Dundee Hospitals Board v Walker [1952]
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Dundee Hospitals Board v Walker [1952] 1 All ER 896, though a Scottish case and therefore not binding in other jurisdictions, provides persuasive authority and establishes principles regarding the circumstances under which the court will intervene in the exercise of a trustee's powers.
The testator bequeathed money to a hospital under the condition that the hospital would not be taken over by the state. The will granted the trustees the power to determine, in their 'sole and absolute' discretion, whether a hospital had been taken over by the state.
The House of Lords held that the trust was valid. Lord Normand, in delivering the judgment, outlined the principles governing the exercise of trustee's powers and the situations in which the court could intervene. Lord Normand emphasised that while the testator had granted the trustees the discretion to determine whether a hospital had been taken over by the state, this discretion was not absolute. The trustees were required to act reasonably when exercising their discretion.
Crucially, Lord Normand established conditions under which the court could intervene in the trustee's decision. The court would step in if it could be demonstrated that the trustees considered the wrong question, failed to apply their minds to the right question, wilfully ignored relevant facts, or did not act honestly or in good faith. In other words, the court would intervene when there were clear instances of misdirection, negligence, or bad faith in the trustees' exercise of their discretion.
This decision set a precedent for the principle that even when a trustee is given discretionary powers, there are limits to that discretion. The court retains the authority to intervene when the trustees' actions fall outside the boundaries of reasonableness or are tainted by dishonesty or bad faith. While this case originates in Scotland, its principles are persuasive and have been influential in shaping the approach to trustee discretion in other jurisdictions.
The testator bequeathed money to a hospital under the condition that the hospital would not be taken over by the state. The will granted the trustees the power to determine, in their 'sole and absolute' discretion, whether a hospital had been taken over by the state.
The House of Lords held that the trust was valid. Lord Normand, in delivering the judgment, outlined the principles governing the exercise of trustee's powers and the situations in which the court could intervene. Lord Normand emphasised that while the testator had granted the trustees the discretion to determine whether a hospital had been taken over by the state, this discretion was not absolute. The trustees were required to act reasonably when exercising their discretion.
Crucially, Lord Normand established conditions under which the court could intervene in the trustee's decision. The court would step in if it could be demonstrated that the trustees considered the wrong question, failed to apply their minds to the right question, wilfully ignored relevant facts, or did not act honestly or in good faith. In other words, the court would intervene when there were clear instances of misdirection, negligence, or bad faith in the trustees' exercise of their discretion.
This decision set a precedent for the principle that even when a trustee is given discretionary powers, there are limits to that discretion. The court retains the authority to intervene when the trustees' actions fall outside the boundaries of reasonableness or are tainted by dishonesty or bad faith. While this case originates in Scotland, its principles are persuasive and have been influential in shaping the approach to trustee discretion in other jurisdictions.