Three Certainties Flashcards

Question

Distinguishing Trusts and powers

Answer 1

* Trusts are equitable, powers are legal * Trusts are mandatory, powers are discretionary * Powers generally have a gift over in default of appointment (where undistributed property goes) * E.g. any property not distributed in 5 years goes to Frank - Objects of the power do not have equitable interest. - Somebody with a power, does not have to exercise it. - A beneficiary of a trust, they have an equitable interest and enforce trust in court, but the object of the power cannot enforce it. - Distinguishing between them, look at the wording used. - Words in a power are optional. - Words like ‘must’ ‘shall’ ‘will’ in a trust. - Words like ‘shall ‘will’ ‘desire’ in a power. - A gift over in a fault of appointment. - A trustee has to distribute, by the end of the trust, there shouldn’t be anything left.

Answer 2

* We can see this is a normal trust where Geoffery is to hold the money for Parveen and pay monthly. * It says on trust, that they are dealing with the trust and the words ‘shall pay’ which is a mandatory discretion. * This is trust from the wording. * Second sentence contains power. Geoffery can be a Doni for power as well as in a trust. * This is not mandatory. It says Geoffery ‘may’ rather than say must. * Geoffrey is to be trustee. * Geoffrey also has a power. * This is a gift over on default on appointment which tells us what happened to the property that is not distributed.

Answer 3

- In a gift, the recipient receives both legal and equitable interest. - They are not split. - A simple gift in a will could be leaving something to someone such as a book. - An example of a gift subject precedent is leaving a law textbook set to those who got a 1st in their year.

Answer 4

- when the paintings were sold, the first opportunity to buy them, and at a discount, would go to the testator’s friends. - She had a large collection of painting. - She believed they’d be sold. - Her friends were first to buy the gift AKA the discount off the painting. - The condition of precedent is that they must be a friend of the testator to get a discount.

Answer 5

Mandatory wording of ‘shall’. This is a discretionary trust.

Answer 6

Mandatory wording of ‘must.’ Income is split equally. This is a fixed trust.

Answer 7

Non mandatory wording of ‘can give.’ Gift is the textbook. This is a gift.

Answer 8

Non mandatory wording of ‘may make’. This is a power.

Answer 9

- It must be certain because of integrity. - Take it as a gift to a subject matter, this requires us to process and see what exactly is going to be the property of the gift or the trust. - The specific bottles must be segregated but are subject to certain. - Objects are the beneficiary of a trust. For a trust to be valid, - You NEED all three certainties before a gift to be valid, you only need subject matter and objects.

Answer 10

- Identify a trust, is mandatory language but the trustee must or shall follow the property on beneficiary. * Trust is a fixed trust but in a share of a fixed trust document, leaving no discretion to your trustee. * For example, the trustee shall hold the money in an equal share of mandatory of ‘shall.’ * It is a fixed trust and it set out the shares, the objects are equal.

Answer 11

Not a fixed trust, it needs mandatory language. * The difference is a trustee has discretion as to how to distribute the property between the beneficiaries. * For example, A person must hold trust for equity students in such proportion as my trustee fits, * These aren’t discretionary trusts.

Answer 12

: A power is not a trust, but it can be similar to a discretionary trust. * While a trustee of the trust may have power as an additional flexibility, powers are still not the same as trust. * Trusts are mandatory. ‘shall’ ‘must.’ * Discretionary is a person made me do this. * The person who has a power is a do ne. * They did not have to distribute poverty. * For example, might be any late payment to equity students in financial need, the word may is the key word. * This is a power of a trust. * As property, the power does not have to be distributed. There may be some leftover. * A gift over, which shares what happens to an undistributed property is an indication of a disposition, is likely to be a power. * For example, any property not distributed at the end of this academic year, they are going to have the student with a top-rated equity. * That is an example of a gift over different employment. * It must have these two powers, but they are a good indicator that it is a power.

Answer 13

* Gift subject to condition precedent: Which is a gift to anybody who makes a condition. * A gift is not a trust because there is no splitting up into your equitable interest. * The recipient receives both legal and equitable interest in the item. * For example, my favourite students, that had one of my textbooks each, if every student received a textbook, they would have both a legal and equitable interest in the textbook.

Answer 14

Complete list test Morice v Bishop of Durham *The trustees have to be able to make a complete list of the beneficiaries

Answer 15

means that the object in a fixed trust be certain the trustee couldn’t make a complete list of the beneficiaries. If a trustee cannot do this, the trust will fail.

Answer 16

* An example would be a trust with my friends. Without the object test for ethics trust. * This example would not meet the test because you cannot work out how friendly I need to be with someone to class them as my friend. * So, the trust of my friends will fail. * The trustee can make a complete list by asking human resources of a list of staff. * Fixed trust may fail, even when it is clear what exactly the testator/tectrix is trying to do.

Answer 17

* Re Gulbenkian – the objects test for powers is the is or is not test. * Must be able to say with certainty whether someone is or is not an object. * People cannot compare the do ne of a power to distribute. * The case of Re Gulbenkian is a leading case for powers and the objects test. It tells us the test for power is or is not test. * This means you must be able to say with certainty whether someone is or is not an object. * It does not need to be a complete list. * Its nearly impossible to say to any person who comes forward if they are or are not an object

Answer 18

- Because of evidential uncertainty. - It means that if lost records mean we cannot make a complete list of the objects. - Then the fixed trust will fail due to lack of certainty of objects. - A fixed trust and the completeness test are the most strict of all object tests.

Answer 19

- Before 1971, the test used to be the complete list test (IRC v Broadway Cottages) - * Historically, the incompleteness test also applies. * IRC v Broadway Cottages, the reasoning behind this was that in the case of trusts, unlike powers, there’s a problem with the trustee. * The court would have to administer the trust themselves. * Many discretionary trusts were void. * The complete list of objects could not be named. * The test to objects in many discretionary trusts fails. * This was not good for public policy.

Answer 20

- A discretionary trust is valid “if it can be said with certainty that any given individual is or is not a member of the class.” * In 1971, the House of lords in McPhail v Doulton, held that the agent was not test for powers also applied to discretionary trusts. * The discretionary trust now applies to the is or is not test for sane other powers. * McPhail v Doulton is an important case. * Perhaps the law decided to do the is or is not test especially the trust the same as for powers. * Because while there are differences between powers in discretionary trusts, they are insufficiently similar to use the same tests. * That quote of ‘class’ means ranges of object. * People can be beneficiaries.

Answer 21

* Called McPhail v Doulton in the House of Lords, but renamed Re Badens in the Court of Appeal * Refers to discretionary trusts as trust powers * “The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons … as they think fit.” * This case is SO important. * There are few confusing things about this case. * This case arose around the provision of the will of Re Baden’s. * The initial case was called by Daulton, and it reached the house of lords on what the test made of what discretionary trust should be. * Lower court then had to apply the facts, decide if the issue is the is or is not test. * This ended up in the court of appeal and be renamed as re Badens. * Another unfortunate thing about these two cases is terminology. * It sometimes refer to discretionary trust as trust powers. * Trust powers = this means discretionary trust. * The facts of the case was that Mr Bertram Maiden was the chairman of a company of about 1300 employees. * He wanted to provide for their future welfare in his will. * His will was written in 1942, which is before the welfare state as we know it. * So the NHS appeared after world war 2. * Major died in 1960 and his executors for those responsible for distributing under his will. * Alleged the trust was void for certainty and objects. * Where he died in 1960, Given till 1972, his will to be finally resolved. * The clause written in the 3rd point. This isn’t a fixed trust due to the wording as they think fit. * DC is giving discretion. * This is a discretionary trust, not a power. * Those are the mandatory words the trustee shall. * In McPhail v Daulton, the house of lords for the first time, held that the discretionary trust but the trustee must select from the class of objects to distribute to. * It was not necessary for the trustee in order to do this to obtain list of all possible objects. * It held that the previous approach in piracy that support when hostages should not continue to be applied to discretionary trusts and no one expressed a complete list. * Instead, the issue of powers should be applied where the trust can be valid, can be said with certainty that any given individual is or is not a member of the class.

Answer 22

* Was “relatives” and “dependants” sufficiently certain for the is or is not test? * Evidential uncertainty – does the person have proof, or can they be traced * Potential beneficiaries have to prove they are in the class * The court had to ask otherwise. * Relatives and dependants, it hadn’t said with certainty, any given individual is or is not a member of the class. * It is important to distinguish between evidential and conceptual uncertainty for evidential and conceptual uncertainty. * Evidential uncertainty is all about evidence. * If the records burned down, a fixed trust would fail for a lack of evidential certainty. * For discretionary trust. Evidential uncertainty around the existence or whereabouts of members of a class or not cause it to fail. * A person does not have to prove that they’re not been the class of beneficiaries. * Key point here is evidential uncertainty will not hold the discretionary trust debate.

Answer 23

- Firstly, the judges agreed in rebated dependents, both conceptual uncertainty dependant is in common uses. - The three judges agreed that relative was a conceptually certain trust. - This does not help us to understand how to determine whether a decent term given to us is conceptually certain. - This is one of the few cases where it is important to look at what the individual judges said. - The rebadate, lord of appeal have already decided the evidential uncertainty of not being able to trace will have proved that someone was a dependent or a relative.

Answer 24

* Sachs LJ – relatives means descended from common ancestor * Megaw LJ – OK if a substantial number of objects are within the trust, even if a substantial number cannot be determined * Stamp LJ – relatives means next of kin, following Harding v Glyn (1739)

Answer 25

* Start with Lord Sach, he said that these are relative in descent from a common ancestor. * This case was decided in 1972, and since then he had DNA testing. * An example in Genghis khan; Genghis Khan was an emperor. * He died in 1247. * It is interesting for us because its estimated to have 16 million descendants. * Lord sachs approach means descended from a common ancestor.

Answer 26

* Lord Megaw, who looks more closely of the wording of the s or is not test. * You recognised in many situations, It was possible to prove a person is or is not a relative. * Its not usually evidence, but the concept of what is a relative. * Lord Megaw said the test for object satisfies at least a substantial number of objects can be said with certainty that only the trust. * It cannot be proven whether they are or are not within the trust. * The purpose of lord Megaw is whether that was the potential number people who say yes, they are relative. * Substantial means that Megaw said this is a test of common sense and a degree in relation to the particular test. * He said that in relation to relatives, there wouldn’t be any practical difficulty determining whether its in their proper and sensible administration of the trust.

Answer 27

* Finally Lord Stamp. He came to the conclusion because of the old acase, according to those who did decided in 1739 to show that when it was made next of kin. * So here we have three different court of appeal judges. * They agree that what is needed is actually nothing but different reasons.

Answer 28

* Is or is not test - “if it can be said with certainty that any given individual is or is not a member of the class.” * Evidential uncertainty – will not defeat a discretionary trust * Conceptual uncertainty – will defeat a discretionary trust, but judges did not agree in Re Baden’s how to determine conceptual uncertainty - Whether it can be said with certainty at any given individual is or is not a member of the class. This is important to remember.

Answer 29

You must show the pattern intended to create a trust rather than intending to give a gift.

Answer 30

Means that the property making up the trust or gift must be sufficiently certain.

Answer 31

requires certainty as to who the beneficiaries are of the trust over who receives the gift.

Answer 32

- Complete list test means the trustee must be able to make a list of every beneficiary. - You need to know the complete list because the share that each beneficiary you receive depends on how many beneficiaries there are.

Answer 33

* Identifiable to the lack of mandatory wording, such as it ‘may’. * This means that the do ne may distribute. * The do ne is a person who has the power, the power to distribute rather than the mandatory wording of must distribute signed in trusts. * The certainty of object tests for powers is the is or is not test on the case of Re Gulbenkian. * This means you don’t need a complete list but it must be possible to identify who is an object even if there are a few people we are not sure about, and if we’re not sure, but they will not be considered objects.

Answer 34

* This is the same test as powers. The cases of McPhail v Doulton and Re Badens as your authority. * Although power and discretionary trust are the same tests, both power and discretionary trust have the easier is not test. * You need to make sure you use the correct case for each. * So the powers Re Gulbenkian and Discretionary trust is McPhail v Doulton and Re Badens. * Our fighter disposition is a gift subject to condition precedent.

Answer 35

* A gift to subject to condition precedent is a gift to be given to anyone who can show they meet the condition. * Features of a gift is that we did not split the legal and equitable interest. * So if you receive the gift, you receive both the legal interest and equitable interest in whatever the gift is. * A gift does not involve either trust or power. * It is something different. * An example of a gift concept, a c condition precedent would be if I laid in my will a textbook to each of my equity students. * Then the role of my executor and the executor is the person administering my will is to give a textbook to every student who would like one, so it is a gift. * But you must meet the condition first. - The leading case on that subject, a condition precedent is Re Barlow’s.

Answer 36

* In Re Barlow’s, a woman in her will instruct that her friends could purchase a painting from her estate at a discount. * Friend is a subjective term. * It was held for a gift subject to condition precedent. The test for certainty of objects. * Its whether it can be possible to say one or more persons that he or they undoubtedly qualify. That is a key phrase to learn. * May also see this as a one-person test. * So, this means that for gifts, subject to condition precedent, the objects are sufficiently certain if you can show at least one person meets the criteria. * In Re Barlows, testator had at least one friend. * One person can be classed as a friend. * Whatever test we use for what is a friend. * There was sufficient certainty of object. * So, the gift was valid. * Each person you could show they were a friend of the testator could, if they wished, have a painting at a discount. * This test for gifts subject to condition precedent is much less strict that trusts In powers. * This is because of the different nature of responsibility for one of the trusts to a power compared to handing out gifts. * A trustee of a discretionary trust, It would only overpower had to decide who to distribute the property to. * This will involve at least some consideration of the situations of the range of objects. * Somebody in charge of giving out gifts, they just have to examine the evidence. * A stricter test is not needed for gifts subject to condition precedent.

Answer 37

- can cure some conceptual uncertainties - * If you have conceptual uncertainty, you may have found your trust or power is likely to be void for lack of certainty of objects. * However, there is a way to write a trust or power to include an arbiter clause. * An arbiter clause is where somebody has been given the power to decide who is in the class of objects. * Including arbiter clause, can only cure some conceptual uncertainties. * So having an arbiter clause or not automatically mean the trust is searching for objects. * One arbiter clause cannot do is out of the jurisdiction of the court by giving trustee too much power to construe the words used.

Answer 38

– to such persons, the company may consider to have a moral claim - * Involved a kind of pension trust operated by the company, his employer. * The clause of this discretionary trust included the words to such persons the company may consider having the moral claim. * So the company was a trustee of this life insurance/ pension policy. * So those considered to have a mobile claim. * Normally this would fail test in Mphail v Daulton. * However, by including the opinion of the company as defining the class of objects, the conceptual uncertainty could be cured.

Answer 39

(obiter) the provision that disputes were to be decided by the Chief Rabbi - * Use this case with caution. * The condition was already certain. * The comments made about arbiter clauses by Lord Denning are merely arbiter. * So, in return, the person could receive if he married somebody of sufficient Jewish origin. * In Orbiter, lord denning said that the Chief rabbi would be an appropriate person to start to decide if someone was sufficient Jewish origin being the leader of that religion. * What this case doesn’t mean is that as long as someone is appointed to resolve the case, the provision, it will be sufficiently certain. * So arbiter clauses are not a guarantee. * The trustee still needs to be given sufficient guidance in the provision to come to proper decision. * The trustee and arbiters must be able to be clear on what is the object. * So this is an area where the law is uncertain. * We don’t have that many cases in conceptual uncertainty.

Answer 40

* Too many people - It must be administratively workable. - It is possible but rare that a trust may fail for administrative and workability. - Administrative workability means too many people. * McPhail v Doulton – relatives and dependants of 1300 employees * The house of lords in McPhail v Doulton confirmed a trust could fail in initiative on workability. * So, the house of lords confirming this is a important feature in trusts. * 1300 is a lot for a trustee to manage but this wasn’t too many people in McPhail v Daulton. * The house of lords recognised it as a requirement that 1300 employees plus their relatives and dependants was not too many people. * McPhail v Doulton did suggest a trust for the inhabitants f greater London would be too many people. * There has been only one decided case on initiative on workability. * Showing you how rare it is for trust to fail for this reason. * R v District Auditor Ex p West Yorkshire Metropolitan CC – for the benefit of the inhabitants of West Yorkshire (2,500,000) * In R v District Auditor case, a trust was created for the benefit of the inhabitants of west Yorkshire, and this was about 2.5 million people. * Court decided that this was too many and hence this trust failed for administrative, and workability.

Answer 41

Where performance of fiduciary duties is impossible due to capriciousness - Re Manisty’s Settlement – (obiter) capricious if the terms “negative any sensible intention on the part of the settlor.” - M’Caig v University of Glasgow – (obiter) trust to establish monuments in memory of the settlor - Brown v Burdett – (obiter) directed the trustees to block up the doors and windows of a house for 20 years

Answer 42

* Another reason why occasionally trusts may fail. * In general, we can leave our property where we like in our will. * If I left money to a charity I don’t support, never heard of before informing my husband and family, this gift would still be valid. * A court can intervene if a person does not make adequate provision for their dependents in their will. * But this is an exception. * This would not invalidate my seemingly illogical gift to random charity. * That is a position as to gifts in wealth to make it however you like. * But the position is different. * Instead of a gift, I want to create a trust. * This is because the law considers the position of trustee who have duties to perform. * Case law on capriciousness is still on the ground. * This is because it is so rare for a case to be challenged on the basis of capriciousness. * The cases related to capriciousness tend to be open to comments or trusts failed for other reasons that also happened to be capricious.

Answer 43

- (obiter) capricious if the terms “negative any sensible intention on the part of the settlor.” - Re Manisty’s Settlement is the main case cited in capriciousness. * The court suggested the trust would be capricious if its terms negative, any sensible intention on the part of the settler. * So it negatives any sensible intention on the part of the settler. * It gave the example of a private individual like one of us, creating the trust to benefit the residents of Greater London. * Aside form the number of people who are potential beneficiaries, there is no point to all of us creating that trust.

Answer 44

- (obiter) trust to establish monuments in memory of the settlor * In M’Caig v University of Glasgow, this involved an attempt to create a trust to establish a monument in the memory of the settler. * This trust failed for other reasons. * It was also considered capricious as it would be perpetrating it at great cost and in an absurd manner.

Answer 45

- (obiter) directed the trustees to block up the doors and windows of a house for 20 years - * Brown v Burdett, this trust failed for other reasons again. * Yet it was also considered capricious to waste the use of the house for so long in a way that did not benefit any beneficiaries and to add to the observed nature of this, the testator also instructed a clock to be left inside the house. * And specifies how the nails to the house would be used. * This was capricious. * But the trust had already failed for other reasons. +

Answer 46

1. Fixed trust – make the complete list of the beneficiaries and distribute according to instructions - The trustee of a discretionary trust had to do a bit more. - The trustee does not have to make a complete list of the beneficiaries. - They instead must decide if anyone coming forward is or is not a beneficiary. - But in your own risk task on discretionary trustee is that they must survey the range of beneficiaries that there are. - By surveying the range of beneficiaries, the trustee have to find out the information needed to decide who to distribute the property to. 2. Discretionary trust – work out if the person is a beneficiary, and survey the range of beneficiaries (McPhail v Doulton) * What discretionary trust cannot do is turn up to seminar group and split the property equally between those who have turned up because this is not what I was intended. * As a trustee, has not considered the rest of you and its just given to the first beneficiaries who have made themselves known to the trustee. 3. Power – donees have a duty to consider whether to exercise the power (Re Manisty’s) * Powers are different from discretionary trusts because they’re not mandatory. * A do ne of a power may distribute. * But that doesn’t mean the do ne of a power can simply ignore that they have it. * The case of Re Manisty, tells us the danger of a power has to consider whether to exercise the power from time to time. * So it only of a power to distribute to my equity students should, from time to time survey you as the objects I consider whether he/she considers your worthy recipients of the power. 4. * Gift subject to condition precedent – check someone is an object before giving the gift * Finally the gift subject to condition precedent, the person has less of the role * They merely have to check someone is an object before giving the gift.

Answer 47

* Trust – beneficiaries have an equitable interest, so have locus standi to enforce in courts * Powers – no equitable interest so no locus standi, except when donees go outside the power * This is important if the trustee don’t do what they’re supposed to do. * Beneficiaries of both fixed and discretionary trusts have the greatest protection. * This is because the beneficiaries have an equitable interest in the trust property. * So if the trustee is not distributing, for example the beneficiary can go to court who can order the trustee to carry out their duties, or the court may even distribute the property themselves. * Objects of a power are in weaker position. * They have no equitable interest, so no locus standi. * If a problem is only of a power is not distributing, the objects cannot go to court to compel the donate to distribute. * The objects of a power can only go to court if it only goes outside their power. * So if the power wants to distribute to equity students, you can only go to court if it don’t need to start distributing property to landlord students or without name is keeping the property for themselves.

Answer 48

* Step 1 - What type of trust/power/gift? * Step 2 - Identify the test for certainty of objects * Step 3 - Apply the test

Answer 49

* What type of disposition is this and why? This is a discretionary trust. * We can see the discretion on the wording to distribute as they seem fit. * It is not a power because of the mandatory wording of shall distribute rather than may distribute. * Next, we need the objects test for destruction and trust. * We apply the is or is not test. * We can start with evidential certainty and we ca see why and talk about it because a records building was destroyed in a snowstorm. * The answers is no, Evidential certainty will not make a discretionary trust fail. * It is those wanting to show they are snowboarders. * They must provide proof. * Relatives is relative sufficiently he for discussion and trust. * Rebate is okay but mentioned that the judges gave different reasons as to why its okay fellow boarders. Do you think that is sufficiently certain? * The word is open to interpretation. * Difficult to say a fellow boarder is conceptually certain. * There is scope to argue otherwise. * So, it’s not about whether you reach the same outcome as me. * I don’t think this is conceptually certain because of the wording of fellow boarding. * If you think there is not sufficient, be sufficient certainty of object, the trust fails. * If you think there is a sufficiently certain of objects and providing the other certainties have been met, your trust is valid.

Three Certainties Flashcards

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