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;

2. 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 TrustsThe 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 ex-officers 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.