The Three Certainties- Object

Question 1

Conceptual Certainty of objects is?

Answer 1

A concept with defined boundaries. i.e. ‘my daughters’ is conceptually certain. ‘my friends’ is not.

Question 2

Evidentiary Certainty of objects is?

Answer 2

Showing a person is an object by evidence.

e.g. ‘fellow members of my school choir’ may or may not have evidentiary certainty depending on the available evidence.

Question 3

what is a fixed Trust

Answer 3

Where the trustees must distribute the property to the beneficiaries and in the shares set out by the trust (or in equal shares if shares not stated).

Eg My residuary estate to be shared equally between my four sons. The objects are specific- not part of a class. Accordingly, it must be possible to identify all the objects in a class. The complete list test is used

Question 4

Inland Revenue Commissioners v Broadway Cottages (1995)

Answer 4

Complete list test- A fixed trust is not valid unless all the beneficiaries are ascertainable because otherwise the court cannot divide the fund into equal shares.

NB: Not used for discretionary trusts anymore.

Question 5

Requirements of the complete list test

Answer 5

1. All objects must be identifiable at the time of distribution (not necessary at time of creation).
2. The objects must be conceptually certain.
3. The objects must have evidentiary certainty.
4. If the trust is subject to a condition, this must be met (the condition itself must also be certain)

Question 6

Certainty required for a condition subsequent in a fixed trust?

Answer 6

Condition subsequent= a condition which if satisfied means beneficiary no longer entitled to trust property.

It must be conceptually certain from its creation precisely what event will void it. i.e. if my daughter married a non-christian man- christian man must be conceptually certain.

Question 7

Clayton v Ramsden

Answer 7

a condition subsequent that would have the effect of forefeiting prop held on trust if the beneficiary were to marry a ‘person not of the Jewish faith’ was void for uncertainty as to the meaning of being a member of that faith. (strict approach taken

Question 8

Re Tepper’s Will Trusts 1987

Answer 8

More recent less strict approach to certainty in conditions subsequent in fixed trusts.

Case: Beneficiaries were entitled to income from the testator’s estate when they reached 25 provided they did not ‘marry outside the jewish faith’.

Scott Focused on extrinsic evidence to resolve the uncertainty (ie. subjective evidence), which involved him asking what the ‘testor sitting in his armchair’ might have meant by the ‘jewish faith’.

Question 9

Certainty required for a condition precedent in a fixed trust?

Answer 9

Condition Precedent= a condition which must be satisfied before prop can be distributed.

Valid if it can be said that at least 1 person has satisfed the condition. No need for evidential or conceptual certainty because it is just about the beneficiary/beneficiaries.

Question 10

Re Barlow’s Will Trusts (1979)

Answer 10

condition precedent

Case: T declared paintings to be held by her executor on trust to sell them, but that her ‘family and friends’ could buy them first at value (condition precedent). The proceeds would go to the residuary estate.

Decision: ‘Friends’ was sufficiently certain for condition precedent as could point to at least one person who was undoubtedly a friend on any measure; up to individual to prove.

Question 11

Re Tuck’s Settlement Trust

Answer 11

Denning: Unclear why conceptual uncertainty would not render a condition precedent void but would invalidate a condition subsequent.

If the concept underlying the condition is uncertain so that it can never be established whether anybody satisfies it, then it is effectively void.

The better view is that conceptual uncertainty will render any condition ineffective.

Question 12

Discretionary Trust

Answer 12

Where trustees have discretion as to who benefits and in what proportions.

Initially same ‘complete list’ test applied to discretionary as to fixed trusts, but looser test applied to powers is now used.

Question 13

Re Gulbenkian [1970] HOL

Answer 13

Case concerning fiduciary powers, not trusts- the ‘is or is not’ test, which was later adopted in McPhail for discretionary trusts.

Upjohn- ‘The power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class.’

Question 14

Evaluation of Re Gulbenkien

Answer 14

1. Held that ‘residing’ had concetual certainty because the court could determine whether a particular person matched the description.
2. This is at odds with the stricter approach in Re Baden (No 2) in which particular concepts needed a clear definition to be valid.
3. BUT Baden involved a discretionary trust and G involved a fiduciary power.
4. AND Baden was decided later, by which time the courts had adopted a more sophisticated approach to the problem of certainty of objects.

Question 15

McPhail v Doulton (1971) HOL

Answer 15

Wilberforce- HOL changed approach to certainty of objects in discretionary trusts.

Facts: Trust in favour of of staff of the company, their relatives and dependents.

1. Complete list test should not be used. The test is the Gulbenkien ‘is or is not’ test- i.e. whether it can be said with certainty that a given individual is or is not a member of the designated class.

2. The trust does not fail for lack of certainty simply because it it not possible to ascertain every member of that class.

3. He may make diligent and careful inquiries depending on how much money he has to distribute and the composition and needs of particular categories and individual objects.

4. The difference between powers and discretionary trusts is not so great that one should require complete list and the other not.
5. Rationale for the list test is so that equal division can be done. BUT here and discretionary trusts generally equal division way not intended by the settlor because gave trustees DISCRETION.
6. BUT adopting Gulbikien is not a complete assimilation of trusts and powers. Court will not normally compel the exercise of a power, but it will compell the carrying out of a trust.
7. Obiter- There may be a 3rd class of case where the meaning of the words is clear but the definition of the beneficiaries is so hopelessly wide as to not form ‘anything like a class’, so the trust cannot be executed. I hesitate to give examples for they may prejudice future cases but perhaps ‘all residents of Greater London’. A discretionary trust for ‘relatives’ does not fall within this category

Question 16

Why change the test for certainty in discretionary trusts?

Answer 16

1. Discretionary trusts of increasing importance, and size- Retaining complete list test would doom many to failure
2. Sometimes very difficult to distinguish between discretionary trust and power. If different tests, validity could hinge on slight differences of wording

Question 17

Burrough v Philcox (1840)

Answer 17

If the settlor in a discretionary trust intends that if the trustee’s discretion is not exercised the trust property should be awarded in equal shares, the complete list test is the appropriate test

Question 18

Re Baden (No 2) (1973) CoA- conceptual/evidentiary certainty

Answer 18

McPhail after being sent back to Chancery to determine whether the object was sufficiently certain. The court had adopted the Gulbenkian test as Wilberforce proposed. Case was appealed to CoA.

Judges in CoA disagreed on what type of certainty was required by the Gulbenkian ‘is or is not’ test.

1. Sachs- Requires conceptual certainty but not evidentiary certainty. Once concpetual certainty of a definition (e.g relatives) is determined the court should look to facts (evidence) to see if persons fall within the class. BUT the trust will never fail ust because it is impossible to prove that a P is not a member of the class.

2. Stamp- Requires both conceptual and evidentiary certainty.

The court and trustees, according to Wilberforce’s anlysis, should look at the whole range of beneficiaries who could be affected, not just the individual who has come to court to enforce the trust, - so it is necessary to find a definitive way of construing who is/is not a relative/dependent, because if there are ‘don’t knows’ the ‘is or is not’ test is not met.

3. Megaw- Probably need conceptual certainty and need some evidentiary certainty. ‘The test is satisfied if it can be said with certainty that a substantial number of objects fall within the trust (evidential)

Substantial is a question of common sense and degree on the facts.

Here it would be fantasy to suggest that any practical difficulty would arise with ‘relatives and dependents’ if a substantial number only is needed.

Doesnt matter if of some objects it can be said that they are outside the trust but it is not proven whether they are in or out (little bit of evidentiary)

Question 19

Re Baden (No 2) (1973)- Dependents

Answer 19

1. There is no conceptual uncertainty in ‘dependents’.
2. Those who are party or wholly financially dependent on another.
3. it is a word which has been used over several generations in comparable trust deeds, so not arguable it is uncertain.
4. It would be hopeless to lay down a rule of guidance because every case would differ in some material circumstance. Each case on own merits.
5. Trustees, or if necessary the court, are capable of deciding whether or not a person is a dependent.

Question 20

Re Baden (No 2) (1973) CoA- Relatives

Answer 20

There is no uncertainty in ‘relatives’ to cause it to be void.

1. Defined by Sachs and Megaw as descendants of a common ancestor.

2. Stamp- narrower approach. Next of kin.

i. Harding was a case where the court executed a discretionary trust for ‘relations’ by distributing to next of kin in equal shares.
ii. When ICS happened it was said to be anomolous.
iii. BUT Wilberforce thought it showed how courts can be flexible about how they execute powers for a class.
iv. This is the foundaiton on which he said first list was wrong, because it was inflexible.
v. So Harding was endorsed by the HOL so ‘relations’ must mean dist to next of kin.
vi. Haunted by his obiter that relations is a wide class.
vii. Obiter- First cousins is conceptually certain. Those under a moral obligation is not.

Question 21

Virgo on Re Badden

Answer 21

1. Stamp’s approach is the most consistent with Wilberforce in McPhail.
2. BUT stamp’s test does mean discretionary trusts are more likely to be found void
3. This is inconsistent with fundamental principle of respecting the settlor’s intent where possible by upholding the trust.
4. In light of that policy, Sachs is to be preferred, because this removes evidential certainty as a means of invalidating trusts.”

Question 22

Re Barlow’s Will Trust (1979)

Answer 22

Family would include all those related by blood to T, not solely the next of kin i.e. not adopting Stamp’s view

Question 23

Trustee as arbiter?

Answer 23

Resolving uncertainty of object by leaving the decisions on uncertain objects to the trustee.

ISSUE: finding the balance between excessive delegation/limiting the court’s ability to determine whether objects are certain against the principle that the settlor/testator’s intention should be respected. Resolved by recognising that trustees are able to be arbiters about questions of evidentiary certainty but NOT conceptual certainty

Question 24

Re Coxen (1948)

Answer 24

Trustee given role of arbiter could resolve evidential uncertainty. The trustee was able to determine whether a condition for revoking a gift had been satisfied, as long as the terms of the condition were defined with sufficient conceptual certainty.

Question 25

Re Leek (1969)

Answer 25

Sachs- A power in a discretionary trust for a trustee to distribute to anybody who the trustee considered to have a ‘moral claim’ on the settlor meant the trustees were arbiters and could determine who had a moral claim.

Evaluation:

1. Maybe incorrect because it appears to make the trustees the arbiters of conceptual certainty.
2. BUT the right result was achieved.
3. A distinction needs to be drawn between a trust for those who have a moral claim on the settlor, and those having a moral claim being determined by the trustees.
4. The first allows the trustees defining the conceptual certainty and this is unacceptable, BUT the second involves the objects being those whom the trustees think have a moral claim on the settlor, in which case the trustees are not the arbiters of whether the power applies, but rather form an essential part of the definition of that power- this was adopted in Re Coates.

Question 26

Third party as arbiter?

Answer 26

Trust may provide for any uncertainty as to object to be resolved by third party. Recognised that it is acceptable to resolve uncertainty relating to the identification of objects by referring the matter to the 3rd party whom the settler has made an arbiter on the matter.. In older cases references to 3rd party arbiters as the definers of concepts were more likely to be rejected, but this has changed now.

Question 27

Re Tuck’s Settlement Trust (1978)- 3rd party as arbiter

Answer 27

Any uncertainty about whether a person was married to an ‘approved wife of Jewish blood’ who worshipped according to the Jewish faith could legitimately be resolved by referring the matter to a chief rabbi, as the settlement had authorised.

Question 28

Administrative Unworkability- Wide class

Answer 28

A trust might fail if its objects are administratively unworkable: McPhail e.g. A class ‘so hopelessly wide’ as to not form anything like a class. Distinct from both conceptual and evidential uncertainty Example given of ‘all the residents of Greater London’- Wilberforce.

Question 29

R v District Auditor, ex parte West Yorkshire CC (1986)- Administrative unworkability

Answer 29

Wilberforce obiter used to invalidate a trust for administrative unworkability-wide class.

The beneficiaries under a trust were ‘all or some fo the inhabitants of West Yorkshire’.

Size of the class was so wide that it was incapable of forming anything that is administratively workable. 2 and a half million potential beneficiaries.

Question 30

Re Harding (2007)

Answer 30

Recognised that a trust for the black community of four London boroughs would have been void for uncertainty had it not been a charitable trust.

Question 31

When will a trust be voided due to administrative unworkability of class size?

Answer 31

No consistent rationale. Because the rule is inconsistent with giving effect to the settlor’s intention any specific rule should be rejected. A matter of evidentiary certainty- the preferable interpretation of evidentiary certainty is that if an object cannot be proven to be within a class, then he should be considered outside of it.

Eg relatives- every person from a common ancestor. While this could be millions of people, only a certain class of persons will be able to prove they are a relative, so this makes the trustee’s discretion workable. So it will be workable unless evidentiary uncertainty cannot be established

Question 32

Capriciousness

Answer 32

If the settlor had no sensible intent in establishing the trust it may be void for capriciousness. Court should consider the nature of the object class to determine whether settlor had a good reason to benefit that particular class; if it is arbitrary, the trust is likely to be void. Seems to relate to size of class and lack of connection between settlor and class.

Question 33

R v District Auditor, ex parte West Yorkshire CC (1986)- Capriciouness

Answer 33

Trust was administratively unworkable but not capricious. The council’s reasons for creating the trust for residents of West Yorkshire were to inform various bodies of the proposed abolition of the authority and of other proposals affecting local government in West Yorkshire.

Question 34

Re Mainstry’s Settlement (1974)

Answer 34

Templemen (case of fiduciary powers, not trusts)- suggested that a power given to trustees to benefit the ‘residents of Greater London’ would be capricious because the terms of the power negatives any sensible intention on the settlor’s part.

If the settlor had any sensible intention he would not have required the trustees to consider only an accidental conglomeration of persons who have no discernible link with the settlor.

Question 35

Contrast District Auditor and Mainstry’s Settlements- capriciouness

Answer 35

Seems to be non-capricious to declare a trust for the residents of West Yorkshire but not Greater London? Could be numbers, but the connection between the settlor and the chosen objects must be significant as well. In WY the settlor was the county council for that area which was consequently especially interested in the needs of those living there. If a settlor chooses to establish a trust for the residents of an area which he has no connection with or he has no reason to benefit, this could be considered a capricious move.

Question 36

Effect of failure of certainty of object?

Answer 36

No trust, settlor retains absolute ownership.

If transfer on trust (i.e. the prop was transferred from the settlor to the trustee) with uncertain objects- Trustee holds on RT for settlor. It would be inappropriate for the trustee to take the property absolutely since the settlor did not intend him to have the benefit of the property.

BUT it cannot be held on an express trust because it is unclear who the objects of the trust are. The logical solution is that the trustee should hold the property on trust for the settlor (this is called a RT). So the settlor can demand transfer of the legal title from the trustee.