Trust v Mere Power

Question 0

Mere power

Answer 0

Arises when authority is give to a person to dispose of property which does not belong to them

• is permissive (discretionary) : therefore a donee does not even have to think about exercising his power
• can be given to a normal person or fiduciary (Re Hays Settlement)

Question 1

Trust

Answer 1

An arrangement whereby one person hold property for the benefit of another

• it is imperative (mandatory) - trustee has the legal duty to act
• beneficiaries have a beneficial interest in he property - equitable ownership : therefore right to demand that trustee exercise his duties

Question 2

Re Hays Settlement

Answer 2

Mere power can be given to a normal person or a fiduciary
if given to a fiduciary must satisfy elements:
-consider whether to exercise power from time to time
-survey the range of beneficiaries
-decide whether any individual appointments are necessary (Turner v Turner)

Question 3

Mettoy Pension Fund Trust

Answer 3

Number of options if trustee of mere power does not perform :

• court can order trustees to reconsider
• demand that a representation of the beneficiaries devise a distribution scheme
• or order a distribution scheme itself

Question 4

Rights of beneficiaries under mere power

Answer 4

Do not have a proprietary right over beneficial interest
- only have hope that donees of the power of the will exercise it in their favour (spec or chose in action)

If donee of mere power does nothing about it there is simply nothing that can be done and the interest of the estate reverts back to the owner

Question 5

Rights of beneficiaries under a trust

Answer 5

They have a beneficial interest in the property – equitable ownership
- right to demand that trustee exercise his power

Question 6

Beneficiary under a discretionary trust

Answer 6

Same as beneficiary under a mere power - have spes or chose in action - but if beneficiaries act together may force the trustee to exercise his power

Question 7

Ways to determine if power is trust or mere power

Answer 7

Special power – if it exists to a limited number of people then possible that trust exists

General Power – present to an unlimited number of people, it can never be a trust and must therefore be a mere power

If there is a gift over in default of appointment then the settlor has envisaged the situation that those entitled may not eve receive the interest and this must be a mere power because goes against the imperative nature of a trust (Re Mills / Re Llewelyn)

Intention- matter of construction - did settlor intend to create a mere opportunity to act or a n obligation to act?

Question 8

Burrough v Philcox

Answer 8

Where settlor has given discretion to the trustee as to who to benefit and how much
- court held that whatever happened testator intended for it to benefit his nephews and nieces - therefore this was a trust subject to a mere power within the scope of a family trust

Question 9

McPhail v Doulton

Answer 9

Discretionary trust as the trust and discretion meet

Question 10

List test - trusts

Answer 10

Stricter test applied to trusts for certainty of objects

- IRC v Broadway Cottages

Question 11

Given postulant test - mere powers

Answer 11

Re Gulbenkian
- can individual be said with certainty to be a member of the class or not? 
This is also the test for certainty of object under discretionary trust

Question 12

Discretionary trust is a hybrid

Answer 12

And it outlines some of the similarities between the two

Question 13

Re Badens Deed Trust 1967-1972

Answer 13

Court finally held that the clause was a discretionary trust so the given postulant test applied overruling IRC v Broadway Cottages (list test)