McPhail v Doulton, sub nom Re Baden's Deed Trusts (No 1)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Reid,Lord Hodson,Lord Guest,Viscount Dilhorne,Lord Wilberforce
Judgment Date06 May 1970
Judgment citation (vLex)[1970] UKHL J0506-2
Date06 May 1970

[1970] UKHL J0506-2

House of Lords

Lord Reid

Lord Hodson

Lord Guest

Viscount Dilhorne

Lord Wilberforce

McPhail and Others
and
Doulton and Others

Upon Report from the Appellate Committee, to whom was referred the Cause McPhail and others against Doulton and others, that the Committee had heard Counsel, as well on Tuesday the 13th, as on Wednesday the 14th, Thursday the 15th, Monday the 19th, Tuesday the 20th and Wednesday the 21st, days of January last, upon the Petition and Appeal of Robert Thomas Mitchell McPhail, of Flag Lodge, The Avenue, Tadworth, in the County of Surrey, Enid May Baden (Widow) and Raymond Rostron Baden, both of 8 Astons Road, Moor Park, in the County of Hertford, praying. That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 5th of February 1969, so far as regards the words "This Court doth Order that so much of the said Order dated 12th July 1967 as declared in answer to Question 2 of the Originating Summons in this Action that upon the true construction of the above-mentioned Deed dated 17th July 1941 the provisions of Clause 9( a) thereof constituted a power and not a trust be affirmed," might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Peter Duke Doulton, Alexander Laing Pearson, Arthur Henry James Hoskins, Denis Edward Clancey, Arthur Frederick Smith, Matthew Hall & Co. Limited and Joseph Francis Norris, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled. That the said Order of Her Majesty's Court of Appeal, of the 5th day of February 1969, in part complained of in the said Appeal, be, and the same is hereby, Discharged except as to Costs: And it is hereby Declared, That the provisions of Clause 9( a) of the Trust Deed, of the 17th day of July 1941, constitute a Trust: And it is further Ordered, That the Cause be, and the same is hereby remitted back to the Chancery Division of the High Court of Justice with a Direction to determine whether, on the basis of the Declaration made, Clause 9 of the Trust Deed is (subject to the effects of section 164 of the Law of Property Act 1925) valid or void for uncertainty: And it is also further Ordered, That the Costs incurred by the Appellants and by the Respondents in respect of the said Appeal to this House be taxed on a Common Fund basis and paid out of so much of the Trust Fund, subject to the Trust Deed of the 17th of July 1941, as was derived from Bertram Baden deceased, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Reid

My Lords,

1

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,

2

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 accumulations 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."

3

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.

4

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.

5

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.

6

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.

7

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 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.

8

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 Hain'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 whole period of its existence with a power to carry forward from year to year.

9

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 duty 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.

10

Goff J. had in addition held that the power was valid and was not void for uncertainty, and on that footing...

To continue reading

Request your trial
129 cases
  • Baden's Deed Trusts (No. 2) Re
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 27 March 1972
    ...further consideration of the issue of validity. 4 The executors thereupon duly went to the House of Lords, where on the 6th May, 1370 ( 1971 A.C. p.424) it was determined that the relevant provisions constituted a discretionary trust and not mere powers: It was further decided that (contrar......
  • Grand View Private Trust Company Ltd v Wong, Wen-Young
    • Bermuda
    • Court of Appeal
    • 20 April 2020
    ...And noting, on the significance of the settlor's wishes in the execution of a discretionary trust by the court, see McPhail v Doulton [1971] A.C 424 HL, at 457 (execution “in the manner best calculated to give effect to the settlor's or testator's 58 2003 J.L.R. 188, at [215]. 59 Ibid. 60 ......
  • ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd
    • Malaysia
    • Court of Appeal (Malaysia)
    • Invalid date
  • Gomez and Others v Vives and Others
    • United Kingdom
    • Chancery Division
    • 18 February 2008
    ...were not that of a discretionary trust. Warner J relied upon a passage in the speech of Lord Wilberforce in Re Baden's Deed Trusts [1971] AC 424 at 456 to 101 Rawcliffe v Steele [1993–1995] MLR426 is a decision of the Staff of Government Division, in the Isle of Man. At pages 495 to 499, A......
  • Request a trial to view additional results
1 firm's commentaries
  • Rights Of A Discretionary Beneficiary And Liabilities Of The Trustee
    • Cayman Islands
    • Mondaq Cayman Islands
    • 8 June 2008
    ...trustee exercises its discretion in a bona fide manner for the purposes it was given, the court will not interfere (see McPhail v Doulton [1971] AC 424). LOCUS STANDI It appears to be good law that a member of the class of beneficiaries of a discretionary trust will have standing to sue in ......
4 books & journal articles
  • The Changing Face of Trusts: The Trusts of Land and Appointment of Trustees Act 1996
    • United Kingdom
    • The Modern Law Review Nbr. 61-1, January 1998
    • 1 January 1998
    ...1786. However, s 19of the 1996 Act makes such a laborious and potentially disadvantageous process unnecessary.55 See McPhail vDoulton [1971] AC 424 (HL).56 On which see Lloyds Bank plc vRosset [1991] AC 107 (HL).57 See Lord Mishcon HL Deb vol 569 col 1721 1 March 1996.The Modern Law Review ......
  • TRUSTEE'S DUTY OF DISCLOSURE
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2012, December 2012
    • 1 December 2012
    ...Trust Ltd[2003] 2 AC 709 at [66], where the court indicated that the law was developing in the direction set by McPhail v Doulton[1970] 2 WLR 1110. See also Richard Wilson & Henrietta Labes, “Schmidt v Rosewood: A Closer Inspection”(2004) 3 PCB 161 at 165. 85[1970] 2 WLR 1110. 86 Richard Wi......
  • Working around Work Choices: collective bargaining and the common law.
    • Australia
    • Melbourne University Law Review Vol. 31 Nbr. 3, December 2007
    • 1 December 2007
    ...principal at the time of the act: see at 113-14. See also Keighley, Maxsted & Co v Durant [1901] AC 240. (106) See McPhail v Doulton [1971] AC 424. According to J D Heydon and M J Leeming, the criterion certainty test expounded by the House of Lords in this case 'has come to be regularl......
  • Equity and Trusts: Concerned with Moral Questions or Formal Rules?
    • United Kingdom
    • Southampton Student Law Review Nbr. 4-1, January 2014
    • 1 January 2014
    ...of Durham (1804) 32 ER 656, [404] 36IRC v Broadway Cottages (1952) 35 TC 577 37 Alderson (n 4) 339 38 [1970] Ch 408 39 Hudson (n 7)159 40 [1971] AC 424 28 S.S.L.R Equity and Trusts: Moral Questions or Form al Rules? Vol.4 approach to this test in order to give effect to trusts which would h......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT