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Galouste Goulbenkian’s Trust Settlement Case as Landmark Precedent in English Law of Trusts

Galouste Goulbenkian, a famous Armenian oil businessman, said to be the godfather of today’s
Royal Dutch Shell plc (and known famously as Mr. Five Percent) is remembered today because
of the Galouste Goulbenkian Charitable Foundation in Portugal operating fabulous museums of
However, few know that his name is also connected with a landmark English case on law of
trusts in Re Gulbenkian’s Settlements Trusts [1968] UKHL 5 which establishes the criteria for
determining certainty in trusts – an absolute condition for validity of any trust in English law.
As a small introduction, it should be noted in general that English trusts law originally arose out of
equity – the means by which a rule-based legal system is able to achieve fairness in individual
The basic idea behind a trust is that it separates legal and beneficial ownership in property
between one or more “trustees” (who hold the legal ownership) and “beneficiaries” (who hold the
beneficial ownership). The person who originally owned both – the legal and beneficial ownership
in the property (the settlor) transfers property to the trustee to hold on behalf of the beneficiaries
usually with instructions on how to deal with the property and what are the conditions upon
satisfaction of which the full legal ownership may be transferred to the beneficiaries of trust.
For a valid trust in English law inter alia there needs to be certainty of intention to create a trust,
certainty of subject matter, i.e. the property subject to trust and certainty of objects, i.e. the
certainty of beneficiaries of a trust (Knight v Knight (1840) 49 ER 58).
It is usually the case that the settlor will name the specific beneficiaries of a trust without in which
case the trust will be deemed to be a fixed trust or the settlor may choose to name only a class of
beneficiaries without naming anyone specific (discretionary trust).
Depending on the type of powers of the trustees, the trust will either require the trustees to
exercise their powers (i.e. obligatory exercise say to pay X amount of money every month to the
named beneficiary), require the trustees only to consider from time to time whether the power is
exercised (but not to exercise it) which is deemed as a “mere power” or discretionary power, or
trustees are vested with discretionary powers but are obliged to exercise it with respect to the
In all three cases mentioned above, the certainty of the object, i.e the beneficiaries for whose
benefit the trust is settled needs to be determined. With respect to fixed trusts, the test applied by
the English courts is that of the full list – i.e. any and all beneficiaries of the trust shall be named
in the trust.
In a discretionary “mere power” trust, the test for the fiduciary mere powers was established in
Gulbenkian’s Settlements [1970] AC 508. Calouste Gulbenkian had made a settlement in 1929
by which the trustees should had “in their absolute discretion” while his son Nubar Gulbenkian
was still alive give trust property to “Nubar Sarkis Gulbenkian and any wife and his children or
remoter issue for the time being in existence whether minors or adults and any person or
persons in whose house or apartments or in whose company or under whose care or control or
by or with whom the said Nubar Sarkis Gulbenkian may from time to time be employed or

It was argued that this settlement was too uncertain of its object to be enforced as a declaration
of trust.
Lord Denning of House of Appeal, while reversing the judgment of the court of first instance
(House of Lords upheld the judgement of the House of Appeal) stated that “if there is some
particular person at hand, of whom you can say that he is fairly and squarely within the class
intended to be benefited, then the clause is good. You should not hold it to be bad simply
because you can envisage borderline cases in which it would be difficult to say whether or not a
person was within the class”.

Author: Gor Margaryan
Managing Partner, Legelata Law Firm


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