Discretionary Trusts, Fixed Trusts, Knight v Knight

Clara was a keen squash player and a member of the Wombourne Squash Club. She died last week following an accident on the squash court.

Three weeks before she died Clare wrote to Benjamin saying he could have her collection of Jill Jeffery paintings. Before Benjamin could collect the paintings Clara died. Clara' s will left the paintings to Amarjit.

Clara's will appointed Benjamin her executor and contained the following information:

  1. I leave £20,000 to Elizabeth in the hope that she will divide it equally amongst all my old friends.
  2. I leave £30,000 on trust for the employees or ex-employers of my company Crunchy Biscuits Ltd or their relatives or dependants as my trustees shall in their absolute discretion think fit.
  3. I leave £15,000 for the maintenance for my car Oscar.
  4. I leave £500,000 for the construction of a new squash court at Wombourne Squash Club.

Advise us to the validity of the clauses contained in the will and whether Benjamin or Amarjit is entitled to the collection of the paintings.

This question needs us to firstly look at the three certainties rule in detail to ascertain whether or not the trusts under the will are valid before moving on to look at the issue of the painting that has been left.

First we will look at part a - a fixed trust. Assuming that the necessary formalities have been adhered to for the formation of a will, for example section 9 of the Wills Act 1837, the requirement for the will to be in writing, then the test that is used to evaluate whether or not the trusts created by it are valid is the three certainties test as set out in the case of Knight v Knight.1

First, is their certainty of intention? As stated in the case of Re Hamilton 2 "you must take the will which you have to construe and see what it means. 3 " After an initially lenient view taken by the courts as regards to so called "precatory words," the case of Re Adams and the Kensington Vestry 4 marked a distinct turnaround. Here it was established that beneficiaries would not be made into trustees unless this was the clear intention of the testator. In Adams a will to give "in full confidence that she would do what was right as to the disposal thereof between my children" was held not to be valid as it is was an absolute gift. Thus in my view the Court could hold the clause here to lack certainty of intention by the very nature of the words "in the hope that" which seem to lack probity of intention, especially in the light of the words "in full confidence" being disallowed.

If the trust fails on certainty then if legal tile is judged to have passed then the transferee (Clara) will hold it free of any trust and it will be held as an absolute gift.

If the Court holds that the test for certainty of intention is passed, then it shall look at certainty of subject matter. The test here will be based on whether or not the trust property is properly defined in objective rather than subjective terms, and this cannot be something on which a matter of opinions differ. Thus, the words "I leave £20,000" should definitely satisfy this requirement.

As regards the certainty of objects, it is doubtful that "my old friends" will be held, to be sufficiently certain, as friendship is indeed a highly subjective concept. The arguments below (part b) would not apply to this case, as this is not a discretionary trust but a fixed trust. Therefore, the trustee has no discretion of how to delegate the trust property but must do so in equal shares. Therefore as per the case of IRC v Broadway Cottages5 the entirety of the list must be drawn up - the class ascertainability test - and as such, if all the members of the class are not known then the trust will fail. As such it is submitted that the enforcement of trust a is likely to fail on grounds of lack of certainty and/or intention.

As regards certainty of objects we will now look at part b, where the intention and certainty of subject matter are obviated by the words "I leave on trust" and "£30,000." This section of the will is an attempt to set up a discretionary trust. This gives the trustee discretion as how to distribute within a certain class of beneficiaries.
The Court will ask whether or not there is certainty as regards the objects of the trust. A striking comparison can be drawn between the case here and the case of Re Baden's Deed Trusts (no 2), 6 property was 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". In this case, the trust was held to be valid, and in responding to the submissions of the applicant that it was necessary to say of each individual whether or not they were in a class or not, the Court held this was not so. In assessing the class ascertainability, for discretionary trusts which Baden's was, and the one in our case is (part B) the courts held that the trust was valid. However, the reasons of argument offered by their Lordships differed. Sachs LJ said that the Courts were only concerned with conceptual difficulty, i.e. who the relatives were, so it would not be fatal that evidential difficulties arose. Megaw LJ was of the opinion that only substantial number of the objects needed to be shown to come under the trust, whilst Stamp LJ provide the strictest test - that there had to be a comprehensive survey of the range of objects drawn up, but it would not be fatal if everyone of the beneficiaries could not be drawn up. Thus the question of whether or not such a trust as set out in this scenario, for all my old friends would fail, as it very much remains an open one and remains undecided, because the exact test to be used is far form agreed.

As regards to part c, and d, based on the same test under Knight and Knight as above, it could be judged to be certainty of intention to create a trust here, though the use of the words "I leave" may leave a little too much for the courts to interpret as regards to exactly what the testator had in mind. As regards certainty of subject matter, there are no problems however, £15,000 and £500,000 are directly referred to as the subject matter. Yet as regards to objects - need they be people or can they be inanimate objects or clubs?

As regards to the club, the trust here would likely be granted charitable status, and thus rather different rules apply then for standard express trusts. This is likely to be considered under the ambit of been a trust for the advancement of education, as per the statue of The Recreational Charities Act 1958. Section 1 stipulates that a trust to assist in the provision of recreational facilities will be valid. From the case of IRC v McMullen7 it is clear this can be for activities outside the classroom such as for sport as in the IRC case itself, or for research that will benefit the public community. Not only do charitable trusts receive tax benefits but they also receive benefits as not having to meet the test of the three certainties as in Knight v Knight. On the basis of all the points raised, this part of the trust should be upheld.

As regards to the trust for the car, it seems that there is no specific object as regards to who should carry out the maintenance of the car, and unless the trust would fit under the one of the three heads for charity, that been the advancement of education, relief or poverty or been for the benefit of the public, then the trust must surely fail for lack of certainty. An example of the trust been upheld would be if the car was, for example, from a film that was made in the town of the testator, and it needed to be maintained as it was on show o the public in the film museum dedicated to the picture. In this case, there would be an argument that the trust would be for the benefit of the public as a whole.

Finally as regards to the painting then the fact that the gift is in writing should be enough to evinced c that the gift has been created and as such, as the will only comes into force when the testator dies, Benjamin will take the paintings, as despite property not passing, he has gained good title in them.

  1. (1840) 3 Beav 148.[^ Return]
  2. [1895] 2 Ch 370[^ Return]
  3. Per Lindley LJ at pg 373[^ Return]
  4. [1884] 27 ChD 394[^ Return]
  5. [1955] Ch. 20 (CA).[^ Return]
  6. [1973) Ch 9[^ Return]
  7. (1981) AC1 [^ Return]

BIBLIOGRAPHY

Hayton D. Commentary and cases on Law of Trust and Equitable Remedies

Moffat G. Trusts Law: Texts and Materials Butterworths Law

Sydneham A. Nutshells Equity and Trusts Sweet and Maxwell

Todd, P. Textbook on Trusts 4th ed Blackstone's Press

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