Re Hay's Settlement Trusts [1982] 1 WLR 202

Facts

  • The case concerned the responsibilities of trustees managing a discretionary trust, specifically their obligations when making distribution decisions.
  • Trustees were required to review the situations of potential beneficiaries before authorising distributions from the trust.
  • The trust at issue involved a potentially large and complex group of beneficiaries, affecting how thorough the consideration could be for each individual.
  • The Court of Appeal provided guidance on the required approach trustees must adopt in such discretionary trusts.

Issues

  1. Whether trustees of a discretionary trust are required to consider all eligible beneficiaries before making distributions.
  2. Whether trustee decisions regarding distributions must be supported by logical reasoning and clear recorded justifications.
  3. The extent to which trustees must review the specific situations of each beneficiary, especially in large or complex trusts.
  4. How the ruling shifted or refined the standards set in previous decisions regarding trustees’ duties in discretionary trusts.

Decision

  • The Court of Appeal held that trustees of a discretionary trust must assess all potential beneficiaries prior to approving distributions.
  • Trustees are not required to conduct detailed investigations into the circumstances of every potential beneficiary but must understand the scope and nature of the beneficiary class.
  • Distribution decisions must be supported by logical reasoning, and trustees must record the factors they considered to show accountability and honesty.
  • The depth of the review may be adapted based on the trust’s size, available resources, and the number of beneficiaries.
  • The judgment provided more specific guidance than earlier rulings, moving from broad principles to clear, actionable steps for trustees.

Legal Principles

  • Trustees in discretionary trusts are obligated to consider all eligible beneficiaries to prevent unfair omission.
  • The necessity for logical reasoning: trustee decisions must be rational, well-documented, and based on balanced consideration.
  • The scale of review required depends on the complexity and size of the trust.
  • The case refined previous approaches by providing concrete steps trustees should follow, building on earlier precedents such as McPhail v Doulton [1971] AC 424.

Conclusion

Re Hay’s Settlement Trusts clarified and structured trustees’ duties in discretionary trusts, requiring consideration of all beneficiaries and logical, well-documented decisions tailored to the trust’s context. The principles established remain authoritative in guiding trustees and inform contemporary trust law practice.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal