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Question 1

Describe a fixed trust

Answer 1

Under a fixed trust, the trustees have no discretion as to how the trust property is to be allocated between the beneficiaries.

The settlor (or testator) has stipulated once and for all who the beneficiaries are and the proportions in which they will share the trust property.

Question 2

The test for certainty of objects in a fixed trust is what?

Answer 2

The complete list test (IRC v Broadway Cottages Trust

Question 3

What is the complete list test?

Answer 3

It must be possible to draw up a comprehensive list of each and every beneficiary. Otherwise the trust fails.

Question 4

What certainties need to be present for the complete list test?

Answer 4

First, the description of beneficiaries must have what is known as ‘conceptual certainty’. In other words, the settlor must define the objects using clear concepts so that the trustees know what type of person they are looking for.

The complete list test also requires what is known as ‘evidential certainty’. A complete list is possible only if you can identify each and every member of the class. If there is no evidence to say whether a particular individual qualifies as a beneficiary or not, a fixed trust is void.

Question 5

A discretionary trust as the settlor requires the trustees to is under a ** to select from among a class of beneficiaries those who are to receive, and the proportions in which they are to receive, income or capital of the trust property.

Answer 5

***duty.

Question 6

Discretionary trust - The trustees must distribute the funds within the time stated or, if none, within a ** time.

Answer 6

*** reasonable. The objects can ask the court to intervene if they do not.

Question 7

Discretionary trust - The trustees must survey the field of objects but need not consider…

Answer 7

…every single one.

Question 8

Discretionary trust - Until selected, no object (a possible beneficiary) has an ‘equitable interest’ in the trust property. Until the trustees decide that an individual is to have a share of the trust income or capital, the individual merely has…

Answer 8

…a hope (‘a spes’), also described as an expectancy, that he will be chosen by the trustees. The individual may never be chosen.

Question 9

A power of appointment is an authority to deal with property in some way. The person who is given the power does not have to exercise ….

Answer 9

…the power.

Question 10

What should you look out for to distinguish a power of appointment from another type of trust?

Answer 10

The person who is given the power does not have to exercise the power. This would be suggested by the word ‘may’ which indicates that the trustee has no duty to select a beneficiary. Secondly, there may be a gift in default of appointment for another person/charity.

Question 11

Power of appointment - Although the trustee is under no obligation to exercise the power, he/she must at least consider whether or not to exercise it and if they do exercise it, must only choose a beneficiary…

Answer 11

…within the class of objects.

Question 12

The court may also be persuaded to intervene by removing the trustees if the trustees act ‘capriciously’, What does this mean?

Answer 12

…act for reasons which I apprehend could be said to be irrational, perverse or irrelevant to any sensible expectation of the settlor; for example, if they choose a beneficiary by height or complexion or by the irrelevant fact that he was a resident of Greater London. (Re Manisty’s Settlement [1973])

Question 13

The test for certainty of objects for powers of appointment is the….

Answer 13

…given postulant test (Re Gestetner’s Settlement)

Question 14

The given postulant test is also sometimes known as the…..test. What is it?

Answer 14

....‘is or is not’ test.
This requires conceptual certainty so the trustees can determine what sort of person falls within the class of objects and what sort of person falls outside the class.

Question 15

The certainty of objects test for discretionary trusts following McPhail v Doulton is the..

Answer 15

…given postulant test (McPhail v Doulton).

Question 16

What is the given postulant test following McPhail v Doulton for discretionary trusts?

Answer 16

The trust is valid if it can be said with certainty that any individual (or postulant) is or is not a member of the class.’ Needs conceptual certainty but not evidential certainty.

Question 17

Dis Trust - Re Baden’s Deed Trust - what did Stamp say?

Answer 17

To satisfy the test, it had to be possible to fit any individual in a ‘yes’ box or a ‘no’ box. If an individual had to go in a ‘don’t know’ box, the trust would be invalid due to uncertainty of objects.

Question 18

Dis Trust - Re Baden’s Deed Trust - what did Sachs say?

Answer 18

Sachs LJ said that conceptual certainty was essential (and was present here because relatives meant descendants from a common ancestor).

The burden was on the claimant to prove that he was in the class of objects and, if he could not, then he fell into the ‘is not’ part of the given postulant test. Difficulty in proving that one comes within the conceptually clear description of the class is evidential and should not cause failure of the trust.

Question 19

Dis Trust - Re Baden’s Deed Trust - what did Megaw say?

Answer 19

Megaw LJ held that if one can say of a substantial number of individuals that they are within the class, the trust is valid even though as regards a substantial number of others one has to say that they are outside the class or that you do not know whether they are in or out.

Question 20

In McPhail v Doulton, Lord Wilberforce said: There may be a third case where the meaning of the words used is clear but the definition of beneficiaries is so hopelessly wide as not to form ‘anything like a class’ so that the trust is …

Answer 20

…administratively unworkable or in Lord Eldon’s words one that cannot be executed (Morice v Bishop of Durham (1805) 10 Ves 522).

Question 21

What was the problem with the trust in R v District Auditor, ex p West Yorkshire Metropolitan?

Answer 21

..It was held that the trust was invalid because the size of the class of objects rendered it administratively unworkable.

Question 22

A trust could be void if it is deemed capricious. What does that mean?

Answer 22

i.e. if the terms of the power ‘negative any sensible intention on the part of the settlor’ or it requires trustees to ‘consider only an accidental conglomeration of persons who have no discernible link with the settlor or any institution.’(Re Manisty’s Settlement).

Question 23

What is the beneficiary principle?

Answer 23

There must be ascertainable beneficiaries who can enforce the trust.

Question 24

Purpose trusts are prima facie void, for lack of…

Answer 24

…identifiable beneficiaries to enforce the trust (Morice v Bishop of Durham).

Question 25

Trusts to carry out charitable purposes are valid even though they do not have identifiable beneficiaries who are entitled to a share of the trust property. Who enforces them?

Answer 25

The Crown enforces them through its officer, the Attorney-General.

Question 26

What DON’T charitable trusts have to satisfy?

Answer 26

…the certainty of objects rule, the beneficiary principle or the rule against inalienability.

Question 27

What makes a purpose trust charitable?

Answer 27

• have a charitable purpose, within the meaning of s3(1) Charities Act 2011,
• be exclusively charitable, and
• be for the public benefit.

Question 28

There are two aspects of public benefit, namely the ‘benefit aspect’ and the ‘public aspect’ s 4(3) of the Charities Act 2011. What are these?

Answer 28

The purpose(s) must be beneficial and any detriment or harm must not outweigh the benefit.

The purpose(s) must be of benefit to the public in general or to a sufficient section of the public and must not give rise to more than incidental personal benefit.

Question 29

The public benefit must not be restricted to those who have a ** nexus….

Answer 29

…a personal nexus, such as a familial relationship to given individuals (Re Compton [1945] Ch 123), or employment by a common employer (Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297).

Question 30

The trust must be exclusively charitable (s 1). What two example show it is not?

Answer 30

a) political purposes
b) profit accruing to individuals (as opposed to being ploughed back into the charitable purpose) is not charitable, and this in turn means that the trust is completely non-charitable.

Question 31

Why did Re Astor’s Settlement Trusts fail?
It was for (a) ‘The establishment, maintenance and improvement of good understanding …between nations’; and
(b) ‘The preservation of the independence and integrity of newspapers …’

Answer 31

(a) First, it offended the beneficiary principle.
The trust was for non-charitable purposes and there was no beneficiary entitled to the trust funds who could enforce the trust against the trustees. A trust arises only if there is a trustee who is subject to an ‘equitable obligation’. A person is not subject to any obligation unless there is someone to enforce it.

(b) The second reason for the trust failing was uncertainty.
The trust gave no guidance as to how the purposes were to be performed.

Question 32

What three non charitable trusts are an exception to the beneficiary principle?

Answer 32

(i) Trusts for the care or maintenance of specific animals (Re Dean)
(ii) Trusts for the maintenance of graves and sepulchral monuments (Re Hooper)
(iii) Denley trusts

Question 33

The perpetuity rule relevant to non-charitable purpose trusts is the rule against inalienability. What is that?

Answer 33

In order to satisfy the rule, non-charitable purpose trusts (for animals, tombs or in the Denley mould) must either:

(a) be limited in duration to 21 years; or
(b) allow the trustees to spend all the trust capital on the purpose and thereby end the trust at any time.

Question 34

What are Denley trusts?

Answer 34

Trusts expressed to be for a purpose which will benefit identifiable persons who are capable of enforcing the trust. Such trusts do not offend the beneficiary principle. The benefit has to be sufficiently tangible to allow the beneficiaries to go to court to enforce the trust.

Question 35

What is necessary for a valid trust to exist under Re Denley?

Answer 35

a tangible benefit,
ascertainable beneficiaries,
compliance with the rule against inalienability and certainty of purpose and objects.

Question 36

What was Re Denley not a charitable trust?

Answer 36

Re Denley was not charitable because employees of a particular company are not a sufficient section of the public (unless the trust is for the relief of poverty) (Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297).

Question 37

There is no case determining which certainty of objects test applies to Denley trusts, but it is thought that they must satisfy the ….

Answer 37

…given postulant test laid down in McPhail v Doulton i.e. that the trust is valid if it can be said with certainty that any individual (or postulant) is or is not a member of the class.

Question 38

The perpetuity rule relevant to non-charitable purpose trusts is the rule against inalienability. In order to satisfy the rule, non-charitable purpose trusts (for animals, tombs or in the Denley mould) must either:

Answer 38

(a) be limited in duration to 21 years; or

(b) allow the trustees to spend all the trust capital on the purpose and thereby end the trust at any time.

Question 39

A non-charitable, unincorporated association (NCUA). A NCUA lacks legal personality so it cannot…

Answer 39

…hold property, or receive property, in its own name.

Question 40

How do you deal with a gift (with no purpose attached) to a non charitable unincorporated association with no purpose?

Answer 40

The favoured approach is to construe the gift as one to the members of the club as an accretion to club funds to be dealt with accordance with the club’s rules (Re Recher).
It will be valid provided the rules allow the members to dissolve the club and share the assets between them (Re Grant). This is to satisfy the perpetuity rule relevant to non-charitable purpose trusts (i.e. the rule against inalienability.)

Question 41

How is a gift to a NCUA dealt with if that gift has a purpose which benefits the members?

Answer 41

Re Lipinski - such a gift will either be

construed as an outright gift to members as an addition to club funds to be dealt with in accordance with the rules (Re Recher) and subject to the club’s rules allowing members to dissolve the club etc (Re Grant’s WT) or

a trust for a purpose which benefits the members (Re Denley), subject to the purpose satisfying the perpetuity rule against inalienability of capital. Either way the gift does not offend the beneficiary principle.