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'Re Baden's Deed Trusts (No.2) [1973] Ch. 9'

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Introduction

Case note: 'Re Baden's Deed Trusts (No.2) [1973] Ch. 9' The Court: > 'The Court of Appeal' The Judges: > Sachs, Megaw and Stamp LJJ What are the relevant facts? > 1941 - Bertram Baden (Settlor), Chairman and Managing Director of Matthew Hall & Co Ltd, established trust fund of 5,000 shares in the company for officers and employees of the company. > Clause 9(a) of the deed directed his trustees to: > "Apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit..." > 1943 - Settlor transferred a further 5,000 shares to the trustees and other shares were added later. > 1960 - Settlor dies. > 1962 - Executors told that trusts were void for uncertainty and claimed payment of the fund to his estate. ...read more.

Middle

Result of Appeal by the Executors: The Judges: Sachs LJ: > Executors believe the words "relatives" and "dependants" imports such uncertainty that the trust as a whole is void. > Agrees with the test laid down by Lord Wilberforce in 'Re Gulbenkian's Settlements' - "can it be said with certainty that any given individual is or is not a member of the class?" > The suggestion that this trust could be invalid because it may be impossible to prove an individual was not in the relevant class is wholly incorrect. > Considers trustees capable of coming to a conclusion in any given case as to whether or not a particular candidate could properly be described as "dependant". > Agrees with Brightman J that "the use of the expression 'relatives' cannot clause the slightest difficulty. > Held: Appeal dismissed. Megaw LJ: > Disagrees with suggestion that the inclusion of "relatives" makes this trust so wide to be administratively unworkable. > Agrees with 'Gulbenkian's' test. ...read more.

Conclusion

> On appeal, the Court of Appeal upheld this decision, but held that Goff J had used the incorrect test of validity - the correct test was used in 'Re Gulbenkian's Settlements' and so the case was given to the Chancery Division to consider the validity of the clause. > Executors appealed to the House of Lords who reversed the Court of Appeal decision stating that clause 9(a) was a trust and again remitted the case to the Chancery Division. > During this hearing, it was decided that the test in 'Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch. 20' no longer applied and instead, the test mentioned earlier in 'Re Gulbenkian's Settlements' was to be utilised - accordingly, the clause was valid as a trust. > The executors' next appeal was dismissed using the above test. > As to the validity of a discretionary trust, you must distinguish between conceptual certainty and evidential difficulty - if an individual could not establish that he was a member, then he must not be a member. > There was no conceptual uncertainty regarding the words "dependants" or "relatives" and so the trust was valid. Word Count: 1,012 words 1 ...read more.

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