Certainty of objects: a requirement to create an express trust

What is certainty of objects?

The objects of a trust are the people who benefit from it (beneficiaries). Certainty of objects is one of the three ‘certainties’ that need to be present for a private express trust to be valid (Knight v Knight (1840). The other two are:

  • certainty of words, (it must be clear what the settler intended the trust property to be used for); and
  • certainty of subject matter (the exact property that is to be the subject of the trust must be identifiable).

Why do we need to identify the objects of the trusts?

There must be someone capable of bringing an action to court if the obligations of the trustee(s) are not fulfilled. The trust must also be capable of being implemented and if there is no beneficiary to gain the benefits, the whole concept of the trust is pointless.

Certainty of objects where there is a trust for an individual

Where the person who will benefit from the trust is expressly named in the trust document, there is no confusion as to the certainty of objects.

Where an individual is not expressly named in the trust document, but the document refers to a description of the person that should benefit from the trust property, if the description is so precise and clear that it is obviously that person, this requirement is satisfied. For example: ‘Hold property on trust for my eldest son’.

Certainty of objects where the trust is created for a group of people

Where a trust is created for a class or group of people described in the document such as ‘my children’, this will only succeed where there is sufficient certainty to identify every member of that class/group of people.

The group of people may be defined or described in such vague terms that its meaning could be interpreted in a number of different ways; this is known as conceptual uncertainty. Problems also arise if evidence is needed to show who is actually in the class of people and the evidence is unavailable.

Tests for certainty of objects

The test to apply to ascertain certainty of objects differs depending on whether the trust is fixed or discretionary.

Fixed trusts

A fixed trust is where the person who makes the trusts (the settler) outlines how the property is to be divided between the beneficiaries and the trustees have no authority to alter the shares allotted. So, for instance, if there was £100 of trust property and there are 10 people in the group, if the testator gives £10 per person, this is a fixed trust.

The class ascertainability test applies for fixed trusts. This means the trust will only be valid if it is possible for the trustees to draw up a complete list of all the beneficiaries.

Discretionary trusts

A discretionary trust gives the trustees the power to divide up the property as they see fit, the shares are not pre-determined by the person who creates the trust.

In the case of a discretionary trust, since the landmark case of McPhail v Doulton (1971), the appropriate test to use for discretionary trusts is the individual ascertainability test. This means the trustees must be able to say with certainty that any given individual is or is not a member of the group of beneficiaries.

When might uncertainty of objects arise?

Failure on the grounds of administrative unworkability

Even where a discretionary trust passes the individual ascertainability test, the trust may still fail on the basis of administrative unworkability. This could occur where the meaning of the words used in the trust document is clear, but the definition of who the beneficiaries are is so wide that it is practically impossible to establish the group of beneficiaries. For example, if a trust was established for ‘the residents of Greater London’, there is no way of establishing exactly who would come into this category of people (McPhail v Doulton).

Curing uncertainty by referring to a third party

Where it appears a trust could fail on the grounds of conceptual uncertainty, the courts have been willing to allow a third party named in the trust instrument to adjudicate on the matter (Re Tuck’s Settlement Trusts (1977)).

Outcome if objects are uncertain

If no certainty of objects can be established, the trustee will hold the property for the settlor on a resulting trust. The settlor can reclaim the legal title back from the trustee and make a new valid, trust. If the trust arises after the settler has died, the trustee will hold the property on trust for the benefit of those entitled to the residuary estate of the deceased.