Treacherous waters: justifying the non-application of Saunders v Vautier to massively discretionary trusts

Abstract

Under the rule in Saunders v Vautier, a beneficiary may at any time call for the trust property to be transferred to them. An unresolved question is whether this rule can apply to “massively discretionary trusts”—trusts where the trustees’ discretions effectively displace or overwhelm a beneficiary’s interests. There has been conflicting authority on this issue: while decisions of superior courts in Guernsey and Jersey have held that the rule can apply, the balance of authority in English law favours the non-application of the rule. In In re GeraldMartinSmith [2021] EWHC 1272 (Comm) Foxton J made obiter comments on the point, indicating that Saunders v Vautier does not and should not apply to massively discretionary trusts. This note discusses the case, and endorses Foxton J’s conclusion. However, it also comments on some points of principle not considered in the decision, arguing that the concept of indefeasibility should be more central to the justification for this conclusion.