Express Trusts

Question 1

What it the best way of evidencing intention? Why might this not always be conclusive?

Answer 1

Legal advice and a trust deed.

Trusts can be created without mentioning the word ‘trust’ or with any knowledge of the trust as a legal concept - Megarry J in Re Kayford.

Question 2

What is a common alternative to disposition by means of a trust? What does the law say about this?

Answer 2

Outright transfer by gift.

The law will not perfect an imperfect gift by treating a failed outright transfer as a successful declaration of trust.

Question 3

Which two cases demonstrate the position of English law on intention and gifts?

Answer 3

Jones v Lock - a father wrote a cheque for his baby and locked it away. Without endorsing the cheque it could not be an effective gift.

Paul v Constance - stating that ‘this money is as much yours as mine’ formed a trust even though the bank account was only in one name - Scarman LJ

Question 4

Is intention determined objectively or subjectively? What must courts be wary of?

Answer 4

Objectively - Lord Millett - Twinsectra v Yardley - it does not matter what the settlor subjectively intended, but whether a reasonable person would infer that this was his intention from his words or conduct.

Courts must be wary of dishonest sham trusts which objectively look like trusts for children etc. but then remain at the settlor’s disposal, potentially to put it out of the way of the mortgagee in insolvency.

Question 5

What are precatory words and what is the law on them?

Answer 5

Precatory words are expressions of hope that property will be used for a particular purpose i.e. ‘I wish that’.

These will be deemed too ambiguous to create a trust - trustees’ duties are too onerous to be imposed in this way.

Question 6

Must trust property be segregated?

Answer 6

Trust property must be segregated from the trustee’s property.

Segregated property will evidence the intention to form a trust - Henry v Hammond.

The trust property of a number of distinct beneficiaries can be mixed in a common fund - R v Clowe.

Question 7

Why is certainty of subject matter and objects so important?

Answer 7

Sir Arthur Hobhouse - Mussoorie v Raynor - lack of certainty reflects a lack of genuine intention to create a trust.

Certainty is required to ensure that the trustee and court have the information necessary to perform their roles in running and enforcing the trust.

Question 8

Explain the two forms of uncertainty.

Answer 8

Conceptual uncertainty - where the settlor is ambiguous in his definition of the subject or objects i.e. ‘to my friends’ or ‘some’.

Evidential uncertainty - where it is unsure who might be beneficiaries i.e. if records need to be looked at.

Question 9

Where is evidential uncertainty a particular problem?

Answer 9

Where property needs to be divided equally between beneficiaries - this can lead to enumerability.

Question 10

Why is identification of the subject matter so important?

Answer 10

Property is at the heart of trusts so it is imperative that the subject matter can be identified.

It is crucial to know the subject matter to determine how much each beneficiary can receive.

Question 11

What is the case law on subject matter?

Answer 11

Palmer v Simmonds - ‘the bulk’ of an estate was not a definition with sufficient certainty.

Re Golay’s Will Trusts - a ‘reasonable income’ to be paid could be objectively assessed and so was certain.

Re London Wine - receivers of an insolvent wine merchant claimed that they were beneficiaries of the wine, however the wine had not been earmarked so they could not be said to be due to them.

Question 12

What are the Three Certainties?

Answer 12

1. The settlor intends to make a trust.
2. The subject matter of the trust is sufficiently identified.
3. The objects (beneficiaries) of the trust is clearly identified.

From Knight v Knight.

Question 13

What is the law relating to intangible/fungible property?

Answer 13

Hunter v Moss - Moss failed to identify which 50 shares should be held on trust for Hunter, but the court found that the subject matter was sufficiently certain.

Affirmed in Re Lehman Brothers International.

This aligns with the way in which shares are viewed through co-ownership.

Question 14

What are the two ways in which fixed trusts can be framed?

Answer 14

1. To be independent of and distinct from the other beneficiaries - ‘to each of’.
2. To be defined referentially so that individual entitlements cannot be ascertained or quantified without identifying and quantifying the others - ‘to be divided equally between’.

Question 15

What is the requirement for independent and distinct fixed trusts?

Answer 15

The claimant must establish that he falls within the class outlined by the settlor to be entitled to the trust property.

The identity of the other beneficiaries is not a relevant consideration.

Question 16

What is the requirement for referentially defined fixed trusts?

Answer 16

The trustee must be able to produce a list of all the members of the class defined by the settlor - ‘list certainty’.

Question 17

What was the law on discretionary trusts initially?

Answer 17

That objects of a discretionary trust required list certainty for the trust to be successful.

Question 18

When did the requirements for powers of appointment change?

Answer 18

Re Gulbenkian’s Settlements - no need for list certainty in relation to powers of appointment.

The test was whether it could be said for any given individual that he was or was not a member of the class.

Question 19

What did Lord Wilberforce emphasise in McPhail v Doulton?

Answer 19

The similarity between discretionary trusts and powers.

Equal division was the last thing the settlor would have intended or he would have created a fixed trust.

Question 20

What was the test introduced in McPhail?

Answer 20

‘Is or is not’ or ‘any given postulant’ test.

Both conceptual and evidential certainty are required.

Question 21

What followed McPhail? What were the approaches of the three judges?

Answer 21

The case was referred back to the CA as Re Baden’s Deed Trusts.

Stamp LJ - conceptual and evidential certainty were required - there is no class of ‘don’t knows’.

Sachs LJ - only conceptual certainty required - ‘don’t knows’ can be treated as ‘nos’.

Megaw LJ - would accept some evidential uncertainty so long as a substantial number of objects can be said to fall within the trust with certainty.

Question 22

What is the result of Re Baden’s?

Answer 22

Only Stamp LJ applied an approach consistent with McPhail and Gulbenkian.

Megaw LJ’s approach is irreconcilable with what was said in McPhail and Gulbenkian.

Question 23

What is the issue with Re Baden’s?

Answer 23

The point of certainty of objects is that the court can administer the trust properly.

There were three distinct tests in the case and so the McPhail test is uncertainty, so how can certainty of objects be achieved?

Question 24

What is the law on administrative unworkability?

Answer 24

Lord Wilberforce - McPhail - imprecision on what criteria should be used to divide the trust property.

A trust left to residents of Greater London would fail due to the ‘hopelessly wide’ size of the class.

The size of class issue was considered in District Auditor No. 3 and Re Harding.

Question 25

What is the law on capriciousness?

Answer 25

Manisty - a discretionary trust will fail if it is capricious, that is, where the beneficiaries picked have no sensible or discernible link to the settlor.

Question 26

How can settlors resolve uncertainty?

Answer 26

Re Tuck’s Settlement Trusts - the settlor can stipulate that in the event of the definition being considered uncertain, a named third party could step in to conclusively resolve the uncertainty.

In Tuck’s, the Chief Rabbi in London of the Portuguese or Anglo German community would be consulted to decide whether the condition of a wife of Jewish blood who continues to worship according to the Jewish faith was met.

It is unclear whether such a level of expertise is required.