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TRUST & POWER


It is said that a trust is an obligation on the trustees which is mandatory while a power is normally discretionary. For example a trust in favour of X and Y must be carried out to the letter and if money is to be paid to them in equal shares it does not matter whether one needs it more than the other.  The trustee is bound to distribute it as directed.  In the case of Re Baden’s Deed Trusts [1973] Ch. 9  the House of Lords stated “as to powers although the trustees may and normally will be under a fiduciary duty to consider whether or in what way they should exercise their power, the court will not normally compel its exercise.  It will intervene if the trustees exceed their power and possibly if they are proved to have exercised it capriciously.  But in the case of a trust power if the trustees do not exercise it the court will do so in a manner best calculated to give effect to the settlor’s or testator’s intentions.”

It would appear that power is a question of construction with respect to each case depending on its circumstances.  One has to construe whether the settlor has shown an intention to benefit the objects of the power and sometimes this may depend on a few words or mere straws in the wind as stated by Lord Justice Harman in Re Baden and also as the leading case of McPhail v. Doulton (1971) A.C. 424 illustrates.  In this case the deed in question provided that the trustees should apply the net income in making payments at their absolute discretion “to or for the benefit of any of the officers and employees or X officers or X employees of the company or to any relatives or dependants of any such persons in such amounts or on such conditions if any as they think fit.”  The Judge of first instance (1967) 1 WLR 457 Goff J. held that it created a power and the court of appeal agreed by a majority.  The House of Lords however held unanimously that it was a trust power and accordingly took effect as a trust.  The clearly expressed scheme of the Deed pointed to a mandatory construction according to the House of Lords.

A power may be said to be an authority given to a person either by instrument or by statute to deal with or dispose off property.  There are those powers which give power of this possession of a property such as a power of appointment to decide who takes what property amongst many properties.  Then there are those which give power to deal with property in a particular manner.  An example of a power of appointment would be where the owner of certain property gives power to another to appoint the property to some third parties e.g. Kenya Shillings one million to the 3rd party for life and the remainder to whomsoever he shall appoint.  The differences may be said to be
1.         A trust is imperative while a power is discretionary;
2.         A trust is always equitable whereas a power can be legal e.g. a power of attorney to transfer land on behalf of the appointer. However note that the majority of powers are also equitable;
3.         A trustee is always under a fiduciary duty but the holder of a power may or may not be under such duty in relation to the power;
4.         A power may be released by its holder by a trustee may not release his trust.

Re Hay’s Wills Trust (1982) 1 W.L.R. 1202 in which the vice chancellor Megarry J. expressed the view that both concepts should be treated similarly.

 
 
 

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