- Created by: Hollylbowen97
- Created on: 06-05-19 11:31
Conceptual Certainty (intro)
In order for a trust to be valid, it is crucial that the description of the beneficiaries (be it fixed or a discretionary trust) should be conceptually certain at the time that the trust was created (M.Hayley). What follows, therefore, is that the settlor must have provided a description which has some ascertainable meaning and which allows the trustee to carry out their instructions in the execution of the trust (Emery). This approach is clearly identified by Lord Wilberforce in the case of Blathwayt v Baron Cawley where he stated that judges should undertake their assessment of objects without excessive astuteness to discover ambiguities.'
The description of Friends
In the case of Re Barlow's Will Trusts, Browne-Wilkinson J had to discuss the validity of a trust which was intended to benefit 'friends.' Miss Barlow, the testatrix had a large collection of pictures which she specifically declared them to be held by her executor on trust to sell them, but her family and friends could buy them first. Browne-Wilkison J held that the trust was valid because the concepts of friends could be given a workable meaning. Although 'friend' could have a wide variety of meaning, the minimum requirements were that (a) the relationship had to be long-standing (b) be a social and not a business or professional relationship, and (c) although they may not have met for some time, when circumstances allowed, they would meet frequently.
Not conceptually certain for discretionary trusts or fiduciary powers because there are many degrees of friendship ranging from an intimate relationship to a mere acquaintance. Rather, in this context, it was sufficient that one person undoubtedly fulfilled the condition and it did not matter whether or not anybody else did (Re Allen). Browne-Wilkinson J further stated that he did need to decide whether Re Gibbard's Will Trust was good law, in that it applied the Re Allen test to powers of appointment. But, it does show that the Re Allen test is the correct test, the word 'friends' is not too uncertain to be given effect. He also disregarded 'my old friends' by Meggary J to not be applied to such a case.
The description of Relatives
Re Baden No.2 case, the court was required to consider the provision in a discretionary trust for “relatives”. The court was required to follow principles set out in McPhail v Doulton. Nonetheless, to have done so on the basis of a purely literal application of the test may have led to the invalidity of trust. Therefore their Lordships sought to add their own gloss to those principles. However, 3 judges sought to give their own versions of interpretations of “relatives.”‘Dependants’ were defined as those who are wholly or partly financially dependent on somebody else. ‘Relatives’ were defined by Sachs and Megaw LJJ as descendants from a common ancestor, whereas Stamp LJ defined them as the next of kin or nearest blood relations. Additionally, they each had different interpretations of the relevant test.
Sach J upheld the literal application of “is or is not” test, but held that the burden of proof should be reversed so that it fell on the person claiming to fall within the class of beneficiaries and not on the trustees to prove that she is or is not within the class of objects. Many trusts would thus be validated because a lot of uncertainty can be resolved in this way. Sachs LJ, however, did not intend this reversal should validate all discretionary trusts and that if it was too vague then it would still be found to be void. This is the preferred approach as places evidential burden on the person best to bare it.
Megaw LJ preferred an approach set out in Re Allen, which had been overruled by Re Gulbenkian, which held that a trust should be valid for certainty if a substantial number of people fell within the test. Therefore, if there would be a sufficient number of claimants about whom one could be certain, then that would be enough to render the trust valid.
Stamp LJ subscribed to the orthodox view that the “is or is not” test requires the trustees to say of any individual that he either is clearly within or outside the class of the objects, the gift is valid. This required clarity and precision in defining the qualifying class or classes of objects without listing them. If such a precise definition of the class of objects is not forthcoming the gift is void.
'Among the People of Wales'
If it is a discretionary trust: When applying the is or is not test, certainty is established if it could be said of any given candidate that she was or was not within the class of beneficiaries. Lord Wilberforce in McPhail v Doulton tentatively suggested that a discretionary trust for the benefit of the 'residents of Greater London' would be administratively unworkable and so void.
This was applied in West Yorkshire Metropolitan Couty Council, the council wished to create a discretionary trust of £400,000 to be applied for a lift of purposes for the benefit of any or all or some of the inhabitants of the county of West Yorkshire. Talyor J held that this trust was invalid because it was administratively unworkable to distribute such small amounts to all people. It was not, however, capricious, but merely too difficult and costly for a court to enforce. In Re Hay's Settlement Trusts Megarry recognised that a discretionary trust for anyone other than a few specific people would be administratively unworkable.
If it is a power of appointment: Fidicuary powers have been recognised as valid where the trustees are able to exercise the power in favour of the whole world. It follows that a fiduciary power cannot be struck down because of administratively unworkable simply because of the breadth of class (Re Hay's Settlement Trust) - although can be invalidated if it is simply capriciousness to do so (not from Wales). (Recognised by Templeman in Re Manisty)
"£10,000 to be distributed equally between..."
A fixed trust with class disposition as 'divided equally'. Under a fixed trust the trustees have no discretion regarding how the trust is to be distributed: exactly how much has already been determined by the settlor. This means that the trustees, or court in default, must know whom the property is for.
The appropriate test for this is the complete list in IRC v Broadway Cottages in which fixed trusts need conceptually and evidential certainty for the trust to be valid. It must be possible to identify all the beneficiaries.
"£10,000 to be distributed to each of my children.
This is a fixed trust with individual disposition. This is the one person test as established in 'Re Barlow's Will Trust 1979' in which the onus is placed on the object to show that they satisfy the condition. It is clear that 'children' of the testor would satisfy this condition.
"£10,000 to my trustees, to distribute in which ev
In this sense, the trustees must distribute the trust property among the objects due to the mandatory wording - but the trustees have the discretion to decide which objects will benefit in which share.
The appropriate test is the 'is or is not' test as established in McPhail v Doulton 1971 in which the validity of the trust depended on whether 'relatives' and 'dependants' were sufficiently certain objects. Lord Wilberforce stated that all we need is to be able to say of any given person, whether they are or are not a member of the class.
Conceptually and evidential certainty is, therefore, important to establish to ensure the trust is valid. Although, each judge in Re Baden (No 2) had different tests to reach the establishment of evidential certainty.
"£10,000 to my trustees, who may distribute to my
This concerns a power of appointment due to the permissive wording.
If trustees then this would be a fiduciary power in which they must consider whether to exercise the power, has a duty to survey the field and a duty to consider the appropriateness of individual appointments. If it is a non-fiduciary power they have no other requirements.
This power can be divided into three categories: general (to the world), special (person from a selected group) or intermediate (everyone except a certain person).
The appropriate test is the 'is or is not test' established in Re Gulbenkian's Settlements 1970 in which the objects of the power included those with whom a particular person had been residing. It was held that it was not conceptually uncertain because the court could determine whether a particular person matched a description. This seems at odds with the strict application to conceptually certainty in Re Baden (No 2) in which you needed a clear definition to be valid. However, it might be because Re Baden involved a discretionary trust and was decided later by which time the courts had adopted a more sophisticated approach to the problem of certainty of objects.
Assumes the same test for evidential certainty as discretionary trusts.
"£10,000 to my trustee if he thinks fit to any of
Power with trust in default.
Failure of any of the three certainties if declara
There is no trust if there is a lack of certainty of intention, subject-matter and objects.
'Trust for employees/ex-employees and no records o
Employees: Re Sayer 1957 - if there is a fixed trust then this would lead to a failure of evidential certainty and will be invalid.
If it is a discretionary trust then evidential certainty is not usually a problem (Re Baden's Deeds Trust) as the trustees only need to distribute to those beneficiaries of whom they have noticed, provided that they have advertised their intention to do so in the press for a specific time (Trustee Act 1925, S.27)
Where one beneficiary is missing, trustees of a testamentary trust may ask for the court for a Benjamin Order (Re Benjamin 1902) in which it would allow them to distribute to other beneficiaries or otherwise must take out insurance - this is not applied in inter vivos trusts, only testamentary trusts.
Or, if one beneficiary is missing it can pay the share of the missing B into the court, and allocate the shares equally between the 5 children (Re Gulbenkian's settlement)
'One beneficiary died before the other could make
In Boyce v Boyce, the testator left his two houses on trust for his daughters, under the condition that his daughter Maria should choose the one she wanted, and the remaining one would then go to his other daughter, Charlotte. Maria died before her father, and it was unknown which house she would have chosen. The Vice-Chancellor, held that the trust failed because it was uncertain which house Maria would have chosen, and which would go to Charlotte.
This, where the beneficial shares are unclear and it is clear that the trustee was not meant to take property absolutely, the property is held on resulting trust for the settlor or held for the beneficiaries of the residue.
In Re Tuck’s Settlement Trusts, Sir Adolph Tuck, a baronet who had run the art publisher Raphael Tuck & Sons, created a trust for future baronets who were married to a wife 'of Jewish blood' and who 'continues to worship according to the Jewish faith'. If in doubt, 'the decision of the Chief Rabbi in London of either the Portuguese or Anglo German Community… shall be conclusive'.
It was contended that the concepts of being of Jewish faith and of Jewish blood were too uncertain for the trust to be valid. Lord Denning MR in obiter held the trust was valid, and the Chief Rabbi could resolve any uncertainty. The trust would have been valid even if the Chief Rabbi had not been identified.
But Eveleigh LJ contrasted and said the trust was valid, but only because the Chief Rabbi’s opinion of who was Jewish was part of the definition of the class of beneficiaries. He felt he would not have been able to resolve an uncertain class. On the facts, it might be too capricious for the president to determine who is the fan of the club.