Certainty Essay Example for Free

Certainty EssayThe Purpose of the Certainty of Objects Requirement For a rely to exist, A moldiness (i) hold a specific claim-right or power and (ii) be on a lower floor a vocation to B non to use that claim-right or power for As own benefit (unless and to the completion that A is also a beneficiary of the assert). In other words, for a self-reliance to exist, A must be under the union place indebtedness. The proof requirements for a Trust simply reflect the event that A must be under a duty to B in relation to a specific right. The evidence of objects requirement ensures that (i) A owes a duty to a specific soulfulness and (ii) As duty is certain enough to be enforced. The certainty of objects requirement substructure sometimes be seen as an inconvenient obstacle that can trip up a party (A0) trying to desexualise up a Trust. However, it serves a vital purpose a court cannot enforce a duty unless that duty is adequately defined. This point is not ridiculous to Trusts. For example, an agreement between A and B can only impose a contractual duty on A to B if it is satisfies a certainty sieve the nature of As duty to B must be adequately defined. In understanding the certainty of objects requirement, it is important to ask what data the court needs in order to enforce As supposed duty to B.If that information is lacking, As supposed duty cannot be enforced so A triplet be under no duty to B so on that point can be no Trust. 2. discretional Trusts A discretional Trust is a form of Trust (see p 222-4 of the book) it can exist only if A is under the core Trust duty. utilisation 1a A0 transfers ? 100,000 to A subject to a duty (i) not to use that bills for As own benefit and (ii) to invest the money prudently and (iii) at the end of 21 years, to pay whatsoever unspent part of the ? 00,000 and its income to Oxfam. A0 also stipulates that, during that 21 years, A can, if he wishes, pay each(prenominal) or any(prenominal) of the ? 100,0 00 and its income to all or any of A0s children or grandchildren. In such a illustration, there is clearly a Trust A is under the core Trust duty.And Oxfam is a beneficiary of that Trust A owes the core Trust duty to Oxfam. A0s children and grandchildren are not, however, beneficiaries of a Trust A does not owe them the core Trust duty. Rather, A has a power A can, if he wishes, give all or any of the money to all or any f A0s children and grandchildren. 1 See eg G Scammell Nephew Ltd v Ouston 1941 AC 251. 1 A discretional Trust is a busy form of Trust it exists where A, in addition to being under the core Trust duty, has a power to choose how to sell the benefit of the right A holds on Trust. exemplification 1b A0 transfers ? 100,000 to A subject to a duty (i) not to use that money for As own benefit and (ii) to pay the money, in equal per centums, to all of A0s children and grandchildren. In such a case, there is clearly a Trust A is under the core Trust duty.There is no arbitrary Trust A does not have a power to choose how to submit the benefit of the ? 100,000. Rather, there is a fixed Trust A is under a duty to distribute the benefit of the right held on Trust in a specific mien. Example 1c A0 transfers ? 100,000 to A subject to a duty (i) not to use that money for As own benefit and (ii) to invest the money prudently and (iii) by the end of 21 years, to have distributed that ? 100,000 and its income, as A sees fit, amongst all or any of A0s children or grandchildren. In such a case, there is a discretionary Trust.A does owe the core Trust duty to A0s children and grandchildren but A has a power to choose how to distribute the benefit of the ? 100,000. 3. Discretionary Trusts Certainty of Objects The Any Given Person discharge Example 2 A0 transfers ? 100,000 to A subject to a duty (i) not to use that money for As own benefit and (ii) to invest the money prudently and (iii) by the end of 21 years, to have distributed that ? 100,000 and its i ncome, as A sees fit, amongst all or any of A0s relatives. In Example 2, there seems to be a problem.A0 has attempted to set up a discretionary Trust. However, such a Trust depends on A being under a duty not to pay any of the money to a mortal who is not a relative of A0. But can a court enforce that duty? For example, lets say A chooses to pay out ? 5,000 to X. Is there a meaningful test the court can use to decide if X really is a relative of A0? If not, a key part of As mean duty cannot be enforced in that case, the intended discretionary Trust cannot exist. And, if that occurs, A will hold the ? 100,000 on Resulting Trust for A0 (or, if A0 has died, for A0s estate).We can sum up this point by saying that, for a discretionary Trust to exist, it must twisting the any wedded person test a court must be able to tell of any abandoned person (eg X) whether or not that person falls indoors the class of those to whom A is permitted to distribute the benefit of the right A holds o n Trust. 2 That any given person test is often referred to as the given postulant test. In re Baden (No 2),3 the Court of Appeal considered whether a discretionary Trust for A0s relatives could pass that test. 2 3 See per master key Wilberforce in McPhail v Doulton 1971 AC 424 at 456. 1973 Ch 9. Stamp LJ held that the discretionary Trust was legitimate. His Lordship reached that conclusion by taking a very narrow view of relatives as including only A0s statutory next of kin (ie those close relatives specified by statute as being able to acquire A0s rights if A0 dies without making a valid will). 4 Sachs and Megaw LJJ took a much broader approach to the term relative, defining it as anyone share-out an ancestor with A0. 5 That rendering seems to cause a problem if X claims that he and A0 had the same great-great-great-great-great grandmother, can the court really test that claim?Sachs and Megaw LJJ both dealt with that point by saying that the onus is on X to prove that claim unti l X does so, it must be assumed that X does not share an ancestor with A0. 6 The approach of Sachs and Megaw LJJ (assuming X is out of the permitted class, unless and until X can show otherwise) seems to make the any given person test redundant. For example, if A0 tries to set up a discretionary Trust in which A has a power to distribute the benefit of a right to anyone who is a in force(p) person, we magnate expect A0s attempt to fail there is no way for a court to tell if X is or is not a dependable person.However, on the approach of Sachs and Megaw LJJ, we could instead say that the discretionary Trust is valid it is just that, if X cannot prove he is a good person, it will be assumed that he is not such a person. It seems that neither Sachs LJ nor Megaw LJ wanted to leave the law in such a way as to permit there to be a discretionary Trust in favour of anyone who is a good person. So each adjudicate added a further certainty requirement.Sachs LJ stated that the class of tho se to whom A can distribute the benefit of As right must be conceptually certain that is, it must be possible to come up with a definition of the class. Practical, evidential problems as to whether X is or is not within that definition can be dealt with by kick ining the simple rule that X is out of the class until he proves otherwise. So the good person discretionary Trust will be invalid as there is no clear way of defining that term it is conceptually uncertain. In contrast, whilst it may be difficult, or correct impossible, to tell if X is or is not a relative of A0, that evidential uncertainty will not defeat the discretionary Trust.Megaw LJ added a different requirement, stating that a discretionary Trust can only be valid if there are a substantial hail of people who are clearly within the class to whom A can distribute the benefit of As right. 8 Again, that requirement can be used to mean that a good person discretionary Trust is invalid, whereas a relatives discretionar y Trust is not. The extra requirements imposed by Sachs and Megaw LJJ do not assist in fulfilling the purpose of the any given person test making sure the court can tell if A distributes the benefit of the right to a person outside the permitted class.It may be that each requirement instead aims to ensure that the discretionary Trust makes some practical 4 5 1973 Ch 9 at 28-29. Ibid at 21-22 (following the lead of the first instance judge, Brightman J). 6 Here, again, the lead of Brightman J was followed. 7 Ibid at 20. 8 Ibid at 24. 3 sense for example, if it is not possible to give a conceptually certain definition to the class, it may well be that no-one can show he is within that class. Megaw LJs requirement for a substantial number to be within the class is of course quite vague the point seems to be that, for a iscretionary Trust to make sense,A must have a genuine choice to make as to who will receive the benefit of As right. However, that point is not always correct for examp le, the discretion in a discretionary Trust could come from A having a power to decide how much of the benefit of As right a particular individual should receive. 4. 4. 1 Discretionary Trusts Certainty of Objects Further Tests The full list test? At one point, it was suggested that a discretionary entrust could be valid only if the court could draw up a full list of the people to whom A is permitted to distribute the benefit of a right.On that view, in Example 2, a discretionary trust would arise only if it is possible to draw up a full list of A0s relatives. However, in McPhail v Doulton, the planetary house of Lords rejected that view. 9 It was based on the idea that, if A failed in his duty to distribute the benefit of the right, a court would have to rate in and decide how to distribute. And, to avoid favouring any one person, the court would have to order equal division of the benefit of the right amongst all members of the class.On that view, a discretionary trust would be come, in effect, like the fixed Trust in Example 1b so a full list would be necessary. In McPhail v Doulton, Lord Wilberforce pointed out that, if A fails in his duty to distribute the benefit of a right, a court does not have to order equal division. 10 afterwards all, such equal division could be one of the worst ways of distributing the benefit of a right for example, splitting up a fund of ? 100,000 evenly among 1,000 people would mean that no one person gains a substantial benefit from the discretionary trust.So, given the other means by which the court can step in to execute a discretionary trust, there is no need to apply the full list test. 4. 2 The administrative workability test The fact that a court may need to step in and execute a discretionary trust does not mean that a discretionary trust must pass the full list test. Nonetheless, it may have some impact. For example, if the terms of the attempted discretionary trust mean that there is no reasonable plan a court co uld adopt to execute that supposed trust, then A0s attempt to set up a discretionary trust must fail.This point may explain the (rarely relevant) administrative workability test. 11 9 1971 AC 424. Ibid at 456-7. 11 That test is referred to by Lord Wilberforce in McPhail v Doulton 1971 1 AC 424 at 457. 10 4 For example, in one case,12 A0 (a council shortly to disappear as part of a reorganisation) attempted to set up a discretionary trust (of a large sum of money) for the benefit of all the former residents of the area covered by that council. The class of people to whom A could distribute the benefit of its right would thus include over 2 million people.It was found that the councils attempt to set up a discretionary Trust failed the planned Trust was administratively unworkable. The problem here may be that, if A fails to perform his duty to distribute, the court will have to step in. And is there any sensible way order a court could make to distribute the benefit of As right? We h ave to relent in mind the need for a court to avoid making the type of contentious political decision which it is ill-suited to make and which may cause resentment. 3 Of course, in most cases, no such problems arise the administrative workability test rarely prevents an intended discretionary trust from arising. This explanation of the administrative workability test explains why it applies to discretionary trusts but not to attempts to give A a power (as in Example 1a). If A chooses not to exercise a power to distribute the benefit of a right then, as A is under no duty to do so, a court does not need to step in and order some form of distribution.There is thus no risk of a court facing the dilemma that would arise if an administratively unworkable discretionary trust were allowed to be valid. 4. 3 The non-capricious test Although the administrative workability test does not apply to powers, that does not mean that powers are free from certainty tests. For example if A has a power to distribute the benefit of a right to all or any of a certain class of people then, as is the case with a discretionary trust, A is under a duty not to distribute outside that class. So, with a power as with a iscretionary trust, the any given person test applies14 the power is only valid if a court can tell, should A exercise the power in favour of X, whether or not X is in the permitted class.Sometimes, when accepting a power, A also comes under a duty to act loyally and responsibly when considering whether to exercise that power. In such a case, for example, A (as is the case if A holds a right on a discretionary trust) cannot simply ignore the power he is under a duty to members of the class of potential recipients to consider periodically whether or not to exercise the power. 5 In these cases, A can be express to have a fiduciary power A is not just under the negative duty not to distribute outside the permitted class he also has some positive duties in relation to the powe r. It has been held that A0s attempt to set up such a power will fail if the intended power is capricious if there are no sensible criteria A can apply in considering whether and how 12 13 R v rule Auditor, ex p West Yorkshire MCC 1986 RVR 24 (noted by Harpum 1986 CLJ 391).For example, would the money be better spent on paying for a new school, or a new hospital, or new sports facilities? 4 See eg re Gulbenkian 1970 AC 508. 15 For a discussion of As duties in such a case see eg per Megarry V-C in re Hay 1982 1 WLR 202, esp at 210. 5 to exercise his power. 16 This does not mean that, when giving A the intended fiduciary power, A0 needs to spell out what factors A should take into account. However, it does mean that if the supposed power is capricious (ie there is no sensible final cause A can come up with) then A0s attempt to give A the power must fail. Two points are worth noting approximately this non-capricious test.First, if it is linked to A0s attempt to impose a duty on A to act loyally and responsibly when considering whether to exercise a power, it must apply to an attempt to set up a discretionary trust such a duty is a key part of a discretionary trust. Second, in practice, it is very unlikely that this test will present a problem people rarely go round setting up bizarre powers that cannot be considered in a sensible way. 4. 4 The one person test Example 3 A0, an owner of a large number of paintings, dies.In his will, he instructs A (his executor) to allow each of my friends to purchase one of those paintings each, at half its market value. In such a case, A0 does not attempt to set up a discretionary Trust A has no power to choose how to distribute his rights. Rather, each friend of A has a fixed entitlement. A0 is attempting to make a conditional gift if X satisfies a particular condition (if he is a friend of A0) he has a specific right. Nonetheless, it may seem that there is still a certainty problem how can A (or the court) tell if X is or is not a friend of A0?However, in re Barlow, the substantive facts of which were identical to Example 3,17 Browne-Wilkinson J held that the conditional gift was valid. His Lordship noted that an attempt to set up a discretionary Trust for friends of A0 would fail applying Sachs LJs test in re Baden (No 2), the term friends of A0 is conceptually uncertain. However, a conditional gift should be treated differently if there was just one person who could clearly show he was, on any reasonable test, a friend of A0, that person is entitled to acquire one of the paintings. 8 The test applied in re Barlow has been criticised.However, it can be defended. If an attempted discretionary Trust (eg in favour of friends of A0) fails a certainty test, then someone who could have benefitted from As power (eg a clear friend of A0) will miss out. But, in any case, that person only had a chance of receiving a benefit he had no legal guarantee. In contrast, if a conditional gift is found to be invalid whe n there is a person who definitely stands to benefit from it, that person is deprived of a definite entitlement a right given to him by A0.