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, also known as ''Re Baden's Deed Trusts (No 1)'' is a leading
English trusts law English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep a ...
case by the
House of Lords The House of Lords, also known as the House of Peers, is the upper house of the Parliament of the United Kingdom. Membership is by appointment, heredity or official function. Like the House of Commons, it meets in the Palace of Westminst ...
on the certainty of beneficiaries. It held that so long as any given
claimant A plaintiff ( Π in legal shorthand) is the party who initiates a lawsuit (also known as an ''action'') before a court. By doing so, the plaintiff seeks a legal remedy. If this search is successful, the court will issue judgment in favor of the ...
can clearly be determined to be a beneficiary, or not, a trust is valid. The Lords also remanded the case to the
Court of Appeal A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much ...
to be decided on this new legal principle as '' Re Baden's Deed Trusts (No 2)''.


Facts

Bertram Baden executed a
deed In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferrin ...
settling a non-charitable trust for the benefit of the staff of Matthew Hall & Co Ltd and their relatives and dependents. The objects clause provided that: The validity of the trust was challenged, averring that the objects were insufficiently certain.


Judgment

Lord Wilberforce Richard Orme Wilberforce, Baron Wilberforce, (11 March 1907 – 15 February 2003) was a British judge. He was a Lord of Appeal in Ordinary from 1964 to 1982. Early life and career Born in Jalandhar, India, Richard Wilberforce was the son of ...
, after noting the fact that the settlor had left his property on trust, with instructions to distribute according to the trustees' choices (and, therefore, not equally among the potential beneficiaries), stated the following: Lord Wilberforce then went on to discuss the authority for this principle, which is compelling. As to the value of the facts, the comment above was a powerful reason for departing from the ''Broadway Cottages'' case ( 955Ch 20), which was the basis for the strict test for certainty of object of discretionary trusts, as overruled in ''McPhail'' (for which see below).


Significance

The case fundamentally restated the law in relation to certainty of objects for discretionary trusts, one of the three certainties required to form a trust. For a trust to be valid, "It is clear law that a trust (other than a charitable trust) must be for ascertainable beneficiaries". Prior to ''McPhail'', the law was that for a discretionary trust one also had to be able to draw up a complete list of beneficiaries.''Re Gestetner Settlement'' 953Ch 672 However, in ''McPhail'' the House of Lords restated the law, abandoning the "complete list" test in favour of an "is or is not" test.
Lord Wilberforce Richard Orme Wilberforce, Baron Wilberforce, (11 March 1907 – 15 February 2003) was a British judge. He was a Lord of Appeal in Ordinary from 1964 to 1982. Early life and career Born in Jalandhar, India, Richard Wilberforce was the son of ...
phrased the new test of certainty thus: On the facts, it was held that it was perfectly possible to say, looking at an individual whether they were either an officer or employee, an ex-officer or ex-employee, or a relative or dependent of one, and the validity of the trust was upheld.


Criticisms

The two key criticisms of the "in or out" test (also known as the "is or is not" or "given postulant" tests) for discretionary beneficiaries were: * A trustee's duty to distribute could only be properly performed if he considered every possible claimant * The court could only execute the trust, if the trustee failed to do so, by percentage division of the trust fund Lord Wilberforce, in relaxing the generally accepted strictures of trust law prior to the decision, met these two objections as follows. It was only necessary, he held, to consider every possible claimant, if one was fully distributing the fund, i.e., essentially winding it up. In such cases he would necessarily make a wider and more systematic survey in deciding to make grants. But there was no requirement to draw up a complete list of names, as indeed the law did not require for the exercise of a discretionary power. Further he felt that the court being called upon to execute the trust if the trustee would not do so was a theoretical rather than a practical difficulty. He pointed out that in cases that had reached the courts, there were no examples of a trustee refusing to act in that manner. But in any event, the court had powers to remove and replace trustees, who could then act properly. Further, it was not the case, in his view, that distribution was impossible unless there was an equal division, and he cited several older cases, prior to 1801, in which the court exercised discretion in relation to the making of distributions.


After ''McPhail''

The case at the centre of ''McPhail'' was remanded to the
Court of Appeal A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much ...
, to be decided using the principles set out in ''McPhail,'' under the name '' Re Baden's Deed Trusts (No 2)''. Although ''McPhail'' is rarely mentioned in the same breath as other revolutionary decisions, such as ''
Donoghue v Stevenson was a landmark court decision in Scots delict law and English tort law by the House of Lords. It laid the foundation of the modern law of negligence in Common law jurisdictions worldwide, as well as in Scotland, establishing general principle ...
'', '' Hedley Byrne & Co Ltd v Heller & Partners Ltd'', and '' Dunlop Pneumatic Tyre v Selfridge and Co. Ltd.'', it nonetheless fundamentally restated the law of trusts, and created the discretionary trust as a far more viable and accessible option in terms of
estate planning Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life, in the event the person becomes incapacitated and after death. The planning inc ...
, and significantly reduced the strictures associated with such trusts.


See also

*
English trusts law English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep a ...


Notes

{{Reflist, 2


References

* House of Lords cases English trusts case law Lord Wilberforce cases 1970 in British law 1970 in case law