Board of Management for the Dundee General Hospitals v Walker and another

Where a legacy is payable only if trustees are satisfied, in their sole and absolute discretion, that a specified state of affairs exists, the contingency is their state of mind rather than the objective existence of that state of affairs. The testator may entrust the trustees with determining the relevant questions of fact and law.

The court may intervene where the trustees act dishonestly or in bad faith, address the wrong question, fail genuinely to consider the question, or exceed the limits of the matter entrusted to them. A decision cannot be displaced for unreasonableness where the trustees had at least one reasonable ground for their conclusion.

A testator conditionally bequeathed £10,000 to Dundee Royal Infirmary. The legacy was payable only if his trustees, in their sole and absolute discretion, were satisfied that at his death the infirmary had not been taken over by, or otherwise placed under the control of, the State or a related public body.

The trustees withheld payment. They relied principally upon the retrospective effect of section 9(8) of the National Health Service (Scotland) Act 1947. The First Division of the Court of Session, Lord Keith dissenting, reversed the Lord Ordinary and dismissed the infirmary's action. The successor hospital board appealed.

The central issues were the scope and finality of the trustees' decision, the permissible grounds of judicial intervention, and whether the trustees could reasonably regard section 9(8) as creating sufficient State control to prevent satisfaction of the condition.

1. Appeal dismissed unanimously. The House affirmed the First Division's interlocutor and ordered the appellants to pay the respondents' costs.
2. Per Lord Normand, Lord Morton of Henryton, Lord Reid, Lord Tucker and Lord Cohen, the bequest was conditional upon the trustees being satisfied of a negative proposition. Its payment therefore depended upon the trustees' state of mind. If they remained in doubt whether the infirmary had been placed under public control, the condition was not fulfilled and the legacy was not payable.
3. Per Lord Normand, Lord Reid and Lord Tucker, the words “in their sole and absolute discretion” made the trustees the judges of the questions of fact and law which had to be resolved, including the meaning of control and the relevance of the statutory scheme. This was not an ordinary discretionary power to pay or withhold money. The testator could lawfully commit particular legal questions to trustees and make their determination final, consistently with Low's Trustees, 8 SLR 638.
4. Per Lord Reid, the court could intervene if the trustees considered the wrong question, failed genuinely to apply their minds to the right question, perversely shut their eyes to the facts, or acted dishonestly or in bad faith. Lord Tucker considered that nothing short of dishonesty would suffice in this case. Lord Normand reserved whether intervention was available on any ground other than dishonesty or a departure from the limits of the entrusted question. Several Law Lords nevertheless considered the appeal on the assumed basis that a decision which no reasonable trustee could reach might be set aside.
5. Per Lord Normand, Lord Morton, Lord Reid, Lord Tucker and Lord Cohen, that assumed unreasonableness standard was not met. Section 9(8) of the National Health Service (Scotland) Act 1947 operated retrospectively from 21 March 1946 and restricted dealings with hospital property which would otherwise transfer under the Act. It could reasonably create doubt whether the infirmary was already subject to a degree of State control at the testator's death. The trustees had considered the correct date, acted deliberately and in good faith, obtained counsel's advice, and adopted that advice.
6. Per Lord Normand, with Lord Reid agreeing, one sustainable ground of doubt was sufficient. It was unnecessary to determine whether the trustees' additional reasons were irrelevant. Lord Normand also considered that disclosure of reasons made examination easier but did not enlarge the court's power of review.

1. House of Lords: Unanimously dismissed the appeal, affirmed the interlocutor of the First Division dated 26 May 1950, and awarded the respondents their costs.
2. First Division of the Court of Session: By a majority, Lord Keith dissenting, reversed the Lord Ordinary, sustained the respondents' plea to relevancy and dismissed the action.
3. Lord Ordinary: After proof, held in favour of the hospital's claim on the basis that the trustees had exceeded the limits of the matter committed to them.