Introduction
The law of trusts, rooted in the principles of equity, hinges on the doctrine of the three certainties—certainty of intention, subject matter, and objects—as famously articulated by Lord Langdale MR in Knight v Knight (1840) 3 Beav 148. The statement under scrutiny suggests a tension within this doctrine, positing that the courts adopt a pragmatic approach to uphold commercial trusts while enforcing strict orthodoxy in private familial dispositions. This essay critically evaluates this assertion by focusing on the judicial treatment of certainty of subject matter and certainty of objects in discretionary trusts, particularly following the landmark decision in McPhail v Doulton (No 1) [1971] AC 424. Through an analysis of key cases and principles, it explores whether the judiciary’s approach indeed reveals contradictions driven by contextual pragmatism. The discussion will first address certainty of subject matter, examining how courts have navigated definitional challenges in different trust contexts, before turning to certainty of objects in discretionary trusts, where McPhail v Doulton marks a pivotal shift. Finally, it will assess whether these judicial approaches reflect a coherent legal framework or a pragmatic divergence shaped by policy considerations.
Certainty of Subject Matter: Pragmatism in Commercial Contexts
Certainty of subject matter requires that the property intended to be held on trust is clearly identifiable. Without such clarity, a trust cannot be constituted, as the trustee must know precisely what is to be administered. In the context of private familial dispositions, the courts have historically adopted a strict stance. For instance, in Sprange v Barnard (1789) 2 Bro CC 585, a testatrix’s direction to leave £300 per annum to her husband with the remainder to be divided equally among her children at his death was deemed void for uncertainty. The court held that the subject matter—specifically the remainder—was not clearly defined, as it depended on variable future events. This strict orthodoxy reflects a judicial concern for precision in personal wealth distribution, ensuring that beneficiaries’ rights are not left ambiguous.
Contrastingly, in commercial trusts, the judiciary has often leaned towards a more pragmatic interpretation to uphold arrangements vital to economic activity. A notable example is found in Hunter v Moss [1994] 1 WLR 452, where the Court of Appeal upheld a trust over 50 shares out of a larger holding of 950 identical shares, despite the lack of segregation. The decision departed from traditional strictness, with the court reasoning that in commercial contexts involving fungible assets, such as shares, exact identification was unnecessary provided the total holding was sufficient to meet the trust obligation. This approach arguably prioritises the practical functionality of commercial dealings over rigid formalism. However, it has been criticised for creating inconsistency with earlier precedents like Re London Wine Co (Shippers) Ltd [1986] PCC 121, where a trust over wine stocks failed due to the lack of specific identification. The divergence in these outcomes suggests that courts may indeed be influenced by a desire to ‘save’ commercial arrangements, potentially at the expense of doctrinal coherence.
The apparent contradiction in judicial treatment raises questions about equity’s role in balancing fairness with practicality. While familial trusts are often scrutinised to prevent disputes over inheritance, commercial trusts are interpreted with an eye to economic stability. This duality, though pragmatic, risks undermining the universal applicability of trust law principles, as the same certainty requirement yields different outcomes based on context.
Certainty of Objects in Discretionary Trusts: The Shift in McPhail v Doulton
Certainty of objects ensures that the beneficiaries of a trust, or the class of potential beneficiaries in discretionary trusts, are sufficiently defined for the trust to be enforceable. Prior to McPhail v Doulton (No 1) [1971] AC 424, the test for certainty of objects in discretionary trusts was governed by the ‘complete list’ test established in IRC v Broadway Cottages Trust [1955] Ch 20. This required trustees to be able to compile a complete list of all possible beneficiaries, a stringent standard that often rendered large discretionary trusts void for uncertainty, particularly in private familial contexts where classes might be broad or ambiguous.
McPhail v Doulton marked a significant departure by relaxing this requirement. In this case, a trust was established for the benefit of employees, their relatives, and dependants of a company—a potentially vast and fluctuating class. The House of Lords, led by Lord Wilberforce, rejected the complete list test for discretionary trusts, adopting instead the ‘is or is not’ test derived from Re Gulbenkian’s Settlements [1970] AC 508, originally applied to powers of appointment. Under this new test, a trust is valid if it can be said with certainty whether any given individual is or is not a member of the class. This shift allowed greater flexibility, enabling trusts with large, conceptually certain classes to stand. The decision was grounded in a recognition of the practical realities of modern trusts, often used in commercial or pension contexts, where compiling a complete list is infeasible.
The implications of McPhail v Doulton are twofold. On one hand, it aligns with the pragmatic desire to uphold trusts serving broader social or commercial purposes, such as employee benefit schemes. On the other hand, it arguably dilutes the strict orthodoxy applied to private familial trusts in earlier cases. For instance, in Re Baden’s Deed Trusts (No 2) [1973] Ch 9, the application of the ‘is or is not’ test still faced challenges in defining terms like ‘dependants,’ revealing that even this relaxed standard requires judicial interpretation, which may vary based on context. Critics argue that such flexibility introduces inconsistency, as courts exercise discretion in determining conceptual certainty, potentially leading to unpredictable outcomes. Indeed, the post-McPhail era suggests a judiciary willing to adapt trust law to changing societal needs, but at the risk of appearing contradictory when compared to the rigid application in smaller, familial arrangements.
Contradiction or Contextual Adaptation?
The statement under evaluation posits a contradiction driven by pragmatism in commercial trusts versus strictness in familial dispositions. The analysis of certainty of subject matter and objects supports this to some extent. In commercial contexts, cases like Hunter v Moss and McPhail v Doulton demonstrate a judicial inclination to prioritise functionality over formalism, reflecting equity’s adaptability to economic imperatives. By contrast, the strict application in cases like Sprange v Barnard underscores a protective stance towards personal property distribution, arguably to prevent familial disputes and ensure clarity for inheritance.
However, it is worth considering whether this divergence truly constitutes a contradiction or merely a contextual adaptation. Equity, by its nature, seeks to address the specific circumstances of each case, balancing fairness with legal certainty. The differing treatment may reflect not inconsistency but a nuanced recognition of trusts’ varying purposes—commercial arrangements often involve public interest considerations, whereas familial trusts concern private wealth transmission. Furthermore, the evolution in certainty of objects following McPhail v Doulton suggests a broader trend towards modernisation of trust law, applicable across contexts, rather than a stark divide. Nevertheless, discrepancies in judicial reasoning, as seen in the contrasting outcomes of Hunter v Moss and Re London Wine Co, highlight a lack of uniform application that can undermine trust law’s predictability.
Conclusion
In conclusion, the law relating to the three certainties reveals tensions between pragmatic flexibility in commercial trusts and strict orthodoxy in familial dispositions, as evidenced by the judicial treatment of certainty of subject matter and objects. Cases like Hunter v Moss illustrate a willingness to uphold commercial trusts through relaxed interpretations, while McPhail v Doulton’s reform of the certainty of objects test reflects a broader shift towards accommodating modern trust purposes. However, this pragmatism contrasts with the rigid application often seen in familial contexts, suggesting a judicial balancing act influenced by policy considerations. While this duality may be viewed as a contextual adaptation rather than a contradiction, the inconsistent application of principles risks eroding the doctrinal coherence of trust law. Ultimately, these developments underscore equity’s role in responding to societal and economic needs, but they also highlight the need for clearer guidelines to ensure predictability across all trust contexts. This tension remains a critical area for further judicial and academic scrutiny, as trust law continues to evolve in response to diverse applications.
References
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