W2 - Certainty of Objects

Question 1

What is a fixed trust?

Answer 1

Where the settlor/testator has stipulated who the beneficiaries are and the proportions in which they will share the trust property.

Outright gifts are likely to be fixed.

Question 2

Certainty of objects test for fixed trusts

Answer 2

Complete List Test (IRC v Broadway Cottages Trust)

Question 3

Complete List Test - IRC v Broadway Cottages Trust

Answer 3

It must be possible to draw up a comprehensive list of each and every beneficiary. Otherwise, the trust fails.

Reason: Without a complete list, the trustees cannot perform their duty to carry out the trust.

Question 4

What elements must be present in the Complete List test?

Answer 4

1) Conceptual Certainty - Settlor must define the objects using clear concepts so that the trustees know what type of person they are looking for.
2) Evidential Certainty - A complete list is only possible if you can identify each and every member of the class.

Question 5

OT Computers v FNTF

Answer 5

A bank account which will hold money on trust for ‘Urgent Suppliers’ was uncertain. ‘Urgent’ is too unclear.

Question 6

What is a discretionary trust?

Answer 6

Where the trustee is under a duty to select the beneficiaries from a class and decide how much income or capital they are to receive (Evans).

Question 7

Certainty of objects test for discretionary trusts

Answer 7

Given Postulant Test - McPhail v Doulton

Question 8

Given Postulant test - McPhail v Doulton

Answer 8

The discretionary trust is valid if it can be said with certainty whether any given postulant is or isn’t a member of the class of objects.

Question 9

Re Baden’s Deed Trust (No 2)

Answer 9

Conceptual certainty is essential in the description of objects, but disagreed as to whether the presence of “don’t knows” would mean the failure of the given postulant test.

Question 10

Stamp LJ in Re Baden

Answer 10

If there are ‘don’t knows’, the trust will fail.

Question 11

Sachs LJ in Re Baden

Answer 11

The burden is on the claimant to prove he is within the class.

Question 12

Megaw LJ in Re Baden

Answer 12

If there is a substantial number of people that say they are within the class, the trust will pass the given postulant test. However, the trust can still fail due to:

1) Administrative workability or size of the class
2) Capriciousness

Question 13

Administrative workability or size of the class

Answer 13

If numbers are too large to form a class, it may make the trust administratively unworkable. (West Yorkshire Metropolitan CC)

Question 14

Capriciousness

Answer 14

The trust is capricious (irrational) if it ‘negates a sensible consideration by the trustees of the exercise of the power (Re Manisty’s Settlement)

Question 15

Powers of Appointment

Answer 15

Where a person has authority to deal with property in a particular way, but is under no obligation to actually exercise this authority.

Question 16

Gift in default of appointment

Answer 16

If power of appointment was not exercised, then the objects are to split the trust property evenly.

Question 17

What happens if there was no gift in default of appointment and the power of appointment was not exercised?

Answer 17

There would be a resulting trust for the settlor’s estate.

Question 18

How to tell whether a person has created a power of appointment or a discretionary trust?

Answer 18

If the words suggest there is a duty to select a beneficiary, then they create a discretionary trust.

If there is no duty to select, it is a power of appointment.

Question 19

Certainty of objects test for power of appointment

Answer 19

Given Postulant test - Re Gestetner’s Settlement

Question 20

Given Postulant test - Re Gestetner’s Settlement

Answer 20

Also known as ‘is or is not’ test

The objects are regarded as sufficiently certain if the settlor’s description of the objects is clear enough to enable you to recognise the sort of people who will be included.

Question 21

When can the court intervene? (Powers of Appointment_

Answer 21

1) The trustees don’t consider a request from a potential beneficiary.
2) The trustees act capriciously, eg irrational/irrelevant conduct to any sensible expectation of the settlor (Re Manisty’s Settlement)