powers

Question 1

Powers vs Trusts

Answer 1

• A trusts is an obligation, so its exercise is mandatory. A power is a permission conferring a complete discretion; its exercise is optional, not mandatory
• A trust will be enforced by a court, whereas the court will not compel the performance of a power but will ensure that there is proper exercise by the donee
• The rule in Saunders v Vautier doesn’t apply to powers
• Re Gulbenkian’s ST (no.1) = equity looks at the substance and not form

Question 2

General power of appointment

Answer 2

• Can be exercised in favour of anybody in the world
• Trustee owes a fiduciary duty to named class of beneficiaries

Question 3

A special power

Answer 3

• Can be exercised in favour of named individuals or limited class
• Named individuals (Bobby, Sacha, Salma) or class of beneficiaries (current employees of KCL)

Question 4

A hybrid (intermediate) power

Answer 4

• Can be exercised in favour of anybody in the world, but it is subject to exceptions
• Typically, in practice, excludes settlor and his partner

Question 5

A personal power

Answer 5

• Power is given to the donee in their personal capacity
• mere/ bare power -> no fiduciary duty
• default clause = donee has the option to not exercise that power

Question 6

A fiduciary power

Answer 6

• power is given to the donee in their fiduciary capacity
• Trustees have the power, therefore fiduciary duty kicks in

Question 7

Accountability from perspective of object: Fraud on a power

also known as improper exercise of power

Answer 7

• Court has inherent jurisdiction to supervise the power. Won’t necessarily intervene.
• Ask courts:
  
  • can the donee be compelled to exercise their power
  • has the donee properly exercised the power that they have

Question 8

Mcphail v Doulton

Answer 8

Lord Wiberforce:
* ‘[the court] will intervene if the trustees exceed their powers’ (ultra vires)
* the court will ‘if they are proved to have exercised it capriciously’

Question 9

Capriciously

Answer 9

Re Manisty’s Settlement, Templeman J:
- ‘irrational, perverse or irrelevant to any sensible expectation of the settlor’

Question 10

Failing to consider

Answer 10

Re Hay’s Settlement, Sir Megarry:
* ‘…the trustee is not bound to exercise a mere power and the court will not compel him to do so. That, however, does not mean that he can ignore it’
* Only when the trustee has applied his ‘mind to this size of the problem should he then consider in individual cases whether, in relation to other possible claimants, a particular grant is appropriate’

Question 11

Klug v Klug

Answer 11

• the beneficiary’s mother was a trustee and refused to approve a power of advancement to her. This was becasue mum was annoyed with daughter over choice of husband.
• Neville J: She has not exercised her discretion at all