Introduction
The concept of certainty of objects is a fundamental principle in English trust law, ensuring that the beneficiaries of a trust can be clearly identified, thereby enabling the trust to be enforceable. This requirement, one of the three certainties alongside certainty of intention and certainty of subject matter, is critical for the legal validity of both fixed and discretionary trusts. However, its application by the courts has often revealed tensions between adhering to strict legal rules and achieving equitable outcomes that reflect the settlor’s intentions or fairness to potential beneficiaries. This essay critically evaluates how the courts have addressed the requirement for certainty of objects in fixed and discretionary trusts, exploring key case law and judicial approaches. It also considers whether this requirement, while indispensable to the structure of trust law, sometimes creates conflicts between rigid legal principles and the pursuit of just results. The analysis will highlight the evolution of judicial tests, particularly the distinction between conceptual and evidential certainty, and assess the balance struck by the judiciary.
Certainty of Objects in Fixed Trusts: The Complete List Test
In fixed trusts, where beneficiaries are entitled to a predetermined share of the trust property, the courts have historically required a high degree of certainty of objects. This is encapsulated in the ‘complete list test,’ which mandates that the trustees must be able to compile a complete list of all beneficiaries at the time the trust is created. This principle was affirmed in the case of IRC v Broadway Cottages Trust (1955), where the court held that a fixed trust would fail if the trustees could not ascertain the full class of beneficiaries (Stamp, 1955). The rationale behind this strict test is to ensure that the trustees can distribute the trust property precisely as intended, thereby upholding the settlor’s wishes and maintaining accountability.
However, the rigid application of the complete list test can lead to outcomes that appear disproportionate or unfair. For instance, if even a single beneficiary cannot be identified due to evidential difficulties—such as missing records or unclear definitions—the entire trust risks invalidity. This highlights a potential conflict between the legal requirement for absolute certainty and the practical challenges of identifying beneficiaries in complex family or charitable arrangements. While the test ensures clarity and enforceability, it may undermine the settlor’s broader intentions, particularly when the general class of beneficiaries is evident but specific individuals cannot be traced. The strictness of this approach arguably prioritises legal formality over equitable considerations, demonstrating the tension between structure and fairness in trust law.
Certainty of Objects in Discretionary Trusts: The ‘Is or Is Not’ Test
In contrast to fixed trusts, discretionary trusts grant trustees the power to select beneficiaries from a defined class and determine the extent of their entitlement. The landmark case of McPhail v Doulton (1971) marked a significant shift in the judicial approach to certainty of objects in discretionary trusts. Prior to this decision, discretionary trusts were subject to the same strict complete list test as fixed trusts, often resulting in invalidity due to the impracticality of listing all potential beneficiaries. However, the House of Lords in McPhail v Doulton introduced the more flexible ‘is or is not’ test, requiring only that it be possible to say with certainty whether any given individual is or is not a member of the class of beneficiaries (Browne-Wilkinson, 1971).
This test, originally derived from the case of Re Gulbenkian’s Settlements (1970) concerning powers of appointment, lowered the threshold for certainty by focusing on conceptual clarity rather than evidential precision. For example, a trust for ‘my friends’ may fail due to conceptual uncertainty, as ‘friends’ is insufficiently defined, whereas a trust for ‘my employees’ could succeed provided the term is clear enough to apply the test. While this approach enhances flexibility, allowing trusts to stand even when compiling a complete list is impractical, it has been critiqued for introducing ambiguity. The courts’ insistence on conceptual certainty, as further clarified in Re Baden’s Deed Trusts (No 2) (1973), sometimes results in lengthy litigation over the interpretation of terms, potentially undermining the settlor’s intent and delaying distributions to beneficiaries (Sachs, 1973). This illustrates a persistent conflict between legal precision and equitable outcomes, as the judiciary grapples with balancing enforceability against practicality.
Conceptual versus Evidential Certainty: A Balancing Act
A key distinction in the courts’ application of certainty of objects is between conceptual and evidential certainty. Conceptual certainty refers to the clarity of the definition of the class of beneficiaries, while evidential certainty pertains to the practical ability to identify specific individuals within that class. In Re Baden’s Deed Trusts (No 2), the Court of Appeal provided further guidance on this distinction, with varying judicial opinions on the level of certainty required. Lord Justice Sachs adopted a relatively lenient approach, suggesting that evidential difficulties should not invalidate a trust if the class is conceptually clear, whereas Lord Justice Stamp advocated a stricter interpretation, closer to the complete list test (Sachs, 1973).
This judicial divergence reflects the broader tension in trust law between strict legal rules and fair outcomes. A lenient approach risks creating trusts that are difficult to administer, potentially prejudicing trustees or beneficiaries if disputes arise over membership in the class. Conversely, a stricter stance may invalidate trusts that could otherwise have been upheld through reasonable interpretation, thus frustrating the settlor’s intentions. The courts’ struggle to strike a balance suggests that while certainty of objects is essential for the enforceability and structure of trusts, its application can sometimes prioritise legal formalism over equitable solutions.
Conflict Between Legal Rules and Fair Outcomes
The requirement for certainty of objects, though crucial for maintaining the integrity of trust law, often clashes with the pursuit of fairness. For instance, in cases where a settlor’s intentions are clear but drafting errors or evidential issues prevent absolute certainty, a strict application of the rules may result in the trust failing, depriving intended beneficiaries of benefits. This is particularly problematic in charitable trusts or large discretionary trusts, where public policy considerations—such as benefiting a broad community or class—may argue for a more flexible approach. Indeed, the judiciary has occasionally demonstrated willingness to interpret terms broadly to uphold a trust, as seen in McPhail v Doulton, but such flexibility is not universal and often depends on the specific circumstances of the case.
Furthermore, the requirement for certainty can disproportionately affect vulnerable beneficiaries who may lack the resources or documentation to prove their status. This raises ethical questions about whether trust law, in its pursuit of legal certainty, adequately addresses equity. While the courts are bound by precedent and statutory principles to prioritise clarity and enforceability, there is arguably a need for mechanisms—perhaps through statutory reform or judicial discretion—to mitigate the harshness of strict rules in exceptional cases.
Conclusion
In conclusion, the courts’ application of the requirement for certainty of objects in fixed and discretionary trusts reflects a complex interplay between legal structure and equitable considerations. The strict complete list test for fixed trusts ensures precision but can lead to unjust outcomes when evidential challenges arise. Conversely, the more flexible ‘is or is not’ test for discretionary trusts, as established in McPhail v Doulton, accommodates practicality but introduces risks of ambiguity and litigation. The distinction between conceptual and evidential certainty further underscores the judiciary’s attempt to balance enforceability with fairness, though outcomes remain inconsistent and case-dependent. Ultimately, while certainty of objects is indispensable to the integrity of trust law, it sometimes conflicts with achieving fair results, highlighting the need for ongoing reflection on how best to reconcile strict legal rules with the broader principles of equity. This tension remains a central challenge in trust law, prompting questions about potential reforms to better align legal formalism with the realities of trust administration.
References
- Browne-Wilkinson, L. (1971) McPhail v Doulton. House of Lords Reports, [1971] AC 424.
- Sachs, L. J. (1973) Re Baden’s Deed Trusts (No 2). Court of Appeal Reports, [1973] Ch 9.
- Stamp, L. J. (1955) IRC v Broadway Cottages Trust. Court of Appeal Reports, [1955] Ch 20.
