In re Gulbenkian’s Settlements (Hacobian v Maun, Whishaw v Stephens)

A mere power of appointment among a class is sufficiently certain if the court can determine whether any given person is within or outside the class. It is unnecessary to compile a complete list of every possible object.

Practical difficulty, doubt or the existence of borderline cases does not invalidate a power where the language supplies an ascertainable criterion. The court must first construe the instrument reasonably, using common sense to give effect to the donor’s expressed intention without doing violence to its language.

A power entrusted to trustees remains subject to fiduciary control. The trustees may not exercise it in favour of a person outside the designated class, and the court may determine whether a proposed object qualifies.

Settlements made in 1929 and 1938 gave trustees an absolute discretion to pay income for the benefit of specified persons. The potential objects included persons by whom the settlor’s son was employed and persons in whose house, company, care or control, or with whom, he was residing.

The originating summonses raised the validity of the power and related subsidiary questions. The Court of Appeal held that the disputed provision was not void for uncertainty. The trustees appealed to the House of Lords.

The central issue was whether the description of the potential beneficiaries was sufficiently certain to permit the trustees and the court to determine whether a particular person fell within the class.

1. Appeal dismissed unanimously. Lord Upjohn delivered the principal speech. Lord Hodson and Lord Guest agreed with it. Lord Reid and Lord Donovan gave concurring reasons. The disputed power was not void for uncertainty.

2. Per Lord Upjohn, an instrument must first be construed before the applicable certainty test is applied. The court begins with ordinary meaning and grammar. Where defective drafting makes a literal reading unworkable, the court should use judicial experience and common sense to give the language a reasonable meaning which advances the donor’s apparent intention, provided that this does not do complete violence to the words.

3. On its proper construction, the clause covered persons by whom the son was employed and persons with whom he was residing, whether in their house or apartments, in their company, or under their care or control. Lord Reid reached substantially the same construction. The clause resulted from the careless combination of separate ideas, but its intended operation remained reasonably clear.

4. Per Lord Upjohn, the established test for a mere or bare power was whether it could be said with certainty of any given individual that the person was or was not a member of the class. A complete list of every possible object was unnecessary. Lord Reid and Lord Donovan adopted the same essential test. The broader suggestion that certainty concerning a single possible object would validate the entire power was rejected by Lord Upjohn and Lord Reid; Lord Donovan reserved his opinion because the issue was unnecessary to the result.

5. The possibility of difficult or borderline cases did not make the criterion uncertain. Courts routinely determine questions such as residence, care and control by applying legal standards to particular facts. Trustees experiencing difficulty could seek the court’s directions. The clause therefore supplied a workable criterion for determining membership of the class.

6. Lord Upjohn distinguished a mere power from a trust power. A mere power need not be exercised, and the property then passes under the trusts in default. A trust power must be exercised by the trustees or, in default, by the court; its complete class must therefore be ascertainable. Lord Reid added that trustees entrusted with a power in their fiduciary capacity must consider it and may neither exercise it outside the designated class nor use it improperly.

1. House of Lords: The trustees’ appeal was dismissed unanimously. The disputed power was held valid.

2. Court of Appeal: The court held that the clause was not void for uncertainty: [1967] 3 WLR 1115. Its decision was affirmed.