Certainty of Objects

Question 1

What are “objects”?

Answer 1

Objects are the people who will be the beneficiaries of the trust - must be human objects!

Question 2

Re Endacott [1960]

Answer 2

A T providing money for “some useful memorial for myself” was held to be void for certainty of objects.

Question 3

Morice v Bishop of Durham (1804)

Answer 3

Sir William Grant
- Every trust must have a definite object.
- There must be somebody in whose favour the Court can decree performance.

Question 4

What is a big advantage of discretionary trusts?

Answer 4

Flexibility!
- No beneficial interest in the trust property until a beneficiary’s share is allocated to them.

Question 5

Gartside v IRC [1968]

Answer 5

A Trustee has to exercise their discretion before the Tax Authorities can tax the money that is held in a discretionary trust.

Question 6

Why is Certainty of Objects required?

Answer 6

1. Trustees must know who the B are to perform their duties.
2. Courts must know who the B are to ensure compliance with the trust.
3. Bs can enforce the Trustee’s duties and have standing to complain to the court.

Question 7

What happens if there’s no Certainty of Objects?

Answer 7

Trust will be void for uncertainty.
- RT in favour of the Settlor or his estate if he’s died.

Question 8

What are the tests for Certainty of Objects?

Answer 8

1. For Fixed Trusts
   The Complete List Test
2. For Discretionary Trusts
   The is or is not Given Postulant Test.

Question 9

What is the complete list test?

Answer 9

A full list of beneficiaries must be able to be created in order for all beneficiaries to be identified.

Question 10

IRC v Broadway Cottages [1955]

Answer 10

If it isn’t possible to draw up a list of all the Bs then the trust will fail - for fixed trusts.

Question 11

OT Computers Ltd v First National Trinity Finance Ltd [2003]

Answer 11

A complete list of objects is required.
- This requires both conceptual certainty and evidential certainty.

Question 12

Re Gestetner Settlement [1953]

Answer 12

The is or is not given postulant test
- “Is any given individual clearly going to be within or not within that class of beneficiaries”?

Question 13

Re Gulbenkian’s Settlement Trusts [1970] AC 508

Answer 13

The correct test for certainty of objects for a power is the is or is not postulant test given in Gestetner Settlement.

Question 14

McPhail v Doulton [1971]

Answer 14

• Changed the certainty of objects test for discretionary trusts to the same test as for powers.

Question 15

What are the 3 ways in which courts can enforce discretionary trusts?

Answer 15

1. Could order a scheme of distribution
2. Could appoint new Ts
3. Arrange for some representatives from the class of Bs to draw up some sort of scheme of distribution themselves.

Question 16

Why may a discretionary trust still be invalid if the test is completed?

Answer 16

1. Administrative unworkability
2. Capriciousness - stupidness

Question 17

What is administrative unworkability?

Answer 17

Where a description of the class of Bs is so hopelessly wide that it doesn’t form anything like a class.

Question 18

R v District Auditor ex parte West Yorkshire Metropolitan County Council [1986]

Answer 18

• “Inhabitants” was not conceptually certain as a class unless they could be taxed.

Question 19

Re Manisty Settlement [1974] - capriciousness

Answer 19

A court will not uphold a trust if the terms negative any sensible intention on the part of the Settlor.

Question 20

Re Baden’s Deeds Trust (No.2) [1973]

Answer 20

Relatives is conceptually certain - all 3 judges agreed.

Question 21

Re Allen [1953] - Conceptual Uncertainty.

Answer 21

A “trust” for “Pure blooded Englishmen” was held not to be a trust.

Question 22

Is there any way to cure conceptual uncertainty?

Answer 22

• There doesn’t seem to be an issue if a 3rd party is being asked to make a decision on a question of fact.

Question 23

Re Coxen [1948] - Opinion of Ts

Answer 23

• Court held that a Testator needs to clearly define when they can exercise their judgment, so it becomes an objective test.

Question 24

Re Tuck’s Settlement Trusts [1978] - Opinion of a 3rd party

Answer 24

• An opinion of a 3rd party is a workable way of curing conceptual uncertainty - by making 3rd parties’ opinion a part of the definition of a class of objects.

Question 25

What is the test for gifts subject to a condition precedent?

Answer 25

• The one person test applies.
• “Old friends” is sufficiently certain for GSCP but not for trusts.

Question 26

What is a power?

Answer 26

A power is where a donee does NOT have to exercise their power, they can choose whether they’d like to or not.

Question 27

What is a special power?

Answer 27

A power where the donee can choose from a specified closed group of people.

Question 28

What is a general power?

Answer 28

A power which can be exercised against anyone in the world.

Question 29

What is a hybrid power?

Answer 29

Where a power can be exercised against anyone in the world, except a specified person or persons.

Question 30

What happens if someone exercises their power improperly?

Answer 30

Courts will often throw it out - Hillsdown Holdings v Pensions Ombudsman [1997]

Question 31

Re Mills [1930] - Intention of Settlor

Answer 31

Court held that if there’s a gift over in default of appointment, this was good proof he was intending to give a power, not a trust.

Question 32

Can administrative unworkability invalidate a power?

Answer 32

No - Re Hay’s Settlement Trust [1981]

Question 33

Can capriciousness invalidate a power?

Answer 33

Potentially - Re Manisty’s Settlement (1974)

Question 34

What is a fiduciary power?

Answer 34

A power given to someone but that someone is already in a fiduciary position

Question 35

Is the donee of a fiduciary power under a duty to distribute?

Answer 35

No - but the donee is under an obligation to periodically consider whether to distribute.

Question 36

Summary of trusts and powers

Answer 36

1. Fixed trust - T under an obligation to distribute - no discretion
2. Discretionary Trust - T under an obligation to distribute at some point, but has no discretion as to how and when.
3. Fiduciary power - Donee under no obligation to distribute but must consider distributing periodically.
4. Mere Power - Donee under no obligation to distribute and under no obligation to consider whether to distribute.