• QUESTION 1

# Why there is a need to distinguish between

fixed trust and a discretionary trust in
discussing certainty of object and explain the
nature of these two trusts
Certainty of Object
Nature of Fixed Trust and Discretionary
Trust
• Fixed Trust

• The trustees are given very specific instructions

as to how and to whom the subject matter of the
trust is to be distributed
• The trustees do not have any power:-
- to vary the amounts give
- to the different beneficiaries named,
- -or to decide whether or not to benefit one
particular beneficiary over the others.
 Inland Revenue Commissioners v
Broadways Cottage Trust
• Jenkin LJ said:”there can be no division in
equal shares amongst a class of person unless
all the members of the class are known”.
• This normally been taken as an authority for
general proposition that in order for a fixed
trust to be valid.
• A list of all possible objects must be possible
of compilation, the so called “list certainty”.
- A fixed trust might look as follows:
• I give £10,000 to my trustees to divide equally between my
children, Jacob and Frances
• You will see here that the trustees have no discretion as to how to
divide the £10,000 .
• The money must be divided equally. Neither are the trustees given
any discretion as to whom the money is to be given.
• The settlor is clearly stated that the money is to be divided equally
• Between Jacob and Frances.
• They are each to be given a half-share of the money and so
• will each receive the sum of £5,000.
• Further example of a fixed trust
• I give £10,000 to my trustees to hold for my children,
Jacob and Frances.
• Despite the fact that there is no express stipulation as
to how the money is to be divided,
• the trust will still be fixed. In the absence of a direction
as to how the trustees are to divide
• the money, the equitable maxim ‘equity is equality’ will
apply, and the money will be
• divided equally between the two children, as with the
first example.
 DISCRETIONARY TRUST
• With a discretionary trust
• A trust where the share for each beneficiary or to whom
the share is given is not being specified.
• Beneficiary is not the equitable owner of the
interest.(suspense until - exercise the discretion)
• the trustees are given discretion, either to
• decide the shares into which the trust fund will be divided
• or to decide who will benefit
• A discretionary trust might look like :-
• I give £10,000 to my trustees to divide between those of my
children they consider most deserving in their absolute
discretion.
• In this scenario, the trustees have discretion as to how the money is
divided.
• discretion as to whom the money is given.
• The Settlor has allowed them to choose which of
• the children they consider most deserving and divide the money
• between them.
• No shares are specified and so the trustees are free to
decide in what proportions the money is to be divided.
• Thus, the trustees could decide to split the money between Jacob
and Frances, £7,000 to Jacob and the remaining £3,000 to Frances.
• Alternatively, if they considered Jacob undeserving of a share of
the trust fund, they could decide to benefit Frances with the whole
£10,000. Such is the nature of their discretion.
 Why there is a need to distinguish
between fixed trust and discretionary
trust?
1)The trustee know to whom the property
should be distributed.
Fixed trusts: the property is held for a fixed
number of beneficiaries, and the trustee is
obliged to distribute property without any
discretion over who gets what.
Discretionary trust, the trustee has discretion
over his actions.
2.Lack of certainty of object will cause
the trust to be void
• Fixed Trust: risk of uncertainty is lesser
• Discretionary Trust: Trustee need to exercise
his discretion and try as much as possible to
ensure certainty of beneficiary.
 3.Beneficiaries’ right over trust
property
• Fixed trusts, the potential beneficiaries have the
equitable ownership of their property. Beneficiaries
has equitable right against trust property.
• The beneficiaries can compel the trustee to act
according to trust deed.
• Discretionary trusts-Is not the equitable owner of the
interest
- The beneficial interest is in suspense until trustees
exercise the discretion .Trustees decide both who shall
benefit and what the benefit shall be.
- Beneficiary cannot claim any right over the interest
unlike.
 4.Fail to distribute property, trustee
liable for breach of trust
• Lack of certainty of object will cause trust to be
void.
• The beneficiaries must be identifiable.
• Failure on part if trustee, will cause him/her liable
of breach of trust.
• Fixed trust: Must execute trust according to fixed
portion.
• Discretionary trust , according to trustee’s
discretionary power . Given power to carry put
the trust.
• Question 2
# Explain the case of Mc Phail v Doultons and Re
Baden Deed Trust and illustrate and explain
the following terms based on these cases :
a.) conceptual uncertainties
b.) evidential difficulties
c.) administrative uncertainty
 Mc Phail v Doultons
• In McPhail, Bertram Baden established a fund for the
benefit of the staff of Matthew Hall & Co Ltd. He died
in 1960 and the executors of his trust claimed that the
trust was invalid for uncertainty of objects. It was,
therefore a power not a trust.
• The issue contested was contained in clause 9(a) of the
trust deed.
• “The trustee shall apply the net income of the fund in
making at their absolute discretion grants to or the
benefit of any of the officers and employees of the
company or to any relatives or dependents of any
persons in such amounts as they think fits.
 JUDGEMENT
1st instance
It was power and not a trust
COA
It was power and not a trust
HOUSE OF LORD
The deed created the trust and not power
 In re BADEN'S DEED TRUSTS (No. 2)
• Whether inclusion of relatives and
dependants made trust void for uncertainty
• The decision of this case provides the good
example of the application of the criterion
certainty test.
• The test : can it be said with certainty that any
given individual is or is not a member of the
class
“ Sachs LJ stated that in applying the test its essential to
bear in mind to difference between conceptual
uncertainty and evidential difficulties.”

• It was held that relatives are all those person from

whom its possible to trace legal descent from a
common ancestor. The widest meaning for relatives did
not produce uncertainty and it was satisfactory as a
criterion for a discretionary trust. Dependant was held
to mean ‘dependant’ for the ordinary necessities of life
for a person of the applicant class and position.
Dependant was also held to satisfy criterion certainty.”
 THREE KINDS OF UNCERTAINTY
Conceptual uncertainties
 Vagueness of language used by the testator to express his intention
 Conceptual uncertainty arises :-
-to benefit "handsome barristers“
-My shorter employee
-For my old friends and business associates
Effect: Express trust fail
Evidential difficulties
• Language used is precise
• Evidence is need for the trustee to carry out the settlor’s instruction
Administrative uncertainties
• Definition is clear but in terms of administrative is impossible.
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