The Three Certainties

Question 1

What are the three certainties?

Answer 1

1) Certainty of intention - intention to create trust
2) Certainty of subject-matter - trust property
3) Certainty of objects - beneficiaries

Question 2

Byrnes v Kendle

Answer 2

Objective test for whether S intended to create a valid trust, Thoughts of the parties at the time etc. are not relevant.

So even though S hated B in this case and did not necessarily think he was still creating a trust, the fact that he had properly executed a trust deed meant that there was certainty of intention under the objective test.

Question 3

Paul v Constance

Answer 3

Words and conduct of the parties can be used to determine whether there was an intention to create an express trust.

S had made statements here to the effect that the property was both theirs equally and they had both used the same bank account for the property etc., so the court found that there was certainty of intention to create a trust - even though NOT explicitly stated

Question 4

Azam v Iqbal

Answer 4

Trust money being mixed with T’s own money is strong evidence to suggest that there was NO intention to create a trust - key trustee duty is to separate T’s own money from B’s money

Question 5

Re Lewis’s of Leicester

Answer 5

Even if trust money is mixed amongst beneficiaries, provided the money is kept separate from T’s own money, then there may be sufficient certainty of intention.

So this applies where there is a mixed trust fund - monies from different beneficiaries can be mixed and it is held on trust for the payees in proportionate co-owned shares

Question 6

Re London Wine

Answer 6

If the subject-matter is not clear due to a lack of segregation between trust property and non-trust property, then there is NOT certainty of subject matter and the trust is invalid

Question 7

MacJordan Construction v Brookmount

Answer 7

Where money is not segregated within a bank account, then there is also not certainty of subject-matter.

The trust property here was 10% of the current value of the house - this is a particular amount rather than a fixed proportion, so failed for certainty of subject-matter because when the value of the house changes, B’s property cannot be identified.

Question 8

Hunter v Moss

Answer 8

However, for shares, there can still be certainty of subject-matter even where the trust shares and non-trust shares cannot be identified. D promised C 50 shares in his company, but it was not clear which shares those were out of the overall pool of shares - but court still found that there was certainty of intention because there was no distinction between the shares.

Court made the distinction between tangible and intangible property - where no tangible distinction can be drawn between the property (e.g. shares, unlike physical chattel like wine), then there can be certainty of subject-matter despite a lack of segregation

Question 9

s.1(3) Sale of Goods Act 1979

Answer 9

This essentially nullifies the effect of Re London Wine for contracts of sale of goods - for contracts of the sale of goods, the buyers become owners at common law of the unsegregated property relative to the quantity that they purchased.

E.g. if 300 tonnes of cotton being sold by seller and each buyer was entitled to 100 tons each under their respective contracts, then they would each hold 1/3 of whatever cotton was on board a given shipment at common law as tenants in common. Therefore, no need for segregation per Re London Wine as they are TiC at common law

Question 10

Pearson v Lehman Brothers

Answer 10

S can create a trust for the entire sum of shares, with a portion held on trust for the beneficiary. Since the rights to the shares is not one right per share but rather one OVERALL right that varies in strength depending on the amount of shares held, having x% of the right held on trust for a beneficiary is sufficiently certain.

There is certainty of subject-matter here because there is a fixed portion of property owned by B in terms of their % owned of the overall right to the shares. So if the number of shares increases or decreases, B’s portion can still be stated with certainty as their % is of the total at any given time.

Question 11

IRC v Broadway Cottages

Answer 11

Test for certainty of objects of fixed trusts is the complete list test - you must be able to draw up a complete list of all the beneficiaries in order to have certainty of subject-matter

Question 12

Re Baden’s Deed Trust (No.1)

Answer 12

Test for certainty of objects of discretionary trusts was changed from the complete list test (as for fixed trusts - IRC v Broadway Cottages) to the ‘is or is not’ test. For the ‘is or is not test’ to be satisfied, it must be stated with certainty whether any given individual is either an object of the class of beneficiaries or not.

Question 13

Re Baden’s Deed Trust (No.2)

Answer 13

The issue then arose of exactly what the ‘is or is not’ test requires. CA affirmed the ‘is or is not’ test for certainty of objects in discretionary trusts, but all three CA judges took different approaches as to its exact requirements.

Stamp LJ took a strict view and argued that any given individual needs to be identified as either being an object of the class of beneficiaries, or not. In other words, it requires both conceptual and evidential certainty.

Sachs LJ took a slightly more relaxed view and explained that the test should only require conceptual certainty, and not evidential certainty. So provided that the concept was sufficiently certain (e.g. all people who paid me on X date) in terms of who is in or out of the class of beneficiaries, then the trust is valid - even if there is evidential uncertainty, i.e. you cannot determine who ALL of the beneficiaries are.

Megaw LJ - took a very different approach from Stamp LJ and Sachs LJ and said that for the is or is not test to be satisfied, you only need to be able to state with certainty that a substantial number of objects are DEFINITELY part of the trust - does not matter if others are evidentially/conceptually uncertain.

Megaw LJ’s approach seems to be quite clearly not what the court intended in Re Baden’s Deed Trust (No.1). Prefer Sachs LJ’s approach overall - it is sensible and pragmatic, and does not invalidate conceptually certain trusts where it may be difficult to identify exactly ALL of the beneficiaries.

Question 14

Re Gulbenkian’s ST

Answer 14

Test for powers of appointment is the ‘is or is not’ test - objects are only certain if any given individual can be said to be either in or out of the class of beneficiaries of the trust

Question 15

Re Coxen

Answer 15

S cannot appoint an expert to resolve any uncertainty for certainty of objects - either there is certainty of objects according to the objective test, or there is not

Question 16

Re Tuck’s ST

Answer 16

Lord Denning explained that where there is conceptual certainty about the particular class of individuals who are to be in or out of the category of beneficiaries, and the expert is EASILY REPLACEABLE, then an expert can resolve uncertainty of objects.

So a Chief Rabbi was able to resolve issues of uncertainty because it is relatively conceptually clear how to determine a jewish person, and there can be other Chief Rabbis to resolve any uncertainty if the appointed expert dies.