Certainty of Objects

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Introduction

Certainty of objects: beneficiaries of a trust must be certain, otherwise the trust is void

  • In other words, a trust will be void if the ‘objects’ of that trust (meaning, the ‘beneficiaries’ of that trust) are uncertain

Trusts must be enforceable, so there must be someone who can enforce the trust (unless it is a charitable trust, where the Attorney-General can bring an action)

Morice v Bishop of Durham (1804) → “There can be no trust over the exercise of which this court will not assume a control”

Proprietary Rights of Beneficiaries

By the principle established in Saunders v Vautier, in the case of a bare trust or a fixed trust, the beneficiaries, acting together, can direct the trustees to transfer the trust property to them. This means that they have proprietary rights, as opposed to rights in personam against the trustees.

Where a trust is discretionary and exhaustive – i.e. where the trustees have to use all the trust property for the benefit of a fixed class of individuals (in other words, an exhaustive discretionary trust is a trust where trustees must allocate all the property and cannot retain any of it) - then those individuals, if all of them act together, may invoke the Saunders v Vautier principle

Identification of Beneficiaries

The beneficiaries of a trust may be identified in four ways:

  1. Named individuals e.g. “My wife, Jill”
  2. A group defined by a description e.g. “My children / “Students at Oxford university”
  3. An organisation or association e.g. “The Law Society”
  4. A general class of people e.g. “Young people” / “Residents of Oxfordshire”

If the trust names the individuals (i.e. the first one) there is no issue: a valid private trust will take effect as there is no uncertainty of objects

The fourth option (i.e. a class of people) would only really take effect as a charitable trust for the benefit of the public or section thereof

The 2nd and 3rd class are therefore the issue

The test to be applied to determine certainty of objects depends upon the nature of the trust:

  • With a ‘fixed’ trust, it is, and always has been, that a trust is void unless it is possible to ascertain every beneficiary (list test)
  • With a discretionary trust and powers, the House of Lords decided in McPhail v Doulton that the test was: can it be said with certainty that any individual is or is not a member of the class? (the is or is not test)

Fixed Trust

A fixed trust is a trust that requires property be held for a fixed number of beneficiaries

Where there is a fixed trust they must be able to say, with certainty, who the beneficiaries are. This is the 'list' test (or Ascertainability test): it must be possible to construct a definitive list of who all the beneficiaries are e.g. with a fixed trust for students at Oxford university you would have to compile a list of who all the beneficiaries are

  • If a list of all the beneficiaries/objects cannot be compiled, the trust will be void for uncertainty

IRC v Broadway Cottages [1955]: the trust in this case failed because they could not identify the list of beneficiaries (Jenkins LJ)

Re Gulbenkian’s Settlement [1970]: House of Lords confirmed the list test

Discretionary Trusts

With a discretionary trust, trustees have the discretion to decide how trust property is to be divided, but no power not to divide it (i.e. they are obliged to exercise the discretion)

The test for certainty of objects in respect of discretionary trusts is the ‘is or is not’ test

  • The 'is or is not' test: can it be said with certainty that any individual is or is not a member of the class?
  • So, for a trust where the property is left for the benefit of the testator’s wife during her lifetime and thereafter to be divided equally between the testator’s children, it must be possible to say who the testator’s children are.

In McPhail v Doulton [1971] it was said that with a discretionary trust the trustees must exercise their discretion i.e. they must distribute/divide the property property and exercise their discretion. With a power, the trustees may exercise their power i.e. the trustees have a discretion as to whether they want to divide the property when they merely have a power: there is no obligation to do so

  • Therefore, beneficiaries can only complain if a discretion has not been exercised; not powers

In Re Ogden [1933] - which is the old law - a trustee had discretion to divide money to certain political organisations. The Court, applying the old law, used the list test; the trustee therefore compiled a list (although probably impossible in the circumstance), so the court held the trust to be valid

  • Note that the law has now changed for discretionary trusts: McPhail v Doulton provides the current law

In McPhail v Doulton [1971] a trust was made in favour of “employees or ex-employees of the Company or any of their relatives”. The House of Lords adopted Re Gulbenkian test i.e. the ‘is or is not’ test is used to determine whether or not a trust fails for uncertainty of objects

Powers

Re Gulbenkian’s Settlement [1970]: Lord Wilberforce said a power simply gives the holder the ability to exercise that power without any obligation to do so

  • An example of fiduciary mere power would be “the trustee may advance £1,000 to X” as opposed to an example of a trust obligation which might read “the trustee shall pay £1,000 to X annually)
  • In the former case, the trustee is able to pay £1,000 but is under no compulsion to do so, whereas the second example compels the trustee to pay £1,000 to X

The case established a test which we shall refer to as the ‘is or is not’ test, which means that the trustees must be able to decide whether any hypothetical beneficiary is or is not within the class of objects

  • Lord Upjohn: “the Trustees or the Court must be able to say with certainty who is within and who is without the power”

The various forms of uncertainty

Despite the is or is not test allowing there to be a more flexible pool of beneficiaries, there are some uncertainties which mean that the discretion/power will be void:

  • Conceptual uncertainty
  • Evidential uncertainty
  • Ascertainability
  • Administrative Workability

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CONTENT

Conceptual and Evidential Uncertainty

Uncertainty may be conceptual – what is a ‘young person’ – or evidential – who was an employee of a company at a certain date. In general, a trust in which there is conceptual uncertainty is more likely to fail than a trust in which there is evidential uncertainty.

Conceptual uncertainty

The situation that is caught by this form of uncertainty is where the meanings of the words used in the trust are unclear/vague (Re Sayer 1957)

So words will be conceptually uncertain if the exact meaning of the definition used contains any linguistic or semantic uncertainty, if in other words it is impossible to say what the words in question actually mean e.g. “friends of settlor” / “pure-Englishman” / “good customers” / “young person”

So, if it is be impossible to be certain of the concept, the trust fails (Re Baden No 2)

Evidential uncertainty

Evidential uncertainty refers not to the meaning of the words involved, but rather to the question of whether or not the claimant can prove that she falls within the class of beneficiaries i.e. it is impossible to prove as a question of fact whether or not a beneficiary falls within a class

Generally, trust wont fail for evidential uncertainty (Mr Vinelott in Re Baden (No2)), but will usually fail for conceptual uncertainty

See the case of Re Baden’s Deed Trusts (No 2) [1973]

Administrative Unworkability

I.e. The definition of beneficiaries is so hopelessly wide as not to form "anything like a class" so that the trust is administratively unworkable (Morice v. Bishop of Durham).

Lord Wilberforce gave example of an administratively unworkable trust as one for “all residents of Greater London” but not one for “relatives” - McPhail v Doulton [1971]

In R v District Auditor, ex parte West Yorkshire Met CC (1985) a trust for West Yorkshire was held to be administratively unworkable, so the power was consequently void

Gifts and Trusts for the benefit of a community:

Although gifts to a wide range of people can fail for administrative unworkability, a gift to the community will be validated as a good trust

Re Smith [1932]: testamentary gift to “my country England” upheld as a charitable gift

Re Harding [2007]: an express trust for the black community of certain areas upheld as a charitable gift too.

Certainty of Conditions

Conditions Subsequent and Conditions Precedent

A potential 4th certainty is certainty of conditions

Sometimes there are conditions placed on the ability to benefit from a trust. However, such a trust will not automatically fail for uncertainty of condition

Condition precedent: a condition which must be met in order to benefit from trust

Condition subsequent: condition which applies after the beneficiary has received a benefit and which will, if met, end or vary the trust

Both must be certain. However, conditions subsequent may be ‘conditions of defeasance’ e.g. a trust providing a benefit until a condition is met (such as a beneficiary divorcing) have the effect of withdrawing financial support from a beneficiary

  • So as a general rule the court will not uphold a condition of defeasance unless the condition is sufficiently certain and unambiguous

See the case of Clayton v Ramsden [1943]

  • Property was left to the settlor's daughter. The trust would be invalid if she married a man not of the Jewish faith or parentage. She subsequently married a non-Jewish man.
  • Lord Atkin said the condition subsequent here was void for uncertainty and therefore the daughter could benefit from the trust

Extrinsic Evidence

In Re Tuck's Settlement Trusts [1978] the meaning of Jewish faith could be resolved by reference to Jewish law: so the uncertainty in this case was resolved by reference to extrinsic evidence

  • Note that the provision that uncertainty could be resolved by reference to an external third party was included in the trust instrument; This case is not authority for a general or implied power to refer questions to any third party to resolve uncertainty of condition

In In Re Tepper’s Will Trusts [1987] the trust was in favour of the children, as long as they did not marry outside the Jewish faith. The House of Lords held the ratio in Clayton v Ramsden [1943] had not said ‘Jewish faith’ was too uncertain and they compiled external evidence, in line with Re Tuck's Settlement Trusts [1978] to determine what the settlor had meant by ‘Jewish faith’

  • There are two problems with this judgment:
    • 1) Although it was not part of the ratio, it is clear that a majority of the House of Lords held, in Clayton v Ramsden, that ‘Jewish faith’ was not sufficiently certain to be a condition subsequent or of defeasance.
    • 2) It has always been held that extrinsic evidence is not admissible for the interpretation of wills.

In Marley v Rawlings [2014] Lord Neuberger said that when construing contracts' ‘subjective evidence of any party’s intention’ is not to be taken into account and, subject to the Administration of Justice Act 1982, the same rule applies to wills

  • Administration of Justice Act 1982: With wills or trusts created by wills, you may now use extrinsic evidence to determine testator’s subjective intent where a will is ambiguous

Testamentary Gifts

For gifts made by a will (i.e. bequests which are not held in trust), then the gift will not fail if it is possible to say that a person might meet the condition, notwithstanding that it might be impossible to say in the case of other people.

In Re Allen; Faith v Allen [1953]: Property was left to the eldest son who was a member of the Church of England. It was held that if it was possible to say a person met the condition by any definition then the gift would not fail (if this was a trust it would have failed for uncertainty)

Re Barlow's Will Trusts [1979]: ‘friends’ could apply to the executor to buy one of the testator’s paintings at a good price. If this was a trust ‘friends’ would be conceptually uncertain and thus void. As this was construed as a gift, as long as a person could show by any definition they were a friend they would be able to buy a painting at good price

Ademption

A testamentary gift is ‘adeemed’ if the property has been disposed of by the testator prior to his or her death: Re Slater [1907]

  • If you are left a gift in the will but the deceased sold that property before he died, the gift will fail
  • In Re Slater, the deceased had got rid of his shares in a water company before he died so the testamentary gift failed

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