3 certainties

Question 1

What is the essence of this certainty? (certainty of intention)

Answer 1

An intention to create a trust is a necessary requirement

Question 2

If A gives B a property and tells her that she desires B to make provisions for A’s son. Will there be a trust created?

Answer 2

No - a desire only carries out a moral obligation. This is different from telling someone to do it.

Question 3

What approach do the courts adopt in determining whether a person intended to create a trust?

Answer 3

• an objective approach
• if a person manifests an intention to impose or assume the duty which is characteristic of a trust - the person intends to create a trust

Question 4

Is it relevant if someone does not actually intend to create a trust/ is unaware that it exists?

Answer 4

No- their subjective intentions are irrelevant (Twinsectra Ltd v Yardley)

Question 5

How is someone’s intention ascertained?

Answer 5

words and actions (Bellis v Challinor)
writing - contract or will (Rainy Sky SA v Kookmin BankandMarley v Rawlings). Meaning of the words, relevant context features, express and implied terms (Re Lehman Brothers International).
Paying to a specific account separated from their own money (Lyell v Kennedy)
Trust can be created without using the words “trust” (Re Kayford)
Even if the trust is characterised as something different (not a trust) (Don King Productions Inc v Warren) or even if labelled as a trust - doesn’t necessarily mean it is one (Modelboard)

Question 6

What are the two distinct requirements for certainty of subject matter?

Answer 6

1. trust property requirement (must be possible to identify the trust property)
2. beneficial entitlement requirement (must be possible to ascertain the beneficiary’s interest in the trust property)

Question 7

What will happen if someone tries to identify the subject matter by description?

Answer 7

• In cases where the trust property is identified by description, the trust will fail for uncertainty if it is not possible to ascertain the trust property from the description.
• For example, a person cannot create a testamentary trust of the ‘bulk’ of their residuary estate because it is not possible to ascertain how much of it constitutes the ‘bulk’ (Palmer v Simmonds)
• And a company cannot create a trust of its ‘net assets’ because ‘net assets’ does not describe any specific property of the company (Wilkinson v North)

Question 8

What will happen if someone tries to identify the subject matter out of larger mass?

Answer 8

• fractional interests is fine (1/5th interest in each diamond)
• intangible assets (like shares) are also fine because they are identical assets (Hunter v Moss)
• if they are other things that are not identical (no object is 100% identical) - it will fail (In re London Wine Company)

Question 9

What is the beneficial entitlement requirement?

Answer 9

It must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property

Question 10

What are usually the objects of a trust?

Answer 10

People

Question 11

What is a fixed trust?

Answer 11

A fixed trust is a trust in which the settlor sets out the entitlement of each beneficiary in the trust instrument. The beneficiaries and their individual entitlements are ‘fixed.’ It is the nature of a fixed trust that each beneficiary has a definable interest in the trust fund.

Question 12

What is the test for certainty of objects for a fixed trust?

Answer 12

complete list test

• It must be possible to draw up a complete list of all the beneficiaries:IRC v Broadway Cottages Trust.
• must have both conceptual and evidential certainty

Question 13

What is conceptual certainty?

Answer 13

• the precision of language used by the settlor to define the class of people who should be the beneficiaries
• if the objects of the trust are not clearly defined, it will not be possible to draw up a conclusive list and the trust will fail.
• ‘friends’ will fail - who are the friends?

Question 14

What is evidential certainty?

Answer 14

proof/ evidence of whether something does or does not exist

Question 15

What are powers of appointment?

Answer 15

• A power of appointment is a right to choose who, from within a specified class of objects, receives property.
• these powers can be given to anyone, they can choose whether to exercise the power at all

Question 16

Must a power of appointment satisfy the certainty of objects test?

Answer 16

• yes in order to be valid, a power of appointment must satisfy test of certainty of objects
• the test = is/is not test (Re Gulbenkian’s Settlement Trusts)

Question 17

What is the test for certainty of objects for a discretionary trust?

Answer 17

is/is not test (McPhail v Doulton)

- must have conceptual certainty but no evidential certainty

Question 18

What is a discretionary trust?

Answer 18

• the trustees of a discretionary trust do have distributive discretion. Generally, they may decide which beneficiary is to receive what sum.
• flexible form of trust

Question 19

What is the is/is not test?

Answer 19

The test is whether it can be said with certainty that any potential claimant is or is not a member of the class.

Question 20

The size of class impacts which type of trust?

Answer 20

Discretionary trusts
- a discretionary trust is void if the class of beneficiaries is too large as it would be administratively unworkable (McPhail)