Certainty of Objects
• Who are the beneficiaries under the trust?
• The test of certainty of the objects differs for
fixed and discretionary trusts.
Fixed Trusts
•
“£100,000 on trust for all my brothers and sisters in equal shares”
•
“£100,000 on trust for all the regulars at The Hilltown Inn in equal shares”
•
“£100,000 on trust for the employees and ex-employees of the Rostrevor Café (est. 1990), in equal
shares”
•
IRC v Broadway Cottages Trust [1955] Ch 20 (CA) – Complete List Test
•
Conceptual Certainty
•
Evidential Certainty
•
Ascertainability
•
Administrative Workability
•
Re the Double Happiness Trust (2002) 5 ITELR 646
Complete List Test
Rationale for complete list test rests on the obligation
imposed on the trustees, an obligation that can be
enforced by the beneficiaries:
1. Trustees need to know who are the beneficiaries, in order
to carry out the terms of the trust;
1. The court must be able to control and supervise a trust,
and execute the trust (i.e. carry it out) should the trustees
fail to do so. ‘…the court cannot guess at it’: per Lord
Upjohn in Re Gulbenkian’s Settlements [1970] AC 508, 524.
Discretionary Trusts
The creator of the trust (settlor/testator) has given the trustees a
discretion as to who should benefit under the trust and by how much.
• “£100,000 on trust for such of my brothers and sisters in such shares
as my trustees shall in their absolute discretion decide”
• “£100,000 on trust for such of the regulars at The Hilltown Inn in
such shares as my trustees shall in their absolute discretion decide”
• “£100,000 on trust for such of the employees and ex-employees of
the Rostrevor Café (est. 1990), in such shares as the trustees shall
decide”
McPhail v Doulton [1971] AC 424.
• “The trustees shall apply the net income of the fund in
making at their absolute discretion grants to or for the
benefit of any of the officers and employees or exofficers and 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 as they
think fit.”
Clause 9(a).
THE ISSUE: Did cl. 9 create a power (of appointment) or a
(discretionary) trust? Whichever it was, did it satisfy the
test of certainty?
Re Gulbenkian’s Settlements (Whishaw
v. Stephens) [1970] AC 508
1.
Can it be said with certainty that any one individual is a
member of the class? Gibbard [1966] 1 All ER 273, Leek
[1967] Ch.1061, and Lord Denning in CA in Gulbenkian [1968]
Ch. 126
This is known as “the any one person test”.
2.
Is the class of beneficiaries defined sufficiently to enable the
trustees (or the court) to determine (when the time comes to
do so) whether any given individual is or is not a member of
the class? Re Gestetner Settlement [1953] Ch. 672.
This is known as “the any given postulant test”.
McPhail v Doulton
• “It is striking how narrow and in a sense artificial is the
distinction, in cases such as the present, between trusts or
as the particular type of trust is called, trust powers, and
powers … A layman and, I suspect, also a logician would
find it hard to understand what difference there is. It does
not seem satisfactory that the entire validity of a
disposition should depend on such delicate shading … Such
distinction as there is would seem to lie in the extent of the
survey which the trustee is required to carry out: if he has
to distribute the whole of a fund's income, he must
necessarily make a wider and more systematic survey than
if his duty is expressed in terms of a power to make grants.”
Lord Wilberforce, 448-9.
Lord Wilberforce
• “…as to the trustees' duty of inquiry or ascertainment, in each case the
trustees ought to make such a survey of the range of objects or possible
beneficiaries as will enable them to carry out their fiduciary duty (cf. Liley
v. Hey ). A wider and more comprehensive range of inquiry is called for in
the case of trust powers than in the case of powers.” 457
• “I desire to emphasise the distinction clearly made and explained by Lord
Upjohn ( [1970] A.C. 508 , 524) between linguistic or semantic uncertainty
which, if unresolved by the court, renders the gift void, and the difficulty
of ascertaining the existence or whereabouts of members of the class, a
matter with which the court can appropriately deal on an application for
directions. There may be a third case where the meaning of the words
used is clear but the definition of beneficiaries is so hopelessly wide as not
to form 'anything like a class' so that the trust is administratively
unworkable or in Lord Eldon's words one that cannot be executed.” 457
Categories of Certainty
• Conceptual Certainty
• Evidential Certainty
• Ascertainability
• Administrative Workability
• Re Hays ST [1982] 1 WLR 202
• R v District Auditor, ex parte West Yorkshire
Metropolitan CC [1986] RVR 24
• Re Manisty [1974] Ch 17
Re Baden’s Deed Trusts (No.2) [1973] Ch 9
•
Sachs LJ – “Once the class of persons to be benefited is conceptually certain it then becomes
a question of fact to be determined on evidence whether any postulant has on inquiry been
proved to be within it: if he is not so proved, then he is not in it.” [20]
•
Megaw LJ – “…the test is satisfied if, as regards at least a substantial number of objects, it can
be said with certainty that they fall within the trust … What is a "substantial number" may
well be a question of common sense and of degree in relation to the particular trust...” [24]
•
Stamp LJ – ““…the trustees ought to make such a survey of the range of objects or possible
beneficiaries as will enable them to carry out their fiduciary duty. It is not enough that
trustees should do nothing but distribute the fund among those objects of the trust who
happen to be at hand or present themselves. … a wider and more comprehensive range of
inquiry is called for in the case of what I have called discretionary trusts than in the case of
fiduciary powers. But, as I understand it, having made the appropriate survey, it matters not
that it is not complete or fails to yield a result enabling you to lay out a list or particulars of
every single beneficiary.” [27]
Conditions Precedent
•
Re Allen [1953] Ch 810 – “I am not persuaded that where a formula constitutes a
condition precedent or a qualification it is right for the court to declare the
condition or qualification void for uncertainty so as thereby to defeat all possible
claimants to the gift unless the terms of the condition or qualification are such
that it is impossible to give them any meaning at all, or such that they involve
repugnancies or inconsistencies in the possible tests which they postulate, as
distinct, for example, from mere problems of degree.” (Lord Evershed MR, 818)
•
Re Tuck’s Settlement Trust [1978] Ch 49 – “The testator may want to cut out all
that cackle, and let someone decide it who will really understand what the testator
is talking about, and thus save an expensive journey to the lawyers and the
courts.” (Lord Denning MR, 62)
•
Re Barlow’s Will Trusts [1979] 1 WLR 278– “if the nature of the gift was such that it
was legally necessary to draw up a complete list of “friends” of the testatrix, or to
be able to say of any person that “he is not a friend,” the whole gift would
probably fail even as to those who, by any conceivable test, were friends.” (Browne
Wilkinson J, 281)
Consequences of Lack of Certainty of
Object
• The purported trust fails, and the trustees
hold the legal title on an automatic resulting
trust for the testator’s estate or for the settlor
(depending on whether the failed trust arose
in a will or a deed). Automatic resulting trusts
are a device for dealing with failed
dispositions, to return the legal title to the
person now entitled to the property.