Three Certainties Simplified

It all started with Knight v Knight 1840:

In order for there to be an express trust there must be:

  1. Certainty of Intention
  2. Certainty of Subject Matter
  3. Certainty of Objects

    Certainty of Intention

The key intention is a unilateral intention; we only look at the settlor’s intention alone.

Case

Principle/s

Richards V Delbridge 1874

  • The courts will construe the words in accordance with their proper meaning. Therefore, you don’t have to have the word trust, but something to that effect
  • Where a property owner clearly intends to make a gift of a legal title, but fails to carry out his intention, the court will not perfect his imperfect gift by reinterpreting the words as a declaration of trust.
Paul v Constance 1977
  • The words relied upon must be so used that on the whole they ought to be construed as imperative. If it can be gathered on the whole that a trust  is intended, no particular form of expression is needed
  • A person can create a trust without knowing it. You don’t need to use the word trust to create a trust.
Lamb v Eames 1879
  • No particular words will impose a trust on their own, however no trust is created unless it is clear from the whole document that a trust was intended
Re Adams and Kensington Vestry
  • Will-maker said “I give, devise and bequeath all my real and personal estate…to my dear wife Harriet…in full confidence that she will do what is right”. Held: Will created an absolute gift to wife, not a trust. Cotton LJ: precatory words are not enough to make a trust – must look the whole will to find the will-maker’s intention
Comiskey v Bowring-Hanbury 1905
  • The words in default indicates there is a duty to divide the property, that duty on the whole clause= she’s not holding the property for herself. Whereas in Re Adams it’s just a confidence as it’s difficult to say there was a duty
Azam v Iqbal 2008
  • If the settlor requires the trustee to keep the trust property separate from the trust’s own property then it’s likely that a trust is intended and vice versa.
  • i.e. If the alleged trustee is not required to keep the money from his own personal funds, is entitled to keep mix it with his own money and deal with it as he pleases and when he’s called upon to hand over an equivalent sum of money= he is not a trustee of the money but merely a debtor.
Charity Commission v Framjee 2014
  • The donations were subject to a trust. The trustees came under a fiduciary duty to ensure that each donation would be used only for the purpose the donor specified, those being the terms on which the donation had been solicited
Milroy v Lord 1862
  • It was not the intention of the settlor to constitute himself a trustee of the shares, but to vest the trust in S. L., there was no valid trust of the shares created in the settlor.
  • No valid trust of the shares was created in S. L., for although he held a power of attorney under which he might have vested the shares in himself,he did not do so, and was not bound to do so without directions from the settlor, since he held the power only as agent for the settlor.
  • Therefore, reversing the decree appealed from, that the disposition of the shares failed, as being an imperfect voluntary gift.
Jones v Lock
  • A trust will not be formed if it is clear that some other intention was there, such as the intention to make a pure gift

Certainty of Subject Matter

Case Principle/s
Palmer v Simmonds 1854
  • Settlor said, the trustee is to hold the bulk of my residuary estate on trust. There is no certainty of subject matter, there would be if the word bulk wasn’t there. A residuary estate can always be identified but bulk isn’t certain because we don’t know how much.
  • ‘the bulk of my residuary estate” cannot satisfy the certainty requirement though “my residuary estate” can
Re London Wine Co 1986

(segregation principle)

  • Cellar with lots of wine and the owner declared that I hold 20 of these 80 bottles on trust for you
  • The objects were not certain, non-had been marked out or separated specifically
Re Goldcorp Exchange Ltd 1995

(segregation principle)

  • Similar facts, settlor said I hold on trust 20 of these 80 gold bars for you and did nothing else
    • In both London Wine and Goldcorp, the court said there is no trust because the property has not been segregated.
  • Basically, if you mark out the property then that’s sufficient segregation.
Hunter v Moss 1994

(segregation principle)

(keep in mind it’s controversial)

  • A settlor declared himself trustee for the benefit of the beneficiary for some shares, he said I declare I hold 50 of my 950 shares in this PRIVATE COMPANY, on trust for you. He didn’t segregate.
    • Dillip LJ said that this trust was valid However because if we are dealing in the case of a trust declared in a will, if in the context of a will a testator says I want to give my sone 50/950 of my shares in my will this will be valid. He said it’s the same logic it should work in the context of a will= no need for segregation.
White v Shorthall
  • Australian case that didn’t follow Hunter v Moss- there was a declaration of trust over 1.5M shares and the claimant was to acquire an equitable interest in 222,000 of them. instead of holding that there was a trust of those 222shares, it held that the trustees could elect which of the total 1.5M shares would count as the 222,000 to be held on trust.
Re Golay’s Will Trusts 1965
  • A trust for B to receive an objectively reasonable income was upheld. The word reasonable provided sufficiently objective standard to enable the court if necessary to quantify the amount
  • the case seems to be saying that where the trustee is given discretion this may enable the court to declare that there is certainty of subject matter.
MacJordan Construction Ltd v Brookmount Erostin Ltd 1992
  • No separate fund was set up to pay the builders= no trusts
  • Just remember separation is really important basically.

 

Certainty of Objects (Beneficiaries)

 

Important Case: Mcphail v Doulton (Re Baden’s Deed Trust No1)

Application of is/is not test, Re Baden’s Deed Trusts 2:

  • Brightman J- held the trust to be valid , the word ‘relatives’ passed the test because the onus of proof was on those seeking money from the trustees to prove that they belonged to the class of beneficiaries. Decision help on appeal. A supposed relative would be bound to produce the relevant certificates or other sufficient evidence to prove their relationship. If no sufficient evidence can be produced the trustees would have no option but to decline to make a grant.
  • Stamp J- the name of the postulant must be capable of being put either in a ‘yes’ box or a ‘no’ box. Thus the discretionary trust would be void if some postulants’ names had to go in t ‘don’t know’ box. Prepared to treat relatives as meaning ‘next-of-kin’ in which case any postulant would fall in the ‘yes’ box or the ‘no’ box, so validating the trust
  • Sachs LJ- If a postulant coouldn’t prove that their name should go in the ‘yes’ box, then it went into the ‘no’ box
  • Megaw LJ- the test is satisfied if ‘as regards a substantial number of objects it can be said with certainty that they fall within the trust, even though a substantal number of other persons the answer would have to be not ‘they are outide the trust’, but ‘it isn’t proven whether they are in or out.’ What is a substantial number may well be a question of common sense and of some degree in relation to the particular trust.

Fixed Trusts

Case Principle/s
IRC v Broadway Cottages Trust 1995
  • This case concerned a discretionary trust and was superseded in that context by McPhail v Doulton, but it still states the law regarding fixed trusts
  • The test for certainty of objects is the complete list test. This means the definition of the beneficiaries must be certain enough, that one can identify each and every one of those beneficiaries.
  • This case is actually a discretionary trust case, but it leaves intact the rule for fixed trusts but overruled in relation to discretionary trusts by McPhail v Doulton (Re Baden No1. Read the whole case)
  • E.g the word relatives isn’t certain enough. There has to be certainty. There is a duty to divide that’s why all beneficiaries have to be identifiable so trustee can carry out his duty.

Mere Powers

Case Principle/s
Re Gulbenkian’s Trust 1970
  • The test is is or is not test as well. Same test because under a power if the trustee then decides to exercise their power they need to know for certain if such and such a person is in/out of the definition.
  • Mere power won’t necessarily fail for administrative unworkability because the trustee doesn’t have to use the power.
Re Hay’s ST 1982
  • A power need not be exercised. It may be but it doesn’t have to therefore it will not fail for administrative unworkability.
  • But it may fail for capriciousness:
    • Re Manisty- Lord Templeman yes it could, if the donee of a power exercises the power in such a way that was irrational or perverse to the settlor’s intentions it would fail for capriciousness

Discretionary Trusts

Case Principle/s
McPhail v Doulton 1971
  • Employer ran a company and created a discretionary trust for employees of company, former employees, their relatives and dependents.
    • The question was what does relatives mean?? The challenge was that this trust fails because relatives is a conceptual vague term. However we don’t need to compile every single person for a discretionary trust,  because all the trustee needs to do is identify if the person who comes to him comes under that category
Re Baden’s Deed Trusts (No2) How do we apply in practice the is/is not test.?

  • Three judges all said different things
    • The term relative is fuzzy
    • Stamp LJ, a very high degree of certainty is required, the term relative needs to be certain enough that we know for sure that any individual that comes to the trustee is in the group or out of the group, if there is a question mark, the whole trust will fail. He said there are two definitions for relatives 1. Can mean ‘descendants from a common ancestor’ but this definition will make the trust fail as its too wide. 2. ‘next of kin’ is a better definition
    • Sachs LJ, there must be people we can say for sure are in the in box, there will be people who fall outside and its ok to have a questions mark box because anyone in the uncertain box goes in the out category
    • Megaw LJ, as long as there is a substantial number of people that fall within the in box , it doesn’t matter that there are others at the penumbra
  • Once the class is conceptually certain, then it becomes a question of evidence as to whether an individual is in a class or not. i.e children= conceptually certain class.
  • He who does not prove he is a relation is not a relation, the concept of descendant of common ancestor being unclear. The concept of friendship isn’t clear.

Resolving Uncertainty

Case Principle/s
Re Coxen [1948] Ch 747
  • If it is a question of fact then the trustees opinion can resolve the problem, in this case money given to trustee for benefit for beneficiary living in a certain property, if trustee perceived that the beneficiary  had ceased to permanently to reside in property then the trustee could give it to someone else
Re Tuck’s ST [1978] Ch 49
  • Money  was given to hold for beneficiaries of Jewish blood who worship according to the Jewish faith. The settlor then instructed the trustees that if you’re not sure ask the Chief Rabbi of London. Expert nominated to clear up uncertainty. Court of Appeal- we don’t need to rely on chief rabbi as its not uncertain.
    • Lord Denning – there is no reason why an expert cannot resolve uncertainty.
Conceptual Uncertainty
  • Has to do with the precision or accuracy of the language used to define the class.
    • Term is so uncertain that you don’t know who you are looking for (object of the trust not defined with sufficient clarity).
Evidential Uncertainty =  the extent to which the evidence available enables specific persons to be identified as valid Bens

  • Doesn’t invalidate a discretionary trust or a power since if a person isn’t proved to be within the beneficial class then he is outside it.
Ascertainability = the extent to which the ‘whereabouts or continued existence’ of persons identified as beneficiaries can be ascertained

  • A trust won’t be invalidated because some class of beneficiaries may have disappeared or become impossible to find or it has been forgotten who they were.
Administrative Unworkability = the extent to which it is practicable for trustees to discharge the duties laid upon them by the settlor towards Beneficiaries.

  • Lord Wilberforce (McPhail) – if the definition of the beneficiaries is so hopelessly wide as not to form anything like a class, the clause will be administratively unworkable and invalid. If someone left property for benefit of all inhabitants of London trustees would have a hopeless task of administering the trust.
  • In re Manisty’s Settlement – Administrative unworkability only came into play when one had a trust power it did not apply when one had a mere power.
Re Hays
  • In the case of a discretionary trust a trustee is under more extensive obligations which the bens can positively enforce because they may lead to the court seeing to the carrying out of the trusts
  • In the case of powers vested in a trustee, the trustee only need consider periodically whether or not he should exercise the power, taking into account the range and appropriateness of possible objects of the power. The only control a court can exercise in the words of Templeman J= ‘is the removal of the trustees and an order requiring trustees to consider exercising their power.
Condition Subsequent = the bens interest will be liable to forfeiture on the happening of an event. The condition must be described in such a way that the court can see from the outset precisely and distinctly upon the happening of what event the interest is to be forfeited.
Condition Precedent = property is held on trust for persons subject to the fulfilment of a condition so that it is up to them to positively show they satisfy this condition precedent.

  • Less strict standard of certainty required.
  • Fixed trust for equal division among all those who can satisfy a particular condition= the condition must be sufficiently certain to enable a complete list to be drawn up of those who satisfy the condition.
  • Discretionary trust/fiduciary power= the condition must be conceptually clear criteria so that it can be said of any given postulant that he is/isn’t a member of a class. McPhail v Doulton.
  • Browne-Wilkinson J– in Re Barlow’s WT held that the qualifying condition is valid if it is possible to say of one or more persons that they undoubtedly qualify, even though it may be impossible to say of others whether they qualify or not.
  • Re Gulbenkian’s Settlements Trusts
    • The power is valid if it can be said with certainty whether any given individual is or isn’t a member of the class and does not fail simply because it is impossible to ascertain every member of the class
    McPhail v Doulton
    • The trust should be valid if it can be said with certainty that any given individual is or isn’t a member of the class
    Mettoy Pension Trustees LTD v Evans
    • If a fiduciary power is left with no one to exercise it, the court must step in. the court if called upon to execute this power will do so in the manner best calculated to give effect to the settlor’s or testator’s intentions.

     

    Overview of situation surrounding certainty

    • If no certainty of intention = no trust
    • No subject matter = no trust
    • If no certainty of object= held on resulting trust (established certainty of intention and subject matter)
    • Resulting trust back to settlor or will-maker’s estate
      • (residuary under the will) if trust fails.

    Share:

    Leave a Reply

    Your email address will not be published. Required fields are marked *