The proper purpose rule after Grand View v Wong

Abstract

The Privy Council’s judgment in Grand View Private Trust Company & Anor v Wong & Ors,1 handed down on 8 December 2022, opens with the following simple statement of principle:It is a fundamental principle of equity that a fiduciary power may be exercised only for a purpose for which the power has been conferred. It is a fundamental principle of equity that a fiduciary power may be exercised only for a purpose for which the power has been conferred. The principle is easier to state than apply in practice, as the history of this case demonstrates. This fundamental principle derives from equity’s concern to ensure that, though technically intra vires and therefore permissible at law, powers are not abused (reflecting equity’s preoccupation with substance rather than form). Its origins trace back2 to a time when trusts held land for successive clearly defined interests, where powers were narrowly drawn to serve such interests and where it was possible for courts to discern the settlor’s expectations and purpose or purposes (and in doing this equity was willing to admit parol evidence3). The principle acquired the moniker “fraud on a power” though fraud is not a necessary ingredient; indeed the power holder may be acting in good faith in what they consider the best interests of the objects of the power. In Eclairs Group Ltd v JKX Oil & Gas plc4 Lord Sumption at [15] explained the reason for this terminology: “For a number of purposes, the early Court of Chancery attached the consequences of fraud to acts which were honest and unexceptionable at common law but unconscionable according to equitable principles.”