Dundee General Hospitals Board of Management v Bell's Trustees

Where a testamentary gift is payable only if trustees are satisfied, in their sole and absolute discretion, that a specified event has not occurred, the relevant contingency is the trustees’ state of mind. The trustees may be made the sole judges of the factual and legal questions entrusted to them.

The court may intervene where they act dishonestly, exceed their remit, consider the wrong question or fail genuinely to apply their minds to it. Mere error of fact or law does not itself invalidate their decision. Even assuming that extreme unreasonableness permits intervention, a decision must stand where a reasonable ground supports the trustees’ doubt. Other potentially irrelevant grounds then make no difference.

A testator left £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 or otherwise placed under public control.

The trustees refused payment after considering the retrospective effect of section 9 (8) of the National Health Service (Scotland) Act 1947 and obtaining counsel’s opinion. The Lord Ordinary accepted that the trustees had exceeded their remit, but the First Division rejected that conclusion and dismissed the action.

The hospital board appealed. The central questions were whether the testator had committed relevant questions of fact and law conclusively to the trustees, when a court could intervene, and whether the trustees could reasonably remain doubtful about State control.

1. Appeal dismissed unanimously. Lord Normand, Lord Morton of Henryton, Lord Reid, Lord Tucker and Lord Cohen concluded that the condition for payment had not been fulfilled. The legacy depended upon the trustees being satisfied that public control had not arisen. Their state of mind, rather than the objective existence of control, was therefore decisive.

2. Per Lord Normand, Lord Morton, Lord Reid and Lord Tucker, the words “sole and absolute discretion” did not confer an ordinary discretion to pay or withhold money. They made the trustees the sole judges of the factual and legal matters necessary to decide whether they were satisfied. Per Lord Reid, a testator may validly prevent recourse to the courts on specified questions by arranging for their determination by trustees. Low’s Trustees supported that conclusion.

3. Per Lord Reid and Lord Tucker, the court could nevertheless intervene if the trustees considered the wrong question, failed genuinely to apply their minds to the entrusted question, perversely shut their eyes to the facts, acted dishonestly or in bad faith, or determined a matter outside their remit. None of those defects was alleged or established. Lord Normand reserved whether, under this unusually worded bequest, any further ground of review was available.

4. Per all five Law Lords, even assuming that the decision could be invalidated as one which no reasonable trustee could reach, that threshold was not met. Section 9 (8) of the National Health Service (Scotland) Act 1947 operated retrospectively over the infirmary’s property. It was reasonably capable of creating doubt whether some State control existed at the testator’s death. The trustees had also taken and followed counsel’s advice, which strongly supported the reasonableness and good faith of their conduct.

5. Per Lord Normand, once one unassailable circumstance reasonably produced the required doubt, it was immaterial whether other considerations were irrelevant or procedurally objectionable. Lord Cohen reached the same conclusion after assuming that the post-death matters challenged by the appellants were irrelevant.

6. Per Lord Normand, beneficiaries claiming payment did not need to seek reduction of the trustees’ recorded minute. After a proof determining the merits, the defenders would ordinarily have been entitled to absolvitor rather than mere dismissal. No such order was made because the respondents sought only dismissal of the appeal. The appeal was dismissed with costs.

1. House of Lords: Dismissed the hospital board’s appeal unanimously and left the First Division’s dismissal of the action undisturbed.
2. First Division of the Court of Session: Rejected the Lord Ordinary’s conclusion that the trustees had exceeded their remit. It sustained the defenders’ plea to relevancy and dismissed the action, without granting absolvitor.
3. Lord Ordinary: Proceeded on the ground that the trustees had failed to confine themselves to the position at the testator’s death and had therefore exceeded the powers committed to them.