3 certanties? Flashcards
Certainty of INTENTION?
Requisite intention
- An intention to impose or assume the duty which is characteristic of a trust
- A desire is different from telling a person to do it.
Ascertain intention
- Through words, or conduct.
- Objective approach by courts
Written documents – meaning of words is:
- Ordinary and natural
- Any relevant facts
- Contact
- Common sense
- The use of the word trust is a good indicator but it’s not determinative
Segregating assets is a good indicator – importance of content always noted.
Relationship with other certainties
- If the others are so vague it won’t be the intention likely.
- Yell v Kennedy – paid into a separate bank account.
Certainty of subject matter?
Trust property requirement
- Characterised by two principal features
- A duty and a property right
Identifying subject matter by description
- Trust will fail for uncertainty if not possible to ascertain from description
Identifying subject matter out of larger mass
- Fractional interest – no problem with a fractional interest in a trust. If it’s clear
- Difficulty arises with SPECEFIC nUMBER OF ITEMS FROM A LARGER MASS – which ones?
Categorizing assets
- Tangible and intangible assets
- Fungible and non-fungible – fungible if they are identical and readily exchangeable.
- Fungible, intangible assets are fine
- Non-fungible, tangible assets are void for uncertainty
- Fungible, tangible assets – NO – Not possible to declare a trust over a specified number of tangible sets forming part of a bulk even if they appear to be identical without identifying them.
Hunter Moss – shares – entire holding on trust and beneficiary is entitled to certain holding. SO DIFFERENT RULES FOR TRUSTS
The beneficial entitlement requirement
- Trust property needs to be certain
- But must also ascertain the nature and extent to the beneficiary’s interest in that trust property.
Power to determine beneficial entitlement
- Can leave two cars on trust for A and B with a power for C to decide. THIS IS FINE. ONLY IF C FAISL TO EXECIRSE THE DECISION then it fails for uncertainty.
Objective assessment
- Can leave a ‘reasonable’ amount will be objectively decided
Context
- Must be able to distinguish between property – like in the wine case. -
Certainty of subject matter ?
Fungible, intaigible
- VALID - INTERCHANGEABLES, NO NEED TO IDNEITFY IT SPECEFICALLY
NON- FUNGIBLES, TANGIBLES
- VOID FOR UNCERTAINTY
FUNGIBLE, TANGIBLE
-NO
- CANNOT DECLARE A TRUST OVER A SPECEFIED NUMBER OF TANGIBLE FUNGIBLE ASSETS WITHOUT IDENITFYING WHICH ONES.
NON FUNGIBLE, INTANGIBLE - NO VOID
Beneficial entitlement requirement?
It must also be possible to ascertain the nature and extent of the beneficiary’s
interest in that trust property. To the extent that it is not possible to do so, the trust will fail. This is
the beneficial entitlement requirement.
Consider a trust under which the trustees are to hold two cars on trust for A and B, with a power
to C to determine which car should be held for A and which for B.
* There is initially no problem with this trust because there is a mechanism for determining
beneficial entitlement.
* However, if C dies before making the selection, the trust will fail because it is no longer possible
to ascertain which beneficiary is entitled to which car. A similar trust failed in Boyce v Boyce
(1849) 16 Sim 476, for this reason.
* This example highlights the importance of good drafting when declaring a trust. The real
problem in this scenario is the failure of the settlor to consider the possibility that C might not
be able to exercise the power. The settlor could have avoided this problem by making clear
what should happen to the property if C couldn’t or wouldn’t exercise the power. One solution
might have been to give the trustees a default power to make the decision.
* The example also highlights an important legal point, being that a trust can fail for certainty
either when it is initially declared or, as in this case, subsequently.
TEST IS OBJECTIVE ASSESSMENT
- MUST BE POSSIBLE TO ACSERTAIN IT
- ALSO IF ITS A REASONABLE AMOUNT - THAT SOMEHOW OBJECTIVELY CAN BE FOUND
Certainty of objects?
Test for certainty of objects
- A greater certainty is required for a fixed trust than a discretionary trust.
- Trustees must know exactly who is to benefit and how much they receive.
- For discretionary trusts - courts apply less stringent test for certainty
Equal distribution between classes
- Complete list test – draw up a complete list of all beneficiaries. These trusts require both tests below.
- Conceptual certainty – linguistic certainty
- Evidential certainty – evidence enable trustees to identify objects of the trust
Power of appointment
- Court to make a judgement, must be able to determine whether the individual making a claim is a member of the class of objects.
Discretionary trusts
- Carry out a survey of the class which is appropriate to the appropriate trust.
- The is/is not test – not a complete list just whether they are
- Conceptual certainty – is still a requirement – need to know who to apply the is/or is not test on.
- Children has a legal meaning – conceptually certain – (step-children are no included)
- What does friend mean – how is it defined
- Evidential certainty is difficult
- Discretionary trust for children’s grandchildren – needs to prove using documentary
- Discretionary trust for past, future employees – may need to show payslips
Consequences of uncertainty?
Inter vivos arrangements
- Depends on specific facts patterns - if the legal owner has not transferred legal title to anyone else, there will be no change in beneficial ownership unless and until all three certainties are satisfied.
- In absence of all three certainties – likely to be a resulting trust
Trusts can fail.
Testamentary arrangements?
If, instead, you are interpreting the provisions of a will, the first question is whether there is an
intention to create a trust at all. If it is clear that a person is intended to receive property, but it is
unclear that they are intended to be a trustee, the effect is a gift. Even if there is some suggestion
that they might benefit another person, unless that intention can be interpreted as imposing a
trust, it will be interpreted as evidence of the motivation behind the gift and impose a moral
obligation only.
In contrast, if the will clearly provides that a person is intended to be a trustee, uncertainty as to
objects or subject matter will simply cause the provision to fail. The executors will not be required
to transfer legal title to the intended trustee and the property will instead form part of the residue
of the estate.
Uncertainty - legal title transferred?
f no certainty of intention,
presumption of resulting trust
applies.
If clear intention for
transferee to be trustee,
automatic resulting trust
arises if there is uncertainty
as to either subject matter or
objects.
