Creation of Express Trusts Flashcards
What are the three certainties needed for creation of an express trust?
Knight v Knight
* Certainty of Intention
* Certainty of Subject Matter
* Certainty of Objects (i.e. beneficiaries)
What cases demonstrate the rules on certainty of intention?
- Paul v Constance: Husband saying ‘the money is as much yours as mine’ showed intention to create a trust (likely the limit, such described as borderline case)
- Re Kayford: Not necessary for the word trust to be used, instead it is about whether there is sufficient intention
- Re Adams & Kensington Vestry: Question of interpretation. Imperative words must be used, otherwise it is a power and not a trust
NO ISSUE OF CERTAINTY OF INTENTION IN CASES OF A WILL
What is the default rule with certainty of subject matter?
Re London Wine Co
Chattels must be separated from a bulk for the subject matter to be certain. Must be possible to ascertain with certainty with what property the interest is attached to
* However is this distinction necessary? claimants did not care which specific bottle of wine they got so perhaps the trust should have been valid
Re Goldcorp Exchange
Purchasers of gold bullion were not able to prove the existence of a trust when it was never segregated
What is the exception to the rule of subject matter?
- Hunter v Moss: A portion of intangible assets does not have to be segregated in order to form the subject matter of a trust
- Re Harvard Securities: Clients had beneficial interest in shares despite them not being allocated. Distinguished Re London Wine Co and Goldcorp from Hunter v Moss because the first was concerned with tangible and not intangible property. Therefore, shares, debt or funds are to be treated differently
- NOTE, Neuberger was relcutant in the above decision but felt bound by precedent
- Pearson v Lehman Brothers Finance: Said Hunter v Moss should have been decided differently, i.e. if it can be determined a person has a proprtion of shares in a company, there is a valid trust because we can say they own X% of the company and can have a right to it
Trust of a business must be a trust over shares (North v Wilkinson)
What is the rule on a ‘whatever is left’ trust?
Pearson v Lehman Brothers Finance
* A trust does not fail for want of certainty because subject matter is uncertain at the present time provided the terms are sufficient to make it identifiable in the future
* Therefore, if ‘residue’ or ‘what is left’ of an estate is said to be held on trust, it will not fail provided it becomes clear on death
What are the four elements that can be considered with regards to certainty?
- Conceptual certainty: precision of the language, if this is not certain to determine the class then not valid
- Evidential certainty: Extent to which evidence available enables specific persons to be identified in the class
- Ascertainability: The extent to which the whereabouts or continued existence of persons identified can be obtained
- Administrative unworkability: Extent to which it is practicable for trustees to discharge the duties laid on them
What is the rule for certainty of objects in a fixed trust?
IRC v Broadway Cottages
* Trustees must be able to draw up a complete list of beneficiaries, must be an ascertainable class so that the trust may be divided equally between all people that fit it, otherwise it is uncertain (complete list test)
What is the exception of validity of objects within a fixed trust?
A fixed trust subject to a condition precedent, trustee in this case is obligied to distribute the property to any individual that satisfies a condition (presumption is that they do not satisfy it until they prove they can)
Re Barlows Will Trust
All that is necessary is that the trustee may say of the person who has stepped forward that he qualifies. It is not necessary to discover who all the possible people are
What is the difference between a fixed trust and a discretionary trust?
- Fixed Trust: beneificaries are certain, trustees have no discretion of how property should be distributed (conceptual and evidential certainty needed)
- Discretionary Trust: Also known as trust power, trustee has discretion as to which objects should receive property and how much
What is the difference between a power and a discretionary trust?
A power need not be exercised if the trustee decides, however if the power is fiduciary then they must consider exercising it, making a reasonable survey of potential objects to make a sensible decision of whether to appoint property
* Re Hay: A power cannot be void for administrative unworkability
A power will be fiduciary if given to a trustee for the benefit of other people (only fidicuary powers can be void for capriciousness)
What is the rule on certainty of objects for discretionary trusts?
McPhail v Doulton
* The ‘is or is not’ test, must be said with certainty in the abstract whether someone can said to be part of the class of beneficiaries or not (also applies to powers per Re Gulbenkians)
* Said a trust for all the residents of Greater London would be void for administrative unworkability
* Confirmed in R v District Auditor ex p West Yorkshire Metropolitan County Council that where a trust is created it may be void for administrative unworkability
Requires conceptual and evidential certainty and administrative workability
Is a trust for ‘relatives’ certain enough?
Re Baden No2
* Megaw: Said it matters if a substantial number could fall in the trust, not if every individual could, otherwise this is just like the previous rejected test
* Stamp: Depends on whether any individual is or is not a member of the class (narrowest definition of relatives being next of kin)
* Sachs: Once the class of person 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
Will a trust for anyone but specified persons be certain enough?
No such trust will not be valid, however a power will be
Re Hay’s Settlement Trust
* Confirmed Re Manisty, such power will not be void for capricousness
* If a power is directed to be for any people in the world apart from X, it cannot be rendered invalid simply because of the width
* Nothing in the nature of an intermediate power of appointment prevented trustees from discharging those duties
How might uncertainty of objects be cured through delegation?
- Re Coxen: Where an event is sufficiently defined to make it possible for the trustees to decide whether it has happened or not the uncertainty may be resolved
- Dundee Hospitals Board v Walker: Clause providing trustees could decide in their ‘sole and absolute’ discretion was valid
- Re Tuck: A settlor should be able to leave discretion to the trustee or a third party and if they are ready and willing to resolve doubt then they should be allowed to do so, as long as his decision is not wholly unreasonable
What is the general rule on non-chartiable purpose trusts?
Cannot be a trust a valid trust as there is no establishable beneficiaries or certain purpose
* Morice v Bishop of Durham: beneficiary principle states that a valid trust must be enforceable by definite objects (i.e. beneficiaries)
What anomalous purpose trusts have arose despite the rule against non-charitable purpose trusts
- Re Dean: Trusts for animals
- Re Hooper: Upkeep of graves
- However, in Re Astor and Re Endacott it was said these cases should not be extended anymore and the principle of a non-charitable purpose trust having to be enforceable by ascertainable beneficiaries
What is a Denley trust?
Re Denley
* Creates an exception to the rule on non-charitable purpose trusts
* Private purpose trusts which directly or indirectly benefit persons can be valid
* The benefit cannot be so indirect or intangible as to not give individuals which would benefit any locus standi
* The beneficiary principle of Re Astor approved in Re Endacott is confined to purpose trusts which are abstract or impersonal
