Re Hay’s Settlement Trusts (1982)

Key Notes

• Facts: The case involved a trust for the "residents of Greater London." The issue was whether the trust was valid or capricious due to the broad and unclear class of beneficiaries. The donor had been a formal chairman of the Greater London Council.

• Outcome: Megarry V-C held that the trust would not be considered capricious because of the donor's position as the formal chairman of the Greater London Council. The settlor had a logical connection to the beneficiaries and a valid intention behind the trust.

• Reasoning: The court found that the trust was not arbitrary or capricious because the donor had a direct connection to the area (Greater London) through his role in the Greater London Council. The settlor’s status and influence in that role justified the inclusion of residents within the defined geographic area as beneficiaries.

Impact & Analysis

• Clarifying Capriciousness: The case highlights that a trust will not be considered capricious merely because it involves a broad class of beneficiaries, as long as there is a rational connection between the settlor and the beneficiaries. In this case, the settlor’s position in the Greater London Council made the inclusion of residents of Greater London a reasonable and purposeful choice.

• Limitations on Capricious Trusts: It reinforces that trusts which appear arbitrary can still be valid if there is a discernible rationale for the selection of beneficiaries, even if they are geographically or class-based. The case limits the application of the "capricious" label by focusing on the settlor's relationship with the beneficiaries.

• Link to Public Service and Geography: The decision suggests that if a settlor is connected to a particular group or region (such as a council chairman for Greater London), a trust benefiting that group is not inherently capricious, as the settlor has a legitimate, identifiable reason for selecting that group.