Extract from the GCHQ case, Council of Civil Service Unions v Minister
for Civil Service [1985].
LORD DIPLOCK.
My Lords, the English law relating to judicial control of
administrative action has been developed upon a case to case
basis which has virtually transformed it over the last three
decades…
Judicial review, now regulated by R.S.C., Ord. 53, provides the
means by which judicial control of administrative action is
exercised. The subject matter of every judicial review is a
decision made by some person (or body of persons) whom I will
call the "decision-maker" or else a refusal by him to make a
decision.
….
For a decision to be susceptible to judicial review the decisionmaker
must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make
decisions that, if validly made, will lead to administrative action
or abstention from action by an authority endowed by law with
executive powers…. The ultimate source of the decision-making
power is nearly always nowadays a statute or subordinate
legislation made under the statute; but in the absence of any
statute regulating the subject matter of the decision the source
of the decision-making power may still be the common law itself,
i.e., that part of the common law that is given by lawyers the
label of "the prerogative." Where this is the source of decisionmaking
power, the power is confined to executive officers of
central as distinct from local government and in constitutional
practice is generally exercised by those holding ministerial rank.
It was the prerogative that was relied on as the source of the
power of the Minister for the Civil Service in reaching her decision
of 22 December 1983 that membership of national trade unions
should in future be barred to all members of the home civil
service employed at GCHQ.
…… there have unquestionably survived into the present day a
residue of miscellaneous fields of law in which the executive
government retains decision-making powers that are not
dependent upon any statutory authority but nevertheless have
consequences on the private rights or legitimate expectations of
other persons which would render the decision subject to judicial
review if the power of the decision-maker to make them were
statutory in origin. From matters so relatively minor as the grant
of pardons to condemned criminals, of honours to the good and
great, of corporate personality to deserving bodies of persons,
and of bounty from moneys made available to the executive
government by Parliament, they extend to matters so vital to the
survival and welfare of the nation as the conduct of relations with
foreign states and - what lies at the heart of the present case -
the defence of the realm against potential enemies. Adopting the
phraseology used in the European Convention on Human Rights
1953 (Convention for the Protection of Human Rights and
Fundamental Freedoms (1953) (Cmd. 8969)) to which the United
Kingdom is a party it has now become usual in statutes to refer
to the latter as "national security."
My Lords, I see no reason why simply because a decisionmaking
power is derived from a common law and not a statutory
source, it should for that reason only be immune from judicial
review. Judicial review has I think developed to a stage today
when without reiterating any analysis of the steps by which the
development has come about, one can conveniently classify
under three heads the grounds upon which administrative action
is subject to control by judicial review. The first ground I would
call "illegality," the second "irrationality” and the third
"procedural impropriety." That is not to say that further
development on a case by case basis may not in course of time
add further grounds. I have in mind particularly the possible
adoption in the future of the principle of "proportionality" which is
recognised in the administrative law of several of our fellow
members of the European Economic Community; but to dispose
of the instant case the three already well-established heads that
I have mentioned will suffice.
By "illegality" as a ground for judicial review I mean that the
decision-maker must understand correctly the law that regulates
his decision-making power and must give effect to it. Whether he
has or not is par excellence a justiciable question to be decided,
in the event of dispute, by those persons, the judges, by whom
the judicial power of the state is exercisable.
By "irrationality" I mean what can by now be succinctly referred
to as "Wednesbury unreasonableness" (Associated Provincial
Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 K.B.
223). It applies to a decision which is so outrageous in its
defiance of logic or of accepted moral standards that no sensible
person who had applied his mind to the question to be decided
could have arrived at it. Whether a decision falls within this
category is a question that judges by their training and
experience should be well equipped to answer, or else there
would be something badly wrong with our judicial system. To
justify the court's exercise of this role, resort I think is today no
longer needed to Viscount Radcliffe's ingenious explanation in
Edwards v. Bairstow [1956] A.C. 14 of irrationality as a ground
for a court's reversal of a decision by ascribing it to an inferred
though unidentifiable mistake of law by the decision-maker.
"Irrationality" by now can stand upon its own feet as an accepted
ground on which a decision may be attacked by judicial review.
I have described the third head as "procedural impropriety"
rather than failure to observe basic rules of natural justice or
failure to act with procedural fairness towards the person who
will be affected by the decision. This is because susceptibility to
judicial review under this head covers also failure by an
administrative tribunal to observe procedural rules that are
expressly laid down in the legislative instrument by which its
jurisdiction is conferred, even where such failure does not involve
any denial of natural justice. But the instant case is not
concerned with the proceedings of an administrative tribunal at
all.
My Lords, that a decision of which the ultimate source of power
to make it is not a statute but the common law (whether or not
the common law is for this purpose given the label of "the
prerogative") may be the subject of judicial review on the ground
of illegality is, I think, established by the cases cited by my noble
and learned friend, Lord Roskill, and this extends to cases where
the field of law to which the decision relates is national security,
as the decision of this House itself in Burmah Oil Co. Ltd. v. Lord
Advocate, 1964 S.C. (H.L.) 117 shows. While I see no a priori
reason to rule out "irrationality" as a ground for judicial review of
a ministerial decision taken in the exercise of "prerogative"
powers, I find it difficult to envisage in any of the various fields in
which the prerogative remains the only source of the relevant
decision-making power a decision of a kind that would be open to
attack through the judicial process upon this ground. Such
decisions will generally involve the application of government
policy. The reasons for the decision-maker taking one course
rather than another do not normally involve questions to which, if
disputed, the judicial process is adapted to provide the right
answer, by which I mean that the kind of evidence that is
admissible under judicial procedures and the way in which it has
to be adduced tend to exclude from the attention of the court
competing policy considerations which, if the executive discretion
is to be wisely exercised, need to be weighed against one
another - a balancing exercise which judges by their upbringing
and experience are ill-qualified to perform. So I leave this as an
open question to be dealt with on a case to case basis if, indeed,
the case should ever arise.
As respects "procedural propriety" I see no reason why it should
not be a ground for judicial review of a decision made under
powers of which the ultimate source is the prerogative. Such
indeed was one of the grounds that formed the subject matter of
judicial review in Reg. v. Criminal Injuries Compensation Board,
Ex parte Lain [1967] 2 Q.B. 864. Indeed, where the decision is
one which does not alter rights or obligations enforceable in
private law but only deprives a person of legitimate expectations,
"procedural impropriety” will normally provide the only ground on
which the decision is open to judicial review. But in any event
what procedure will satisfy the public law requirement of
procedural propriety depends upon the subject matter of the
decision, the executive functions of the decision-maker (if the
decision is not that of an administrative tribunal) and the
particular circumstances in which the decision came to be made.
*412 My Lords, in the instant case the immediate subject matter
of the decision was a change in one of the terms of employment
of civil servants employed at GCHQ. That the executive functions
of the Minister for the Civil Service, in her capacity as such,
included making a decision to change any of those terms, except
in so far as they related to remuneration, expenses and
allowances, is not disputed. It does not seem to me to be of any
practical significance whether or not as a matter of strict legal
analysis this power is based upon the rule of constitutional law to
which I have already alluded that the employment of any civil
servant may be terminated at any time without notice and that
upon such termination the same civil servant may be re-engaged
on different terms. The rule of terminability of employment in the
civil service without notice, of which the existence is beyond
doubt, must in any event have the consequence that the
continued enjoyment by a civil servant in the future of a right
under a particular term of his employment cannot be the subject
of any right enforceable by him in private law; at most it can only
be a legitimate expectation.
Prima facie, therefore, civil servants employed at GCHQ who
were members of national trade unions had, at best, in
December 1983, a legitimate expectation that they would
continue to enjoy the benefits of such membership and of
representation by those trade unions in any consultations and
negotiations with representatives of the management of that
government department as to changes in any term of their
employment. So, but again prima facie only, they were entitled,
as a matter of public law under the head of "procedural
propriety, " before administrative action was taken on a decision
to withdraw that benefit, to have communicated to the national
trade unions by which they had theretofore been represented the
reason for such withdrawal, and for such unions to be given an
opportunity to comment on it.
The reason why the Minister for the Civil Service decided on 22
December 1983 to withdraw this benefit was in the interests of
national security. National security is the responsibility of the
executive government; what action is needed to protect its
interests is, as the cases cited by my learned friend, Lord Roskill,
establish and common sense itself dictates, a matter upon which
those upon whom the responsibility rests, and not the courts of
justice, must have the last word. It is par excellence a nonjusticiable
question. The judicial process is totally inept to deal
with the sort of problems which it involves.
The executive government likewise decided, and this would
appear to be a collective decision of cabinet ministers involved,
that the interests of national security required that no notice
should be given of the decision before administrative action had
been taken to give effect to it. The reason for this was the risk
that advance notice to the national unions of the executive
government's intention would attract the very disruptive action
prejudicial to the national security the recurrence of which the
decision barring membership of national trade unions to civil
servants employed at GCHQ was designed to prevent.
There was ample evidence to which reference is made by others
of your Lordships that this was indeed a real risk; so the crucial
point of law in this case is whether procedural propriety must
give way to *413 national security when there is conflict between
(1) on the one hand, the prima facie rule of "procedural
propriety" in public law, applicable to a case of legitimate
expectations that a benefit ought not to be withdrawn until the
reason for its proposed withdrawal has been communicated to
the person who has theretofore enjoyed that benefit and that
person has been given an opportunity to comment on the reason,
and (2) on the other hand, action that is needed to be taken in
the interests of national security, for which the executive
government bears the responsibility and alone has access to
sources of information that qualify it to judge what the necessary
action is. To that there can, in my opinion, be only one sensible
answer. That answer is "Yes."
I agree with your Lordships that this appeal must be dismissed.
Thursday, May 7, 2009
Extract from the speech of Lord Hope in the case of Campbell v MGN
Extract from the speech of Lord Hope in the case of Campbell v MGN
[2004] 2 AC 457 241
104 In my opinion the Court of Appeal's approach is open to the criticism that… they failed to carry out the
required balancing exercise.
105 The context for this exercise is provided by articles 8 and 10 of the Convention. The rights guaranteed by
these articles are qualified rights. Article 8(1) protects the right to respect for private life, but recognition is given
in article 8(2) to the protection of the rights and freedoms of others. Article 10(1) protects the right to freedom
of expression, but article 10(2) recognises the need to protect the rights and freedoms of others. The effect of
these provisions is that the right to privacy which lies at the heart of an action for breach of confidence has to be
balanced against the right of the media to impart information to the public. And the right of the media to impart
information to the public has to be balanced in its turn against the respect that must be given to private life…..
As Sedley LJ pointed out in Douglas v Hello! Ltd [2001] QB 967, 1004, para 135:
"The European Court of Human Rights has always recognised the high importance of free media of
communication in a democracy, but its jurisprudence does not – and could not consistently with the Convention
itself – give article 10(1) the presumptive priority which is given, for example, to the First Amendment in the
jurisprudence of the United States' courts. Everything will ultimately depend on the proper balance between
privacy and publicity in the situation facing the court."
107 I accept, of course, that the importance which the Court of Appeal attached to the journalistic package finds
support in the authorities. In Jersild v Denmark (1994) 19 EHRR 1, para 31 the European court, repeating what
was said in Observer and Guardian v United Kingdom (1991) 14 EHRR 153, para 59, declared that freedom of
expression constitutes one of the essential foundations of a democratic society and that the safeguards to be
afforded to the press are of particular importance. It then added these comments in para 31:
"Whilst the press must not overstep the bounds set, inter alia, in the interest of 'the protection of the reputation
and rights of others', it is nevertheless incumbent on it to impart information and ideas of public interest. Not
only does the press have the task of imparting such information and ideas: the public also has a right to receive
them. Were it otherwise, the press would be unable to play its vital role of 'public watchdog'."
108 *487 The freedom of the press to exercise its own judgment in the presentation of journalistic material was
emphasised in a further passage in Jersild's case where the court said, at p 26, para 31:
"At the same time, the methods of objective and balanced reporting may vary considerably, depending among
other things on the media in question. It is not for this court, nor for the national courts for that matter, to
substitute their own views for those of the press as to what technique of reporting should be adopted by
journalists. In this context the court recalls that article 10 protects not only the substance of the ideas and
information expressed, but also the form in which they are conveyed."
In Fressoz and Roire v France (1999) 31 EHRR 28, 60, para 54 the court said that in essence article 10 leaves it
for journalists to decide whether or not it is necessary to reproduce material to ensure credibility, adding:
"It protects journalists' rights to divulge information on issues of general interest provided that they are acting in
good faith and on an accurate factual basis and provide 'reliable and precise' information in accordance with the
ethics of journalism."
…110 The need for a balancing exercise to be carried out is also inherent in the provisions of article 10 itself …
…111 Section 12(4) of the Human Rights Act 1998 provides:
"The court must have particular regard to the importance of the Convention right to freedom of expression and,
where the proceedings relate to material which the respondent claims, or which appears to the court, to be
journalistic, literary or artistic material (or to conduct connected with such material), to--(a) the extent to which-
-(i) the material has, or is about to, become available to the public; or (ii) it is, or would be, in the pubic interest
for the material to be published; (b) any relevant privacy code."
But, as Sedley LJ said in Douglas v Hello! Ltd [2001] QB 967, 1003, para 133, you cannot have particular regard
to article 10 without having equally particular regard at the very least to article 8: see also In re S (A Child)
(Identification: Restrictions on Publication) [2004] Fam 43, 72, para 52 where Hale LJ said that section 12(4)
does not give either article pre-eminence over the other. These observations seem to me to be entirely consistent
with the jurisprudence of the European court, as is the following passage in Sedley LJ's opinion in Douglas, at p
1005, para 137:
"The case being one which affects the Convention right of freedom of expression, section 12 of the Human
Rights Act 1998 requires the court to have regard to article 10 (as, in its absence, would section 6). This,
however, cannot, consistently with section 3 and article 17, give the article 10(1) right of free expression a
presumptive priority over other rights. What it does is require the court to consider article 10(2) along with
article 10(1), and by doing so to bring into the frame the conflicting right to respect for privacy. This right,
contained in article 8 and reflected in English law, is in turn qualified in both contexts by the right of others to
*489 free expression. The outcome, which self-evidently has to be the same under both articles, is determined
principally by considerations of proportionality."
It is to be noted too that clause 3(i) of the Code of Practice of the Press Complaints Committee acknowledges
this limitation. It states that a person may have a reasonable expectation of privacy in a public place.
Striking the balance
112 There is no doubt that the presentation of the material that it was legitimate to convey to the public in this
case without breaching the duty of confidence was a matter for the journalists. The choice of language used to
convey information and ideas, and decisions as to whether or not to accompany the printed word by the use of
photographs, are pre-eminently editorial matters with which the court will not interfere. The respondents are
also entitled to claim that they should be accorded a reasonable margin of appreciation in taking decisions as to
what details needed to be included in the article to give it credibility. This is an essential part of the journalistic
exercise.
113 But decisions about the publication of material that is private to the individual raise issues that are not simply
about presentation and editing. Any interference with the public interest in disclosure has to be balanced against
the interference with the right of the individual to respect for their private life. The decisions that are then taken
are open to review by the court. The tests which the court must apply are the familiar ones. They are whether
publication of the material pursues a legitimate aim and whether the benefits that will be achieved by its
publication are proportionate to the harm that may be done by the interference with the right to privacy. The
jurisprudence of the European Court of Human Rights explains how these principles are to be understood and
applied in the context of the facts of each case. Any restriction of the right to freedom of expression must be
subjected to very close scrutiny. But so too must any restriction of the right to respect for private life. Neither
article 8 nor article 10 has any pre-eminence over the other in the conduct of this exercise. As Resolution 1165 of
the Parliamentary Assembly of the Council of Europe (1998), para 11, pointed out, they are neither absolute not
in any hierarchical order, since they are of equal value in a democratic society.
… 123 The same process of reasoning that led to the findings in Peck that the article 8 right had been violated
and by the majority in Aubry that there had been an infringement of the claimant's right to respect for her private
life can be applied here. Miss Campbell could not have complained if the photographs had been taken to show the
scene in the street by a passer-by and later published simply as street scenes. But these were not just pictures of a
street scene where she happened to be when the photographs were taken. They were taken deliberately, in secret
and with a view to their publication in conjunction with the article. The zoom lens was directed at the doorway
of the place where the meeting had been taking place. The faces of others in the doorway were pixelated so as not
to reveal their identity. Hers was not, the photographs were published and her privacy was invaded. The
argument that the publication of the photograph added credibility to the story has little weight. The photograph
was not self-explanatory. Neither the place nor the person were instantly recognisable. The reader only had the
editor's word as to the truth of these details.
124 Any person in Miss Campbell's position, assuming her to be of ordinary sensibilities but assuming also that
she had been photographed surreptitiously outside the place where she been receiving therapy for drug addiction,
would have known what they were and would have been distressed on seeing the photographs. She would have
seen their publication, in conjunction with the article which revealed what she had been doing when she was
photographed and other details about her engagement in the therapy, as a gross interference with her right to
respect for her private life. In my opinion this additional element in the publication is more than enough to
outweigh the right to freedom of expression which the defendants are asserting in this case.’
[2004] 2 AC 457 241
104 In my opinion the Court of Appeal's approach is open to the criticism that… they failed to carry out the
required balancing exercise.
105 The context for this exercise is provided by articles 8 and 10 of the Convention. The rights guaranteed by
these articles are qualified rights. Article 8(1) protects the right to respect for private life, but recognition is given
in article 8(2) to the protection of the rights and freedoms of others. Article 10(1) protects the right to freedom
of expression, but article 10(2) recognises the need to protect the rights and freedoms of others. The effect of
these provisions is that the right to privacy which lies at the heart of an action for breach of confidence has to be
balanced against the right of the media to impart information to the public. And the right of the media to impart
information to the public has to be balanced in its turn against the respect that must be given to private life…..
As Sedley LJ pointed out in Douglas v Hello! Ltd [2001] QB 967, 1004, para 135:
"The European Court of Human Rights has always recognised the high importance of free media of
communication in a democracy, but its jurisprudence does not – and could not consistently with the Convention
itself – give article 10(1) the presumptive priority which is given, for example, to the First Amendment in the
jurisprudence of the United States' courts. Everything will ultimately depend on the proper balance between
privacy and publicity in the situation facing the court."
107 I accept, of course, that the importance which the Court of Appeal attached to the journalistic package finds
support in the authorities. In Jersild v Denmark (1994) 19 EHRR 1, para 31 the European court, repeating what
was said in Observer and Guardian v United Kingdom (1991) 14 EHRR 153, para 59, declared that freedom of
expression constitutes one of the essential foundations of a democratic society and that the safeguards to be
afforded to the press are of particular importance. It then added these comments in para 31:
"Whilst the press must not overstep the bounds set, inter alia, in the interest of 'the protection of the reputation
and rights of others', it is nevertheless incumbent on it to impart information and ideas of public interest. Not
only does the press have the task of imparting such information and ideas: the public also has a right to receive
them. Were it otherwise, the press would be unable to play its vital role of 'public watchdog'."
108 *487 The freedom of the press to exercise its own judgment in the presentation of journalistic material was
emphasised in a further passage in Jersild's case where the court said, at p 26, para 31:
"At the same time, the methods of objective and balanced reporting may vary considerably, depending among
other things on the media in question. It is not for this court, nor for the national courts for that matter, to
substitute their own views for those of the press as to what technique of reporting should be adopted by
journalists. In this context the court recalls that article 10 protects not only the substance of the ideas and
information expressed, but also the form in which they are conveyed."
In Fressoz and Roire v France (1999) 31 EHRR 28, 60, para 54 the court said that in essence article 10 leaves it
for journalists to decide whether or not it is necessary to reproduce material to ensure credibility, adding:
"It protects journalists' rights to divulge information on issues of general interest provided that they are acting in
good faith and on an accurate factual basis and provide 'reliable and precise' information in accordance with the
ethics of journalism."
…110 The need for a balancing exercise to be carried out is also inherent in the provisions of article 10 itself …
…111 Section 12(4) of the Human Rights Act 1998 provides:
"The court must have particular regard to the importance of the Convention right to freedom of expression and,
where the proceedings relate to material which the respondent claims, or which appears to the court, to be
journalistic, literary or artistic material (or to conduct connected with such material), to--(a) the extent to which-
-(i) the material has, or is about to, become available to the public; or (ii) it is, or would be, in the pubic interest
for the material to be published; (b) any relevant privacy code."
But, as Sedley LJ said in Douglas v Hello! Ltd [2001] QB 967, 1003, para 133, you cannot have particular regard
to article 10 without having equally particular regard at the very least to article 8: see also In re S (A Child)
(Identification: Restrictions on Publication) [2004] Fam 43, 72, para 52 where Hale LJ said that section 12(4)
does not give either article pre-eminence over the other. These observations seem to me to be entirely consistent
with the jurisprudence of the European court, as is the following passage in Sedley LJ's opinion in Douglas, at p
1005, para 137:
"The case being one which affects the Convention right of freedom of expression, section 12 of the Human
Rights Act 1998 requires the court to have regard to article 10 (as, in its absence, would section 6). This,
however, cannot, consistently with section 3 and article 17, give the article 10(1) right of free expression a
presumptive priority over other rights. What it does is require the court to consider article 10(2) along with
article 10(1), and by doing so to bring into the frame the conflicting right to respect for privacy. This right,
contained in article 8 and reflected in English law, is in turn qualified in both contexts by the right of others to
*489 free expression. The outcome, which self-evidently has to be the same under both articles, is determined
principally by considerations of proportionality."
It is to be noted too that clause 3(i) of the Code of Practice of the Press Complaints Committee acknowledges
this limitation. It states that a person may have a reasonable expectation of privacy in a public place.
Striking the balance
112 There is no doubt that the presentation of the material that it was legitimate to convey to the public in this
case without breaching the duty of confidence was a matter for the journalists. The choice of language used to
convey information and ideas, and decisions as to whether or not to accompany the printed word by the use of
photographs, are pre-eminently editorial matters with which the court will not interfere. The respondents are
also entitled to claim that they should be accorded a reasonable margin of appreciation in taking decisions as to
what details needed to be included in the article to give it credibility. This is an essential part of the journalistic
exercise.
113 But decisions about the publication of material that is private to the individual raise issues that are not simply
about presentation and editing. Any interference with the public interest in disclosure has to be balanced against
the interference with the right of the individual to respect for their private life. The decisions that are then taken
are open to review by the court. The tests which the court must apply are the familiar ones. They are whether
publication of the material pursues a legitimate aim and whether the benefits that will be achieved by its
publication are proportionate to the harm that may be done by the interference with the right to privacy. The
jurisprudence of the European Court of Human Rights explains how these principles are to be understood and
applied in the context of the facts of each case. Any restriction of the right to freedom of expression must be
subjected to very close scrutiny. But so too must any restriction of the right to respect for private life. Neither
article 8 nor article 10 has any pre-eminence over the other in the conduct of this exercise. As Resolution 1165 of
the Parliamentary Assembly of the Council of Europe (1998), para 11, pointed out, they are neither absolute not
in any hierarchical order, since they are of equal value in a democratic society.
… 123 The same process of reasoning that led to the findings in Peck that the article 8 right had been violated
and by the majority in Aubry that there had been an infringement of the claimant's right to respect for her private
life can be applied here. Miss Campbell could not have complained if the photographs had been taken to show the
scene in the street by a passer-by and later published simply as street scenes. But these were not just pictures of a
street scene where she happened to be when the photographs were taken. They were taken deliberately, in secret
and with a view to their publication in conjunction with the article. The zoom lens was directed at the doorway
of the place where the meeting had been taking place. The faces of others in the doorway were pixelated so as not
to reveal their identity. Hers was not, the photographs were published and her privacy was invaded. The
argument that the publication of the photograph added credibility to the story has little weight. The photograph
was not self-explanatory. Neither the place nor the person were instantly recognisable. The reader only had the
editor's word as to the truth of these details.
124 Any person in Miss Campbell's position, assuming her to be of ordinary sensibilities but assuming also that
she had been photographed surreptitiously outside the place where she been receiving therapy for drug addiction,
would have known what they were and would have been distressed on seeing the photographs. She would have
seen their publication, in conjunction with the article which revealed what she had been doing when she was
photographed and other details about her engagement in the therapy, as a gross interference with her right to
respect for her private life. In my opinion this additional element in the publication is more than enough to
outweigh the right to freedom of expression which the defendants are asserting in this case.’
Extract from Hashman and Harrup v United Kingdom [2000] 30 EHRR 241
Extract from Hashman and Harrup v United Kingdom [2000] 30 EHRR 241
‘A. As to the existence of an interference with the applicants' freedom of Expression
27. The applicants, "hunt saboteurs", disrupted the Portman Hunt on 3 March 1993. Proceedings were brought
as a result of which they were bound over in the sum of £100 not to breach the peace and to be of good behaviour
for 12 months. [note: ‘binding over
28. The Court recalls that proceedings were brought against the applicants in respect of their behaviour while
protesting against fox hunting by disrupting the hunt. It is true that the protest took the form of impeding the
activities of which they disapproved, but the Court considers nonetheless that it constituted an expression of
opinion within the meaning of Article 10. [FN30]
The measures taken against the applicants were, therefore, an interference with their right to freedom of
expression.
FN30 See, e.g. Steel v. United Kingdom, loc. cit., para. 92.
B. Whether the interference was "prescribed by law"
… 31. The Court recalls that one of the requirements flowing from the expression "prescribed by law" is
foreseeability. A norm cannot be regarded as a "law" unless it is formulated with sufficient precision to enable the
citizen to regulate his conduct. At the same time, whilst certainty in the law is highly desirable, it may bring in its
train excessive rigidity and the law must be able to keep pace with changing circumstances. The level of precision
required of domestic legislation--which cannot in any case provide for every eventuality--depends to a
considerable degree on the content of the instrument in question, the field it is designed to cover and the number
and status of those to whom it is addressed. [FN34]
FN34 See generally in this connection, Rekvenyi v. Hungary: 20 May 1999, para.
34.
32. The Court further recalls that prior restraint on freedom of expression must call for the most careful scrutiny
on its part. [FN35]
FN35 See, in the context of the necessity for a prior restraint, The Sunday Times v. United Kingdom (No. 2),
loc. cit., para. 51.
33. The Court has already considered the issue of "lawfulness" for the purposes of Article 5 of the Convention of
orders to be bound over to keep the peace and be of good behaviour. [FN36] In that case, the Court found that
the elements of breach of the peace were adequately defined by English law. [FN37]
FN36 In Steel v. United Kingdom, loc. cit., paras. 71-77.
FN37 ibid., para. 75.
34. The Court also considered whether the binding-over orders in that case were specific enough properly to be
described as "lawful order[s] of a court" within the meaning of Article 5(1)(b) of the Convention. It noted at
paragraph 76 of the judgment that:
... the orders were expressed in rather vague and general terms; the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order. However, in each *257 applicant's case the binding-over order was imposed
after a finding that she had committed a breach of the peace.
Having considered all the circumstances, the Court is satisfied that, given the context, it was sufficiently clear
that the applicants were being requested to agree to refrain from causing further, similar, breaches of the peace
during the ensuing 12 months.
The Court also noted that the requirement under Article 10(2) that an interference with the exercise of freedom
of expression be "prescribed by law" is similar to that under Article 5(1) that any deprivation of liberty be
"lawful". [FN38]
FN38 ibid., para. 94.
35. It is a feature of the present case that it concerns an interference with freedom of expression which was not
expressed to be a "sanction", or punishment, for behaviour of a certain type, but rather an order, imposed on the
applicants, not to breach the peace or behave contra bonos mores in the future. The binding-over order in the
present case thus had purely prospective effect. It did not require a finding that here had been a breach of the
peace. The case is thus different from the case of Steel, in which the proceedings brought against the first and
second applicants were in respect of breaches of the peace which were later found to have been committed.
36. The Court must consider the question of whether behaviour contra bonos mores is adequately defined for the
purposes of Article 10(2) of the Convention.
37. The Court first recalls that in its Steel judgment, it noted that the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order". [FN39] Those considerations apply equally in the present case, where the
applicants were not charged with any criminal offence, and were found not to have breached the peace.
FN39 ibid., para. 76.
38. The Court next notes that conduct contra bonos mores is defined as behaviour which is "wrong rather than
right in the judgment of the majority of contemporary fellow citizens". [FN40] ……..
FN40 See para. 13 above.
40. With specific reference to the facts of the present case, the Court does not accept that it must have been
evident to the applicants what they were being ordered not to do for the period of their binding over. Whilst in
the case of Steel the applicants had been found to have breached the peace, and the Court found that it was
apparent that the bind over related to similar behaviour, [FN43] the present applicants did not breach of the
peace, and given the lack of precision referred to above, it cannot be said that what they were being bound over
not to do must have been apparent to them.
FN43 ibid.
41. The Court thus finds that the order by which the applicants were bound over to keep the peace and not to
behave contra bonos mores did not comply with the requirement of Article 10(2) of the Convention that it be
"prescribed by law".
… 43. It follows that there has been a violation of Article 10 of the Convention.’
‘A. As to the existence of an interference with the applicants' freedom of Expression
27. The applicants, "hunt saboteurs", disrupted the Portman Hunt on 3 March 1993. Proceedings were brought
as a result of which they were bound over in the sum of £100 not to breach the peace and to be of good behaviour
for 12 months. [note: ‘binding over
28. The Court recalls that proceedings were brought against the applicants in respect of their behaviour while
protesting against fox hunting by disrupting the hunt. It is true that the protest took the form of impeding the
activities of which they disapproved, but the Court considers nonetheless that it constituted an expression of
opinion within the meaning of Article 10. [FN30]
The measures taken against the applicants were, therefore, an interference with their right to freedom of
expression.
FN30 See, e.g. Steel v. United Kingdom, loc. cit., para. 92.
B. Whether the interference was "prescribed by law"
… 31. The Court recalls that one of the requirements flowing from the expression "prescribed by law" is
foreseeability. A norm cannot be regarded as a "law" unless it is formulated with sufficient precision to enable the
citizen to regulate his conduct. At the same time, whilst certainty in the law is highly desirable, it may bring in its
train excessive rigidity and the law must be able to keep pace with changing circumstances. The level of precision
required of domestic legislation--which cannot in any case provide for every eventuality--depends to a
considerable degree on the content of the instrument in question, the field it is designed to cover and the number
and status of those to whom it is addressed. [FN34]
FN34 See generally in this connection, Rekvenyi v. Hungary: 20 May 1999, para.
34.
32. The Court further recalls that prior restraint on freedom of expression must call for the most careful scrutiny
on its part. [FN35]
FN35 See, in the context of the necessity for a prior restraint, The Sunday Times v. United Kingdom (No. 2),
loc. cit., para. 51.
33. The Court has already considered the issue of "lawfulness" for the purposes of Article 5 of the Convention of
orders to be bound over to keep the peace and be of good behaviour. [FN36] In that case, the Court found that
the elements of breach of the peace were adequately defined by English law. [FN37]
FN36 In Steel v. United Kingdom, loc. cit., paras. 71-77.
FN37 ibid., para. 75.
34. The Court also considered whether the binding-over orders in that case were specific enough properly to be
described as "lawful order[s] of a court" within the meaning of Article 5(1)(b) of the Convention. It noted at
paragraph 76 of the judgment that:
... the orders were expressed in rather vague and general terms; the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order. However, in each *257 applicant's case the binding-over order was imposed
after a finding that she had committed a breach of the peace.
Having considered all the circumstances, the Court is satisfied that, given the context, it was sufficiently clear
that the applicants were being requested to agree to refrain from causing further, similar, breaches of the peace
during the ensuing 12 months.
The Court also noted that the requirement under Article 10(2) that an interference with the exercise of freedom
of expression be "prescribed by law" is similar to that under Article 5(1) that any deprivation of liberty be
"lawful". [FN38]
FN38 ibid., para. 94.
35. It is a feature of the present case that it concerns an interference with freedom of expression which was not
expressed to be a "sanction", or punishment, for behaviour of a certain type, but rather an order, imposed on the
applicants, not to breach the peace or behave contra bonos mores in the future. The binding-over order in the
present case thus had purely prospective effect. It did not require a finding that here had been a breach of the
peace. The case is thus different from the case of Steel, in which the proceedings brought against the first and
second applicants were in respect of breaches of the peace which were later found to have been committed.
36. The Court must consider the question of whether behaviour contra bonos mores is adequately defined for the
purposes of Article 10(2) of the Convention.
37. The Court first recalls that in its Steel judgment, it noted that the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order". [FN39] Those considerations apply equally in the present case, where the
applicants were not charged with any criminal offence, and were found not to have breached the peace.
FN39 ibid., para. 76.
38. The Court next notes that conduct contra bonos mores is defined as behaviour which is "wrong rather than
right in the judgment of the majority of contemporary fellow citizens". [FN40] ……..
FN40 See para. 13 above.
40. With specific reference to the facts of the present case, the Court does not accept that it must have been
evident to the applicants what they were being ordered not to do for the period of their binding over. Whilst in
the case of Steel the applicants had been found to have breached the peace, and the Court found that it was
apparent that the bind over related to similar behaviour, [FN43] the present applicants did not breach of the
peace, and given the lack of precision referred to above, it cannot be said that what they were being bound over
not to do must have been apparent to them.
FN43 ibid.
41. The Court thus finds that the order by which the applicants were bound over to keep the peace and not to
behave contra bonos mores did not comply with the requirement of Article 10(2) of the Convention that it be
"prescribed by law".
… 43. It follows that there has been a violation of Article 10 of the Convention.’
Extract from the decision of European Court of Human Rights in CR and SW vs UK (1995) 21 EHRR 245
Extract
“The applicant maintained that the general common law principle that a husband could not be
found guilty of rape upon his wife, albeit subject to certain limitations, was still effective on 18
September 1990, when he committed the acts which gave rise to the rape charge. A succession
of court decisions before and also after that date for instance on 20 November 1990 in R. v. J
had affirmed the general principle of immunity. It was clearly beyond doubt that as at 18
September 1990 no change in the law had been effected, although one was being mooted....
On 17 September 1990 the Law Commission provisionally recommended that the immunity
rule be abolished. However, the debate was pre-empted by the Court of Appeal's and the
House of Lords' rulings in the case of R. v. R. In the applicant's submission, these rulings
altered the law retrospectively, which would not have been the case had the Law Commission's
proposal been implemented by Parliament.
The Government and the Commission were of the view that by September 1990 there was
significant doubt as to the validity of the alleged marital immunity for rape. This was an area
where the law had been subject to progressive development and there were strong indications
that still wider interpretation by the courts of the inroads on the immunity was probable. In
particular, given the recognition of women's equality of status with men in marriage and
outside it and of their autonomy over their own bodies, the adaptation of the ingredients of the
offence of rape was reasonably foreseeable, with appropriate legal advice, to the applicant. He
was not convicted of conduct which did not constitute a criminal offence at the time when it
was committed.
In addition, the Government pointed out, on the basis of the agreed facts Owen J. had found
that there was an implied agreement between the applicant [CR] and his wife to separation and
to withdrawal of the consent to intercourse. The circumstances in his case were thus covered by
the exceptions to the immunity already stated by the English courts.
The Court notes that the applicant's conviction for rape was based on the statutory offence of
rape in section 1 of the 1956 Act, as further defined in section 1(1) of the 1976 Act. The
applicant does not dispute that the conduct for which he was convicted would have constituted
rape within the meaning of the statutory definition of rape as applicable at the time, had the
victim not been his wife. His complaint under Article 7 of the Convention relates solely to the
fact that in deciding on 18 April 1991 that the applicant had a case to answer on the rape
charge, Rose J. followed the Court of Appeal's ruling of 14 March 1991 in the case of R. v. R
which declared that the immunity no longer existed.
It is to be observed that a crucial issue in the judgment of the Court of Appeal in R. v. R
related to the definition of rape in section 1(1)(a) of the 1976 Act: 'unlawful sexual intercourse
with a woman who at the time of the intercourse does not consent to it'. The question was
whether 'removal' of the marital immunity would conflict with the statutory definition of rape,
in particular whether it would be prevented by the word 'unlawful'. The Court of Appeal
carefully examined various strands of interpretation of the provision in the case law, including
the argument that the term 'unlawful' excluded intercourse within marriage from the definition
of rape. In this connection, the Court recalls that it is in the first place for the national
authorities, notably the courts, to interpret and apply national law. It sees no reason to disagree
with the Court of Appeal's conclusion, which was subsequently upheld by the House of Lords,
that the word "unlawful" in the definition of rape was merely surplusage and did not inhibit
them from 'removing a common law fiction which had become anachronistic and offensive' and
from declaring that 'a rapist remains a rapist subject to the criminal law, irrespective of his
relationship with his victim'.
The decisions of the Court of Appeal and then the House of Lords did no more than continue a
perceptible line of case law development dismantling the immunity of a husband from
prosecution for rape upon his wife. There was no doubt under the law as it stood on 18
September 1990 that a husband who forcibly had sexual intercourse with his wife could, in
various circumstances, be found guilty of rape. Moreover, there was an evident evolution,
which was consistent with the very essence of the offence, of the criminal law through judicial
interpretation towards treating such conduct generally as within the scope of the offence of
rape. This evolution had reached a stage where judicial recognition of the absence of immunity
had become a reasonably foreseeable development of the law.
The essentially debasing character of rape is so manifest that the result of the decisions of the
Court of Appeal and the House of Lords – that the applicant could be convicted of attempted
rape, irrespective of his relationship with the victim – cannot be said to be at variance with the
object and purpose of Article 7 of the Convention, namely to ensure that no-one should be
subjected to arbitrary prosecution, conviction or punishment. What is more, the abandonment
of the unacceptable idea of a husband being immune against prosecution for rape of his wife was
in conformity not only with a civilised concept of marriage but also, and above all, with the
fundamental objectives of the Convention, the very essence of which is respect for human
dignity and human freedom.
Having reached this conclusion, the Court does not find it necessary to enquire into whether
the facts in the applicant's case were covered by the exceptions to the immunity rule already
made by the English courts before 18 September 1990. In short, the Court, like the
Government and the Commission, finds that the Crown Court's decision that the applicant
could not invoke immunity to escape conviction and sentence for rape upon his wife did not
give rise to a violation of his rights under Article 7(1) of the Convention.”
“The applicant maintained that the general common law principle that a husband could not be
found guilty of rape upon his wife, albeit subject to certain limitations, was still effective on 18
September 1990, when he committed the acts which gave rise to the rape charge. A succession
of court decisions before and also after that date for instance on 20 November 1990 in R. v. J
had affirmed the general principle of immunity. It was clearly beyond doubt that as at 18
September 1990 no change in the law had been effected, although one was being mooted....
On 17 September 1990 the Law Commission provisionally recommended that the immunity
rule be abolished. However, the debate was pre-empted by the Court of Appeal's and the
House of Lords' rulings in the case of R. v. R. In the applicant's submission, these rulings
altered the law retrospectively, which would not have been the case had the Law Commission's
proposal been implemented by Parliament.
The Government and the Commission were of the view that by September 1990 there was
significant doubt as to the validity of the alleged marital immunity for rape. This was an area
where the law had been subject to progressive development and there were strong indications
that still wider interpretation by the courts of the inroads on the immunity was probable. In
particular, given the recognition of women's equality of status with men in marriage and
outside it and of their autonomy over their own bodies, the adaptation of the ingredients of the
offence of rape was reasonably foreseeable, with appropriate legal advice, to the applicant. He
was not convicted of conduct which did not constitute a criminal offence at the time when it
was committed.
In addition, the Government pointed out, on the basis of the agreed facts Owen J. had found
that there was an implied agreement between the applicant [CR] and his wife to separation and
to withdrawal of the consent to intercourse. The circumstances in his case were thus covered by
the exceptions to the immunity already stated by the English courts.
The Court notes that the applicant's conviction for rape was based on the statutory offence of
rape in section 1 of the 1956 Act, as further defined in section 1(1) of the 1976 Act. The
applicant does not dispute that the conduct for which he was convicted would have constituted
rape within the meaning of the statutory definition of rape as applicable at the time, had the
victim not been his wife. His complaint under Article 7 of the Convention relates solely to the
fact that in deciding on 18 April 1991 that the applicant had a case to answer on the rape
charge, Rose J. followed the Court of Appeal's ruling of 14 March 1991 in the case of R. v. R
which declared that the immunity no longer existed.
It is to be observed that a crucial issue in the judgment of the Court of Appeal in R. v. R
related to the definition of rape in section 1(1)(a) of the 1976 Act: 'unlawful sexual intercourse
with a woman who at the time of the intercourse does not consent to it'. The question was
whether 'removal' of the marital immunity would conflict with the statutory definition of rape,
in particular whether it would be prevented by the word 'unlawful'. The Court of Appeal
carefully examined various strands of interpretation of the provision in the case law, including
the argument that the term 'unlawful' excluded intercourse within marriage from the definition
of rape. In this connection, the Court recalls that it is in the first place for the national
authorities, notably the courts, to interpret and apply national law. It sees no reason to disagree
with the Court of Appeal's conclusion, which was subsequently upheld by the House of Lords,
that the word "unlawful" in the definition of rape was merely surplusage and did not inhibit
them from 'removing a common law fiction which had become anachronistic and offensive' and
from declaring that 'a rapist remains a rapist subject to the criminal law, irrespective of his
relationship with his victim'.
The decisions of the Court of Appeal and then the House of Lords did no more than continue a
perceptible line of case law development dismantling the immunity of a husband from
prosecution for rape upon his wife. There was no doubt under the law as it stood on 18
September 1990 that a husband who forcibly had sexual intercourse with his wife could, in
various circumstances, be found guilty of rape. Moreover, there was an evident evolution,
which was consistent with the very essence of the offence, of the criminal law through judicial
interpretation towards treating such conduct generally as within the scope of the offence of
rape. This evolution had reached a stage where judicial recognition of the absence of immunity
had become a reasonably foreseeable development of the law.
The essentially debasing character of rape is so manifest that the result of the decisions of the
Court of Appeal and the House of Lords – that the applicant could be convicted of attempted
rape, irrespective of his relationship with the victim – cannot be said to be at variance with the
object and purpose of Article 7 of the Convention, namely to ensure that no-one should be
subjected to arbitrary prosecution, conviction or punishment. What is more, the abandonment
of the unacceptable idea of a husband being immune against prosecution for rape of his wife was
in conformity not only with a civilised concept of marriage but also, and above all, with the
fundamental objectives of the Convention, the very essence of which is respect for human
dignity and human freedom.
Having reached this conclusion, the Court does not find it necessary to enquire into whether
the facts in the applicant's case were covered by the exceptions to the immunity rule already
made by the English courts before 18 September 1990. In short, the Court, like the
Government and the Commission, finds that the Crown Court's decision that the applicant
could not invoke immunity to escape conviction and sentence for rape upon his wife did not
give rise to a violation of his rights under Article 7(1) of the Convention.”
Wednesday, May 6, 2009
Liversidge v. Anderson [1942] A.C. 206
Liversidge v. Anderson [1942] A.C. 206 is an important and landmark case in English law which concerned the relationship between the courts and the state, and in particular the assistance that the judiciary should give to the executive in times of national emergency. It concerns civil liberties and the separation of powers. Both the majority and dissenting judgements in the case have been cited as persuasive precedent by various countries of the Commonwealth of Nations. However, in England itself, the courts have gradually retreated from the decision in Liversidge.
Background
Emergency powers in Regulation 18B of the Defence (General) Regulations 1939 permitted the Home Secretary to intern people if he had "reasonable cause" to believe that they had "hostile associations". Sir John Anderson exercised this power in respect of a man called Jack Perlzweig, who used the name Robert Liversidge, committing him to prison but giving no reason.[1] On appeal, the case, joined with that of Ben Greene, reached the House of Lords Judicial Committee (HoLJC), the highest court of appeal.[2] They had to decide whether the court could investigate the objective basis for the reasonable cause; in other words, could they evaluate the Home Secretary's actions on an objective standard, comparing them to that which might be taken by a reasonable man, or were they to measure them against the personal standard of the Secretary?[3]
[edit] Majority judgments
The majority of the Law Lords held that the legislation should be interpreted so as to make effective in the way parliament intended, even if that meant adding to the words to give that effect. Although parliament had made the power subject to a reasonable belief they accepted the Home Secretary's statement that he held such a belief; in otherwise that he believed he had reasonable cause. Viscount Maugham said that the court should "prefer a construction which will carry into effect the plain intention of those responsible " and Lord Macmillan that "it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy". According to him, if the Secretary had acted in good faith, he need not disclose the basis for his decision, nor were his actions justiciable in a court of law.[3]
The majority of the Lords appear to have been greatly concerned with the fact that they were dealing with a matter of national security. In their view, it was not appropriate for a court to deal with matters of national security, especially as they were not privy to classified information that only the executive had.[4]
[edit] Dissenting judgment
The case is most famous for the dissenting speech of Lord Atkin, which has been recognised as a defining statement of the need for courts to remain independent of the executive whatever the prevailing circumstances. In his view the majority had abdicated their responsibility to investigate and control the executive, and were "more executive-minded than the executive". Lord Atkin protested that theirs was "a strained construction put on words with the effect of giving an uncontrolled power of imprisonment to the minister". He went on to say:
“ In England, amidst the clash of arms, the laws are not silent. They may be changed, but they speak the same language in war as in peace. It has always been one of the pillars of freedom, one of the principles of liberty for which on recent authority we are now fighting, that the judges are no respecters of persons and stand between the subject and any attempted encroachments on his liberty by the executive, alert to see that any coercive action is justified in law. ”
Lord Atkin continued:
“ I know of only one authority, which might justify the suggested method of construction. 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean, neither more nor less'. 'The question is,' said Alice, 'whether you can make words mean so many different things.' 'The question is,' said Humpty Dumpty, 'which is to be the master, that's all.' After all this long discussion, the question is whether the words 'If a man has' can mean 'If a man thinks he has'. I have an opinion that they cannot and the case should be decided accordingly. ”
Lord Atkin's view was that the phrase "reasonable cause" in the statute at hand indicated that the actions of the Secretary were meant to be evaluated by an objective standard (which means, of course, a subjective standard applied by judges). As a result, it would be within the court's purview to determine the reasonableness of the Secretary's actions.[4]
[edit] Aftermath
The potential power of this dissenting judgement was clearly recognised even before it was published. The Lord Chancellor, John Simon, 1st Viscount Simon, wrote to Lord Atkin asking him to amend the proposed terms of the speech. He did not.[5]
Atkin's interpretation has generally been preferred subsequently. In Nakkuda Ali v Jayaratne[6] a strong Privy Council held that Liversidge v. Anderson must not be taken to lay down any general rule on the construction of the expression "has reasonable cause to believe". Subsequently Liversidge v Anderson was described by Lord Reid in Ridge v Baldwin[7] as a "very peculiar decision". Lord Diplock in I.R.C. v Rossminster Ltd[8] thought that "the time has come to acknowledge openly that the majority of this House in Liversidge v Anderson were expediently and, at that time, perhaps, excusably, wrong and the dissenting speech of Lord Atkin was right".
However, in the 1977 deportation case of R v. Secretary of State ex parte Hosenball[9], Lord Denning MR, in the Court of Appeal, supported judicial non-interference with ministerial discretion in matters of national security.[10]
[edit] Commonwealth countries
In the Commonwealth, many jurisdictions, particularly in the Caribbean, have opted to follow Lord Atkin's judgement as well. In A-G of St. Christopher, Nevis and Anguilla v. Reynolds, the Privy Council even went further than Lord Atkin's judgement had intended. Lord Atkin had suggested that a subjective standard would only be applicable if the statute had used phrasings such as "if it appears to the Secretary of State that..." or "where the Secretary of the State is satisfied that..."[4] In this case, however, the Privy Council held that despite the statute's statement that the Governor could detain a person if he was "satisfied" that the person was involved in acts "prejudicial to public safety and order", the statute did not grant unlimited discretion to the Governor; his actions could be evaluated on an objective standard.[11]
In other parts of the Commonwealth such as Singapore and Malaysia, the courts have generally followed the majority decision in Liversidge. In Singapore, the case of Re Ong Yew Teck saw the arrest of a man under the Singaporean Criminal (Temporary Provisions) Ordinance 1955, which granted police officers the power to arrest and detain anyone "whom he has reason to believe that there is ground to justify his arrest and detention under s. 47" of the ordinance. The detainee appealed, arguing that the phrase "has reason to believe" meant that an objective test of reasonableness was to be used, citing Nakkuda Ali. Justice Chua rejected this argument, and accepted the majority decision in Liversidge as persuasive precedent.[12] In Malaysia, the case which established the subjective test of reasonableness for executive actions was Karam Singh v. Menteri Hal Ehwal Dalam Negeri. The case, heard by the Federal Court in 1969, remains as binding precedent in Malaysia. In the case, the appellant had been detained under the Internal Security Act (ISA), but the statement of the Home Minister giving the grounds for his detention provided only one reason, even though his detention order had initially stated there were more. It was argued that the Home Minister had taken a "casual and cavalier" approach to the detention, and that because the allegations against the appellant had been unduly vague, the Home Minister had acted in bad faith, thereby voiding the detention. The court held that the detention was good, because it could not assess the actions of the executive, applying the subjective test of reasonableness as Liversidge had.[13]
In India, the Liversidge decision was cited in Gopalan v. State of Madras, where the court held that the subjective test was to be applied. However, subsequent decisions such as Fazal Ghosi v. State of Uttar Pradesh have allowed some measure of judicial intervention by holding that the executive's decisions must be based on "pertinent material"; if it is found that there is no such material justifying the decision, the courts may act.[14] In some other Commonwealth countries such as Malaysia, it has been attempted to overrule the precedent of Liversidge by citing Indian cases as persuasive precedent; in the case of Karam Singh, the Indian case of Jagannath Misra v. State of Orissa, where the facts were similar, was cited. Legal commentators have noted, however, that the Malaysian judiciary has been reluctant to accept Indian authorities, seeking to distinguish them whenever possible. One Malaysian judge has suggested that "English courts take a more realistic view of things while Indian judges ... impress me as indefatigable, idealists seeking valiantly to reconcile the irreconcilable".[13]
Background
Emergency powers in Regulation 18B of the Defence (General) Regulations 1939 permitted the Home Secretary to intern people if he had "reasonable cause" to believe that they had "hostile associations". Sir John Anderson exercised this power in respect of a man called Jack Perlzweig, who used the name Robert Liversidge, committing him to prison but giving no reason.[1] On appeal, the case, joined with that of Ben Greene, reached the House of Lords Judicial Committee (HoLJC), the highest court of appeal.[2] They had to decide whether the court could investigate the objective basis for the reasonable cause; in other words, could they evaluate the Home Secretary's actions on an objective standard, comparing them to that which might be taken by a reasonable man, or were they to measure them against the personal standard of the Secretary?[3]
[edit] Majority judgments
The majority of the Law Lords held that the legislation should be interpreted so as to make effective in the way parliament intended, even if that meant adding to the words to give that effect. Although parliament had made the power subject to a reasonable belief they accepted the Home Secretary's statement that he held such a belief; in otherwise that he believed he had reasonable cause. Viscount Maugham said that the court should "prefer a construction which will carry into effect the plain intention of those responsible " and Lord Macmillan that "it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy". According to him, if the Secretary had acted in good faith, he need not disclose the basis for his decision, nor were his actions justiciable in a court of law.[3]
The majority of the Lords appear to have been greatly concerned with the fact that they were dealing with a matter of national security. In their view, it was not appropriate for a court to deal with matters of national security, especially as they were not privy to classified information that only the executive had.[4]
[edit] Dissenting judgment
The case is most famous for the dissenting speech of Lord Atkin, which has been recognised as a defining statement of the need for courts to remain independent of the executive whatever the prevailing circumstances. In his view the majority had abdicated their responsibility to investigate and control the executive, and were "more executive-minded than the executive". Lord Atkin protested that theirs was "a strained construction put on words with the effect of giving an uncontrolled power of imprisonment to the minister". He went on to say:
“ In England, amidst the clash of arms, the laws are not silent. They may be changed, but they speak the same language in war as in peace. It has always been one of the pillars of freedom, one of the principles of liberty for which on recent authority we are now fighting, that the judges are no respecters of persons and stand between the subject and any attempted encroachments on his liberty by the executive, alert to see that any coercive action is justified in law. ”
Lord Atkin continued:
“ I know of only one authority, which might justify the suggested method of construction. 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean, neither more nor less'. 'The question is,' said Alice, 'whether you can make words mean so many different things.' 'The question is,' said Humpty Dumpty, 'which is to be the master, that's all.' After all this long discussion, the question is whether the words 'If a man has' can mean 'If a man thinks he has'. I have an opinion that they cannot and the case should be decided accordingly. ”
Lord Atkin's view was that the phrase "reasonable cause" in the statute at hand indicated that the actions of the Secretary were meant to be evaluated by an objective standard (which means, of course, a subjective standard applied by judges). As a result, it would be within the court's purview to determine the reasonableness of the Secretary's actions.[4]
[edit] Aftermath
The potential power of this dissenting judgement was clearly recognised even before it was published. The Lord Chancellor, John Simon, 1st Viscount Simon, wrote to Lord Atkin asking him to amend the proposed terms of the speech. He did not.[5]
Atkin's interpretation has generally been preferred subsequently. In Nakkuda Ali v Jayaratne[6] a strong Privy Council held that Liversidge v. Anderson must not be taken to lay down any general rule on the construction of the expression "has reasonable cause to believe". Subsequently Liversidge v Anderson was described by Lord Reid in Ridge v Baldwin[7] as a "very peculiar decision". Lord Diplock in I.R.C. v Rossminster Ltd[8] thought that "the time has come to acknowledge openly that the majority of this House in Liversidge v Anderson were expediently and, at that time, perhaps, excusably, wrong and the dissenting speech of Lord Atkin was right".
However, in the 1977 deportation case of R v. Secretary of State ex parte Hosenball[9], Lord Denning MR, in the Court of Appeal, supported judicial non-interference with ministerial discretion in matters of national security.[10]
[edit] Commonwealth countries
In the Commonwealth, many jurisdictions, particularly in the Caribbean, have opted to follow Lord Atkin's judgement as well. In A-G of St. Christopher, Nevis and Anguilla v. Reynolds, the Privy Council even went further than Lord Atkin's judgement had intended. Lord Atkin had suggested that a subjective standard would only be applicable if the statute had used phrasings such as "if it appears to the Secretary of State that..." or "where the Secretary of the State is satisfied that..."[4] In this case, however, the Privy Council held that despite the statute's statement that the Governor could detain a person if he was "satisfied" that the person was involved in acts "prejudicial to public safety and order", the statute did not grant unlimited discretion to the Governor; his actions could be evaluated on an objective standard.[11]
In other parts of the Commonwealth such as Singapore and Malaysia, the courts have generally followed the majority decision in Liversidge. In Singapore, the case of Re Ong Yew Teck saw the arrest of a man under the Singaporean Criminal (Temporary Provisions) Ordinance 1955, which granted police officers the power to arrest and detain anyone "whom he has reason to believe that there is ground to justify his arrest and detention under s. 47" of the ordinance. The detainee appealed, arguing that the phrase "has reason to believe" meant that an objective test of reasonableness was to be used, citing Nakkuda Ali. Justice Chua rejected this argument, and accepted the majority decision in Liversidge as persuasive precedent.[12] In Malaysia, the case which established the subjective test of reasonableness for executive actions was Karam Singh v. Menteri Hal Ehwal Dalam Negeri. The case, heard by the Federal Court in 1969, remains as binding precedent in Malaysia. In the case, the appellant had been detained under the Internal Security Act (ISA), but the statement of the Home Minister giving the grounds for his detention provided only one reason, even though his detention order had initially stated there were more. It was argued that the Home Minister had taken a "casual and cavalier" approach to the detention, and that because the allegations against the appellant had been unduly vague, the Home Minister had acted in bad faith, thereby voiding the detention. The court held that the detention was good, because it could not assess the actions of the executive, applying the subjective test of reasonableness as Liversidge had.[13]
In India, the Liversidge decision was cited in Gopalan v. State of Madras, where the court held that the subjective test was to be applied. However, subsequent decisions such as Fazal Ghosi v. State of Uttar Pradesh have allowed some measure of judicial intervention by holding that the executive's decisions must be based on "pertinent material"; if it is found that there is no such material justifying the decision, the courts may act.[14] In some other Commonwealth countries such as Malaysia, it has been attempted to overrule the precedent of Liversidge by citing Indian cases as persuasive precedent; in the case of Karam Singh, the Indian case of Jagannath Misra v. State of Orissa, where the facts were similar, was cited. Legal commentators have noted, however, that the Malaysian judiciary has been reluctant to accept Indian authorities, seeking to distinguish them whenever possible. One Malaysian judge has suggested that "English courts take a more realistic view of things while Indian judges ... impress me as indefatigable, idealists seeking valiantly to reconcile the irreconcilable".[13]
Entick v Carrington (1665)
Entick v Carrington (1765) 19 Howell's State Trials 1030 is a leading case in English law establishing the civil liberties of individuals and limiting the scope of executive power. The case has also been influential in other common law jurisdictions and was an important motivation for the Fourth Amendment to the United States Constitution.
On 11 November 1762, the King's Chief Messenger Nathan Carrington, and three other King's messengers, James Watson, Thomas Ardran, and Robert Blackmore broke into the home of the Grub-street writer, John Entick (1703?-1773), in the parish of St Dunstan, Stepney, "with force and arms" and seized Entick's private papers. Entick, an associate of John Wilkes, was arrested. Also arrested that day was a lawyer, Arthur Beardmore. The King's messengers were acting on the orders of Lord Halifax, newly appointed Secretary of State for the Northern Department, "to make strict and diligent search for . . . the author, or one concerned in the writing of several weekly very seditious papers intitled, 'The Monitor or British Freeholder, No 357, 358, 360, 373, 376, 378, and 380'".
Entick sought judgment against Carrington and his colleagues who argued that they acted upon Halifax's warrant. A jury returned a special verdict finding that the defendants had broken into Entick's home "with force and arms" and searched for and taken away some of his private papers.
The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:
The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:
The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good. By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my license, but he is liable to an action, though the damage be nothing; which is proved by every declaration in trespass, where the defendant is called upon to answer for bruising the grass and even treading upon the soil. If he admits the fact, he is bound to show by way of justification, that some positive law has empowered or excused him. The justification is submitted to the judges, who are to look into the books; and if such a justification can be maintained by the text of the statute law, or by the principles of common law. If no excuse can be found or produced, the silence of the books is an authority against the defendant, and the plaintiff must have judgment.[1]
”
So the individual may do anything but that which is forbidden by law, and the state may do nothing but that which is expressly authorised by law.
The judgment established the limits of executive power in English law, that an officer of the state could only act lawfully in a manner prescribed by statute or common law.
It was also part of the background to the Fourth Amendment to the United States Constitution and was described by the Supreme Court of the United States as a "great judgment, one of the landmarks of English liberty, one of the permanent monuments of the British Constitution,’’ and a guide to an understanding of the Fourth Amendment.[2][3]
On 11 November 1762, the King's Chief Messenger Nathan Carrington, and three other King's messengers, James Watson, Thomas Ardran, and Robert Blackmore broke into the home of the Grub-street writer, John Entick (1703?-1773), in the parish of St Dunstan, Stepney, "with force and arms" and seized Entick's private papers. Entick, an associate of John Wilkes, was arrested. Also arrested that day was a lawyer, Arthur Beardmore. The King's messengers were acting on the orders of Lord Halifax, newly appointed Secretary of State for the Northern Department, "to make strict and diligent search for . . . the author, or one concerned in the writing of several weekly very seditious papers intitled, 'The Monitor or British Freeholder, No 357, 358, 360, 373, 376, 378, and 380'".
Entick sought judgment against Carrington and his colleagues who argued that they acted upon Halifax's warrant. A jury returned a special verdict finding that the defendants had broken into Entick's home "with force and arms" and searched for and taken away some of his private papers.
The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:
The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:
The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good. By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my license, but he is liable to an action, though the damage be nothing; which is proved by every declaration in trespass, where the defendant is called upon to answer for bruising the grass and even treading upon the soil. If he admits the fact, he is bound to show by way of justification, that some positive law has empowered or excused him. The justification is submitted to the judges, who are to look into the books; and if such a justification can be maintained by the text of the statute law, or by the principles of common law. If no excuse can be found or produced, the silence of the books is an authority against the defendant, and the plaintiff must have judgment.[1]
”
So the individual may do anything but that which is forbidden by law, and the state may do nothing but that which is expressly authorised by law.
The judgment established the limits of executive power in English law, that an officer of the state could only act lawfully in a manner prescribed by statute or common law.
It was also part of the background to the Fourth Amendment to the United States Constitution and was described by the Supreme Court of the United States as a "great judgment, one of the landmarks of English liberty, one of the permanent monuments of the British Constitution,’’ and a guide to an understanding of the Fourth Amendment.[2][3]
Tuesday, May 5, 2009
Law of Trusts - Computer Marked Assessment III
No additional materials are provided for the following eight 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 What is the rule in Milroy v Lord (1861)?
Choose one answer. A. That courts of equity will not enforce bare promises
B. That courts of equity will not generally enforce voluntary covenants
C. That courts of equity will not order the perfection of imperfect gifts
D. That courts of equity will not enforce trusts in favour of volunteer beneficiaires
E. Don't know
Feedback
That's correct.
Although statements (a) and (b) are perfectly correct, they are not rules contained in Milroy v Lord. And statement (d) is plainly wrong. As cases such as Paul v Paul (1882) 20 Ch D 742 demonstrate, the objection is not that the claimant is a volunteer per se, for most trusts have volunteer beneficiaries. The fact that the claimant is a volunteer is only relevant where the trust is not completely constituted, where, in other words, there is no trust, merely a failed attempt to create one.
Correct
Marks for this submission: 1/1.Question 2
Marks: 1 What is a covenant to settle?
Choose one answer. A. A promise by deed to convey rights to the promisee outright
B. A promise by deed to convey rights to the promisee to hold on trust
C. A conveyance of rights to a third party to hold on trust
D. A written promise to convey rights to the promisee to hold on trust
E. Don't know
Feedback
That's correct.
A covenant is a promise in a deed, and a covenant to settle is a promise to set up a trust contained in a deed. Answer (d) is wrong, for though a deed must be written, writing itself is not enough to constitute a deed. Answer (a) is wrong because this is not a promise to create a trust, and answer (c) is wrong because it mentions no promise at all.
Correct
Marks for this submission: 1/1.Question 3
Marks: 1 What is the general attitude of equity to voluntary coventants?
Choose one answer. A. Equity will award damages for breach of a voluntary covenant
B. Equity will decree specific performance of a voluntary covenant
C. Equity will deem a voluntary covenant to have been fully performed
D. Equity will not lend its assistance to the enforcement of a voluntary covenant
E. Don't know
Feedback
That's correct.
The general rule, subject to one exception, is that only promises made for consideration will be enforced in equity, and then only those in which an award of damages is an inadequate remedy.
Correct
Marks for this submission: 1/1.Question 4
Marks: 1 What is the fundamental problem the intended beneficiary normally faces in trying to enforce voluntary covenants to settle?
Choose one answer. A. He is not privy to the deed
B. The deed does not purport to confer a benefit on him
C. The covenant cannot be enforced against a deceased covenantor
D. The intended beneficiary gave no consideration for the promise
E. Don't know
Feedback
That's correct.
Although the promise, because under seal, will be enforceable at law, the intended beneficiary cannot normally (Cannon v Hartley (1949) is exceptional in this regard) enforce it because he will not be privy (party) to it. Answer (b) is wrong, because the deed clearly does purport to confer a benefit on him. Answer (c) is wrong because the death of the covenantor does not extinguish his liablity for non-performance of the covenant; it is perfectly possible to pursue a claim for damages against his estate. Answer (d) is wrong because consideration is not needed for enforcement at law where the promise is contained in a deed.
Correct
Marks for this submission: 1/1.Question 5
Marks: 1 What exception is made in the case of marriage settlements?
Choose one answer. A. That equity will decree specific performance in favour of all intended beneficiaries
B. That equity will make an award of damages in favour of all intended beneficiaries
C. That equity will decree specific performance in favour of those within the marriage consideration
D. That equity will decree specific performance in favour of the next of kin alone
E. Don't know
Feedback
That's correct.
Although equity will not generally lend its aid to enforce a voluntary covenant, it takes a radically different view in the case of marriage settlements where the person seeking to enforce is within the 'marriage consideration'. In such cases, not only will the court decree specific performance, but it will do so even where damages are not an inadequate remedy. Answer (a) is wrong because relief is restricted to those within the marriage consideration. Answer (b) is wrong both for this reason and the further one that the remedy is specific performance, not damages. Answer (d) is wrong because, as re Plumptre's Marriage Settlement (1910) demonstrates, the next of kin will not be granted specific performance of a marriage settlement.
Correct
Marks for this submission: 1/1.Question 6
Marks: 1 What is the 'trust of the covenant' argument?
Choose one answer. A. That the right to sue vested in the covenantees is held on trust for the covenantor
B. That the right to sue vested in the covenantees is held on trust for the intended beneficiary
C. That the damages the covenantees will receive from suing the covenantor for breach of covenant will be held on trust for the intended beneficiary
D. That the covenantor holds the benefit of the covenant on trust for the intended beneficiary
E. Don't know
Feedback
That's correct.
The reason this argument will be made is that if the right is so held, then the intended beneficiary, though still not a beneficiary of a trust of the rights promised to be transferred, is at least the beneficiary of a different trust, a trust of the right to sue for failure to transfer the rights as promised. And given that he is the beneficiary of a completely constituted trust, it matters not that he is a volunteer (Paul v Paul (1882)). Answer (a) is wrong, because this argument would not suit the intended beneficiary. Answer (c) is wrong because this does not give the intended beneficiary what he is seeking, viz a lever to compel the covenantees to sue. Answer (d) is wrong because it is the convenantees, not the covenantor, who have the benefit of the covenant.
Correct
Marks for this submission: 1/1.Question 7
Marks: 1 What do the intended trustees generally have which the intended beneficiaries do not?
Choose one answer. A. They are parties to the covenant and so have a right specific performance
B. They are parties to the covenant and so have a right to damages at law
C. They are within the marriage consideration and so can claim damages in equity
D. They are within the marriage consideration and so can claim specific performance
E. Don't know
Feedback
That's correct.
Answer (a) is wrong, because although the covenantees are party, they will be trying to enforce a voluntary covenant, and equity will not generally lend its aid to the enforcement of such a covenant. However, the absence of consideration is no defence at common law: the fact of the promise being under seal and being enforced by a party to the covenant is enough. That is why (b) is correct. Answers (c) and (d) are both wrong because, even in the case of a marriage settlement, the covenantees will not usually be within the marriage consideration.
Correct
Marks for this submission: 1/1.Question 8
Marks: 1 What is the resulting trust argument which sometimes surfaces in this area?
Choose one answer. A. That any damages recovered by the covenantees in a suit against the covenantor will be held by them on resulting trust for the intended beneficiaires
B. That the rights promised to be transferred are held by the covenantees on resulting trust for the covenantor
C. That the covenantor is a resulting trustee of the rights he has promised to transfer for the intended beneficiaries
D. That the right to sue on the covenant being held by the covenantees on resulting trust for the covenantor, so too will any damages recovered from him in a suit for breach of covenant
E. Don't know
Feedback
That's correct.
Answer (a) is wrong, because a resulting trust is one arising in favour of the transferor of the rights now held on trust, and the intended beneficiaries transferred nothing to the covenantees. Answer (b) is wrong because the rights promised to be transferred have not been transferred at all - that is the very problem the intended beneficiary is trying to overcome. And answer (c) is wrong for the reason that this trust would once again not be a trust arising in favour of the transferor of rights.
Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extract from the judgment of Eve J in re Pryce [1917] 1 Ch 234 and then answer the five questions (Q9 - Q13) that follow.
Context
Under what was a typical marriage settlement, the defendant wife covenanted to convey to covenantees any after-acquired property she might receive to be held by them on trust for her husband and herself for their joint lives, for the survivor for their life, remainder to the children of the marriage (if any), and, in default of issue, remainder to her next-of-kin. This was known as the 'wife's fund'. The husband later gave the defendant a remainder interest he had from his own parents' marriage settlement, which interest vested in possession on the death of his mother. At that point, the defendant had a right to call for a transfer of these rights from the trustees of her husband's parents' marriage settlement to the covenantees/trustees of the 'wife's fund'. In breach of covenant, the defendant left the rights where they were, with the result that they were held for her absolutely. Her husband having now died, and in light of the fact that there were no issue of the marriage and that the only persons who would benefit from a transfer of the rights to the covenantees/trustees were the defendant widow's next of kin, the covenantees/trustees sought directions, inter alia, as to whether they were bound to take steps to enforce the payment and transfer to themselves of the rights currently held in trust for the defendant outright.
Question 9
Marks: 1 How does Eve J paraphrase the question asked by the covenantees?
Choose one answer. A. Whether the covenantees/trustees could be compelled to take steps to recover or enforce payment of transfer to them of the rights concerned
B. Whether the wife's next of kin could sue for breach of covenant
C. Whether the covenantees/trustees ought to take any steps to recover or enforce payment or transfer to them of the rights concerned
D. Whether the wife's next of kin could obtain specific performance of the covenant
E. Don't know
Feedback
That's correct.
The point to notice is that the word 'ought' has here been substituted for 'bound'. For that reason, answer (a) is what Eve J should have asked himself, but unfortunately didn't. And answers (b) and (d) are wrong because the next of kin were not themselves trying to enforce the covenant, either through an award of damages or a grant of specific performance.
Correct
Marks for this submission: 1/1.Question 10
Marks: 1 In relation to the 'wife's fund', what was the relevance of the fact that there were no children of the marriage?
Choose one answer. A. The trust failed and the rights were held on resulting trust for the wife
B. The only person who would gain from performance of the covenant would be the next of kin
C. If there had been children of the marriage, they would have been within the 'marriage consideration' and would have been able to bring an action for specific performance of the covenant
D. Both (b) and (c)
E. Don't know
Feedback
That's correct.
The wife was absolutely entitled to the rights held for her on trust by the trustees of her husband's parents' marriage settlement. By conveying those rights to the trustees of her own marriage settlement, she would thereby reduce her entitlement to a life interest, the remainder going to the next of kin. Given that this was a marriage settlement, had any children been born of her marriage, they would have been within the marriage consideration and so able to enforce the covenant in equity: Pullan v Koe (1913). No such right, however, is given to the next of kin: re Plumptre's Marriage Settlement (1910). Answer (a) is wrong, because the trust provided beneficiaries in case of failure of issue, viz the next of kin.
Correct
Marks for this submission: 1/1.Question 11
Marks: 1 If there had been children of the marriage, what effect would that have had so far as any trusts were concerned?
Choose one answer. A. None - there would be no trust until the rights in question were transferred to the covenantees
B. A constructive trust would arise in favour of the next-of-kin
C. A constructive trust of the defendant's interest would arise in favour of the children
D. None of the above
E. Don't know
Feedback
That's correct.
Since the covenant would now be specifically enforceable, application of the maxim that 'equity looks upon that as done which ought to be done' would generate a construcitve trust in favour of the children. Answer (a) is therefore wrong, and answer (b) is untenable because the next of kin could only take where there were no issue.
Correct
Marks for this submission: 1/1.Question 12
Marks: 1 What, according to Eve J, was the effect of the Judicature Act?
Choose one answer. A. That the same defences to a claim in equity could now be opposed to a claim at law
B. There was now only one court, and in it the rules of equity prevailed
C. All trusts were now executed, with the rights of the trustees now being vested in their beneficiaries
D. That voluntary covenants were now enforceable in equity
E. Don't know
Feedback
That's correct.
Answer (b) is the view of Sir George Jessel MR in Walsh v Lonsdale, not that of Eve J in this case, answer (c) would mean that our entire subject no longer existed, and answer (d) is the exact opposite of what Eve J was saying.
Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Why did Eve J order that the trustees ought not to take any action to enforce the covenant?
Choose one answer. A. Because any damages awarded at common law would be nominal
B. Because any damages would be held on resulting trust for the wife
C. Because it would give the next of kin by indirect means relief they could not obtain by any direct procedure
D. Because the next of kin were not party to the covenant
E. Don't know
Feedback
That's correct.
Answers (a) and (b) are wrong for the simple reason that these issues were not addressed in Eve J's judgment. Answer (d) is true, but irrelevant, the issue being the position of the covenantees, who were, of course, party to the covenant.
Correct
Marks for this submission: 1/1.Application
Please consider the following fact scenario, then answer the four examination questions (Q14 - Q17) that follow:
Fred covenanted with Ella that he would convey £50,000 from the £100,000 currently in his account with the London Bank plc and any earnings he might receive from a book he was about to publish to her to hold on trust for Peter. Although he later earned £1,000,000 in royalties from the sale of his book, Fred failed to keep either promise.
Question 14
Marks: 1 What is the relevance of the fact that the covenant concerns royalties in respect of a book not yet written?
Choose one answer. A. It is not possible to have a trust of after-acquired property
B. The royalties would be after-acquired property, and according to re Cook, no trust of the covenant is possible in such circumstances
C. Rights to after-acquired property are incapable of assignment and so cannot be transferred to Ella
D. There is no certainty of subject-matter with after-acquired property
E. Don't know
Feedback
That's correct.
It was for this reason that Buckley J refused to countenance the idea that the covenantees held the benefit of the covenant on trust for the intended beneficiary. You should note that his reasoning in this regard is extremely contentious. And though (a) is perfectly correct, no-one is saying that there is a present trust of the royalties. Answer (c) is not the right answer, for though true, no attempt was made by Fred to convey to Ella the right to receive the royalties. And answer (d) is wrong because the issue is not one of uncertainty of subject-matter but of no subject-matter at all.
Correct
Marks for this submission: 1/1.Question 15
Marks: 1 What would Peter need to establish before he could sue for breach of covenant?
Choose one answer. A. That he could sue on the covenant by virtue of the Contracts (Rights of Third Parties) Act 1999
B. That the right to sue on the covenant was held for him on trust
C. That this was a marriage settlement and he was within the marriage settlement
D. Either (a) or (c)
E. Don't know
Feedback
Answer (d) is correct.
There are two ways in which Peter could sue in his own right. The first, which is doubtful, is that the 1999 Act applies to voluntary covenants and that he is able to invoke the Act. If both those questions are answered affirmatively, then Peter would be able to sue for damages at law. Second, where the requirements of a marriage settlement are present, in which case Peter will be able to obtain specific performance in equity. Answer (c) is not strictly correct, for the right to sue in such case would be vested in Ella, not Peter. However, in such circumstances, Peter could compel Ella to bring a claim, and, if she refused, in certain circumstances bring the claim himself in her name.
Incorrect
Marks for this submission: 0/1.Question 16
Marks: 1 What barrier does re Pryce present to Ella, who is considering suing Fred for breach of covenant?
Choose one answer. A. That the court will direct her not to sue Fred
B. That the court, if asked for directions, will direct her not to sue Fred
C. That the court will only direct her to sue Fred if it finds that she holds the right to sue on trust for Peter
D. That even if she does sue, the damages she will obtain will be nominal
E. Don't know
Feedback
That's correct.
Answer (a) is wrong because Eve J said nothing at all about the situation in which the covenantee simply goes ahead and sues without asking. Answer (c), though arguably what Eve J should have said in re Pryce, was not part of his reasoning at all. And answer (d), though one of the arguments put forward to defend the result, though not the reasoning, in re Pryce, again formed no part of the reasoning of Eve J.
Correct
Marks for this submission: 1/1.Question 17
Marks: 1 Which of the following arguments could NOT be made to show that re Pryce was wrongly decided?
Choose one answer. A. That Eve J mistook the effect of the Judicature Acts
B. That Eve J wrongly held that the right to sue was not held on trust for the next of kin
C. That Eve J answered a different question to that from which he was asked
D. That the fact that the next of kin could not sue in their own right had no bearing on the covenantees' right to do the same
E. Don't know
Feedback
That's correct.
Answer (b) was a point which was unfortunately not addressed in Eve J's judgment. All of (a), (c), and (d) are perfectly legitimate arguments to make against the correctness of Eve J's judgment.
Correct
Marks for this submission: 1/1.
Question 1
Marks: 1 What is the rule in Milroy v Lord (1861)?
Choose one answer. A. That courts of equity will not enforce bare promises
B. That courts of equity will not generally enforce voluntary covenants
C. That courts of equity will not order the perfection of imperfect gifts
D. That courts of equity will not enforce trusts in favour of volunteer beneficiaires
E. Don't know
Feedback
That's correct.
Although statements (a) and (b) are perfectly correct, they are not rules contained in Milroy v Lord. And statement (d) is plainly wrong. As cases such as Paul v Paul (1882) 20 Ch D 742 demonstrate, the objection is not that the claimant is a volunteer per se, for most trusts have volunteer beneficiaries. The fact that the claimant is a volunteer is only relevant where the trust is not completely constituted, where, in other words, there is no trust, merely a failed attempt to create one.
Correct
Marks for this submission: 1/1.Question 2
Marks: 1 What is a covenant to settle?
Choose one answer. A. A promise by deed to convey rights to the promisee outright
B. A promise by deed to convey rights to the promisee to hold on trust
C. A conveyance of rights to a third party to hold on trust
D. A written promise to convey rights to the promisee to hold on trust
E. Don't know
Feedback
That's correct.
A covenant is a promise in a deed, and a covenant to settle is a promise to set up a trust contained in a deed. Answer (d) is wrong, for though a deed must be written, writing itself is not enough to constitute a deed. Answer (a) is wrong because this is not a promise to create a trust, and answer (c) is wrong because it mentions no promise at all.
Correct
Marks for this submission: 1/1.Question 3
Marks: 1 What is the general attitude of equity to voluntary coventants?
Choose one answer. A. Equity will award damages for breach of a voluntary covenant
B. Equity will decree specific performance of a voluntary covenant
C. Equity will deem a voluntary covenant to have been fully performed
D. Equity will not lend its assistance to the enforcement of a voluntary covenant
E. Don't know
Feedback
That's correct.
The general rule, subject to one exception, is that only promises made for consideration will be enforced in equity, and then only those in which an award of damages is an inadequate remedy.
Correct
Marks for this submission: 1/1.Question 4
Marks: 1 What is the fundamental problem the intended beneficiary normally faces in trying to enforce voluntary covenants to settle?
Choose one answer. A. He is not privy to the deed
B. The deed does not purport to confer a benefit on him
C. The covenant cannot be enforced against a deceased covenantor
D. The intended beneficiary gave no consideration for the promise
E. Don't know
Feedback
That's correct.
Although the promise, because under seal, will be enforceable at law, the intended beneficiary cannot normally (Cannon v Hartley (1949) is exceptional in this regard) enforce it because he will not be privy (party) to it. Answer (b) is wrong, because the deed clearly does purport to confer a benefit on him. Answer (c) is wrong because the death of the covenantor does not extinguish his liablity for non-performance of the covenant; it is perfectly possible to pursue a claim for damages against his estate. Answer (d) is wrong because consideration is not needed for enforcement at law where the promise is contained in a deed.
Correct
Marks for this submission: 1/1.Question 5
Marks: 1 What exception is made in the case of marriage settlements?
Choose one answer. A. That equity will decree specific performance in favour of all intended beneficiaries
B. That equity will make an award of damages in favour of all intended beneficiaries
C. That equity will decree specific performance in favour of those within the marriage consideration
D. That equity will decree specific performance in favour of the next of kin alone
E. Don't know
Feedback
That's correct.
Although equity will not generally lend its aid to enforce a voluntary covenant, it takes a radically different view in the case of marriage settlements where the person seeking to enforce is within the 'marriage consideration'. In such cases, not only will the court decree specific performance, but it will do so even where damages are not an inadequate remedy. Answer (a) is wrong because relief is restricted to those within the marriage consideration. Answer (b) is wrong both for this reason and the further one that the remedy is specific performance, not damages. Answer (d) is wrong because, as re Plumptre's Marriage Settlement (1910) demonstrates, the next of kin will not be granted specific performance of a marriage settlement.
Correct
Marks for this submission: 1/1.Question 6
Marks: 1 What is the 'trust of the covenant' argument?
Choose one answer. A. That the right to sue vested in the covenantees is held on trust for the covenantor
B. That the right to sue vested in the covenantees is held on trust for the intended beneficiary
C. That the damages the covenantees will receive from suing the covenantor for breach of covenant will be held on trust for the intended beneficiary
D. That the covenantor holds the benefit of the covenant on trust for the intended beneficiary
E. Don't know
Feedback
That's correct.
The reason this argument will be made is that if the right is so held, then the intended beneficiary, though still not a beneficiary of a trust of the rights promised to be transferred, is at least the beneficiary of a different trust, a trust of the right to sue for failure to transfer the rights as promised. And given that he is the beneficiary of a completely constituted trust, it matters not that he is a volunteer (Paul v Paul (1882)). Answer (a) is wrong, because this argument would not suit the intended beneficiary. Answer (c) is wrong because this does not give the intended beneficiary what he is seeking, viz a lever to compel the covenantees to sue. Answer (d) is wrong because it is the convenantees, not the covenantor, who have the benefit of the covenant.
Correct
Marks for this submission: 1/1.Question 7
Marks: 1 What do the intended trustees generally have which the intended beneficiaries do not?
Choose one answer. A. They are parties to the covenant and so have a right specific performance
B. They are parties to the covenant and so have a right to damages at law
C. They are within the marriage consideration and so can claim damages in equity
D. They are within the marriage consideration and so can claim specific performance
E. Don't know
Feedback
That's correct.
Answer (a) is wrong, because although the covenantees are party, they will be trying to enforce a voluntary covenant, and equity will not generally lend its aid to the enforcement of such a covenant. However, the absence of consideration is no defence at common law: the fact of the promise being under seal and being enforced by a party to the covenant is enough. That is why (b) is correct. Answers (c) and (d) are both wrong because, even in the case of a marriage settlement, the covenantees will not usually be within the marriage consideration.
Correct
Marks for this submission: 1/1.Question 8
Marks: 1 What is the resulting trust argument which sometimes surfaces in this area?
Choose one answer. A. That any damages recovered by the covenantees in a suit against the covenantor will be held by them on resulting trust for the intended beneficiaires
B. That the rights promised to be transferred are held by the covenantees on resulting trust for the covenantor
C. That the covenantor is a resulting trustee of the rights he has promised to transfer for the intended beneficiaries
D. That the right to sue on the covenant being held by the covenantees on resulting trust for the covenantor, so too will any damages recovered from him in a suit for breach of covenant
E. Don't know
Feedback
That's correct.
Answer (a) is wrong, because a resulting trust is one arising in favour of the transferor of the rights now held on trust, and the intended beneficiaries transferred nothing to the covenantees. Answer (b) is wrong because the rights promised to be transferred have not been transferred at all - that is the very problem the intended beneficiary is trying to overcome. And answer (c) is wrong for the reason that this trust would once again not be a trust arising in favour of the transferor of rights.
Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extract from the judgment of Eve J in re Pryce [1917] 1 Ch 234 and then answer the five questions (Q9 - Q13) that follow.
Context
Under what was a typical marriage settlement, the defendant wife covenanted to convey to covenantees any after-acquired property she might receive to be held by them on trust for her husband and herself for their joint lives, for the survivor for their life, remainder to the children of the marriage (if any), and, in default of issue, remainder to her next-of-kin. This was known as the 'wife's fund'. The husband later gave the defendant a remainder interest he had from his own parents' marriage settlement, which interest vested in possession on the death of his mother. At that point, the defendant had a right to call for a transfer of these rights from the trustees of her husband's parents' marriage settlement to the covenantees/trustees of the 'wife's fund'. In breach of covenant, the defendant left the rights where they were, with the result that they were held for her absolutely. Her husband having now died, and in light of the fact that there were no issue of the marriage and that the only persons who would benefit from a transfer of the rights to the covenantees/trustees were the defendant widow's next of kin, the covenantees/trustees sought directions, inter alia, as to whether they were bound to take steps to enforce the payment and transfer to themselves of the rights currently held in trust for the defendant outright.
Question 9
Marks: 1 How does Eve J paraphrase the question asked by the covenantees?
Choose one answer. A. Whether the covenantees/trustees could be compelled to take steps to recover or enforce payment of transfer to them of the rights concerned
B. Whether the wife's next of kin could sue for breach of covenant
C. Whether the covenantees/trustees ought to take any steps to recover or enforce payment or transfer to them of the rights concerned
D. Whether the wife's next of kin could obtain specific performance of the covenant
E. Don't know
Feedback
That's correct.
The point to notice is that the word 'ought' has here been substituted for 'bound'. For that reason, answer (a) is what Eve J should have asked himself, but unfortunately didn't. And answers (b) and (d) are wrong because the next of kin were not themselves trying to enforce the covenant, either through an award of damages or a grant of specific performance.
Correct
Marks for this submission: 1/1.Question 10
Marks: 1 In relation to the 'wife's fund', what was the relevance of the fact that there were no children of the marriage?
Choose one answer. A. The trust failed and the rights were held on resulting trust for the wife
B. The only person who would gain from performance of the covenant would be the next of kin
C. If there had been children of the marriage, they would have been within the 'marriage consideration' and would have been able to bring an action for specific performance of the covenant
D. Both (b) and (c)
E. Don't know
Feedback
That's correct.
The wife was absolutely entitled to the rights held for her on trust by the trustees of her husband's parents' marriage settlement. By conveying those rights to the trustees of her own marriage settlement, she would thereby reduce her entitlement to a life interest, the remainder going to the next of kin. Given that this was a marriage settlement, had any children been born of her marriage, they would have been within the marriage consideration and so able to enforce the covenant in equity: Pullan v Koe (1913). No such right, however, is given to the next of kin: re Plumptre's Marriage Settlement (1910). Answer (a) is wrong, because the trust provided beneficiaries in case of failure of issue, viz the next of kin.
Correct
Marks for this submission: 1/1.Question 11
Marks: 1 If there had been children of the marriage, what effect would that have had so far as any trusts were concerned?
Choose one answer. A. None - there would be no trust until the rights in question were transferred to the covenantees
B. A constructive trust would arise in favour of the next-of-kin
C. A constructive trust of the defendant's interest would arise in favour of the children
D. None of the above
E. Don't know
Feedback
That's correct.
Since the covenant would now be specifically enforceable, application of the maxim that 'equity looks upon that as done which ought to be done' would generate a construcitve trust in favour of the children. Answer (a) is therefore wrong, and answer (b) is untenable because the next of kin could only take where there were no issue.
Correct
Marks for this submission: 1/1.Question 12
Marks: 1 What, according to Eve J, was the effect of the Judicature Act?
Choose one answer. A. That the same defences to a claim in equity could now be opposed to a claim at law
B. There was now only one court, and in it the rules of equity prevailed
C. All trusts were now executed, with the rights of the trustees now being vested in their beneficiaries
D. That voluntary covenants were now enforceable in equity
E. Don't know
Feedback
That's correct.
Answer (b) is the view of Sir George Jessel MR in Walsh v Lonsdale, not that of Eve J in this case, answer (c) would mean that our entire subject no longer existed, and answer (d) is the exact opposite of what Eve J was saying.
Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Why did Eve J order that the trustees ought not to take any action to enforce the covenant?
Choose one answer. A. Because any damages awarded at common law would be nominal
B. Because any damages would be held on resulting trust for the wife
C. Because it would give the next of kin by indirect means relief they could not obtain by any direct procedure
D. Because the next of kin were not party to the covenant
E. Don't know
Feedback
That's correct.
Answers (a) and (b) are wrong for the simple reason that these issues were not addressed in Eve J's judgment. Answer (d) is true, but irrelevant, the issue being the position of the covenantees, who were, of course, party to the covenant.
Correct
Marks for this submission: 1/1.Application
Please consider the following fact scenario, then answer the four examination questions (Q14 - Q17) that follow:
Fred covenanted with Ella that he would convey £50,000 from the £100,000 currently in his account with the London Bank plc and any earnings he might receive from a book he was about to publish to her to hold on trust for Peter. Although he later earned £1,000,000 in royalties from the sale of his book, Fred failed to keep either promise.
Question 14
Marks: 1 What is the relevance of the fact that the covenant concerns royalties in respect of a book not yet written?
Choose one answer. A. It is not possible to have a trust of after-acquired property
B. The royalties would be after-acquired property, and according to re Cook, no trust of the covenant is possible in such circumstances
C. Rights to after-acquired property are incapable of assignment and so cannot be transferred to Ella
D. There is no certainty of subject-matter with after-acquired property
E. Don't know
Feedback
That's correct.
It was for this reason that Buckley J refused to countenance the idea that the covenantees held the benefit of the covenant on trust for the intended beneficiary. You should note that his reasoning in this regard is extremely contentious. And though (a) is perfectly correct, no-one is saying that there is a present trust of the royalties. Answer (c) is not the right answer, for though true, no attempt was made by Fred to convey to Ella the right to receive the royalties. And answer (d) is wrong because the issue is not one of uncertainty of subject-matter but of no subject-matter at all.
Correct
Marks for this submission: 1/1.Question 15
Marks: 1 What would Peter need to establish before he could sue for breach of covenant?
Choose one answer. A. That he could sue on the covenant by virtue of the Contracts (Rights of Third Parties) Act 1999
B. That the right to sue on the covenant was held for him on trust
C. That this was a marriage settlement and he was within the marriage settlement
D. Either (a) or (c)
E. Don't know
Feedback
Answer (d) is correct.
There are two ways in which Peter could sue in his own right. The first, which is doubtful, is that the 1999 Act applies to voluntary covenants and that he is able to invoke the Act. If both those questions are answered affirmatively, then Peter would be able to sue for damages at law. Second, where the requirements of a marriage settlement are present, in which case Peter will be able to obtain specific performance in equity. Answer (c) is not strictly correct, for the right to sue in such case would be vested in Ella, not Peter. However, in such circumstances, Peter could compel Ella to bring a claim, and, if she refused, in certain circumstances bring the claim himself in her name.
Incorrect
Marks for this submission: 0/1.Question 16
Marks: 1 What barrier does re Pryce present to Ella, who is considering suing Fred for breach of covenant?
Choose one answer. A. That the court will direct her not to sue Fred
B. That the court, if asked for directions, will direct her not to sue Fred
C. That the court will only direct her to sue Fred if it finds that she holds the right to sue on trust for Peter
D. That even if she does sue, the damages she will obtain will be nominal
E. Don't know
Feedback
That's correct.
Answer (a) is wrong because Eve J said nothing at all about the situation in which the covenantee simply goes ahead and sues without asking. Answer (c), though arguably what Eve J should have said in re Pryce, was not part of his reasoning at all. And answer (d), though one of the arguments put forward to defend the result, though not the reasoning, in re Pryce, again formed no part of the reasoning of Eve J.
Correct
Marks for this submission: 1/1.Question 17
Marks: 1 Which of the following arguments could NOT be made to show that re Pryce was wrongly decided?
Choose one answer. A. That Eve J mistook the effect of the Judicature Acts
B. That Eve J wrongly held that the right to sue was not held on trust for the next of kin
C. That Eve J answered a different question to that from which he was asked
D. That the fact that the next of kin could not sue in their own right had no bearing on the covenantees' right to do the same
E. Don't know
Feedback
That's correct.
Answer (b) was a point which was unfortunately not addressed in Eve J's judgment. All of (a), (c), and (d) are perfectly legitimate arguments to make against the correctness of Eve J's judgment.
Correct
Marks for this submission: 1/1.
EXTRACT FROM JUDGMENT OF EVE J IN re PRYCE [1917] 1 Ch 234
EVE J. These proceedings have been instituted by the plaintiffs, the present trustees of the settlement executed on the marriage in 1887 of the late Mr Pryce Meyrick Pryce with the defendant, who is now his widow, with the object ... of having it determined whether, in the events which have happened, the trustees ought to take any steps to recover or enforce payment or transfer to them of such, if any, of the said premises as the Court shall hold to have been caught by the said covenant or agreement respectively. ...
The interests given by the husband to the wife, and the husband's one-third share of the £4700 ... have only fallen into possession on the recent death of the husband's mother, and are still outstanding in the trustees of the parents' marriage settlement and in the trustees of the deed of family arrangement respectively. The question I have to decide is whether the plaintiffs as trustees of the marriage settlement ought to take steps to obtain transfer and payment to them of these premises. ...
The position of the wife's fund is ... that her next of kin would be entitled to it on her death; but they are volunteers, and although the Court would probably compel fulfilment of the contract to settle at the instance of any persons within the marriage consideration (see per Cotton LJ in In re D'Angibau), and in their favour will treat the outstanding property as subjected to an enforceable trust (Pullan v Koe), "volunteers have no right whatever to obtain specific performance of a mere covenant which has remained as a covenant and has never been performed": see per James LJ in In re D'Angibau. Nor could damages be awarded either in this Court, or, I apprehend, at law, where, since the Judicature Act, the same defences would be available to the defendant as would be raised in an action brought in this Court for specific performance or damages.
In these circumstances, seeing that the next of kin could neither maintain an action to enforce the covenant nor for damages for breach of it, and that the settlement is not a declaration of trust constituting the relationship of trustee and cestui que trust between the defendant and the next of kin, in which case effect could be given to the trusts even in favour of volunteers, but is a mere voluntary contract to create a trust, ought the Court now for the sole benefit of these volunteers to direct the trustees to take proceedings to enforce the defendant's covenant? I think it ought not; to do so would be to give the next of kin by indirect means relief they cannot obtain by any direct procedure, and would in effect be enforcing the settlement as against the defendant's legal right to payment and transfer from the trustees of the parents' marriage settlement. The circumstances are not unlike those which existed in the case of In re D'Angibau, and I think the position here is covered by the judgments of the Lords Justices in that case.
Accordingly, I declare that the trustees ought not to take any steps to compel the transfer or payment to them of the premises assured to the wife by the deed of December 12, 1904.
The interests given by the husband to the wife, and the husband's one-third share of the £4700 ... have only fallen into possession on the recent death of the husband's mother, and are still outstanding in the trustees of the parents' marriage settlement and in the trustees of the deed of family arrangement respectively. The question I have to decide is whether the plaintiffs as trustees of the marriage settlement ought to take steps to obtain transfer and payment to them of these premises. ...
The position of the wife's fund is ... that her next of kin would be entitled to it on her death; but they are volunteers, and although the Court would probably compel fulfilment of the contract to settle at the instance of any persons within the marriage consideration (see per Cotton LJ in In re D'Angibau), and in their favour will treat the outstanding property as subjected to an enforceable trust (Pullan v Koe), "volunteers have no right whatever to obtain specific performance of a mere covenant which has remained as a covenant and has never been performed": see per James LJ in In re D'Angibau. Nor could damages be awarded either in this Court, or, I apprehend, at law, where, since the Judicature Act, the same defences would be available to the defendant as would be raised in an action brought in this Court for specific performance or damages.
In these circumstances, seeing that the next of kin could neither maintain an action to enforce the covenant nor for damages for breach of it, and that the settlement is not a declaration of trust constituting the relationship of trustee and cestui que trust between the defendant and the next of kin, in which case effect could be given to the trusts even in favour of volunteers, but is a mere voluntary contract to create a trust, ought the Court now for the sole benefit of these volunteers to direct the trustees to take proceedings to enforce the defendant's covenant? I think it ought not; to do so would be to give the next of kin by indirect means relief they cannot obtain by any direct procedure, and would in effect be enforcing the settlement as against the defendant's legal right to payment and transfer from the trustees of the parents' marriage settlement. The circumstances are not unlike those which existed in the case of In re D'Angibau, and I think the position here is covered by the judgments of the Lords Justices in that case.
Accordingly, I declare that the trustees ought not to take any steps to compel the transfer or payment to them of the premises assured to the wife by the deed of December 12, 1904.
Trust Law - Computer Marked Assessment II
No additional materials are provided for the following seven 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 What is the main difference between a discretionary trust and a power of appointment under a trust instrument?
Choose one answer. A. Discretionary trusts always give the trustees a discretion as to who will receive the property, whereas powers of appointment can involve only one object
B. Powers of appointment are always to appoint capital, whereas discretionary trusts can be trusts of income
C. Discretionary trusts must be executed, whereas powers of appointment need not be exercised
D. Objects of a discretionary trust have vested interests in the trust property; objects of powers of appointment do not
E. Don't know
Feedback
The correct answer is (c).
The use of the terminology of 'trust' and 'power' generally aims to indicate the distinction between trustees' duties, and 'mere' powers which they have, which they need not exercise. While (a) is correct, it is not the main difference between the two: a trust with one object is still a trust, which a trustee must carry out, but it is a fixed trust, not a discretionary one. (b) is false: powers to appoint income are common. (d) is false as well. Neither objects of a discretionary trust nor objects of a power of appointment are regarded as having vested interests in the trust property.
Incorrect
Marks for this submission: 0/1.Question 2
Marks: 1 What is a dispositive power?
Choose one answer. A. It is a power to deal with or affect the beneficial interests in the trust property
B. It is a power to invest the trust property
C. It is a power to insure the trust property
D. It is a power to appoint new trustees
E. Don't know
Feedback
That's correct.
'Dispositive' powers are those by which the trustee 'disposes' of the trust property, which in this context means 'distributes' the trust property, i.e. to the trusts objects. It is standardly used in contrast to 'administrative powers, powers such as the power of investment, the power to insure the trust property, the power to appoint new trustees and so on. These administrative powers do not affect the beneficial interests of the objects -- they merely allow the trustee properly to manage the trust while it is in operation. Answers (c) and (d) are wrong as these are clearly administrative powers. Answer (b) is wrong for the same reason, but note that the way a trustee invests the trust funds can work to favour beneficiaries with income interests over the capital beneficiaries, or vice versa, so the power (and duty) to invest the trust funds is overlaid with a fiduciary duty to invest in an even-handed way (see the study guide 4.4).
Correct
Marks for this submission: 1/1.Question 3
Marks: 1 Which of the following statements about fiduciary duties is true?
Choose one answer. A. Only trustees can have fiduciary duties under a trust
B. All trustee duties are fiduciary duties
C. A fiduciary duty requires the trustee to act in the best interests of the beneficiaries
D. A fiduciary duty regulates trustees so they can act in conflict of interest
E. Don't know
Feedback
That's correct.
Answer (a) is wrong because, for example, other persons besides the trustee may have fiduciary powers under the trust; for example, a settlor may give himself a power to direct the trustee investments, and this power is likely to be fiduciary, i.e. must be exercised in the best interests of the beneficiaries. Answer (b) is incorrect, because trustees have duties of care and skill, for example in the investment of the trust funds, and duties of care and skill are not fiduciary duties, for they do not concern the trustees loyalty to the beneficiaries, but his competence. Answer (c) correctly gives the standard formulation of the fiduciary duty. Answer (d) is wrong because fiduciary duties prohibit trustees from acting in conflict of interest; they do not positively provide a framework whereby a trustee can do so.
Correct
Marks for this submission: 1/1.Question 4
Marks: 1 In which of the following situations does a fraud on a power take place?
Choose one answer. A. The trustee gives Mark £3000 on condition that he splits it with his sister, who is not an object of the power
B. The trustee gives Frank £2000 under a power of appointment on condition that Frank finishes his university studies
C. At Alison's request, the trustee gives Alison £5000 under a power of appointment so that Alison can set up a trust for her children, who are not objects of the power
D. Both (a) and (c)
E. Don't know
Feedback
The correct answer is (d).
Answer (a) is a paradigm example of a fraud on a power, for here the condition requires Mark, a proper object of the power, to direct the appointed property into the hands of someone who is not a proper object, and in answer (c) the exercise of the power is intended to place the trust money in the hands of non-objects; it doesn't matter if this fraud is instigated by a proper object of the power; it is still a fraud on the power. Answer (b) is incorrect because it is not fraudulent for a trustee merely to impose conditions on his exercise of the power, so long as he acts in the best interests of the beneficiaries. Answer (d) is incorrect; while a breach of trust, a mistaken exercise of an investment power is not fraudulent.
Incorrect
Marks for this submission: 0/1.Consider the following testamentary trust provision, which would be typical in a family trust of the 19th century.
"The rest and residue of my estate on trust for my wife Marjorie for life, and then to my children in such shares as my trustees shall in their absolute discretion see fit, with power to my trustees to appoint up to half the capital during the life of my said wife to such of my children as they shall in their absolute discretion think fit"
Questions 5 to 7 relate to this provision.
Question 5
Marks: 1 Which statement best describes the positions of the objects under this provision?
Choose one answer. A. Marjorie and the children are all discretionary beneficiaries
B. Marjorie has an income interest, the children each have a discretionary capital interest, and the children are each objects of a power of appointment of capital
C. Marjorie has an income interest and the children are the objects of a power of appointment of the income, and of a capital interest in remainder
D. Marjorie has a fixed interest and the children are beneficiaries of a discretionary trust
E. Don't know
Feedback
The correct answer is (b).
Answer (a) is wrong because Marjorie has a fixed interest in the income. While, if the power to appoint capital is exercised, there will be less capital upon which income can be earned, the appointment does not alter her interest. Answer (c) is wrong because the power of appointment is of capital, not income. Answer (d) is correct as far as it goes, but it doesn't mention that the children are also objects of the power of appointment.
Incorrect
Marks for this submission: 0/1.Question 6
Marks: 1 Who are the persons who take in default of appointment under this provision?
Choose one answer. A. The children
B. Marjorie
C. The children in such shares as the trustee selects
D. Marjorie and the children
E. Don't know
Feedback
That's correct.
Answer (a) is close, but (c) is better; if the power of appointment is not exercised, then the trustee will have all of the capital to distribute amongst the children, but as objects of a discretionary trust, each child has only a 'mere hope' or mere spes (latin for hope) of getting any property. So they take in default of appointment as a discretionary class. Answers (b) and (d) are wrong because Marjorie cannot take any of the capital whether the power is exercised or not. If you thought (d) because Marjorie is better off if the capital is not appointed, because more capital in the fund is likely to mean more income, then you were on the right track, but is technically wrong because Marjorie's income interest is not altered in any way if capital is appointed; it's just that her interest is less valuable now, depending upon a smaller pool of capital.
Correct
Marks for this submission: 1/1.Question 7
Marks: 1 In practical terms, which statement best describes the purpose behind the provision?
Choose one answer. A. To provide for Marjorie during her life, and then to provide for the children, but if Marjorie antagonises the trustees they can use the power of appointment to reduce her income
B. To provide as much as possible for the children, while giving Marjorie some income during her life
C. To give Marjorie the benefit of the property for her life, but with the possibility of benefiting the children during her life if they are well behaved
D. To provide for Marjorie during her life, and then to provide for the children on her death, but to allow the trustees to give the children the benefit of the capital early depending on the circumstances of Marjorie and the children
E. Don't know
Feedback
That's correct.
The purpose of such a provision is to allow flexibility. The settlor's first concern is to provide for his widow for as long as she lives, and then allow the trustee to distribute the capital to the children in whatever shares seem sensible at the time of his widow's death. For example, one child might already have made a fortune, while another is poor. The discretionary trust of capital allows the trustee to give unequal amounts depending upon the circumstances at the time. The power of appointment, to appoint up to half the capital, gives further flexibility. If for example, the income from the fund is large, and more than enough to meet Marjorie's needs, but the children could benefit from the capital while she is still alive, for example if one was getting married or was starting a business, the power allows the trustee to give one or more children the benefit of some of the capital without having to wait until Marjorie dies.
Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424 and then answer the six questions (Q8 - Q13) that follow. Question 8
Marks: 1 How does Lord Hodson explain the principle stated by Lord Eldon in Morice v Bishop of Durham?
Choose one answer. A. Where a trust has too many beneficiaries, the court cannot control the trust
B. The court must be able to distribute the trust property equally amongst the beneficiaries
C. If the beneficiaries cannot be ascertained the court cannot control the trust, and it is void for uncertainty
D. Too many beneficiaries makes a trust void for uncertainty
E. Don't know
Feedback
That's correct.
Answers (a) and (d) are wrong because the issue is not one of absolute numbers, but whether each beneficiary can be identified. Where the beneficiaries cannot each be identified, the trustee's duty to distribute is uncertain, and thus the court cannot control the execution of the trust. Answer (b) is not relevant at this point, for that concerns the way in which a court might execute a trust where the beneficiaries can all be identified.
Correct
Marks for this submission: 1/1.Question 9
Marks: 1 Why did Lord Hodson think that the court has no power to authorise a scheme of distribution where not all the beneficiaries are acsertainable?
Choose one answer. A. Such a scheme would allow the court to distribute amongst a class not chosen by the settlor
B. Such a scheme would violate the maxim 'equality is equity'
C. Such a scheme would be impractical to administer
D. Such a scheme would interfere with the trustee's discretion
E. Don't know
Feedback
That's correct.
Answers (b), (c) and (d) are wrong; Lord Hodson doesn't mention them in the passage where he discusses this. Lord Hodson quotes Lord Upjohn in Re Gulbenkian for the proposition that the settlor did not confer upon the trustee any discretion to choose only amongst a subset of the class he intended, in particular only amongst the identifiable beneficiaries, leaving those who are not ascertained out of his consideration. Thus if a court were to propose a scheme of distribution amongst only the beneficiaries that were ascertainable, the scheme would distribute to a class that the settlor had not chosen. In such a case, the court would not be carrying out the settlor's trust, but a different trust of its own devising.
Correct
Marks for this submission: 1/1.Question 10
Marks: 1 Which of the following reasons does Lord Wilberforce give for his claim that the distinction between powers and duties is 'narrow', and in a sense, 'artificial'?
Choose one answer. A. A trustee will have fiduciary duties in respect of both
B. A trustee has an obligation to exercise both powers and duties
C. In practical terms, a trustee will decide whether to exercise a power or exercise his discretion under a discretionary trust in much the same way
D. Both (a) and (c)
E. Don't know
Feedback
That's correct.
Review the three paragraphs beginning with 'Before dealing with these two questions....' and locate the reasons given in (a) and (c). Answer (b) is wrong because, not only does Lord Wilberforce not suggest it as a reason, but his speech does not intend to assimilate powers with duties per se, so that powers of appointment are discretionary trusts; rather, his argument is that trusts, like powers, can still be carried out even though the class of beneficiaries contains some unascertainable members.
Correct
Marks for this submission: 1/1.Question 11
Marks: 1 What, in practical terms, is the main difference between how a trustee will give effect to a discretionary trust and a power of appointment, according to Lord Wilberforce?
Choose one answer. A. The trustee must try to equalise the benefit amongst beneficiaries in the case of a trust
B. In the case of a trust, each benefiary must get something
C. In the case of a power of appointment, the trustee needn't consider using the power at all
D. The trustee must carry out a wider and more systematic survey of the objects in the case of a trust
E. Don't know
Feedback
That's correct.
Answers (a) and (b) are both wrong, and there is nothing in Lord Wilberforce's judgment to suggest otherwise. Answer (c) is wrong, as Lord Wilberforce specifically requires a trustee holding a power of appointment to consider exercising it from time to time.
Correct
Marks for this submission: 1/1.Question 12
Marks: 1 In the case of a discretionary trust where the trustees fail or refuse to carry out the trust, which of the following is not a means that Lord Wilberforce says the court can employ to execute the trust?
Choose one answer. A. The court can appoint new trustees
B. If an appropriate method of distributing the trust property is apparent to the court, it can order the distribution of the property itself
C. The court can order the trustee to distribute the property as equally as possible amongst most of the beneficiaries
D. The court can call on the representative beneficiaries to prepare a scheme by which the trust assets can be distributed, and order that distribution
E. Don't know
Feedback
That's correct.
The methods of execution in (a), (b), and (d) are all illustrations Lord Wilberforce gives to show 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.' The means of distribution outlined in answer (c) is not acceptable; indeed, Lord Wilberforce denies that a distribution of the fund on the basis that 'equality is equity' is sensible in this context, for it is likely to be the last thing the settlor intended.
Correct
Marks for this submission: 1/1.Question 13
Marks: 1 What, according to Lord Wilberforce, would give rise to 'administrative unworkability'?
Choose one answer. A. The words describing the objects of the trust are too vague
B. The definition of the class is so wide as not to describe a class of objects at all
C. The whereabouts of the beneficiaries is unknown
D. The class of objects is uncertain
E. Don't know
Feedback
That's correct.
Answers (a) and (d) are wrong because administrative workability is not, about the use of vague words or uncertainty in general. Nor, as against answer (d), does it have to do with finding out where the beneficiaries are. Administrative unworkability is a difficult concept, but seems to be related not to certainty of objects per se, but to the problem any trustee would have in distributing the funds if the class chosen, such as all ther residents of greater London, doesn't seem to give the trustee any idea as to how he is to choose one object over another in distributing the trust property.
Correct
Marks for this submission: 1/1.Application
Please answer the following two examination questions (Q14 and Q15):
Question 14
Marks: 1 Consider the following testamentary provision: 'I hereby give £1m on trust to my trustees to distribute within 10 years to anyone in the world except to the trustee, any employee of the trustee or relation of the trustee, or to anyone in my immediate family.'
Which statement best explains the validity or invalidity of this provision?
Choose one answer. A. This is a power of appointment that is uncertain on the 'is or is not' test
B. This is a discretionary trust that is certain on the 'is or is not' test
C. This is a power of appointment that fails for administrative unworkability
D. This is a discretionary trust that fails for administrative unworkability
E. Don't know
Feedback
That's correct.
Answers (a) and (c) are wrong because this provision is framed imperatively, 'on trust... to distribute'. This imposes a duty, not a mere power which the trustee can exercise or not as he chooses. (b) is correct as far as it goes, though there may be queries to be made about the conceptual certainty of the term 'relation' or 'relative' (see Re Baden No. 2 [1973] Ch. 9). But it does not recognise the problem which is stated in answer (d), which is that the beneficial class here is everyone in the world except an excluded group. This would seem to fall within a class description 'so hopelessly wide' as not to indicate any true class of objects at all.
Correct
Marks for this submission: 1/1.Question 15
Marks: 1 Consider the following testamentary provision: '£1m for distribution to persons in Wales who have had coal miners in their family for three generations'
The validity of this provision will turn on whether...
Choose one answer. A. 'in their family for three generations' is sufficiently certain to define a class
B. it creates a discretionary trust or a power of appointment
C. it is administratively unworkable
D. whether a complete list of mining families in Wales can be drawn up
E. Don't know
Feedback
That's correct.
Answer (a) is correct because it is not clear what having coal miners 'in the family for three generations' means: does a person who only has distant cousins who were miners count? Answer (b) is wrong because the same test of validity, the 'is or is not' test, will apply to both. Answer (c) is wrong because adminstrative unworkability does not seem to be a problem here; the class appears to be a sensible one; clearly the settlor has some emotional attachment to miners and their families and wished to benefit those who had a long association with the industry. Answer (d) is wrong because it suggests the 'complete list' test for certainty applies, but McPhail v Doulton decided that it doesn't.
Correct
Marks for this submission: 1/1.
Question 1
Marks: 1 What is the main difference between a discretionary trust and a power of appointment under a trust instrument?
Choose one answer. A. Discretionary trusts always give the trustees a discretion as to who will receive the property, whereas powers of appointment can involve only one object
B. Powers of appointment are always to appoint capital, whereas discretionary trusts can be trusts of income
C. Discretionary trusts must be executed, whereas powers of appointment need not be exercised
D. Objects of a discretionary trust have vested interests in the trust property; objects of powers of appointment do not
E. Don't know
Feedback
The correct answer is (c).
The use of the terminology of 'trust' and 'power' generally aims to indicate the distinction between trustees' duties, and 'mere' powers which they have, which they need not exercise. While (a) is correct, it is not the main difference between the two: a trust with one object is still a trust, which a trustee must carry out, but it is a fixed trust, not a discretionary one. (b) is false: powers to appoint income are common. (d) is false as well. Neither objects of a discretionary trust nor objects of a power of appointment are regarded as having vested interests in the trust property.
Incorrect
Marks for this submission: 0/1.Question 2
Marks: 1 What is a dispositive power?
Choose one answer. A. It is a power to deal with or affect the beneficial interests in the trust property
B. It is a power to invest the trust property
C. It is a power to insure the trust property
D. It is a power to appoint new trustees
E. Don't know
Feedback
That's correct.
'Dispositive' powers are those by which the trustee 'disposes' of the trust property, which in this context means 'distributes' the trust property, i.e. to the trusts objects. It is standardly used in contrast to 'administrative powers, powers such as the power of investment, the power to insure the trust property, the power to appoint new trustees and so on. These administrative powers do not affect the beneficial interests of the objects -- they merely allow the trustee properly to manage the trust while it is in operation. Answers (c) and (d) are wrong as these are clearly administrative powers. Answer (b) is wrong for the same reason, but note that the way a trustee invests the trust funds can work to favour beneficiaries with income interests over the capital beneficiaries, or vice versa, so the power (and duty) to invest the trust funds is overlaid with a fiduciary duty to invest in an even-handed way (see the study guide 4.4).
Correct
Marks for this submission: 1/1.Question 3
Marks: 1 Which of the following statements about fiduciary duties is true?
Choose one answer. A. Only trustees can have fiduciary duties under a trust
B. All trustee duties are fiduciary duties
C. A fiduciary duty requires the trustee to act in the best interests of the beneficiaries
D. A fiduciary duty regulates trustees so they can act in conflict of interest
E. Don't know
Feedback
That's correct.
Answer (a) is wrong because, for example, other persons besides the trustee may have fiduciary powers under the trust; for example, a settlor may give himself a power to direct the trustee investments, and this power is likely to be fiduciary, i.e. must be exercised in the best interests of the beneficiaries. Answer (b) is incorrect, because trustees have duties of care and skill, for example in the investment of the trust funds, and duties of care and skill are not fiduciary duties, for they do not concern the trustees loyalty to the beneficiaries, but his competence. Answer (c) correctly gives the standard formulation of the fiduciary duty. Answer (d) is wrong because fiduciary duties prohibit trustees from acting in conflict of interest; they do not positively provide a framework whereby a trustee can do so.
Correct
Marks for this submission: 1/1.Question 4
Marks: 1 In which of the following situations does a fraud on a power take place?
Choose one answer. A. The trustee gives Mark £3000 on condition that he splits it with his sister, who is not an object of the power
B. The trustee gives Frank £2000 under a power of appointment on condition that Frank finishes his university studies
C. At Alison's request, the trustee gives Alison £5000 under a power of appointment so that Alison can set up a trust for her children, who are not objects of the power
D. Both (a) and (c)
E. Don't know
Feedback
The correct answer is (d).
Answer (a) is a paradigm example of a fraud on a power, for here the condition requires Mark, a proper object of the power, to direct the appointed property into the hands of someone who is not a proper object, and in answer (c) the exercise of the power is intended to place the trust money in the hands of non-objects; it doesn't matter if this fraud is instigated by a proper object of the power; it is still a fraud on the power. Answer (b) is incorrect because it is not fraudulent for a trustee merely to impose conditions on his exercise of the power, so long as he acts in the best interests of the beneficiaries. Answer (d) is incorrect; while a breach of trust, a mistaken exercise of an investment power is not fraudulent.
Incorrect
Marks for this submission: 0/1.Consider the following testamentary trust provision, which would be typical in a family trust of the 19th century.
"The rest and residue of my estate on trust for my wife Marjorie for life, and then to my children in such shares as my trustees shall in their absolute discretion see fit, with power to my trustees to appoint up to half the capital during the life of my said wife to such of my children as they shall in their absolute discretion think fit"
Questions 5 to 7 relate to this provision.
Question 5
Marks: 1 Which statement best describes the positions of the objects under this provision?
Choose one answer. A. Marjorie and the children are all discretionary beneficiaries
B. Marjorie has an income interest, the children each have a discretionary capital interest, and the children are each objects of a power of appointment of capital
C. Marjorie has an income interest and the children are the objects of a power of appointment of the income, and of a capital interest in remainder
D. Marjorie has a fixed interest and the children are beneficiaries of a discretionary trust
E. Don't know
Feedback
The correct answer is (b).
Answer (a) is wrong because Marjorie has a fixed interest in the income. While, if the power to appoint capital is exercised, there will be less capital upon which income can be earned, the appointment does not alter her interest. Answer (c) is wrong because the power of appointment is of capital, not income. Answer (d) is correct as far as it goes, but it doesn't mention that the children are also objects of the power of appointment.
Incorrect
Marks for this submission: 0/1.Question 6
Marks: 1 Who are the persons who take in default of appointment under this provision?
Choose one answer. A. The children
B. Marjorie
C. The children in such shares as the trustee selects
D. Marjorie and the children
E. Don't know
Feedback
That's correct.
Answer (a) is close, but (c) is better; if the power of appointment is not exercised, then the trustee will have all of the capital to distribute amongst the children, but as objects of a discretionary trust, each child has only a 'mere hope' or mere spes (latin for hope) of getting any property. So they take in default of appointment as a discretionary class. Answers (b) and (d) are wrong because Marjorie cannot take any of the capital whether the power is exercised or not. If you thought (d) because Marjorie is better off if the capital is not appointed, because more capital in the fund is likely to mean more income, then you were on the right track, but is technically wrong because Marjorie's income interest is not altered in any way if capital is appointed; it's just that her interest is less valuable now, depending upon a smaller pool of capital.
Correct
Marks for this submission: 1/1.Question 7
Marks: 1 In practical terms, which statement best describes the purpose behind the provision?
Choose one answer. A. To provide for Marjorie during her life, and then to provide for the children, but if Marjorie antagonises the trustees they can use the power of appointment to reduce her income
B. To provide as much as possible for the children, while giving Marjorie some income during her life
C. To give Marjorie the benefit of the property for her life, but with the possibility of benefiting the children during her life if they are well behaved
D. To provide for Marjorie during her life, and then to provide for the children on her death, but to allow the trustees to give the children the benefit of the capital early depending on the circumstances of Marjorie and the children
E. Don't know
Feedback
That's correct.
The purpose of such a provision is to allow flexibility. The settlor's first concern is to provide for his widow for as long as she lives, and then allow the trustee to distribute the capital to the children in whatever shares seem sensible at the time of his widow's death. For example, one child might already have made a fortune, while another is poor. The discretionary trust of capital allows the trustee to give unequal amounts depending upon the circumstances at the time. The power of appointment, to appoint up to half the capital, gives further flexibility. If for example, the income from the fund is large, and more than enough to meet Marjorie's needs, but the children could benefit from the capital while she is still alive, for example if one was getting married or was starting a business, the power allows the trustee to give one or more children the benefit of some of the capital without having to wait until Marjorie dies.
Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424 and then answer the six questions (Q8 - Q13) that follow. Question 8
Marks: 1 How does Lord Hodson explain the principle stated by Lord Eldon in Morice v Bishop of Durham?
Choose one answer. A. Where a trust has too many beneficiaries, the court cannot control the trust
B. The court must be able to distribute the trust property equally amongst the beneficiaries
C. If the beneficiaries cannot be ascertained the court cannot control the trust, and it is void for uncertainty
D. Too many beneficiaries makes a trust void for uncertainty
E. Don't know
Feedback
That's correct.
Answers (a) and (d) are wrong because the issue is not one of absolute numbers, but whether each beneficiary can be identified. Where the beneficiaries cannot each be identified, the trustee's duty to distribute is uncertain, and thus the court cannot control the execution of the trust. Answer (b) is not relevant at this point, for that concerns the way in which a court might execute a trust where the beneficiaries can all be identified.
Correct
Marks for this submission: 1/1.Question 9
Marks: 1 Why did Lord Hodson think that the court has no power to authorise a scheme of distribution where not all the beneficiaries are acsertainable?
Choose one answer. A. Such a scheme would allow the court to distribute amongst a class not chosen by the settlor
B. Such a scheme would violate the maxim 'equality is equity'
C. Such a scheme would be impractical to administer
D. Such a scheme would interfere with the trustee's discretion
E. Don't know
Feedback
That's correct.
Answers (b), (c) and (d) are wrong; Lord Hodson doesn't mention them in the passage where he discusses this. Lord Hodson quotes Lord Upjohn in Re Gulbenkian for the proposition that the settlor did not confer upon the trustee any discretion to choose only amongst a subset of the class he intended, in particular only amongst the identifiable beneficiaries, leaving those who are not ascertained out of his consideration. Thus if a court were to propose a scheme of distribution amongst only the beneficiaries that were ascertainable, the scheme would distribute to a class that the settlor had not chosen. In such a case, the court would not be carrying out the settlor's trust, but a different trust of its own devising.
Correct
Marks for this submission: 1/1.Question 10
Marks: 1 Which of the following reasons does Lord Wilberforce give for his claim that the distinction between powers and duties is 'narrow', and in a sense, 'artificial'?
Choose one answer. A. A trustee will have fiduciary duties in respect of both
B. A trustee has an obligation to exercise both powers and duties
C. In practical terms, a trustee will decide whether to exercise a power or exercise his discretion under a discretionary trust in much the same way
D. Both (a) and (c)
E. Don't know
Feedback
That's correct.
Review the three paragraphs beginning with 'Before dealing with these two questions....' and locate the reasons given in (a) and (c). Answer (b) is wrong because, not only does Lord Wilberforce not suggest it as a reason, but his speech does not intend to assimilate powers with duties per se, so that powers of appointment are discretionary trusts; rather, his argument is that trusts, like powers, can still be carried out even though the class of beneficiaries contains some unascertainable members.
Correct
Marks for this submission: 1/1.Question 11
Marks: 1 What, in practical terms, is the main difference between how a trustee will give effect to a discretionary trust and a power of appointment, according to Lord Wilberforce?
Choose one answer. A. The trustee must try to equalise the benefit amongst beneficiaries in the case of a trust
B. In the case of a trust, each benefiary must get something
C. In the case of a power of appointment, the trustee needn't consider using the power at all
D. The trustee must carry out a wider and more systematic survey of the objects in the case of a trust
E. Don't know
Feedback
That's correct.
Answers (a) and (b) are both wrong, and there is nothing in Lord Wilberforce's judgment to suggest otherwise. Answer (c) is wrong, as Lord Wilberforce specifically requires a trustee holding a power of appointment to consider exercising it from time to time.
Correct
Marks for this submission: 1/1.Question 12
Marks: 1 In the case of a discretionary trust where the trustees fail or refuse to carry out the trust, which of the following is not a means that Lord Wilberforce says the court can employ to execute the trust?
Choose one answer. A. The court can appoint new trustees
B. If an appropriate method of distributing the trust property is apparent to the court, it can order the distribution of the property itself
C. The court can order the trustee to distribute the property as equally as possible amongst most of the beneficiaries
D. The court can call on the representative beneficiaries to prepare a scheme by which the trust assets can be distributed, and order that distribution
E. Don't know
Feedback
That's correct.
The methods of execution in (a), (b), and (d) are all illustrations Lord Wilberforce gives to show 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.' The means of distribution outlined in answer (c) is not acceptable; indeed, Lord Wilberforce denies that a distribution of the fund on the basis that 'equality is equity' is sensible in this context, for it is likely to be the last thing the settlor intended.
Correct
Marks for this submission: 1/1.Question 13
Marks: 1 What, according to Lord Wilberforce, would give rise to 'administrative unworkability'?
Choose one answer. A. The words describing the objects of the trust are too vague
B. The definition of the class is so wide as not to describe a class of objects at all
C. The whereabouts of the beneficiaries is unknown
D. The class of objects is uncertain
E. Don't know
Feedback
That's correct.
Answers (a) and (d) are wrong because administrative workability is not, about the use of vague words or uncertainty in general. Nor, as against answer (d), does it have to do with finding out where the beneficiaries are. Administrative unworkability is a difficult concept, but seems to be related not to certainty of objects per se, but to the problem any trustee would have in distributing the funds if the class chosen, such as all ther residents of greater London, doesn't seem to give the trustee any idea as to how he is to choose one object over another in distributing the trust property.
Correct
Marks for this submission: 1/1.Application
Please answer the following two examination questions (Q14 and Q15):
Question 14
Marks: 1 Consider the following testamentary provision: 'I hereby give £1m on trust to my trustees to distribute within 10 years to anyone in the world except to the trustee, any employee of the trustee or relation of the trustee, or to anyone in my immediate family.'
Which statement best explains the validity or invalidity of this provision?
Choose one answer. A. This is a power of appointment that is uncertain on the 'is or is not' test
B. This is a discretionary trust that is certain on the 'is or is not' test
C. This is a power of appointment that fails for administrative unworkability
D. This is a discretionary trust that fails for administrative unworkability
E. Don't know
Feedback
That's correct.
Answers (a) and (c) are wrong because this provision is framed imperatively, 'on trust... to distribute'. This imposes a duty, not a mere power which the trustee can exercise or not as he chooses. (b) is correct as far as it goes, though there may be queries to be made about the conceptual certainty of the term 'relation' or 'relative' (see Re Baden No. 2 [1973] Ch. 9). But it does not recognise the problem which is stated in answer (d), which is that the beneficial class here is everyone in the world except an excluded group. This would seem to fall within a class description 'so hopelessly wide' as not to indicate any true class of objects at all.
Correct
Marks for this submission: 1/1.Question 15
Marks: 1 Consider the following testamentary provision: '£1m for distribution to persons in Wales who have had coal miners in their family for three generations'
The validity of this provision will turn on whether...
Choose one answer. A. 'in their family for three generations' is sufficiently certain to define a class
B. it creates a discretionary trust or a power of appointment
C. it is administratively unworkable
D. whether a complete list of mining families in Wales can be drawn up
E. Don't know
Feedback
That's correct.
Answer (a) is correct because it is not clear what having coal miners 'in the family for three generations' means: does a person who only has distant cousins who were miners count? Answer (b) is wrong because the same test of validity, the 'is or is not' test, will apply to both. Answer (c) is wrong because adminstrative unworkability does not seem to be a problem here; the class appears to be a sensible one; clearly the settlor has some emotional attachment to miners and their families and wished to benefit those who had a long association with the industry. Answer (d) is wrong because it suggests the 'complete list' test for certainty applies, but McPhail v Doulton decided that it doesn't.
Correct
Marks for this submission: 1/1.
Extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424
Extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424
(Brief facts: The case concerned the interpretation and validity of the following provisions in a trust instrument:
"9. (a) The trustees shall 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 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 …
"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."
The first issue the court addressed was whether the provision created a trust, i.e. imposed a duty on the trustee to distribute this property to the class specified, or merely a power to do so. Their Lordships unanimously decided a trust was intended; the question then was whether the trust was certain. Lord Hodson (dissenting) held that a trust would be invalid unless each object was ascertainable, i.e. identifiable. In other words, unless one had or could come up with a complete list of the objects, the trust would fail. Lord Wilberforce, for the majority, held that a trust would be valid if for any individual it could be said whether he was or was not within the class of objects indicated framed by the settlor's words. Prior to this decision, the 'is or is not' test was regarded as the correct test for the validity of powers of appointment, but not for discretionary trusts, for which the 'complete list' test was the test for certainty of objects)
LORD HODSON (dissenting)
There remains the vexed question, much canvassed before your Lordships not only in this case but in In re Gulbenkian's Settlements (Whishaw v. Stephens) [1970] A.C. 508, 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 Inland Revenue Commissioners v. Broadway Cottages Trust 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.Jr. 522 as stated by Lord Eldon, where he said, at pp. 539, 540:
"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 maladministration 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 maladministration, 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 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 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 uncontrollable the court cannot interfere (Gisborne v. Gisborne (1877) 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 consideration cases in which bad faith may be alleged.
…
In the Gulbenkian case [1970] A.C. 508 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.
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, 10 Ves.Jr. 522 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 that 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 Cottages Trust case [1955] Ch. 20, 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, Mosely v. Moseley (1673) Fin. 53, Clarke v. Turner (1694) Free.Ch. 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 (pp. 326-327). 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 Richard Arden M.R. in Kemp v. Kemp (1801) 5 Ves.Jr. 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 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 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, 10 Ves.Jr. 522, 540 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 inquiry 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 [1970] A.C. 508, 524:
"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 having given the best consideration I can to the problem, I still adhere to the view I have previously expressed
in the Broadway Cottages case [1955] Ch. 20 and in the Gulbenkian case [1970] A.C. 508 as to the requirements for certainty in the case of the objects of a trust.
…
LORD WILBERFORCE
My Lords this appeal is concerned with the validity of a trust deed dated July 17, 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. …
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 state 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 Inland Revenue Commissioners v. Broadway Cottages Trust [1955] Ch. 20 as applied in later cases by which, unless this House decides otherwise, 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 either 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 unless he exercised it capriciously, or outside the field permitted by the trust (cf. 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 the power and whether, in relation to other possible claimants, a particular grant was appropriate.
Correspondingly a trustee with a duty to distribute, 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 know. He would examine the field, by class and category; might indeed make diligent and careful inquiries, 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 inquire 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 Sir George Farwell, Farwell on Powers, 3rd ed. (1916), p. 10, trusts and powers are often blended, and the mixture may vary in its ingredients.
…
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, probably 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.
…
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 Inland Revenue Commissioners 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 In re Gulbenkian's Settlements [1970] A.C. 508 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 (Scott on Trusts (1939)) discusses the suggested distinction as regards validity between trusts and powers and expresses the opinion that this would be "highly technical" (s. 122, p. 613). Later in the second Restatement of Trusts (1959), s. 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 abridgment, published in 1960 (Scott's Abridgment of The Law of Trusts, s. 122, p. 239), 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 that if a testator authorises a legatee to divide the property among such of the testator's friends as he might select, he can properly do so, but that if he directs him to make such a selection, he will not be permitted to do so."
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 Settlements 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
(p. 525). 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 representative persons of the classes of beneficiaries to prepare a scheme of distribution, 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) 1 Amb. 507, Supple v. Lowson (1773) 2 Amb. 729, Liley v. Hey (1842) 1 Hare 580 and Lewin on Trusts, 16th ed. (1964), p. 630). Then, as to the trustees' duty of inquiry or ascertainment, in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty (cf. Liley v. Hey). A wider and more comprehensive range of inquiry is called for in the case of trust 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 ([1970] A.C. 508, 524) 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, 10 Ves.Jr. 522, 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.
(Brief facts: The case concerned the interpretation and validity of the following provisions in a trust instrument:
"9. (a) The trustees shall 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 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 …
"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."
The first issue the court addressed was whether the provision created a trust, i.e. imposed a duty on the trustee to distribute this property to the class specified, or merely a power to do so. Their Lordships unanimously decided a trust was intended; the question then was whether the trust was certain. Lord Hodson (dissenting) held that a trust would be invalid unless each object was ascertainable, i.e. identifiable. In other words, unless one had or could come up with a complete list of the objects, the trust would fail. Lord Wilberforce, for the majority, held that a trust would be valid if for any individual it could be said whether he was or was not within the class of objects indicated framed by the settlor's words. Prior to this decision, the 'is or is not' test was regarded as the correct test for the validity of powers of appointment, but not for discretionary trusts, for which the 'complete list' test was the test for certainty of objects)
LORD HODSON (dissenting)
There remains the vexed question, much canvassed before your Lordships not only in this case but in In re Gulbenkian's Settlements (Whishaw v. Stephens) [1970] A.C. 508, 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 Inland Revenue Commissioners v. Broadway Cottages Trust 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.Jr. 522 as stated by Lord Eldon, where he said, at pp. 539, 540:
"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 maladministration 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 maladministration, 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 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 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 uncontrollable the court cannot interfere (Gisborne v. Gisborne (1877) 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 consideration cases in which bad faith may be alleged.
…
In the Gulbenkian case [1970] A.C. 508 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.
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, 10 Ves.Jr. 522 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 that 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 Cottages Trust case [1955] Ch. 20, 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, Mosely v. Moseley (1673) Fin. 53, Clarke v. Turner (1694) Free.Ch. 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 (pp. 326-327). 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 Richard Arden M.R. in Kemp v. Kemp (1801) 5 Ves.Jr. 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 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 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, 10 Ves.Jr. 522, 540 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 inquiry 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 [1970] A.C. 508, 524:
"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 having given the best consideration I can to the problem, I still adhere to the view I have previously expressed
in the Broadway Cottages case [1955] Ch. 20 and in the Gulbenkian case [1970] A.C. 508 as to the requirements for certainty in the case of the objects of a trust.
…
LORD WILBERFORCE
My Lords this appeal is concerned with the validity of a trust deed dated July 17, 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. …
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 state 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 Inland Revenue Commissioners v. Broadway Cottages Trust [1955] Ch. 20 as applied in later cases by which, unless this House decides otherwise, 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 either 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 unless he exercised it capriciously, or outside the field permitted by the trust (cf. 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 the power and whether, in relation to other possible claimants, a particular grant was appropriate.
Correspondingly a trustee with a duty to distribute, 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 know. He would examine the field, by class and category; might indeed make diligent and careful inquiries, 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 inquire 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 Sir George Farwell, Farwell on Powers, 3rd ed. (1916), p. 10, trusts and powers are often blended, and the mixture may vary in its ingredients.
…
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, probably 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.
…
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 Inland Revenue Commissioners 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 In re Gulbenkian's Settlements [1970] A.C. 508 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 (Scott on Trusts (1939)) discusses the suggested distinction as regards validity between trusts and powers and expresses the opinion that this would be "highly technical" (s. 122, p. 613). Later in the second Restatement of Trusts (1959), s. 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 abridgment, published in 1960 (Scott's Abridgment of The Law of Trusts, s. 122, p. 239), 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 that if a testator authorises a legatee to divide the property among such of the testator's friends as he might select, he can properly do so, but that if he directs him to make such a selection, he will not be permitted to do so."
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 Settlements 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
(p. 525). 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 representative persons of the classes of beneficiaries to prepare a scheme of distribution, 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) 1 Amb. 507, Supple v. Lowson (1773) 2 Amb. 729, Liley v. Hey (1842) 1 Hare 580 and Lewin on Trusts, 16th ed. (1964), p. 630). Then, as to the trustees' duty of inquiry or ascertainment, in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty (cf. Liley v. Hey). A wider and more comprehensive range of inquiry is called for in the case of trust 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 ([1970] A.C. 508, 524) 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, 10 Ves.Jr. 522, 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.
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