The Three Certainties
Certainty of Object:
1. Fixed Trust:
Fixed Trust = where the proportion is set by the settlor – e.g., equal shares.
IRC v Broadway Cottages –
“Complete list rule”
Sensible – need to know how many people, e.g., if equal shares, to split
between.
2. Discretionary Trust:
Discretionary Trust = where the trustee(s) have discretion to decide how much the
beneficiaries get from the trust.
McPhail v Doulton; Re Baden No.1 –
“is/is not test”.
Can we say of any given postulant whether they are or are
not part of the class.
Question = does the distinction between evidential and conceptual uncertainty have
any bearing on this test?
Re Baden No.2 –
3 different tests were laid down for dealing with uncertainty of objects in
discretionary trusts.
Run through all interpretations.
Megaw LJ – Substantial Numbers Test:
The “is/is not” test is satisfied if it can be said with certainty whether
a substantial number of objects fall within the trust.
Have to identify substantial number who undoubtedly belong
in class.
Doesn’t matter if conceptually uncertain.
BUT – don’t know what “substantial” means – courts will struggle to
adjudicate trusts- not void for conceptual uncertainty and therefore
courts won’t have answer.
Stamp LJ – Any Person Test:
Validity depends on whether you can say with certainty any (not just
some) individual is or is not a member of the class.
For any beneficiary, need to say yes or not – if don’t know,
trust is void.
If have evidential uncertainty, then void.
BUT – very difficult to prove a negative – will be defeated by
evidential uncertainty.
Seems to be introducing a “fixed list test” which is not what Lord
Wilberforce wanted in McPhail v Doulton – no point having
discretionary trusts.
Sachs LJ – Evidential Presumption Approach:
Introduced distinction between evidential and conceptual.
A discretionary trust is never void for evidential uncertainty.
A trust cannot be invalid only because it might be impossible
to prove of a given individual that he was not in the relevant
class.
If can’t prove, assume they’re not.
A discretionary trust can be void for conceptual uncertainty.
Once the class of persons to be benefitted is conceptually
certain, it then becomes a question of fact to be determined
on evidence.
There is an evidential presumption against them being in a trust.
, Seems to solve/lack the problems of the other two judgements.
This is the best judgement.
Conceptual uncertainty is important – have to be able to say of the
trustees that they are appointing within the class.
If not conceptually certain, court cannot do this very basic
thing – want court to be able to enforce trusts and monitor
the performance of these duties.
“As equally as they consider possible.”
Fixed trust or discretionary trust?
Fixed – seems to set proportions – divide equally.
Can read as opinion clause (curing).
Discretionary – there is some discretion in it.
Not necessarily each getting the same amount but rather to
put them on a level playing field.
e.g., if Person A is very ill and not working whereas Person
B has just won the lottery, would give Person A more than
Person B.
3. Fiduciary Powers:
Fiduciary Power = ability to change rights and duties of another – no obligation to
distribute trusts.
Look carefully at the wording:
“As they see fit” = discretionary trust.
“If they see fit” = fiduciary power.
No obligation – choice.
In re Gulbenkian’s Settlement Trusts –
Lord Upjohn held that the “is/is not” test is applicable to powers.
Apply the test set down by Sachs LJ in Re Baden No.2
4. Conditional Gift:
Conditional Gift = grant of right to people who fill certain conditions.
NOT a trust.
Will most likely fit facts of In re Barlow’s Will Trusts –
A testatrix died in 1975, owning a large collection of pictures. She gave some
of them to her executor upon trust for sale, directing him “to allow any
member of my family and any friends of mine who may wish to do so to
purchase any of such pictures” at a valuation made in 1970.
Gift = right to purchase.
Condition = “friend”.
Lord Browne Wilkinson:
The gift is valid if it is possible to say of one or more persons that
they undoubtedly qualify even though it may be difficult to say of
others whether or not they qualify.
Test = at least one person who falls within class.
Very generous test:
Only makes sense because in this case, LBW says this is not a gift to
a class where duty of T is to think about class as a whole but is rather
a series of individual gifts subject to a condition.
Sachs LJ is more relaxed – evidential:
Means you don’t have to identify anyone – with this test, have to
identify at least one.
Sachs LJ is more strict – conceptual:
Means will have trusts that are void even if we have lots of people
within class – e.g., “for tall people”.
The share of any beneficiary who can be identified but whose whereabouts cannot be ascertained
should be paid into court.
Certainty of Object:
1. Fixed Trust:
Fixed Trust = where the proportion is set by the settlor – e.g., equal shares.
IRC v Broadway Cottages –
“Complete list rule”
Sensible – need to know how many people, e.g., if equal shares, to split
between.
2. Discretionary Trust:
Discretionary Trust = where the trustee(s) have discretion to decide how much the
beneficiaries get from the trust.
McPhail v Doulton; Re Baden No.1 –
“is/is not test”.
Can we say of any given postulant whether they are or are
not part of the class.
Question = does the distinction between evidential and conceptual uncertainty have
any bearing on this test?
Re Baden No.2 –
3 different tests were laid down for dealing with uncertainty of objects in
discretionary trusts.
Run through all interpretations.
Megaw LJ – Substantial Numbers Test:
The “is/is not” test is satisfied if it can be said with certainty whether
a substantial number of objects fall within the trust.
Have to identify substantial number who undoubtedly belong
in class.
Doesn’t matter if conceptually uncertain.
BUT – don’t know what “substantial” means – courts will struggle to
adjudicate trusts- not void for conceptual uncertainty and therefore
courts won’t have answer.
Stamp LJ – Any Person Test:
Validity depends on whether you can say with certainty any (not just
some) individual is or is not a member of the class.
For any beneficiary, need to say yes or not – if don’t know,
trust is void.
If have evidential uncertainty, then void.
BUT – very difficult to prove a negative – will be defeated by
evidential uncertainty.
Seems to be introducing a “fixed list test” which is not what Lord
Wilberforce wanted in McPhail v Doulton – no point having
discretionary trusts.
Sachs LJ – Evidential Presumption Approach:
Introduced distinction between evidential and conceptual.
A discretionary trust is never void for evidential uncertainty.
A trust cannot be invalid only because it might be impossible
to prove of a given individual that he was not in the relevant
class.
If can’t prove, assume they’re not.
A discretionary trust can be void for conceptual uncertainty.
Once the class of persons to be benefitted is conceptually
certain, it then becomes a question of fact to be determined
on evidence.
There is an evidential presumption against them being in a trust.
, Seems to solve/lack the problems of the other two judgements.
This is the best judgement.
Conceptual uncertainty is important – have to be able to say of the
trustees that they are appointing within the class.
If not conceptually certain, court cannot do this very basic
thing – want court to be able to enforce trusts and monitor
the performance of these duties.
“As equally as they consider possible.”
Fixed trust or discretionary trust?
Fixed – seems to set proportions – divide equally.
Can read as opinion clause (curing).
Discretionary – there is some discretion in it.
Not necessarily each getting the same amount but rather to
put them on a level playing field.
e.g., if Person A is very ill and not working whereas Person
B has just won the lottery, would give Person A more than
Person B.
3. Fiduciary Powers:
Fiduciary Power = ability to change rights and duties of another – no obligation to
distribute trusts.
Look carefully at the wording:
“As they see fit” = discretionary trust.
“If they see fit” = fiduciary power.
No obligation – choice.
In re Gulbenkian’s Settlement Trusts –
Lord Upjohn held that the “is/is not” test is applicable to powers.
Apply the test set down by Sachs LJ in Re Baden No.2
4. Conditional Gift:
Conditional Gift = grant of right to people who fill certain conditions.
NOT a trust.
Will most likely fit facts of In re Barlow’s Will Trusts –
A testatrix died in 1975, owning a large collection of pictures. She gave some
of them to her executor upon trust for sale, directing him “to allow any
member of my family and any friends of mine who may wish to do so to
purchase any of such pictures” at a valuation made in 1970.
Gift = right to purchase.
Condition = “friend”.
Lord Browne Wilkinson:
The gift is valid if it is possible to say of one or more persons that
they undoubtedly qualify even though it may be difficult to say of
others whether or not they qualify.
Test = at least one person who falls within class.
Very generous test:
Only makes sense because in this case, LBW says this is not a gift to
a class where duty of T is to think about class as a whole but is rather
a series of individual gifts subject to a condition.
Sachs LJ is more relaxed – evidential:
Means you don’t have to identify anyone – with this test, have to
identify at least one.
Sachs LJ is more strict – conceptual:
Means will have trusts that are void even if we have lots of people
within class – e.g., “for tall people”.
The share of any beneficiary who can be identified but whose whereabouts cannot be ascertained
should be paid into court.
