The significance of the judgements in Re Baden\'s Deed Trust (No. 2) PDF

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The significance of the judgements in Re Baden's Deed Trust (No. 2)...

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Student ID: 100286390

TRUSTS LAW Formative Assessment

Total words: 784 Seminar Leader: Lucy Barnes

Student ID: 100286390 The significance of the judgements in Re Baden's Deed Trust (No. 2) (Re Baden) 1 led to a new approach in establishing the certainty of objects in trust law. The leading authority in this case was the House of Lords who chose to adopt the, ‘is or is not’, method established in the Re Gulbenkian case. 2 This can be defined by Lord Wilberforce, who agreed with the views expressed by Lord Reid and Lord Upjohn in In Re Gulbenkian, that, “The power is valid if it can be said with certainty whether any given individual is or is not a member of the class.” 3 The legal issue specifically revolved around the conceptual certainty of the terms, ‘relative’, and, ‘ dependant’, and the class boundaries they implied. The judgement concluded that to uphold a valid trust, the three certainties must be satisfied, including the certainty of objects. The most critical opinion in this case was voiced by Stamp LJ, whose quite literal interpretation of the law contradicts the test in McPhail (1970) 4 and allows little room for flexibility to ensure the settlers wishes are upheld. According to paragraph 10, Stamp LJ ascertained that if an inquiring member could not indefinitely establish that he was within the class of beneficiaries, it was to be held that he was not a member. The difficulty with this interpretation, is that the strictness confines the interpretation of certainty of objects to more of a complete list test, as was established in IRC v Broadway Cottages (1955)5, rather than the Gulbenkian test. He said that the court could always determine who was a dependant,6. To imply that that a complete list would be more suitable however, does not allow for cases whereby it becomes administratively unworkable to create a list of each and every potential beneficiary. If the HOL stands by upholding the settler’s wishes as a priority, this view does not mirror that statement as it prolongs the process of distributing the assets. It cannot be argued against however, that Stamp’s opinion would create clearer guidelines when interpreting ambiguous terms. Overall, despite his specific concentration of the facts, his approach raises more concerns of harshness and the potential to be overly comprehensive. Arguably the more inaccurate opinion and lesser agreed with is held by Megaw LJ, who held, “That it is enough if we can decide of a substantial number of people if they are in or out of the class”. What he meant to be interpreted from this is that it should be sufficient for the trustee to clarify the group of beneficiaries providing it would not result in the advantage of merely one person. This is a similar judgement expressed in Re Allen7, which does prevent the limiting of social functions in discretionary trusts that the, ‘is or is not’, test provides. However, his opinion regarding evidential certainty is doubtful because the phrase, ‘substantial number’, is imprecise and would raise issues of legal uncertainty. Contrasting to the view of Stamp LJ, this judgement is overly lenient, and the outcomes would be too unreliable. Sachs LJ provides an overall, more pragmatic judgement which ensures that only conceptual uncertainty is applicable by the McPhail (1970) test, and the burden of proof is on the beneficiaries not the trustees. Critically speaking, it is arguable that his opinion actually creates more conceptual uncertainty because it relies upon the moral obligations of the court to interpret the legal parameters of defining specific classes in a way that validates the trust. This does not necessarily guarantee the desired result intended by the settlor, yet his stance did allow for a more sensible interpretation of the word, ‘dependants’, which the other judges failed to provide. It furthermore provides that evidential uncertainty should not be fatal to validating a discretionary trust. Although none of the judgements really establish a precedent with the solution to operating the class test, it cannot be argued that this case did offer more direction regarding the class of beneficiaries. Sachs LJ does have the most 1 Re Baden’s Deed Trusts (No 2) [1973] Ch 9, Court of Appeal. 2 Re Gulbenkian's Settlement Trusts (No 1) [1968] UKHL 5 3 Re Gulbenkian's Settlement Trusts (No 1) [1968] UKHL 5, (Para 19). 4 McPhail v Doulton [1970] UKHL 1. 5 IRC v Broadway Cottages [1955] Ch 20. 6Re Baden;s Deed Trust (No 2) [1973] Ch 9, Court of Appeal. (Para 25). 7 Re Allen (Deceased) (No.1) [1953] Ch. 116.

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Student ID: 100286390 satisfactory justification which allows adequate flexibility for courts to interpret the law in a way that does not raise further uncertainties such as Megaw LJ. It also seems the most likely way to uphold the settlors wishes without being too literal in its approach, or too constrictive.

Bibliography A, Hudson, Equity and Trusts (4th edition, Oxford University Press, 2014) G. Virgo, The Principles of Equity and Trusts (1st edition, Oxford University Press, 2014). IRC v Broadway Cottages [1955] Ch 20. McPhail v Doulton [1970] UKHL 1. Available at: https://www.oxfordlawtrove.com/view/10.1093/he/9780191866111.001.0001/he-9780191866111chapter-26?rskey=WKIH9t&result=1 Accessed on 30/10/20. R. Wilson, “Personal representatives and commissions to agents tracing beneficiaries” (2005) P.C.B. 293. Re Allen (Deceased) (No.1) [1953] Ch. 116. Re Baden’s Deed Trusts (No 2) [1973] Ch 9, Court of Appeal. Available at: https://www.oxfordlawtrove.com/view/10.1093/he/9780191866111.001.0001/he-9780191866111chapter-35 accessed on 30/10/20. Re Gulbenkian's Settlement Trusts (No 1) [1968] UKHL 5 available at https://uk.practicallaw.thomsonreuters.com/D-000-6361? transitionType=Default&contextData=(sc.Default)&firstPage=true accessed on 30/10/20.

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