![]() “The conclusion which I would reach…..is that the wide distinction between the validity test for powers and that for trust powers is unfortunate and wrong, that the rule recently fastened upon the courts by Inland Revenue Commissioners v. Broadway Cottages Trust ought to be discarded, and that the test for the validity of trust powers ought to be similar to that accepted by this House in In re Gulbenkian's Settlements [1970] A.C. 508 for powers, namely, that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class.” Lord Wilberforce in McPhail v Doulton [1971] A.C. 424 at 451 Express trust necessitates the coincidence of the three certainties listed in Knight v Knight[1], lack of such results in the trust being void ab initio. This essay seeks to critically discuss the statement made by Lord Wilberforce in McPhail v Doulton[2], clearly analysing the certainty of objects test for fixed trusts, discretionary (power) trusts and fiduciary trusts (powers of appointment); ultimately concluding that the any given postulant test which states that any given being ‘is or is not’ part of a class isn’t a sensible and pragmatic approach, thus as discussed, isn’t appropriate for power trusts. Per Knight v Knight[3], it was established that there must be a certainty of intention, a certainty of subject matter, and a certainty of objects. Certainty of objects is the most intricate and has undeniably caused the most legal wrangling and debates. At its core is the perception that the court should be able to ascertain the beneficiary(/ies) of the trust, thus, the beneficiary principle operates alongside the certainty of objects. Emphasising this, Lord Denning in Re Vandervell’s Trusts (No. 2) stated, “It is clear law that a trust (other than a charitable trust) must be for ascertainable beneficiaries.” Fixed trusts are constituted by a settlor for a pre-determined class of individuals where each is entitled to a set share, and executed by a trustee for benefit of the beneficiary(/ies). It is imperative that the court can ascertain who the beneficiaries of the trust are at the time of property distribution for there to be a valid fixed trust, this is known as a ‘complete list test’. Conceptual and evidential certainty as to beneficiaries was emphasised in IRC v Broadway Cottages[4]. Conceptual certainty is the ability to define the description of the class with certitude, if it is impossible to compile the ‘complete list test’ then the trust is void. Evidential certainty is the ability to prove that someone is a beneficiary, thus, even if the classification of the object is certain, once there is difficulty proving exactly who the beneficiaries should be, the trust would be void. The courts however have taken both a wide and narrow accommodating approach regarding this. In Re Tuck Settlement Trust[5], the court permitted a third party (Chief Rabbi) to arbitrate the will to ensure that Sir Adolph Tuck’s successors were of Jewish fate. While in Re Wynn[6] the court was reluctant to permit a clause allowing trustees to determine all uncertain elements of the trust. It was established that it was not a requirement for the beneficiaries to be ascertained (location of beneficiary or continued existence); a ‘Benjamin Order’ would permit the trustee to distribute property to the ascertainable beneficiaries while the trustee, however, must provide constructive notice, that is, publishing an advertisement in the London Gazette or another appropriate forum in hopes of locating the unascertainable beneficiaries; if that also fails, the money would go to the crown. There is no evidence that the size of the class is relevant for fixed trusts due to the application of the complete list test. The capriciousness of the settlor has never been questioned with regards to fixed trusts, nor has it ever invalidated a trust. The precedent set in IRC v Broadway Cottages [7]has operated well, allowing the court to endorse more equitable outcomes,[8] discretionary trusts however, have proven to be more contentious. In a discretionary trust, the settlor defines the class, while the trustee must choose who the beneficiaries are and how much property they would be entitled to. Originally the court echoed the approach of the ‘complete list test’ set out in IRC v Broadway Cottages[9] for discretionary trusts, where it was believed that ‘equity was equality’ authorizing the distribution of property equally; however, this was redeveloped under Lord Wilberforce in McPhail v Doulton[10]. In this case, a trust was created via deed for the benefit of employees and ex-employees of a corporation including their relatives and dependants. Applying the ‘complete list test’, it would not have been possible to list all the members of the class, thus, Lord Wilberforce ruled that the operative question was whether the court could’ve said with certainty that a person is or is not a member of the class, on that ground, it was satisfied. This was known as the ‘any given postulant test’ and refers to anyone who may be considered object. Consequently, the validity of the trust relied on whether ‘relatives’ and ‘dependants’ were certain objects. This case was appealed to the House of Lords where it was concluded that the trust was valid[11]. If the trust was not conceptually certain, it would be rendered void. In Re Baden Deed Trusts (No 2)[12] the court recognised that ‘relatives’ and ‘dependants’ were conceptually certain. The semantics of relatives was established as a ‘next of kin’ by Stamp LJ and ‘descendants from a common ancestor’ by Sachs and Megaw LJJ, subsequently, the normal meaning of ‘family’ as seen in Re Barlow Will Trusts[13] was considered as those related by blood; while a dependant is ‘anyone wholly or partly dependant on the means of another’ by Sachs LJ and ‘financially dependent’ by Stamp LJ. Sachs LJ also took into consideration that ‘someone under a moral obligation’ wouldn’t be conceptually certain, while first cousins’ would be. Additionally, Browne-Wilkinson J concluded in Re Barlow Will Trusts[14] that ‘friends’ was not sufficiently certain. While evidential certainty was satisfied by all three judges in Re Baden (No 2)[15], they utilised diverse tests to establish the conclusion. Sachs LJ’s reasoning was preferred, he concluded that the courts would never be defeated by evidential certainty and that the claimant must prove that they are in the class, if they couldn’t prove it, they weren’t in. He said that it was simply a question of fact based on the evidence as to whether a person fell within the class. Megaw LJ stated that it was only necessary to prove that a substantial number of objects fell within the class, and that the trust would be valid even though it could be proved if they were or were not in the class. Lastly, Stamp LJ concluded that evidential uncertainty would defeat the trust. Ascertainability of objects do not invalidate a discretionary trust, inability to ascertain an object simply means that they would not benefit from the trust. Unlike fixed trusts which apply to a smaller class of individuals, discretionary trusts apply to a much larger class, however, where the class is too large, it can be considered administratively unworkable and would thus render the trust void. In R v District Auditor, ex p West Yorkshire MCC[16], it was concluded that ‘the inhabitants of West Yorkshire’ which amounted to about 2.5million persons, invalidated the trust. Subsequently in Re Harding[17], the trust would have been void due to administrative unworkability, if it wasn’t for charitable purposes. Case law sets out multiple examples displaying administrative unworkability, as Lord Wilberforce suggested in McPhail v Doulton that ‘all the residents of Greater London’ is administratively unworkable. Additionally, in Re Hay’s Settlement Trust[18], it was established that a discretionary trust for anyone other than a few specified people would be administratively unworkable. While administrative unworkability exists, it is inconsistent with the intention of the settlor and should be rejected. There is no definite answer as to whether the size of the class would render the trust void. Capriciousness may render a trust void if the settler did not possess sensible intent in establishing the trust. Re Manisty’s Settlement[19] established that if the settlor creates a trust for residents in an area where he has no connection and no reason to benefit then it would be capricious, while in R v District Auditor, ex p West Yorkshire MCC[20], the trust was found to not be capricious because the council had a sensible reason for benefitting West Yorkshire. While it does play a role, no power trust has been made void due to capriciousness. Fiduciary powers or powers of appointment are held by trustees and other fiduciaries. Where powers are appointed, the donor defines the class, but there is no obligation on the donee to distribute to the objects. Re Gulbenkian’s Settlements[21] established that the test for fiduciary powers was the ‘any given postulant test’ as in discretionary trusts, where any given person was or was not part of the class. Conceptual certainty is relevant as applied to fiduciary powers, however there are strict and lenient approaches. In Re Gulbenkian’s Settlements[22], the object included those with whom a person had been residing, this was conceptually certain. While in Re Baden (No 2)[23], it needed a clear definition to be valid. Discretionary trusts and fiduciary powers uses the same test for evidential certainty. Ascertainability of objects do not invalidate a power, this is clearer for powers because there is no obligation on the donor to exercise power. A fiduciary power cannot be struck down for administrative unworkability due to the size of the class. Capriciousness can invalidate a fiduciary power, it would be considered capricious if there is no distinct connection with the donor. Essentially, fixed trusts and discretionary trusts should not have to apply the same test for certainty of objects. The ‘any given postulant test’ which states that any given person is or is not part of a class allows flexibility for the existence of a discretionary trust. Initially, it was believed that ‘equity was equality’, thus all the property on a discretionary trust was to be divided to all the members of the class in equal shares; principally, this may not always be equitable. The current test for a discretionary trust allows trustees to exercise their prudent discretion as to who benefits from the trust and how much they can receive. In some cases, allowing those who were closest to the settlor to benefit the most. It can be argued that true equity exists in a discretionary trust. Contrary, a fixed trust therefore has a more rigorous test for certainty of objects. While in a discretionary trust, the trust may be found void on the grounds of administrative unworkability, a fixed trust with the same objects as the discretionary trust may not be found administratively unworkable because a complete list of all the objects would be drawn up by the time of property distribution. This ultimately prevents the failure of a trust, due to lack of ascertainability and conceptual or evidential certainty of the beneficiaries. Due to resounding similarity between discretionary (power) trusts and fiduciary powers (powers of appointment) one can argue that the same test should be applied for both. Lord Wilberforce, regarded as ‘broken new ground’, stating that even him, a layman and a logician, would find it difficult to understand the difference between trust powers and powers. The essential test for these is already the same, ‘any given postulant test’, the only difference is the administrative unworkability of discretionary trusts. Ability to exercise powers to the world at a whole, other than the limited class would not make the powers void. Powers can be exercised by the donors to anyone they seem fit. Whether the class is large would not prevent the trustee from performing their duty, especially since there is no compulsory responsibility to even perform any duty. However, since a power of appointment is viewed as a gift rather than a trust, it is more flexible at law; it is opined that it should remain that way. Due to the distinction between a trust and a power, the same test for both cannot be applied. A trust is obligatory while a power is discretionary, trusts would require more rigid regulations and tests. To apply the same test for both strips the flexibility of powers, essentially putting regulations on a ‘gift’ that should not be there. One of the fundamental distinctions between a power and a power trust is the capriciousness of the settlor or donor. Similar with a gift, there must be an intention, in this case, for powers, there must be a sensible intent for the donor to benefit the objects. Trust powers and fiduciary powers should therefore have different tests. Lord Wilberforce’s view for power trusts is that it ought to be more like powers and he sought to discard the applicable test that was being used as discussed in IRC v Broadway Cottages. Many have followed the “is or is not’ test over the years for discretionary trusts and it has been applied or mentioned in multiple rulings; Twinsectra Ltd v Yardley (2002)[24] and more recently, Trustees of the Christian Brothers in Western Australia Inc v Attorney General of Western Australia (2007)[25]. It can be disputed that McPhail v Doulton[26], for discretionary trusts has resulted in more heat than light. It has developed nothing more than convoluted reasonings and can be viewed as the unnecessary result of over-explication and the expectation of potential theoretical complications that are more real than supposed; while the reasoning behind the complete list test for fixed trusts is easy to ascertain and defend. The drawn-out, high-level litigation that was generated by Mr Baden’s Deed Trusts[27] could be said to be the outcome of the rapidly increasing size of the fund which fuelled the enthusiasm of the executors to pursue the claim than the product of genuine jurisprudential difficulty arising from the issues in question. After a thorough examination of fixed trusts, discretionary trusts and power trust, it should be concluded that while equality is not equity, something is better than nothing; discretionary trusts and fixed trusts should have the same test applied. A settlor’s intent for choosing a class means that he would’ve wished to benefit everyone in the class. Allowing a trustee to now choose who to benefit, excluding some, may not have been the settlor’s intent. Additionally, applying the same test for power trusts and powers gives the trustee too much flexibility; permitting this allows a trustee to refuse to give the property to anyone in the class, or may open the door to perhaps give the property to themselves, given that the donor included them in the class. Of all the tests, the complete list test is the most certain, it allows the beneficiaries to know exactly what they are to benefit and should be re-applied to discretionary tests. [1] Knight v Knight [1840] Court of Chancery, 49 ER 58 3 Beav 148 (Court of Chancery). [2] McPhail v Doulton [1971] House of Lords, UKHL 1, AC 424 (House of Lords). [3] Knight v Knight [1840] Court of Chancery, 49 ER 58 3 Beav 148 (Court of Chancery). [4] Inland Revenue v Broadway Cottages: CA 26 Jul 1954 [5] Re Tuck’s Settlement Trusts: CA 1 Nov 1977 [6] Re Wynn [1952] [7] Ibid (4) [8] Ibid (5) [9] Ibid (4) [10] Ibid (2) [11] Re Baden’s Deed Trusts (No 2) [1972] [12] Ibid (11) [13] Re Barlow Will Trusts [1979] [14] Ibid (13) [15] Ibid (11) [16] R v District Auditor, ex p West Yorkshire MCC [1986] [17] Re Harding [18] Re Hay’s Settlement Trust [19] Re Manisty’s Settlement [20] Ibid (16) [21] Re Gulbenkian’s Settlements Trust [1970] AC 508 [22] Ibid (21) [23] Ibid (11) [24] Twinsectra Ltd v Yardley (2002) [25] Trustees of the Christian Brothers in Western Australia Inc v Attorney General of Western Australia (2007) [26] Ibid (2) [27] Ibid (11)
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