The 3 Certainties

Question 1

What are the 3 Certainties?

Answer 1

certainty of intention, certainty of subject matter and certainty of objects

Question 2

what type of trust is exempt for the 3 Certainties?

Answer 2

charitable trust

Question 3

what case established the 3 Certainties?

Answer 3

Knight v Knight (1840)

Question 4

certainty of Intention?

Answer 4

The requirement of certainty of intention requires a obligation to be placed upon the trustee. This can be done through considering the wording of the trust as imperative wording as opposed to precatory wording, and considering the conduct of the parties.

Question 5

certainty of objects?

Answer 5

who are the beneficiaries of the trust?

Question 6

why is it important that a trust satisfies the 3 Certainties?

Answer 6

1. the trustees need to know what their obligations are clearly (therefore if the 3 Certainties are not met it provides a degree of protection for the trustee)
2. it means that if necessary the court will be able to administer the trust

Question 7

what are the main indicators for certainty of intention?

Answer 7

language - imperative or precatory

conduct

Question 8

what case established the distinction between precatory and imperative language?

Answer 8

Lambe v. Eames (1871)

Question 9

precatory words?

Answer 9

express hope, a wish, a moral obligation they usually indicate that a gift is intended

Question 10

imperative words?

Answer 10

express a command or a duty to do something, used to indicate that a trust is intended

Question 11

example of precatory wording

used in Lambe v. Eames (1871)?

Answer 11

to be at her full disposal in any way she may think best, for the benefit of herself and her family

Question 12

example of precatory wording in the case of Re Adams and Kensington Vestry (1884)

Answer 12

in full confidence that she would do what is right

Question 13

example of precatory wording in the case Re Diggles (1888)

Answer 13

it is my desire that (my daughter) allows Anne an annuity of £25 during her life

Question 14

Which case established that there is no meaning in the word trust?

Answer 14

Kinloch v. Secretary of State for India (1882)

Question 15

Case examples of certainty of intention, when conduct is being considered?

Answer 15

Paul v. Constance, Jones v. Lock, Rowe v. Prance,

Question 16

Paul v. Constance

Answer 16

The case of Paul v. Constance establishes that conduct can constitute evidence of certainty of intention. In this case it included treating a bank account as shared. This case should be contrasted with the case of Jones v. Lock (1865)

Question 17

Jones v. Lock

Answer 17

The court held that loose conversations would not amount to establish a trust

Question 18

Prance v. Rowe

Answer 18

The case of Rowe v. Prance, concerned a couple buying a yacht together, it was registered in P’s name, but they referred to it as ‘ours’. The court held this conduct amounted to a trust through claiming certainty of intention.

Question 19

Does equity look at the substance or the form?

Answer 19

“equity looks at substance and not form”, therefore the word trust being included is not conclusive that a trust has been established. This can be seen by the case of Tito v. Wondel,

Question 20

Tito v. Wondel

Answer 20

the British government put money aside for the islanders of a particular island and called it a trust. The court in this case held that this was a governmental obligation rather than a trust.

Question 21

When is something called a trust not a trust?

Answer 21

A self proclaimed trust will not be considered a trust if it is a sham. That is if the court believes that the trust is established with the immoral intentions, then the court will hold that trust void for lack of certainty of intention. This was stated by Lord Diplock in the case of Snook v. London West Riding Investment “a sham means when documents are signed intending to give the apperance to third parties or the court that a situation is different to the actual situation. Therefore just because the word trust is used does not mean it is binding”. This was demonstrated through avoiding bankruptcy in the case of Midland Bank v. Whyatt

Question 22

What is the commercial context for ascertaining a trust when one party is not aware?

Answer 22

The case of Re Kayford held that customer money was held on resulting trust for them despite their unawareness, therefore in bankruptcy proceedings they were able to remain it. This can also be seen in the case of Re Lewis of Leicester, where the concessionaires could access their money.

Question 23

What occurs in the lack of certainty of intention?

Answer 23

if a trust is void for want of certainty of intention, then the property (if successfully transferred) will amount to a outright gift. If the property had not been transferred then it will remain with those who initially owned the property.

Question 24

Certainty of Subject matter.

Answer 24

The certainty of subject matter requires certainty as to the contents of the trust. For example in the case of Palmer v. Simmonds it was held that the bulk of the estate did not amount to a trust.

Question 25

Such minimal part of my estate capable under English law - as certainty of subject matter?

Answer 25

Anthony v. Donges - this did not amount to a trust as it was void for uncertainty of subject matter.

Question 26

Re Kolbs Wills Trust

Answer 26

This case held that Stocks and Shares in the Blue chip category did not amount to a trust because it was void for lack of certainty of subject matter.

Question 27

Boyce v. Boyce (1849)

Answer 27

This case concerned a father with 2 daughters and four houses, he left one house to one daughter on the proviso that should could pick any one she wanted, and the other daughter got the other 3. The one daughter died before the father, therefore the trust was held void for lack of certainty of subject matter.

Question 28

What about in cases of discretionary trusts where the trustees determine the subject matter?

Answer 28

In the case of Re Golay the trust outlined a “reasonable income”, the court held in this case there was enough background evidence to determine what was meant by a reasonable income.

Question 29

Segregation of Subject Matter?

Answer 29

Re London Wine, in this case a wine dealer did not separate the wine for the customers upon their payment. The company went bankrupt, and the court held that as there was not segregation there was not certainty of subject matter. This can be contrasted with the case of Re Stapelton Fletcher where the wine dealer did segregate, therefore it was held to be on trust for the customers. This was also upheld by the case of Re Goldcorp Exchange,

Question 30

Re Goldcorp Exchange

Answer 30

some of the Gold had been segregated off whereas others had not - it was a trust where the gold had been segregated

Question 31

What about when the subject matter is not tangible property?

Answer 31

In the case of Hunter v. Moss, the case concerned an oral conversation where 5% of shares were promised to an employee yet no shares were transferred. Upon the company being brought out, H received no money. In this case the court held there need not be the transfer of shares to amount to certainty of subject matter. This decision has been criticised by D.

Question 32

Criticism of Hunter v. Moss

Answer 32

Hayden who states that the courts were blinded by sympathy for the claimant in this case and made the wrong decision, where as J Martin argues that this is a fair and sensible decision as the equitable trace could be used.

This case was further discussed by Lord Neuburger in Re Harvard Securities

Question 33

Lord Neuburger in Re Harvard Securities

Answer 33

“it seems to me that the correct way at first instance to explain the difference between the result in Hunter and that in London Wine is on the ground that Hunter is concerned with shares as opposed to chattels”

However this approach was criticised as it did not account for non-fungible mass. Therefore it was not followed in the Australian case of White v. Shortall.

Question 34

Pearson v. Lehman Brothers (2010)

Answer 34

In this case following the collapse of the Lehamn Brothers in 2008, the remaining shares had not been segregated. In this case Biggs, J stated an alternative interpretation of the Hunter case:
“trust works by creating a beneficial co-ownership share in the identified fund, rather than in the conceptually much more difficult notion of seeking to identify a particular part of that fund which the beneficiary owns outright”.

Question 35

Future property and certainty of subject matter?

Answer 35

The case of Re Ellenborough established that you cannot create a trust for subject matter you do not own yet. In this case she attempted to create a trust for subject matter she may inherit from her siblings and it was held to be void.

Question 36

If you want to create a trust of money is this possible?

Answer 36

Lewis’s of Leicester hold that if that money is in a separate bank account then there is certainty of subject matter.
it was held in the case of MacJorden Construction that there has to be some element of segregation of the money, and gaining access to any old money would be impossible.
In the case of Wilson Browne it was held that in order for a contract stating she was entitled to £110,000 to be valid a certain amount of money needed to be set aside for her. This case should be contrasted with that of Paul v. Constance.

Question 37

What is the certainty of Object?

Answer 37

The certainty of object refers to the beneficiaries of a trust, and a trust can be held void if there is not a specific beneficiary of a trust. For example in the case of Re Endercott a trust for a memorial of myself was held void. The case of Morice v. Bishop of Durham was held void for the purpose of “benevolence and liberality”.

Question 38

Why is certainty of objects important?

Answer 38

certainty of object is important for everyone involved in a trust. It is important for the trustee as they must carry out their duty and discover who to give the trust to. It is also important for the court to be aware who the beneficiaries are, as well as the beneficiaries themselves to be able to validate their claim.

Question 39

What are the different test for certainty of objects?

Answer 39

the test for a fixed trust is: the complete list test

the test for a discretionary trust is: the given postulent test

Question 40

The complete list test.

Answer 40

The complete list test outlines that a complete list of all objects is required. in a fixed trust the description of beneficiaries should ether be conceptually or evidently uncertain. This was demonstrated in the case of IRC v. Broadway Cottages

Question 41

IRC v. Broadway Cottages

Answer 41

a fixed trust was created for a wide range of people including relatives of employees, therefore it was impossible to draw up a complete list therefore the trust was invalid.

Question 42

OT Computers v. First national Trinity finance

Answer 42

held that urgent suppliers was void due to the complete list test

Question 43

The Given Postulent test.

Answer 43

This test emerged from the case of Re Gulbenkiens Settlement Trust which established this test in relation to powers. It was upheld in the case of McPhail v. Doulton;
the court held that the test that should be used is “can it be said with certainty to at a given individual is or is not a member of a certain class”

Question 44

Conceptual certainty

Answer 44

There is a need for conceptual certainty meaning the concept used to describe the class of beneficiaries needs to be sufficiently clear to see if someone in it must or cannot benefit from the trust. This was illustrated in the case of R v. District Auditor ex.p. West Yorkshire

Question 45

R v. District Auditor ex.p. West Yorkshire -

Answer 45

a trust for all the inhabitants of west Yorkshire was held to be conceptually uncertain due to the word inhabitants.

Question 46

The requirement for the absence of capriciousness.

Answer 46

In the case of Re Maristry’s Settlement it was held that the trust must not be to the negative intentions of the settlor.

Question 47

What is conceptually uncertain?

Answer 47

In the case of Re Bardens Trust (no.2) the court considered if he word relatives was conceptually certain, they held it was but all the judges had different reasoning

Question 48

The judgement in Re Bardens Trust (no.2)

Answer 48

Stamp: Held relative to mean next of Kin per an old case therefore was able to put an individual in an is or is not box
Sach: it is up to any person coming forward to show that he is in that class otherwise it would be presumed that he is not in that class
Megew: it is enough to show that there are a substantial number of people in the category despite a large number of don't knows.

Question 49

What happens in the event of a trust being void for conceptually uncertainty?

Answer 49

it goes back on resulting trust to the settlors estate.

Question 50

How can conceptually uncertainty be cured?

Answer 50

It is possible to bring in a third party arbitrator to cure conceptual uncertainty. However the third party must only be a guide for questions of fact, in terms of questions of law the court will provide guidance.

Question 51

Re Jones

Answer 51

it was held if a women had a social or other relationship with a certain individual then she will loose the trust. The court held this was conceptually uncertain.

Question 52

Re Tuck’s Settlement Trust

Answer 52

held that a Jewish man who passed down his wealth provided his descendent marry appropriate Jewish women and worship the Jewish faith. He appointed a Rabbi to determine if this was okay. Lord Denning said it was fine in this case however LJ Eversly noted that the opinion of the third party could not form part of the class.

Question 53

Gifts subject to a condition precedent and conceptual uncertainty.

Answer 53

There is a less strict test which to considering if gifts subject to a condition precedent are conceptually uncertain. This is the “one person test”. This was established in the case of Re Barlows will Trust, where a dead women left a painting to any of her family or friends. The court held in this case if one person could fulfil that criteria then the gift stands.

Question 54

Powers

Answer 54

In a power the doner will transfer the property to the donee, the donee will then have the power to make appointments of the property, however this is at their discretion. In the event that they do not make an appointment then it will be made as a gift over in default of appointment

Question 55

What is the difference between a power and a trust?

Answer 55

in a power they have the option to exercise the power, in a trust it is a obligation (and upon failure they trustee will be held liable)

Question 56

What are the different types of powers?

Answer 56

special power - the donee can choose from among a specified closed group of people
general power - there is no closed group of people and the power is exercisable amongst anyone in the world
hybrid power - if a power can be exercised amongst anyone in the world except a certain group.

Question 57

Administrative unworkability in powers?

Answer 57

administrative unworkability will not invalidate a power

Question 58

Capriciousness and powers?

Answer 58

Capriciousness will still invalidate a power per Bird v. Luckie

Question 59

What is the difference between a power and a fiduciary power?

Answer 59

A fiduciary power is given to someone in a fiduciary position (i.e. they are a trustee), they cannot exercise this power like a mere power and they are also under an obligation to consider their power periodically. This was demonstrated in the case of Re Hays ST.