The Three Certainties- Object Flashcards
Conceptual Certainty of objects is?
A concept with defined boundaries. i.e. ‘my daughters’ is conceptually certain. ‘my friends’ is not.
Evidentiary Certainty of objects is?
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.
what is a fixed Trust
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
Inland Revenue Commissioners v Broadway Cottages (1995)
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.
Requirements of the complete list test
- All objects must be identifiable at the time of distribution (not necessary at time of creation).
- The objects must be conceptually certain.
- The objects must have evidentiary certainty.
- If the trust is subject to a condition, this must be met (the condition itself must also be certain)
Certainty required for a condition subsequent in a fixed trust?
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.
Clayton v Ramsden
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
Re Tepper’s Will Trusts 1987
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’.
Certainty required for a condition precedent in a fixed trust?
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.
Re Barlow’s Will Trusts (1979)
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.
Re Tuck’s Settlement Trust
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.
Discretionary Trust
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.
Re Gulbenkian [1970] HOL
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.’
Evaluation of Re Gulbenkien
- Held that ‘residing’ had concetual certainty because the court could determine whether a particular person matched the description.
- This is at odds with the stricter approach in Re Baden (No 2) in which particular concepts needed a clear definition to be valid.
- BUT Baden involved a discretionary trust and G involved a fiduciary power.
- AND Baden was decided later, by which time the courts had adopted a more sophisticated approach to the problem of certainty of objects.
McPhail v Doulton (1971) HOL
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.
- 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.
- The difference between powers and discretionary trusts is not so great that one should require complete list and the other not.
- 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.
- 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.
- 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
Why change the test for certainty in discretionary trusts?
- Discretionary trusts of increasing importance, and size- Retaining complete list test would doom many to failure
- Sometimes very difficult to distinguish between discretionary trust and power. If different tests, validity could hinge on slight differences of wording
Burrough v Philcox (1840)
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
Re Baden (No 2) (1973) CoA- conceptual/evidentiary certainty
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)
Re Baden (No 2) (1973)- Dependents
- There is no conceptual uncertainty in ‘dependents’.
- Those who are party or wholly financially dependent on another.
- it is a word which has been used over several generations in comparable trust deeds, so not arguable it is uncertain.
- 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.
- Trustees, or if necessary the court, are capable of deciding whether or not a person is a dependent.
Re Baden (No 2) (1973) CoA- Relatives
There is no uncertainty in ‘relatives’ to cause it to be void.
- 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.
Virgo on Re Badden
- Stamp’s approach is the most consistent with Wilberforce in McPhail.
- BUT stamp’s test does mean discretionary trusts are more likely to be found void
- This is inconsistent with fundamental principle of respecting the settlor’s intent where possible by upholding the trust.
- In light of that policy, Sachs is to be preferred, because this removes evidential certainty as a means of invalidating trusts.”
Re Barlow’s Will Trust (1979)
Family would include all those related by blood to T, not solely the next of kin i.e. not adopting Stamp’s view
Trustee as arbiter?
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
Re Coxen (1948)
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.
