EQUITY & TRUSTS

LAW501
Express Private Trust

MOHAMMAD RIZAL ABIDIN

 Express Private Trust:
1. Three Certainties
ü Certainty of Intention
ü Certaity of Subject Matter
ü Certainty of Objects
Chapter 2. Formal Requirements
Details üCapacity of Parties
üFormalities
3. Transfer Trust Property
üCCT
üICT
 Three points must be certain for an express
Three private trust to be created:
Certainties 1. Certainty of Intention
2. Certainty of Subject Matter
3. Certainty of Objects
 The settlor must be
shown to have
intended a trust
before the court will
hold that one has
been created.

In majority of the
cases, this will be a
Certainty of matter of looking at
words used in a trust
Intention deed or a will to see if
they can be construed
as a trust.

No particular form of
words need to be
used and it is
unnecessary to use
the word ‘trust’.
 In Wright v Atkyns [1823] Turn & R 143, Lord Eldon
said ‘the words must be imperative’. In other words
they must make it clear that the person holding the
property is obliged to hold it for the benefit of
others.

Certainty In the 18th and early 19th century, the Court of

Chancery readily construed precatory words i.e.
of ‘hope’ or ‘desire’ or ‘in confidence’ as creating a
Intention trust. It is no longer so since Lambe v Eames
(1871) 6 Ch App 597, T left his estate to his widow
‘to be at her disposal in any way she may think
best, for the benefit of herself and family’. This was
held to be ineffective to create a trust, the widow
took absolutely.
 Re Adams and The Kensington Vestry (1884) 27
ChD 394, T left all his estate ‘to the absolute use of
his wife … in full confidence that she will do what
is right as to the disposal thereof between my
children, either in her lifetime or by will after her
death’. Court of Appeal held the gift to be
absolute.

Certainty Comiskey v Bowring-Hanbury [1905] AC 84, T left

of his estate to his wife ‘in full confidence that she will
Intention make use of it … at that at her death she will
devise it to such one or more of my nieces as she
may think fit and in default of any disposition by
her thereof in her will … I hereby direct that all my
estate and property acquired by her under this
will shall at her death be equally divided among
the surviving said nieces’. Court held that a trust
was construed because the whole context
indicated this as being the T’s true intention.
 Re Kayford [1975] 1 WLR 279, A mail order
company in financial difficulties sought
professional advice on how to protect customer’s
monies sent to it for goods, the aim being to avoid
this falling into the hands of the liquidator. A
special account was opened at a bank and called
Certainty ‘Customers Trust Deposit Account’ into which

of customers monies were paid pending fulfilment of

orders. When the company went into liquidation
Intention there was some money in the account and the
question arose if this was held upon trust. Megarry
J held that there was a trust since the whole
purpose was to ensure that the beneficial interest
in the money remained with the customers until
their orders were despatched.
 The subject matter of a trust may
comprise of cash, choses in action,
livestock, chattels, land etc. Property
can be classified into tangible or
intangible; movable or immovable.

The property must be an existing

Certainty of property. A trust cannot be created
over future or after acquired
Subject property. Mere expectation of
inheriting a property without
Matter certainty disables the property from
being the subject matter of a trust.

Courts have taken different approach

according to whether the trust
property is tangible (car, painting,
jewels) or intangible (eg: money in a
bank account, shares).
 In Hemmens v Wilson Browne; a document
purported to give X the right to a monetary
payment of 110,000 pounds at any time from Y.
Held: no trust was created in favor of X since there
was no fund identified from which the money was
to be paid.

In Hunter v Moss; Mr Hunter was entitled, under

Certainty his contract of employment with Mr Moss, to claim
of Subject 50 shares out of 950 shares in a particular company
held by his employer. COA held that there was a
Matter valid trust created over the 50 shares in favor of Mr
Hunter since the shares were essentially intangible
and identical, any 50 shares in the company were
capable of forming the subject matter of the trust.
 Re London Wine (Shippers) Ltd (1976) 126 NLJ 977,
It was claimed that wine bought by customers from
the company but still held at warehouses was held
by the company in trust for those customers so as
Certainty to defeat a claim by a bank which sought to
of Subject enforce a charge over the company’s property
Matter including the wine. Court held that as the wine had
never been set aside for each customer, there
could be no trust because of lack of certainty of
subject matter.
Every settlor must be certain of
the property that he intends to
dispose of. The property must be
identifiable and ascertainable.
There are two aspects to this
requirement:
1. There must be certainty Certainty of
as to what is to be held Subject
upon trust;
2. There must be certainty
Matter
as to what is the extent of
beneficial interest of
each beneficiary.
 1. There must be certainty as to what is to be
held upon trust:
Palmer v Simmonds (1854) 2 Drew 221, The
phrase ‘bulk of my estate’ was held not to be
certain as it will not identify the subject matter
clearly since it may mean different thing to
different people.
Certainty
of Subject Sprange v Banard (1789) 2 Bro CC 585, Testatrix
Matter left $300 to her husband for his sole use and at
his death, the remaining part of what is left … to
be divided between my brothers and sisters
equally. Arden MR held that this was not a trust
but rather an absolute gift. There could be no
certainty as to what would be left for the
brothers and sisters on the husband’s death.
 There is also a possibility suggested in Ottaway v
Norman [1972] 3 All ER 1325 by Brightman J that a
floating trust might be imposed, which is to say a
trust suspended during the donee’s lifetime and
only attaching to the remaining property on the

Certainty donee’s death.

of Subject
Matter Re Kolb’s WT [1962] Ch 531, The words ‘blue chip
securities’ used in an investment clause in a will
were held to be uncertain.
 2. There must be certainty as to what is the
extent of beneficial interest of each
beneficiary. The beneficial interest of each
beneficiary must be certain so that the
trustees know exactly what or how much
each beneficiary will be entitled to.

Certainty of Boyce v Boyce (1849) 16 Sim 476, Testator left

Subject houses to his wife for life and on her death to

convey any one house to his daughter, Maria,
Matter as she might choose and the remaining
houses to another daughter, Charlotte. Maria
died before she could make the choice and
it was held that Charlotte’s share was
uncertain as it depended on Maria’s choice
therefore the trust failed.
 The final element of requirement of
certainty is that the settlor shall have
identified the persons who are to benefit
under the trust. There are different rules
or test for certainty of objects in fixed and
discretionary trusts.

Certainty of
Objects Re Endacott; Lord Evershed MR : “no
principle perhaps has greater sanction or
authority behind it other than the general
proposition that a trust by english law, not
being a charitable trust, in order to be
effective must have ascertained or
ascertainable beneficiaries”.
 Beneficiaries must be individually identified such
as “jane”, “john” or must be identified as a
member of a clearly defined class such as “to hold
on trust for the benefit of my children”.

The description of beneficiaries must not be

conceptually uncertain at the time the trust is
created. Example:
Certainty “to distribute money between my favourite
people” or “among my relatives who are
of Objects handsome”.

The above would be conceptually uncertain

because it would be impossible to ascertain who
the settlor truly intended to benefit.
 Brown v Gould; “old friends” – conceptually
uncertain and trust was held invalid.

Re Coates; “dear friends” – conceptually uncertain

and trust was held invalid.

Re Tuck’s Settlement [1978] Ch 49; ‘$10,000 to my

friends as determined by X in his absolute
Certainty discretion’. Court held that conceptually uncertain
of Objects terms may not defeat the trust if the settlor has left
a discretion to the trustee to decide who falls
within the term.

Re Poulton’s Will Trust; “for my relations in equal

shares”. Held: refers to statutory next of kin. Also
refer to Re Baden’s Deed Trust; relatives was
synonymous with next of kin and nearest blood
relations, descendants from a common ancestor.
 Fixed trust
A fixed trust is one where the trustees
are under an obligation to distribute to
named persons or to all members of a
specified group. Under a fixed trust,
trust instrument specifies the share
which each beneficiary is to take. The
test of certainty of objects in a fixed
trust is that it must be possible to draw
up a complete list of all the
Certainty of beneficiaries and if this is not possible
Objects it is void.
If they’re identified as a member of a
class, then the class must be clearly
defined so that the trustees know who
each and every member is (this is
known as the ‘list principle’). The reason
is simple, unless the trustee know who
the beneficiaries are they cannot carry
out their duty.
 If the trustee is unable to draw a complete list of
Certainty of the beneficiaries entitled under the trust, the
Objects trust shall fail for uncertainty of object.

See Re Gulbenkian [1970] AC 508 and IRC v

Broadway Cottages Trust [1955] Ch 20. see also
Re Benjamin [1902] 1 Ch 723 where court may
make a benjamin order which authorises the
trustee to distribute to the known beneficiaries,
reserving the right of the missing beneficiary,
should he subsequently appears.
Certainty of Discretionary trust

Objects This is a trust where the trustee has the power

of appointment i.e. the power to choose who,
from a range of possible beneficiaries, shall
actually receive benefits under the trust and the
share which they will receive.
The trustee is given the discretion to select,
from among a specified class of beneficiaries,
who will benefit under the trust and often when
and to what extent.
 The test for certainty of objects in discretionary
trust was laid down in McPhail v Doulton [1971] AC
424, settlor declared his intention to establish a
fund to provide benefits for the staff of Mathew
Hall & Co. In the deed, he directed the trustees ‘…
in making at their absolute discretion grants to or

Certainty for the benefit of any of the officers and employees

or ex officers and ex employees of the company or
of Objects to any relatives and dependants of any such
persons. Court held that the direction amounted to
a trust. Lord Wilberforce said ‘Can it be said with
certainty that any given individual is or is not a
member of the class’ a.k.a. the ‘any given
postulant’ test.
 Problems of Certainty of Objects in Fixed &

Certainty of Discretionary Trusts

1. Conceptual Uncertainty
Objects This is where the settlor has used words
which are too vague and indistinct for a
court to apply. Trusts for ‘my brother and
sisters’ or ‘for my nephews and nieces’
would be conceptually certain since these
are terms which are understood as
referring to specific relationships with the
settlor. However, it would seen that ‘trusts
for my friends’ would be conceptually
uncertain since the meaning of the term
friends vary from one person to another.
 2. Evidential Uncertainty
This is where the settlor’s words are clear
and precise but the court has difficulty in
applying them in any given situation
because of the uncertainty of the facts i.e. a
trust for the former employees of Z Co may
be evidentially uncertain if the company was
dissolved years ago and its records of names
of former employees lost.
Certainty
of Objects 3. Ascertainment of Beneficiaries
This refers to cases where there is neither
conceptual nor evidential uncertainty but
rather difficulty in tracking down known
beneficiaries.
 4. Administrative workability
There may be a case where the meaning of
the words used is clear but the definition of

Certainty the beneficiaries is so hopelessly wide as not

to form ‘anything like a class’ so that the trust
of Objects is administratively unworkable and therefore
cannot be executed.
 Capacity of Parties

Settlor
He must be a person who can own and dispose
property. According to section 3 Wills Act 1959
(WA), property is disposal by a person who is
of sound mind and not a minor. Therefore an
insane person or a minor does not have the
Formal capacity to create a trust.
Requirements
A settlor may be:
a. the trustee of his own trust (he may
declare himself as the trustee); or
b. the beneficiary of his own trust.
 Trustee
A trustee must be:
a. capable of owning property; and
b. able to deal with the property in question.

A minor has the capability of owning

Formal property (except land – section 43 NLC), but
Requirements they lack the capacity to deal with
properties i.e. if the property is a piece of
land and settlor instructed the land to be
leased out, minor does not have the capacity
to enter into a lease agreement. Therefore
minors, in general, does not have the
capacity to be appointed as a trustee.
 Beneficiary
Anyone may be a beneficiary under a trust,
may he or she be a minor, an insane person,
a physically disabled person etc. One of the
Formal reason why trust is created is so that
Requirements
persons who are unable to care for
themselves can be taken care of.
 Formalities

There is no requirement for a trust to be in writing.

Trust may be:
1. in writing;
2. verbal; or
3. inferred from conduct i.e. Re Kayford (see
Formal certainty of words or intention for facts of this
Requirements
case).

However by virtue of section 5 WA, trust created in

a Will must be in writing. Trust for land must also
be in writing to be valid – see NLC.
 There are two ways of constituting a trust:
Transfer of
Trust Property 1. Settlor appoints a trustee to hold the
property. The property will be
transferred to the trustee.

2. Declaration of trust by the settlor

himself i.e. that the settlor himself is
holding the property on trust for
someone.
 Completely Constituted Trust (CCT)

Trust property must be transferred to the trustee

for the trust to be completely constituted. For a
trust to be a CCT ‘transfer’ must be in accordance
with the formalities laid down by law for that kind
of property i.e. a trust or land will only be a CCT
when the land is conveyed to the trustee in
Transfer of accordance with the NLC.
Trust
Property The effects of a CCT are as follows:
1. legal title of the property will pass to the
trustee where as beneficial interest will vest
in the cestui que trust (beneficiaries).
2. Settlor loses his interest in the property
therefore may not get the property back
 Re Bowden [1936] Ch 71
Settlor, who became a nun, transfer to trustee
such property as she would become entitled to
on her father’s death. 60 years later she asked
the trustee to retransfer the property to her on
the ground that the settlement was voluntary.
Transfer of Bennett J held that the property was bound by
Trust the trust and that the settlor had lost all her
Property beneficial interest in it.

3. Beneficiaries can enforce the trust against the

trustee
 The principle in Saunders v Vautier:
A trust can be terminated by the
beneficiaries if they are :
1. of age of majority;
Transfer of 2. sound mind; and
Trust Property 3. all the beneficiaries consent to the said
termination to distribute the trust
property among the beneficiaries.
 Transfer of Property
It is essential that property is transferred by the
appropriate formalities laid down by law for that
property.

Milroy v Lord (1862) 4 De G F & J 264

Medley executed a deed which purported to transfer to
Lord 50 shares in the Louisiana Bank to hold these upon
trust for a number of persons, including Milroy. The
deed was not a proper transfer shares because they
Transfer could only be effectively transferred in law by
execution of a share transfer and registration. Ct held
Trust that there was no CCT therefore the shares forms part of
Medley’s estate. Turner LJ put forward the following
Property principles: ‘… in order to render a voluntary settlement
valid and effectual, the settlor must have done
everything which, according to the nature of the
property comprised in the settlement, was necessary to
be done in order to transfer the property and render the
settlement binding upon him. He may do this by:
1. actually transferring the property to persons he
intends to provide (in the case of a gift);
2. transfers the property to a trustee; or
3. declares that he himself holds it in trust.
 The appropriate method of transfer will depend
upon the type of property which is the subject
matter of the trust i.e.:

1. Land – must be conveyed in accordance

with the NLC
2. Chattels or goods – by delivery of the
chattels to trustee
3. Cheques – by mere delivery if the cheque
is payable to bearer, if not payable to
Transfer Trust bearer, by indorsement and then delivery.

Property 4. Shares – there are four stages in the

process of transferring shares:
i. Execution of share transfer form
(STF)
ii. Delivery of STF and share certificate
(SC) to trustee
iii. Delivery of STF and SC to company
iv. Registration of transfer by company
(Re Rose [1949] Ch 78)
 In private companies the transfer of shares is
restricted by the articles of association and it is
common to find a clause giving the board of
directors (BOD) a discretion to refuse to register a
transfer of shares without giving reasons for doing
so.

Transfer
Trust If this is the case the transfer of such shares will not
be valid. However in Re Rose [1952] Ch 499,
Property Evershed MR in his judgement said that a trust is
deemed to be a CCT at the moment the settlor has
done everything he can to make the settlement
effective, even though this may not amount to a
transfer of the trust property at law.
 Self Declaration as Trustee
The problem of transferring trust property to
trustee may be avoided if the settlor declares
himself to be the trustee whereby he must has
manifested his intention to create a trust and
declare himself as the trustee clearly.

Jones v Lock [1865] 1 Ch App 25

A father was scolded for failing to bring back for
Transfer Trust his nine month old son a gift from his business
Property trip whereupon he took a cheque payable to
himself from his pocket saying ‘look you here, I
give this to baby …’. The cheque was put in a
safe and found after the father’s death. Lord
Cottenham refused to treat the father’s words as
amounting to a declaration of self as trustee. He
said that it would be very dangerous if loose
conversations of this sort should have the effect
of declaration of trust.
 Paul v Constance [1977] 1 WLR 527
Mr C said to Mrs P that money in his bank account
was hers as much as it is his. He said this on a
number of occasions and arranged for her to draw
on the account which she did on numerous
occasions. Scarman LJ said that a combination of
words and conduct my show that there is a
declaration of self as trustee.
Transfer
Trust Middleton v Pollock [1876] 2 Ch D 104
Property A client gave his solicitor money for investment. The
solicitor died insolvent having failed to invest the
money but after his death there were found amongst
his papers a written declaration of trust by him in
favour of the client over some of his property. The
trust were upheld.
 Incompletely Constituted Trust (ICT)

Where trust property failed to be transferred to

the trustee the trust is an ICT. An ICT is not a
trust at all in strict terms. It is merely a promise
to create a trust. Consequently those who have
not given any consideration for the settlor’s

Transfer Trust promise to create the trust cannot enforce such

trust as they are volunteers (equity will not assist
Property a volunteer). Many objects of a trust are
volunteers, consequently, have nothing whilst
the trust remains an ICT.

However, there is an exception to this rule. The

exception in question is marriage settlement.
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