Property Law about Certainty of Objects in Discretionary Trusts - Essay Example

?Property Law The issue in this question requires an analysis of the certainty of objects and the problems that were resolved in the case of McPhail v Doulton. The problem that used to arise was the fact that the courts had to determine the issue in respect of discretionary trusts was present and the fact that a whole list with broad categories of beneficiaries was provided for or in other words a large and fluctuating class and whether such a trust was enforceable. The context in which court decided this was the infamous is or is not test whereby it is determined whether a person is a part of the list of beneficiaries or not. The historical test used to be the complete test which required a complete list, but this has been changed by the introduction of the is or is not test. The case of McPhail decided on the essential element of the ‘is or is not’ test and the important points that were made were that the courts that is the fact that the ‘is or is not’ test deals with conceptual certainty and the fact that that the ‘the court is never defeated on the basis of evidential certainty’. The decision is said to be the key case in this respect because the problem on the ‘is or is not’ test in respect of the broad list was considered. The essential problem in respect of certainty of objects was that the is or is not test needed be clearly spelled out in respect of such lists. This was because the trusts with such lists would fail for uncertainty of objects and thus the principle needed establishment, which was clearly done by the important decision in McPhail and a demarcation and principle in respect of such lists was clearly identified. 2. Explain the background to the Court of Appeal decision in Re Baden’s DT No.2, and its lasting significance. (500-600 words) The issue in this question requires an analysis of the background of the case in respect of Re Baden’s DT No.2. The case was on the principle was the determination of the ‘is or is not test’ and its application to certain types of trusts which will be discussed at length. The case had been remitted to the High Court so as to determine the issue of validity in respect of the ‘is or is not’ test. The case subsequently went up to the Court of Appeal whereby the certainty of objects in respect of the trust was concerned. The trust in this case was about, amongst others, employees and their ‘dependants’ and ‘relatives’. The court stated that ‘dependants’ was not uncertain and the reasoning for this was that the Parliament had used it often whereby it had described dependants. However, there were issues in respect of ‘relatives’ whereby differences in interpretation arose. The meaning that was normally ascribed to relatives was descendants who originated from common ancestors thereby discussing the indefinite and large number of distant relatives. It was discussed at length that the common ancestor was not a conceptual uncertainty and the problem lied in respect of the evidential uncertainty that is the problem of proving the connection. In the case of Re Baden there was property which had been left "to or for the benefit of any of the officers or ex officers or ex employees of the company or to any of the relatives or dependants of any such persons". The applicant argued that for identification of the beneficiary it was important the each and every individual should be identified so as to ensure the question of whether they were a class or not. The respondent argued to the contrary and stated that this was not necessary to identify each and every individual and therefore the trust should be held to be valid and should not fail on the basis of uncertainty of objects. It was further argued that if the class was not considered and the trust was held to be failed then it would be contrary to the wishes of the settler as the reason for such a broad class was the intention of the settler and he could have clearly narrowed the class if he wanted to and therefore the settler had clearly by writing the words had taken into account the people that would be covered by use of his words. Therefore, in lieu of the current situation the settlor’s intention must be given effect and it was clear that the wordings could be used in the practical interpretation that was granted which was clearly put forward by the respondent. Therefore in lieu of the arguments the court accepted the respondent’s argument and stated even though by way of differing interpretation that the even though a broad class had been identified the is or is not test could be used to determine the certainty of object and therefore the trust was valid. 3. Consider how a future Court of Appeal or Supreme Court decision might rule on determining whether a class of objects is “sufficiently certain” so as not to invalidate the trust. The arguments put forward by the respondent were that even though a broad class had been identified the is or is not test would clearly lead to the trust being held valid and therefore the settlor’s intention should be given effect. Sachs LJ in his judgment differentiated between conceptual and evidential certainty and stated that the ‘is or is not’ test is clearly applicable to conceptual certainty and went on to say that ‘the court is never defeated by evidential uncertainty’. He further stated that the issue was a question of fact that is whether ‘any individual postulant has on inquiry been proved to be within [the class]. If he is not so proved then he is not in it’. Thus it requires proof that is a person needs to prove that he is within the class. There were problems in this area as who had the onus of proof in this respect was not pointed out, as clearly even though a trustee may be satisfied that a person is within the class, he could still face a challenge from another beneficiary. Therefore even though it had been stated that evidential uncertainty could not be a cause but the boundaries of such a class has been defined by adduction of evidence. In respect of the class, Megaw LJ stated and laid down a number of factors for the ‘is or is not’. The first thing that was pointed out was the fact that if there were a substantial number of beneficiaries within the class, then the class is certain. However, this can be interpreted to state that the historical complete list test is being used s it cuts down people within the class by stating the word substantial. Furthermore, it has been argued that the word merely deals with the validity aspect of the trust. The problem in this respect is that the exercise or the process that the trustee must go through before distributing has not been provided. Finally Stamp LJ demarcated and stated that evidential certainty should in no way be used to resolve the problems that are caused by conceptually certain term. He went on to say that the is or is not test is basically an evaluation which is defined by way of the concepts that had been used by the settler and so it should not be made such which requires a burden of proof, because if such a burden exists then it would give rise to evidential certainty. Thus what had been stated by Stamp LJ means that the entire class of the persons that had been has their right to be considered and so trustees should be able to evaluate that on that basis. As far as Sachs LJ is concerned the objects tend to are not exactly like a class, but rather are potential applicants who might be able to meet the criteria for the distribution. The case being a landmark abolished the complete test list and incorporated the is or is not test In respect of the situation after the case even though the case is normally not referred, it goes without saying that the law on trusts was restated and thereby discretionary trusts have now become more viable and available alternative in respect of and among other things for estate planning, and considerably abridged the problem that had been previously related to such trusts. Thus Sachs and Megaw LJ clearly stipulated that ‘relative’ means ‘descendant of a common ancestor’ and therefore cannot be said to be a term which would lead to invalidation in respect of the ‘is or is not’ test. However, the position remains the same in respect of the complete list test. Finally, you should also reflect on the process of how you identified the important cases and the article in your Reflective Learning Journal. When doing this, think about the other ways you could have identified your sources; why you chose the method(s) you did, and the strengths and weaknesses of the research process you used. The process that was used for the research was the library and finding relevant texts on the law of trusts. There were problems in this respect as the report on the case was not present. However, an advantage was that it provided an opportunity in respect of the development of the concepts and how the principle works as of now. The other sources that were consulted were the LexisNexis and Westlaw. The important advantage in respect of this was that a clear cut case report was easily accessible which allowed reading and understanding the actual reasoning by the judges to reach the decisions in respect of the cases. However, this merely focused on the decision and so the case report was not in itself to sufficiently answer the question. Finally articles in respect of the decision were also obtained which allowed me to formulate ideas in respect of the decisions. The drawback in respect of this was that a clear cut development was not obtained and a mere criticism and review was provided by way of the articles, thus there had been problems in respect of the articles which had merely focused on critical thinking rather than discussing in particular the development that had been cause by way of the significant development in the law of trusts. References PENNER, J. E. (2010). The law of trusts. Oxford, Oxford University Press HAYTON, D. J., MITCHELL, C., & MARSHALL, O. R. (2005). Commentary and cases on the law of trusts and equitable remedies. London, Sweet & Maxwell. MARTIN, J. E., & HANBURY, H. G. (2009). Hanbury & Martin Modern equity. London, Sweet & Maxwell. Read More