Certainty of Objects Flashcards
What are “objects”?
Objects are the people who will be the beneficiaries of the trust - must be human objects!
Re Endacott [1960]
A T providing money for “some useful memorial for myself” was held to be void for certainty of objects.
Morice v Bishop of Durham (1804)
Sir William Grant
- Every trust must have a definite object.
- There must be somebody in whose favour the Court can decree performance.
What is a big advantage of discretionary trusts?
Flexibility!
- No beneficial interest in the trust property until a beneficiary’s share is allocated to them.
Gartside v IRC [1968]
A Trustee has to exercise their discretion before the Tax Authorities can tax the money that is held in a discretionary trust.
Why is Certainty of Objects required?
- Trustees must know who the B are to perform their duties.
- Courts must know who the B are to ensure compliance with the trust.
- Bs can enforce the Trustee’s duties and have standing to complain to the court.
What happens if there’s no Certainty of Objects?
Trust will be void for uncertainty.
- RT in favour of the Settlor or his estate if he’s died.
What are the tests for Certainty of Objects?
- For Fixed Trusts
The Complete List Test - For Discretionary Trusts
The is or is not Given Postulant Test.
What is the complete list test?
A full list of beneficiaries must be able to be created in order for all beneficiaries to be identified.
IRC v Broadway Cottages [1955]
If it isn’t possible to draw up a list of all the Bs then the trust will fail - for fixed trusts.
OT Computers Ltd v First National Trinity Finance Ltd [2003]
A complete list of objects is required.
- This requires both conceptual certainty and evidential certainty.
Re Gestetner Settlement [1953]
The is or is not given postulant test
- “Is any given individual clearly going to be within or not within that class of beneficiaries”?
Re Gulbenkian’s Settlement Trusts [1970] AC 508
The correct test for certainty of objects for a power is the is or is not postulant test given in Gestetner Settlement.
McPhail v Doulton [1971]
- Changed the certainty of objects test for discretionary trusts to the same test as for powers.
What are the 3 ways in which courts can enforce discretionary trusts?
- Could order a scheme of distribution
- Could appoint new Ts
- Arrange for some representatives from the class of Bs to draw up some sort of scheme of distribution themselves.
Why may a discretionary trust still be invalid if the test is completed?
- Administrative unworkability
- Capriciousness - stupidness
What is administrative unworkability?
Where a description of the class of Bs is so hopelessly wide that it doesn’t form anything like a class.
R v District Auditor ex parte West Yorkshire Metropolitan County Council [1986]
- “Inhabitants” was not conceptually certain as a class unless they could be taxed.
Re Manisty Settlement [1974] - capriciousness
A court will not uphold a trust if the terms negative any sensible intention on the part of the Settlor.
Re Baden’s Deeds Trust (No.2) [1973]
Relatives is conceptually certain - all 3 judges agreed.
Re Allen [1953] - Conceptual Uncertainty.
A “trust” for “Pure blooded Englishmen” was held not to be a trust.
Is there any way to cure conceptual uncertainty?
- There doesn’t seem to be an issue if a 3rd party is being asked to make a decision on a question of fact.
Re Coxen [1948] - Opinion of Ts
- Court held that a Testator needs to clearly define when they can exercise their judgment, so it becomes an objective test.
Re Tuck’s Settlement Trusts [1978] - Opinion of a 3rd party
- 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.
What is the test for gifts subject to a condition precedent?
- The one person test applies.
- “Old friends” is sufficiently certain for GSCP but not for trusts.
What is a power?
A power is where a donee does NOT have to exercise their power, they can choose whether they’d like to or not.
What is a special power?
A power where the donee can choose from a specified closed group of people.
What is a general power?
A power which can be exercised against anyone in the world.
What is a hybrid power?
Where a power can be exercised against anyone in the world, except a specified person or persons.
What happens if someone exercises their power improperly?
Courts will often throw it out - Hillsdown Holdings v Pensions Ombudsman [1997]
Re Mills [1930] - Intention of Settlor
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.
Can administrative unworkability invalidate a power?
No - Re Hay’s Settlement Trust [1981]
Can capriciousness invalidate a power?
Potentially - Re Manisty’s Settlement (1974)
What is a fiduciary power?
A power given to someone but that someone is already in a fiduciary position
Is the donee of a fiduciary power under a duty to distribute?
No - but the donee is under an obligation to periodically consider whether to distribute.
Summary of trusts and powers
- Fixed trust - T under an obligation to distribute - no discretion
- Discretionary Trust - T under an obligation to distribute at some point, but has no discretion as to how and when.
- Fiduciary power - Donee under no obligation to distribute but must consider distributing periodically.
- Mere Power - Donee under no obligation to distribute and under no obligation to consider whether to distribute.
