CERTAINTY OF OBJECTS AND THE BENEFICIARY PRINCIPLE

1. CERTAINTY OF OBJECTS

! Reasons Why Trusts must have Certain Objects

 Trustee  trustees can’t carry out their duty to distribute the trust fund
to the right beneficiaries unless they know who they are.

 Courts  beneficiaries may complain to courts if trustees don’t carry

out their duties at all / perform them incompletely, however the court
cannot fulfil this function if they aren’t able to ascertain who the
beneficiaries are.

 Beneficiaries  beneficiaries enforce trustees’ duties, e.g. they would

complain to the court if trustees distribute to people who aren’t’
beneficiaries, they cannot do this if settlor’s definition of beneficiaries
is so unclear that nobody knows who is / isn’t a beneficiary.

 Note: where trust fails due to uncertainty of objects, trustees hold trust
property on a resulting trust for the settlor.

 E.g. “£1000 to my trustees to hold on trust for those to whom I

am under a moral obligation, in equal shares” = uncertain
objects  the £1000 would be held on a resulting trust for the
residuary beneficiary under the will, where there is no such
beneficiary it would pass to the statutory next-of-kin on
intestacy.
 The correct way to determine whether a description of potential objects is too vague
to be certain, is to apply the appropriate legal test, which varies depending on the
nature of the trust in question.

 To identify the relevant certainty of objects test one must ask first whether the
disposition would be:

a) A fixed trust;

b) A discretionary trust; or

c) A power of appointment.

 After identifying the relevant test, one must explain the test relevant to the particular
type of trust / or power, before then applying the test in question and concluding as to
whether the trust is valid or not.
1.1. Fixed Trusts

1.2. What are fixed trusts?

 Trustees have no discretion with regards to how the trust property is to be

allocated between the beneficiaries.

 The settlor / testator has stipulated precisely who the beneficiaries are and the
proportions in which they will share the trust property.

 In contrast, a discretionary trust requires the trustees to choose which objects

will benefit and in what proportions.

! Examples of Fixed / Discretionary Trusts

 “I give all my estate to my Trustees to hold on trust for my wife for life
remainder to my children” = fixed trust, the trustees have no discretion
as to the share or interest of the beneficiaries.

 “£1000 to my Trustees on trust to divide the same between A, B and C

equally” = fixed trust again.

 “I give all my estate to my Trustees on trust as to both capital and

income for such of my friends and in such shares as my Trustees think
fit” = discretionary trust, the settlor requires the trustees to choose the
beneficiaries and the amounts they are to take.

 “I give all my estate to my Trustees to hold on trust for my wife for life
remainder to such of my nephews and nieces and in such shares as my
Trustees think fit” = begins as a fixed trust, but when the wife dies it
converts into a discretionary trust for the nephews and nieces.

 “£1000 on trust to my children” = fixed trust, presumed they will share

equally.

 “£1000 on trust for X at 21” = conditional fixed trust.

1.3 Complete list test

 The “complete list test” is the test for certainty of objects in fixed trusts
(Broadway Cottages).

 According to the “complete list test”  it must be possible to draw up a

comprehensive list of each and every beneficiary, otherwise the trust fails.

 The “complete list test” has different elements which have to be present:

a) Description of beneficiaries must have “CONCEPTUAL

CERTAINTY”  meaning the settlor must define the objects using clear
concepts so the trustees know what type of person they are looking for.

 E.g. a trust “to divide £ X between my old friends equally” = void

for conceptual uncertainty, since there’s insufficient criteria laid
down for the trustees to determine who is regarded as “old” and
who is regarded as “a friend”.

b) “EVIDENTUAL CERTAINTY” is also required  refers not to the

meaning of the words involved, but rather to the question of whether or not
the claimant can prove that she falls within the class of beneficiaries i.e. it
is impossible to prove as a question of fact whether or not a beneficiary
falls within a class meaning if there’s no evidence to say whether a
particular individual qualifies as a beneficiary or not, such a fixed trust
would be void.

 E.g. “£ X on trust for all employees and ex-employees of Y

Company equally”, where Y Company has no records of the
employees pre-2000 = fixed trust would fail since there’s
evidential uncertainty, those employed before 2000 will not be
able to prove this was the case, so a complete list would be
impossible to draw up.
2. DISCRETIONARY TRUSTS

2.1 What are Discretionary Trusts, and Why Use Them?

 The trustees under a discretionary trust are put under a duty to select from among
a class of beneficiaries those who are to receive, and the proportions in which they
are to receive, income or capital of the trust property (Mettoy Pension v Evans).

 The trust will define a class of beneficiaries, but who’s to benefit from within that
class, and upon what terms = not decided until the trustees select one or more of
the possible beneficiaries.

 Until selected, no possible beneficiary has an “equitable interest” in the trust

property.

 Until the trustees decide that an individual is to have a share of the trust income or
capital, the individual just has a “hope”, that he will be chosen by the trustees, so
maybe they won’t be chosen.
2.2 Certainty of Objects Test for Discretionary Trusts

 The certainty of objects test for discretionary trusts is the “GIVEN POSULANT
TEST” (i.e. the “is or is not” test).

》 McPhail v Doulton

o RATIO: where the trust is discretionary the court should use the “is or is
not” test  the trust is valid if it can be said with certainty that any
postulant “is or is not” a member of the class.

o Note: the test for powers and discretionary trusts were brought into line
with one another here.

 What is required to pass the “is or is not” test is “CONCEPTUAL CERTAINTY”

 the settlor must have laid down sufficient criteria in the description of objects
so that it’s clear what sort of person will quality.

o E.g. “those to whom I am under a moral obligation” = a conceptually

uncertain statement  there’s no legal definition for this, and so it would
fail the test since it would not be possible to ascertain whether they fell
within the description or not.

o However, the description “my first, second and third cousins” = a

conceptually certain statement as it’s capable of an objective definition.
》 Re Baden’s Deed Trust (No 2)

o All judges agreed conceptual certainty is essential in the

description of objects.

o The issue was whether a description of objects was sufficiently

certain if one could envisage people coming forward of whom one
could not say “he is in the class”, or “he is not in the class”, but of
whom one would have to conclude, “I don’t know whether he is in
the class or not”.

o The judges disagreed as to whether the presence of “don’t knows”

would mean the failure of the given postulant test.

o Whether or not we need evidential certainty is unclear as the three

judges were of differing opinions.

〜 Stamp LJ

 Believed evidential certainty was necessary.

〜 Sachs LJ (favoured approach):

 Sachs LJ argued the presence of “don’t knows” would not

necessarily entail the failure of the given postulant test, as

Sachs LJ believed the “is or is not” test applied only to

conceptual certainty.

 evidenal
di<cules will
not
 invalidate a
trust because
any person who
cannot prove
that he is a
member of
 the class will
be deemed to
be outside it
 evidenal
di<cules will
not
 invalidate a
trust because
any person who
cannot prove
that he is a
member of
 the class will
be deemed to
be outside i
 In other words, as long as it’s still theoretically possible for

potential beneficiaries to prove they are objects in a trust –

 notwithstanding it may be difficult for them to do so in

practice – that would still be fine as evidential difficulties

will not invalidate a trust per se, for any person who cannot

prove he is a member of the class will simply be deemed to

be outside of it (seeing as the burden of proof is on those

saying they are objects to show they are in fact objects,

rather than on the trustees to demonstrate the trust is valid).

 IN SUMMARY: where a potential beneficiary comes

forward and the trustees have to decide whether the person

“is or is not” an object in the trust, everything comes down

to the question of proof – where the potential beneficiary

does prove they fit the criteria set out in the trust, they

would be said to be “in” the class of objects, but if not, they

would be “out”.

〜 Megaw LJ

 Megaw LJ said that some evidential certainty would be

necessary, and this requirement would be satisfied if a

substantial number of people were definitely the objects in

a trust; accordingly, if there’s a substantial number of

people that say they are within a given class, the trust will

pass the “is or is not” test.

2.3 Administrative Unworkability and Capriciousness

 A discretionary trust which has certain objects may still fail due to:

1. Administrative unworkability;

》 McPhail v Doulton
 o Lord Wilberforce: where the definition of beneficiaries is so
hopelessly wide as not to form “anything like a class”
making the trust administratively unworkable.

 E.g. a discretionary trust “for everyone in the

world” has certain objects but would fail
because the class is simply too big.

 E.g. a discretionary trust for “all residents of

Greater London” would be an administratively
unworkable trust.

》 West Yorkshire Case

o FACTS: a trust was purported to be established for any or

all or some of the “inhabitants of west Yorkshire’’.

o HELD: this was said to be administratively unworkable due

to the sheer size / mass of the class of people, the trust as a
result failed.

2. Capriciousness

》 Re Manistry’s Settlement

o Templeman J: a trust is said to be irrational where it

“negatives a sensible consideration by the trustee of the
exercise of the power”.
 o FACTS: a power given to trustees to benefit the “residents
of Greater London” was said to be irrational.

o QUESTION: why should benefiting the “residents of

Greater London” be irrational when benefitting the
“inhabits of West Yorkshire” was said to not be?  the
connection between the settlor / testator and the chosen
objects must be significant.

o NOTE: in the case of West Yorkshire, the settlor was the

county council for that area, which was consequently
especially interested in the needs of those living there;
however, where a settlor choses to establish a trust for the
residents of an area with which they had no connect and
who they had no reason to benefit, such as the “residents of
Greater London” in this case here, this would be considered
to be an irrational motive.

2.4 Powers of Appointment

 Power of appointment is an authority to deal with property in some way.

 The person given the power does not have to exercise the power though.

o E.g. where X is making her will and cannot decide the proportion in which
her property is to be divided between her children, she accordingly gives a
 power of appointment to her husband, but adds that if no appointment is
made then her children will take in equal shares.

 Note: the provision that if no appointment is made the children are

to take equally is called a “gift in default of appointment” (where
there’s no gift in default of appointment and the person with power
of appointment fails to appoint someone, there would be a resulting
trust for X’s estate).

2.5 How does a power of appointment differ from a discretionary trust?

 The person with a power is not obliged to distribute the property.

 The objects cannot complain to the court if the person does not exercise the
power.

 Trustees of a discretionary trust are under a duty to distribute property in favour of

members of the class of objects, though they have a discretion as to which
members to choose  if the trustees don ‘t carry out their duty within the time
specified in the trust instrument (or if none, within a “reasonable time”), the
objects can get the court to intervene.

 Question: how can one tell whether a person has created a power or a
discretionary trust?  a person’s intention must be ascertained from the words
they have used; if the words suggest there’s a duty to select a beneficiary they
have created a discretionary trust, but if there’s no duty to select, it’s a power of
appointment instead.

o E.g. “£ X amount to my trustees to hold on trust for such of my children as

my trustees my appoint but failing appointment then for Oxfam” = the
 trustees have a power of appointment, there’s TWO FACTORS which
suggest this:

i. The word “may” suggests they have no duty to select a beneficiary;

and

ii. There’s a gift in default of appointment (by including the gift in

default, the creator this disposition would have recognised and
catered for the possibility the trustees might not select a
beneficiary, meaning the creator of the disposition didn’t intend to
impose a duty on the trustees to select a beneficiary).

o Note: the word “trust” doesn’t necessarily indicate an intention to create a

discretionary trust.

2.6 Fiduciary powers of appointment

 Powers are often given to trustees, when a power of appointment is conferred on a

trustee, it’s called a “fiduciary power”.
 With respect to both fiduciary and non-fiduciary powers, the donees of both types
need not appoint anyone, though if they do make an appointment, it must be within
the terms of the power, e.g. cannot be to a person who is not an object.

 However, trustees holding a fiduciary power owe some extra duties since they are
trustees.

! Duties of Trustees in Connection with Fiduciary Powers

 Duties of a trustee which are specific to a power are THREEFOLD:

i. A duty for the trustee to obey the trust instrument (especially of

making no appointment that’s not authorised by it);

ii. A duty for the trustee to:

a. Consider periodically whether or not he should exercise

the power; and

 E.g. a trustee with a power would be in

breach of his duty to consider from time to
time whether to exercise the power where
say they blindly follow the orders of the
settlor (which are not contained in the trust
instrument) to not do anything without their
authority; here they would breach their duty
by not exercising their own judgement in
deciding whether or not to distribute the
money.

》 Turner v Turner
 o FACTS: a farmer transferred
his property to a trust for the
benefit of his wife and
children. He appointed his
father and other family
members, none of whom had
any knowledge or experience
of trusts, as trustees. He later
instructed the trustees to
make appointments of the
property.

o HELD: as the trustees had not

considered the powers and
whether they should be
exercised, but had simply
followed the instructions of
the settlor, the appointments
were said to be a nullity.

b. Consider the range of objects of the power.

iii. A duty to consider the appropriateness of the individual

appointments.

 The court may be persuaded to intervene by removing the trustees if

they act capriciously, i.e. act for reasons which could be said to be
 irrational, perverse or irrelevant to any sensible expectation of the
settlor (Re Manistry’s Settlement).

o E.g. if they choose a beneficiary by height or complexion or by

some other irrelevant fact.

2.7 Certainty of objects test for powers of appointment

 The test for certainty of objects for powers of appointment is the “given postulant”
test (i.e. the “is or is not” test).

 The power is valid if it can be said with certainty whether any given postulant “is or is
not” a member of the class of objects.

 The definition of objects must be sufficiently certain so that one would know what
sort of person falls within the class of objects and what sort of person falls outside the
class.

! The Given Postulant Test in Relation to Powers

》 Re Gestetner’s Settlement

o FACTS: a settlor created a trust for such members of a

specified class as his trustees might appoint and included a gift
in default of appointment  specified class included four
named individuals; descendants of the settlor’s father or his
uncle; any spouse, widow or widower of any such person; five
charities; any former employees of the settlor or his wife.

o Harman J: the description was not uncertain as it was quite

certain as to whether or not the particular individuals would be
regarded as objects; the uncertainty as to exactly which objects
 are in existence currently / may come into existence at a later
point, would not invalidate the power; it’s not necessary to
know of all the objects but only to consider from time to time
the merits of such persons of the specified class as are known to
them, and if they think fit, to give them something; therefore,
where the trustee is given permission to exercise a power
without any further obligation the trustee’s only obligation is to
consider whether or not such a power should be exercised and
if someone fell in the class (to carry out this duty, they need to
be able to identify the sort of people who fall within the
description of the objects), it remains open to the trustee to
decide if they want to exercise the power though.

3.NON-CHARITABLE PURPOSE TRUSTS

  The aim of a purpose trust is not to give property / money beneficially to anyone.

 The aim of a purpose trust is for the trustees to apply the property / money to promote
a given purpose instead.

o E.g. “to campaign for an Act of Parliament banning the sale of tobacco in all
forms”;

o E.g. “to promote good manners in East Anglia”;

o E.g. “to encourage reading among my relatives”.

3.1 The Beneficiary Principle

 As a general rule, trusts are valid only if they have beneficiaries who can go to court
to enforce them; if there are no beneficiaries, there are no enforcers, meaning the
trustees are not then subject to a duty and so there’s no valid trust (Morice v Bishop
of Durham).

! Application of the Beneficiary Principle

 E.g. “to campaign for an Act of Parliament banning the sale of tobacco
in all forms” would not satisfy the beneficiary principle, since there are
no ascertainable beneficiaries who can go to court to enforce the trust,
so the trust would be void.

 There are exceptions to the beneficiary principle though.

3.2 The charitable exception

 Trusts to carry out charitable purposes are valid.

 The Attorney-General enforces them on behalf of the public.

 THREE REQUIREMENTS must be satisfied for a trust to be deemed as being

charitable in nature:

a) Must have a CHARITBLE PURPOSE;

b) Must have SUFFICIENT PUBLIC BENEFIT; and

c) Must be EXCLUSIVELY CHARITABLE.

 According to Section 2(1)(a) Charities Act 2011, a charitable purpose is one falling
within Section 3(1) Charities Act 2011, and moreover as per Section 2(1)(b)
Charities Act 2011 it must also be for the “public benefit”.

 Section 3(1) Charities Act 2011 sets out possible charitable purposes.

 There are TWO ASPECTS regarding the requirement of “PUBLIC BENEFIT”:

a) The BENEFIT aspect;

〜 The purpose(s) must be beneficial and any detriment or harm must not
outweigh the benefit.

〜 If the benefit is not obvious, evidence is required.

〜 According to Section 4(2) Charities Act 2011, there’s no presumption of

benefit, so it must be proved.

b) The PUBLIC aspect;

〜 The purpose(s) must benefit the public in general or a sufficient section of

the public.

〜 No problem when benefits are offered to the whole public, e.g. trusts for
medical research, a museum or schools open to all, these involve of course
sufficient public benefit.
 〜 Where the benefit is restricted to a section of the public, one must check
the numbers involved, and note the opportunity to benefit must not be
unreasonably restricted  any restrictions must be legitimate,
proportionate, rational and justifiable given the nature of the
organisation’s charitable aims.

Public benefit and medical research into finding a cure for a disease

 It would not be considered reasonable to limit such a purpose trust to a geographical

area or to very wealthy people via charging high fees.

Public benefit where benefits are restricted

 There is no objection where benefits are restricted according to charitable needs (e.g.
youth, age, poverty, disability).

Public benefit and geographical restrictions

 Geographical restrictions are acceptable if they are related to the aims of the charity.

 E.g. provision of a village hall can be charitable though it benefit’s only the
inhabitants of the village.

 E.g. the provision of facilities in a local hospital would be considered as having

sufficient public benefit also.

 In the case of IRC v Baddley though, a trust for the promotion of the religious, social
and physical training of persons resident in West Ham who were likely to become
members of the Methodist church was regarded as non-charitable  restricting the
benefits to a particular area was not what was objectionable here, rather limiting the
trust to Methodists within that area made the group a class within a class (and so
would not amount to a sufficient section of the public).

Public benefit and the relief of poverty

 As a general rule poverty has always been a special charitable head.

 The fact a purpose trust relieves poverty would mean it was charitable regardless of
the size of the group it was benefitting: e.g. the settlor’s “poor relatives”.
  The case of Re Scarisbrook provides an exception to the general rule that individuals
connected by some personal tie / nexus, e.g. blood or contract, such as the members of
a particular family or the employees of a particular firm, do not amount to a sufficient
section of the public  trusts for the relief of poverty have been held to be charitable
even though they may be limited in their application between those connected by a
personal nexus, this exception operates whether the personal tie is one of blood, or of
contract, such as between employees of a particular company.

Public benefit and the advancement of education

 There are cases where testators have tried to establish charitable trusts in situations
where beneficiaries are in some way related to the settlors.

 In the case of Re Compton, the gift was for the advancement of education but the
beneficiaries were three named relatives of the testator; it was said the benefit must
not be restricted to those who have a personal nexus; in relation to the advancement of
education, the reason for poverty is not accepted in this case; if you leave a trust for
the advancement of education for relatives or employees it will not satisfy the public
benefit requirement (the reason of poverty would not apply here).

 In the case of Oppenheim v Tobacco Securities Trust, money was to be applied for
the education of employees and ex-employees of the tobacco company; it was said the
benefit must not be restricted to those who have a personal nexus, such as here where
the benefit would be given to employees / ex-employees of the particular tobacco
company.

 In relation to advancement of education, the arguments which succeed for poverty do

not apply here: regarding personal nexus in the advancement of education  where
the nexus exists through employment this is regarded as not being a sufficient section
of the public; where the nexus exists through personal or family ties this is not a
sufficient section of the public either.

 Question: does advancement of education apply to situations where you have to pay
for the education? Issue as to whether private schools could satisfy the requirement of
public benefit.

 In the case of Independent Schools Council v Charity Commission for England

and Wales, it was said schools whose sole object was the education of children
whose families could afford to pay the fees would not be charitable, though even if an
organisation excluded the poor, it could still be a charity as long as there is some
effort to include the poor, but private schools must make more than a mere token
provision for the less well-off, they must focus on direct benefits such as scholarships
and the like allowing students from local state schools to attend.

Trust must be exclusively charitable

 According to Section 1 Charities Act 2011, a trust must be exclusively charitable.

  Where the stated purposes of the trust include anything, which is not charitable the
whole trust may be regarded as non-charitable.

 E.g. a trust created for the education of the public, in the principles, views and
objectives of the Conservative party = non-charitable as political purposes are not said
to be charitable.

 Note: where profit is accrued to individuals, as opposed to being ploughed back into
the charitable purpose, this would make a charitable purpose non-charitable.

3.2 Other exceptions to the beneficiary principle

 Trusts for the care or maintence of specific animals  e.g. “£ X amount to my

trustees to hold on trust to look after my dog Y” (Re Dean).

 Trusts for the maintenance of graves and monuments  e.g. “£ X amount to my

trustees to hold on trust to maintain the ‘A’ family grave situated at ‘B’ churchyard”
(Re Hooper).

 Note: nobody can compel the trustees to carry out such purposes, though these are
valid, they don’t have beneficiaries, there’s nobody to enforce them as such; if the
trustees don’t carry out the purpose specified in the legacy, the residuary beneficiaries
can go to claim the money, since they have an entitlement to the money where it’s not
used for the purpose of maintaining the animal or grave / monument.

3.3 Denley’s trusts

  A trust that appears to be for a non-charitable purpose might be valid if the purpose
can be regarded as directly or indirectly benefiting ascertain individuals (though the
benefit must not be so indirect or intangible they would have no standing to apply to
the court to enforce the trust).

》 Denley

o FACTS: a plot of land was transferred to trustees, to be held on

trust to be maintained and used for the purpose of a sports and
recreation ground for the benefit of employees of a particular
company and for such other persons as the trustees might allow.
Duration of the trust was limited to the perpetuity period.

o HELD: while the trust was expressed as a purpose, it was directly

or indirectly for the benefit of individuals, namely the employees.
The benefit was sufficiently tangible to allow them to go to court to
enforce the trust, and so did not offend the beneficiary principle
and was valid.

o Note: if the employees did not have a share in the trust property
here, the benefit must have been the ability to play sport on the
land, meaning this case would be authority for saying people who
can enforce trusts are not confined to hose having a proprietary
interest in the trust property.

 Non-charitable purpose trusts must also satisfy the usual requirements for trusts,
including certainty of objects and the rule against perpetuities (inalienability).

3.3 Certainty of Objects

 Must satisfy the given postulant test.

 The number of people to benefit must not be so large the trust would be
administratively unworkable.

3.4 Perpetuities
  To satisfy the inalienability rule which is relevant with respect to non-charitable
purpose trusts (for animals, tombs / monuments or in the Denley mould), non-
charitable purpose trusts must either:

a) Be limited in duration to 21 years; or

b) Allow the trustees to spend all the trust capital on the purpose and thereby end
the trust at any time.

4. GIFTS TO NON-CHARITABLE UNINCORPORATED ASSOCIATIONS

4.1 What are Unincorporated Associations?

 An unincorporated association is a group bound together by a common purpose, that

purpose not being business purposes though (Conservative and Unionist Central
Office v Burrell).

 Note: one requires something that is structured for it to be effective such as a

constitution, without these characteristics an association will not be an unincorporated
association.

 Note: such an association must be non-profit-making and its members must be bound
together by identifiable rules such as a constitution of the association.

 Unincorporated association have no legal personality and so cannot hold property in

the name of the association, they have no identifiable human beneficiaries who can
enforce the trust, this clearly is problematic as one cannot make a gift to somebody
who does not exist legally (Morice v Bishop of Durham).

4.2 Outright Gifts to Non-Charitable Unincorporated Associations

  The most common construction of an outright gift to an association is that it’s a gift to
the members of the association, as an accretion to the association’s funds to be dealt
with in accordance with the rules.

》 Recher

 The rule against inalienability would be satisfied if the club rules allow the members
to dissolve the association and divide the assets between themselves at any time.

》 Grant

o RATIO: a gift that joins the club’s other assets, must be freely
alienable, the club must be able to disband and distribute its assets
amongst its members; they must have that power within their rules;
if they cannot do that, then the gift will fail because it offends the
rule against inalienability.

4.2 Intended Trust for Purposes

 According to Lipinski a gift to a club for a purpose which benefits the members will
either be construed as an outright gift to members as an accretion to club funds to be
dealt with in accordance with the rules (Recher), so long as that purpose benefits the
members of the association; afterwards one must consider in alienability though
(Grant).

 Note: a gift with a purpose attached can also be interpreted as a Denley trust
exception  meaning it confers a sufficiently tangible benefit either directly or
indirectly on identifiable beneficiaries; one must remember to also deal with
inalienability under a Denley trust exception.

 According to Lipinski, under both constructions the testator’s motive will not be
binding though, so a testator cannot be sure the purpose will be carried out.