B e f o r e :
LORD JUSTICE SACHS
LORD JUSTICE MEGAW
and
LORD JUSTICE STAMP.
____________________
| |
Re BADEN'S DEED TRUSTS
|
|
| |
BADEN and ORS.
|
|
| |
-v-
|
|
| |
SMITH and ORS.
|
|
| |
PEARSON and ORS.
|
|
| |
-v-
|
|
| |
SMITH and ORS.
|
|
____________________
(Transcript of the Shorthand Notes of the Association of Official Shorthandwriters,
Room 592 Royal Courts of Justice, and 2, New Square, Lincoln's Inn, W.C.2.)
____________________
MR JOHN VINELOTT, Q.C. and MR RUPERT EVANS, (instructed by Messrs. Slaughter & May)
appeared on behalf of the Appellants (2nd, 3rd and 4th Defendants).
MR R. WALTON, Q.C. and MR A.A. BADEN FULLER, (instructed by Messrs. Gregory, Rowcliffe & Co.)
appeared on behalf of the Respondents (1st, 5th and 6th Defendants).
MR V.G.H, HALLETT, (instructed by Messrs. Gregory, Rowcliffe & Co.)
appeared on behalf of the Respondents (Plaintiffs).
____________________
HTML VERSION OF JUDGMENT
____________________
Crown Copyright ©
LORD JUSTICE SACHS: By a Deed dated 17th July, 1941, well before the Welfare State came into being, the late Mr. Bertram Baden, then the Chairman and Managing Director of Matthew Hall Ltd., which had a pay roll of some 4,300 employees, established by a personal gift of shares "The Matthew Hall Staff Trust Fund" which is the subject of this appeal. Plainly this fund was intended by this apparently forward-thinking man to further the welfare of the employees and those connected with them: it was recited in the Deed that "the Settlor wishes to establish a fund for providing benefits for the staff of the Company and their relatives and dependants". Mr. Bertram Baden himself became one of the Trustees.
Then on the 4th April, 1960, Mr. Bertram Baden died. A little over two years later, on the 8th August, 1962, by which time the fund's assets had attained the value of £163,000 his executors notified the Trustees that they alleged the trusts were wholly void. Since then they have caused much time and money to be devoted to their efforts to destroy the fund and frustrate the intentions of the man who appointed them executors. The course taken by the resulting litigation merits attention.
On the 14th January, 1963, the Trustees, not unnaturally, issued an Originating Summons with a view to determining what was their position. The first question posed by it was as to whether the Trust was for the benefit of employees or for staff or both. The second question was whether the Trust was void for uncertainty. Lamentably, for the operation of the Trusts was being held up, the matter did not come even before a court of first instance for four and a half years - until the 12th July, 1967 (1967 1 W.L.R. p.1457). Then Mr. Justice Goff reached a conclusion on the first question which has not been assailed - that both staff and employees were objects of the trusts. On the second question he held that the Deed was one which gave mere powers as opposed to constituting a discretionary trust. At that stage it was common ground between the parties that if the learned Judge was right on the latter point the trusts were valid. Accordingly, on the 4th October, 1967 the executors appealed; but on the 5th February, 1969 the Court of Appeal (1969 2 Ch. p.388) by a majority upheld Mr. Justice Goff's above-stated view, but having regard to the intervening decision of the House of Lords in In re Gulbenkian's Settlements (31st October, 1968: reported in 1970 A.C. p.508) remitted the case to Mr. Justice Goff for further consideration of the issue of validity.
The executors thereupon duly went to the House of Lords, where on the 6th May, 1970 (1971 A.C. p.424) it was determined that the relevant provisions constituted a discretionary trust and not mere powers: it was further decided that (contrary to what was apprehended from the Broadway Cottages case, 1955 Ch. p.20) the tests applicable as regards uncertainty remained the same as if the Trustees had been given mere powers.
Unfortunately, however, it had been agreed both before the Court of Appeal and before the House of Lords that there was not sufficient material available upon which it could be determined whether on those tests there was or was not an invalidating uncertainty. So back the matter went - 10 years after the death of the testator - to the Chancery Division. There, a full year later, on the 19th May, 1971, Mr. Justice Brightman (1971 3 W.L.R. p.475) after a four day hearing and after considering further evidence, which was not of an importance that warranted it being laid before us, delivered a judgment expressed, if I may respectfully so state, in lucid and cogent terms holding that there was no such uncertainty and that the trusts were valid.
Undeterred, the executors have once more appealed to this court, fortified perhaps by having so far secured orders that their costs were to come out of the Trust Funds and that, even after providing for the costs of all parties (other than of this appeal) at £54,000, its value had by the 15th January this year risen to £463,000 - the major part of which derives from the settlor's gifts. No doubt if unsuccessful here they will seek to carry the litigation into what may well be 1975, sterilising the Fund for yet a further period. Moreover, we have been told that if they then fail on this or any further appeal there still remains an issue which is not before us and which is likely to result in a further protraction of the litigation.
At the patent risk of this judgment being in due course attacked as emotive - in other words, of my having lifted my eyes from the delectably refined arguments put before us to look at the background situation in which they have been adduced - I feel impelled to observe that that situation lacks attraction. The mere recital of the time-table of events is sufficient to disclose something that is less than creditable to the process of law, and something which could have been avoided.
Turning now to the substance of the present appeal, everything turns on that part of Clause 9 (a) which reads:
"THE Trustees shall apply the net income of the Fund in making at their absolute discretion grants to or for benefit of any of the officers and employees or ex-officers or ex-employees of the Company or to any relatives or dependenys of any such persons in such amounts at such times and on such conditions (if any) as they think fit".
It is submitted on behalf of the appellants that each of the words "relatives" and "dependants" imports such an uncertainty that the trusts as a whole are void.
The test to be applied to each of these words is: "can it be said with certainty that any given individual is or is not a member of the class?" (per Lord Wilberforce, 1971 A.C. at pp. 450,454 and 456), words which reflect those of Lord Reid and Lord Upjohn in the Gulbenkian case (1970 A.C. at pp.518, 521 and and 525). Being in general agreement, as already indicated, with everything that Mr. Justice Brightman has said as regards the two relevant words, it is sufficient first to make some observations as to the approach to be adopted to the questions raised before us and then in the light of those observations to deal comparatively compactly with the effect of the use of the two relevant words.
It is first to be noted that the Deed must be looked at through the eyes of a businessman seeking to advance the welfare of the employees of his firm and those so connected with the employees that a benevolent employer would wish to help them. He would not necessarily be looking at the words he uses with the same eyes as those of a man making a Will. Accordingly, whether a court is considering the concept implicit in relevant words, or whether it is exercising the function of a court of construction, it should adopt that same practical and common sense approach which was enjoined by Mr. Justice Upjohn (as he then was) in Sayer's case (1957 1. Ch. at p.456), and by Lord Wilberforce in the present case (1971 A.C. at p.452) and which would be used by an employer setting up such a fund.
The next point as regards approach that requires consideration is the contention, strongly pressed by Mr. Vinelott, that the court must always be able to say whether any given postulent is not within the relevant class as well as being able to say whether he is within it. In construing the words already cited from the speech of Lord Wilberforce in the Baden case (as well as those of Lord Reid and Lord Upjohn in the Gulbenkian case), it is essential to bear in mind the difference between conceptual uncertainty and evidential difficulties. That distinction is explicitly referred to by Lord Wilberforce in the Baden's Trust case (1971 A.C. at p.457) when he said:
"As to the question of certainty I desire to emphasise the distinction clearly made and explained by Lord Upjohn (1970 AC 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".
As Mr. Vinelott himself rightly observed, "the court is never defeated by evidential uncertainty", and it is in my judgment clear that it is conceptual certainty to which reference was made when the "is or is not a member of the class" test was enunciated. (Conceptual uncertainty was in the course of argument conveniently exemplified, rightly or wrongly matters not, by the phrase "someone under a moral obligation" and contrasted with the certainty of the words 'first cousins'). Once the class of persons to be benefited is conceptually certain it then becomes a question of fact to be determined on evidence whether any postulant has on inquiry been proved to be within it; if he is not so proved then he is not in it. That position remains the same whether the class to be benefited happens to be small (such as "first cousins") or large (such as "members of the X Trade Union" or "those who have served in the Royal Navy"). The suggestion that such trusts could be invalid because it might he impossible to prove of a given individual that he was not in the relevant class is wholly fallacious - and only Mr. Vinelott's persuasiveness has prevented me from saying that the contrary is almost unarguable.
It was suggested that some difficulty arises from the passage in the speech of Lord Wilberforce in the Baden case (1971 A.C. at p.457) where he referred to the need of trustees "to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duties". The word "range", however, in that context has an inbuilt and obvious element of considerable elasticity, and thus provides for an almost infinitely variable range of vision suitable to the particular trust to be considered. In modern trusts of the category now under consideration it may be sufficient to know whether the range of potential postulants runs into respectively dozens, hundreds, thousands, tens of thousands or even hundreds of thousands. I cannot imagine that the above quoted passage was intended to cast doubt, for instance, on the validity of wide-ranging discretionary trusts such as those of the Army Benevolent Fund. When looked at in the context of the rest of the speech this particular passage does not seem to me to cause any difficulty. In my judgment it refers to something quite different, to a need to provide a list of individuals or to provide a closely accurate enumeration of the numbers in the class: it relates to that width of the field from which beneficiaries may be drawn and which the trustees should have in mind so that they can adapt to it their methods of discretionary selection. Assessing in a businesslike way "the size of the problem" is what the trustees are called on to do.
It is at this stage appropriate to record that Mr. Vinelott expressly disclaimed relying on any suggestion that - if his other submissions failed - either of the relevant classes ("dependants" or "relatives") was so large that the trusts were "administratively unworkable". (See the phrase used by Lord Wilberforce at page 457).
I now turn to a third point that perhaps merits mention in view of the reliance placed by Mr. Vinelott on cases such as Slfton -v- Slfton (1958 A.C. p.658). It has been saidmore than once that divesting clauses being sui generis (see Lord Cohen in Fawsatt Properties Ltd -v- Buckingham County Council, (1961 A.C. at p.662, and Lord Denning at pp.677/8) decisions on such clauses are very unlikely to be of any real assistance.
The final prelimiary point to be noted is that we are not today sitting as a court of construction called upon to give an exhaustive definition of the words "dependants" and "relatives" if once we reach the conclusion that the widest meaning attributable to those words does not produce uncertainty. Mr. Hallett did at one moment tentatively suggest that some dicta, however obiter, as to individual cases that did or did not fall within the relevant classes would be of assistance to the trustees, but was constrained in answer to questions from the court to acknowledge that no practical difficulties had so far arisen, and none were envisaged as likely to arise, from the meanings adopted by Mr. Justice Brightman, to which I am about to advert.
Turning now to the word "dependants" - a word used over several generations in comparable trust deeds - I confess that the suggestion that it is uncertain seems no longer arguable. In Simmonds -v- White Bros (1899 1. Q.B. p.1005) Lord Justice Collins, albeit when considering that word when used in the Workmen's Compensation Act 1897, quoted with approval the following passage from the then current work dealing with that subject: "it would be hopeless to attempt to lay down any rule of guidance, because every case would probably differ in some material circumstance from almost every other. Dependant probably means dependent for the ordinary necessaries of life for a person of that class and position in life. Thus the financial and social position of the recipient of compensation would have to be taken into account. That which would make one person to be dependent upon another would in another case merely cause the one to receive benefit from the other. Each case must stand on its own merits and be decided as a question of fact".
It is true that the court was then dealing with a specific Act, but the good sense of the above quotation has, in relation to the meaning of 'dependant', a general application, and, has frequently been cited with approval. It demonstrates, incidentally, that such difficulties as may arise in determining whether an individual is a dependant are evidential and raise questions of fact and not of law. Indeed the whole stream of authority runs counter to the contentions put forward on behalf of the appellants - save only the first instance decision in Re Ball (1947 Ch. p.228), a Will case which would probably be decided differently today.
In agreement with the practical approach of Mr. Justice Brightman (see at p.485), I consider that the trustees, or if necessary the court, are quite capable of coming to a conclusion in any given case as to whether or not a particular candidate could properly be described as a dependant - a word that, as the learned judge said, "conjures up a sufficiently distinct picture". I agree, too, that any one wholly or partly dependent on the means of another is a "dependant". There is thus no conceptual uncertainty inherent in that word and the appellants' contentions as to the effect of its use fail.
As regards "relatives" Mr. Justice Brightman, after stating, "it is not in dispute that a person is a relative of an employee .... if both trace legal descent from a common ancestor", a little later said, "In practice the use of the expression 'relatives' cannot cause the slightest difficulty". With that view I agree for the reasons he gave when he correctly set out the evidential position.
As regards the suggested uncertain numerative range of that concept of the word "relative" (a matter which strictly would only be relevant to the abandoned "administratively unworkable" point) and also when considering the practical side of the functions of the trustees, it is germane to note that in In re Scarisbrick (1951 1 Ch. p.622) Lord Evershed observed with regard to a class of "relations": "That class is, in theory, capable of almost infinite expansion, but proof of relationship soon becomes extremely difficult in fact". That factor automatically narrows the field within which the trustees select. Further, a settlor using the word "relatives" in the context of this Deed (which is not the same context as that of a Will) would assume that the trustees would in the exercise of their discretion make their selection in a sensible way from the field, however wide. Thus in practice they would presumably select those whom a reasonable and honest employee or ex-employee would introduce as "relative", rather than as a "kinsman" or as a "distant relative".
Indeed, on a construction summons some such definition might emerge for the word "relative" - but that is not relevant to the present appeal as the widest meaning that has been suggested for that word does not in my judgment produce uncertainty.
As a footnote to this conclusion it is interesting to observe that no case was cited to us in which a court has actually decided that a trust was invalid on account of the use of that word, whatever may have been said obiter. If this is due to a tendency to construe Deeds and Wills so as to give effect to them rather than to invalidate trusts, that is an approach which is certainly in accord with modern thought. I would accordingly dismiss this appeal.
LORD JUSTICE MEGAW: If this trust were to be held void for uncertainty because of the inclusion of the "dependants" in Clause 9 (a) I think that few trusts would stand. I do not find any greater uncertainty in it than is inherent in, or can by ingenuity be conjured up in relation to, any ordinary, well understood word. It would be odd indeed, and wholly regrettable, if a word which was regarded as sufficiently certain to be used, without further explanation or definition, for the purposes of an Act of Parliament (see, for example Section 46 (1) (vi) of the Administration of Estates Act 1925) had nevertheless to be condemned by the courts as being so uncertain as to involve the validity of a trust deed.
Then it is said that the deed is invalid because of the inclusion of the word "relatives". Mr. Justice Brightman approached that question on the basis that: "It is not in dispute that a person is a relative of an officer or employee or ex-officer or ex-employee, if both trace legal descent from a common ancestor"". He held that the executors' argument on this issue also failed. I agree, for the reasons given by the learned Judge. But out of deference to the clear and forceful submission addressed to us by Mr. Vinelott for the executors, I shall state in my own words why in my judgment that submission is wrong.
First, lest there should be any suggestion that the inclusion of "relatives" makes this trust so wide as to be administratively unworkable, I would respectfully agree with Lord Wilberforce's words - obiter dicta, it is true - when the present case was earlier considered by the House of Lords (1971 A.C. at page 457 E): "I do not think that a discretionary trust for 'relatives' even of a living person falls within this category."' Lord Wilberforce's dictum was, I have no doubt, directed towards the terms of this particular trust deed. I do not think it was intended to be confined, or ought to be confined, to a provision specifying one single living person. It is apt as regards relatives of employees in the plural. Such a trust is not administratively unworkable.
The main argument of Mr. Vinelott was founded upon a strict and literal interpretation of the words in which the decision of the House of Lords in In re Gulbenkian's Settlements (1970 A.C. p.508) was expressed. That decision laid down the test for the validity of powers of selection. It is relevant for the present case, because in the previous excursion of this case to the House of Lords (at p.424) it was held that there is no relevant difference in the test of validity, whether the trustees are given a power of selection or, as was held by their Lordships to be the case in this trust deed, a trust for selection. The test in either case is what may be called the Gulbenkian test.
The Gulbenkian test, as expressed by Lord Wilberforce (at p,450 E, and again in almost identical words at page 454 D) is this:
".... the power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class,''
The executors' argument concentrates on the words "or is not" in the first of the two limbs of the sentence quoted above: "if it can be said with certainty whether any given individual is or is not a member of the class". It is said that those words have been used deliberately, and have only one possible meaning; and that, however startling or drastic or unsatisfactory the result may be - and Mr. Vinelott does not shrink from saying that the consequence is drastic - this court is bound to give effect to the words used in the House of Lords' definition of the test. It would be quite impracticable for the trustees to ascertain in many cases whether a particular person was not a relative of an employee. The most that could be said is: "There is no proof that he is a relative". But there would still be no "certainty"' that such a person was not a relative. Hence, so it is said, the test laid down by the House of Lords is not satisfied, and the trust is void. For it cannot be said with certainty, in relation to any individual, that he is not a relative.
I do not think it was contemplated that the words "or is not" would produce that result. It would, as I see it, involve an inconsistency with the latter part of the same sentence: "does not fail simply because it is impossible to ascertain every member of the class." The executors' contention, in substance and reality, is that it does fail "simply because it is impossible to ascertain every member of the class".
The same verbal difficulty, as I see it, emerges also when one considers the words of the suggested test which the House of Lords expressly rejected. That is set out by Lord Wilberforce in a passage at page 450 E, immediately following the sentence which I have already quoted. The rejected test was in these terms: ".... it is said to be necessary .... that the whole range of objects .... shall be ascertained or capable of ascertainment". Since that test was rejected, the resulting affirmative proposition, which by implication must have been accepted by their Lordships, is this: a trust for selection will not fail simply because the whole range of objects cannot be ascertained. In the present case, the trustees could ascertain, by investigation and evidence, many of the objects: as to many other theoretically possible claimants, they could not be certain. Is it to be said that the trust fails because it cannot be said with certainty that such persons are not members of the class? If so, is that not the application of the rejected test: the trust failing because "the whole range of objects cannot be ascertained"?
In my judgment, much too great emphasis is placed in the executors' argument on the words "or is not". To my mind, the test is satisfied if, as regards at least a substantial number of objects, it can be said with certainty that they fall within the trust; even though, as regards a substantial number of other persons, if they ever for some fanciful reason fell to be considered, the answer would have to be, not "they are outside the trust", but "it is not proven whether they are in or out". What is a "substantial number" may well be a question of common-sense and of degree in relation to the particular trust: particularly where, as here, it would be fantasy, to use a mild word, to suggest that any practical difficulty would arise in the fair, proper and sensible administration of this trust in respect of relatives and dependents.
I do not think that this involves, as Mr. Vinelott suggested, a return by this court to its former view which was rejected by the House of Lords in the Gulbenkian case. If I did so think, I should, however reluctantly, accept Mr. Vinelott's argument and its consequences. But as I read it, the criticism by the House of Lords of the decision of this court in that case related to this court's acceptance of the view that it would be sufficient if it could be shown that one single person fell within the scope of the power of trust. The essence of the decision of the House of Lords in the Gulbenkian case, as I see it, is not that it must be possible to show with certainty that any given person is or is not within the trust; but that it is not, or may not be, sufficient to be able to show that one individual person is within it. If it does not mean that, I do not know where the line is supposed to be drawn, having regard to the clarity and emphasis with which the House of Lords has laid down that the trust does not fail because the whole range of objects cannot be ascertained. I would dismiss the appeal.
LORD JUSTICE STAMP: The Originating Summons in this case raised, among other questions, the question whether Clause 9 (a) of the Settlement made by the late Bertram Baden conferred a power upon the trustees of the Settlement or imposed a trust. The Summons was heard by Mr. Justice Goff, who held that the provisions of the clause conferred a mere power and upon that footing was valid. On appeal this court by a majority (Lord Justice Russell dissenting) upheld the decision of Mr. Justice Goff that a mere power was conferred upon the trustees, but held also that the learned Judge had applied the wrong test for the validity of powers, the correct test being that stated (subsequent to his decision) in In re Gulbenkian's Settlements (1961 1 Ch. p.126). This court remitted the case to the Chancery Division to reconsider the validity of the provisions. The executors of Mr. Bertram Baden's Will appealed to the House of Lords against that decision.
The House of Lords (Lord Reid, Lord Hodson, Lord Guest, Viscount Dilhorne and Lord Wilberforce) were unanimously of the opinion that the effect of the clause in question was to constitute a mandatory trust for distribution. The House of Lords, declaring to that effect, remitted the case to the Chancery Division for determination whether on this basis Clause 9 was valid or void for uncertainty.
Had the House of Lords gone no further than that, the learned Judge of the Chancery Division before whom the matter came - Mr. Justice Brightman, as it turned out to be - would if - and the "if" is important - the word "relatives" extends to include all the descendants of a common ancestor, have been constrained by authority to hold that the trust was void for uncertainty. It had been held by this court in Inland Revenue Commissioners -v-Broadway Cottages Trust (1955 Ch. p.20) that a trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment. Where the Trustees had a duty to distribute the whole of the fund or its income, as opposed to a mere power of appointment over it coupled with a trust in default of appointment, it was thought that any of the beneficiaries could compel the execution of that trust by the court if necessary and that the trust could not be executed by the court except by equal division and accordingly could not be executed unless all the beneficiaries could be ascertained. The law, as it was understood, was fully stated in the speeches of Lord Hodson and Lord Guest when the Originating Summons came before the House of Lords in the present case (1971 A.C. p.424), and it would be presumptuous of me to add anything to those statements. I may, however, perhaps be permitted to quote from the speech of Lord Upjohn in the Gulbenklan case a passage which was not part of his ratio decidendi and which was quoted or referred to by Lord Hodson, Lord Guest and Lord Wilberforce, in which he said: "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 to select the donees merely from among known claimants who are within the class, for that is constituting a narrower class and the donor has given them no power to do this".
The Trust contained in Clause 9 (a) of the Trust Deed here in question is a trust to apply "the net income of the trust 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 (viz. Matthew Hall & Co. Ltd.) 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."' Upon the footing that a reference to the "relatives" of a given person is prima facie a reference to all who are descended from a common ancestor, it must in my judgment follow that unless a gloss be put upon that word the trust here would if the law laid down in Inland Revenue Commissioners -v- Broadway Cottages Trust was still good law, be void for uncertainty.
In this case (1971 A.C. p.424) the House of Lords was invited to consider the test of validity laid down in Inland Revenue Commissioners -v- Broadway Cottages Trust and Lord Wilberforce, after expressing the opinion that it ought to be declared that the provisions of Clause 9 (a) constituted a trust and that the case should be remitted to the Chancery Division for determination whether on this basis the clause was valid or void for uncertainty, remarked that this made it necessary to consider whether in so doing the court should proceed on the basis that the relevant test was that laid down in that case.
That Lord Wilberforce, whose opinion was that of the majority, rejected the Broadway Cottages Trust test is not in doubt and he rejected the reasoning on which it was founded. In his view it did not follow that because the test of validity of a trust is whether the trust can be executed by the court execution is impossible unless there can be equal division. He pointed to cases up to the time of Lord Eldon from which he deduced the principle that a discretionary trust "can in a suitable case, be executed according to its merits and otherwise than by equal division", and remarked that he preferred not to suppose that the great masters of equity, if faced with the modern trust for employees, would have failed to adopt their creation to its practical and commercial character. Lord Wilberforce examined what had been said in the House of Lords in the Gulbenkian case regarding the Broadway Cottages Trust test, and more particularly the speech of Lord Upjohn, and having done so concluded that the House was free to review the Broadway Cottages Trust case and that the test for validity of "trust powers" (the expression "trust powers" connoting, I think, a trust for division coupled or combined with a power of selection or, as it is now more commonly referred to, a "discretionary trust") ought to be similar to that accepted by the House of Lords in the Gulbenkian case for powers, namely - and here I quote the words of Lord Wilberforce - "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".
Mr. Vinelott, fastening on those words, "if it can be said with certainty that any given individual is or is not a member of the class", submitted in this court that a trust for distribution among officers and employees or ex-officers or ex-employees or any of their relatives or dependants does not satisfy the test. You may say with certainty that any given individual is or is not an officer, employee, ex-officer or ex-employee. You may say with certainty that a very large number of given individuals are relatives of one of them; but, so the argument runs, you will never be able to say with certainty of many given individuals that they are not. I am bound to say that I had thought at one stage of Mr. Vinelott's able argument that this was no more than an exercise in semantics and that the phrase on which he relies indicated no more than that the trust was varied if there was such certainty in the definition of membership of the class that you could say with certainty that some individuals were members of it: that it was sufficient that you should be satisfied that a given individual presenting himself has or has not passed the test and that it matters not that having failed to establish his membership - here his relationship - you may, perhaps wrongly, reject him. There are, however, in my judgment serious difficulties in the way of a rejection of Mr. Vinelott's submission.
The first difficulty, as I see it, is that the rejection of Mr. Vinelott's submission involves holding that the trust is good if there are individuals - or even one - of whom you can say with certainty that he is a member of the class. That was the test adopted by and the decision of the Court of Appeal in the Gulbenkian case where what was under consideration was a power of distribution among a class conferred upon trustees as distinct from a trust for distribution: but when the Gulbenkian case came before the House of Lords that test was decisively rejected and the more stringent test upon which Mr. Vinelott insists was adopted. Clearly Lord Wilberforce in expressing the view that the test of validity of a discretionary trust ought to be similar to that accepted by the House of Lords in the Gulbenkian case did not take the view that it was sufficient that you could find individuals who were clearly members of the class; for he himself remarked, towards the end of his speech as to the trustees' duty of inquiring or ascertaining, that 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.
It is not enough that trustees should do nothing but distribute the fund among those objects of the trust who happen to be at hand or present themselves. Lord Wilberforce, after citing that passage which I have already quoted from the speech of Lord Upjohn in the Gulbenkian case, put it more succinctly by remarking that what this did say (and he agreed) was that the trustees must select from the class, but that passage did not mean (as had been contended) that they must be able to get a complete list of all possible objects. I have already called attention to Lord Wilberforce's opinion that 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, and I ought perhaps to add that he indicated that a wider and more comprehensive range of inquiry is called for in the case of what I have called discretionary trusts than in the case of fiduciary powers. But, as I understand it, having made the appropriate survey, it matters not that it is not complete or fails to yield a result enabling you to lay out a list or particulars of every single beneficiary. Having done the best they can, the Trustees may proceed upon the basis similar to that adopted by the court where all the beneficiaries cannot be ascertained and distribute upon the footing that they have been: see, for example, Re Benjamin (1902 1 Ch. p.725). What was referred to as "the complete ascertainment test" laid down by this court in the Broadway Cottages case is rejected. So also is the test laid down by this court in the Gulbenkian case. Validity or invalidity is to depend upon whether you can say of any individual - and the accent must be upon that word "any", for it is not simply the individual whose claim you are considering who is spoken of - "is or is not a member of the class", for only thus can you make a survey of the range of objects or possible beneficiaries.
If the matter rested there, it would in my judgment follow that, treating the word "relatives" as meaning descendants from a common ancestor, a trust for distribution such as is here in question would not be valid. Any "survey of the range of the objects or possible beneficiaries" would certainly be incomplete, and I am able to discern no principle upon which such a survey could be conducted or where it should start or finish. The most you could do, so far as regards relatives, would be to find individuals who are clearly members of the class - the test which was accepted in the Court of Appeal, but rejected in the House of Lords, in the Gulbenkian case.
The matter does not, however, rest there, and I must return to examine more closely Lord Wilberforce's reasons for rejecting the Broadway Cottages test. Lord Wilberforce in his speech referred to Kemp -v- Kemp (5 Ves. Jr. p.849), where Sir Richard Arden had held that the court disclaimed the right to execute a power (i.e. a trust power) and gave the fund equally. It was upon this basis that this court in the Broadway Cottages case held that a discretionary trust is not valid unless all the beneficiaries are ascertainable: for otherwise the court being called upon to execute the trust cannot divide the fund in equal shares. But, as I have already said, accepting that the test of validity is whether the trust can be executed by the court, Lord Wilberforce did not think it followed that execution is impossible unless there can be equal division. He cited cases where prior to the time of Sir Richard Arden a discretionary trust had been executed otherwise than by equal division. Harding -v- Glyn (1 Atk. p.469), he said, was an early case where the court executed a discretionary trust for "relations" - and it is a discretionary trust for relations that I am considering - by distributing to the next of kin in equal shares. Lord Wilberforce continued as follows:
"I dwell for a moment upon this point because, not only was Harding -v- Glyn described by Lord Eldon (8 Ves. Jr. 561, 570) as having been treated as a clear authority in his experience for a long period, but the principle of it was adopted in several nineteenth-century authorities. When the Broadway Cottages Trust case came to be decided in 1955, these cases were put aside as anomalous (see 1955 Ch. at pp. 35, 35), but I think they illustrate the flexible manner in which the court, if called on, executes trust powers for a class. At least they seem to prove that the supposed rule as to equal division does not rest on any principle inherent in the nature of the trust. They prompt me to ask why a practice, or rule, which has been long valid and found useful in 'relations' cases should not also serve in regard to 'employees' or 'employees and their relatives," and whether a decision which says the contrary is acceptable."
I have referred to this part of Lord Wilberforce's speech because what he said regarding Harding -v- Glyn was, as I read the speech, part of the foundation upon which he built his conclusion, first that the court can execute a discretionary trust otherwise than by direction an equal division, and secondly, and consequently, that the ratio decidendi of the Broadway Cottages case was wrong and that that case was wrongly decided. Harding_-v- Glyn accordingly cannot be regarded simply as a case where in default of appointment a gift to the next of kin is to be implied as a matter of construction, but as authority endorsed by the decision of the House of Lords (1971 A.C. p.424) that a discretionary trust for "relations" was a valid trust to be executed by the court by distribution to the next of kin. The class of beneficiaries thus becomes a clearly defined class and there is no difficulty in determining whether a given individual is within it or without it.
Does it then make any difference that here the discretionary trust for relations was a reference not to the relations of a deceased person but of one who was living? I think not. The next of kin of a living person are as readily ascertainable at any given time as the next of kin of one who is dead. A trust for the next of kin of a person, without more, was not a trust for the next of kin according to the statutes which would regulate the distribution of the personal property of a deceased person had he died intestate, but a trust for his nearest blood relations: see Re Gray's Settlement (1896 2 Ch. p.802). To execute a discretionary trust for the relations or relatives of a living person by distribution among his nearest blood relations appears to me a satisfactory method of so doing; and, if it were necessary to give a construction to the word "relatives" in relating to a living person in an inter vivos settlement, to construe it as a reference to his nearest blood relations would be far more likely to give effect to the intention than a construction which embraced all who were descended from one of his ancestors. Putting aside the doctrine ut res magis valeat quam pereat, which would if necessary have persuaded me that the word "relatives" in this settlement should be construed to mean nearest blood relations, nothing could be more improbable than that Mr. Baden should have intended the trustees to be at liberty to make grants to a relative of an employee of whose very existence that employee might be ignorant.
"Nearest blood relations or dependants" makes more sense. In Eagles -v- Le Breton (L.R. 15 Eq. p.148) which was expressly approved by this court in Re Ganslosers Trusts (1952 1 Ch. p.30) and see Re Kilvert (1957 Ch. p.588), a gift by Will "to my relations in America" was held to be a gift to the next of kin of the testatrix in America; and, if it were necessary to do so, I would have thought an inter vivos trust for the relatives of a living person could properly be similarly construed. And if there were no authority constraining me to adopt a different view, I can for myself see no good reason for construing the class of relatives to take under a trust for division among relatives in such shares as trustees think fit differently from the class to take under a trust for division among relatives in equal shares.
In coming to these conclusions I remain haunted by a remark towards the end of Lord Wilberforce's speech when, in considering the possibile unworkability of a trust, he speaks of "relations" as if it were a very wide class; for I confess that I find a difficulty in treating a discretionary trust as one which may be executed by the trustees among a wider class than would be contemplated if the court were required to execute it. It may be, however, that such cases as Re Scarisbrick (1951 1 Ch. p.622) can only be reconciled with the views of the House of Lords in the instant case upon the footing that I am wrong in this regard, and since we are only concerned with the question whether the trust here is valid, I resist the Respondent Trustees' invitation to go outside that question.
The only other challenge to the validity of the trust is directed against the use of the word "dependants" which it is said introduces a linguistic or semantic uncertainty. That in the context the word connotes financial dependence I do not doubt, and although In a given case there may be a doubt whether there be a sufficient degree of dependence to satisfy the qualification of being a "dependant", that is a question which can be determined by the court and does not Introduce linguistic uncertainty. On this part of the case I would follow Re Hooper's 1949 Settlement (34 A.T.C. p.3) and Re Sayer (1959 Ch. p.423). As was held by Lord Upjohn in the Gulbenkian case, the strict test of certainty required in a divesting clause (see Sifton -v- Sifton (1938 A.O. p.658)) is not the test for the validity of a trust. I agree that the appeal should be dismissed.
(Appeal dismissed. Both Respondents' costs on party and party basis. Discussion on leave to appeal to House of Lords adjourned until next term.)
