certainty of objects

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Equity & Trusts Assignment

Student ID: 10322658

Introduction

As we all know, for a trust to exist, the three certainties must be present: certainty of intention (i.e. to create to trust), certainty of subject matter (the property in the trust) and certainty of objects (those who will or may benefit under the trust): per Lord Langdale in Knight v Knight.

To fulfil the requirements of ‘certainty of objects’, it is of long-standing in law that a trust (other than charitable trusts) must have an ascertained or ascertainable beneficiary.  The reason for this ‘beneficiary principle’ is that a trust gives rise to an obligation and so, consequently, there must be a beneficiary to whom the duties of a trustee are owed.  In other words, the beneficiaries have a correlative right to render the trustee accountable for his actions and, if necessary, compel performance of his obligations by court order: see Morice v The Bishop of Durham below.

To what extent, however, is it legitimate for non-charitable purpose trusts to exist where there are no beneficiaries vested with equitable ownership in the trust property?  

We will discuss below, under several circumstances and exceptions, the beneficiary principle does not apply to those non-charitable purpose trusts.  Thus, they are valid trusts.


Beneficiary Principle

It is the principle that, with the exception of charitable trusts, ‘a trust to be valid must be for the benefit of individuals’.  Therefore, under this rule, the beneficiaries of trusts other than charitable trusts must be legal persons (i.e. either human beings or trust corporations) which are ascertainable.

According to Leahy v AG of New South Wales,

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A gift can be made to persons (including a corporation) but it cannot be made to a purpose or to an object; so, also, a trust may be created for the benefit of persons as cestuis que trust, but not for a purpose or object unless the purpose or object be charitable.

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The basic idea of the validity of such trusts relates to the question of enforceability.  In other words, a non-charitable trust is void unless there are ascertained or ascertainable beneficiaries capable of enforcing the trust.  As per Sir William Grant in Morice v The Bishop of Durham,

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Every trust (other than a charitable one) must have a definite object.  There must be somebody, in whose favour the court can decree performance.

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The above rule has been followed by Ernst & Young v Central Guaranty Trust Co (No. 2) which has been restated by Harman J in Re Wood, who observed “that a gift on trust must have a cestui que trust”.  The principle is also affirmed by Roxburgh J in Re Astor’s Settlement Trusts and the Court of Appeal in Re Endacott.

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However, there are number of circumstances and exceptions (albeit limited) in which the beneficiary principle does not apply.


Exceptions to Beneficiary Principle: Valid but unenforceable Trusts

Usually, these exceptions are referred to as “trusts of imperfect obligation” or “unenforceable trusts” because the trustees cannot be compelled to carry them out.  If the trustees are unwilling to perform the trust during the specified period of the trust (or, if none, the perpetuity period), or if there is a surplus after the purpose has been carried out, there will be a resulting trust for the settler’s estate.  

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