1.2 - 3 certainties

Question 1

Jones v Lock

Answer 1

The judge held that it would be dangerous if “loose conversations of this sort” were sufficient to declare a trust.

Heheld that all the father meant was that he intended to provide for his son, rather than to create a proprietary interest in the cheque for the child.

Question 2

Re Barlow’s Will trusts

“Friends” uncertain?

Answer 2

Browne-Wilkinson J denied that “friends” was “too vague to be given legal effect”, and he stipulated criteria for its application:

1. Relationship must have been long standing
2. relationship must have been a social relationship as opposed to a bsuiness or professional relationship
3. although thtere may have been long periods when they did not meet, when circumstances did permit, they must have met frequently.

Question 3

Re Gulbenkian

What did he think of “friends”

Answer 3

Lord Upjohn used “old friends” as a paradigm example of conceptual uncertainty.

Question 4

Why does using the word “trust” not follow that a trust is created?

Answer 4

This is because the use of the word “trust” might not be intended to refer to the private law institution of a trust, but might instead be used in a “higher” public law sense to refer to the trust that is bestowed on public officials as regards how they deal with particular property for the benefit of citiziens.

Question 5

Knight v Knight

Answer 5

Lord Langdale:

A trust will be created if:

1. The words are used that they ought to be construed as imperative. There was intention
2. Certainty of subject matter
3. Certainty of objects

Question 6

Why do we need the three certainties?

Answer 6

Essentially so that the court can step in and execute the trust if the trustees don’t do that for them. If the court doesn’t know what was intended and doesn’t know what the subject matter is, and who the beneficiaries are to be, how could the court execute the trust? Three certainties are there to make the task of the court in executing the trust straightforward.

Question 7

Re Kayford

Answer 7

Intention is a question of interpretation and substance: no specific form of words necessary.

What matters is that, in substance, a sufficient intention to create a trust has been manifested.

Question 8

Re Snowden

Answer 8

? Imperative words (i.e. words of obligation) will generally be indicative of an intention to create a trust e.g. must, shall, will distribute trust fund. A moral or family obligation will not suffice, however: Re Snowden:

Held: that there was insufficient evidence to show that the testatrix intended to bind her brother by any legally enforceable trust as to the disposition of residue, and that there was no more than a moral obligation imposed on him to distribute it as she herself might have done.

Question 9

Re Hay’s Settlement Trusts

Answer 9

Megarry V-C: fiduciary power

• A trust = trustee bound to execute it. The court will enforce it.
• A fiduciary power: he has to consider from timt to time, and court may direct him to do this.

He must:

• “make such a survey of the range of objectives or possible beneficiaries”.
• Find out the “permissible area of selection and then consider”

How?

• He must consider what persons are objects
• No need to compile a complete list.
• What is needed is an appreciation of the width of the field. #

He should not prefer the undeserving to the deserving, but he is not required to make an exact caluclation.

Three things:

1. Consider periodically whether to exercise the power
2. Consider the range of objects of the power
3. Consider the appropriateness of individual appointments.

Instrument provided “at the discretion of the trustees” of such appointment in trust for the nieces and nephews of the settlor now living in equal shares among them. .

• Held: these words were indicate that there was certainty of intention behind these words that the trustees had a power (fiduciary power) to appoint or distribute money to anyone in the world, except a handful of people. There was a Fiduciary power because the power was held by the trustees.

Question 10

Turner v Turner

Answer 10

The court will intervene where a fiduciary power is exercised without due consideration.

Question 11

Mettoy v Evans

Answer 11

Warner J held: in some circumstances the court might be willing to step in and compel the exercise of the fiduciary power.

This is so, even though Megarry in Re Hay’s settlement indicated that the courts would compel the donee of a fiduciary power to consider exercising it. But courts have been reluctant to compel to exercise the power because this is inconsistent with the discretionary power.

This case could be confined to its facts.

Mettoy either:

• sanctions the court to intervene in powers
• or is an exceptional case with exceptional facts where should there be no way forward, the court will intervene.

Question 12

Re Brookes

Answer 12

Objects of power have a mere spes (mere hope) of inheriting property.

They have no proprietary rights in the property unless and until that power is exercised.

Potential beneficiaries cannot combine together and claim the [property themselves (unlike for trusts: Saunders v Vautier)

Question 13

What happens if trustee does not exercise theduty?

Answer 13

The court will itnervene to ensure that the duyt is discharged and fulfil the settlor’s intentions either by:

1. Directing the trustees to fulfil their duty and exercise the discretion
2. appointing replacement trustees
3. ordering that a scheme of distribution be prepared by the porential objecs of the trust
4. in default, exercising the distribution duty itself.

Question 14

Breadner

Answer 14

Trustees have to exercise their discretion within a reasonable time. If they do not, then the court will intervene. Firstly, by telling them to exercise their distribution discretion, and in default, by exercising the discretion themselves.

Trustees must exercise their discretion within a reasonable period of time, otherwise the court will intervene and exercise it on their behalf.

Question 15

Gartside v IRC

Answer 15

The HL held: objects of a discretionary trust are in competition with each other. Until the discretion is exercised, they dont know what they will get. At best they have an expectation, a mere hope.

An expectation of receiving property is not a proprietary right in a certain amount of property.

Question 16

Problem with Ottaway v Norman

Answer 16

Penner

It is not clear from the floating trust analysis whether the floating trustee has any obligations to preserve the property?

Penner thinks that the result in Ottaway can be done under traditional trust principles

Question 17

Burrough v Philcox

Answer 17

Discretionary trust

testator gave life interests to his property to his two children with the proviso that should one of the children die without issue, the surviving child had a power to dispose of the property amongst the testator’s nephews and nieces in proportions as the survivor felt appropriate. This was held to have created a trust in favour of nephews and nieces but subject to a power of selection held by the surviving child. Held: Court looked at the certainty of intention and noted that this gave rise to a trust in favour of nephews and nieces with a selection in favour of surviving child.

Question 18

Re Weekes’ Settlement

Answer 18

‘[Property to husband for life] and I give him power to dispose of all such property by will amongst our children …’ Held: it was a mere power conferred on the husband. It wasn’t conferred on a trust. The words indicated that he was not bound to exercise it. Wording did not show he MUST exercise it, so it is a power.

Romer J - you must find in the will an indication that the testatrix did intend the class or some of the class to take - intended in fact, that the power should be regarded in the nature of a trust

Question 19

McPhail v Doulton

Read the case

Answer 19

Facts: says that the trustee applied the net income of the fund in “absolute discretion”… as they think fit.

Power or trust?

CA held: power

HL held: this was a discretionary trust, overtuning the CA decision.

There was disagreements as to the nature of the disposition in this case (CA vs HL).

Question 20

Are precatory words sufficient alone?

Answer 20

words of desire, wish, confidence, pleading no longer sufficient alone to indicate to create a trust. The court will take account of the whole context.

Question 21

Re Adams and Kensington Vestry

Answer 21

• Precatory words: words of desire, wish, confidence, pleading no longer sufficient alone to indicate intention to create a trust. Court will take account of whole context.

Facts: In a will - ‘[property to wife] in full confidence that she will do what is right as to the disposal thereof between [my] children’ Precatory words: “in full confidence”, from certainty of intention view. Held: these were precative words giving rise to a moral imperative and not an imperative to distribute the property. It was not a trust. In fact, this gave rise to an absolute gift. Outright gift to wife, with moral obligation but it is still an absolute gift with moral force that does not have legal direction.

Cotton: “some of the older authorities went a great deal too far in holding that some particular words appearing in a will were sufficient to create a trust”. We must look at the whole of the will.

Question 22

Gold v Hill

Answer 22

It was held that a man who orally directed the beneficiary of his life insurance policy to ‘look after Carol and the kids’ had intended to impose a mandatory obligation and created a trust

The Court said that it is the duty of the court to make sense of the party’s intentions, however obsure and ambiguous, to give reasonable meaning to that lanaguage without doing violence to it.

Held: trust.

Question 23

: Comiskey

HL.

Answer 23

Contrast this case with Re Adams and Kensington Vestry. This was 20 years after that case.

Property transferred “in full confidence” but court did find trust here because, taken as a whole in the whole context of settlement there was a intention to give rise to trust. Here in a gray area whether these words will give rise to a trust or not. This involved precatory wording.

Question 24

Jones v Lock

Answer 24

An intention to create a trust is distinct from a general intention to benefit.

Facts: father gave £900 cheque to baby and said “I give this to baby and put it away for him” and lock it into safe. Father dies before an arrangement was made which allowed the baby to receive this. Held: this did not create a trust. Father intended his son to benefit from the £900 but not enough certainty of intention to create a trust. Instead what is more likely is that it is a gift. The Intention to benefit is different from an intention to create a trust.

Question 25

Paul v Constance

Answer 25

Intention in informal dealings.

Analyse words but can also infer intention from conduct: actions and conduct.

Facts: Constance and his wife separated. Later, Constance met Paul and they began living together. When Constance received £950 as damages for personal injuries, he and the Paul decided to open a bank account in Constance’s sole name but from which Paul could also withdraw money. On many occasions, both prior to the money (including later bingo winnings) being deposited, Constance told the Paul that the money was as much hers as his. When Constance died having made no will, Bridget (the first wife) claimed the money in the account was hers as his wife. Paul claimed that the money in the account had been held by Constance on express trust for himself and her equally.

Held: we can infer from the conduct alone that a trust was created. The putting the money into the account is sufficient to give rise to a trust. Actions matter. Before this, it was felt that actions were irrelevant and that intentions would be inferred from the words used. This opened the door that actions AND conduct will help infer intentions.

Question 26

Re Kayford

Answer 26

Intention in the insolvency context

Where there are insufficient funds to satisfy all creditors in an insolvency context, claimants may wish to argue they enjoy a proprietary interest in the fund under an express trust and therefore their claim to the assets takes priority over general creditors:

Facts: Kayford was advised to open a customer deposite account, where money would be held until customer goods were delivered. Kayford asked the bank to create a separate account, but they did not. Kayford became liquidated. In subsequent liquidation proceedings the question arose whether the sums of the money paid into the bank account were held on trust for Kayford’s customers or whether they formed part of the general assets of the company.

Held: that the customers’ money was held on trust and should be returned to them. There had been discussions between Kayford and the accountants for the bank account to be set up demonstrating an interntion to create a trust. Setting up a separate account is sufficient conduct to which certainty of intention can be inferred. Not only words but conduct is important.

Question 27

Don King Promotions Inc v Warren

Answer 27

Intention in the commercial context: ‘business common sense’.

Facts: The parties entered into an agreement. The question was whther the purported assignments amounted to a declaration of trust?

Held: Despite the agreements being expressly incapable of assignment and no evidence of clear intention to create a trust, the court held that ‘as a matter of business common sense’ the parties must have intended that a trust be created. This finding fulfilled the parties’ overriding intention and reflected the commercial reality of dealings between them said Lightman J.

a trust MUST have been, as a mater of business sense, been what they intended. Reflecting the commercial reality of them. Court should hold and upstand the “business reality”.

Drifting away from using “clear express words to create a trust. Court will find a trust if it “meets the business reality of the situation”, it is “business common sense”. The court is carving more lenient rules in business context.

Question 28

Quistclose

Answer 28

Where a creditor advances a loan to an individual (the debtor) or another company, the loan is advanced for a specific purpose (i.e. dividends to shareholders) and that purpose fails and is not fulfilled (i.e. company goes insolvent before it happens), the money is held on trust for the creditor. This is a Quistclose trust. Result: creditor can get their money back.

What is required to evidence the certainty of intention: all that is needed is evidence that the money was advanced for a specific purpose. If you are a creditor who gave a loan to advance a specific purpose, this is enough for a Quitstclose trust occurs. Express words do not need to be used. The court made a special rule in the case of business situations of creditors and loans.

Question 29

What is certainty of subject matter?

Answer 29

This means we must be able to ascertain:

1. What property is to be held on trust
   
   1. Trust property
   2. Mechanism or exist of beneficiaries entitlement
2. The extent of beneficiaries interests.

Question 30

Don King Productions v Warren

Answer 30

Non-assignable, personal contracts can be trust property. The benefit under a contract can be a trust property. The trust arose in agreements of boxing contracts. Trust can be a benefit under contract.

Question 31

Hunter v Moss

Answer 31

trust property can be shares in a property. Shares are not tangible but can be benefit of trust.

Question 32

Re Ellenborough

Answer 32

Future property will be too uncertain to give rise to a trust unless it is certain.

Facts: The claimant purported to assign to trustees any property to which she might become entitled under the wills or intestacies of her brother and sister. The sister died in 1895; the claimant received a share of her estate; and she transferred it to the trustees. When the brother died, she did not wish to transfer the property to the trustees. She therefore took out a summons to decide the question whether she could refuse to do so.

Held: Held: no trust existed, all there was, was a mere promise to potentially create a mere trust over future property. There is no contract here either because no consideration to create legal relations. There was nothing here in the wording to stop her from going back on her words.

Question 33

Sprange v Barnard

Answer 33

1. The ‘whatever is left’ trust?: PROPERTY

Facts: £300 in securities given to a husband and on his death ‘the remaining part of what is left, to be divided equally amongst three named persons.

Held:

it is too uncertain because if court is called upon to exercise the trust (trustees do not exercise trust), the court was unsure how to distribute, unclear of the subject matter, all they would have is: “what is left – this leaves ambiguity. Therefore, husband is absolutely entitled, he received this as an absolute gift. This case:

1. Demonstrates the courts’ key concerns which is: what if they do if they are called upon to exercise a trust.
2. When certainties fail, what happens to property. In this case, when certainty of subject matter is not present, court needs to decide where property goes – in this case it went to husband.

Question 34

Ottaway v Norman [

Answer 34

Floating or suspended trust

Facts: father died and his son and daughter claimed that father left his house, contents and money to a housekeeper. Children said he left property to housekeeper but only for her lifetime, when she dies, they claimed the property was held on trust for them. This looks like a “whatever is left” case. We do not know how much the housekeep will use or exhaust, so looks uncertain for subject matter point of view. Courts held: this is acceptable that we do not know how much housekeeper will use because we will put on this a “floating or suspended” trust. They say that a trust is essentially floating above the property during the housekeeper’s lifetime. When she dies, this floating trust comes into being and a full trust is created. If they use this analysis, the court says it does not matter that we cannot say with any certainty how much the children will gain.

This floating trust has been recognised in english law, but only in the specific context of secret trusts. There is no reason (says Virgo) why this concept cannot be applied more generally.

Question 35

Palmer v Simmonds

Answer 35

1. The ‘bulk of my residuary estate’ trust?

The expression of confidence was sufficient to create a trust. But the subject matter was no sufficiently certain.

Kindersley V-C held: When someone said bulk, what is meant is not the whole, but a greater part. But this term does not express a definite, clear, certain part of her estate.

Held:“bulk of residuary estate” was too uncertain. Harrison took absolutely, he took this as an absolute gift.

Kindersley - “she has not designated the subject as to which she expresses her confidence”

Question 36

Pearson v Lehman Brothers

Answer 36

1. Trust of the ‘residue’

Residue is, in most cases sufficiently certain.

Briggs J - A trust does not fail for want of certainty merely because its subject matter is at present uncertain, if the terms of the trust are sufficient to identify its subject matter in the future.

Question 37

Is there a difference between “Whatever is left” property and “residue” property?

Answer 37

Whatever is left property is not sufficient subject matter: Sprange v Barnard

Residue property is sufficient subject matter: Pearson v Lehman Brothers

Question 38

Re Golay’s Will Trust

Answer 38

1. The ‘reasonable income’ trust

Trust which provides for a reasonable income for beneficiaries

Facts: Direction in a will to executors ‘to let X enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties’

Ungoed-Thomas J held: the yardstick indictated is not what he subjectively considers to be reasonable, but what he identifies objectively as reasonable. The court is constantly involved in making such objective assessments of what is reasonable. Here, the testator intended by reasonable income the yardstick which the court would apply in quantifying the amount. The cout can make an objective assessment as to what is reasonable.

Question 39

Authorities on segregation of property

Answer 39

Lower court: London wine

PC : Goldcorp

CA: Hunter v Moss

Re Harvard Securities

I do not consider that I can hold that Hunter is not binding on the basis that it has been effectively overruled by Goldcorp. First, it appears to me that while the decision in Hunter is undoubtedly binding on me in principle, the decision in Goldcorp, being that of the Privy Council and not of the House of Lords, is not binding on me, and would not have been binding on the Court of Appeal in Hunter. Secondly, I refer again to the way in which Dillon LJ distinguished London Wine: he said it was “concerned with the appropriation of chattels and when the property in chattels passes”, whereas in Hunter the Court of Appeal was concerned with shares and a declaration of trust. In my judgment, therefore, the ground upon which the Court of Appeal in Hunter distinguished London Wine is substantially the same ground upon which Goldcorp can be distinguished from Hunter.

Question 40

Re London Wine Co

Answer 40

1. Trusts of part of a larger bulk of property. The orthodox approach: trust property must be segregated from a larger bulk

Facts: London Wine allowed customers to buy wine, mostly as an investment. Customer were sent documents confirming their ownership. The customers’ wine was not segregated from the other London Wine company stock. Company went into liquidation: did the wine belong to the company or were they held on trust?

Held: relying on the sale of goods law AT THE TIME, since been amended. Held: the company did not hold bottles of wine on trust for customers because it could not be said which wines were subject to trust and which wines were subscribed to the customer. If you have not segregated it, we do not know the subject matter. YOU NEED TO PHYSICALLY SEGREGATED.

Question 41

Re Goldcorp Exchange

PC decision

Answer 41

The orthodox approach: trust property must be segregated from a larger bulk.

Facts: Godcorp acquired bullion for clients, but then went into liquidation. The customers argued that bullion was held on trust for them and so they ranked as secured creditors ahead of the company’s other creditors. Held: The subject matter had not been segregated, could not point specifically to gold bullion for customer A or B so no trust. This is a strict approach. Trust of large bulk needs to be segregated from a larger trust.

Question 42

MacJordan Construction v Brookmount

Answer 42

• An exception for intangible or fungible property?

Facts: MacJordan were sub-contractors for Brookmount as main contractors. Stage payments were to be made to the sub-contractors periodically during building works. Brookmount had a a single bank account, so it was mixed with moneys to be paid to other parties and the money owed to MacJordan was not therefore segregated. Brookmount went into insolvency before MacJordan received its money. MacJordan argued there was a trust of the moneys in the account in its favour.

Held: this may be intangible or fungible property, but trust still fails because you have no priority over others because property is not separated. This case follows authodox approach of Re London. MacJordan did not treat intangible or fungible property as different.

Question 43

Are tangible and fungible property in one big account allowed?

Answer 43

Tangible property no: Gold Bullion and Re london wine

Fungible no: MacJordan v Brookmount

BUT : Hunter v Moss

Question 44

Hunter v Moss

Answer 44

Change of approach to other property cases:

Facts: involved shares, that Hunter’s payment would include shares in the property. Mr Moss had declared himself trustee for Mr Hunter of 5% of the company’s share capital (i.e. 50 shares). The parties subsequently fell out and Mr Hunter never received his shares. Mr Moss argued that, as the 50 shares has not been segregated from the larger share holding, the trust failed for lack of certainty of subject matter.

Court held: there was an effective trust. drawing an analogy on wills, the judge held that if someone in a will can leave a legacy of 50 shares out of 100, Mr Moss can do it alive. We can distinguish Re London Wine because this involved chattels, physical forms of property – tangible. Whereas here it is intangible shares and each share is identical to another, it is fungible. So to say Mr Hunter is entitled to 50 shares. They are all the same anyway. There was also an express trust in this case, distinguishing London Wine and Goldcorp, maybe this is the reason for the difference? but this was rejected by Neuberger in Re Harvard Securities.

Question 45

Why does Virgo think thaat Re London Wine and Re Goldcorp would be decided differently today?

Answer 45

The result of these sale-of-goods cases would be different in England following the enactment of the Sale of Goods Act 1995, which provides that a purchaser of an unascertained part of a bulk of goods acquires property rights in that bulk.

Question 46

What did Alastair Hudson

think about hunter v moss?

Answer 46

Hunter v Moss is wrong and should not be relied upon”.

Firstly, it contradicts an element of property law which requires there be “specific and identifiable property” to be subject to a property right. Secondly, he suggests it is difficult to see why there should be a dividing line between intangible and tangible property, since there are some principles which apply to both. 500 ball bearings are tangible, but identical; under Hunter, there is no reason these should also not require separation, so the distinction between tangible and intangible is thus “spurious”

Question 47

What was the significance of hunter v moss?

Answer 47

Hunter is commonly cited as having said that with intangible, identical property, it is not necessary to segregate the trust and non-trust sections. In fact Dillon LJ never said such a thing, although “it is the obvious conclusion to draw [from his statement]”. He merely distinguished Re London Wine Co, allowing him to decide the case on the facts alone. Hunter was reluctantly applied in Re Harvard Securities, where Neuberger J reluctantly decided that it had said there was no need to segregate intangible property.[13]

Outside of England and Wales, the decision has not been applied. In White v Shortall,[14] the Supreme Court of New South Wales explicitly rejected Dillon’s reasoning.[

Question 48

What do the problems in Hunter v Moss cause?

Answer 48

• Reference to the law of wills is problematic, there are good reasons why the law of wills is different on the law of making gifts or trust when someone is alive, because when someone dies, there is a procedure about organising property which does not exist when someone is alive. Therefore, drawing it will wills is problematic.

Question 49

Re Harvard Securities

Answer 49

Confirms Hunter v Moss by saying it carved out a special rule for intangible property and in particular shares. Re Harvard is trying to make sense of the law. Case says, looking at hunter v moss there is a special case involving shares. When a case involves shares, you do not need to segregate them.

Facts: Harvard purchased shares in various companies and sold them on to clients in parcels of shares. Held: Despite shares not having been designated, there was a valid trust. Following hunter v Moss, there is a specific rule on shares.

Neuberger J: was unhappy about following Hunter v Moss, he tries to make sense of it. Court has to follow hunter v moss. “While I am not particularly convinced by the distinction, it appears to me that a more satisfactory way of distinguishing Hunter from the other cases is that it was concerned with shares, and not with chattels. “ Difference between shares and tangible property.

, it appears to me that a more satisfactory way of distinguishing Hunter from the other cases is that it was concerned with shares, and not with chattels.

Question 50

Re Lehman Brothers

SUPREME COURT

Answer 50

Hunter was applied in the SC!

Facts: Lehman Brothers were required to segregate client money in separate trust accounts due to FSA regulations. Court held:

this was a valid statutory trust despite non segregation. Following rules, it is specific to its facts:

1. Deals with finance authority rules
2. Deals with statutory trusts

Briggs (AT THE HIGH COURT, NOT SC) has the most important comments about Hunter v Moss:

1. He preferred the proportionate shares approach than the idea of shares v chattels. He says that if there is a mass of shares, if you can point to a percentage or a proportion to be trust property, then it is sufficiently certain.
   
   1. This is the approach taken in the White v Shortall.
2. If someone wants to create a trust in shares of a company (10%), the mere fact of setting out a proprotion is sufficiently certain.
3. This is not what the court is saying in Re Harvard Securities, this is a position in Austrialia, in their top courts.
4. If you can say a percentage of a larger bulk - you can perhaps say this is sufficiently certain.

Briggs J in HC says this should be the way, if you can point to a proportion, this is acceptable, ignore shares/non shares, just look at the proportion. THIS IS NOT THE LAW, but should it be the law. 10% of wine in the winehouse, Briggs says this is certain. BUT THIS IS NOT THE LAW only Briggs thinks it should be.

Question 51

Parkinson, ‘Reconceptualising the Express Trust’

Answer 51

Fluctuating /non-fluctuating mass:

Can distinguish Re London Wine because dealing with a large mass, which vary over time to time, it fluctuates. The Gold Bullion fluctuated in mass because not all was held on site. Where there is a fluctuating mass, there needs to be segregation. In Hunter v Moss, shares are just sat there, non-fluctuating. A series of ways of making sense of the case law.

Question 52

Emery, ‘The Most Hallowed Principle - Certainty of Beneficiaries of Trusts and Powers of Appointment’ (1982) 98 LQR 551

Answer 52

Read

Question 53

McPhail v Doulton

Answer 53

Certainty of objects

1. The most hallowed or ‘cardinal principle’

Lord Wilberforce:

“A trust should be upheld if there is sufficient practical certainty in its definition for it to be carried out.”

Question 54

What are the 4 aspects to certainty of objects?

Answer 54

1. conceptual certainty
2. evidential certainty
3. ascertainability
4. administrative workability

According to Emery in “The Most Hallowed Principle”

Question 55

What is “conceptual certainty”?

Answer 55

this refers to the precision of language used by the settlor to define the class of person whom he intends to benefit.

Whether a class is certain.

Question 56

What is evidential certainty?

Answer 56

1. this refers to the extent to which the evidence available in a particular case enables specific persons to be identified as members of those classes – and so as beneficiaries or potential beneficiaries;

E.g. if trust for Nobel Prize Winners - there will be a list of names, can provide evidence.

Question 57

What is Ascertainability?

Answer 57

This refers to the extent to which ‘the whereabouts or continued existence’ of persons identified as beneficiaries or potential beneficiaries can be ascertained.

Can you actually locate the people who are to benefit under the trust?

Question 58

What is ‘Administrative workability’?

Answer 58

this refers to the extent to which it is practicable for trustees to discharge the duties laid upon them by the settlor towards beneficiaries or potential beneficiaries.

Question 59

Table of the certainty of objects

Answer 59

Conceptual certainty

Evidential certainty

Ascertainability

Administrative workability

Fixed trust

YES

YES

NO

NO

Discretionary trust (Burrough)

YES

YES

NO

NO

Discretionary trust (Baden)

YES

NO

NO

YES

Power of appointment

YES

NO

NO

NO

Question 60

With fixed trusts, is there a requirement to have a “complete list”?

Question 61

IRC v Broadway Cottages Trust

Answer 61

Fixed trusts - trustees must be able to draw up a complete list of all beneficiaries who are to benefit under the trust.

HL confirmed this in Re Gulbenkian’s settlement

If cannot draw up complete list, don’t have certainty of objects, trust will fail.

Question 62

Re Gulbenkian’s Settlements

Answer 62

Confirmed IRC v Broadway Cottages Trust that for fixed trusts the trustees must be able to draw up a complete list of all beneficiaries who are to benefit under the trust.

1. Moreover, the complete list must be capable of being drawn up at date of execution of the trust, not necessarily the date it was created.
2. Do not need every beneficaries full name, but enough to be able to identify them. The HL gave the example of a trust for old friends - said it is conceptually uncertain as the phrase can have different meanings: aged friends or long standing friends.

Question 63

Re Sayer

Answer 63

Complete list test:

A trust for employees and ex-employees failed because there was no employee register.

Question 64

OT Computers

Answer 64

A trust for urgent suppliers failed because it is too conceptually uncertain - what is meant by urgent - could not draw up a complete list so the trust failed.

Question 65

Burrough v Philcox

Answer 65

Discretionary trusts of Burrough type: the ‘complete list’ test

Smaller, often family trusts. Case law confirms complete list test is the correct test. Closer to fixed trust than Baden type trust. What we need is conceptual certainty and evidential certainty

Question 66

Re Baden’s Deed Trusts (No 2)

Answer 66

1. Discretionary trusts of Baden type: the ‘is or is not test’

Before Re Baden, the court in IRC had said that the complete list test would apply to fixed and discretionary trusts.

But McPhail radically altered this position and changed the test for the Baden type.

• The court rejected the complete list test - this means that the same test for certainty applies for powers as it does for discretionary trusts.
• The Court noted that the distinction is narrow so makes sense that test applies, rejected complete list idea

Trustees of this type have duty to survey, come up with potential beneficiaries, to do that a complete list isn’t needed.

• Do not need evidential certainty (Re Baden No.2) CA.
  
  • What is meant as relatives, the 3 judges took different views:
• • Sachs LJ
    * Sachs LJ takes a more lenient approach. Sachs LJ thinks that the McPhail test only applies to conceptual uncertainty, not evidential uncertainty. In other words, if the court knew all the facts in the universe like a God, it must always be able to say whether a given person is an object of the trust. If the problem is simply that the person has difficulty proving that there are an object, there is no problem. If a purported trust uses a word like “friends”, that would be conceptually uncertain because the word “friend” is inherently ambiguous. If a trust used the words “anybody who gave me money on the 1st October 1951”, that would be evidentially uncertain but not conceptually uncertain. It will be extremely hard, if not utterly impossible, for anyone to prove that they gave money to the settlor 50 years ago - but the trust is at least theoretically certain.
    This boils down to using burdens of proof to get around the problem. As long as it is theroetically possible for people to prove that they are objects, that is fine. The burden of proof is on people who think they are objects to show this: if somebody’s name goes into the “don’t know box”, they are assumed not to be objects.
    * In deciding the is or is not test, the burden of proof is reversed, placing the burden is on those that think they should be a beneficiary to prove they belong to the class, if they cannot - they are outside it.
    
    • Megaw LJ
      
      • ​Trusts of a Baden type will be valid if a substantial number of objects are within the class. If there are a small number of people we are unsure if they fall within the trust, then the trust is invalid.
      • All we need to demonstrate is that there is a substantial number of people. If we are certain about most class of objects, trust is void. Do not worry about one or two people. This is not what Mcphail v Doulton is saying. Is or is not test is more certain but Megaw is trying to make test more certain. But he cannot he is only a CA judge not HL!
      • thinks that the McPhail test is satisfied if a substantial number of people are definitely objects of the trust. This is very difficult to reconcile with House of Lords in McPhail.
    • Stamp LJ
      
      • ​Must be possible to say of any individual whether he is or is not a member of the class. If you c annot, they will be outside the class and the trust will fail.
      • that the McPhail “is or is not” test means you must be able to tell with certainty whether a given person is or is not an object of the trust. If there is anybody about whom it is unclear whether he is or is not an object, the trust fails for uncertainty of objects. In other words, you MUST be able to put EVERYBODY into a “yes” or “no” box. If there is anybody who goes into the “don’t know” box, the trust fails. This appears quite harsh. However, Stamp LJ wasn’t so harsh on the facts - he interpreted “relative” to mean “next-of-kin” - which is a little bit fishy.

The HL in Re Baden No.1 said this is the only trust that needs administrative workability. E.G. a trust for the whole of london is not sufficient

Out of the three, I back Sachs LJ. His approach is pragmatic and sensible. Megaw LJ’s interpretation is clearly not what the House of Lords said in McPhail. Stamp LJ’s interpretation is very harsh and relies on playing semantic games (i.e. treating “relatives”, an ambiguous term, as meaning “next-of-kin”) to get around its harshness.

Question 67

Re Barlow

Answer 67

FACTS: Barlow leaves paintings, said paintings can be distributed to his friends on small payment to trustees.

Question 68

McPhail v Doulton

Answer 68

Administrative unworkability: applicable only to Baden type discretionary trusts

Wilberforce: - [Where] the meaning of the words used is clear but the definition of the beneficiaries is so hopelessly wide as to not form ‘anything like a class’ so that the trust is administratively unworkable.

Question 69

What is the difference between the Baden and Burrough type discretionary trusts?

Answer 69

There are some discretionary trusts, then, which (if the trustees default) the court will execute by dividing the trust property equally among all potential beneficiaries. We call call these trusts “the Burrough type”. There are others. Which (if the trustees default) the court will not execute by equal division among all potential beneficiaries. These are the “Baden” type. The distinction is what the settlor appears to have intended. In both cases, our cardinal principle requires that the court must know with “sufficient certainty” the objects of the beneficence of the donor so as to execute the trust.

Question 70

R v District Auditor

Answer 70

held that a discretionary trust created by the council for the benefit of the residents of West Yorkshire was not capricious, distinguishing from Re Hay’s Settlement Trusts. This is the only case where a trust failed for administrative unworkability. County council structure was being dismantled . The size of the class problematic.

Question 71

What is the added element for powers?

Answer 71

Capriciousness

Question 72

Re Manisty’s Settlement

Answer 72

OBITER comments only:

Templeton J said powers may fail for being capricious. There must be a logical and rational link between the person creating the power and those who might potentially benefit under it.

Question 73

Re Barlow’s Will Trusts

Answer 73

1. Curing uncertainty: a series of conditional gifts?

Testator directed his trustees “to allow.. any friends of mine who may wish to do so to purchase paintings. Browne Wilkinson treated this as a series of individual gifts to persons answering the description “friend”. In this case, paintings left in will to be sold to members of family and friends of testator at a very reduced price. Court said it was too uncertain to be a trust, but would fail for certainty of intention. But court interpreted it not as a trust at all, but as a series of conditional gifts with trusts attached. If anyone came forward to demonstrate that they were within the terms, they could satisfy the condition, they were entitled to buy a painting at an undervalue. Not a trust at all, but a series of conditional gifts.

The problems of certainty arise here. Held that the trust that would otherwise be invalid because it is uncertain. It could be interpreted differently, not as a trust at all, but could be interpreted as a series of individual conditional gifts, meaning a series of gifts to which conditions attach. If we construe it that way, it is valid.

Question 74

If a trust is uncertain, how can this uncertainty be cured?

Answer 74

1. Conditional gift: Re Barlow’s will trust
2. Independent experts and trustee discretion

Question 75

Re Leek

Answer 75

A trust for the benefit of such persons as the company may consider to have a moral claim on the settlor.

Buckley J: what this meant was that the trustees could use their interpretation of moral claim to identify who can have the property. Not anyone’s moral claim but what the trustee’s point of view was on moral claim. Objective test is sufficient and certain

Question 76

Re Tuck’s Settlement Trusts

Answer 76

A trust of money for children if they married a woman of Jewish blood. Testator wants his offspring to remain in Jewish faith. Any disagreement is to be resolved by chief Rabbi in London.

Denning: draw an analogy with the law of contract, where parties can refer to a third party for decisions and are bound by this. The settlor could leave a decision to a third party.

Problem with denning: the analogy with the law of contract is not exact, since, under the law of trusts, the court does have a supervisory jurisdiction for the benefit of the beneficiaries. Lord Dennign thought that conceptual uncertainty could be resolved by a third party.

Eveleigh LJ: The third party does not resolve uncertainty, but forms part of the definition of the class. The definition of the class is those people whom the chef ravvi considers to be of Jewish faith. In other words, the relevant concept is not objectively those of jewish faith, but those whom the chief rabbi considers to be of Jewish faith.

Russell didn’t think it was uncertainty in the first pace.

Question 77

Re Tepper’s Will Trusts

Answer 77

The testator left his residuary estate upon trust for grandchildren provided they should not marry outside the Jewish faith. Held: the clause created a condition which was void for uncertainty but extrinsic evidence was admissible to clarify the meaning of the express “of jewish faith” in the way that was consistent with the notion that the testator had in mind.

Followed Eveleigh’s approach in this case

Question 78

What happens if the three certainties are missing:

Settlor purported to self-declare as trustee

Answer 78

there is simply no trust – no trust takes effect – the settlor remains wholly entitled to the property;

Question 79

What happens if the three certainties are missing:

• Where property was transferred to purported trustees to hold on trust:

Answer 79

• If absence of certainty of intention/objects – purported trustee will hold the property on resulting trust for the settlor i.e. property will ‘bounce back’ to settlor;
• If absence of certainty of intention/subject matter/objects – court may interpret transfer as outright gift to purported trustees.

Where uncertainty as to part of the trust instrument, the court may be able to sever that uncertain clause and save the remainder of the instrument.

Question 80

Re Kayford

Answer 80

1. Certainty of words or intention

The wording used around the time the device was created is used to work out intention, analysing the words and their nature. Intention is a question of interpretation and substance: there is no specific form of words necessary, no technical phrasing or special formula – even the word ‘trust’ need not be used:

Nature of the words used.

Facts:

A mail-order company was in financial difficulties and used a separate bank account to deposit money received from customers whose goods had not yet been delivered. It was held that a truste had been created. A trust can arise even when the word ‘trust’ is not used. What matters is the substantive intention of those creating the device.

Megarry J:

“The question is whether in substance a sufficient intention to create a trust has been manifested. As for the requisite certainty of words, it is settled that a trust can be created without using the words ‘trust’ or confidence or the like…”

What matters is that, in substance, a sufficient intention to create a trust has been manifested.

Question 81

Re Snowden

Answer 81

A moral or family obligation will not suffice.

Facts: An elderly lady who could not decide how to leave her property among her nephews and nieces left it all to her brother, Bert, telling him that he would ‘know what to do’. It was held that she had not intended to impose a mandatory obligation on him to hold the property on trust for her nephews and nieces, but merely expressed a moral obligation to distribute the property among her family.

Question 82

Re Hay’s Settlement Trusts

Answer 82

Whether a trust or a power was intended therefore turns on the degree of compulsion/obligation in the language used.

‘[a] for such persons or purposes for such interests and with such gifts over and (if for persons) with such provisions for their respective maintenance or advancement at the discretion of the trustees or of any other persons as the trustees shall by any deed or deeds revocable or irrevocable (but if revocable not after the expiration of 21 years from the day hereof) executed within 21 years from the date hereof appoint’ [b] of such appointment in trust for the nieces and nephews of the settlor now living in equal shares among them’

In this case the court was called upon to decide the certainty of the intention behind the words. They held that the trustees had a fiduciary power to appoint or distribute money to anyone in the world except a handful of specified companies. This gave rise to a power not a trust, which was fiduciary because the power was held by a trustee. This power was to distribute the fund to anyone in the world except a specified class.

Question 83

Burrough v Philcox

Answer 83

The testator gave life interests to his property to his two children with the proviso that should one of the children die without issue, the surviving child had a power to dispose of the property amongst the testator’s nephews and nieces in proportions as the survivor felt appropriate. This was held to have created a trust in favour of nephews and nieces but subject to a power of selection held by the surviving child. Certainty of intention - the court looked closely at the wording.

Question 84

Re Weekes’ Settlement

Answer 84

‘[Property to husband for life] and I give him power to dispose of all such property by will amongst our children …’ property was left to a husband for life with a power to him to dispose of such property by will amongst the children. The court said this was a mere power confirmed on the husband, not one in a trust. This was because the words indicated that he was not bound to exercise it. Imperative words – wording didn’t suggest he must exercise it therefore it was a power.

Romer J -

“The authorities do not show, in my opinion, that there is a hard and fast rule that a gift to A for life with a power to A to appoint among a class and nothing more must, if there is no gift over in the will, be held a gift by implication to the class in default of the power being exercised”

Question 85

McPhail v Doulton (aka. Re Baden No1)

Answer 85

This is an exercise in interpretation which is subjective but based on the words found in the disposition and will or deed.

Facts: In this case, there was a settlement which provided in clause 9A – ‘trustees shall apply the net income of fund making at their absolute discretion in such amounts at such times and on such conditions as they think fit.’ Is this a trust or a power?

The Court of Appeal said this was a power. There is so much discretion in this that it was closer to a power than a trust.

However, the House of Lords held that this was a trust, overturning the Court of Appeal decision. Held that it was a discretionary trust, with categorisation of Baden-type discretionary trust. (Even well-trained judges disagree and can disagree about the nature of a settlement or disposition as they did in this case.)

Lord Guest: “if it was a power the trustees would not be bound to distribute one penny of the income. This is quite contrary to the plain intentions of the settlor “

The mandatory character of the language used in the deed meant that the deed created a trust and not a mere power. The word ‘shall’ demonstrated that the recipients were under a mandatory duty to make grants, but had discretion about where they would go.

Question 86

Boyce v Boyce

Answer 86

A testator bequeathed his two houses to trustees, one to be held on trust for each of his two daughters. The terms of the trust required the trustees to convey to Maria whichever house she chose and then to convey the other house to Charlotte. However as Maria had died during his lifetime the court held that no valid trust of either house was created in favour of Charlotte because it was impossible to ascertain which house she was intended to have

Question 87

What approach should we go for in a problem question regarding seperation of funds?

Answer 87

If get a problem question: if looks like wine/gold bullion or money in MacJordan, MUST BE SEGREGATED from the larger bulk if a valid trust is to be created. However, if it involves shares, we follow Hunter v Moss and Re Harvard Securities. If we want to be critical of the law, we can push this issue and ask why can we not apply Hunter v Moss to a MacJordan set of facts? If MacJordan were decided today, one could argue that it should follow Hunter.

Question 88

Re Lehman Brothers

SC

Answer 88

Hunter was applied in this case (SUPREME COURT).

Facts: Under FSA regulations governing client assets Lehman Brothers was required to segregate client money in separate trust accounts; but it was authorised temporarily to defer segregation and deposit the funds in its current account. When Lehman Brothers went into administration, the question arose as to whether the statutory trust of client money created by the FSA regulations took effect upon receipt, or only upon the segregation, of client money.

The court upheld Hunter v Moss. Re Lehman Brothers does not change the law.

Issue in Lehman Brothers - hadn’t segregated client money from other moneys.

The court said this was a valid statutory trust, despite non-segregation following these rules.

This case is specific to its facts, dealing with financial service authority rules – dealing with statutory trusts coming into being through statutory provisions. However it is important for upholding the Hunter v Moss line and not changing the law as many had hoped it would.

Briggs J in High Court (not Supreme court) made an interesting comment about Hunter v Moss:

He preferred a proportionate shares approach to the idea of shares vs chattels.

This is the approach which has been taken in a NSW Supreme Court case – White v Shortall

Question 89

White v Shortall

Answer 89

Briggs J in High Court (not Supreme court) made an interesting comment about Hunter v Moss:

He preferred a proportionate shares approach to the idea of shares vs chattels.

This is the approach which has been taken in a NSW Supreme Court case

Facts: This case says – if have a mass, eg of shares, if you can point to a % or proportion which is to be trust property, then it is sufficiently certain.

Question 90

Is White v Shortall (NSW SC) case a good approach?

Answer 90

Proportionate approach – new way. Not exactly what court is saying in Re Harvard. Not necessarily the law as it stands – but it is the position taken in Australia in top courts. If can say % of larger bulk, perhaps that does give the certainty which is needed. This is a useful point to pull on in a problem question in this area.

Question 91

How, can we rationalise the law post-*Hunter v Moss*?

Answer 91

• Chattels/Non-chattels?

Could say wine bottles vs shares. Wine bottles have to segregate, shares, don’t.

Alternatively could say:

• Tangibles/non-tangibles?

Aligns most closely with Re Harvard Securities. Physically tangible stuff needs to be segregated, shares do not (arguably money also should not)

• Proportionate approach taken in Lehman Brothers?

As taken by Briggs J in High Court in Lehman Brothers – should that be way we rationalise the law? If proportionate, that should suffice – ignore chattels v non-chattels and tangibles v non-tangibles. This is not the law – Harvard Securities is - but should it be the law? Should 10% e.g., be sufficient for certainty. This is the approach that Pearce and Barr justify the case law on – that a better basis for making the distinction is that property is sufficiently identified if a trust is declared of a defined fractional share of a clearly identified whole.

• Solvency/Insolvency?

When a company becomes insolvent, all the general creditors come out of woodwork and say a debt needs to be paid. But for customers buying wine or in the case of MacJordan, they will lose out to general creditors if they cannot demonstrate they have a trust. If you have a trust and property rights, you jump to the front of the queue and take priority over creditors. Everyone wants to argue they have trust over a property once it’s gone bust.

Could we draw a distinction based on context – where context involves insolvency and there is a lot at stake, segregation is needed, eg, MacJordan – and in a solvent case where business is still running, perhaps segregation is not so important. This analysis could explain the MacJordan case – Brookmount had gone insolvent, and the court seeing all of the people wanting to get their share of money had to be strict on subject matter to be equitable between all parties. Interesting distinction to consider.

Question 92

Fluctuating /non-fluctuating mass: Parkinson, ‘Reconceptualising the Express Trust’

Answer 92

Idea given by Parkinson.

Can distinguish Re London Wine and Gold Corp because dealing with mass of wine and gold and this mass varied from time to time, therefore it was fluctuating. On day 1 may be 1000, day 2 might be 950. Where there is a fluctuating mass, we need segregation – e.g. wine, and gold. In Hunter v Moss however, shares are just sitting there, not fluctuating. If the mass is non-fluctuating, then shares are not needed.

Question 93

What did Gravells say about the discretionary trust of Baden type?

Answer 93

The imposition of the same “list certainty” requirement in the case of discretionary trusts had been confirmed in IRC v Broadway Cottages Trust, but almost immediately the courts began to express misgivings and to suggest that discretionary trusts should be subject instead to the less strict “criterion certainty” requirement which was application to powers. In Re Gulbenkian’s Settlements, Lord Upjohn expressed his support for this “list certainty” requirement in the case of discretionary trusts, but in McPahil v Doulton a bare majority of the House of Lords rejected that requirement and substituted a “criterion certainty” test, “similar” to the one formulated for powers of appointment, namely that a discretionary trust is valid “if it can be said with certainty that any given individual is or is not a member of the class”…

The House of Lords had to deal with two main arguments in favour of the stricter “list certainty” requirement. The first argument, that the court, if called upon to execute the trust, could do so only by equal division of the trust property among all the beneficiaries, has been considered above: Lord Wilberforce effectively said that in the context of Baden-type discretionary trusts the court would never order equal division, or indeed any division of the trust property that involved giving something to all potential beneficiaries. It followed that a complete list of the potential beneficiaries would be unnecessary. According to the second argument, even if not all members of the class are to benefit, all members of the class are entitled to be considered and for that purpose the trustees still require a complete list of the potential beneficiaries.

Question 94

McPhail v Doulton (Re Baden (No.1))

Effect

Answer 94

Before the case of McPhail v Doulton (Re Baden No1), the court in IRC v Broadway Cottages had said that the complete list would apply for Baden-type discretionary trusts.

However, McPhail v Doulton radically altered this position and changed from the complete list test, favouring instead the “is or is not” test. The court must be in a position to make a valid judgment if it is alleged that the trustees have performed their duties wrongly, and must be capable of intervening if it is alleged that the trustees have failed to perform their duty.

The discretion is so wide that it makes no sense to come up with complete list. For example, in McPhail v Doulton, it would never be possible to draw up a list of every single individual who fell within the class of employees, ex-employees, and relatives and dependants. The continued allocation of the complete list test would have stagnated the developing social function of the discretionary trust. Trustees have a duty to inquire, to survey, and to come up with potential beneficiaries and to do that, a complete list is not needed.

The complete list test also placed too much emphasis on the distinction between trusts and powers of appointment – it became essential to tell if a particular obligation was a trust or power. If it were characterised as a power then it would probably be valid, as the test of certainty in Re Gulbenkian would apply. If it were characterised as a trust, then the much more demanding complete list test would render it void. This placed an undue significance to the question of characterisation, especially since the obligations are in essence very similar to each other.

Question 95

What is the “is or is not test”?

Answer 95

a trust will be valid if it can be said with certainty whether any individual is or is not a member of any class. We must be able to say whether anyone coming forward is or is not a member of the class.

Question 96

McPhail v Doulton

Answer 96

Lord Wilberforce:

‘the trust is valid if it can be said with certainty that any given individual is or is not a member of the class’

Question 97

Re Baden’s Deed Trusts (No 2)

Answer 97

This case sets out that you do not require evidential certainty for a Baden type of trust to be valid.

This is the case setting out that you don’t need evidential certainty for this type of trust to be valid. In particular around terms ‘relatives’. Question of what you would need to show to demonstrate the idea of ‘relatives’ for a trust to be valid. The judges all took different approaches. Not altogether satisfactory.

Sacks LJ: only need conceptual certainty. The burden is on those who think they should be a beneficiary to prove they fall within the class. If they can’t, then we can presume they fall outside the class. If a class was ‘conceptually certain’ then there was in essence no evidential difficulty because of the operation of a presumption that anyone not positively proved to be within the class is outside of it. The burden falls on potential claimants to prove they fall within the class. Trying to uphold as many trusts as possible. Only need to worry about conceptual certainty.

Megaw LJ:

different approach – substantial numbers approach. Said the trust of a Baden type would be valid if can say that at least a substantial number of objects are within the class. If there’s a small number we aren’t sure about, that will not invalidate the trust. Only a substantial number needs to fall within class.

He considered that there were three groups of persons: those positively proved within the class, those positively proved to be outside the class, and those about whom, if they were to be considered, it would have to be said they are not proven to be inside or outside the class.

Difficulty with this approach is that it is coming up with a list, which we aren’t supposed to do with the “is or is not” test. Megaw’s approach has been criticised for getting close to a complete list approach

Stamp LJ:

another approach. Says must be possible to say of ANY individual whether he is a member of the class – as being either inside the class or outside it. On that basis, if he had not also considered that the expression ‘relatives’ should be treated as limited to the statutory next of kin, the trust would have failed for uncertainty.

This is the strictest approach of all – if you cannot say of any individual that they are in the class, then they must be outside the class and the trust will fail because it is uncertain. Harsh approach. His view seems to require BOTH CONCEPTUAL AND EVIDENTIAL CERTAINTY and, if applied, it would ultimately be possible to draw up a complete list by surveying all potential objects.

Question 98

Where does Re Badens (No 2) leave the law?

Answer 98

All of the judges agreed that the trust was conceptually certain, that the terms “relatives” and “dependents” were conceptually certain. However, they agreed on different basis. Megaw and Sacks took this to mean ‘descendants of a common ancestor’, therefore it was conceptually certain. Stamp took a much harsher approach – used the definition of ‘statutory next of kin’.

However, the majority of the Court of Appeal took the view that the Gulbenkian test did not require that it could be proved that any given individual is not within the class. Sachs and Megaw LJJ emphasised the distinction between conceptual and evidential certainty, and neither believed that the test required evidential certainty. The majority of the court concentrated on the need to prove that individuals were within the description of the class, taking a pragmatic approach to the possibility that it might be difficult to make a conclusive decision as to whether other individuals were outside the class.

All agree the terms are conceptually certain, don’t need evidential certainty.

Despite much academic debate, the difference of opinion between the members of the court in Re Baden (No 2) has not given rise to any significant problems in subsequent cases. This no doubt is because the decision in McPhail v Doulton makes two things clear:

1. That the courts will seek to facilitate the intentions of the settlor rather than trying to shoehorn dispositions into rigid categories
2. That the emphasis is on how the trustees should act and how the court should control them. In order to distribute the funds the trustees of a discretionary trust do not need to know the identity of every member of the class, nor the exact number of the beneficiaries.

Question 99

What did Gravells say about administrative unworkability: applciable only to Baden type of discretionary trusts?

Answer 99

Lord Wilberforce suggested, albeit somewhat hesitantly, that a discretionary trust for “all the residents of Greater London” would be void on this ground, but he did not expand on the substance of the requirement of administrative workability. Moreover, even though the decision in R v District Auditor, ex parte West Yorkshire Metropolitan County Council was based on administrative unworkability, that case provides virtually no clarification. It has been suggested that the notion relates to the practicability of the execution of the trustees’ duties; and that administrative unworkability exists where the settlor has in effect set the trustees an impossible task because the class is so defined that there are no discernible criteria according to which the selection procedure should be approached. Accordingly it is argued that the duty apparently imposed on the trustees is in its nature incapable of enforcement and control by the courts; and that the discretionary trust is therefore void. If this is indeed the substance of administrative unworkability, then in the light of the post-McPhail v Doulton developments in relation to fiduciary powers of appointment - the recognition of the duties of trustee-donees and, more particularly, the provision of remedies for the enforcement of those duties - it is arguable that administrative unworkability is, in principle, no less a problem for fiduciary powers of appointment than for discretionary trusts

Question 100

When will a Baden type discretionary trust be administratively unworkable.

Answer 100

If it is so wide in scope that it doesn’t form anything like a class, eg, all the residents of London. This class would be so huge, how would the trustees make this work? It is deemed administratively unworkable.

This has been a criticised concept – what harm is this idea of administrative workability trying to prevent? If those creating the trust want to create one trust for the whole of London, why should they not be able to? To what harm is this directed? Is it directed at the court, concerning the fact that they wouldn’t be able to execute the trust? is it recognising that if a class is too vast in number, it is impossible for the trustees to carry out their duty to survey the range of the beneficiaries of the trust in any real sense?

Question 101

R v District Auditor, ex parte West Yorkshire Metropolitan County Council

Answer 101

How can you spot in a problem question something that might be a question on administrative workability?

Look at the size of the class. There was only one reported class where a trust has failed for not being administratively workable:

Facts:

Trust of £400,000 for all the habitants of the county of West Yorkshire. The council’s purpose was to circumvent government legislation which prevented them incurring expenditure prior to their being abolished. Held to be “quite simply unworkable”. Although the class was conceptually certain, the range of objects comprising some 2.5 million potential beneficiaries was so wide as to be ‘incapable of forming anything like a class’. It was thus administratively unworkable and void. There are too many people, how would you distribute the money? How would you begin to distribute they, where would you start? Problems with the size of that class.

Use this case to inform any discussion of administrative workability. Drawing from Lord Wilberforce’s example and this case, it can be surmised that administrative unworkability will only render discretionary trusts void which have a class ranging in the magnitude of millions. Where the line is to be drawn is impossible to predict.

Question 102

What type of test do powers need?

Answer 102

The ‘is or is not test’

Powers of appointment differ from trusts in that they do not require the donee of the power to distribute the property concerned. They authorise the donee to nominate a beneficiary. sufficient certainty is required to enable the donee to identify in whose favour an appointment can be made, and to allow the court to intervene should the limits of the donee’s authority be exceeded.

It is possible for a power to be general (to contain no restrictions on who can be chosen). The class of objects can be restricted either by limiting the exercise of the power for the benefit of the named individuals or a defined class of objects (a special power) or by excluding certain individuals or groups (a hybrid power).

The same test applies for a discretionary trust of Baden-type and powers of appointment. We only need conceptual certainty.

Question 103

Re Gestetner Settlement

Answer 103

The same test applies for a discretionary trust of Baden-type and powers of appointment. We only need conceptual certainty.

The test was initially propounded in this case by Harman J.

Question 104

Re Gulbenkian’s Settlements

Answer 104

The same test applies for a discretionary trust of Baden-type and powers of appointment. We only need conceptual certainty.

Facts: A special power of appointment was granted in favour of a class consisting of Gulbenkian, his wife and children and ‘any person or persons in whose house or apartments or in whose company or under whose care or control or by whom or with whom he may from time to time be employed or residing.’ Upheld as sufficiently certain.

Lord Upjohn -

“So the trustees, or the court, must be able to say with certainty who is within and who without the power…certainty say whether any given individual is or is not a member of the class: you do not have to be able to ascertain every member of the class”

Question 105

Do powers of appointment need there to be a complete list of objects?

Answer 105

The court does not need there to be a complete list of objects as the only function of the court is interfering if there has been an excessive exercise of the power. The court must be able to determine whether any person selected by the donee was within the class, and, therefore, entitled to enjoy the benefit of the exercise.

e.g. if Toby grants Steph a power of appointment over his residuary estate in favour of ‘old men’ it would be impossible for the court to determine if an appoint in favour of Robert (64) was excessive. It is not possible to say whether anyone is ‘old’ because it has no objective clear meaning. It would be different if the power was limited to ‘men over 65’ – this is objectively clear.

Question 106

What is the added element which could make something void for powers of appointment?

Answer 106

Capriciousness - this relates only to powers.

Question 107

Re Manisty’s Settlement

Answer 107

Comments in this case were OBITER ONLY. No caselaw to point to say for certain, but obiter statements. Templeton J said powers may fail for being capricious if

“‘potential objects are powers are accidental agglomeration of persons who have no discernible link with the settlor or with any institution’”

If the donee of a power exercises the power in such a way that was irrational or perverse to the settlor’s intentions it would fail for capriciousness

Question 108

Re Barlow’s Will Trusts

Answer 108

If we conclude that the device is uncertain, there are certain ways that uncertainty can be cured: a series of conditional gifts

The court held that a trust that would otherwise be invalid – would fail because it was uncertain – could be interpreted differently - not as a trust at all, but as a series of individual conditional gifts, meaning there was a series of gifts to which conditions attach. If we construe the trust in that way, it’s valid.

Facts: In this case, paintings were left in a will to be sold to members of family and friends of the testator at a very reduced price. ‘any members of my family and any friends of mine’. The court said it was too uncertain to be a trust - would fail for certainty of intention.

However, the court interpreted it not as a trust at all, but as a series of conditional gifts with trusts attached. It was to be properly regarded as a series of individual gifts to persons answering the description of friend or family member.

‘anyone who can prove that by any reasonable test he or she must have been a friend’ of Helen Barlow would be entitled to purchase a picture. If anyone came forward to demonstrate they were within the terms, they could satisfy that condition, and they were entitled to buy a painting at an undervalue. Not a trust at all, but a series of conditional gifts. Test: anyone coming forwards must prove they meet condition.

The fact that there might be considerable areas of uncertainty did not defeat the provision for those who clearly satisfied it. This solution could not apply where the size of each gift depended upon the number of individuals satisfying the description.

Question 109

Re Leek

Answer 109

Curing uncertainty: ‘independent experts’ and trustee discretion

Trust for “benefit of such persons as the company may consider to have a moral claim on the settlor.” ‘moral claim’ – what does that mean? Uncertain?

The court held - in particular Buckley J in the High Court - that what this meant was that a trustee could use their interpretation of moral claim as to who should receive. Court said they could take into account the definition of moral claim as put into practice by trustees. Not anyone’s moral claim, but what the trustees perceive to be a moral claim, and therefore they are acting as independent expert or arbiter. Through this, they resolved the uncertainty in that arrangement. Can reach a conclusion, apply objective test, this is sufficient and certain say High Court.

Question 110

Re Tuck’s Settlement Trusts

Answer 110

Curing uncertainty: ‘independent experts’ and trustee discretion

Trust of money for such of testator’s children as “marry a wife of Jewish blood”. Testator wants offspring to remain in Jewish faith and marry within Jewish faith. But trust said any dispute as to Jewish blood/faith to be determined conclusively by the chief rabbi in London. Seems uncertain.

Denning LJ said the rabbi is an expert on the Jewish faith. Any uncertainty about Jewish blood can be resolved by recourse to the expert in the Jewish faith, the chief rabbi.

Other judges took different approach – upholding the trust on different grounds. Russell didn’t think the trust was uncertain in the first place, didn’t express view that chief rabbi was an expert, and Eveleigh LJ said that rabbi’s evidence would be just that – evidence of testator’s intention and definition of class. Rather than say the rabbi will resolve uncertainty, said the rabbi’s definition of Jewish can be taken as the testator’s definition of Jewish.

Question 111

Re Tepper’s Will Trusts

Answer 111

Trust for children as long as they remain within the Jewish faith and shall not marry outside it. Scott J followed case in Re Tuck’s, taken with Eveleigh LJ’s discussion, and said that evidence from outside experts can be admitted to resolve uncertainty. Evidence resolving it can be admitted to cast light on settlor’s intentions.

Question 112

Why was MacJordan Construction different from Hunter v Moss?

Answer 112

In MacJordan, the client never assumed an obligation to establish the rentention fund from the account. Hunter v Moss was where the settlor intended that some of the shares he owned should be held on trust for the claimant.

Question 113

How was Re London Wine distinguished from Hunter v Moss?

Answer 113

Re London Wine was distinguished in Hunter v Moss on the ground that it concerned the appropriation of chattels and the passage of legal title, whereas Hunter v Moss concerned shares and the declaration of rust.

Question 114

How did Virgo distinguish Hunter v Moss and MacJordan Construction?

Answer 114

In MacJordan a seperate retention fund was intended to be set up, but this never occurred. Therefore

• The client had never assumed an obligation to establish the retention fund from that account.

Hunter v Moss was difference, since the settlor had intended that some of the shares that he owned should be held on trust for the claiamnt.

Question 115

What did Gravells think about whether discretionary trust objects have interests?

Answer 115

He thought that since trustees have discretion to select some. It follows that no individual memebr of the class has an interest in any part of the trust property unless and until the trustees exercise their discretion.