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Certainty of objects Morice v Bishop of Durham ‘’Every trust must have a definite object. There must be somebody in whose favour the court can decree performance’’. If a trust fails for uncertainty of objects, there will be a resulting trust. 2 kinds of equitable obligations: 1. Fixed trust

 The settlor has attempted to specify the number of beneficiaries and the extent of their interests in the trust instrument.  It must be possible to draw up a ‘complete list’ of each and every beneficiary. IRC v Broadway Cottages Trust Facts: A settlement was created whereby trustees held property upon trust to apply the income for the benefit of all or any of a class of objects, including specific relations of the settlor and the Broadway Cottages Trust, a charitable institution. The trustees paid to to the BCT and claimed exemption from income tax in respect of this. It was not possible to ascertain all the objects who might fall within the class of objects but it was possible to determine whether a particular person was a member of the class. Held: The trust was void for uncertainty of objects, and the claim for a repayment of income tax failed.

 If the beneficiaries are defined as a class, then a complete list can only be drawn up if the class is both conceptually & evidentially certain. Trustee must establish all the objects. Complete list test of class ascertainability: traditional test.

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2. Powers of Appointment

 Something that is discretionary at the point of exercise.  It does not impose an obligation on the done , but empowers him to distribute the property in his discretion. Re Gulbenikan’s Settlement Facts: A special power of appointment was granted to trustees to appoint in favour of Nubar Gulbenkian, ‘’any wife and his children or remoter issue.. and any person in whose house or apartment or in whose company ‘’ subject to a gift over in default of appointment. Held: The gift created a valid power of appointment within the strict Gestener test.  Is or is not test Pronounced in Re Gestetner and approvied in IRC v Broadway  Application of the ‘’is or is not’’ test:

 Laid down in Re Gulbenkian, and was adopted in McPhail v Doulton  It was applied in Re Baden’s Deed Trusts.  while the ‘is or is not’ test requires conceptual certainty, a special power will not be invalid for reasons of evidential certainty! The Baden litigation  Conceptual certainty: the class must be defined by objective criteria by which the court can judge whether any given individual is within the class. OT Computers v First National Tricity Finance Facts: A proposed trust in favour of ‘’urgent suppliers’’ Held: Failed because it did not create a conceptually certain class.  Evidential certainty: 2

 Providing whether a person falls within the specified class of objects of an equitable obligation. In Re Baden’s Deed Trust the majority of the CoA held that a discretionary trust which was conceptually certain was not defeated by evidential uncertainty. In other words, provided the class criteria are clear-cut it does not matter that it is not possible to prove of every individual whether they meet the criteria or not. The lack of requirement of strict evidential certainty follows from the fact that the donee of the power does not have to consider every single potential object in exercising his discretion to appoint the property. Re Sayer Facts: A trust in favour of the employees and ex-employees of Sayers. Held: Void for uncertainty because it was impossible to draw up a complete list of the persons employed by the company since its incorporation. McPhail v Doulton Facts: The settlor, transferred property to trustees to apply the net income, in their absolute discretion, to : the officers, ex-officers, employees and ex- employees of a company or their relatives. Held: The trust objects were too broad to satisfy the narrow ‘list’ test. HoL: The trust was valid and changed the test for certainty in respect of discretionary trusts. Lord Wilberforce: The ‘is or is not’ test is satisfied: “if it can be said with certainty whether any given individual is or is not a member of the class and [the trust] does not fail simply because it is impossible to ascertain every member of the class.” Duty to survey class.. What we are looking for is conceptual certainty not evidential certainty Discretionary trust will not fail for evidential uncertainty; it would fail if the concept underpinned that, that purported trust was uncertain;

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Why the ‘complete test’ was not effective?

 Equal division was inappropriate if the trustee defaulted in his duty: o It was wholly inappropriate to large-scale discretionary trusts of the type in issue: o “Equal division is surely the last thing the settlor ever intended: equal division among all may, probably would, produce a result beneficial to none” o This represents a recognition that the social function of discretionary trusts had evolved to enable property owners to ‘confer benefits on deserving cases among large constituencies-in the same sort of way as charitable trusts’ (Gardner, ‘An Introduction to the Law of Trusts (2nd edition 2003, pp199-200)  The Court could enforce the trust other than by ordering equal division: o Although equal division’ might be inappropriate, cases such as Gray v Gray (1862) and Kemp v Kemp (1795) suggested that the courts had not alterative. o In McPhail v Doulton Lord Wilberforce, noted the early cases where the courts had taken a more flexible approach and concluded that: ‘the court, if called upon to execute the [discretionary trust], will do so in the manner best calculated to give effect to the settlor’s or testator’s intentions’  The trustee does not need a ‘complete list’ of the potential beneficiaries to exercise his discretion: o The trustee has only the duty of ‘inquiry or ascertainment’ so ‘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’

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 Discretionary trust: a duty imposed on the trustees; the trustees unlikely in the power of appointment have no discretion as to whether or not to carry the power; they must carry the trust  Power of appointment: fiduciary in nature; no duty to exercise the power but duty to at least consider it  DISCRETIONARY TRUST MUST BE CERTAIN; but only conceptual certainty necessary not evidential certainty (McPhail v Doulton)

How to interpret the ‘is or is not’ test

 Re Baden's DT (No. 2) (1973) (CA): the application of the ‘is or is not’ test merely requires that the class of potential beneficiaries is conceptually certain. If the class is not conceptually certain, then the trust will be void, but it will not be rendered void merely by evidential uncertainty! 5

Do the classes of “dependents” and “relatives” satisfy the test? Is or is not a member of the class? Vinelott QC (for trustees) proposed test:  ‘is or is not test’ quiet problematic as we only look if someone comes within the classes; but Vinelott QC said that you have to establish all the potential objects so we are back to the class ascertainability test that existed after the McPhail v Doulton case  Negative dimension of the ‘is or is not test’  Does it need to be shown that any given individual is definitely not within the class of objects?  A return to the class ascertainability test? Relationship Conceptual & Evidential Certainty  ‘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 enquiry been proved to be within it; if he is not so proved then he is not in it’. Sachs LJ  (on handout)  it is just a Q of fact on an individual basis Relatives and dependents...  Not all dispositions will create discretionary trusts other obligations may give rise to discretionary trusts.  A trust can be conceptually certain but may be invalid! Administrative Unworkability  A purported trusts appears to be conceptually certain but the court still invalidates it:  McPhail v Doulton  There may be a case where “the definition of beneficiaries is so hopelessly wide as not to form ‘anything like a class’ so that the trust is administratively unworkable” (Lord Wilberforce)  Example that he gave: if we try to establish a discretionary trust for all the inhabitants of Greater London but how many people live in Greater London? Many! How could you determine what was in London and what was not in London? The point is that if you have 10 million potential objects and you say you have a trust of 10 million pounds, then you are not possibly going to be able as a trustee to favor those people because the class is too class evidentially. So this seems to be evidential certainty creeping through the back door! Evidential certainty is still a factor (maybe not a decisive factor) for the viability of a trust.

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 Moreover, a special power in ‘favor of the residence of Greater London’ would be capricious ‘because the terms of the power negated any sensible intention on the part of the settlor’ i.e. no rational basis behind the donee  HOWEVER, in R v District Auditor ex p West Yorks MCC (1986) it was held that a discretionary trust created by the council for the benefit of the residents of west Yorkshire was not capricious. R v District Auditor ex p West Yorks MCC  ‘The council had every reason for wishing to benefit the inhabitants of West Yorkshire ... [but] a trust with two and a half million potential beneficiaries is quite simply unworkable; the class is far too large,’  The council tried to establish a private a trust for the whole West Yorkshire  Administrative unworkability goes to the obligations imposed to the trustee if the class is too wide  The Divisional Court held that, although the class was conceptually certain the range of objects, comprising some 2.5 million potential beneficiaries was so wide as to be ‘incapable of forming anything like a class’. It was thus administratively unworkable and void. What is meant by “certainty” Emery (1982) 98 LQR 551 (see the article on QMPLUS) 1. Conceptual certainty 2. Evidential certainty 3. Ascertainability 4. Administrative workability

1) Conceptual certainty: the precision of language used by the settlor to define the classes of person whom he intends to benefi 2) Evidential certainty: referring to the extent to which the evidence available in a particular case enables specific persons to be identified as members of those classes and so as potential beneficiaries 3) “Ascertainability” the whereabouts or continued existence of persons identified as potential beneficiaries can be ascertained 4) Administrative workability: referring to the extent to which it is practicable for trustees to discharge the duties laid upon them by the settlor towards potential beneficiaries.

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Conceptual certainty: Beneficiaries may be named individuals or members of a class specified by the settlor. The word used by the settlor to define a class may be highly precise such as “father”, “son” or they may be imprecise “a good citizen”. However, there can be concepts that are more or less precise e.g. “relative”, “old friend” etc. Sometimes even if the wording is precise it might be difficult to state the necessary criteria for a person to fulfill in order to be a member of the class: one reason is because that there might be more than one precise meaning (e.g. “son”, legitimate male child of a parent, not illegitimate ones or stepsons?). Evidential Certainty: It exists when it is possible to gather facts which will demonstrate of a particular person that he does, or does not fulfill those criteria. Ascertainability: A class must be defined in terms of indisputable conceptual clarity. The difficult of ascertaining the existence or whereabouts of the members of a class. Such notions refers to the question of whereabouts or continued existence of persons who are clearly members of a class, it does not refer to the question “who are the members of the class” which is a question of conceptual and evidential certainty. Administrative workability: Could the trustees discern and apply criteria according to which to exercise their discretion as to carry out the settlor’s wishes?

FIXED TRUSTS a) The complete list rule Fixed trust: “who is entitled to the trust and when?” Fixed trust opposed to discretionary trust to which the trustee have some choice in the matter who is entitled to what and when. It is necessary for the trustees to be able to draw up a complete list of the members of the class to execute the trust. The trust is not carried out unless the trustees ensure that each member of the class, without exception, receives his benefit. b) Conceptual certainty The class must be defined in terms clear enough for the trustees to be able in principle to say of no matter who that he is or is not a member

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of the class. Otherwise, one could not be sure of making the complete list required. However, in order to complete the list evidence must be shown that we can with certainty identify every individual of the class. What degree of conceptual uncertainty will the courts tolerate in the definition of trust beneficiaries? Re Gulbenkian: Lord Upjohn “if the trustees feel difficulty on the point the Court of Chancery is available to solve it for them” c) Excursus- conditions precedent Fixes trusts are constituted for the benefit of each member of a class. In such a case the terms or concepts in which the class is defined must be such that in principle one may classify ‘no matter who’ as in or out of the class. Otherwise, one cannot execute a trust of which all the members are beneficiaries. Fixed trusts are also constituted for the benefit of named individuals. d) Summary of conceptual certainty in fixed trusts A fixed trust may be in favor of each member of a class. In this case, it will be necessary that the concepts used to define the class are precise enough for the trustees or, in case of doubt or difficulty, the court to be able to say in principle of no matter who that he is within or without the class. On the other hand, a fixed trust may be in favor of an individual who satisfies a condition precedent. Here the test is whether it can be said with certainty that he satisfies the condition. However, in a case of gift to a member of a class who satisfy the condition precedent, the test is the general one for fixed trusts (above). It was suggested that a less stringent test can apply in cases where the maximum member of the class can be ascertained. e) Evidential certainty in fixed trusts There must be a list of all persons entitled that can be identified. Failing such a list cannot ascertain the size of an individual share. The word just ‘employees of Sainsbury’s” will fail if their names cannot be identified. In the case of a fixed trust subject to a condition precedent, the degree of evidential certainty will vary according to the nature of the gift. f) Ascertainability If it is possible to draw up a complete list of persons failing within the class, the trust is good even though it may be difficult to ascertain the continued existence of some people in the list apply to courts to pay a share into court? g) Administrative workability Such a notion appears only to relate to discretionary trusts where it is not clear what class is intended to benefit. In fixed trusts, where the requirements of conceptual and evidential certainty are fulfilled, the 9

trustees are able to execute the trust by distributing property among those persons who are within the class of beneficiaries. No selection. DISCRETIONARY TRUSTS Trustee’s duty to distribute property to beneficiaries BUT discretion as to which members of the class of beneficiaries will benefit. When the trustees fail, the court sometimes will divide the property equally, sometimes it will do otherwise. WHY? ‘ where there appears a general intention in favor of a class, and a particular intention in favor of individuals of a class to be selected by another, and that particular intention fails, from that selection not being made, the court will carry into effect the general intention in favor of the class’  Burrough v Philcox On the other hand, there are clearly cases of discretionary trusts where the last thing the settlor intended is to divide the property equally and so the court will not do that “Baden Type”. a) The Burrough type The court must have a complete list of all beneficiaries. Otherwise, there cannot be any equal division if all the members of the class are not known. b) The Baden type HOL held the clause constituted a trust and the appropriate test to see whether the settlor defined the objects of his beneficence with sufficient certainty was whether “it can be said with certainty that any given individual is or is not a member of the class”. Overruling of Broadway Cottages which maintained the complete list even for discretionary trusts of Baden type. In Re Baden, the HOL a complete list of all the members of the class is not required. The test adopted was the same with the one adopted by HOL in Re Gulbenkian for powers of appointment the court can know with sufficient certainty the objects of the beneficence of the donor so as to execute the trust if it can be said with certainty that any given individual is or is not a member of the class. So, the trustees can make grants to those members of the class to whom they consider deserving. c) Re Baden (No 2): new test applies The majority of COA held that even if relatives were so defined, the trust’s definition of its beneficiaries, including as it did “relatives” of certain persons, passed the Baden Test of certainty. What are the requirements concerning conceptual and evidential certainty, 10

ascertainability and administrative workability? d) Conceptual certainty under the Baden Test The test is identical to complete list in fixed trusts and the Burrough type in discretionary trusts. It must be possible to say in principle of no matter who that he is or he is not in the class. e) Evidential certainty 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 be proved to be within it, if he is not so proved then he is not in it. f) Summary of the certainty requirements. Baden No 1 test can be valid if it is said with certainty that any given individual is or is not a member of the class. It requires that the concepts used to describe the class are of such clarity and that a person claiming to be within the class must prove his claim. g) Ascertainability The problem of ascertainability and its solution seem confined to the type of fixed trusts and discretionary trusts of the Burrough type.

h) Administrative workability Administrative unworkability is a factor that avoids a trust. It appears to apply only to discretionary trusts. For a discretionary trust of a Baden type may fulfill the law’s requirements as to the certainty of objects, yet still fail because it purports to impose on trusties duties, because, so ill-defined, they cannot discharge and the court cannot execute. i) Distinguishing discretionary trusts The distinction turns on what the settlor had intended. Complete list of all the members is required to Burrough type and not on to Baden type. POWERS OF APPOINTMENT The donee of the power, unlike a trustee, has no duty whether to make any appointment of the settlement property. However, it is still the case

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that a donee cannot give money to a person who is not within the class designated by the settlor. Fiduciary power, bare power? Or both? a) Re Gulbenkian It concerned the validity of the power fiduciary in favor of: ‘any person or persons by whom may from time to time be employed and any person or persons with whom from time to time is residing whether in the house or apartments of such person or persons or whether in the company or under care or control of such persons’. The conceptual certainty required in the case of power of appoin...