Baden's Deed Trusts (No. 2) Re
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SACHS,LORD JUSTICE MEGAW,LORD JUSTICE STAMP |
| Judgment Date | 27 March 1972 |
| Neutral Citation | [1972] EWCA Civ J0327-2 |
| Date | 27 March 1972 |
| Court | Court of Appeal (Civil Division) |
Trusts - Discretionary - Power of selection - Fund for staff, other employees, their relatives and dependants - Nature of test of validity - Whether inclusion of relatives and dependants made trust void for uncertainty
By a deed executed in 1941 a settlor established a trust fund for the benefit of the staff of his company, their relatives and dependants and by clause 9 (a) thereof directed the trustees to “apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons ….” The settlor died in 1960. In 1962 his executors alleged that the trusts were wholly void and claimed payment of the fund to his estate. The trustees by originating summons, joining, inter alia, the settlor's executors as defendants, sought to determine whether the trust was valid or void for uncertainty. Goff J. held that the provisions of clause 9 (a) constituted a power and not a discretionary trust and as such were valid.
On appeal by the executors, the Court of Appeal by a majority upheld the decision that the clause constituted a power but held that Goff J. had applied the wrong test for the validity of a power.
On appeal the House of Lords reversed the decision of the Court of Appeal and held that the provisions of clause 9 (a) constituted a discretionary trust and not a power and remitted the case to the Chancery Division for determination whether on that basis, the clause was valid.
Brightman J. held that the test to be applied was the same as that in In re Gulbenkian's Settlements [
On appeal by the executors:—
Held, dismissing the appeal, (1) that in applying the test laid down by the House of Lords in In re Gulbenkian's Settlements as to the validity of a discretionary trust, i.e. whether it could be said with certainty that any given individual was or was not a member of a class, it was necessary to distinguish between conceptual uncertainty and evidential difficulty; (per Sachs L.J. and Megaw L.J.) that when considering whether a candidate was or was not a member of a class, if he could not, on proper inquiry establish that he was a member then he must be held not to be a member and there was in practice no evidential difficulty in ascertaining whether such a candidate was a dependant or a relative (post, pp. 255E, F, 259E, F); (per Stamp L.J.) that the test was not satisfied unless one could say affirmatively either that a given individual was within the class of beneficiaries or that he was outside it and that test could not be satisfied if “relatives” fell to be construed as “all descendants of a common ancestor” (post, p. 262H–263A).
(2) That there was no conceptual uncertainty in the word “dependants” upon the widest meaning attributable to it as to cause the clause to be void for uncertainty (post, pp. 257H–258A, 264H).
(3) That as regards “relatives” (per Sachs L.J. and Megaw L.J.) that upon the widest meaning attributable (viz. “all descendants of a common ancestor”) there was no conceptual uncertainty attaching to that word (post, pp. 257C, 258B); (per Stamp L.J.) that a discretionary trust for “relations” was a valid trust to be executed by the court by distribution to the next of kin so that the class of beneficiaries became clearly defined and there was no difficulty in determining whether a given individual was within it or without it and accordingly no conceptual uncertainty attached to that word (post. p. 263H–264A).
Observation on “survey of the range of objects” to be made by trustees (post, pp. 255H–256B, 259B–D, 262F, G).
The following cases are referred to in the judgments:
Baden's Deed Trusts, In re [
Ball, decd., In re [
Benjamin, In re [
Brown v. Higgs (
Eagles v. Le Breton (
Fawcett Properties Ltd. v. Buckingham County Council [
Gansloser's Will Trusts, In re [
Gray's Settlement, In re [
Gulbenkian's Settlements, In re [
Harding v. Glyn (
Hooper's 1949 Settlement, In re (
Inland Revenue Commissioners v. Broadway Cottages Trust [
Kemp v. Kemp (
Kilvert, In re [
Sayer, In re [
Scarisbrick, In re [
Sifton v. Sifton [
Simmons v. White Brothers [
The following additional cases were cited in argument:
Bennett v. Honywood (
Blausten v. Inland Revenue Commissioners [
Brigden, In re [
Brown v. Higgs (
Clarke v. Turner (
Gun, In re [
Hain's Settlement, In re [
Lanyon, In re [
Leek, decd., In re [
Mosley v. Mosley (
Richardson v. Chapman (
Saxone Shoe Co. Ltd.'s Trust Deed, In re [
Supple v. Lowson (
Walker, In re (
Warburton v. Warburton (
APPEAL from Brightman J.
By a deed dated July 17, 1941, Bertram Baden (the settlor), chairman and managing director of Matthew Hall & Co. Ltd., established a trust fund, consisting of 5,000 shares in the company, for officers and employees of the company. Clause 9 (a) of the deed directed his trustees, inter alia “… to apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts and at such times and on such conditions (if any) as they think fit …” Clause 11 confined the operation of the deed to a period permitted by the rule against perpetuities. In April 1943, the settlor transferred to the trustees a further 5,000 shares and other shares were added later from other sources.
The settlor died in 1960. In 1962 his executors were advised that the trusts were wholly void for uncertainty. On January 4, 1963, the trustees, Edwin Baden, Peter Duke Doulton, Sidney Kindler and Alexander Laing Pearson, as plaintiffs, issued an originating summons seeking directions, inter alia, (1) whether the reference to “employees” comprised (a) the company's staff, or (b) some other and what class of persons, and (2) whether the trusts powers and provisions for officers and employees and ex-officers and ex-employees and any relatives and dependants of such persons were valid or void for uncertainty. The defendants to the summons were Arthur Frederick Smith, one of the company's staff, joined as claiming to be beneficially interested in the fund, Robert Thomas Mitchell McPhail, Mrs. Enid May Baden and Raymond Rostron Baden, joined as being the settlor's personal representatives and claiming in the event of the invalidity of the trusts to be entitled to so much of the fund as had been contributed by the settlor, Matthew Hall & Co. Ltd., joined as being entitled in the event of invalidity to such of the fund as had been contributed by them, and Joseph Frederick Norris, joined as being an employee who was not a member of the company's staff claiming to be beneficially interested in the fund.
Goff J. held that the provisions of clause 9 (a) constituted a power and not a trust and as such were valid. The Court of Appeal (Harman, Russell and Karminski L.JJ.) by a majority upheld the decision of Goff J. that the clause constituted a power but concluded that the wrong test had been applied for determining the validity of a power. The House of Lords (Lord Reid, Lord Hodson, Viscount Dilhorne, Lord Guest and Lord Wilberforce) reversed the Court of Appeal's decision and held that the provisions of clause 9 (a) constituted a trust and not a power and remitted the case to the Chancery Division for determination whether on that basis the clause was valid or void for uncertainty. Brightman J. then held that the clause...
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