Contents TRUSTS; THE THREEE CERTAINTIES ...... 3 Ramifications if failure of certainty ...... 3 What happens to the ‘trust’ property then? ...... 4 How do courts decide certainty issues? ...... 4 Admissibility of Extrinsic evidence ...... 4 When is evidence admissible to clarify a will? O’Brien v Smith [2012] ...... 5 Certainty of Intention ...... 6 Mere Precatory words will not suffice Re Williams ...... 6 Settlor must intend to create a trust immediately ...... 7 Trust or something else ; Gift to A absolutely with moral obligation to help B, no legal remedy for B if A doesn’t provide benefit (eg Marilyn Monroe case) ...... 8 Trust or something else; To A on condition they help B: common law condition - if A doesn’t perform condition, forfeits property (and B gets nothing)\ ...... 8 Trust or something else; A takes full title with a less formal ‘condition’, might be subject to a personal equitable obligation which B can enforce via equitable compensation or order for specific performance if A doesn’t perform condition (Gill v Gill (discussed in Cobcroft v Bruce S14.2c) ...... 8 Trust or something else; A takes legal title subject to an equitable charge, which gives B an enforceable proprietary interest (won’t be examined this year) ...... 11 Certainty of Subject ...... 11 Likely invalid where quantum not clear ...... 11 Likely invalid where can’t identify relevant property ...... 11 Likely invalid where Non-fungible assets (not the same) ...... 12 Certainty of object...... 12 Objects (beneficiaries or cestui que trustee) are sufficiently certain ...... 12 Trusts for people not purposes (Beneficiary principle) ...... 12 Exercise : spot the ‘certainty of object’ problems ...... 14 Tests for Certainty of Object: Fixed Trust ...... 15 Must meet list certainty test for object ...... 15 Example; Commissioner for State Revenue v Viewbank Properties (2004) VSC 127 ...... 15 Trying to losen the test; Controversial West v Weston ...... 15 Tests for Certainty of Object: Discretionary Trusts ...... 16 Consider the nature of the trustee power ...... 16 First, what is Criterion Certainty? ...... 17 Application of this test; One test for bare power/trust power ...... 17 Types of uncertainty of object discretionary trust; conceptual, evidentiary and administratively unworkable ...... 18 Conceptual uncertainty ...... 18 Administrative Unworkability ...... 18 Examples ...... 19 Example 1 ...... 19 Example 2 ...... 21

TRUSTS; THE THREEE CERTAINTIES The exam: usually an example of someone’s wills and your jobs will be to see whether or not it is valid, another is usually a longer problem solving question on trustees

‘Separation of management and enjoyment qualified’ rule in Saunders v Vautier (B&V 212); No matter what the trustees think the beneficiaries if they meet the condition in that at case can call for the trust property, they can bring the trust to an end and say give me all the money. Eg give me the trust property. If you succeed in this rule that is the end of the trusts Conditions; 1. Have to be of age (can’t be children) 2. Between they have to hold the entire beneficial interest in the trust

Sample question from ETR 2016 final exam Maisie’s will: ‘I leave $100,000 on trust to such of my children Jack, Ben and Harry as my trustees select within three years of my death.’ 2 years after Maisie dies, trustees have made no distribution. J, B and H want to get their hands on the trust property: advise them. If J, B and H are of age and between them hold entire beneficial interest in trust property, can call for the property and terminate the trust, even if trustees disagree. Discretionary trust or fixed trust? Bare power or trust power? More on this later in course

E requires that 3 certainties are met: . Certainty of intention . Certainty of subject . Certainty of object Then need to consider formalities (Week 7)

Ramifications if failure of certainty If no intention to create a trust, no trust If subject uncertain, no trust (eg this to my ‘old best friend’, or ‘people of greater london’) but courts these days will work really hard to identify who the trusts is for) If object is o . ‘conceptually uncertain’ or ‘administratively unworkable’ no trust o . Hard to identify (‘evidentiary uncertainty’) trust may be held to exist (next week’s lecture)

What happens to the ‘trust’ property then? Where no intention to create a trust or subject uncertain and property transferred, donee takes absolutely, his/her estate if donee later dies If post-mortem trust in will fails because no intention to create a trust, property reverts to the residuary estate If uncertainty of object but OK certainty of intention and subject, the donee holds on resulting trust for settlor Example: Lecture 4 . What was the uncertainty problem in this case? . What was the alleged trust subject,object? . What would have happened to the subject if trust failed?

Sample question from 2016 final exam

Q 4 ‘I now hold this pen on trust for Mary.’ Am I disposing of a subsisting (existing) equitable interest in the pen? (5 marks) No- I’m disposing of my property interest, the creation of the trust is what creates the equitable interest (was not pre-existing)

How do courts decide certainty issues? Depends on Settlors’s intention at the time property transferred Question of fact (Deane J, Muchinski v Dodds) Have regard to . The language used . Nature of the property . Nature of the obligation (Gill v Gill) -revert back to these general ones if you get lost in exam.

Equity’s rules

Generally follow common law rules of contract construction (have regard to whole document and read troublesome clause in context; evidence of surrounding circumstances permitted where language ambiguous or susceptible of more than one meaning, Codelfa)

Admissibility of Extrinsic evidence (1) Where intention clear but words re subject or object ambiguous, court is entitled to ‘sit in the testator’s armchair’ (O’Brien v Smith [2012] QSC 166, to search for a private ‘dictionary meaning’ (Re Gulbenkian) eg emails identifying who indeed are her ‘old friends’. Only goes to actual factual circumstances, not direct evidence of intention re subject or object “eg ‘bob told me he was to give me this money’ (2) Second situation where extrinsic evidence admitted is where there is an equivocation: o ‘An equivocation rises where words in the will contain a latent ambiguity. That is the specific words of the will can equally be used to describe equally and accurately two or more things. o Here the court will (contrast to point (1)) admit extrinsic evidence of the testator’s intentions (eg declarations by the testator of his intentions before or after he made the will and any actual instruction to the solicitor who drafted the will).’ Mustard as Executrix of the Will of Thanas (Dec v Oikonomov)

When is evidence admissible to clarify a will? O’Brien v Smith [2012]

Under Statute, Equity expanded slightly Legislation in states and territories to expand evidence admissible to clarify a will largely means the same thing as circumstance (1) above -you can use both in the exam, even though equity is slightly wider.

WILLS ACT (Vic) 1997 - SECT 36 (1) In any proceedings to construe a will, if the language used in a will renders the will or any part of the will— (a) meaningless; or (b) uncertain or ambiguous on the face of the will; or (c) uncertain or ambiguous in the light of surrounding circumstances— evidence may be admitted to assist in the interpretation of that language. (2) Evidence which may be admitted under subsection (1)(c) does not include evidence of the testator's intention. (3) Nothing in this section prevents the admission of evidence which would otherwise be admissible at law in any proceedings to construe a will.

Recent Australian example O’Brien v Smith [2012] QSC 166 Testator’s self-drafted will: ‘on trust to my executors; monies may be invested; on my death my executor may sell or dispose of properties as they see fit. Loans may be made to those whose ability to repay is proved.’ Daughter wished to introduce extrinsic evidence that testator had always said he would create trust to benefit his children and grandchildren Held -court didn’t allow this evidence; stated the intention of the trust was clear. Testator’s intention to create trust clear Nothing in will to indicate children and grandchildren were beneficiaries, language clear so can’t admit evidence from daughter Trust fails for uncertainty of object What would happen to this property? Created a residuary estate (not a trust)

The Supreme Court of Queensland case of O’Brien & Anor v Smith & Anor [2012] QSC 166is a good example of how things do go wrong with a home made Will.

The testator in the case made a home made Will leaving specific cash gifts to certain beneficiaries and then gifted his residuary estate to “a trust or other entity to be set up by my Executors…and administered by them as they shall see fit.” The matter went to the Supreme Court because the executors were unable to determine who the beneficiaries of the residuary estate would be. It was argued, and accepted by the Court, that the clause which endeavoured to create the trust failed. For any trust to arise, there must be certainty as to the intended beneficiaries and in this case, there was no such certainty. The end result was that there was an intestacy as to the residue which means it had to be dealt with under the Succession Act as if the testator died without a Will.

Certainty of Intention

Burden of proof on person asserting trust exists

Why treated cautiously by court?

• More attention paid to intention than in contract • Settlor is disposing of their interest in property • Onerous duties on trustee • Need to make sure trustee didn’t mean something else

How to study for this section • Different possibilities when someone disposes of property for benefit of another – obligation? • Very fine distinctions, lack of clear tests/logic • Try to match factual scenario in exam with something you’ve seen in lectures/Sourcebook • In real world, these strategic decisions: what’s best argument for client available to me on these facts?

Certainty of intention raises a number of issues A Precatory words B Trust or something else C Intention to create an immediate trust

Mere Precatory words will not suffice Re Williams

Examples: Here’s some property and I wish, hope, pray, expect, recommend, believe, desire, beseech you will use it to benefit Fred

History: 18th century cases assumed imperative (Queen says to you ‘I hope you’ll follow me’, or I say ‘I believe you have something to say’ – request may be a command!) In early days precative words was assumed to be imperitive; Literally ‘your wish is my command’!

Early examples ‘I make no provision expressly for my dear daughter, knowing that it is my dear wife’s happiness as well as mine to see her comfortably provided for; but in case of [death of wife] I request my friends Stables and Hunter to take care of and manage to the best advantage for my lovely daughter Harriet Nowlan, all I may die possessed of.’ Nowlan v Nelligan (1785) Property to wife by will ‘but did desire her at or before her death to give such…goods and chattels..unto and amongst such of his own relations as she should think most deserving and approve of’ Harding v Glyn (1793) Held that created trusts in both cases.

History: 19th century change Chancery no longer treated any wish of settlor as command Testator left property to widow ‘feeling confident that she will act justly to our children in dividing the same when no longer required by her’. Held : No trust. Mussoorie Bank v Raynor (1882) – in effect court said will means ‘I give to my children so much as is not required by the widow’

Current Law Leading authority; Re Williams (S14.2b)

Property to wife absolutely ‘in the fullest trust and confidence that she will carry out my wishes in the following particulars’ (then expresses conditions) Husband ‘used the language he did because he really intended to trust to his widow’s discretion’, rather than directly providing for daughter or putting a legal fetter on wife’s use of property Just a wish that daughter should get insurance policy unless widow could think a better way of doing things Mere precatory words, no trust

Another famous will; Estate of clothes and personal effects of Marilyn Monroe ‘to my Executor hereinafter named, it being my desire that he distribute these, in his sole discretion, among my friends, colleagues, and those to whom I am devoted’ Virtually none of estate distributed in this way What obligation created on Executor? No – merely precatory words – no legal obligation to do anything.

For example: ‘I leave $100,000 to Ann trusting that she will care for Janey when I am gone, then devote the remaining funds to securing a ban on greyhound racing.’ Is a valid trust created here? If so identify settlor, trustee, subject, object/s. If not, why not? -no its not “trusting that she will care” is an example of precatory words. -lets say it was a trust; the objects of the second fund in the charity; or the first part Janey, -trustee; ann

Settlor must intend to create a trust immediately Settlor must intend to create a trust immediately ie relinquish beneficial ownership at same time -if I don’t intend to split the equitable and legal interstest immediately, then the is no trust Key issue in Harpur v Levy (S 14.2d) Claimed R claimed himself trustee of his property in August 1997, with trust ‘coming into operation on Commencement Day 1 Oct 1997’ Maj: OK to create trust and postpone benefit via its terms Clear that R intended he would keep legal and beneficial ownership until 1 Oct, could change his mind till then. No trust (Maxwell P dissenting)

Trust or something else ; Gift to A absolutely with moral obligation to help B, no legal remedy for B if A doesn’t provide benefit (eg Marilyn Monroe case)

Estate of clothes and personal effects of Marilyn Monroe ‘to my Executor hereinafter named, it being my desire that he distribute these, in his sole discretion, among my friends, colleagues, and those to whom I am devoted’ Virtually none of estate distributed in this way What obligation created on Executor? No – merely precatory words – no legal obligation to do anything.

Trust or something else; To A on condition they help B: common law condition - if A doesn’t perform condition, forfeits property (and B gets nothing)\

Courts sometimes reluctant to find a common law condition precedent or subsequent, because if not met, B gets nothing. But where formal condition, that’s what’s held to exist rather than trust Example (leading case)

Re Gardner Estate left to Ivor on condition that within two years he pay 1,000 pounds to his brother; Ivor didn’t pay his brother Held: Ivor must forfeit the estate for breaching a condition subsequent Why? Clear and imperative demand to do something within two years; if E had held this a trust or charge not formal condition, would have overturned this element

Trust or something else; A takes full title with a less formal ‘condition’, might be subject to a personal equitable obligation which B can enforce via equitable compensation or order for specific performance if A doesn’t perform condition (Gill v Gill (discussed in Cobcroft v Bruce S14.2c)

Possibly a less formal ‘condition’ Just to add to difficulty: use of word ‘condition’ in a will not necessarily compelling evidence of what the term means (Re Boning) Sometimes gift to A to look after B gives rise to a binding personal equitable obligation rather than trust, or absolute gift to A with moral discretion This gives B right to equitable compensation or an order for specific performance if condition not met. (however no proprietary interest in property) Unlike property subject to an equitable charge, beneficiary doesn’t hold a proprietary interest in the property -remember all these comes back to the intention of the settlor

Leading authority; Leading authority; Gill v Gill (discussed in Cobcroft v Bruce S14.2c)

G left farm and homestead to son ‘on condition that he keep the homestead as a home and provide board and residence for his sisters’. The difference between this case and the Ivor case is that Ivor was never really going to be entitled to the $1000 while in gill he would have enjoyed the property all the time (ongoing interest) as well as the sisters who had an equitable interest.

Held: E imposed a personal equitable obligation, less strict than formal ‘condition of forfeiture’, on A to provide board and residence for the sisters. Appropriate? Not a trust, not a charge (court said S didn’t give sisters a property interest in farm), not a formal condition but an obligation Equity would uphold via its remedies if not fulfilled. Eg not common law whereby all those interested would lose their interest; loser criteria to allow a rememdy for sisters.

Cobcroft v Bruce [2013] NSWSC 774 (S14.2c)

‘My shares to my wife to deal with as she in her absolute discretion sees fit, but otherwise on condition that she ultimately gives those shares, or the remainder thereof, to my nephews David and Nikolas.’ Held: Gill v Gill-type condition, imposing an equitable obligation on wife to either give nephews shares during her life or in her will

Facts; • The deceased died owning a considerable number of valuable shares in public companies which were transferred to his wife who was also one of his executors. • The testator's widow Denise died on 13 May 2010 and probate of her last will dated 4 May 2010 was granted to the second defendants on 15 February 2011. • During her lifetime, the widow disposed of a number of the shares but at her death there remains some $6 million or $7 million worth. However, there are some factors which mean this figure may need to be adjusted as I hope will subsequently appear. • Under the widow's will it would seem that the shares would pass as part of her residuary estate to four charities. • Accordingly, the contest really is between the two nephews and the four charities as to who is entitled to the shares that remained in the widow's hands at the date of her death. • It does not require very much imagination from a lawyer to realise that as a matter of legal analysis there are a number of possibilities as to the true construction of clause 9 of Gavin Cobcroft's will. The principal possibilities are that:

Decision;

54. Mr Willmott submits that if I should come to that conclusion then the situation is one where there is a mandatory obligation cast in equity on the widow to transfer the shares to the nephews which obligation can be enforced in a court of equity by a decree very similar to specific performance. (is this case there was – ‘deal’ meant that it must be within her lifetime, and her absolute discretion was not designed for her will) 55. The leading case in this area of the law is Gill v Gill [1921] NSWStRp 39; (1921) 21 SR (NSW) 400. In that case, a farm and homestead was devised to a son "on condition that he keep the homestead as a home and provide board and residence for his sisters..." Harvey J (at 406) distinguished that condition from a condition precedent of forfeiture and also said that with the condition in the will in that case the requirements of certainty were not as strict. At 407, his Honour said that in some cases of this nature the court may think that the testator intended to attach a charge or trust upon the property and in other cases that a personal liability alone was intended. This will depend partly on the language used to describe the obligation, partly on the nature of the property given to the obligee and partly on the nature of the obligation. Where the obligation is merely personal then the court (even if it could not grant specific performance) would grant a relief by way of equitable damages or equitable compensation. 56. Of course the words used in any particular will may not create such a condition, they may merely be words expressing the testator's desire, precatory words. 57. Mr Whittle says that the existence of what I will call the Gill v Gill condition commenced in about 1821 with the decision of Lord Lyndhurst inMessenger v Andrews [1828] EngR 341; (1828) 4 Russ 478; 38 ER 885; [1824-1834] All ER Rep 651. Examples have appeared over the last two centuries over most of the common law world, including in Ireland (see re McMahon; McMahon v McMahon [1901] I IR 489) and in Canada (seere Trembaley (1920) 56 DLR 281; a decision Orde J in the Ontario Supreme Court). 58. In my view, we are now getting close to a way of construing the will which will give effect to all words and respect the principle of res magis valeat quam pereat. 59. However, when one gets to a Gill v Gill condition one may get a trust, one may get a charge, or one may get an equitable obligation. 60. Mr Willmott cited the decision of Needham J in Hayes v National Heart Foundation of Australia [1976] 1 NSWLR 29 in which the will provided that the testator's daughter was to take the balance of his estate, including his shares; "these shares [are] to be retained by her as a source of income on the understanding that she write into her will that, at her death, these shares are to be sold and the capital received to be divided in equal parts between" three named charities. The learned judge considered that the words were sufficiently definite to make it clear that the limitation on the power of ownership was not merely a request, but a legal restriction. 61. Although there was little in the will to guide the judge into deciding whether there was a trust, or a gift subject to a condition, he thought that the will indicated that full legal title vested in the daughter. She received the property pursuant to an obligation to hold them on trust after her death for the three charities. 62. In the High Court, Dixon J had to consider an analogous situation in the income tax case of The Countess of Bective v Federal Commissioner of Taxation [1932] HCA 22; (1932) 47 CLR 417. He said that there were at least four different possibilities where one had a gift testamentary, or otherwise directing a payment to one person and expressing a purpose beneficial to another person. In summary these were:

• the expression of the purpose may be taken merely as a statement of motive or expectation in which case the first person takes the gift absolutely and incurs no legal or equitable obligation to fulfil the purpose; • the purpose may be stated so as to amount to a condition, in which case by accepting the gift the donee incurs the equitable duty to perform a condition; • the first person may take the gift beneficially, but the statement of purpose may operate as an equitable charge in favour of the other; • the direction to pay the first person may be regarded as conferring no beneficial interest on him but means that he receives the gift strictly in the character of a trustee.

63. In my view, the commands that the widow took her benefaction on condition that she gave the shares to the testator's nephew is a Gill v Gillcondition imposing an equitable obligation on the widow to either; give the shares during her life, or alternatively, to make provisions on her death for the shares to pass to the nephews. The wills says that the nephews are to take as tenants in common. That is not possible. At least, it is not possible that a chose in action, such as shares, can be held as tenants in common at common law (see re McKerrell [1912] 2 Ch 648, 653). However this is a minor wrinkle in the case. 64. Accordingly, in my view the plaintiffs are entitled to obtain "the shares." I put that expression in quotation marks because I now need to consider what is included in that expression. Prima facie, the order would seem to be an order allied to an order for specific performance that the second defendants transfer the shares to the plaintiffs, but I will stand the matter over for short minutes to be brought in. Any problems with this sort of relief can be discussed at this time.

Trust or something else; A takes legal title subject to an equitable charge, which gives B an enforceable proprietary interest (won’t be examined this year)

Certainty of Subject • Must be property upon which the trust is to operate: without it, no trust. • Any property may be held on trust: real or personal, tangible or intangible, legal or equitable. • Mere equities are not property, so can’t have a trust of a beneficiary’s interest in a discretionary trust. • Three kinds of uncertainty of subject.

Likely invalid where quantum not clear Direction ‘to remember’ certain persons (Bardswell v Bardswell (1838)); a direction to ‘reward very old servants and tenants according to their deserts’ ( (1840)) ‘The bulk of my residuary estate’ or ‘an appropriate sum of money’ () Held no trust, uncertainty of subject. Servants got nothing!

Dean v Cole (1921) 30 CLR 1 D’s will left all to his wife on 2 ‘conditions’, one was ‘trusting to her that she will at some time during her lifetime or after her death divide in fair just and equal shares between [kids] all such part and portion of my estate as she may…’

Held: No trust so no binding obligation to distribute equally amongst kids. Higgins J dissenting said ‘trusting to her’ created trust, meant ‘in trust to divide’.

More modern approach Re Golay’s Will Trusts Trustees to pay Tossy a ‘reasonable income’ Sufficiently certain? B&V OK where t/ees asked to decide quantum provided capable of objective determination Held: ‘court is constantly involved in making such objective assessment of what is reasonable…’ Doesn’t matter that there’s a subjective element. Subject sufficiently certain. New judicial approach: find a way to make trust work, hard to reconcile w earlier decisions

Likely invalid where can’t identify relevant property Impossibility of identifying relevant property Boyce v Boyce Testator devised four houses on trust to a trustee who was to convey to Maria whichever one she chose, with rest to Charlotte. Maria predeceased testator before making choice. -trust failed Which houses does Charlotte get? none Can we identify the trust property? !!!

Note though its outcome may have become outdated by the more recent judgments in In re Roberts[1] and Re Golay's Will Trusts.[2]

Likely invalid where Non-fungible assets (not the same) Fungible; exactly the same Equity has a problem with non-fungible property in the ascertainment of certainty. New concept: fungible assets – all the same as each other Non-specified non-fungible assets • I leave to John on trust for Mary 50% of my jewelry: I’ve got 25 different pieces, some valuable, some not – what’s trust property? • 5% of collection of 1965 vintage of Grange Hermitage bottles of wine – sufficiently certain? No • equity says that bottles of wine are not fungible (some might have been sitting ion the sun) o Re London Wine Company • if shares are in the same named company and of the same class, a number of shares or percentage of total holding can be valid subject of a trust. Hunter v Moss (S14.3a) ; White v Shortall (S14.3b) o Eg 5% of shares or 20 shares (which are in the same class).

Certainty of object. This is required because Equity wants to make sure there's someone who can ensure the performance of the trust. This means that trusts without a beneficiary are invalid, unless they fall into one of the exceptions. I've posted a Trusts Checklist to the Week 6 Guidebook which I hope you find useful. See you in the lecture. Two issues (1) Beneficiary principle is adhered to (2) Objects (beneficiaries or cestui que trustee) are sufficiently certain

Objects (beneficiaries or cestui que trustee) are sufficiently certain

Trusts for people not purposes (Beneficiary principle) Trusts must be for the benefit either of a legal person or persons ‘… every trust [other than charitable] must have a definite object. There must be somebody, in whose favour the court will decree performance.’ Morice v The Bishop of Durham (DP 17.70)

Policy underpinning Makes sense Courts need someone to bring matters before it, someone on whose behalf they correct injustices Court can intervene if no trustee, but if no beneficiary – no role

The major exception Generally, trust for a purpose not people is invalid Major exception: trust for a charitable purpose as defined Big category of trusts Eg job at Melbourne University to work solely in this area!

Not always black and white whether the trust is for people or purpose Can be difficult to distinguish trust for legal persons from trust for a purpose Many purposes, if fulfilled, would benefit individuals! Trust for ‘world peace’!

Other exceptions; anomalous trusts

Anomalous trusts for (no legal person behind the trust) (1) Trusts for care of pets (2) Trusts for personal tombs and monuments (3) Trusts for the saying of prayers and holding mass (4) Trusts for the promotion and furthering of foxhunting, residuary estate to Trinity Hall Cambridge Any rationale?  In each case, no beneficiary, no charitable purpose as defined by equity yet valid  Hard to defend rationally (‘concessions to human weakness’); note often a human with an interest in the trust (eg residuary beneficiary who gets money once pet dies)

Old Case law Pettingall v Pettingall ‘Having a favourite black mare, I hereby bequeath… 50 pounds per annum to be paid to keep her in some park in England or Wales; her shoes to be taken off, and she is never to be ridden or put in harness’ (1842) – valid trust

New case law Re Jeffree Hegarty [2011] NSWSC 1194 “$30,000 to my t/ee upon trust to pay for 15 years (out of capital and income) $2,000 to Karen Heywood for the maintenance and care of any pets in my possession at the date of my death [1 shelti dog, 2 cats and budgie] as long as she produces the said animals alive to my t/ee….and on their death, remaining capital to RSPCA NSW” Object of this trust; the pets Found it was a trust, but trust failed because Karen didn’t want to look after them Held Australian law will uphold anomalous trust (eg Pedulla v Nasti (1990) 20 NSWLR upheld trust for maintenance of vault for testator’s ashes) but not expand in any way This trust would be valid as for individually identified pets, but… Trust failed because KH refused to take on the task Court had to decide what to do with the money: would the RSPCA receive it, or should it go to residuary estate? -trying to discern what the settlor would have wanted; it is clear that she wanted th money to rspca?

What happened to gift over?  Where intermediate trust created for benefit of first object/s, then gift over to another  Here, trust said RSPCA NSW took the remainder after death of pets  But intermediate trust failed for another reason, pets still alive – what happens to gift over?  Court decided pets’ interest determined ie intermediate trust finalised, so remainder to RSPCA NSW rather than back into residuary estate  Usually in exam two parts two trusts questions with the latter being a gift over

Other Exceptions; Denley Trust Re Denley’s Trust Deed (DP 17.145) Trust for land to be maintained as sports ground ‘primarily for the benefit of the e/ees of the company and secondarily for the benefit of such other person/s as the t/ees may allow to use…’ Argued void for uncertainty of object; non-charitable purpose t Held Goff J : can identify class of cases where although individuals benefit, ‘that benefit is so indirect or intangible or otherwise (does) not give those persons any locus standi to the apply to the court…’ Invalid.

Denley Trust Principle

Beneficiary principle only invalidates purpose trusts which are ‘abstract or impersonal’. ‘The objection is not that the trust is for a purpose…per se, but that there is no beneficiary…’ ‘Where, then, the trust, though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals, it seems to me that it is in general outside the mischief of the beneficiary principle.’ Trust here valid. Eg behind the purpose I can see the specified people Created a new trust; Denley Trust Criticised, not recommended by B&V

Exercise : spot the ‘certainty of object’ problems  ‘My land at Daintree Road via Mossman… to be retained by my t/ees on trust for a period of 20 years upon the following conditions…all the birds and animals on the property are to be left undisturbed’, water, electricity cut-off, no-one permitted on land Re Boning [1996] QSC 216  Intention created, object of the trust is animals; forgetting about charitable; prima facie breach beneficiary prionciple. Likely answer to be no analmous scenario because there is no specific pet it was given to. That is is happened.  Am I right to say there is no human benefit? Many could argue no! eg an abstract public good.  Last year’s exam, students had to draft a clause in my will so that Janey my dog would be looked after when I die, with any remaining money to banning greyhound racing  Can be valid; heggedy case; no valid trust for banning greyhound racing being it is only a purpose; and not a dennely trust, because can’t see any people behind purpose.  Trust for ‘improvement of co-operation between nations and for the preservation of the independence and integrity of newspapers’ Re Astor’s Settlement Trust (mentioned B&V 273)  Breach beneficiary principle; not a valid trust because its for a purpose; not a valid charitable trust

Tests for Certainty of Object: Fixed Trust

Must meet list certainty test for object

Fixed Trust and List Certainty See B&V p 239 Fixed trust is one where settlor determines who gets what in trust instrument: only valid if identity of all beneficiaries is known Have to be able to make a list of all of them at time of distribution (Inland Revenue v Broadway Cottages) If existence or whereabouts unknown, can pay their share into court (Kinsela v Caldwell (1975)

Example; Commissioner for State Revenue v Viewbank Properties (2004) VSC 127

Beneficial interests in property to be distributed by t/ees in following proportions: 50% to interests representing the Hargraves family; 25% to interests rep the Adrian family; 25% to interests rep the Russell Small family -example of fixed trust -examples of lack clarity; no technical meaning to ‘interests representing’; do you mean family members? Your accountant? Your lawyer? The barrister/solicitor/law firm? Your neighbor? Certainty of object? What test to apply here?

Held  Nothing which was said by the High Court in Kinsela is in any way opposed to the idea that for the purposes of a fixed trust it is necessary that the creator define the class of beneficiaries with list certainty. Indeed it stands as express authority for the need for list certainty notwithstanding that one may meet with considerable evidential difficulties in determining which of the possible objects come within the list.  …it would not be possible to say with certainty either at the date of creation of trust or at any subsequent date of distribution precisely which "interests" were to be included and which were not.  Court found not clear enough for the court to decide

Trying to losen the test; Controversial West v Weston -single judge in new Zealand; not very powerful. • Testator’s will instructed trustees to divide equally amongst ‘such of the issue of my four grandparents living at the time of my death’ • Is this a fixed trust or a discretionary trust? • Who are the ‘issue’ of the grandparents’? this was the uncertainty. • Were over 1600 possibilities of these ‘issues’ found my guneologist. • How would you find them? Issues of where were they? • When would you know you’ve found them all?

Held Young J : Modify English rule for (Australian conditions why Australia? I thought its new Zealand?) (today marriage not considered necessary before having children, in remote areas not all births registered, children not necessarily given their father’s surname etc) ‘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 substantial majority of beneficiaries have been ascertained and that no reasonable inquiries could be made which would improve the situation.’ Followed in Victoria? Probably not. Only single judge, criticised as wrong by some experts, DO NOT APPLY THIS TO DISCRETIONARY TRUSTS; only fixed

Lecture Exercise I give $1,000 to you on trust to distribute equally amongst all the students in the Agora at lunchtime tomorrow. Valid? No, unless you can ‘west and western’ it and get the majority and barrier things off; too uncertain

Tests for Certainty of Object: Discretionary Trusts The test of certainty for the objects of a trust power in a discretionary trust is criterion certainty The trustee of a discretionary trust may be subject to a bare/mere power or a trust power

Consider the nature of the trustee power

A bare power Trustee may be granted a bare power of appointment: have a discretion to appoint (ie select) someone to benefit, but are not required to do so Often gift over in default of selection is a big hint that the power is a bare power, because settlor envisaged that all money would not necessarily be distributed Different language may indicate same idea

A trust power Trustee may be given a trust power (sometimes referred to as a ‘trust’ v confusing!) This means that they must exercise their discretion to appoint, cannot do nothing

So why care about nature of powers? (1) The nature of Equity’s intervention different as between bare power and trust power (2) The nature of the beneficiaries’ capacity to terminate the trust under the rule in Saunders v Vautier is different as between bare power and trust power (3) The nature of the ‘survey of the field’ of possible objects differs as between a trust with a bare power and one with a trust power. -Eg trust often say you must give but at your absolute discretion to x group of people; trustee must no more to survey the field of possible beneficiaers. Eg higher obligation to survey the field in trust power Eg trust power in scholarship; you must give away one scholarship every year; bare power: you don’t have to but you have x amount of money to support x type of students

Read Sourcebook p 332/3  Obligations on trustee with mere/bare power and trust power.  Lord Wilberforce argues not sharp distinction between mere power and trust power to justify different tests for certainty.  BUT w trust power, if t/ees don’t act.  Court will in manner best suited to do what settlor wanted  Court could appoint new trustees, or authorise representatives of class to prepare scheme of distribution or even direct t/ees to distribute to certain people  Trustees must ‘make such a survey of the range of objects…as will enable them to carry out their FD. A wider and more comprehensive range of inquiry for trust power than mere powers

Examples I give $10,000 to my trustees to hold on trust and they shall distribute this sum among any of Fred, Marcia or Con as they in their absolute discretion see fit. Imperitive language; This is a trust power: it is clear that the trustees must distribute the $10,000 (‘they shall’ - imperative) but they have a discretion about who they give it to. I give $10,000 to my trustees who may distribute the sum among any of Fred, Marcia or Con in their absolute discretion; if no appointment is made, to my sister absolutely. This is clearly a mere power. The trustees are not obliged to distribute the funds (‘they may’) to Fred, Marcia or Con. Instrument envisages gift over.

Used to be different tests -a bit complex Prior to McPhail v Doulton there were different tests for certainty for mere powers and trust powers in a discretionary trust Trust power – list certainty; must tell me the list of beneficiares (everyone) Bare power – criterion certainty; Now same test applies to both – criterion certainty

First, what is Criterion Certainty? Re Gulbenkian, Lord Reid (S14.4a) Must be able to determine whether or not a particular person ‘is or is not, on the facts at a particular time, within one of the classes of beneficiaries’ If can reasonably imagine cases where court could not tell, then void for uncertainty. Not void just because difficult to work out. That is, don’t need to have a complete list of all beneficiaries as for fixed trust but criterion must be clear

Application of this test; One test for bare power/trust power

Re Gulbenkian G then richest man in world tries to help son Nubar (a bit disabled) Cl 2 says t/ees may at their absolute discretion provide funds for benefit of (a) any person by whom Nubar is employed; and/or (b) any person in whose house or in whose company or under whose care Nubar may be residing. Courts found Mere power (ie T/ees could choose to give no money) (a) Found to be sufficiently certain (b) Less clear; ‘in whose company’?? friend? a doctor who drops in once a week? Old classmates? Judicial logic (a) Sufficiently certain (b) Would be uncertain if t/ee can’t carry out Matter of construction: start with the literal words, but if unclear ‘it is then the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlor’s or parties’ expressed intentions, however obscure or ambiguous…to give reasonable meaning to that language.’ T only fails if t/ees can’t work it out with help of court Just because mere power can’t just ‘push power aside’ and refuse to consider, can’t give to non- objects If you can’t tell whether a person is or is not a member of the class of benef, then bad for uncertainty of object Here, court could tell whether or not someone was a person who lived with Nubar, had Nubar in their care etc

One test for bare power/trust power Decision in McPhail v Doulton (Baden No 1) (S14.4b) Trust with trust power: Held that trust powers are to be subject to same test as mere 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 that class.’ -Criterion certainty

Types of uncertainty of object discretionary trust; conceptual, evidentiary and administratively unworkable (1) Conceptual : if court can’t resolve, trust void (2) Evidentiary or difficulty ascertaining whereabouts of members of class : court can deal with by applications for directions, trust often won’t fail for evidentiary uncertainty (3) Administratively unworkable; ‘May’ be also cases where ‘the definition of beneficiaries is so hopelessly wide as not to form “anything like a class” so that the trust is administratively unworkable’. Eg ‘on t for all the residents of greater London’

Conceptual uncertainty Lord Upjohn in Re Gulbenkian : ‘My old friends’ : invalid for uncertainty unless admissible evidence that the donor had some special ‘dictionary’ meaning to enable t/ees to ascertain meaning

Administrative Unworkability - A bit of discussion happening about whether it’s a third area of uncertainty Named as a kind of uncertainty of object in Re Gulbenkian Applied where class is enormous, but Re Blyth trust for ‘such organisations as Public Trustee [thinks] are formed for the purpose of raising the standard of life throughout the world’ – this conceptually uncertain rather than administratively unworkable? ‘West Yorkshire Trust’ for 2.5 million (S p 334)

Decision in Baden No 2 Pension trust for e/ees of business plus their depedents and relatives ‘Dependents’ sufficiently certain ‘Relatives’ more complex, but a valid class of objects, and one of the judges defined this as descent from a common ancestor.

Again here the judges saved it Sachs LJ says ‘relatives’ might be uncertain if taken to mean ‘ancestors’, but in this case take it to mean ‘next of kin’ Australia follows Stamp LJ: relatives means ‘nearest blood relatives’ – and this is sufficiently certain

Examples

Example 1 ‘I give the money in my bank account to my t/ees to distribute, within 3 years of my death, in their absolute discretion, b/n such of my nearest blood relatives who, at date of my death, possesses an intention to become a lawyer, the remainder to be divided between (as my t/ees see fit) the city- dwellers of Maldon, UK

C’s known relatives are two sons and several first, second and third cousins. At the date of C’s death three of her third cousins are enrolled in Law at LTU. Being third cousins mean they are a great- great-grandparent with C. C has 2 bank accounts…Account No 1 had a balance of $100,000, Account No 2 had $1,000 and hadn’t been accessed for ten years. Maldon has city itself and larger countryside, thousands of residents.

. City of Maldon boundaries include township of Maldon plus farmland, population 2 million. -I think trust power because; ‘to distribute, within 3 years of my death’ -intention can be made up; how do you know there is an intention? Very uncertain City dwellers of meldon; definitely undertain and administratively unworkable

Clause 1 This is not a model answer. These comments are written in note form (incomplete sentences, lack of citations etc). Please don’t copy out this answer in the exam. To be valid the trust must meet the 3 certainties. Will validly made, clearly an intention to create a trust. Certainty of Subject • Which bank account? Words clear but they refer to two identical things (the two bank accounts), see lecture on equivocation. Factual evidence can be led, including evidence of intention. This is likely to disclose that she intended Account 1 given that she may have forgotten all about Account 2, but would depend on facts available. • Assume certainty of subject. Certainty of Object – First class of beneficiaries • First part of Clause 1 aims to create discretionary trust for the following objects: ‘my nearest blood relatives who, at the date of my death, possess an intention to become a lawyer’. Is this sufficiently clear? • Test for certainty of object in a discretionary trust is criterion certainty; o Is ‘possesses an intention to become a lawyer’ sufficiently clear? What does ‘become a lawyer’ mean – does it include doing a law degree? Just starting it but not finishing? Finishing but working as a waitress? An individual’s intention might be an evidentiary problem but trust won’t fail for this reason (Kinsella v Caldwell) Arguably the trustees could solve it by inquiry, and evidence of enrolment in a law degree might be taken as an indication of the intention to graduate as a lawyer. As with ‘reasonable’ in Re Golay, courts comfortable with this kind of inquiry so might be OK. In Re Golay, courts accepted that even if an element of subjectivity was necessarily present, the matter could still be determined. I think same would apply here. • Arguably the first trust is valid but could go other way. If void for uncertainty of object, all money to remainder (Lecture Week 7) if second class of objects is sufficiently certain (see below). • Assuming that the objects are sufficiently certain, what are the trustees’ obligations re first class of objects? o Depends on whether a bare power or a trust power. Finely balanced. Bare power is indicated by permissive language, and a gift over is indicative of a bare power (ie the trustees not obliged to make any distribution at all). Here ‘in their absolute discretion…between such of…’ is permissive language. An equivalent clause in Re Leek, ‘absolute discretion…such one or more of…’ with a gift over (‘failing that’) was held to be a bare power. • What’s tricky here is the phrase ‘to distribute, within three years’: o these words are imperative and tend to suggest something should be done, indicating that perhaps the choice of doing nothing is not open to the trustees. If correct, it is a trust power, and the gift over (‘remainder’) simply refers to whatever money is left after some of it is given to the beneficiaries of the first trust. In this view ‘absolute discretion’ relates to who to select not whether or not to select at all. • If it is a trust power, the duty on the trustees to survey the class of beneficiaries is higher than for a bare power. Could mean if trust power would have to take steps to ascertain which of the identified relatives, if any, had the requisite intention. Inquiry would be limited to what was reasonable. • Nature of the trust in relation to remainder • The remainder is a discretionary trust with a trust power. Trust power because clear that remainder must go to this purpose and that the funds are to be ‘divided between’ the class as per the trustees’ discretion, imperative language. This suggests not intended that trustees give no one anything, and there’s no provision as to remainder of remainder! Certainty of object – second class of beneficiaries • Discretionary trust so criterion certainty. ‘City-dwellers’ and ‘Maldon’ unclear: does it mean the people living ‘downtown’ (as we say people who live ‘in the city’ in Melbourne, we don’t mean Nunawading), or people who lives within the boundaries of the urban city, or the broader area including some of the countryside? Possible this could be solved via the arm- chair principle (eg testator may have had a private dictionary meaning of ‘city-dweller’, eg homeless people living under a bridge in the city – unlikely!). But even if the meaning of city- dwellers and Maldon can be ascertained, the numbers in the class might be administratively unworkable in the sense that it would simply not be possible for the trustees to survey millions of people (or deal with enquiries from them) as to whether or not they were members of the class. It is likely that this part of the will is void for uncertainty of object. The remaining funds would revert to the residuary estate and be distributed in accordingly.

Clause 2 of Catherine’s will states I give $100,000 to my trustees to invest and apply the income thereof in holding an annual party in my memory at the Koo Wee Rup Pigeon Fanciers Club, the party to be attended by members of the Club and any other person the trustee shall select. • The primary issue here concerns the object of this trust. This is a trust for a purpose – the holding of an annual party in the testator’s memory at the KWRPF Club. The beneficiary principle requires that a trust be for a person or people, or fall into one of the recognised exceptions. • A trust for a party in the memory of an individual is not a valid charitable trust (See charitable trusts). • Could the party be regarded as akin to the anomalous memorial trust? o Equity sometimes recognises personal memorials (usually tombs or solid sculptures etc) as valid objects but as noted in Lecture Week 7 it is unlikely the anomalous categories would be extended by an Australian court in the 21st century. The party is not really like a fixed monument, arguably not a monument at all, so unlikely to be accepted in the anomalous category. • The only other possibility is that this could be seen as a Denley Trust. o In that case, it was held that a trust for a sports ground was valid because the trust deed named the individuals who would get to use it (the employees of company X and other members of the public as the trustees decide). Because the purpose was not vague and abstract (like a trust for world peace) and could be linked to identifiable people, it was held to be valid. Here, perhaps the members of the club and any other person the trustee shall select are equivalent to those people in the Denley case. o On the other hand, could it be said that the club members and others invited to attend the party are really beneficiaries of anything positive? What kind of party would it be? Are they really getting the benefit of anything? Certainly not as meaningful as access to sportsground in Denley. o [Just note it’s clear that the object is not the Club itself, although it may benefit indirectly from holding the party. If trust did say the income was to go to the Club (rather than the party), there are rules around gift to unincorporated associations which would apply: probably upshot would be that the Club takes all the money, with members entitled to an equal share depending on their contracts with the club. We no longer study this part of the course so you don’t need to know it.] • The second issue is that clause 2 creates a perpetual trust: the income on $100,000 would keep accumulating forever, and thus the trust breaches the perpetuity period (Tobias’ lecture week 7). The perpetuity period for a trust without a human beneficiary is 21 years.

Example 2 Residue of estate to be divided amongst ‘such Christian organisations and societies in such manner as my said trustee shall in his absolute discretion think fit’ Fixed trust or discretionary trust? Discretionary trust power Bare power or trust power? Trust power; must be given out Test for certainty of object? No its not going to past the test; you are not going to be able to list all the Christian organiations in the world. Criterion test? Class so hopelessly wide, ymca? Brotherhood of st larance? Judge said you never really know whether it is the clarity in the words or the clarity in the people that is the main issues -ive decided this is a trust for purpose not people; therefore will only consider charitable considerations. McCracken v AG(V) [1995] VR 67