McPhail v Doulton [1971]

Facts

• A wealthy industrialist set up a trust, instructing trustees to apply the trust "as they see fit" to a large class of beneficiaries, including 4,300 employees at his company, former employees, and their relatives.

• The key issue was whether this constituted a trust or merely a power, and whether it was too uncertain for a valid trust to exist due to the large number of potential beneficiaries.

• The main question was whether it was necessary to have a complete and precise list of beneficiaries for the trust to be valid.

Outcome

• The court held that this arrangement was a valid trust, not a mere power.

• The trust would not fail due to uncertainty regarding the beneficiaries.

• It was not necessary to have a complete list of all beneficiaries. The trust could still be executed as long as it was possible to determine whether a person belonged to the class of beneficiaries.

• The decision clarified that a trust does not fail for uncertainty of objects if it is possible to determine whether someone is a member of the beneficiary class.

Key Notes

• Lord Wilberforce's Judgment (Majority):

◦ Lord Wilberforce emphasised that a complete division or list of beneficiaries was unnecessary, especially for a large class of people like employees and their families.

◦ He noted that equal division was likely not the settlor’s intention, as it would be impractical for such a large class of beneficiaries.

◦ He reaffirmed that the trust could still be valid as long as the class of beneficiaries could be identified.

• Agreement of Lords Reid and Dilhorne:

◦ Both Lord Reid and Viscount Dilhorne agreed with Lord Wilberforce's judgment, reinforcing that a trust could still be valid despite the impracticality of listing every possible beneficiary.

◦ This case marked a shift in discretionary trust law, where certainty of objects was no longer tied to the need for a complete list.

• Impact:

◦ This case significantly relaxed the requirement for certainty of objects in discretionary trusts, moving away from the strict "list certainty" rule as seen in IRC v Broadway Cottages (1955).

◦ It established that a class of beneficiaries could be sufficiently certain even without a complete list, provided that the class was conceptually certain and it was possible to identify who belonged to it.