Inland Revenue Commissioners v Broadway Cottages Trust (1954)

English Equity & Trusts

‘Anonymity’ by Ben Will

Uncertainty as to the exact class of trust beneficiary lies central to the disposition and taxation of funds, when after establishing two virtually identical charitable trusts (the Broadway Cottages Trust and the Sunnylands Trust), the nominated trustees and now appellants were faced with claims by the Inland Revenue that any monies generated by the use of the trust were lawfully subject to taxation under the Income Tax Act 1918.

In the summer of 1950, the now deceased settlor bequeathed a sum of £80,000 for the benefit of a number of beneficiaries, while the design was such that the appellants were granted discretionary powers to invest and apply the money, so as to accrue sufficient income for his wife and numerous other parties for the duration of the trust.

However the appellees claimed that clause 8 of the trust instrument was void for uncertainty, on grounds that while it stated in relevant part that:

“[T]he trustees shall hold the income of the trust fund from the date or respective dates from which the trustees shall become entitled to such income upon trust to apply the same for the benefit of all or any one or more of the donor’s said wife and the beneficiaries….

The beneficiary schedule conversely included:

“1. All persons (other than the settlor and any wife of his and any infant child of his) who have been in the past or (as the case may be) at the date of these presents or subsequently thereto at any time during the period ending on December 31, 1980, or during the appointed period whichever shall be the shorter employed by: (a) the settlor; (b) the wife of the settlor; (c) William Timpson deceased (father of the settlor and who died on January 20, 1929); (d) Katherine Chapman Timpson deceased (mother of the settlor and who died on December 16, 1940); (e) William Timpson Limited or by any other limited company which may succeed to the business of William Timpson Limited; (/) Any other limited company of which the settlor is a director at the date of these presents.
2. The wives and widows of any such persons as is specified in cl. 1 of this schedule.
3. All persons (other than the settlor and any wife of his and any infant child of his) who are the issue however remote of the said William Timpson deceased . . . and Charles Henry Rutherford deceased (father of the wife of the settlor and who died on February 17, 1930).
4 , 5, 6, 7. [Certain named persons.]
8. Alastair John Grenville Stevenson and any spouse of his or issue of him.
9. [The trustees of the settlement and their spouses or issue].
10. Joseph Baker and any spouse of his or issue of him.
11. Godchildren of the settlor or his wife.”

And so the appellees argued that there was no clear and ascertainable list of beneficiaries upon which to refer, while the appellants contended that the trust afforded them discretionary powers to assign the funds to those parties they believed to be ascertainable, and so the trust remained valid under clause 10, which read in relevant part that:

“The trustees shall also have power during the appointed period to apply the whole or any part of the capital of the trust fund in their discretion for the benefit of all or any one or more of the beneficiaries either by way of advancement on account of his or her or their share or shares or not as the trustees may in their discretion think fit….”

In the first instance, the Inland Revenue Special Commissioners reviewed the claim, and awarded for the respondents, while holding that:

“[T]he trusts of the settlement in so far as they related to the income of the trust fund were not void for uncertainty, and that the trustees under the provisions of cl. 8 of the settlement had a power of selection and that it was a valid and effective trust of the income of the trust fund, and that, accordingly, the sums of money received by the respondents from the trustees were the income of the respondents and thus entitled to the exemption claimed.”

Whereupon the appellees challenged the judgment in the Chancery Court, who allowed the appeal, while instead holding that:

“[I[n cases of an imperative trust to distribute there must be certainty as to the objects.”

Upon which the appellants challenged the judgment in the Court of Appeal, who then relied upon In re Gestetner Settlement, in which the Chancery Court had held that:

“[I]n a case where there is a duty on a trustee to select from a number of persons which of them shall be the recipients of the settlor’s bounty, there must be a certainty as to those recipients.”

Thus the court dismissed the appeal whilst reiterating to the parties that:

“[A] trust for such members of a given class of objects as the trustees shall select is void for uncertainty, unless the whole range of objects eligible for selection is ascertained or capable of ascertainment….”

Trusts (An Overview)

Insight | May 2017

Unknown artwork by Jon Krause

Originating from the latin phrase ad opus, the purpose of a trust is to provide the safe containment of assets (whether those of property or money) on condition that they will be of benefit to another party or parties. There are many instances in which a trust can be created, and it is the intention of this article that we have a look at the more common trusts used today, before explaining their application through suitable case law propositions.

Purpose Trusts


(i) The intention of the settlor
(ii) The subject matter of the trust

The inherent problem with purpose trusts is that they are by nature, constructed so as to benefit an unlimited number of people, although often under a charitable intention. An excellent example of a purpose trust is the one described in Re Denley, where the use of recreational ground was exclusively reserved for the current and future employees of an aircraft manufacturer, and that despite presupposition of its failure, the judge upheld its validity on grounds that an approximation of the staff was, in the immediate sense, obtainable. This allowance was expressed by Goff J who remarked:


Resulting Trusts

Ironically, resulting trusts are express trusts that have, by their lack of specificity, wound up benefiting the settlor, despite the very wish to relinquish title or interest. As with the third element of a successful trust, where the identities of the beneficiaries are either remitted or withheld, the principles of equity would defer the construction of the trust to that of the settlor’s gain. While in some instances the outcome causes little damage, there are equally those where a resulting trust inflicts financial loss, as was seen in Vandervell v IRC. Appreciably, there is rarely if ever, any intention to create a resulting trust, and so the instances where they do emerge rely upon clear conditions, as explained by Lord Millet in Air Jamaica v Charlton when he remarked that:


Charitable Trusts

One of the advantages of a charitable trust is that it enjoys exemption from the otherwise exactness of both beneficiary and subject, although in many cases the charity of choice is typically named so as to avoid confusion within the court, or a need to invoke the cy-pres doctrine. Another is the avoidance of taxation, as charities are free from the burden of inheritance tax, capital gains tax and occupancy rates (where circumstances allow). As also outlined in s.1(1) of the Charities Act 2006, the trust beneficiaries must fall within the scope of legislation in order for the trust to succeed, and as can be found under s.2(2) of the 2006 Act, the possible forms such charities might take are reasonably extensive.

Constructive Trusts

Sharing a close relevance to the strictness of fiduciary duties, constructive trusts are a means of remedy where a trustee has immorally profited from another’s property through the dysfunction of their relationship. Where evidence is found to support wrongful gain, a constructive trust is created that serves to hold the assets on trust for the now slighted settlor. An example of this is Attorney-General of Hong Kong v Reid  where Lord Templeman stressed that:


Express Trusts

As with purpose trusts, an express trust is the standard form of trust, whereby the settlor (i) makes a clear expression of his wish to create a trust (ii) deliberately illustrates what form the trust takes (property or funds) (iii) who the beneficiaries are (iv) takes the correct steps to transfer the property in accordance with statute and where necessary makes it known who the acting trustees will be. The reason for this is to facilitate court intervention in the event of contention, particularly where the settlor has since died,  leaving instructions within their final will or codicil. Failure to demonstrate evidence of those key elements will result in a void trust, and in death, eventual lapse into the residual estate of the deceased.

An example of the exactness required for an express trust is found in Milroy v Lord where despite having made verbal declarations as to his wish for his company shares to benefit his niece, his associate had failed to officiate the trust through the legal channels; resulting in the shares remaining on trust for himself (as would be the case in a purpose trust). This was elaborated by Lord Justice Turner, who remarked:


Cestuis Que Trusts

Cestui que is an abbreviated version of ‘cestui a que use le foeffment suit fait’, which means ‘the person for whose use the foeffment was made.’ Further simplified, ‘foeffment’ represents any grant of freehold property, therefore a cestui que trust would be those holding property upon trust for the benefit of another named individual who retains legal title; although any beneficial interest remains in the hands of the cestui que trust (or person assigned the interest).

This translates that unlike other forms of trust, the legal owner acts as a trustee, while the actual beneficiary serves as operator of the trust, much like a reversal of roles. The result of this is that should the trustee decide to convey the property, the cestui que trust can sue for breach of duty where no permission has been granted and no profits enjoyed. This was explained by Austin Wakeman Scott in his Columbia Law Review article ‘The Nature of the Rights of the Cestui Que Trust’ (1917), when he wrote:


Fixed Trusts

These are typically used where multiple beneficiaries exist, while the nature of the fixed trust is to state exact figures or quantities of benefit to each party, so as to avoid inequitable profit by those in receipt or miscalculation by the appointed trustees. The criteria for this form of trust was established by Jenkins LJ in Inland Revenue Commissioners v Broadway Cottages Trust, where having examined the specificity of the trust, there was insufficient evidence to obtain certainty of the beneficiaries, thus the trust failed with the reasons given that:


Secret Trusts



Discretionary Trusts


Statutory Trusts

Brought about through the disposition of land under co-ownership and the rules of intestacy, these trusts are designed to protect the interests of those in title. First introduced through s.34-36 of the Law of Property Act 1925 the intervention, or at least creation of such trusts, was also enforced through s.33 of the Law of Administration Act 1925, before consolidation of both Acts came through the Trusts of Land and Appointment of Trustees Act 1996. In the former instance, there is an automatic trust power to sell and retain under co-ownership, and in the latter, a power to sell through personal representative where no will was executed.

Public Trusts

There is little to explain here other than that unlike a private trust, a public trust is created by the settlor with the express intention of benefitting certain members (or sections) of the general public. This is often achieved through the use of a charitable trust, as deemed valid through the requirements of rules required by the Charities Act 2006.

Bare (or Simple) Trusts

Perhaps the most basic of trusts, the bare or ‘simple’ trust serves only to hold property or funds in favour of a beneficiary, yet with no trustee duties attached. In this instance, the trustee is replaced with the title of nominee until transfer is required.

Special Trusts

Unlike the previous trusts, these are created with prerequisite trustee instructions, albeit divided into two categories, namely ministerial and (as above) discretionary trusts. In the former, those duties may include rent collection and administrative functions, whereas the latter affords the trustee with powers to decide how best go about his or her role.

Quistclose Trusts

Running parallel to laws of contract, the quistclose trust was brought about in Barclays Bank v Quistclose Investments Ltd, in which the lender took steps to clarify that the money loaned was on condition of use, and held within the bank until the borrower chose to redeem the funds. When the borrower lapsed into liquidation, the lender asserted property rights against the bank under the principle that the funds were held on trust, and that the bank was now acting as a trustee; thus circumventing the rights of other creditors, while holding the funds in safe reserve for the lender as acting settlor. This unique approach was supported by the House of Lords, and explained well when Lord Wilberforce remarked:
