Creating an express trust: 3 Certainties Flashcards
What do we look for in certainty of intention?
Did the giver intend to create a trust? Or did they instead try to make a power, or a gift?
Lambe v Eames - Precatory words suggest gift, words must be imperative
Comiskey - ‘In full confidence’ suggested gift, but later on he said the property ‘shall’ be divided - trust with imperative words.
Sham trusts (Wyatt)
Express trust of house created for man’s wife and children, but he did not tell them and continued to use the house as his own.
Held: Trust was a sham, intended to place property beyond reach of creditors, trust was void.
Paul v Constance
Conduct can lead to inference of a trust. Man and mistress set up joint bank account, he added money in and he said ‘This money is as much yours as is mine’.
On his death, held that he declared a trust over the money in the bank account - his words showed sufficient intention, so the bank account passed to her on his death.
Business Common Sense: Don King v Frank Warren
Under an agreement, each partner would hold the benefit of any future agreements for the partnership.
Held: Deduce, from the agreements as a whole against their commercial background, the purpose which the entities intended to achieve.
If such intent can be deduced and it is necessary to give effect to it, court may ignore inacccuracies and errors in choice of language to support the true intention.
Mills v Sports Direct
One party acted solely as middle man to hold the shares and cash for the parties until they could be transferred.
Held: Despite lack of words, the intention here was clearly to create a trust
Certainty of subject matter
Settlor must identify the property or provide sufficient criteria by which the property can be ascertained.
Why?
Trustee needs to know how to fulfil his obligations, the court needs to know to properly supervise, and the beneficiary needs to know what is in their interest.
Others also need to know what is trust property (eg creditors of the trustee)
Re Golay
Testator directed executors to allow beneficiary to ‘enjoy one of my flats during her lifetime and to receive reasonable income from my other properties’.
Held: This was an effective determinant - by saying ‘reasonable’ this provided the court with a yardstick to quantify the amount, as the court constantly assesses what is reasonable.
Palmer v Simmonds ‘The bulk of my estate’
No trust - no definite part of the estate expressed.
‘The residue’
Sprange - No trust found, as no certainty as to how much will be left.
Re Last’s - Trust found
Re London Wines
Wine sold to C but not identified in warehouse.
D goes into liquidation.
Held: No trust as subject matter was uncertain - no two bottles are exactly the same, so C couldn’t prove wines were on trust.
Hunter v Moss
C works for M, 5% shares in company promised to him.
They fall out, C goes to work elsewhere but demands transfer.
D tried to rely on re London wines, but held that there was a valid trust, as the shares were indistinguishable from one another, and all achieved same purpose.
Re Goldcorp
Gold bars and coins bought by investors, bullion stored in warehouses.
Only those whose bullion had been separated were successful as there was certainty of subject matter here.
Boyce v Boyce - How is the beneficial interest to be shared?
Houses on trust to widow for life, then for trustees to convey one of them to Maria, and the rest to Charlotte.
Maria dies before the testator.
Held: Gift to Charlotte failed, as it was only a gift of the houses remaining after Maria chose one, but Maria could not make her choice.
Consequences of failure
If trust property uncertain: Disposition fails entirely.
If uncertain disposition attaches to an absolute which is certain, gift may be valid but trust fails.
If objects uncertain, trust fails, property held on resulting trust for settlor or testator’s estate.
Certainty of objects
Check for: conceptual certainty, evidential certainty, ascertainability.
McPhail v Doulton
Trust set up to provide benefits ‘for staff’ and ‘their relatives and dependants’.
Trustees to apply at their discretion the net income from the trust fund to make grants to any of these people.
McPhail applied the ‘is or is not’ test - can you determine whether any given claimant is a potential beneficiary? You don’t need to be able to draw up a list of every beneficiary.
This applies to both discretionary trusts and powers now.
Administrative workability - R v District Auditor
Trust fund for ‘all or some of the inhabitants of West Yorkshire’ held to be administratively unworkable. Too difficult and costly for the court to enforce such small payments to such a vast quantity of people.
Re Tuck
The meaning of Jewish faith could be resolved by reference to Jewish law - resolved the uncertainty.
Knight v Knight
Case which set out the authority that the three certainties are needed for a valid express trust.
English v Keats
Deeds for execution of powers did not list all 4 trustees, so not all 4 signed. This rendered deeds void.
Held: Where someone has attempted to execute a power but failed, equity will supply a remedy.
Re Hay’s Settlement Trusts
No doctrine of administrative unworkability for powers
OT Computers
Company facing insolvency set up a ‘Customer trust’ and a ‘Supplier Trust’ for urgent suppliers to make payments and deposits in the event of insolvency
Held: For the suppliers’ trust - no certainty of beneficiaries - who is an ‘urgent supplier’?
For customers’ there was, as they could find lists of customers through receipts
Re Baden’s Deed Trusts (No 2)
Concerned validity of the trust from McPhail v Doulton - for relatives and dependants.
Held: When applying the ‘is or is not’ test, conceptual and evidential uncertainty are distinct.
No evidential uncertainty where a claimant could bring evidence that he is a beneficiary, and there was no conceptual uncertainty in words ‘dependants’ or ‘relatives’.
Stamp LJ - Required both complete evidential and conceptual certainty - must be possible to prove any individual in or out. Here, we could narrow definition of relatives to next of kin so it works.
Sachs LJ - Only conceptual certainty needed - if the term can be understood, the trust is valid even if we can’t list everyone in the group.
Megaw LJ - Trust valid if a substantial number of people can fit within the class.
Overall: Conceptual definitely needed, evidential not required for validity.
Conceptual uncertainty
Where the words used by settlor to describe beneficiaries are too vague - ‘friends’.
Renders the trust void.
