Express trusts-the three certainties Flashcards
What are the three certainties of express trusts?
- Certainty of intention
- Certainty of subject matter
- Certainty of objects
What is the requisite intention to form certainty of intention?
The requisite intention is an intention to impose or assume the duty which is characteristic of a trust i.e. a duty to hold property for, or apply it for the benefit of, a beneficiary (or purpose).
What are the two requirements of certainty of subject matter?
- The trust property requirement-it must be possible to identify the trust property.
- The beneficial property requirement-it must also be possible to ascertain the nature and extent of the beneficiary’s interest in that trust property.
What are tangible and intangible assets?
Tangible assets are physical assets such as diamonds or cash.
Intangible assets do not exist in physical form e.g. shares or debts or IP rights.
What are fungible and non-fungible assets?
Fungible assets are assets that are identical and readily exchangeable, such as shares.
Non-fungible assets are assets that may have similarities but are distinguishable in cut, colour and clarity and may not have the same value e.g. diamonds.
Is it possible to declare a trust over intangible, fungible assets?
Yes, this is possible because a trust over shares for example is valid because the shares are intangible and fungible-there is no need to identify the specific shares which are subject to the trust as they are interchangeable.
Is it possible to declare a trust over tangible assets?
This is only possible where the specific assets forming the subject matter of the trust are identified.
Describe the case of Boyce v Boyce (1849) in relation to the beneficial property requirement.
Boyce v Boyce (1849): a trust was created under which the trustees were 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. However, C died before making the selection and the trust failed for certainty because it was no longer possible to ascertain which beneficiary is entitled to which car.
What does certainty of objects mean?
The objects of a trust need to be certain so that the trust can be regulated and enforced by the Court if necessary.
What is a fixed trust?
A fixed trust is a trust in which the settlor sets out the entitlement of each beneficiary in the trust instrument.
What is the complete list test?
It is the test for certainty of objects in fixed trusts cases where the trustees are required to distribute property in fixed proportions.
It must be possible to draw up a complete list of all the beneficiaries.
What is the ‘is/is not’ test?
The “is or is not” test is a legal principle used to determine if a discretionary trust is valid. It asks if it’s possible to say with certainty whether a person is a member of a class.
What is administrative unworkability and provide an example?
It is possible for a discretionary trust to fail because the class of objects is too wide, also known as administrative unworkability.
McPhail v Doulton (1971): a discretionary trust is void if the class of beneficiaries is so hopelessly wide as not to form anything like a class e.g. all the residents of Greater London.
