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_GE Dal Pont_*
‘FAULT LINES’ IN CERTAINTY OF OBJECT FOR
PRIVATE TRUSTS: ‘NONE THE WORSE FOR IT’?
A bstrAct
It is well established that the validity of trusts is grounded in, amongst other things, certainty of object. Courts have developed rules, which function in a binary fashion as ‘fault lines’, directed to distinguishing objects that are certain from those that are not. At the same time, instances arise that test the boundaries of these lines. This article probes such instances, on the way to revealing that the concept of certainty of object may be more fluid, and indeed less precise, than may have been imagined. And it ultimately raises the question whether the law should be any the worse for this.
I settIng the scene
I
t has become fashionable, particularly in the equity sphere, to speak of ‘fault lines’.^1 The phrase is intended to invoke a more generic concept than some form of terrestrial fracture caused by the shifting of tectonic plates. It targets any form of division or rift that is prone to triggering confrontation. But it can be conceived more broadly again, to encompass the line dividing two inconsistent outcomes, and specifically where that line is to be drawn, and why. In many ways, the latter represents the ultimate focus of the law. As Oliver Wendell Holmes Jr famously wrote, ‘where to draw the line … [is] pretty much everything worth arguing in the law’, 2 having some two decades earlier characterised ‘[m]ost distinctions’ as ones of degree and ‘none the worse for it’.^3 In the legal environment the notion of fault lines is, in this sense, nothing revolutionary, reflecting the Biblical adage that there is nothing new under the sun.^4
- (^) Faculty of Law, University of Tasmania. This article represents an edited version of a paper delivered as the Christopher Legoe Lecture at the Trusts Symposium 2019 (under the joint auspices of the Law Society of South Australia and Society of Trust and Estate Practitioners) in Adelaide on 8 March 2019. I am most grateful to two anonymous reviewers for their valuable comments on the paper. Errors remain my own responsibility. (^1) Indeed, a book has been published with this focus: see James Glister and Pauline Ridge (eds), Fault Lines in Equity (Hart Publishing, 2012). (^2) Irwin, Former Collector of Internal Revenue v Gavit , 268 US 161, 168 (1925). (^3) Haddock v Haddock , 201 US 562, 631 (1906). (^4) Ecclesiastes 1:19.
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This article probes a ‘fault line’ in the trusts context. Merely because trusts emanated from the broader equitable jurisdiction, which originally marked itself by its flexibil- ity and discretion as compared to the common law, hardly obviated the need for rules to distinguish one outcome from another. While there were (and arguably remain) instances where equity jurisdiction rests upon the length of the Chancellor’s foot, most of the law surrounding express trusts, in particular, is characterised by well- defined rules.
As ‘rules’ of law serve to draw a (fault) line — so that the outcome differs depending on which side of the line a scenario is declared to fall — they are accordingly inherently binary in nature. Their application dictates either one outcome or another, which by definition differ. And this is notwithstanding that, as Holmes noted above, questions of degree are frequently involved.
For the purposes of this article, the focus is on one of the core rules underscoring the validity of an express trust: certainty of object. Given the prevalence of rules espoused by the general law of trusts, it is certainly not exhaustive of where fault lines emerge. For instance, in inquiring into an intention to create a trust, there is no scope for a court to conclude that a person partly intended to create a trust; instead, the law determines whether a trust was intended, or was not. The same applies to the second of the so-called ‘three certainties’ underscoring the creation of an express trust: certainty of subject matter. Again, either the subject matter of a trust is certain, or it is not. There is no legal concept or validity inhering in partially certain trust subject matter. Hence the binary concept mentioned above.
Parallel observations stem from inquiry into the third certainty, namely certainty of object as elaborated in this article. The general law ostensibly acknowledges no such thing as partial certainty of object; again, an object is either certain, or it is not. The need for rules to set the fault lines when addressing the three certainties is heightened because, if one of the certainties is lacking, no express trust enters into being; any supposed trust in this instance is said to ‘fail’. To this end, ‘certainty’ assumes value because it aims to define what is, and is not, a trust.
(Un)certainty of intention to create a trust reflects the legal (and social) policy under- scoring persons’ freedom to dispose of their property on the terms they deem fit. Yet a person can express an intention to declare a trust over property (thus fulfilling certainty of intention) but at the same time fail to identify that property with the requisite certainty. In this event, the intended trust fails for certainty of subject matter. It is similarly conceivable that a person intending to create a trust, and specifies its subject matter with the requisite certainty, may nonetheless be thwarted in that intention by uncertainty of object.
The second and third certainties target the basal aspects of the trust, namely the holding of property (subject matter) for the benefit of another (object). This in turn explains why intention to create a trust is a necessary, but not sufficient , element of the trust equation. It ultimately acknowledges, in line with the remarks in the preceding paragraph, that the law does not always give effect to a person’s intention when it comes to disposing of their property. In trusts law, the reasons for this are
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on the possibility that the court might, under the umbrella of inherent jurisdiction, be called upon to step in and administer the trust, or to direct distribution of trust income or capital to a beneficiary.^7
There are accordingly two aspects of the ‘beneficiary principle’. There is the one immediately above evincing the concern that trustees must be held accountable, by the court if need be. Beneficiaries therefore have standing to ‘enforce’ the trust — in this context reflecting an exception to the equitable maxim that ‘equity will not assist a volunteer’, a category within which most trust beneficiaries inhabit — again by reference to the court if the trustees resist. By itself, however, this may not fully explain why the law demands ‘certainty’ of object, in the sense of ascertained or ascertainable beneficiaries. After all, not every beneficiary need be a party to a curial application to enforce the trust. Status as a beneficiary, not collective action by the beneficiaries, suffices for standing to this end.
At the same time, certainty plays a role here precisely because standing rests upon status as a beneficiary (and the ‘interest’ attaching to this status); hence a need to be able to discriminate persons who are beneficiaries from those who are not. There is no middle category in this regard where, assuming certainty of intention and subject matter, a trust may partially fulfil certainty of object.
This can in turn present challenges for the courts, given that drawing the (fault) line can, as Holmes acknowledged, involve matters of degree (or, expressed another way, inquiry along a continuum). With this backdrop, this article elaborates three scenarios where the ostensibly strict application of certainty of object has been relaxed by courts: certainty of object for fixed trusts, for discretionary trusts, and in distinguishing purpose from individual trusts. And while these have eschewed an intermediate category of partial certainty, their upshot in shifting what may be perceived as potentially uncertain into the ‘certain’ side of the (fault) line may belie the suggestion that they have not, at least in some way, loosened the dictates of certainty. These scenarios, which represent the substance of the article, may trigger a (re)consideration of what is meant by ‘certainty’ of object.
III fIxeD trusts
A The Certainty Rule
It is well established that certainty of object for fixed trusts is governed by the ‘list certainty’ test. What marks a fixed trust is that its beneficiaries have an (equitable) fixed entitlement to the capital and/or income of the trust, which courts have char- acterised in (equitable) proprietary terms. Beneficiaries can accordingly call for, and enforce the distribution of, that entitlement. It stands to reason that, to fulfil the certainty of object requirement, the trustee must be able to ascertain (that is, list) all of the beneficiaries at least when it comes to the time of distribution. If the
(^7) Morice v Bishop of Durham (1805) 10 Ves 522, 539–40; 32 ER 947, 954.
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trustee can only ascertain some of the beneficiaries at that time, part of the equitable interest in the capital and/or income at that time remains unallocated. This would in turn conflict with the law’s policy against gaps in (beneficial/equitable) ownership of property, and threaten oversight vis-à-vis the unallocated income/capital. The latter, in line with earlier observations, misaligns with the prospect of the matter being brought to the court’s attention for control and enforcement.
Commonly cited as a leading case in support of the ‘list certainty’ approach, Inland Revenue Commissioners v Broadway Cottages Trust actually involved what was, for all intents and purposes, a discretionary trust.^8 It retains its relevance in this context because, at the time, the same test for certainty of object applied whether the trust was fixed or discretionary in nature. For discretionary trusts, this subse- quently changed, a point elaborated later in the article. The case involved a trust to apply income for the benefit of all or any of a class of beneficiaries specified in the Schedule to the trust deed ‘in such shares proportions and manner as the trustees in their discretion from time to time think fit’. The Schedule referred, inter alia, to the following persons by way of clauses 1 and 2:
- All persons (other than the settlor and any wife of his and any infant child of his) who have been in the past or (as the case may be) at the date of these presents or subsequently thereto at any time during the period ending on December 31, 1980, or during the appointed period whichever shall be the shorter employed by:— (a) the settlor; (b) the wife of the settlor; (c) William Timpson deceased (father of the settlor and who died on January 20, 1929); (d) Katherine Chapman Timpson deceased (mother of the settlor and who died on December 16, 1940); (e) William Timpson Limited or by any other limited company which may succeed to the business of William Timpson Limited; (f) any other limited company of which the settlor is a director at the date of these presents.
- The wives and widows of any such persons as is specified in cl 1 of this schedule. 9
Given the wide scope of clauses 1 and 2 above, it was conceded that the persons who constituted ‘the beneficiaries’ comprised an aggregate of objects incapable of ascertainment, in the sense that it would be impossible at any given time to achieve a complete and exhaustive enumeration of those who qualified as ‘beneficiaries’. At the same time, it was similarly conceded that the qualifications for inclusion in the beneficiary class were sufficiently precise to make it possible to determine with certainty whether or not any particular individual was a member of the class.
Lord Justice Jenkins, who delivered the reasons of the English Court of Appeal, expressed ‘some sympathy’ for the argument that the latter should suffice to sub- stantiate certainty of object in the circumstances. His Lordship’s sympathy emanated
(^8) [1955] Ch 20 (‘ Broadway Cottages ’).
(^9) Ibid 23–4.
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be on the qui vive to realise that community circumstances have changed.’^18 The changes his Honour had in mind included the following:
these days, being married is not a necessary prerequisite to having children. Even married persons may give the child a surname other than the father’s surname. Unmarried persons who produce a child often call the child by the mother’s surname. In remote areas and some Aboriginal communities births are not always registered. All these factors produce greater uncertainties than would have been the case when the rules as to certainty were laid down.^19
In other words, evidential difficulties — which the House of Lords had a quarter of a century earlier viewed as not undermining certainty of object^20 — could translate from the procedural to the substantive when it comes to the validity of trusts.^21 In view of these difficulties, Young J perceived a justification in ‘slightly modifying’ the operation of the ‘list certainty’ rule ‘for Australian conditions of the present day’ to read as follows:
The rule will be satisfied if, within a reasonable time after the gift comes into effect, the court can be satisfied on the balance of probabilities that the substan- tial majority of the beneficiaries have been ascertained and that no reasonable inquiries could be made which would improve the situation.^22
This represented ‘good equity and good sense’, his Honour surmised, as ‘[e]quity does not make a rule just for the sheer fun of making a test, but it must have a purpose’.^23 He saw the purpose of the list certainty rule as, in modern conditions, just as well catered for by the above modification as in its original form. Indeed, Young J remarked, it was ‘better accommodated’ because, on the facts before the Court,
instead of the testator’s intention being completely frustrated and the money passing as bona vacantia, at least 1,675 people who can be ascertained and do fit
(^18) Ibid 663.
(^19) Ibid 664.
(^20) ‘[I]f the class is sufficiently defined by the donor the fact that it may be difficult
to ascertain the whereabouts or continued existence of some of its members at the relevant time matters not. The trustees can apply to the court for directions or pay a share into court’: see Re Gulbenkian’s Settlements [1970] AC 508, 524 (Lord Upjohn) (‘ Re Gulbenkian’s Settlements ’). See also Lempens v Reid (2009) 2 ASTLR 373, 377–8 [21] (Gray J) (‘ Lempens ’). (^21) Cf RP Austin, ‘Discretionary Trusts: Conceptual Uncertainty and Practical Sense’
(1980) 9(1) Sydney Law Review 58. Austin maintains a confluence between semantic and evidential uncertainty issues. (^22) West (n 15) 664.
(^23) Ibid.
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within the description will benefit as the testator intended notwithstanding that it might not be possible to make a complete list with certainty.^24
In view of the extensive genealogical inquiries made to date, his Honour envisaged that the risk of other beneficiaries ‘coming out of the woodwork’ could be addressed by publishing advertisements in a national newspaper and the executrix taking out insurance against missing beneficiaries (if insurance of this kind remained avail- able).^25 Although his Honour made no specific reference to this point, it may be noted that, if 1,675 persons could be identified as beneficiaries, each would have been entitled to less than $300 (the net estate totalling around $500,000), not a sub- stantial sum by any means. One may ponder whether Young J would have pursued the same solution had the sums in question been much more substantial.
Justice Young in West did not seek to create a new category of partial uncertainty straddling (list) certainty and uncertainty, which itself would have been productive of uncertainty. Instead, while conceding in the above quote that ‘it might not be possible to make a complete list with certainty’, he purported to mitigate the strictures surrounding the list certainty test so as to locate what would otherwise have been punctuated by uncertainty within the (list) certainty fold. In so doing, he adopted essentially utilitarian reasoning, by contrasting the utility in giving effect to testamentary intention (that would benefit at least 1,675 persons) with that of frus- trating it (wherein every such person would be denied a claim). In other words, his Honour evinced marked discomfort with an outcome where, contrary to the testator’s intention, members of an extensive class of beneficiaries would miss out entirely merely because of (potential) minimal remnants of uncertainty as to their class. Not only would they miss out, their share would, given the lack of next-of-kin, likely accrue to the Crown as ownerless goods, an outcome the law is generally loathe to countenance. After all, few testators or donors would, absent specific direction to this effect, wish their estate to be devoted to the Crown.
Clearly, there would have been no need for Young J to modify the certainty test had some element of discretion vested in the trustees of the estate in question. In that event, the sympathy espoused by Jenkins LJ in Broadway Cottages mentioned earlier, which as discussed below witnessed fruition in McPhail , may have come to the fore. At the same time, it cannot be denied that West involved unusual facts, sufficiently so to have generated little curial need to probe the parameters of the modified test in the ensuing two decades or so. 26 Unusual facts, moreover, are not
(^24) Ibid 664–5.
(^25) Ibid 665–6.
(^26) West was applied, without analysis, by Ross J in Re Estate of Meyerstein (2009) 4
ASTLR 180. Some other cases have cited West , but by reference to Young J’s mention (at 662) of the traditional English practice surrounding inquiry into next-of-kin, involving an order for an advertisement to be published calling for potential claimants, specifying that those who do not come forward and substantiate their claim will be excluded from the benefit of any subsequent order of the court: see, eg, Re Application by NSW Trustee and Guardian [2012] NSWSC 1532, [11] (Hallen J); Re NSW Trustee
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Iv DIscretIonAry trusts
A The Certainty Rule
The term ‘discretionary trust’, the High Court has remarked, is ‘used to describe particular features of certain express trusts’. 29 The main such features are that its trustees commonly enjoy discretion to select who in the designated class of potential beneficiaries is to receive any benefit, and to decide the amount of any benefit to be paid. This impacts on both the entitlement of the trust’s beneficiaries and the obli- gations of its trustees, making it unsurprising that it should translate to how the law couches the relevant test for certainty of object.
That beneficiaries of discretionary trusts, like their fixed trust counterparts, clearly possess standing to enforce the trustees’ obligations under the trust pursuant to the ‘beneficiary principle’ — were it otherwise, the trustees could deal with the trust property in their own interests (‘selfishly’) — is not to confer upon them any individual proprietary interest in the trust income or capital.^30 They accordingly cannot demand a trust distribution in their favour, which rests upon an exercise of the trustees’ discretion, conferred by the trust deed. The beneficiaries, as a result, have no more than a hope or expectation that the trustees will exercise the discretion in their favour.
This in turn explains why there is no need for the trustees of a discretionary trust to make a complete list of (potential) beneficiaries when it comes to the proper exercise of discretion to distribute (sometimes termed ‘appoint’). All that trustees must do is exercise the discretion in good faith, with a real and genuine consideration, and for the purposes for which it was conferred.^31 A discretion is qualitatively distinct from a compulsion, which applies in the fixed trust scenario, namely a compulsion to make a distribution according to the fixed entitlements of the beneficiaries.
The above distinctions between trustee obligation (versus discretion) and beneficiary entitlement (versus hope or expectation) were primary motivators for a majority of the House of Lords in McPhail to shelve the list certainty test when it came to dis- cretionary trusts. 32 The trust deed there established a fund, the income from which was to be applied ‘in making at [the trustees’] absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the
(^29) Chief Commissioner of Stamp Duties (n 6) 234 [8] (The Court).
(^30) Gartside v Inland Revenue Commissioners [1968] AC 553, 607 (Lord Reid), 615 (Lord
Wilberforce). (^31) Karger v Paul [1984] VR 161, 164 (McGarvie J).
(^32) McPhail (n 12) 456 (Lord Wilberforce). They were not, however, the only drivers to
this end. Their Lordships’ determination was facilitated by adopting a more flexible approach to applying the equitable maxim ‘equality is equity’: at 451–3 (Lord Wilber- force). Preceding McPhail , the basis for requiring list certainty for trust powers was that, should the donee/trustee not appoint the property, the court would do so in their stead. Application of the above maxim dictated that the court equally divided the
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company or to any relatives or dependants of any such persons …’ (cl 9(a)). Another sub-clause provided that the trustees were not ‘bound to exhaust the income of any year or other period in making such grants …’ (cl 9(b)) and, to reiterate the effect of cl 9(a), under cl 10 ‘[a]ll benefits being at the absolute discretion of the trustees, no person shall have any right title or interest in the fund otherwise than pursuant to the exercise of such discretion …’.^33 It was accepted that the class of beneficiaries in cl 9(a) was incapable of reduction to a list, meaning that, if the Broadway Cottages approach applied, the trust would fail for lack of certainty of object.
In reaching the conclusion that the list certainty test did not govern a discretionary trust, a majority of the House of Lords compared the discretion as to appointment under a discretionary trust to that under what the law recognises as a ‘mere power’. The latter, which need not be confined to the holder of property to which the power attaches, vests in its donee a complete discretion as to whether or not to exercise the power. When referring to a discretionary trust (sometimes termed a ‘trust power’), while there is likewise a discretion (in a trustee), the relevant language ‘imposes a clear duty … to distribute the fund amongst some at least of the specified class of potential beneficiaries, the discretion conferred … extending merely to selection and not to deciding whether or not to select’.^34 This in turn translates to what Lord Upjohn in Re Gulbenkian’s Settlements , the leading ‘modern’ mere powers case, explained as the ‘basic difference’ between a mere power and a trust power, namely
that in the [mere power scenario] trustees owe no duty to exercise it and the relevant fund or income falls to be dealt with in accordance with the trusts in default of its exercise, whereas in the [trust power scenario] the trustees must exercise the power and in default the court will. 35
To this end, both the beneficiaries of a discretionary trust and the objects of a mere power have no more than a hope or expectancy of a distribution in their favour. Neither can compel the trustee or donee to exercise the discretion or power in their favour. The difference comes down to whether or not the discretion must be exercised. Critically, the law had before Re Gulbenkian’s Settlements accepted that certainty of object for mere powers rested on fulfilling ‘criterion certainty’, namely that the donor specified a criterion capable of certain application by the donee in exercising the power.^36 In effect, this was the test (unsuccessfully) pressed upon the English Court of Appeal in Broadway Cottages vis-à-vis the discretionary trust in that case.
property between the class of objects, thus requiring knowledge of the identity of each such object (ie list certainty). McPhail veered from the equal division approach in curial appointment, thereby obviating the need for list certainty. (^33) Ibid 447.
(^34) Re Leek (deceased) [1967] Ch 1061, 1073 (Buckley J).
(^35) Re Gulbenkian’s Settlements (n 20) 525.
(^36) It may be noted, however, that this did not appear to be settled from early times. In
Re Gulbenkian’s Settlements , Lord Upjohn saw it as ‘curious that there is no long line of decided cases as to what is the proper test to apply when considering the validity of a mere power when the class of possible appointees is or may be incapable of
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any differences were insufficient in substance to apply discrete tests of certainty of object. This prompted his Lordship to express the following opinion:
we are free to review the Broadway Cottages case. The conclusion which I would reach, implicit in the previous discussion, 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 [ Broadway Cottages ] 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 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.^42
In Re Gulbenkian’s Settlements Lord Reid, in this vein, had expressed the test in terms that ‘[i]f the classes of beneficiaries are not defined with sufficient particularity to enable the court to determine whether a particular person is or is not, on the facts at a particular time, within one of the classes of beneficiaries, then the power must be bad for uncertainty’.^43 Having determined the appropriate test to apply, the House of Lords in McPhail then remitted the case to the Chancery Division for determination whether, on the basis of the test so prescribed, cl 9(a) was valid. 44 On appeal from the Chancery Division, the English Court of Appeal in Re Baden’s Deed Trusts [No 2]^45 upheld the validity of the clause. Even though the judgments had their differences, broadly speaking its upshot was that the criteria prescribed thereunder — ‘officers’, ‘employees’, ‘ex-officers’, ‘ex-employees’ or ‘relatives’ or ‘dependants’ of such persons — fulfilled the criterion certainty test. In other words, it was possible for the trustees (and thus the Court) to determine with certainty whether or not a person was an ‘officer’, ‘employee’, ‘ex-officer’ or ‘ex-employee’ of the company in question, and also whether or not they were a ‘relative’ or ‘dependant’ thereof. Records of
“anything like a class” so that the trust is administratively unworkable’ (emphasis added). This tentativeness translated to a hesitation to give examples ‘for they may prejudice future cases’, although he added that ‘perhaps “all the residents of Greater London” will serve’. His Lordship proceeded to disclaim any notion that a discretion- ary trust for ‘relatives’ of a living person falls within this category. There is little that is genuinely probative in the subsequent case law to give administrative uncertainty any greater precision, and indeed occasions where some confusion surfaces as to its role as distinct from semantic uncertainty: see, eg, Crawford v Phillips [2018] 3 NZLR 247, 257–8 [37]–[42] (Asher J for the Court), as well as the discussion in Geraint Thomas, Thomas on Powers (Oxford University Press, 2nd ed, 2012) 492–8. There is, in any event, no suggestion in Lord Wilberforce’s tentative reference to ‘admini- strative uncertainty’ that sought to upset the binary inquiry underscoring semantic uncertainty. (^42) McPhail (n 12) 456 (citations omitted).
(^43) Re Gulbenkian’s Settlements (n 20) 518. See also Lord Upjohn, ‘a mere or bare power
of appointment among a class is valid if you can with certainty say whether any given individual is or is not a member of the class; you do not have to be able to ascertain every member of the class’: at 521. (^44) McPhail (n 12) 450.
(^45) [1973] Ch 9 (‘ Re Baden’s Deed Trusts [No 2] ’).
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company officers and employees existed, from which the identity of potential bene- ficiaries could be gleaned, to be distinguished from persons outside that class.
The Court had little difficulty in interpreting ‘relatives’ as ‘blood relations’, again capable of being differentiated from persons who were not ‘relatives’.^46 After all, a longstanding line of case authority involving wills interpreted the term in this fashion. 47 As ‘dependants’ was ‘a word used over several generations in comparable trust deeds’, Sachs LJ opined that ‘the suggestion that it is uncertain seems no longer arguable’. 48 His Lordship referred, moreover, to the use of that term in statute, which courts have been able to define with the certainty needed for its statutory applica- tion. Implicit in this observation is that a term capable of definition with certainty in a statutory context should not be viewed as uncertain in a private disposition of property. (Indeed, it may be argued that the certainty threshold for statute should exceed that in trusts and wills).
Hence the discretionary trust in McPhail was ultimately held to fulfil the criterion certainty test (and thus exhibit ‘semantic’ or ‘linguistic’ certainty in the words of Lord Wilberforce), in that the criteria specified could be the subject of certain appli- cation. A dividing line could be drawn between those who came within the criteria, and those who fell outside it. Terms such as ‘officer’, ‘employee’, ‘relative’ and ‘dependant’ meet the certainty threshold precisely because they are amenable to setting objectively clear dividing lines and in so doing avoiding matters of degree.
It is curious that, even though McPhail is approaching its 50th^ anniversary, the High Court of Australia has yet to explicitly rule on the application of the criterion certainty test in relation to trust powers. 49 Having said that, as multiple lower court judgments endorse its correctness in Australian law, 50 and a contrary conclusion would threaten the validity of literally thousands of trusts that have been created and operate upon
(^46) Ibid 21–2 (Sachs LJ), 22–3 (Megaw LJ), 29–30 (Stamp LJ).
(^47) See, eg, Re Lanyon [1927] 2 Ch 264, 267 (Russell J); A-G (Vic) v Commonwealth
(1962) 107 CLR 529, 545 (Dixon CJ). The same may be said, incidentally, of terms such as ‘child(ren)’, ‘issue’, ‘next-of-kin’, ‘descendants’, ‘heirs’, ‘nephews/nieces’ or even ‘family’, which likewise have attracted prima facie meanings in testamen- tary instruments: see generally Gino E Dal Pont, Interpretation of Testamentary Documents (LexisNexis Butterworths, 2019) ch 7. (^48) Re Baden’s Deed Trusts [No 2] (n 45) 21. See also at 30 (Stamp LJ).
(^49) The best that can be said is that in Registrar of the Accident Compensation Tribunal
v Federal Commissioner of Taxation (1993) 178 CLR 145, three members of the High Court referred to McPhail with apparent approval, although not strictly in relation to the test for certainty: at 183. (^50) See, eg, Horan v James [1982] 2 NSWLR 376, 382 (Glass JA), 383–4 (Mahoney JA);
Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271, 277 (Gummow J); McCracken v A-G (Vic) [1995] 1 VR 67, 71 (Phillips J) (‘ McCracken ’); Re Blyth [1997] 2 Qd R 567, 576 (Thomas J); Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501, 509 [20] (Nettle J). See further Creighton (n 27) 99–103.
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‘my old friends’ (or ‘friends’, for that matter) contemplates that each ‘old friend’ receive an equal proportion of the fund. Far from being a power, even of the trust variety, it involves a fixed entitlement in each ‘old friend’, the validity of which is, by definition, premised upon a complete list being made of ‘old friends’.^53 Of course, that the criterion ‘old friend’ appears prima facie incapable of certain application challenges the trustee’s (and court’s) ability to make such a list, and thereby functions to infect the disposition with uncertainty of object.
Yet at least in the context of mere powers , the foregoing must be viewed against the backdrop of case law upholding dispositions in favour of a donor’s ‘friends’ (or the like). A leading case is Re Coates (deceased) , where after making provision for his wife and bequeathing a number of pecuniary legacies, the testator directed, inter alia, that
[i]f my wife feels that I have forgotten any friend I direct my executors to pay to such friend or friends as are nominated by my wife a sum not exceeding £25 per friend with a maximum aggregate payment of £250 so that such friends may buy a small memento of our friendship.^54
Justice Roxburgh was careful to stress that he was ‘not deciding whether or not a power to appoint in favour of a testator’s friends without qualification would be valid’, 55 but instead ‘whether there is such a degree of uncertainty about the word “friends” in the context in which I find it, and in the circumstances of the case, as would justify me in coming to the conclusion that the gift was bad’.^56 Though conceding that ‘friendship’ ‘draws a picture particularly blurred in outline’, his Lordship held that its context, and the circumstances of the case — in particular that the power was vested in the testator’s widow — ‘may well fill in what would otherwise be vague’.^57 What this dictated, Roxburgh J surmised, was that the gift contemplated ‘a degree of intimacy sufficiently close to make its detection quite easy’,^58 so that ‘it is only friends of a considerable degree of intimacy who are to be included in this gift’.^59
A little over 12 years later a similar issue confronted Plowman J in Re Gibbard’s Will Trusts.^60 The testator conferred a mere power in the survivor of two trust beneficia- ries, by way of her will, to
(^53) See, eg, Re Connor (1970) 10 DLR (3rd) 5 (Alberta Supreme Court). This case
involved a gift of residue to be ‘divided among my close friends in such a way and at such time as my trustee in her discretion should determine’. The gift was held void for uncertainty because it was not possible to ascertain the entire class of ‘close friends’. (^54) [1955] Ch 495, 495. (^55) Ibid 497.
(^56) Ibid 499.
(^57) Ibid.
(^58) Ibid.
(^59) Ibid 500.
(^60) [1967] 1 WLR 42.
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appoint my residuary trust funds in such a manner and at such times and under such terms and conditions as she may think fit to charities or charitable institu- tions and amongst any old employees of mine or their descendants any of my old friends and their descendants and any nephews or nieces of mine and any of their descendants …^61
As the law defines the term ‘charity’ (and thus ‘charities’ and ‘charitable’), 62 there was no problem with certainty in that part of the disposition. Nor did the terms ‘employees’, ‘descendants’, ‘nephews’ or ‘nieces’ present difficulties with certainty of object, for the reasons elaborated in Re Baden’s Deed Trusts discussed earlier. More challenging on the certainty front, and thus the subject of argument before Plowman J, was the reference to ‘my old friends’. Yet, following Re Coates (deceased) , his Lordship viewed that phrase as ‘a sufficiently precise test in the sense that there is no difficulty in envisaging cases where claimants might come along and establish beyond question that they would be eligible to use that expression’.^63 Seemingly influential was the following example offered by counsel for the appointee (that is, object) of the power, Mr Browne-Wilkinson, which Plowman J cited as follows:
suppose that the testator had been at preparatory school with X and had gone on from prep. school to public school with X, and then to University with X; each had become god-father to one of the other’s children, perhaps lived in the same neighbourhood, perhaps belonged to the same club, perhaps played golf together, perhaps dined in each other’s houses and had been doing that for 50 years. Could X, coming along and stating that that was the relationship between the testator and himself, fail to satisfy the description ‘any of my old friends’? I should have thought that the answer was no.^64
The (mere) power of appointment was accordingly valid. There was no requirement that the objects of the power be capable of exhaustive listing, nor any requirement that the donee be capable in every instance of determining with certainty whether or not a person fell within the object class. Re Gibbard’s Will Trusts was a weaker case, in the latter regard, than Re Coates (deceased) , given that, inter alia, the donee of the power was ostensibly not in as close a relationship to the testator as the donee in Re Coates (deceased) (the testator’s wife).
Each of these decisions preceded the House of Lords’ determination in McPhail , which in aligning the test of certainty of object concerning mere powers to trust powers obviated the list certainty requirement in the latter context. As noted earlier, the very nature of the ‘certainty’ underscoring the test espoused in McPhail rests on a binary inquiry: is an object ‘in’ the class, or ‘out’ of the class? A criterion that introduces matters of degree challenges this approach. What influenced the judges in both Re Coates (deceased) and Re Gibbard’s Will Trusts were scenarios that
(^61) Ibid 42.
(^62) See GE Dal Pont, Law of Charity (LexisNexis Butterworths, 2nd (^) ed, 2017) ch 2.
(^63) Re Gibbard’s Will Trusts [1967] 1 WLR 42, 49.
(^64) Ibid.
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acknowledges as possessing a vested interest typically in the income of the fund, but one liable to be divested by the donee exercising the power to distribute that income among the specified class of objects.^67
As there is a ‘backup’ in the event of the donee not exercising the power, and so no gap in beneficial ownership pertaining to the income (or fund) in question, there may be logic in being stricter when it comes to certainty of object in this context than where trustees are compelled to exercise their discretion in favour of a class (trust power). After all, as was envisaged in Re Gulbenkian’s Settlements , in so far as the (mere) power there was not exercised by the trustees or was void for uncer- tainty ,^68 the income fell to be held upon the trusts declared under the gift over in default provision. The latter provision, in expressing the testator’s intention, serves to overcome the prospect that uncertainty of object, even where some potential objects are identifiable, could frustrate that intention. That, in turn, may be the consequence in the case of a trust power, unsupported by any gift over in default provision. In that context, a stricter approach to certainty has the prospect of fostering the failure of the disposition entirely, and with this frustrating the settlor’s intention.
Whatever may be the correct position, even for mere powers courts acknowledge that certainty plays more than a nominal role. This was apparent, for instance, from the remarks of Lord Reid in Re Gulbenkian’s Settlements. His Lordship noted that it was not disputed that if the description of the class is too uncertain, ‘the whole provision fails even although the other potential beneficiaries are easily ascertain- able’.^69 Hence, merely because it is possible for the donee to identify persons who can take under the criterion specified does not by itself dictate that the criterion is one capable of certain application.
In view of the foregoing, one may hope to be instructed by investigating the curial approach to (un)certainty of object for mere powers post- McPhail. But there is not a great deal of case law to assist when it comes to drawing the certainty line. An indication that McPhail has not functioned to upset mere powers aligned with the criterion of friendship is found in Re Barlow’s Will Trusts.^70 The judgment was delivered by Browne-Wilkinson J, whom it may be recalled acted as counsel for the appointee (that is, object) of the power in Re Gibbard’s Will Trusts. Consistent with
(^67) Commissioner of Succession Duties (SA) v Isbister (1941) 64 CLR 375, 380
(Williams J); Commissioner of Stamp Duties (NSW) v Sprague (1960) 101 CLR 184, 194 (Dixon CJ). (^68) This was so even though the gift over in default provision made no specific reference
to failure due to uncertainty; it simply referred to holding ‘the said income or so much thereof as shall not be paid or applied under such discretionary trust or power’ upon certain trusts: Re Gulbenkian’s Settlements (n 20) 520 (Lord Upjohn). Evidently, their Lordships interpreted this clause as encompassing not merely a failure to appoint but a failure of the mere power in its entirety, including for reasons of uncertainty of object. (^69) Re Gulbenkian’s Settlements (n 20) 517.
(^70) [1979] 1 WLR 278.
DAL PONT — ‘FAULT LINES’ IN CERTAINTY OF OBJECT 686 FOR PRIVATE TRUSTS: ‘NONE THE WORSE FOR IT’?
his submission in that case, his Lordship was willing to uphold the validity of a bequest of valuable artwork on a trust for sale, subject to the executor
allow[ing] any member of my family and any friends of mine who may wish to do so to purchase any of such pictures at the prices shown in [a] catalogue or at the values placed upon them by valuation for probate purposes at the date of my death, whichever shall be the lower. 71
The argument was presented that the term ‘friends’ was semantically uncertain because of the many different degrees of friendship, it being impossible to say which degree the testatrix had in mind. 72 Justice Browne-Wilkinson accepted that if the nature of the gift made it legally necessary to draw a complete list of the testatrix’s ‘friends’, or to be able to say of any person that ‘he is not a friend’, the entire gift ‘would probably fail even as to those who, by any conceivable test, were friends’.^73 But this was not so on the facts, according to his Lordship, who explained the point as follows:
But in the case of a gift of a kind which does not require one to establish all the members of the class (eg ‘a gift of £10 to each of my friends’), it may be possible to say of some people that on any test, they qualify. Thus … the example of a gift to X ‘if he is a tall man’; a man 6 ft 6 ins tall could be said on any reasonable basis to satisfy the test, although it might be impossible to say whether a man, say, 5 ft 10 ins high satisfied the requirement.
So in this case, in my judgment, there are acquaintances of a kind so close that, on any reasonable basis, anyone would treat them as being ‘friends’. Therefore, by allowing the disposition to take effect in their favour, one would certainly be giving effect to part of the testatrix’s intention even though as to others it is impossible to say whether or not they satisfy the test.^74
Re Barlow’s Will Trusts adds another wrinkle to the certainty of object scenario. It must be conceded that it does not engage the standard ‘mere power’ scenario, instead being better described in terms of a testamentary option. Accordingly, any exercise of ‘discretion’ in this context lies in the optionee, not in the donee (or trustee) of any power. 75 At the same time, though, standing to exercise the option rested upon
(^71) Ibid 280.
(^72) Ibid. His Lordship also addressed the criterion of ‘family’, noting that ‘[i]t is not
suggested that this class is too uncertain’, and that ‘[i]n the absence of issue, the prima facie meaning of “family” means “relations,” that is to say those related by blood’: at 283. (^73) Ibid 281.
(^74) Ibid.
(^75) It may be observed, as an aside, that the position of an optionee vis-à-vis the relevant
property is ‘stronger’ than that of a beneficiary of a discretionary trust vis-à-vis the trust property. After all, the optionee can select property within the terms of the option, whereas the beneficiary of a discretionary trust cannot call for distribution. It
