Certainty

Question 1

What does Knight v Knight (1840) say?

Answer 1

Established that three certainties are required for the creation of a trust: the language used must show the settlor created a trust; and the subject matter of the trust must be certain, as well as the persons or objects intended to be benefited.

Question 2

What did McPhail v Doulton (1971) establish?

Answer 2

That discretionary trusts do not require a complete list of beneficiaries. Instead, the test of object certainty focuses on whether any given postulant is or is not a member of the class of beneficiaries (the ‘is or is not’ test). [Attribute to Lord Wilberforce]: we must be able to say of any individual who happens to come our way whether he falls within the class or outside it.

Question 3

What did Re Coxen (1948) suggest?

Answer 3

That dependence on a third party would not clarify any conceptual certainty.

Question 4

What did Lord Denning say in Re Tuck’s Settlement Trusts (1978)?

Answer 4

That a provision of a third party to resolve conflict would resolve any conceptual uncertainty.

Question 5

What did Eveleigh LJ assert in Re Tuck’s Settlement Trusts (1978)?

Answer 5

That a third party may be used to resolve conceptual uncertainty when the settlor’s definition can be read to be the same as the third party’s. This is contrasted with the viewpoint of the third party being an arbitrator of marginal cases, as opposed to actually substituting his opinion for the settlor’s.

Question 6

What did Lord Wilberforce in McPhail v Doulton (1971) highlight?

Answer 6

That there exists a potential third class of uncertainty, administrative unworkability, that would arise where ‘the definition of beneficiaries is so hopelessly wide’. Were the size of the beneficiary class to be exceedingly large, this may prevent execution of the trust.

Hence, is there a distinction between the definition being too wide or the number of beneficiaries being too wide?

Question 7

What did R v District Auditor No. 3 (1986) reinforce?

Answer 7

Lord Wilberforce’s idea of administrative unworkability frustrating certainty of trust.

Question 8

Will the excuse of administrative unworkability work for fixed trusts?

Answer 8

Webb and Akkouh (2015) suggests that Lord Wilberforce’s additional requirement referred to discretionary trusts. Furthermore, in a fixed trust, if a successful claim does not need to be referenced to other claims by potential beneficiaries, this would arguably overcome administrative unworkability.

Question 9

What happened in Re Barlow’s Will Trusts (1979)?

Answer 9

The term ‘friends’ was not found to be conceptually certain, but it did not defeat the disposition because it was a fixed trust to ‘each’ of her friends and not something to be divided equally amongst friends. So all that was needed was that one person could be found to fall within the definition.

Question 10

What did Palmer v Simmonds (1854) say?

Answer 10

The property subject matter must either be clearly defined or be capable of ascertainment.

Question 11

What was Re London Wine Co (Shippers) (1986) about?

Answer 11

In this case no steps were taken to segregate the contended (wine that customers had ordered and paid for) from the dealer’s general stock. It was found necessary to identify not only the beneficiary’s interest, but to which property such an interest attaches.

The trust would only succeed if customers could identify which specific bottles were held on trust for them.

Question 12

What is the significance of Re Harvard Securities (1997)?

Answer 12

The position after this case is that identification of specific trust assets is still required for tangible property, even where a collection consists of identical assets.

Question 13

What is the significance of Re Benjamin (1902)?

Answer 13

Concerns the need for ascertainability of all beneficiary class members. This test may be relaxed where the maximum number of people within a class is known, but not all can be reached. This is because the trustee will thus be able to apply for a Benjamin order.

So after sufficient enquiries have been made to ascertain the missing beneficiaries, trustees can distribute the trust property as if the beneficiary who cannot be traced were dead, and thus their share is divided equally amongst the established beneficiaries. If eventually found, they can pursue the other beneficiaries for their share.

Question 14

What does Re Kayford tell us?

Answer 14

Megarry J said that: ‘it is well settled that a trust can be created without using the words “trust” or “confidence” or the like: the question is whether in substance a sufficient intention to create a trust has been manifested.’

Question 15

What was said in Milroy v Lord (1862)?

Answer 15

There are three ways in which we can benefit others by property:

(1) Outright transfer (gifts)
(2) Self-declaration of trust
(3) Transfer to a third party on trust

Question 16

What does Jones v Lock (1865) tell us?

Answer 16

Father put a £900 cheque in his baby’s hand and said it was his. The wife said the baby might tear it, and the father said, ‘it is his own, and he may do what he likes with it’. He locked it in the safe and died six days later. This was held not to show sufficient intent to create an express trust.

Lord Cranworth noted that it would be dangerous ‘if loose conversations of this sort’ declared a trust.

Equity would not “perfect an imperfect gift” by creating a trust.

Question 17

What happened in Paul v Constance? (1977)

Answer 17

Mr Constance separated from his wife but never got divorced. Later met his future girlfriend. He received £950 from a injury settlement from his employer. He put it in a bank account in his name alone (due to the fact he was still married) but girlfriend could still withdraw with a signed note from him and he said the money was as much hers as his. He died intestate and wife claimed the account formed part of his estate, whilst girlfriend said the amount in the account was held on trust for hers and Mr Constance’s benefit.

It was held that there was an express declaration of trust and the claimant was entitled to the money in the account. LJ Scarman: “…the words that he did use on more than one occasion, “This money is as much yours as mine,” convey clearly a present declaration that the existing fund was as much the plaintiff’s as his own.”

Question 18

What did IRC v Broadway Cottages Trust (1955) say?

Answer 18

In the pre-Baden era, a complete list of beneficiaries was required to validate all kinds of trusts.

Question 19

What does Re Baden’s Deed Trusts (No 2) (1972) tell us about the ‘is or is not’ test?

Answer 19

The three judgments put forth by, Sachs LJ, Megaw LJ and Stamp LJ, offer three modes through which a discretionary trust might be confirmed.

Question 20

What did Sachs LJ say in Re Baden’s Deed Trusts (No 2) (1972)?

Answer 20

Conceptual certainty is needed, but evidential certainty is irrelevant. Onus of proof fell on the potential beneficiaries. ‘The court is never defeated by evidential certainty.’

‘Once the class of persons to be benefited is conceptually certain it then becomes a question of fact to be determined on evidence whether any postulant has on inquiry been proved to be within it: if it is not so proved, then he is not in it.’

All those who, because of factual uncertainty, are ‘don’t knows’ are to be treated as ‘no’s’.

Question 21

What did Stamp LJ say in Re Baden’s Deed Trusts (No 2) (1972)?

Answer 21

Was the most conservative of the three judges. He preferred complete certainty. Both conceptual and evidential certainty is needed.

Question 22

What did Megaw LJ say in Re Baden’s Deed Trusts (No 2) (1972)?

Answer 22

Suggests that a discretionary trust could be validated if a substantial number of people can be successfully classed as beneficiaries. However, there are many problems created by this approach. For a start the test itself is uncertain: how much is a ‘substantial number’?

Question 23

What happens when a trust fails for uncertainty?

Answer 23

If the ‘trust’ is self-declared, the settlor/trustee remains absolutely entitled to the property.

Question 24

What did Re Kayford (1975) tell us?

Answer 24

What matters is the substance - not the language. Possible to create a trust without mentioning the word ‘trust’.

Question 25

What are precatory words?

Answer 25

When a donor transfers property to someone, expressing the wish or hope that the recipient will use the property for the benefit of some other named individual.

Question 26

What did Re Adams (1884) show us?

Answer 26

Courts will refuse to allow a trust where precatory words are used. Want to avoid the situation where you are imposing legal obligations in respect of the recipients in how they use the relevant property. You should use imperative language.

Question 27

What did Henry v Hammond (1913) tell us?

Answer 27

A duty to segregate the trust property from the trustee’s own property is a good indication that a trust is intended.

The same rule does not apply when there is a mixing of other beneficiary’s property.

Exceptional case: Re Kayford - trust money paid into account which already had trustee’s money. Point here was that this account would be treated differently from his others, so trustee did not add extra money or withdraw for his own benefit.

Question 28

What do we mean by conceptual certainty?

Answer 28

Uncertainty where the definition of the objects or subject matter provided by settlor is, at least in part, imprecise or ambiguous.

Question 29

What do we mean by evidential certainty?

Answer 29

May be uncertainty where we do not have the factual information at hand to determine what people or property match the definitions of the settlor - should be able to say ‘yes’ or ‘no’ to the person if they fall under the beneficiary category.

Question 30

What did Palmer v Simmonds (1854) tell us about the certainty of subject matter?

Answer 30

Settlor sought to create a trust of ‘the bulk’ of his residuary estate. Reference to ‘bulk’ meant that the court could not be sure what part of the residue was to be held on trust. Unsure how much property was held on trust.

Question 31

What happened in Hunter v Moss (1994)?

Answer 31

Court found that Moss had declared a trust of 50 out of 950 shares for Hunter. Despite the fact that it was not identified which particular shares were to go to Hunter.

Question 32

What happened in Re Lehman Brothers International (Europe) (2010)?

Answer 32

Here it was felt that the best interpretation of Hunter v Moss was not that Hunter had become beneficiary of 50 shares, but he had acquired 50/950 share of the total shareholding. So the whole fund of 950 shares was co-owned in equity by Hunter and Moss in proportions of 50:900. This would show that Hunter has no application to tangible property, where segregation is possible

Question 33

What did Sprange v Barnard (1789) tell us about floating trusts?

Answer 33

S transferred money to T on terms that T may use as much of it as he likes during his lifetime but must on his death leave what is left of it on trust for B. The court held that no trust arose and that T instead took the property beneficially. The property that would ultimately be received by B we do not know because we are uncertain how much T would spend in his lifetime

Question 34

What are the different tests for fixed trusts when it comes to certainty of objects?

Answer 34

Beneficiary’s entitlement is independent from others (e.g. £100 to each of my friends): freestanding interest, hence all he needs to show is that he can establish his entitlement.

Beneficiary’s interest is defined referentially (e.g. £100 to be divided equally amongst my friends): Stricter test applies. Entitlement cannot be quantified until we know everyone in the class: list certainty.

Question 35

What did Templeman J say in Re Manistry’s Settlement (1974)?

Answer 35

A power will fail if it is ‘capricious.’ This will be the case where the terms ‘negative any sensible intention on the part of the settlor’. Question is thus not width of the class, but rather with who these people are and why the settlor picked them.