Re Manisty’s Settlement, [1974] Ch 17

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Eric owns a bustling coffee shop in central London and welcomes visitors from all over the world. He recently decided to establish a discretionary trust, naming as potential beneficiaries every individual who has purchased a beverage from his shop since it opened. Over the past decade, thousands of patrons have come and gone, and Eric kept no systematic records of their information. He believes the trustees can simply select deserving past customers based on their collective memory and word-of-mouth. However, the trustees suspect this broad description of beneficiaries may make the trust unworkable.


Which of the following statements most accurately reflects the principle of administrative unworkability as applied in this scenario under Re Manisty’s Settlement?

Introduction

Administrative unworkability is a central principle in trust law, particularly for discretionary trusts. It arises when the class of potential beneficiaries is too broad or uncertain for trustees to carry out the settlor’s instructions. This rule, established in McPhail v Doulton [1971] AC 424 and further explained in Re Manisty’s Settlement, restricts how widely a discretionary trust’s beneficiaries can be described. To demonstrate administrative unworkability, it must be shown that the trust cannot practically function, not merely that it is difficult to administer. The aim is to maintain the trust’s objectives while ensuring it can operate effectively.

The Capricious Test in Re Manisty’s Settlement

Templeman J in Re Manisty’s Settlement defined a class as “capricious” if it renders the trust unmanageable. For instance, a power to benefit “residents of Greater London” would fail not because of its size but because the group lacks any clear relationship to the settlor, making the trustees’ duties impractical. Conversely, a broad class like “employees of a company and their families” is valid because the connection is rational, even if the group is extensive.

Administrative Unworkability Compared to Conceptual Certainty

Administrative unworkability is distinct from conceptual certainty. Conceptual certainty concerns whether the beneficiary class is precisely defined. If the definition is unclear, the trust is invalid. Administrative unworkability applies even when the class is certain but too expansive or arbitrary to administer. In Re Manisty’s Settlement, the term “friends” was deemed too uncertain, while “residents of Greater London” was certain but unworkable due to its randomness.

Trustee Discretion and Limits

Trustees have wide discretion, but courts will intervene if the beneficiary group is so broad or irrational that trustees cannot make reasoned choices. Re Manisty’s Settlement affirms trustee autonomy but sets boundaries when administration becomes unfeasible.

Guidance for Drafting Trusts

Re Manisty’s Settlement informs trust drafting. Settlors should define beneficiaries with clear connections to their intentions, avoiding arbitrary classes. Specific terms, such as “individuals listed in a sealed document,” help prevent disputes. Clear definitions ensure trusts remain valid and functional.

Comparing Re Manisty’s Settlement and McPhail v Doulton

McPhail v Doulton introduced the “is or is not” test for beneficiary clarity. Re Manisty’s Settlement clarified that even definite classes may fail if impractically large or arbitrary. This distinction refines how courts enforce certainty rules.

Conclusion

Re Manisty’s Settlement clarifies administrative unworkability following McPhail v Doulton. It emphasizes defining beneficiary groups with rational ties to the settlor, avoiding impractical selections. The separation of unworkability from conceptual certainty sharpens the “is or is not” test. Settlors must draft precise, purposeful terms to ensure trusts operate as intended. Clear drafting strengthens trust validity and practicality, supporting the framework’s reliability.

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