Three certainties

For a valid express private trust, the three certainties of intention, subject matter and objects
must be satisfed: Knight v Knight
> These need to be present so that a trust can be practicable, enforceable and capable of
supervision by the court
CERTAINTY OF INTENTION
> It is necessary for settlor to create a trust as opposed to gift or po!er"
> Trusts can be expressly declared or inferred from conduct of parties or surrounding
circumstances
> #o general re$uirement for a trust to be created or evidenced in !riting, the exception being
express trusts of land !hich need to be evidenced in !riting and signed on behalf of the settlor
> Test: is there a clear intention that property is to be held on trust for the beneft of a third
party from construction of !ords used and%or behaviour of the parties
> Intention must be to separate legal and e$uitable o!nership and to impose obligations of
trusteeship on the holder of the title: &right v 't(yns
> )aul v *onstance + possible to create a trust !%o you (no!ing !hat a trust is
, court can infer that you intended to create a trust
, fact that the money is held by one person but more than one person is intended to be the
benefcial o!ner + this ma(es it loo( li(e a trust
> -e Kayford + mail order business in di.culties and accountant decided customers pay in
advance for goods
, company did go into insolvency and customers !anted their money bac(
, held that intention that accountants had demonstrated !as an intention to segregate money so
that it could be attributed to the customers
Problem of precatory words
> There can be no trust based on precatory !ords alone: /ussoorie 0an( 1td v -aynor
> ' mere expression of desire to ma(e a gift or to confer a beneft is insu.cient
> ' mere obligation or mere re$uest is not enough: 2!eeny v *oghill
> &here there is doubt, the burden lies on the *1 to establish the necessary intention on a
balance of probabilities: -e 2no!den
> -e 'dams 3 Kensington 4estry: + testator5s estate !as devised by !ill to the absolute use of
his !ido! 6in fll con!dence that she !ill do what is ri"ht as to the disposal thereof bet!een
my children, either in her lifetime or by !ill after her decease7
, this is merely a moral obligation and did not impose a legal obligation on the !ido!
, it !as an absolute gift, she !as entitled to use the property other than benefting the children
> 1ambe v 8ames: , testator left his estate to his !ido! 6to be at her disposal in any way she
may thin# best, for the beneft of her and her family7
, held this !as an precatory expression and did not connote the necessary intention to create a
trust
> /ussorie 0an( v -aynor: , !here a husband left land to his !ido!, $feelin" con!dent that
she !ill act justly to our children in dividing the same !hen no longer re$uired by her7
, !ido! mortgaged the land and eventually the ban( sough to sell it to recoup the loan
, she argues that as she !as a trustee, the mortgage !as invalid
, 91 held no trust existed because the husband had used precatory !ords
, she !as legal and benefcial o!ner of the property and the mortgagee could sell the property
> *omis(ey v 0o!ring,9anbury: , legacy !as left to a !ido! $in fll con!dence7 that she
!ould leave the property on her death to one or more of the testator5s nieces
, the precatory !ords !ere in themselves ine:ective to create a trust
, this !ill, ho!ever, !ent on to declare that 6in default of any disposition by here thereof by her
!ill, I hereby direct that all my estate and property ac$uired by her under my !ill shall at her
death by e$ually divided among the surviving said nieces7
, 91 held in loo(ing for certainty of intention, it !as necessary to consider trust document as a
!hole
, imperative !ording of the gift over imposed the mandatory obligation upon the !ido!
> /ore liberal approach: ;ames 1;: I could not help feeling that the o.cious (indness of the *ourt
of *hancery in interposing trusts !here in many cases the father of the family never meant to
create trusts must have been a very cruel (indness indeed
> 2ham" /idland 0an( v &yatt + a husband and !ife declared a trust in respect of the
matrimonial home
, benefcial interest !as to be shared e$ually bet!een the !ife and their daughters
, property !as mortgaged to the /idland 0an( and the husband continued to borro! on the
security of the family home
, he did not inform the ban( of the trust and ban( eventually sought to sell the property in order
to recover the husband5s outstanding debt
, 9* held that husband had never had the intention to truly divest himself of his interest in the
property
, had had declared the trust merely as a means of shielding the family home from claims of the
0an(
, there !as no real intention to create trust, the declaration !as a mere pretence and the trust
!as void
, sham trust !ill fail and title to the property remains !ith the settlor
%aw or constrction&
> -e 2teele5s &ill Trust + involved a solicitor drafting a trust deed for a client, but unfortunately
utilising an outmoded precedent that featured precatory !ords: 6I re$uest my said son to do in
all his po!er7
, in the more contemporary setting, there should have been no trust because of lac( of certainty
, nevertheless, judge concluded that the deliberate use of the precedent demonstrated the
necessary intention to declare a trust of a diamond nec(lace
, 1angan: describes this as a rouge decision and thoroughly unsafe
, disregards the actual !ording of the deed, imputes an artifcial intention to the settlor and
departs from the general rule that extrinsic evidence is inadmissible in the construction of a trust
deed
'istclose Trst
> Intention may be inferred !here the property is transferred and segregated from other funds
on the shared understanding of both the payer and the recipient" that is to be held on trust:
0arclays 0an( v <uistclose Investments 1td + -olls -a=or borro!ed >?@,??? from <uistclose
investments under and arrangement !hereby the loan !as to be paid only for the purposes of
providing a dividend for shareholders that the company had already announced
, money !as deposited in a specially created ban( account at 0arclays, to !hom -olls !as
already heavily indebted
, before payment of dividends, -olls !ent into voluntary li$uidation
, <uistclose claimed the money in the special account on the ground that the parties had created
a trust and that, as its purpose had failed, the funds !ere to result bac( to itself
, 91 held that the shared intention of payer and recipient" had been that the money !as to be
held on trust unless it !as employed for the specifed purpose
, as specifc purpose had failed, money !ould be held for beneft of <uistclose
> Intention may be inferred from a unilateral act pre payment": -e Kayford + the unilateral act
of the company paying the payments into a trust account demonstrated its intention to create a
trust /eggary ;"
, not <uistclose trust due to absence of bilateral understanding bet!een the parties
, but is <uistclose due to segregation of funds
> Intention may arise !here both payer and recipient have expressly attached restrictions to the
recipient5s use of funds: *arreras -othmans v Freemans /atthe!s Treasure 1td + *arreras
manufacturer of cigs" employed advertising frm Freeman" to place ads in media
, frm incurred substantial expenses and invoiced *arreras for liabilities it incurred on their behalf
, frm experienced fnancial di.culties and *arreras insisted they open a special ban( account
into !hich payments !ere made, frm agreed
, frm became insolvent
, 9* held a trust arose as soon as money !as paid into special account
, (ey factor !as that *arreras intended the frm be subject to an enforceable obligation to apply
the money for specifed purpose
Conse(ences for lac# of certainty: alternative options as to !hat !ill become of the
property
given or ban$ueted to a A
rd
party, it !ill be vie!ed as an absolute gift to that person +
legal and benefcial title !ill be transferred !ithout recipient being subject to any legal
obligations to do anything !ith property
settlor retained legal title to the property, it !ill simply remain in settlor5s estate -e TBC
8urope Droup )lc
CERTAINTY OF )*+,ECT -ATTER
> 'll trust property must be identifable
> 2ettlor must provide means by !hich the interests of benefciaries can be ascertained
.ith re"ard to trst property
> &ords employed by settlor must be such that they identify !ith clarity the property to be held
on trust or at least provide machinery through !hich such property can be ascertained
> )almer v 2immonds + testatrix by !ill" left residue of her estate to her friend subject to
proviso that, if he died childless, 6he !illE leave the bl# of my said residary estate unto7
four named persons
, reference to Fbul(5 !as ine:ective to create a trust
, no clear meaning and thoroughly uncertain
, she had failed to identify Fa defnite, clear, certain part of her estate5
> -e Dolay + testator set up trust under !hich Tossy !as to 6enjoy one of my Gats during her
lifetime and to receive a reasonable income from my other properties7
, di.culty concerned calculation of 6reasonable income7
, held that 6reasonable7 o:ered an objective determinant
, court could loo( at Tossy5s age, her present income and current outgoings and conjure up a
fgure that !as reasonable for her
> -e ;ones + a trust of 6sch parts of myE estates as she shall not ha/e sold7 failed for
uncertainty of subject matter
, vie!ed as being an absolute gift to the legatee
> 2prange v 0ernard + $remainin" part of what is left0 + no certainty of subject matter
because it !ould be uncertain !hat !ould be left on the husband5s death
> In the 8state of 1ast , $anythin" that is left0 + court too( a di:erent approach to 2prange
because brother !as given merely a life interest in property
, trust created on death of testatrix, and trust property !as su.ciently certain at that date
> Hegree of certainty for intangible assets shares, money in ban( accounts, debts" is di:erent
for that re$uired of tangible assets
, 9ayton: describes this as an old fashioned, but surely spacious, distinction
, 9unter v /oss + 9 !as entitled, under his contract of employment !ith /, to claim I? shares
out of @I? shares in a particular company held by /
, although this sho!ed intention to increate trust, / did not specify !hich shares !ere subject to
this arrangement
, / later sold @I? shares and (ept proceeds for himself
, 9 claimed a proportion of those proceeds
, in orthodox approach, it !ould be impossible to identify precisely !hich I? shares !ere to be
subject matter
, *' held there !as a valid trust + since shares !ere identical and indistinguishable, any I? !ere
capable of forming subject matter
, commentators criticise approach of *' and see no logical distinction to justify divergent
treatment of tangibles and intangibles eg I? identical boo(s"
, 9ayton: suggest court !as blinded by merits of donee, !ho had done a!ful lot for ungrateful
donerJ
> 'fter,ac$uired property cannot be the subject matter of a trust property that may vest in the
future, but as regards !hich there is no certainty"
.ith re"ard to bene!cial interest
> *urtis v -ippon: each benefciary5s share under the trust must be allocated in some !ay !hen
the trust is established
> 0oyce v 0oyce + property consisted of t!o houses, out of !hich one of the benefciaries !as
going to chose !hich one she !antedJ
, ho!ever, she pre,deceased testator and died !ithout ma(ing a selection + entire trust had to
fail for uncertainty of benefcial shares
, testator had prescribed a method of allocation that had subse$uently become impossible
> -e Knapton + no machinery provided through !hich the properties !ere to be divided bet!een
benefciaries
, 9* held benefciaries had a right to chose !hich house they !anted +order of choice !as
according to order their names appeared on !ill and others !ere !or(ed out by the dra!ing of
lots
, court felt able to imply a right of selection in order to save be$uests
> Fixed trust + Fe$uity is e$uality5 can be applied !here it does not declare the benefcial interest
to be ta(en by each benefciary: 0urrough v )hilcox + trust set up to beneft settlors son and
daughter, benefcial shares remained unspecifed
, court !as able to uphold trust by invo(ing Fe$uity is e$uality5, each child deemed to have an
e$ual share
, maxim can only be invo(ed !here there is no contrary intention demonstrated: /arguiles
> Hiscretionary trusts + can only apply if trustees fail to exercise discretion
Conse(ences for lac# of certainty1 alternati/e possibilities
no certainty of trust property !hatsoever + there can be no trust and property !ill remain
!ith settlor%settlor5s estate susceptible to claims of creditor"
lac( of certainty as to benefcial share + trust !ill fail and if property has left the settlor"
trustee !ill hold property on resulting trust for settlor%settlor5s estate
CERTAINTY OF O+,ECT) 2+ENEFICIARIE)3
> There have to be benefciaries !ho are certain in order for the trust to be e:ective + must be
someone !ho can enforce the trust or someone in !hose favour the court can enforce the trust:
-e 'stor
> There must be human benefciaries except for charitable trusts"
> 0enefciaries must be individually identifed or identifed as a member of a clearly defned
class: -e TBC 8urope Droup
> This test varies bet!een fxed trusts benefciaries and their shares have been identifed" and
discretionary trusts trustee selects !ho exactly is to beneft from a !ider class specifed by the
settlor"
> #o need establish this for charitable trusts because the 'D and the *harity *ommission have
the legal authority to enforce charitable trusts
Fi4ed trsts
> *onceptual and evidential certainty + fxed trust is to confer fxed benefts upon fxed
benefciaries , you need to (no! !ho are all of the benefciaries
> The fnite lists test + a fxed trust is void unless all benefciaries are ascertainable
> I-* v 0road!ay *ottages Trust + you must be able to compile a complete list of benefces in
advance for there to be certainty
, a trust in favour of customers !as upheld because benefciaries could be identifed in context
of the payments made to them, but trust in favour of suppliers failed because of lac( of certainty
of objects + not possible to dra! up a complete list of $r"ent0 suppliers
5iscretionary trsts and powers of appointment
> there is no division of e$ual shares, trustees have a discretion + so do not necessarily need a
complete list of the benefciaries
> -e Dulben(ian + !here there are fduciary po!ers po!ers of appointment"
, the is or is not test
, 1ord -eed + thought is or is not test !ould be enough + slightly less strict than complete list test
, 1ord 9odson + !anted complete list test to apply
, 1ord Cpjhon + also appreaed to be in favour of complete list test but suggests !e should use is
or is not test + not clear !hich test he is in favour of
> /c)hail v Houlton 91 + /C2T '))1K these tests frst
, applies the is or is not test to discretionary trusts
, it must be possible to say !ith certainty !hether someone is or isn5t a member of the class of
benefciaries
, if there is anyone about !hom they are unsure, then the trust fails
, 1ord &ilberforce + thought 1ord Cpjohn !as in favour of is or is not
, 1ord 9odson + thought !hat 1ord Cpjohn !anted complete list , majority agreed !ith this
'))1K T98 T82T + eg can !e say !ith certainty that B in !ithin the class of 6friends7
8xceptions%other approaches to the is or is not test:
> -e 0adens Heed Trust #o > *' + defnition of benefciaries as 6relatives7 and 6dependants7
, *' found these expressions to be conceptually certain
, relatives proved more problematic than dependants
Postlant6indi/idal ascertainability test
, )tamp %, + term is synonymous to next of (in and nearest blood relations,
, if the ans!er to !hether a person is part of the class is 6I don5t (no!7, then the discretionary
trust is void for uncertainty
, )achs %, + said is or is not test should be applied + in deciding this, if !e reverse burden of
proof and place onus on the *1, if they fail to prove they fall in class, then !e !ill deem that they
do not but still important to recognise some terms !ill be so vague that they !ill be uncertain"J
, ta(es a more lenient approach and thin(s the /c)hail test applies only to conceptual certainty
and not evidential certainty + as long as it is theoretically possible for people to prove that they
are objects, then that is fne
, a pragmatic and sensible approach
, thought it didn5t matter if it !as I don5t (no! as long as there !as at least one benefciary of
!hom it could defnitely be said yes Henning also said this in relation to a test for po!ers, but
this !as overruled"
, /ega! 1; + a di:erent approach is ta(en, all !e should need to demonstrate is that there is a
substantial number of people of !hom !e are certain
, also thought it didn5t matter if the ans!er !as I don5t (no!, but said there should be a
substantial number of benefciaries in the 6yes7 category
, trying to ma(e the test more Gexible, does not still !ell !ith /c)hail or Dulben(ian + retreat
from is or is not test
> you still have to apply 91 test, but structure ans!er to say there are alternative approaches
and ho! 2achs and /ega! may lead to di:erent approachesJ
L -e 0arlo!5s &T + paintings can be distrusted to any $old friends07 such expressions !ould
render a trust conceptually uncertain
, terms old and friends have so many shades of meaning, impossible to say !ho !as intended to
beneft
, 0ro!ne &il(inson 1; + M says he can validate the testamentary dispositions it because he thin(s
the testator intended to ma(e a series of gift, if you can call it a gift then none of the trust rules
apply unsatisfactory + people involved are executives under a !ill trust and di.cult to claim
they don5t have any fduciary duties that need to be satisfed, saying that !e are going to ma(e
gifts but !hat if !e run out of paintings and more people claim to be friends + surely !e need to
(no! !ho are friends in advance", > + saying that trustees suggest the people !ho are
benefciaries on the basis that they have !or(ed out !ho are the people are intended ie !ho the
friends are suggests in particular circumstances, if you can be sure of the intended
benefciaries, then there is certainty"
, ho!ever, if !e have circumstances !here it is not so clear !ho are the old friends%mere
ac$uaintances, then there is no certainty
L -e Tuc(5s 2T , !here property to be left as long as she marries someone of the ;e!ish faith
, !hat is meant by the ;e!ish faith or !hether someone is a member of the ;e!ish faithN
, Henning + thought it !ould be possible to appoint an expert the chief -abbi" !ho !ould be
able to determine any issues of fact
, particular factual circumstances !here thought an expert could be used to decide !hether
someone !as part of the class
, O# T98 F'*T2 + is it possible to have such an expertN
Administrati/e nwor#ability and capriciosness
> 8ven if the class is su.ciently certain, it may still fail due to administrative un!or(ability
, 2achs 1; is clear to tell us that if concept involved is too uncertain, then nothing !ill validate it
> - v Histrict 'uditor ex p &K /et ** + 6any or all or some of the inhabitants of the *ounty of
&est Kor(shire7
, class !as too large to be un!or(able
> has rarely been applied to invalidate a trust
, 9ardcastle: it is unclear !hether it !as meant to refer to practical problems of surveying a !ide
class, administrative futility !here a fund is deemed small in relation to the si=e of the class or
undesirability of granting large numbers of people locus standi to enforce the trust
> -e 9ay5s 2T + a trust to beneft anyone in the !orld !ould be ine:ective
, trustees duties are imperative and more stringent than those called upon to exercise a po!er
so similar terms may be valid in eg a po!er of appointment"
> -e 8ndacott + 6 for the purpose of providing some sitable monument to myself7
, unclear !hat the term suitable encompassed
> *onse$uences for lac( of certainty:
if settlor is the trustee, nothing at all happens
if third party appointed as trustee + property is to be held on automatic resulting trust for
the settlor%settlor5s estate
CON)TIT*TION OF TR*)T)
> even !here A certainties are present, express private trust is only enforceable !hen it is
completely constituted
> it is then enforceable by benefciaries, settlor drops out of picture unless expressly reserved
himself po!ers"
8ow is a trst completely constitted&
> /ilroy v 1ord: , there must be either M a transfer or property to the trustees or > a declaration
of self as trustee in both cases, this must be accompanied by intention to create a trust"
, if you intended to ma(e a gift, and failed to ma(e it properly, you cannot simply call it a trust
instead: cannot perfect an imperfect gift
5eclaration of self as trstee
> ;ones v 1oc( + 6loo( you here, I give this to the baby7
, !rites a che$ue to himself
, !ife argued that husband had intended to create a trust in favour of child
, court argues there !as no trust, no intention to transfer money to child or hold it in trust , they
!ere having an argument and he !rote the che$ue in the pea( of the argument
, declaration but no intention
> -ichards v Helbridge + failure to e:ect transfer of the lease
, tenant sought to transfer business premises to son
, he did not execute conveyance necessary to e:ect a transfer of legal land
, grandson argued that court should discern an intention to create a trust + court rejected
reasoning as they cannot regard failed transfer as amounting to a gift
> )aul v *onstance + an intention to create a trust, one trustee but intended to beneft t!o
benefciaries
Transfer to trstee
> must be in the appropriate form to the particular type of trust property
> -ichards v Helbridge
, he did not execute conveyance necessary to e:ect a transfer of legal land
FOR-A%ITIE)
> even !hen the above are present, there may still be formalities that need to be observed
Trsts created by will
> governed by s@ &ills 'ct MPAQ as amended by 'dministration of ;ustice 'ct M@P>"
> must be in !riting, signed by testator and !itnessed by at least > people
> trust contained in !ill is bound to fail if !ill is void
Inter /i/os trsts
> Trusts of personality re$uire no formalities
9 Trsts of %and
, sAIM"b" 1)' M@>I
, a declaration of trust must be in !riting and must be signed by a person able to create that
trust
, sanction R trust is void applies to express trusts only"
, e$uity !ill not permit statute to be used as an instrument of fraud: -ochefoucauld v 0ousted ,
> #on express trusts
, sAI>" + the section does not e:ect the creation or operation of resulting, implied or
constructive trusts
5ispositions of e4istin" e(itable interests
> sIAM"c"
, must be in !riting and signed by the person disposing of the e$uitable interest
TER-INATION OF TR*)T)
L -evocation + pursuant to retention by settlor of an express po!er to revo(e
L -ule in 2aunders v 4autier
> collectively the benefciaries can call for legal title and put an end to the trust
, benefciary must be of full age MP" and sound mind
-e -ose + /r - intended to ma(e transfer of property 2hares" to !ifeJ Filled in form and posed to
comp + he had don5t everything re$uired by him to ma(e the transfer of sharesJ 't that time,
board of directors had to give agreementJ
*' held, at appropriate time, the shares had not been transferred and gift not completedJ Time
imp because if transfer had ta(en e:ect !hen he submitted form, no tax payableJ
*' held e$uity should treat the e$uitable interest as having passed, once /r - had done
everything he !as supposed to doJ )ennington v &aine + court prepared to stretch -e -ose
principle as long as you have done everything necessary for you to do to transfer the property,
!e can deem that property to have been transferJ"
&anted to transfer shares to nephe!J 2he completed share transfer form and sent to accountantJ
9e failed to for!ard form on to the companyJ 2he signed form consenting to nephe! becoming
director but failed to transfer su.cient shares for him to be controlling directorJ
*' 9eld e$uitable interest in shares should be treated as passing to nephe! because it !ould
have been unconscionable for her to refuse transfer of shares + form of e$uitable assignmentJ
Cnconscionable for her to go bac( on !hat she had promisedJ
Cnli(e -e -ose + she hadn5t done everything necessary for her to doJ )roblem + e$uitable
interest has passed !%o board of directors agreeing that she should become a shareholderJ
Cnsatisfactory principal in !hich trust la! is subverting a rule of company la!J