agree with the proposition as enunciated
    " in Re Gestetner [1953] 1 All E.R. 1150 and the later cases."
    The reference to " defeating the intention of donors completely " shows
    that what he is concerned with is to point to the contrast between powers

    16

    and trusts which lies in the facultative nature of the one and the mandatory
    nature of the other, the conclusion being the rejection of the "broader"
    proposition as to powers accepted by two members of the Court of Appeal.
    With this in mind it becomes clear that the sentence so much relied on by
    the Appellants will not sustain the weight they put on it. This is :

    " The trustees have a duty to select the donees of the donor's bounty
    " from among the class designated by the donor; he has not entrusted
    " them with any power to select the donees merely from among known
    " claimants who are within the class, for that is constituting a narrower
    " class and the donor has given them no power to do this."

    What this does say, and I respectfully agree, is that, in the case of a trust,
    the trustees must select from the class. What it does not say, as I read it,
    or imply, is that in order to carry out their duty of selection they must have
    before them, or be able to get, a complete list of all possible objects.

    So I think that we are free to review the Broadway Cottages case. The
    conclusion which I would reach, implicit in the previous discussion, is that the
    wide distinction between the validity test for powers and that for trust
    powers, is unfortunate and wrong, that the rule recently fastened upon the
    courts by I.R.C. v. Broadway Cottages Trust ought to be discarded, and
    that the test for the validity of trust powers ought to be similar to that
    accepted by this House in Re Gulbenkian's Settlement for powers, namely
    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.

    I am interested, and encouraged, to find that the conclusion I had reached
    by the end of the argument is supported by distinguished American authority.
    Professor Scott in his well known book on Trusts (1939) discusses the
    suggested distinction as regards validity between trusts and powers and
    expresses the opinion that this would be " highly technical " (I.c. s. 122.
    p. 613). Later in the second Restatement of Trusts (1959) section 122
    (which Restatement aims at stating the better modern view and which
    annotates the Broadway Cottages case) a common test of invalidity is taken,
    whether trustees are " authorised" or " directed " : this is that the class
    must not be so indefinite that it cannot be ascertained whether any person
    falls within it. The Reporter is Professor Austin Scott. In his abridgement,
    published in 1960, Professor Scott maintains the same position. " It would
    " seem that if a power of appointment among the members of an indefinite
    " class is valid, the mere fact that the testator intended not merely to confer
    " a power but to impose a duty to make such an appointment should not
    " preclude the making of such an appointment. It would seem to be the
    " height of technicality ... (as above) " I.c.. § 122.

    Assimilation of the validity test does not involve the complete assimilation
    of trust powers with powers, As to powers, I agree with my noble and
    learned friend Lord Upjohn in In re Gulbenkian's Settlement that although
    the trustees may, and normally will, be under a fiduciary duty to consider
    whether or in what way they should exercise their power, the Court will
    not normally compel its exercise. It will intervene if the trustees exceed
    their powers, and possibly if they are proved to have exercised it capriciously.
    But in the case of a trust power, if the trustees do not exercise it, the Court
    will: I respectfully adopt as to this the statement in Lord Upjohn's opinion
    (page 1139 B—D). I would venture to amplify this by saying that the
    Court, if called upon to execute the trust power, will do so in the manner
    best calculated to give effect to the settlor's or testator's intentions. It
    may do so by appointing new trustees, or by authorising or directing repre-
    sentative persons of the classes of beneficiaries to prepare a scheme of distri-
    bution, or even, should the proper basis for distribution appear by itself
    directing the trustees so to distribute. The books give many instances where
    this has been done and I see no reason in principle why they should not do
    so in the modern field of discretionary trusts (see Brunsden v. Woolredge
    (1765) Amb. 507. Supple v. Lowson (1773) ib. 729, Liley v. Hey (1842)
    1 Hare 580 and Lewin on Trusts 16th ed. p. 630. Then, as to the trustees'
    duty of enquiry or ascertainment, in each case the trustees ought to make

    17

    such a survey of the range of objects or possible beneficiaries as will enable
    them to carry out their fiduciary duty (c.f. Liley v. Hey u.s.). A wider
    and more comprehensive range of enquiry is called for in the case of trusts
    powers than in the case of powers.

    Two final points: first, as to the question of certainty, I desire to emphasise
    the distinction clearly made and explained by Lord Upjohn (page 1138

    D--G), between linguistic or semantic uncertainty which, if unresolved by the

    Court, renders the gift void, and the difficulty of ascertaining the existence
    or whereabouts of members of the class, a matter with which the Court
    can appropriately deal on an application for directions. There may be a
    third case where the meaning of the words used is clear but the definition of
    beneficiaries is so hopelessly wide as not to form " anything like a class"
    so that the trust is administratively unworkable or in Lord Eldon's words
    one that cannot be executed (Morice v. Bishop of Durham (u.s.) 527). I
    hesitate to give examples for they may prejudice future cases, but perhaps
    " all the residents of Greater London " will serve. I do not think that a
    discretionary trust for " relatives " even of a living person falls within this
    category.

    I would allow the appeal and make the order suggested earlier in this
    opinion. The costs of the Appellants of this appeal taxed on a common
    fund basis should be paid out of so much of the Trust Fund subject to
    the Trust Deed of the 17th July, 1941, as was derived from Bertram Baden
    deceased.

    (306614) Dd. 197055 100 5/70 St.S.


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