Introduction
The requirement of certainty of objects forms a fundamental element of the validity of trusts and powers. In essence, this test demands that the class of beneficiaries or objects must be defined with sufficient clarity to enable trustees or donees to identify those entitled to benefit. The nature of the applicable test varies according to the type of disposition, and these variations arise principally from the distinct duties imposed upon trustees and donees. This essay examines the historical and doctrinal development of the tests, analyses their relationship to fiduciary and administrative duties, and evaluates whether the tests adequately support the practical performance of those duties under English law.
Fixed Trusts and the Requirement of List Certainty
In a fixed trust, the beneficiaries hold defined shares or interests, placing trustees under a strict duty to distribute property according to precise entitlements. Consequently, the law demands ‘list certainty’, requiring that it must be possible to compile a complete list of all beneficiaries at the date of distribution. The Court of Appeal in IRC v Broadway Cottages Trust [1955] Ch 20 established this standard, holding that a trust fails if the trustees cannot ascertain every beneficiary with precision. This stringent approach reflects the trustees’ duty of equal (or proportionate) distribution; any uncertainty would render performance of that duty impossible. The rule thus directly serves administrative efficiency and protects beneficiaries’ rights by ensuring that no entitled person is overlooked.
Discretionary Trusts and the ‘Is or Is Not’ Test
Discretionary trusts impose different obligations. Trustees must select beneficiaries from within a defined class and may distribute at their discretion, subject to a duty to consider the range of possible objects. The House of Lords in McPhail v Doulton [1971] AC 424 rejected the list-certainty requirement for such trusts, adopting instead the ‘is or is not’ test previously formulated for powers. Under this test, the class is certain if it can be said with certainty whether any given individual is or is not a member. This change acknowledges that trustees need only conduct a survey of the field sufficient to make rational appointments, without compiling an exhaustive list. The decision illustrates how the test is calibrated to the nature of trustees’ fiduciary duties, balancing flexibility for the trustee against the need to prevent arbitrary exclusion of objects.
Powers and the Alignment of Tests
The test for certainty of objects in powers has converged with that applicable to discretionary trusts. In Re Gulbenkian’s Settlements [1970] AC 508, the House of Lords held that a power of appointment is valid provided the donee can determine whether any individual is inside or outside the class when deciding whether to appoint. Although donees are not obliged to exercise the power, they remain subject to a duty not to appoint outside the permitted class. The adoption of the ‘is or is not’ test therefore ensures that donees can discharge this negative duty without undue difficulty. Indeed, the assimilation of the test for powers and discretionary trusts after McPhail v Doulton demonstrates the courts’ recognition that both contexts involve a comparable risk of misapplication of property.
Relationship Between Certainty Tests and Duties
The foregoing analysis shows that the stringency of each certainty test corresponds closely to the intensity of the duties imposed. Fixed-trust trustees bear an absolute duty of distribution that necessitates exhaustive identification; hence list certainty is required. In contrast, discretionary trustees and donees of powers possess wider discretions and correspondingly lighter positive duties; the ‘is or is not’ test suffices because it enables them to avoid improper appointments while permitting efficient administration. However, critics have noted that the ‘is or is not’ test may still impose practical burdens where classes are conceptually uncertain, as illustrated by the diverging judgments in Re Baden’s Deed Trusts (No 2) [1973] Ch 9. Nevertheless, the test remains defensible because it preserves the core protective function of certainty rules without paralysing trustees or donees through unrealistic demands.
Conclusion
The tests governing certainty of objects are not arbitrary technical rules but functional instruments designed to facilitate performance of trustees’ and donees’ duties. Fixed trusts demand list certainty because of the duty of precise distribution, whereas discretionary trusts and powers employ the more flexible ‘is or is not’ test consistent with duties of selection and non-misapplication. This calibration promotes both administrative practicality and beneficiary protection. While occasional conceptual difficulties persist, the linkage between certainty and duty remains a coherent and necessary feature of modern trusts law.
References
- Hayton, D.J. and Mitchell, C. (2022) Hayton, Matthews and Mitchell: Commentary and Cases on the Law of Trusts and Equitable Remedies. 15th edn. Sweet & Maxwell.
- IRC v Broadway Cottages Trust [1955] Ch 20.
- McPhail v Doulton [1971] AC 424.
- Penner, J.E. (2019) The Law of Trusts. 11th edn. Oxford University Press.
- Re Baden’s Deed Trusts (No 2) [1973] Ch 9.
- Re Gulbenkian’s Settlements [1970] AC 508.
