Trustees' powers and the beneficiary principle

This week completes the movement from the creation of trusts to their administration. Earlier weeks established the architecture: certainty, constitution, formalities, resulting and constructive trusts, estoppel, charitable purposes, anomalous non-charitable purposes, and the core fiduciary duties of trustees. Week 11 asks a more operational question: once a trust exists, what may trustees do, for whom, and under whose supervision?

Two ideas must be kept distinct. First, trustees have powers. Some are administrative, such as investment, delegation, insurance, maintenance, advancement and sale. Others are dispositive, such as powers to appoint capital or income among objects. Secondly, the trust itself requires beneficiaries, unless it is a recognised charitable trust or one of the narrow and anomalous non-charitable purpose exceptions. This is the beneficiary principle. It is not merely a rule about drafting. It expresses the private-law character of the trust: the trust is a relationship in which someone can hold the trustee to account.

The leading proposition remains Sir William Grant MR's formulation in Morice v Bishop of Durham: there must be someone in whose favour the court can decree performance. That sentence should not be treated as a slogan. It contains several distinct functions. It supplies enforceability; it prevents private trusts for abstract purposes; it fixes the objects to whom fiduciary duties are owed; and it explains why the apparently technical rules on certainty of objects matter in practice.

Trustees' powers complicate this picture. A fixed trust gives beneficiaries proprietary interests according to predetermined shares. A discretionary trust gives trustees a duty to select, from within a class, who is to benefit and in what amounts. A mere power gives the donee authority to appoint, but usually no duty to distribute. Modern trust drafting often uses wide dispositive powers and wide administrative powers to create flexibility. The legal question is therefore not whether trustees have discretion, but how discretion is controlled without destroying it.

For Durham purposes, this is a high-yield topic because it unites several compulsory private-law skills learned in the first year. Contract trained close reading of instruments; Tort trained duty analysis; UK and EU Constitutional Law trained attention to institutional competence; The Individual and the State trained public/private distinctions and standards of review. In Trusts Law, those skills converge. A strong answer classifies the power, identifies the relevant standard of certainty, explains who may enforce, and then asks whether the trustees have exercised the power for a proper purpose, upon relevant considerations, and in good faith.

The central tension is this: equity gives trustees substantial autonomy, but not sovereignty. Courts do not substitute their own view of generosity, investment policy or family fairness merely because a different decision was available. They do intervene where trustees act outside the scope of the power, misunderstand the class, fail to consider whether to exercise a fiduciary power, take irrelevant matters into account, act capriciously, or use an administrative power to alter beneficial interests in a manner not authorised by the settlement. The revision task is to turn that tension into a disciplined exam structure.

The beneficiary principle is one of the points at which English trust law most clearly reveals its private-law foundations. The medieval use separated the management of property from enjoyment of property, and the Court of Chancery compelled the feoffee to uses to act according to conscience. That jurisdiction was not conceived as a general power to supervise property devoted to benevolent aspirations. It was a jurisdiction to enforce obligations owed by conscience to persons. The trust's genius lay in permitting ownership to be split functionally, not in licensing property to be held for any purpose a settlor might fancy.

The historical distinction between private trusts and charitable trusts is therefore crucial. Charitable trusts are purpose trusts, but they are enforced by or on behalf of the Crown through the Attorney General and the Charity Commission. Their purposes are treated as sufficiently public and legally recognisable to justify perpetual or near-perpetual administration. Private purpose trusts do not have that enforcement mechanism. Unless a human beneficiary has standing, there is no orthodox claimant able to insist upon performance.

Morice v Bishop of Durham stands at the doctrinal beginning of the modern rule. A bequest to the Bishop of Durham for such objects of benevolence and liberality as he should approve failed because it was not confined to charity and did not identify private beneficiaries. The case is often filed under certainty of objects, but that is incomplete. It is better understood as a case about enforceability and institutional supervision. The court was not willing to allow a private trustee to be the final judge of an indefinite moral purpose.

Nineteenth-century equity then developed a more elaborate law of powers. A power of appointment enabled property to be appointed among objects, sometimes with a gift over in default. Powers were attractive because they accommodated changing family circumstances. But equity distinguished between mere powers, trust powers and fixed trusts because each posed a different enforcement problem. A fixed trust requires the court to be able to distribute, if the trustee defaults. A trust power requires the trustee to exercise judgment, but the court must at least be able to say who is within the field of possible selection. A mere power does not require exercise, yet a fiduciary donee may be required to consider whether to exercise it.

The twentieth century shifted the centre of gravity. In Inland Revenue Commissioners v Broadway Cottages Trust the Court of Appeal adopted a strict complete-list test for discretionary trusts. That approach treated a discretionary trust as needing the same degree of certainty as a fixed trust, because if the trustee failed to act the court must be able to execute the trust. The House of Lords in McPhail v Doulton rejected that formalism. Lord Wilberforce insisted that modern discretionary trusts required flexibility and that the same is-or-is-not test should apply to discretionary trusts as to powers. The judicial aim was practical: to validate useful commercial and family arrangements without abandoning the need for objective ascertainability.

That reform did not dissolve the beneficiary principle. It re-expressed it. The court no longer needed a complete list of every possible object in a discretionary trust, but it still required a conceptually certain class and sufficient administrative workability. The beneficiary principle survives because the trust remains enforceable by beneficiaries or those representing them, and because trustees remain accountable for the exercise or non-exercise of their discretions.

The statutory history of trustees' powers follows a parallel pattern. Older trust instruments often conferred detailed powers because the default law was narrow. The Trustee Act 1925 rationalised many powers, including advancement, maintenance and court authorisation. The Trustee Act 2000 modernised investment and delegation in response to contemporary portfolio management. Those statutes do not displace the beneficiary principle. They enlarge what trustees may do in administering trust property; they do not convert private trusts into ownerless funds. The modern trustee is given greater managerial freedom, but that freedom is still fiduciary and beneficiary-facing.

1. The beneficiary principle

The orthodox rule is that a private express trust must have identifiable human beneficiaries who can enforce it, unless the trust is charitable or falls within a small exceptional category of non-charitable purpose trusts. The rule is commonly associated with Morice v Bishop of Durham. Its core is not metaphysical but remedial: equity will not compel trustees to perform duties unless someone has standing to insist upon performance. A trust without beneficiaries is not merely difficult to administer; it lacks the juridical structure of a private trust.

The principle performs at least four functions. First, it supplies standing. Secondly, it ensures that fiduciary duties have correlative rights. Thirdly, it prevents settlors from tying up property for indefinite private purposes. Fourthly, it preserves the distinction between private trusts and charitable trusts. A private trust for the maintenance of a tomb, the saying of masses in private, or the care of particular animals may survive only if it fits one of the historically tolerated anomalies or can be analysed as a trust for persons with a purpose motive.

1. Persons, purposes and Re Denley

The hard cases arise where the trust appears purposive but benefits identifiable people. Re Denley's Trust Deed upheld a trust of land for use as a sports ground by employees. Goff J treated the trust as one for ascertainable individuals, although expressed by reference to a purpose. The case should be handled carefully. It does not abolish the beneficiary principle. It shows that a trust may be valid where the stated purpose directly benefits identifiable persons who can enforce the trust. The safer formulation is that a purpose may describe the mode of enjoyment of a trust for persons; it cannot, without more, be the object of an enforceable private trust.

1. Fixed trusts, discretionary trusts and powers

A fixed trust predetermines beneficial shares. The trustee has no discretion as to who benefits or in what proportions. Certainty of objects normally requires the ability to draw up a complete list, because the court may need to distribute the trust fund.

A discretionary trust imposes a duty on trustees to consider distribution among a class and, if appropriate, to select beneficiaries and amounts. No individual object has a proprietary share until appointment, but each has standing to compel proper administration. Since McPhail v Doulton, the test for certainty of objects is whether it can be said of any given person that he or she is or is not within the class. Conceptual certainty is essential; evidential difficulty is not necessarily fatal.

The cases are best organised by function rather than chronology.

The starting point is Morice v Bishop of Durham, which supplies the orthodox beneficiary principle. Its importance lies in the court's refusal to enforce a private trust for benevolence untethered to charitable status or identifiable beneficiaries. The point is not hostility to benevolence. It is the insistence that equity enforces trusts through rights held by persons or through the special public machinery of charity.

Leahy v Attorney-General for New South Wales demonstrates the same idea in a more modern form. A gift to an order of nuns failed as a private purpose trust insofar as it was not a gift to individuals or a valid charitable gift. The case is a warning against assuming that every religious or benevolent purpose is charitable, or that a group description automatically identifies beneficial owners.

Re Denley's Trust Deed is the essential qualification. A trust of land for recreational use by employees was valid because it directly benefited ascertainable persons. It should not be over-expanded. It is not authority for a general private purpose trust jurisdiction. It is authority for the proposition that a trust expressed by reference to a purpose may be treated as a trust for persons where those persons have enforceable rights to the benefit.

McPhail v Doulton transformed discretionary trusts. By replacing the complete-list test with the is-or-is-not test, the House of Lords aligned discretionary trusts with powers for certainty purposes. The conceptual foundation was practical: trustees can perform a discretionary trust without knowing every possible object, provided they can determine whether any candidate falls inside the class.

Re Baden (No 2) then exposed the difficulty in applying McPhail. The three judgments reveal different tolerances for uncertainty. This is invaluable in essays because it shows that modern law is not simply 'liberal'. It is liberal in relation to evidential difficulty, but not indifferent to conceptual vagueness.

Re Manisty's Settlement and Re Hay's Settlement Trusts explain fiduciary powers. A wide fiduciary power may be valid even if it is administratively broad, but the trustees must consider whether and how to exercise it. The court controls abuse by policing capriciousness, proper purpose, good faith and the fiduciary obligation to consider.

Saunders v Vautier is the beneficiary principle from the opposite direction. Where the beneficiaries together own the entire beneficial interest and are all sui juris, they can collapse the trust. The trustees' powers cannot be used to preserve the trust against the beneficiaries' collective entitlement.

Mettoy Pension Trustees Ltd v Evans illustrates the modern court's analysis of powers in a commercial pension context. Warner J drew careful distinctions between trusts, powers and duties, emphasising that a fiduciary power is not the same as an uncontrolled personal liberty. The case is useful because many contemporary trusts are institutional rather than family settlements.

See practice questions section below.

See further reading section below.