The Three Certainties Flashcards
What are the three certainties for ensuring a trust is valid and enforceable?
Knight v Knight:
Intention
Subject matter
Objects
In which ways may a settlor show intention to create a trust?
Words or conduct
3C - intention - what 2 conditions must ‘words’ have in displaying intention to create a trust?
(1) The words must substantially manifest a sufficient intention to create a trust (Re Kayford)
(2) Words must be imperative rather than precatory (Lambe v Eames)
(1) The words must substantially manifest a sufficient intention to create a trust - words which are not essential or conclusive in determining settlor’s intentions?
Technical words, i.e. ‘trust’, ‘confidence’
(2) Words must be imperative rather than precatory - imperative words?
Words that impose an obligation
‘in full confidence’ usually precatory (Re Adams and Kensington)
but if coupled with an imperative ‘direction’ they become imperative (Comiskey v Bowring-Hanbury)
(2) Words must be imperative rather than precatory - precatory words? Plus 3 examples.
The words that express a mere hone or wish
Ex:
Property left at the ‘disposal’ of a spouse to deal with ‘in any way she may think best’ (Lambe v Eames)
Property given in ‘full confidence’ that the spouse would ‘do what is right as to the disposal’ (Re Adams and Kensington)
‘I wish them to bequeath (Re Hamilton)
How must words be interpreted?
In their context (Re Hamilton). It is only appropriate to interpret identical words from older cases in the same way if the whole document is worded in a similar way. In this case the earlier decision should be followed unless it’s clearly wrong (Re Steele’s Will Trust)
Will a transfer of money give rise to a trust?
Not unless it is:
1) segregated (Azam v Iqbal) or
(2) transferred for a specific purpose (Re Kayford
Will money that is paid into the overdrawn account of a company in liquidation constitute a trust?
No, it will be distributed to creditors (Moriarty v Various customers of BA Peters)
Are the words ‘I am as from today holding 4,000 shares in the company for you’ a trust or a gift?
Trust (Shah v Shah)
What is conduct?
Repeated assurances that a bank account was ‘as much yours as it is mine’ and an instruction that the money in the account was to go to the lover after death was sufficient to constitute an express declaration of trust (Paul v Constance)
Certainty of subject matter - what are the two aspects of the property that must be certain?
The trust property itself
The beneficial entitlements
What two things can property be?
Tangible (Chattels)
Tangible property must be identifiable (Re London Wine). It will be identifiable if it has been segregated (Re Goldcorp Exchange)
Intangible (i.e. dematerialised shares)
There is no requirement that intangible property be identifiable
Intangible property includes shares as long as they are shares of the same class (Hunter v Moss)
3 examples of statements that were not sufficiently clear re trust property.
‘The remaining part of what is left’ (Sprange v Barnard)
‘Anything that is left’ (In the Estate of Last)
‘The bulk of my Estate (Palmer v Simmonds)
What is beneficial entitlement?
The amount of property to which the beneficiaries are entitled must be sufficiently clear
A ‘reasonable income’ was held to be sufficiently certain (Re Golay’s Will Trust)
Where the certainty of the property depends on a conditions precedent and that condition never occurs the property will remain uncertain (Boyce v Boyce)
What 3 conditions ensure that there is no uncertainty of subject matter?
1) Trustees are given a discretion to determine beneficial interests; or
2) It is possible to apply the maxim ‘equity is equity’; or
3) The settlor lays down an effective determinant as in Re Golay
Residue of an estate is ascertainable, and therefore certain
What is certainty of objects?
The beneficiaries of a trust must be ascertainable (Morice v Bishop of Durham)
The trustees must be informed by the settlor who the beneficiaries are
Note: no requirement for the beneficiaries to be informed
The type of trust will determine the level of certainty required
Which types of trusts are covered under certainty of objects?
Fixed interest trusts, discretionary trusts.
Certainty of objects - discretionary trusts, what is it and test
Discretion is given to the trustees as to what the beneficiaries are to receive
The test ‘is / is not test’ set out in McPhail v Doulton is used
It must be possible to determine conclusively whether an individual is or is not within the class
The test has been interpreted in three different ways in Re Baden’s (no 2) and it is not clear which is the correct approach
- Sachs LJ stated conceptual certainty was required and an individual seeking to be in a class must prove he is within it
- Megaw LJ stated no conceptual certainty was required as long as a substantial number of individuals in the class are identifiable
- Stamp LJ stated all the individuals within the class must be identifiable Trusts will be void for administrative unworkability (R v District Auditor ex p West Yorkshire CC)
How large should the class of individuals be for a trustee to be able to exercise his duty? 2 examples
Not be too.
‘Friends’ is not conceptually certain enough (Re Lloyds Trust Instrument)
‘Relatives’ is conceptually certain enough (Re Baden’s Deed Trusts (no 2))
Powers of appointment - test
The ‘is / is not test’ (Re Gulbenkian’s Settlement Trusts)
A trusts for relatives who were ‘deserving material hardship’ was uncertain as ‘deserving’ could not be sufficiently clearly defined (Public Trustee v Butler)
Administrative unworkability does not apply to powers (Re Manisty’s Settlement)
‘Friends’ is not conceptually certain (Re Gulbenkian’s Settlement)
Note: an individual trust will not be treated as a power (Re Shaw)
Gifts
Gifts with a condition precedent are gifts made to a class
Where gifts are made to a class, conceptual certainty will exist if one or more individuals can be determined with that class
‘Friends’ can, therefore, be sufficiently certain for a gift (Re Barlow’s Will Trust) – anyone who could prove by any reasonable test that they had been a friend of the testatrix was entitled to exercise the object