'Absolute discretion' in the Singapore Court of Appeal; substance, form, and the company; Fideicomisa; FATCA, the ugly American; French trust disease arrives in Argentina; Cyprus raises its game; Jersey tries to improve its firewall, but must try harder; a Swiss dog seems unlikely to raise its leg; some interesting New Zealand trust possibilities; and Humpty-Dumpty and the split in the Supreme Court in Lehman Brothers

A phrase to that effect occurred in the trust in Gisborne v Gisborne.1 The House of Lords held that larger words than those it would be impossible to introduce into a will. The trustees are not merely to have discretion, but they are to have ‘uncontrollable,’ that is, uncontrolled ‘authority.’ Their discretion and authority, always supposing that there is no mala fides with regard to its exercise, is to be without any check or control from any superior tribunal. … It is for them to say whether they will apply the whole, or only a part, and if so what part. And how are they to decide, if they do not apply the whole; what is the part which they are to apply? They are to decide upon this principle, that it is to be such part as they shall think expedient, not such part as shall be sufficient, not such part as shall be demanded by or for the person to be benefited, but such part as they shall think expedient; and upon the question of what is expedient it is their discretion which is to decide, and that discretion according to which they are to decide is to be uncontrolled. As Mahoney JA said in Hartigan Nominees Pty Ltd v Rydge2: In a discretionary trust of this kind, the settlor has placed confidence in his trustee and has on that basis transferred property to him. It has, I think, been the purpose of the law to respect that trust. It depends upon confidence and confidentiality. The settlor seeks to have the trustee resolve, without unnecessary abrasion, the conflicting claims of persons in an area, the family, where disputes are apt to be bruising. In cases of this kind, if a settlor’s wishes cannot be dealt with in confidence, the purpose of the trust may be defeated. It has been the practice of the Chancery Courts to protect trustees from interference in the administration of such trusts. Thus, there is, it has been said, a general right of a beneficiary to have trusts administered by or under the supervision of the court. But rules have been evolved to ensure that, unless there be cause, there will be no interference with the administration of the trust by the trustee. As a matter of principle, the discretion of the trustee has been respected by the courts. For all that, it is unlikely that the settlor will have intended to licence her trustees, in making their decisions, to, say, allocate benefits randomly; or just to young and attractive beneficiaries but not to older or unlikeable beneficiaries; or to refuse to consider their requests at all. In Gisborne terms there then would be ‘mala fides with regard to its exercise’. And in Tempest v Lord Camoys3 terms the trustees would have acted ‘improperly’4 and in a ‘way which is wrong or unreasonable’.5 Neither these tests, nor lack of bona fides test, are of much help to an anxious trustee or to an unfavoured and vexed beneficiary. As Bowen LJ held, in another context:6 Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational. it is open to the Court to examine the evidence to decide whether there has been a failure by the trustees to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. As part of the process of, and solely for the purpose of, ascertaining whether there has been any such failure, it is relevant to look at evidence of the inquiries which were made by the trustees, the information they had and the reasons for, and manner of, their exercising their discretion. However, it is not open to the Court to look at those things for the independent purpose of impugning the exercise of discretion on the grounds that their inquiries, information or reasons or the manner of exercise of the discretion, fell short of what was appropriate and sufficient. Nor is it open to the Court to look at the factual situation established by the evidence, for the independent purpose of impugning the exercise of the discretion on the grounds the trustees were wrong in their appreciation of the facts or made an unwise or unjustified exercise of discretion in the circumstances. The issues which are examinable by the Court are limited to whether there has been a failure to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. In short, the Court examines whether the discretion was exercised but does not examine how it was exercised. I regard it as an inherent requirement of the exercise of any discretion that it be given real and genuine consideration. To borrow a phrase from a passage quoted in Partridge v The Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149, at p 164, there must be the ‘exercise of an active discretion’. It has been held that when the occasion for the exercise of a discretionary power has arisen, trustees, while not bound to exercise the discretion, are bound to consider whether it ought in their judgment to be exercised: Klug v Klug [1918] 2 Ch 67; In re Gulbenkian’s Settlement [1970] AC 508, at p 518. I think that it goes without saying that they must give real and genuine consideration, It seems to me that it is in this sense only that the Court can examine whether the trustees gave ‘proper’ consideration to the exercise of the discretion. The language used in this area has not always been distinguished by its precision: see Hardingham and Baxt, Discretionary Trusts, 1975, p, 92. The courts will examine whether a discretion has been exercised irresponsibly, capriciously or wantonly: Lutheran Church of Australia South Australia District Incorporated v Farmers Co-operative Executors and Trustees Ltd (1970) 121 CLR 628, at p 639. This is another way of saying that there may be an examination as to whether trustees have exercised their discretion on real and genuine consideration: Pilkington v, Inland Revenue Commissioners [1964] AC 612, at p 641; [1962] 3 All ER 622. It is an established general principle that unless trustees choose to give reasons for the exercise of a discretion, their exercise of the discretion can not be examined or reviewed by a court so long as they act in good faith and without an ulterior purpose: Re Beloved Wilkes’ Charity (1851) 3 Mac & G, 440; 42 ER 330; Duke of Portland v Topham (1864) 11 HLC 31; 11 ER 1242. For reasons given above, I would add the further requirement, so obvious that it is often not mentioned, that they act upon real and genuine consideration, In the context, it was in that sense that Lord Truro LC used the expression ‘with a fair consideration’ in Re Beloved Wilkes’ Charity, at (42 ER) p 333. In the case of an absolute and unrestricted discretion such as the discretion in the present case, the general principle is given unqualified operation: Gisborne v, Gisborne (1877) 2 App Cas 300, at p, 305, per Lord Cairns LC … . How, then, to test for ‘real and genuine consideration in accordance with the purposes for which the discretion was conferred’? Templeman J, as he then was, had no doubt in Re Manisty’s Settlement8. Foreshadowing McGarvie J, his Lordship first affirmed that the court ‘cannot judge the adequacy of the consideration given by the trustees to the exercise of the power’.9 He then referred to the ‘only right and only remedy of any object of the power’, viz: If a person within the ambit of the power is aware of its existence he can require the trustees to consider exercising the power and in particular to consider a request on his part for the power to be exercised in his favour. The trustees must consider this request, and if they decline to do so or can be proved to have omitted to do so, then the aggrieved person may apply to the court which may remove the trustees and appoint others in their place.10 Mauruce Cullity, a distinguished Australian/Canadian scholar, later Justice of the Superior Court of Justice, Ontario, Canada, writing before Karger v Paul,11 but after Re Manisty’s Settlement,12 was able to express surprise at the time it has taken for such clear statements to evolve. As the existence of the court’s supervisory jurisdiction over the discretions of trustees has been recognized since the seventeenth century,13it is surprising that the scope of the jurisdiction and the principles which govern its exercise remain so obscure. In no other area of the law relating to trusts and trustees are judicial statements apparently so inconsistent. Linguistic differences and the fact that the degree of control asserted by the court has varied considerably in different periods undoubtedly provide part of the explanation. Sir George Jessel’s warning14 that the rules of equity must not be supposed to have been established from time immemorial and that regard should, therefore, be paid to the modern, rather than the more ancient, cases is particularly apposite in this context. … statements of the principle in Gisborne v Gisborne are in a of they to the of the general which trustees are to in the exercise of their their may be by the of the cannot be it seems clear that the ‘mala in this to a which is to the of the In the in the more has been placed on a to his to the exercise of his discretionary with all the of that are in the of the on the of such as or would not to be as Gisborne v Gisborne established that the of discretionary power a of of and not merely an exercise of judgment its was, and As an on the and of the court’s supervisory jurisdiction over trustees it can be that the passage from that this is not that ‘mala has any particular in with an and discretion, or that it is the only way to court’s supervisory over such is by Karger v in this to the by the House of Lords of its in v before that the on from in v had held that v must not be taken to any general on the of the expression to It would be impossible to consider the of such words as the has grounds to without of the of the House of Lords in v Sir to a for for the been by an made by the under the of the It was not a case that had any on the court’s power to a of to the in respect of taken under that but it a question as to the of the words the of has to any person to be of or which at the of the in And the of the of the House that those words in that no more than that the of had to that he had to the that good faith, the of the to be the only judge of the of his Their do not a of the words in which are before it would he a if the of case … to be as any general as to the of such when they in It is an for the that the words has to are of that he has to and that in the and of they in fact just But the consideration which the of the House gave to the and before that that there is no general principle that such words are to be so and the of Lord at as a of the when they have been as there is in fact for so to words such as these are when a or on a or they must be intended to in sense as a the exercise of an otherwise But if the question whether the has been is to be by the the power the of the intended is in effect doubt he must not exercise the power in but the in which this of question is such that the for the case of faith is more than a Their the words in the has grounds to that any is to be to as a as a that there must in fact such to the before he can exercise the power of is to the It is to and a in to the settlor to a of all … it is that the over trust is held in the of trustee … words such as or or and are not under the of discretion, a trustee must act and in a of by the Thus, the court will not the trustee to act in faith or for purpose or other than to the purposes of the discretionary The judgment of the Court of in v both Sir George and Justice Cullity, and in their on the and of the court’s supervisory jurisdiction over a over the in a of the Court the that an trustee discretion ‘cannot be in a court of in this of the of the Court of in v those of of the to on the equity of this The Court of of the principle, but do is that if exercise of if there is no faith, be to judicial it does that a exercise of discretion would the of the court unless faith is Lord it in his in v which was on principle that no discretion, … can be exercised for purposes to those of the by which it is Lordship both and of this general The law a the power of to the exercise in had been and it in that case on the that the exercise had not been for the purpose for which the power had been As has The by which the principles to on a power were for law purposes was in the Court of Chancery for the relevant the was by way of v The of was the case, and Lord LC The case of the on a principle and on the principles of The principle is that when persons in for the of which those in them have from the to of making to the the persons so cannot be to exercise the on them for any that is, for any purposes those for which the has them with The for this principle when it an that be of of persons and to are given of for purposes with the of In such a of things it was that be the with the principles on which they be able to such or within their and when the has given them power to with property for from that power for … It has a of that any by the to the of another for a if to it for any other be by the of the Court of Chancery from so shall not from And the of all to to where And the for the first that the grounds for the in were the as Lord of the test for a on a in Duke of Portland v the principles of the law upon this must be that the the under the at the time of the exercise of that and for any purpose for which it is act with good faith and and with an and to the real purpose and object of the and not for the purpose of or into effect any or object in the sense of its the purpose and of the which he may to effect in the exercise of the In the of the law of there is a clear on the basis of of a on the and on the basis of on a on the of the as an of a power are to of in the sense and to a of grounds for judicial The purpose has a in terms of the with the law of on a The of in the of on a does not an of or and the to good faith in this case law be so In a case on a the said that that the power has been exercised for a or with an the scope of or not by the the that can from other from He is an in both the law trust and its in South In this he trust that has been used for a without any there is the under of the This has been used say, money has been on a trust for the of to that It the trust to be so as to require the an on all trust there is the under of that of the and of the of the trust may be the and it will be the with and the trust as the or trustees shall his more the to be placed the control of the trustee is an in the that it is not a trust but the real In a of that in this he with the of the of the and of and the In v an was to the Court to the effect that the apparently of the where it is a for was and be The Court this but held that the was on the of the the by the Court of the the and of the The such claims in the law are this a by that and a of in In for that to in the Court of Australia in v of the judgment of the Court of Australia in v Nominees & in which the of a v It is of what his 75 It is not open to doubt that the particular factual a of a trustee and a beneficiary or beneficiaries of a may the of them … . But to say this is not to say that there is in the trust beneficiary as It is not open to doubt that at of the law on a a trust are as on the and of that … In with the is the in a of cases that the of to their can of to the beneficiaries of a trust of which their is a trustee … . It is in whether this in law is a or in the trust context. To the that it is as a of trust beneficiaries from by of their trustee or of their the trust it can be said that that can be by other and in a more of the were to the with the they said, and were at the of the that the existence of the The for the was a the not and at the time this and the into that the that not a to the of the on which the of and had been But it a while before it was that it just the from the that The apparently as a of a the were not by This been the was by from the on to has all the of it is an unlikely on which to that might the of to or the of and and in this the of to and the of to only to in its is The to this is the of and of this after long has to its a with the trust both in terms of and of and the in They that, given and on the part of the and there is for to the and trust will be to in that their is a of otherwise is he and he has or trusts will his and an to be at v was the of the under the that If the of has to any person to be of or … and that by it is to exercise control over he may an that person that he be I of only which might the of I a said in a rather just what I choose it to more nor question said you can words so different question said is to be the all this long the question is whether the words a can a he I of that they and that the case be that was what the of say, their other than Lord held that his grounds not be It that the of the of such evidence of as are the of a of the power of and the of his apparently after the case in the House of Lords his judgment had been but before its others of the Lords to the In particular Lord had not been on the in the case, by that the of the nor the of nor the of would from the the Lord it that such a have been made by not in the case at I the and I not that at present I I have the for If I had not I have used different language to what I have I have not the to nor I think does the passage you But I to the as as I and to the by which it is I consider that I have it on and it seems to me fair to with a of I cannot think that the of the House will if the House is at all it will be in its judicial in the of of and in a and on words his were as a later to a Lord to a to The from Lord had on the made a the in and It may be of an to express a upon the of the House of but as so distinguished a as Lord has an appropriate in which to upon part of the of another of the it may be for a of the to his and to say that in where the by of all of was of for, and to, Lord for his the of which to to be I was that the of the of had me for writing the but not to … … are not from the but from the not from those and under the of or with but from the of their and their their and their from the limited which the before has there been so as they at the used the in the to the the the in the … . that the of the not the it seems and to at all. not the and the In Lord v as a in in v Inland Revenue Commissioners p the House of Lords to the The was a that limited the power of a to and remove The power be exercised only in respect of those he has to may be as evidence for the purposes of for an Lord said the time has to that the of this House in v were at the wrong and the of Lord was But a has the and of judgment than his and he the in a appreciation of another of the Court of then are the and which a judge to this but he must be aware of the and the He must long before more to the than he in the that the of any law may as much in its as in its He must long before their that the said no more than they He must have the to the which the the which it the which it the which to But all this is only the for he must the more power of which can into the purpose its and to that which only in the to before and he must his and will of those and which all he must his with as of what be the as it is given to to in short, the of his will be his for not as a on that that is what the in this by and It the in Lord and Lord on the and Lord Lord and Lord on the in and in the matter of the all what a trust is, and what its This case was not a but a by do not what I a said just what I choose it to more nor As the the to of & of the is the money is that where the is used as part of a it is of This is in part the trust has which are of for the of a of It from the law trust which the is in to the so of a property on the in the property is held in and to trusts of the by the In case, its its and it is to that purpose before those rather than the other way its from its as a This is more so than when it is used in the of a to the of a of or will when it will be more that Ltd v was an in in so as it that there are of and that only a degree can an within the scope of judicial It is that discretion must be exercised what does that with the used in to exercise of discretions often the in a rather It has been used and is used as a general of the things that must not be For a person with a discretion so to in He must his to the which he is bound to He must from his consideration which are to what he has to If he does not those he may be said, and often is said, to be there may be so that no person that it within the of the LJ in v Ch gave the of the had This is in In another it is into consideration It is so that it might be as in in all these things into another

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