Mc Phail v Doulton (1970)

Mc Phail v Doulton (1970) Free Online Research Papers Q ) ‘It seems to be as plain as can be that if all the objects are not ascertainable, then to distribute amongst the known object is to take a narrower class than the settler has directed and so to conflict with his intention.’ (Lord Guest (dissenting) in Mc Phail v Doulton (1970)). Discuss. As stated in question the statement is a dissenting view of Lord Guest in Mc Phail v Doulton (1970). For better understanding, it would be convenient to break the statements into parts. First, ‘If all the objects are not ascertainable’. This entails that all the objects of the trust to be identified or specified by the settler Broadway Cottages. Second, â€Å"to distribute among the known objects† means â€Å"any given postulant test† or â€Å"is or is not test† as in Gulbenkian. Third, â€Å"is to take a narrower class† it is a view of the judge which needs discussion to see whether â€Å"is or is not test† conflicts with the directed intention of the settler or not. Proceeding accordingly, the first thing to consider is certainty of objects. For certainty of objects to subsist, a settler must give conceptually certain class to trustee. Previously, in fixed trust and discretionary trust it was necessary to identify all the members of the stipulated class of settler for the valid execution of the trust. This was known as complete list test as settled in I.R.C v. Broadway Cottages (1955). Jenkins LJ in Court of Appeal in Broadway regarded this test as contrary to common sense with regard to discretionary trust. Moreover, the dissenting judges Hodson LJ and Guest LJ in McPhail regarded it as absurd and contrary to public interest and held that it should to be changed by statue respectively. The reason that the dissenting judges had ambivalence regarding Broadway test was concept of duty. They held that if objects are not ascertainable the court could not control and execute that trust because if trustees fail to exercise their discretion, the court could not direct an equal distribution among the beneficiaries because to execute a discretionary trust application of complete list test was necessary. Lord Wilberforce in McPhail demolished the complete list argument. He emphasized that the purpose of the discretionary trust is to appoint trustee to distribute property fairly among beneficiaries. He insisted the application of equal distribution as illogical because it would produce a result beneficial to none in case of big class in discretionary trust. Equal distribution is not the motive behind the discretionary trust. Equal distributions are matters used in family matters and not elsewhere. Lord Wilberforce is giving more flexibility to court. In addition, discretionary trust is meant to distinguish deserving from undeserving. You do not need equal division in discretionary trusts. This is because, as oppose to fix trusts, in discretionary no one has the right to entitlement to trust property. Therefore, you also do not need to know everyone in the class for a valid execution of the trust. Only those beneficiaries are given share which trustee chooses among the class. The second thing to consider in this essay is â€Å"is or is not test.† The court of first instance in McPhail construed the provisions in as Power. They concluded that the words were fluffy which entailed no obligation on trustee thus power. Goff J used Gestetner rule, while applying the wider interpretation of Lord Denning of court of appeal in Gulbenkian. The rule validates power if any individual comes within the class. Court of Appeal in McPhail accepted the fact that the arguments found in favor of interpreting the provisions as a trust or power were of equal standing. Since, at that time, discretionary test used to apply complete list test of Broadway, it would have meant that the trust would fail of evidential uncertainty therefore court of appeal construed it as power. Notwithstanding, Lord Harman in court of appeal criticized the merits of Broadway rule in discretionary trust on policy grounds. His stance was that saying the provisions were trust or power sho uld not invalidate the deed in either case and that invalidity of a discretionary trust by not being able to make a complete is just absurd and embarrassing. While the case was in court of appeal, House of Lords in ReGulbenkians had reestablished the narrower approach of â€Å"is or is not† test. Test required that if it is applied to any random person, it would be possible to say of every person, with certainty, whether he falls in the class of defined objects or not. This test entailed that without actually surveying, on paper you can say for sure that using that particular test would give a certain result. With this interpretation in hand, court of appeal in McPhail regarded the provisions as amounting to power and ordered resubmission of the case to the chancery division to check on evidence whether the provisions fulfill the narrower interpretation of Gestetner test. Tendency of courts had become more inclined towards not using complete list test for discretionary test. This was an unnecessary hurdle towards the validity of discretionary trusts. Broadway requirement was rendering many trusts as not valid. This rule was as old as nineteenth century where courts had established in several cases that where trustees failed to carry out a trust, the court would simply order an equal distribution Kemp v Kemp(1801), Brown v Higgs(1800). The decision In I.R.C v Broadway Cottages had led to series of cases where discretionary trusts in favor employees, ex-employees, dependants, etc. were brought before courts to check there validity. Re Sayer Trust (1957), Re Eden (1957), Re Hain’s Settlement (1961), Re Saxone Shoe Co. Ltd’s Trust Deed (1962) and Re Leek (1969). In these cases if courts decided that income or capital of trust fund were subject to discretionary than all its objects had to be ascertainable following Broadway otherwise in cases of mere power it would be valid if it met the test laid down in Re Gestetner(1953). More problems emerged with time to time. It was impractical to expect a complete list in cases of big class. Lord Reid in Gulbenkian and Lord Wilberforce in McPhail stipulated that sometimes the class is so big, notwithstanding conceptually certain, it is simply administratively unworkable to carry out a trust by making a complete list. It was felt that just because you do not have enough evidence to locate all beneficiaries it would be unfair to reject a trust. Similarly, a strong desire had emerged to allow trustees to execute a trust and not defeat a trust on mere technicality or ,as later decided, on the basis of peradventure(chance, doubt or evidential uncertainty) Re Hays Settlements(1982). It had a few benefits such as you can at least benefit some people where as in complete list trust, even if one person is not found(certain) than no one would get the benefit. This would in turn waste the time of settlor and wastage of purpose of transferring the property in the name of trustee and wastage of lots of money used to create a trust. House of Lords took notice of all the detriments brought by complete list test in the field of discretionary test and brought an important change in the English law of trust. House of Lords in McPhail brought an end to rule in I.R.C v Broadway Cottages (1955) (complete list test in discretionary trust). House of Lords in McPhail felt that, as power is almost practically same and closest to discretionary trust so court decided to apply the test used in power to discretionary trusts from now onwards. The difference was just of enforceability not of kind. They imported narrower approach of â€Å"is or not† test as laid down by Lord Upjohn in ReGulbenkians. The premise of this change was that if the trustee’s job is X than court would not diverge from that and would do the same job X to carry out the trust if in case trustees fail to execute a trust. Court would not do anything different from the powers conferred on to trustees. This stance was in compliance to very old cases Moseley v Moseley (1673), Clarke v Turner (1694), Warburton v Warburton (1702), Harding v Glyn (1739), Richardson v Chapman (1760). In these cases, chancery judges a ssumed free legal authority to exercise the discretions which settlor conferred on trustees. Although all the judges in McPhail agreed that, it was a discretionary trust. However, two of the judges Lord Hodson and Lord Guest who had previously supported Broadway rule in Gulbenkian were still in favor of this rule in McPhail and insisted to apply complete list test. This inevitably meant that trust would fail due to evidential uncertainty but they still gave strong dissenting judgments. As already mentioned in question Lord Guest iterated that it would be opposite to settlor’s intentions if we do not allow complete list test and follow the narrower interpretation of â€Å"is or is not† test. In response to practical approach laid down by Lord Wilberforce for ruling out Broadway, dissenting judges raised the argument that practical expediency should not be dictating questions of law. They held that trustees should consider everyone, whether he deserves or not. Therefore, to secure a right to be considered a complete list test still desirable. Moreover, com plete list test gives more certainty. Lord Wilberforce in response to this emphasized that ascertaining all complete list of defined group is costly. He accentuated to conduct reasonable enquires and ascertain group reasonably as it is not sensible or good thing to ascertain everyone as it is costly too. This was similar to imposing a duty to survey as in Re Gestetner and encouraging trustee not to just stop in ascertaining class by just finding one person who falls within that class. If trustees had to defray more to ascertain objects of the class then the original trusts fund, it would simply be odd to carry out that trust. Further, he articulated that if trustees refuse to execute trust, court could have methods to implement the intentions of the trustees in the best possible way. It could appoint new trustees, force present trustees, in extreme cases courts itself could do it or can appoint committee from the representatives of the class of beneficiaries. To say that the application of narrower approach of is or is not test conflicts with the intention of the settlor is not appropriate. In fixed trust, where complete list test is still used, beneficiary’s can come to court and then court can distribute equally. For equal distribution, you need exact list. Equity is equality. Trustees have limited choice in terms of distribution. Only equal distribution is allowed. If here trustee do any kind of discrepancy then it can be validly argued that trustees are diverging from the intention of the settlor. Whereas in the case of discretionary test settlor, himself, gives trustee the power to distribute among anyone he like from the people who fall in the class. Therefore, in case of discretionary trust settlor gives his submission to the conscience of the trustee to execute the trust fairly. Settlor has no authority to question how the trust was carried out except for the fact that trusts fund was distributed within the stipula ted class of beneficiaries. House of Lords sent this case back to chancery division to determine the validity of the provisions under the narrower approach of is or is not test. Brightman J in chancery division regarded the provisions as certain and then the case went up to court of appeal as ReBaidens No.2 where three judges gave different interpretations to is or is not test. Sachs LJ clearly distinguished conceptual and evidential certainty. He said that evidential uncertainty could never fail a trust; if you could just locate just one person, the trust would be valid. Megaw LJ stated that if you know or discovered substantial number of beneficiaries who fall in the class than the class is certain. The problem is the word â€Å"substantial.† Judge said it is a matter of common sense. Substantial and few are just a matter of degree. This interpretation of the test is just like the rejected interpretation of is or is not test in court of appeal in Gulbenkian where the power was held valid if any one or few people fell within the class than trust was valid. Stamp LJ asserted you should be able to say with complete certainty that someone falls in the class or not. Sacks LJ and Megaw LJ say if there are some people, of which you are not sure than even in that scenario the trust is valid. As oppose to this the test for â€Å"Is nor is not test† by Stamp LJ is very stringent. However, it is still to be determined whose interpretation of â€Å"is or is not† test is regarded as good law. Research Papers on Mc Phail v Doulton (1970)Standardized TestingArguments for Physician-Assisted Suicide (PAS)Research Process Part OneBook Review on The Autobiography of Malcolm XUnreasonable Searches and SeizuresMoral and Ethical Issues in Hiring New EmployeesQuebec and CanadaCapital PunishmentIncorporating Risk and Uncertainty Factor in CapitalThe Project Managment Office System