Certainty Of Objects for Validating a Trust

This sample of an academic paper on Certainty Of Objects reveals arguments and important aspects of this topic. Read this essay’s introduction, body paragraphs and the conclusion below.

The Certainty of object form one of the three requirements which must be satisfied to validate a trust. The fundamental principle is that to properly enforce a trust it must have cestque tui trust and it must be possible to establish who the beneficiaries are

1. These apply to both fixed and discretionary trusts, which convey the expressed wish of a testator.

In effect it is incumbent on the settlor to enable some means of ascertaining the intended beneficiary; and appropriate tests for objects would be needed to ensure the trust is properly enforced.

Traditionally a general rule applied to all trusts; the trustee has a duty to administer the trust according to the trust instrument and so would need to know exactly how many beneficiaries there are, thus must draw up a ‘fixed list’

2. Under a fixed trust the testator would express the beneficiary to whom the trust was intended and therefore the object is often clear. However where the beneficiaries are of a wide class conceptual uncertainties commonly arise and it would therefore require interpretation. Such a situation arose in Broadway3 the trust was void for uncertainty as the whole range of objects could not be ascertained.

Fixed Vs Discretionary Trust

It is generally accepted that the terms in a fixed trust are precise enough to comprise a complete list test.

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However where the testator aims to give to the benefit of a large number of people a discretionary trust is most useful. This is because no individual potential beneficiary has an interest on the fund until the trustees’ discretion is exercise. More recently, the complete list has proved especially problematic for the increasingly popular large corporate trusts, which tends to distribute amongst a very wide class- (by applying Broadway), these would frequently fail for uncertainty. 4

One the one hand, because the court is obliged to enforce the trust5, the use of a ‘complete list test’ is essential to manage a trust. When applied to fixed trusts, it reflects the testator’s determination to ensure the trust is executed exactly as he intended. Thus if the executor was uncertain, the income would belong to the settlor on resulting trust. In such circumstances it seems plausible that whilst reforms in McPhail6 only changed the law in relation to discretionary trusts, Broadway continues to regulate fixed trust. Mcphail 7drew upon similarities between powers and discretionary trusts which Broadway overlooked.

Firstly although trustees for discretionary trusts have an imperative duty to execute the fund, like a power, they are given the choice of how this should be done and so proposed to assimilate the validity test for trusts with that which applies to powers. Overall a complete list was deemed too rigid and instead ReGulbekian8 should also apply to discretionary trusts. Whilst it was the ideal test for mere powers, its application to discretionary trust would prove objectionable. 9 In addition to the need for conceptual certainty, there was also need for sufficient practical certainty in its definition to be carried out.

Therefore even if a class is conceptually certain it could still be invalid if administratively unworkable. However to uphold the principle in Broadway would be to order an equal distribution in which every beneficiary share. This would probably defeat the settlors intention; as equal division among all may… produce a result beneficial to none. 10 Overall it considered whether the ‘is or is not’ test was a semantic or evidential one; a question which, if unresolved, could lead to an irrational development of law. The issue was addressed in ReBaden, however there were three distinct reasoning;

At one end of the spectrum Stamp LJ, imposed the most rigorous test, question whether he is, or is not, a member of a conceptually certain class. However whilst accepting that it would be impossible to devise a complete list, he emphasised a need to obtain the widest possible range of objects. In practice, the difference between this test, and the `complete list’ test, is very slight. Therefore while it seems keenest to consider the maximum number of beneficiaries, the approach makes it most vulnerable to failing of conceptual uncertainty.

Megaw LJ took an almost opposing view, which was also the softest approach. Identifying a ‘substantial number of people’, within the terms set out by the settlor. Whilst it classifies when a trust would be valid, it does not guide the trustee on how to measure uncertainty in the boundaries of the class. This inability to distinguish between conceptual certainty and evidential certainty therefore makes it impractical. Sach LJ was a middle ground approach. 11 The trust would succeed if it would be possible to determine in theory whether any given person was inside or outside of the class.

Where objects are less like ‘a class’ and appear ‘rather as applicants to a fund for which they might qualify for a distribution’, … (whether they actually receive funds lies at the discretion of the trustee… whose only obligation is to distribute), therefore the trustee could justify their act based on ‘a solid test of whether or not any individual distribution is legitimate’. 12 The Courts generally adopt the Sach approach, largely because it is least likely to fail for administrative unworkability13. It only imposed the need for conceptually certainty, thus evidential difficulties would not affect the validity of a trust.

However problems with administering the trust itself could still exist for instance where the words in the trust are clear, but the ambit is so wide that the costs of ascertaining the members would outweigh the value of fund. However precedent suggests this is unlikely. 14Another problem is that he focused on the similarities between a trust and a power, without addressing the differences. Clearly the duty under a trust is more onerous and the consequences for negligence are higher than for a power who can act free from regulation.

However on a positive note the ‘is or is not test’, does not oblige trustees to consider all the potential candidates, so it may be easier to prove that their actions were for the benefits of the trust. Whilst Sach’s approach may enable the trustee to provide a theoretical justification, it does not ascertain every object. Certainty of objects also apply to testamentary gifts subject to condition precedent. Ambiguity as to whom the testator intended to benefit, would give rise to the same problems which affect trusts. In Re Barlow, the question arose as to the meaning of ‘friends of mine’ and the courts contemplated which test should apply.

Although bearing similarities to Megaw, the final ruling did not fully adopted any of the approaches in Re Baden, inevitably it is questionable whether the ‘is or is not’ is appropriate. Despite the difficulties in applying suitable tests the courts is clearly more inclined to give effect to a trust than to invalidate one. This was demonstrated in the lack of unanimity in ReTuck which deferred the Chief Rabbi to provide definition of ‘Jewish women’ should difficulties arise, although there was no consensus in the judges the trust was still held valid.