L5 Certainty of Objects

Question 1

Re Barlow

Answer 1

• Case concerning certainty of the words ‘family’ and ‘friends’ in a will
• Facts
• Mrs Barlow the testatrix had a large collection of pictures. She specifically bequeathed some. For the remainder, she declared them to be held by her executer on trust to sell them, but her ‘family and friends’ could buy them first at 1970 valuations or at the probate value, whichever was lower. The proceeds would go to the residuary estate. The executors asked the court whether the direction about family and friends was void, given its uncertainty, and if it was valid, who the family and friends were.
• Held
• Browne-Wilkinson J – held that the trust was valid because both concepts of family and friends could be given a workable meaning. The minimum requirements were that (a) the relationship had to be long standing (b) be social and not a business or professional relationship, and (c) although they may not have met for some time, when the circumstances allowed, they would meet frequently. The word family could be construed as any ‘blood relation’, and the only reason in other cases to restrict the concept to statutory next of kin had been to save gifts from failing for uncertainty.

Question 2

*IRC v Broadway Cottages Trust (CA)

Answer 2

• The case concerned the validity of a discretionary trust where it was admitted by the taxpayers ‘that it would be impossible any given time to achieve a complete and exhaustive enumeration of all the persons then qualified for inclusion in the class of beneficiaries’. But it was admitted by the Crown that it was ‘possible to determine with certainty whether any particular individual is or is not a member of the class’.
• Facts
• A trust fund was to be held during a defined period to apply for the benefit of all or any of certain persons, described as the ‘donor’s wife and the ‘beneficiaries’’, in such manner as the trustees in their discretion should from time to time think fit and the discretion of the trustees was declared to be absolute and uncontrolled.
• It was not possible at any given moment to ascertain all the persons that may come within the meaning of ‘beneficiaries’, but it was possible to determine with certainty which individuals would be members of the class.
• Held
• If a trust is to be valid, it must be one which the court could control and execute. If the whole range of members of the class were not ascertainable, void for uncertainty, although certain members of the class were ascertainable.

Question 3

Re Gulbenkian’s Settlement [1968] UKHL

Answer 3

• Case concerns certainty of trusts.
• It held that the ‘is or is not’ test was suitable for mere powers, the complete list test remained the appropriate test for discretionary trusts. It was only a year late in McPhail v Doulton that the ‘is or is not’ test was considered appropriate for discretionary trust.
• Facts
• Mr Gulbekian made a settlement that said the trustees should ‘in their absolute discretion’ and while his son Nubar was still alive, give trust property to
• ‘Nubar Sarkis Gulbenkian and any wife and his children or remoter issue for the time being in existence whether minors or adults and any person or persons in whose house or apartments or in whose company or under whose care or control or by or with whom the said Nubar Sarkis Gulbenkian may from time to time be employed or residing’. It was argued this was too uncertain to be enforced.
• Held
• At first instance – the trust was held to be invalid
• In the CA – the trust was declared valid so long as the claimant could be said to fall within the class at hand
• Denning MR said ‘I have always thought that the condition should be held good so long as it can be given an intelligible and ascertainable content.’
• The HL – held for powers of appointment, objects were sufficiently certain if any given individual could be said to be in, or not in, the class. (this is less strict than the list of certainty, which requires everyone to be said to be in the class.)
• Overall it was held that the trust was certain enough to succeed.
• Lord Upjohn reaffirmed the list certainty test for discretionary trusts, and in McPhail v Doulton, the list certainty test was abandoned for discretionary trusts as well.

Question 4

McPhail v Doulton HL

Answer 4

• (Distinction between trusts and powers)
• Upholding the settlor’s intentions is of paramount importance
• Leading case on certainty of beneficiaries. It held that so long as any given claimant can clearly be determined to be a beneficiary, or not, a trust is valid.
• Facts
• Betram Baden executed a deed settling a non-charitable trust for the benefit of the staff of Matthew Hall & Co Ltd and their relatives and dependants. The object clause provided:
• ‘The trusteed shall apply the net income of the fund in making their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit.’
• The validity of the trust were challenged in that the objects were insufficiently certain.
• Held
• The case departed from the Broadway Cottages case which was the basis for the strict test for certainty of object of discretionary trusts, as overruled in this case, McPhail.
• Lord Wilberforce phrased the new test of certainty: ‘Can it be said with certainty that any given individual is or is not a member of the class.’ This was the same test which was previously applied to powers.
• Hence, it was held to be perfectly possible to say, looking at an individual whether they were either an officer or employee, an ex-officer or ex-employee, or a relative or depended of one, and the validity of the trust was upheld.

Notes on McPhail

Criticisms to the case

• A trustee’s duty to distribute could only be properly performed if he considered every possible claimant
• The court could only execute the trust, if the trustee failed to do so, by percentage division of the trust fund.

Question 5

** Re Baden

Answer 5

• The case concerns the circumstances under which a trust will be held to be uncertain. It followed on from McPhail v Doulton, where the HL affirmed that upholding the settlor’s intentions was of paramount importance
• Facts
• Mr Baden settled a trust for the employee, relatives and dependants of his company, Matthew Hall & Co Ltd. It said the net income of the trust fund should be applied by the trustees ‘in their absolute discretion’ and as they thought fit for the employees, relatives and dependants in grants. The HL in McPhail v Doulton held that trust would in principle be valid if it could be said with certainty that a claimant ‘is or is not’ within the class of beneficiaries.
• Brightman J held the HL decision had overruled previous IRC v Broadway Cottages so that the rule in Re Gulbenkian applied equally to trusts as to powers: a trust was valid if it could be said with certainty that any give individual was or was not a member of a class of beneficiaries, and accordingly the clause was valid as a trust. The executors appealed and the appeal was dismissed by the CA.
• Held
• The test in Re Gulbenkian for discretionary trust ‘conceptual’ and ‘evidential’ were distinct. If a claimant could not bring evidence he as a beneficiary, he would not be. But there was no conceptual uncertainty in the words ‘dependants’ or ‘relatives’, and the clause was valid.
• Reasoning:
• Stamp LJ – held that the trust was valid because the court could always determine who was a dependant and a relative could be restricted to a workable definition of the next of kin.
• Sach Lj – held that the test required only clarity in the concept
• Megaw LJ – He said that requiring complete conceptual certainty would amount to a return to the list certainty test.

Question 6

Re Gibbard

Answer 6

• Facts
• A testator by his will created a testamentary power, which was collateral power and not a power coupled with a trust, to appoint his residuary estate ‘amongst…any of my old friends’, with a gift over in default of appointment. On the question of validity of power.
• Notes
• A testator with a power to appoint his residuary estate to ‘any of my old friends’ was a valid power of appointment or was void for uncertainty or for some other reason.
• Held
• The power of appointment being collateral, and not a trust power, uncertainty was not fatal to its validity, provided that the objects were described with sufficient certainty; that there was sufficient degree of certainty in the expression ‘old friends’, since it would not be difficult for claimants to show that they were within the description, and, therefore the power was valid.
• So it was simply necessary to ascertain whether a particular claimant was within the description of the object but was not necessary to be able to ascertain who all the objects of the power were.

Question 7

Brown v Gould

Answer 7

• Facts
• A lease of business premises contained an option to renew the lease, providing for ‘such new lease to be for a further term of 21 years at a rent to be fixed having regard to the market value of the premises at the time of exercising this option taking into account to the advantage of the tenant any increased value of such premises attributable to structural improvements made by the tenant…’
• The tenant had substantially rebuilt the premises and sought to exercise his option, which was more advantageous to him than his possible rights under the Landlord and Tenant Act 1954. The landlord was willing to grant him a new tenancy under the Act but contended that the option to renew was void for uncertainty.
• Issues
• Whether the tenant’s option for renewal under the clause was valid and enforceable or void for uncertainty –
• Held
• The court was reluctant to hold void for uncertainty any provision that was intended to have legal effect, and it was accepted that the option was intended to have business efficacy

Question 8

**Re Barlow

Answer 8

• If the gift can be construed as a series of gifts to individuals rather than a gift to a class, the ‘is or is not’ test may be avoided.

Question 9

*Re Tuck’s Settlement

Answer 9

• Case concerning the certainty of trusts
• Facts
• Sir Tuck created a trust for future baronets who were married to a wife ‘of Jewish blood’ and who ‘continues to worship according to the Jewish faith’. If in doubt, ‘the decision of the Chief Rabbi in London of either the Portuguese or Anglo German Community…shall be conclusive’.
• It was contended that the concepts of Jewish faith and of Jewish blood were too uncertain for the trust to be valid.
• Held
• Lord Denning MR held the trust was valid, and the Chief Rabbi could resolve any uncertainty. The trust, however, would have been valid even if the Chief Rabbi had not been identified.

Question 10

McPhail v Doulton

Answer 10

• If the class of objects is so wide that it cannot be considered to be anything like a class, the trust or power may fail as being administratively unworkable.

Question 11

Re Hay’ Settlement Trusts

Answer 11

• Whether a deed of appointment was valid
• Facts
• By settlement the trustees were directed to hold the trust fund for ‘such persons or purposes’ as the trustees should in their discretion appoint by deed within 21 years of the day of settlement, and in default of appointment, for the settlor’s nieces and nephews living at the date of the settlement in equal shares.
• Issues
• Following the expiration of 21 years from the date of the original settlement the trustees instituted proceedings to determine (i) whether the power of appointment in the original settlement in favour of ‘such persons or purposes’ as the trustees should appoint was invalid as being too wide, and therefore the trust fund vested in the nieces and nephews living at the date of the settlement, (ii) Whether, if the power of appointment in the original settlement was valid, the discretionary trust created by the deed of appointment was invalid as being too wide and outside the power of appointment in the settlement, so that the nieces and nephews living at the date of the settlement became entitled to the trust fund on the expiration of 21 years from the date of the settlement, or (iii) whether both the power of appointment in the original settlement and the deed of appointment were valid so that the trustees continued to hold on trust to pay the income to such persons or charities as they thought fit until 21 years after the death of the last surviving niece of nephew.
• Held
• An ‘intermediate’ or ‘hybrid’ power of appointment vested in a trustee to appoint to anyone in the world except a specified number or class of persons was not rendered invalid. The power of appointment contained in the settlement was not void for uncertainty.
• NOTE that if this had been a trust, it would have been void for uncertainty of objects

Question 12

Re Manisty’ Settlement

Answer 12

• Capriciousness (irrationality) voids: discretionary trusts & powers of appointment
• ‘A power to benefit ‘residents of greater London’ is capricious because the terms of the power negative any sensible intention on the part of the settlor…A capricious power negatives a sensible consideration by the trustees of the exercise of the power.’

Question 13

Blausten v IRC

Answer 13

• The case concerned income and corporation taxation, settlements and transfer of assets, revocable settlements, settlor retaining interest, power of appointment, validity of appointment.
• Facts
• A taxpayer made a settlement containing discretionary trusts for the benefit of members of a specified class which included the taxpayer’s ‘wife [or] widow’.
• The settlement conferred power on the trustees during the trust period to pay or apply capital of the trust of the trust fund to or for the benefit of any one or more of the specified class.
• Held
• It was not open to the taxpayer to argue that the power contained in para 5 of Sch 2 to the settlement was void for uncertainty. The power was not one which the trustees were under a duty to exercise; it was a power of which they had a duty to consider from time to time.

Question 14

R v District Auditor,

Answer 14

• Facts
• The council was being abolished and created discretionary trust of £400,000 ‘for any or some inhabitants of West Yorkshire’
• Issue
• Was the discretionary trust valid?
• Held
• The trust was invalid – the size of class of objects rendered it administratively unworkable

Question 15

Mettoy Pension Trustees Ltd

Answer 15

• Note
• A settlor may authorise another to distribute property to a class of objects without imposing an obligation to do so. This is called a mere power of appointment. The donee of the power may be granted a ‘personal’ or a ‘fiduciary’ power.
• A fiduciary power unlike a personal power is granted to an individual such as a trustee. It is similar to the personal power in that neither imposes an obligation to distribute the property. But a personal power requires the trustees to deal with the discretion in a responsible manner.
• The case
• Where a trustee acts under a discretion given to him by the terms of the trust the court will interfere with his action if it is clear that he would not have so acted as he did had he not failed to take into account considerations which he ought to have taken into account.
• In cases such as this, where it is claimed that the rule in Hastings-Bass applies, three questions arise: (1) What were the trustees under a duty to consider? (2) Did they fail to consider it? (3) If so, what would they have done if they had considered it?