Introduction
The case of Morice v Bishop of Durham, specifically the rulings in (1804) 9 Ves 399 and (1805) 10 Ves 522, is a foundational case in the field of trust law, particularly concerning the beneficiary principle. This principle dictates that, excluding charitable trusts, a valid trust requires definite objects, meaning ascertainable beneficiaries who can enforce the trust's terms. The legal reasoning behind this principle is based on the premise that courts must be able to exercise control over the trust. If the beneficiaries are uncertain, the court is unable to ensure proper administration and would not be able to execute the trust. A crucial concept established in Morice v Bishop of Durham is that if a trust does not meet this requirement of definite objects, then the trust property is held on a resulting trust for the settlor. This ruling distinguishes between private and charitable trusts, the latter of which is exempt from the requirement for definite beneficiaries. The case provides a structured framework for identifying valid trusts, emphasizing the importance of identifiable beneficiaries for judicial oversight and enforcement.
The Facts of the Case and Initial Ruling
The legal proceedings in Morice v Bishop of Durham arose from a bequest in a will. The testatrix bequeathed her estate to the Bishop of Durham, directing the Bishop to distribute the funds to “such objects of benevolence and liberality as the Bishop of Durham in his own discretion shall most approve of.” This testamentary disposition presented a question about the validity of the trust since the description of potential beneficiaries was highly ambiguous. Specifically, the court considered whether such a generalized description could constitute a valid trust that a court of law could enforce. In the initial hearing before Sir William Grant MR in the Court of Chancery, the trust was ruled invalid. Grant’s judgment rested on the principle that a court must be able to exert control over the execution of a trust. He concluded that if the objects of a trust are not defined with sufficient certainty, the court cannot compel performance or review administration. Grant reasoned that while a “power of disposition would be ownership, and not trust,” the ambiguity of “objects of benevolence and liberality” made the trust unenforceable. He further clarified that unless there were "definite objects", the court could not oversee or enforce the intended distribution, causing the property to result back to the settlor, as outlined under the doctrine of resulting trust. The property would not remain with the Bishop of Durham.
Lord Eldon's Affirmation in the High Court of Chancery
The decision in Morice v Bishop of Durham was appealed, ultimately being heard by Lord Eldon LC in the High Court of Chancery. Lord Eldon upheld the earlier judgment, confirming the position that a valid trust requires ascertainable beneficiaries. His judgment further emphasized the necessity for judicial control of trust administration. He stated, “As it is a maxim, that the execution of a trust shall be under the control of the court, it must be of such a nature, that it can be under that control”. Eldon clarified that a trust must possess a structure allowing a court to review its administration, and if needed, direct a due administration. The crucial part of Lord Eldon’s ruling was that for this control to be possible, the "subject" and "objects" of the trust must be ascertained based on familiar legal principles. In essence, the ruling re-affirmed that a valid trust must have a structure that could be overseen by a court. The case set the precedent that if the objects of a purported trust cannot be defined with enough clarity to permit judicial oversight, the trust fails. The ruling ensured that the trust principle could not be used as a tool to avoid the usual laws of inheritance and distribution. This meant that it was not sufficient to create a vague description of charitable intentions, rather they must be precisely outlined with defined objects.
The Beneficiary Principle and its Application
Morice v Bishop of Durham is often cited as the cornerstone for understanding the beneficiary principle. This principle requires that all non-charitable trusts must be for the benefit of ascertained or ascertainable beneficiaries. The case highlights the difference between charitable and private trusts. Charitable trusts are often designed to benefit society in general and, as such, are exempt from the requirement of having specific named beneficiaries. Conversely, a private trust must be made for individuals whose identities can be established. This requirement helps to create a framework for the equitable enforcement of trusts. Without specific beneficiaries, it becomes nearly impossible to ascertain who should enforce the trust’s terms, or who should be deemed to have benefited unfairly from the trust. This principle, while foundational, has seen some modifications through subsequent case law, but Morice v Bishop of Durham continues to be essential to understanding the principle's importance. The case clarifies that trust law will not allow a trustee to operate under a vague instruction; for any trust to be enforced, there must be a beneficiary able to seek enforcement.
The Impact on Discretionary Trusts and the 'Complete List' Test
The principles established in Morice v Bishop of Durham initially had a significant impact on discretionary trusts. A discretionary trust gives the trustees discretion to decide who among a class of potential beneficiaries should receive a distribution of the trust property, and how much they should receive. The case of IRC v Broadway Cottages further expounded on this concept. This case stipulated that a discretionary trust was only valid if it was possible to compile a complete list of all potential beneficiaries (the ‘complete list test’). This approach stemmed directly from Morice v Bishop of Durham, ensuring that the courts could theoretically oversee the trust since the full class of beneficiaries was known. If the class was considered unascertainable, then the trust would fail for lack of defined objects. In the IRC v Broadway Cottages case, Jenkins LJ invoked the ruling from Morice v Bishop of Durham, stating that a trust had to be such that “the Court can control and execute.” He further stated that if the beneficiaries could be identified it would be possible to order an equal distribution, but that if this were not the case, then the trust could not be executed. This approach, however, was later overruled by the House of Lords.
The Overruling of the 'Complete List' Test in McPhail v Doulton
The “complete list test” imposed by the ruling in IRC v Broadway Cottages, and linked back to Morice v Bishop of Durham, proved to be overly restrictive, especially with respect to discretionary trusts. It made it difficult to create trusts for broad groups of people, for example all the employees of a company. The strictness of the ‘complete list test’ led to several attempts by settlors being deemed invalid. The limitations of the ‘complete list test’ were subsequently challenged and eventually overruled in the case of McPhail v Doulton (Re Baden (No. 1)). McPhail v Doulton established the "is or is not" test, which stated that a discretionary trust is valid if it can be determined with certainty whether a given individual is or is not within the class of potential beneficiaries. The House of Lords stated that the previous ‘complete list test’ was too restrictive and that it was sufficient to identify individuals based on conceptual certainty. This landmark decision relaxed the requirements for discretionary trusts, allowing for more flexibility whilst still respecting the foundational principles established in Morice v Bishop of Durham. This change in test allowed for many trusts that would have previously failed, to become valid. While Morice v Bishop of Durham established the importance of ascertainable beneficiaries, the subsequent ruling in McPhail v Doulton showed the evolution of this principle for discretionary trusts.
Conclusion
Morice v Bishop of Durham is a pivotal case that establishes the necessity of ascertainable beneficiaries for the validity of non-charitable trusts. The case’s impact reverberates throughout trust law, specifically regarding the beneficiary principle and the requirements for certainty of objects. By demanding that a trust must have beneficiaries that can be identified and enforced, the case ensures that trusts remain within the realm of judicial oversight. This ruling establishes a distinct divide between private and charitable trusts. While the ruling in IRC v Broadway Cottages, based on principles derived from Morice v Bishop of Durham, imposed a restrictive 'complete list' test on discretionary trusts, the eventual overruling of this test in McPhail v Doulton reflects the legal system’s willingness to modify the principles to maintain practical applications. The lasting significance of Morice v Bishop of Durham is found in its articulation of the foundational requirement for trusts to be enforceable by their beneficiaries, emphasizing the fundamental role of beneficiary enforcement in trust law. The principles set out remain a critical component of trust law and show that the structure of a trust must be certain to be valid.
