The Three Certainties

Question 1

The necessity of the three certainties in the creation of a valid express trust have been established by authority in which cases?

Three certainties being:

1) Certainty of Intention - Settlor must demonstrate a clear intention to create a trust opposed to creating something else.
2) Certainty of Subject Matter - The trust property must be sufficiently segregated from other property so that the trust property is identifiable and therefore certain.
3) Certainty of Objects - The people who are to benefit from the trust must also be identified with sufficient certainty.

Answer 1

Wright v Atkyns (1823) - First…the words must be imperative… secondly…the subject must be certain…; and thirdly…the object must be as certain as the subject “ - Lord Eldon

Knight v Knight (1840) per Lord Langdale MR - “First, if the words are so used, that upon the whole, they ought to be construed as imperative; Secondly, if the subject of the recommendation or wish be certain; and, Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain”

Question 2

How you can tell between a gift and a trust?

Answer 2

The essence of a trust is splitting the legal title and equitable title in some piece of property such that one or more people (the trustees) have the legal title and control the property while others (the beneficiaries) own the equitable title and get the use and enjoyment of the property.

An intention to make a gift involves the intention to transfer property absolutely without intending to impose any obligations on the donor to hold the property for someone else.

Question 3

Test for identifying a trust?

Answer 3

Proving that the settlor intended to impose a legally binding obligation on the trustee to hold and manage the property on behalf of the beneficiary.

Question 4

Maxim of Equity in relation to certainty of intention?

Answer 4

‘Equity looks to intent, rather than form’ - This is a question of the construction of the relevant documents or of the gathering of inferences from the words or conduct of the alleged settlor, considering all the circumstances of the case.

Question 5

Administration of Justice Act 1982 s21 (2) states

Answer 5

Extrinsic evidence, including evidence of the testator’s intention, may be admitted to assist in the interpretation of a will.

Question 6

Kinloch v. Secretary of State for India stated?

Answer 6

There is no magic in the use of the word ‘trust’. Even if the word trust is used, maybe several times, it does not follow that a trust has been created.

Re Harrison (2005); In relation to a will Hart J said, that the mere facts that the words ‘in trust’ had been used was not, in itself, inconsistent with an intention that the testator’s wife should be the absolute beneficial owner. A strong context is required to deny the prima facie construction of the word ‘trust’

Question 7

Precatory words are?

Answer 7

Words that involve a request

Question 8

Imperative words are?

Answer 8

Words that express a command or a duty to do something

Question 9

What do precatory words do?

Answer 9

Precatory words express a hope, a wish, or a moral obligation that the donee will deal with testator’s property in a particular way. Use of such words typically indicates that a gift is intended. There is no intention to impose a binding trust on that person.
Modern attitude - No trust is created by precatory words

Question 10

Which cases concern precatory words and what did they say about them?

Answer 10

Mussoorie Bank v. Raynor [1882] - “Feeling confident”

Re Adams and Kensington Vestry [1884] - “In full confidence”

Re Diggles (1888) - “It is my desire”

Re Hamilton (1895) - “I wish them”

Re Williams (1897) - “In the fullest confidence”

Re Connolly [1910] - “specially desire”

Re Johnson [1945] - “request that”

These words lack the necessary elect of requiring the other party to hold the property for someone else therefore will not be evidence of a sufficiently certain intent to create a trust.

Question 11

Courts can infer an intent to create a trust from the circumstances of the case, the conduct of the parties and careful construction of any relevant documentation.

Answer 11

Look at essay on precatory words.

Question 12

Conduct - an intention to create a trust can also be inferred from the conduct of the donor

Answer 12

Paul v Constance (1977) - When Mr Constance died, a dispute arose regarding whether his wife (from home he was separated but not divorced) or his new partner Mrs Paul, was entitled to the money held in a bank account in his sole name. During the relationship, Mr Constance had made arrangements for Mrs Paul to be able to withdraw money with his write permission. Mr Constance only drew money once, the money was split evenly between them and he often told Mrs Paul that the money was “as much yours as mine”. In addition, they also paid joint winnings from bingo into the account.

Held - The court held that Mr Constance’s actions should be interpreted as having declared a trust over the money in the bank account. The reasoning was that the statement§ “this money is as much yours as mine” demonstrated sufficient intention that Mr Constance would hold the property on trust for both himself and Mrs Paul. Furthermore, the fact they couple had treated the money in the account as being their joint money was taken to be evidence of an intention to create a trust.

Question 13

Jones v Lock (1865)

Answer 13

Courts may look at all surrounding circumstances and decided that, on the facts, there is insufficient intention to create a trust.
This case concerned a father coming home form a business trip, giving his baby a cheque for £900. He said “Look you here, I give this to the baby” and placed the cheque into the baby’s hands. The issue arose whether there was a trust created over the cheque for the benefit of the baby.
Held - The court held there was nothing to indicate the intention to create a trust of the cheque. The father’s intention was either to make a gift or simply to make a point to his wife for giving him in trouble for not bringing any presents for the baby from his trip.

Question 14

Lassence v Tierney (1849)

Answer 14

If there is no intention to create a trust, the donee will take the property absolutely as a gift.

Question 15

CERTAINTY OF SUBJECT MATTER

Answer 15

Must be clear what the property is held on trust and the beneficial interest must be clear

Question 16

What are the two aspects of ‘certainty of subject matter’?

Answer 16

PROPERTY - it must be certain what property is subject to the trusts
BENEFICIAL ENTITLEMENTS - it must be certain what part or share of the property each beneficiary is entitled to

Question 17

In order for there to be certainty of subject matter, w.r.t the property that is subject to the trust, what must the testator do?

Answer 17

Settlor must describe the property in objective terms, so that the court can understand what is meant to be in the trust. If the settlor is too vague in his description, the court/trustee wont know what is in the trust, and the trust will probably fail lack of certainty of subject matter.

Question 18

Sprange v Bernard [1789]

Answer 18

THERE MUST BE CERTAINTY AS TO WHAT PROPERTY IS SUBJECT TO THE TRUST
CANNOT SAY ‘ANY THING THAT REMAINS’ TO GO TO THE REMAINDERMAN
Testatrix provided in her will ‘for my husband, to bewill him the sum of £300 for his sole use; and at his death, the remaining part of what is left, that he does not want for his own want and use, to be divided between my brothers and sister.’

HELD - Sir Richard Arden, Master of the Rolls held that no trust arose, and the husband took all the property beneficially. Making a gift was the dominant intention, not to bind the husband with a trust.
It was not certain that any property would be left at the husband’s death, let alone what it would be. One could not say what property the trust was to cover, so the subject matter was uncertain, there was no trust and the husband took the money absolutely.

Question 19

In the Estate of Last [1958]

Answer 19

The words ‘anything that is left’ were held to = no certainty of subject matter, and therefore = no trust. Instead = absolute gift.

Question 20

Palmer v Simmonds [1854]

Answer 20

MUST BE CERTAINTY OF SUBJECT MATTER
‘BULK OF MY SAID RESIDUARY ESTATE’ = NO CERTAINTY OF SUBJECT MATTER
Testatrix gave her residuary estate to Thomas ‘for his own use and benefit, as I have full confidence in him that if I die without lawful issue he will leave the bulk of my said residuary estate to Anne’

HELD - Sir RT Kindersley held that because the court could not be sure which parts of the residue were meant to be held on trust, the trust failed. The term “bulk” was too uncertain for the court to determine what was meant.
Therefore, Thomas took the property absolutely. (also issue of precatory words here)

Question 21

Re London Wine Co [1986]

Answer 21

UNIDENTIFIED TANGIBLE PROPERTY = TRUST WILL FAIL FOR UNCERTAINTY OF SUBJECT MATTER
Buyers of wine stored in various warehouses could not establish a trust of particular bottles in their favour as the bottles had not been segregated or identified in any way. So when the wine supplier went into liquidation, the customers could not claim priority over other creditors by saying that particular bottles of wine were held on trust for them.

HELD - Oliver J held that even if the company had said the wine was to come from current stocks, the trust would in any event have been uncertain. There could be no award for specific performance because the Sale of Goods Act required similarly that any goods be ascertained. In the course of his judgment, Oliver J said as follows.

“I appreciate the point taken that the subject matter is a part of a homogeneous mass so that specific identity is of as little as importance as it is, for instance, in the case of money. Nevertheless, as it seems to me, to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach.

Question 22

Re Goldcorp Exchange Ltd [1995]

Answer 22

Confirmed view in Re London Wine Co Ltd - UNIDENTIFIED TANGIBLE PROPERTY = TRUST WILL FAIL FOR UNCERTAINTY OF SUBJECT MATTER
Purchasers of bullion, who had paid for it but not taken delivery, claimed rights to it on the insolvency of the company. Their claims were rejected, apart from a group whose buillion had been segregated. There was no trust for the others as there was no identifiable property on which any trust could attach, as no particular buillion had been segregated for them.

Question 23

Problems with these cases are largely resolved, how?

Answer 23

Since the Sales of Goods Amendment Act 1995. If a buyer has paid for unascertained goods, s/he is deemed to have property rights in them regardless of the segregation.

Question 24

Hunter v Moss [1994]

Answer 24

UNIDENTIFIED INTANGIBLE PROPERTY = OK, THE TRUST WILL BE VALID
There was an oral declaration of a trust of 5% of the issued shares of a particular company. 1000 shares had been issued, so 5% was 50 shares. This was held to be sufficiently certain even though no particular 50 shares had been identified as subject to the trust.
Tangible assets, although apparently similar may have distinguising characteristics e.g. some bottles of wine might have deteriorated. Whereas intangible property is all the same, provided the shares are of the same class. So there was no need to identify which 50 shares were being held on trust.

HELD - In the High Court Colin Rimer QC, sitting as a Deputy High Court Judge, held that since the shares were all identical, the lack of segregation between them did not invalidate the trust.
Hunter v Moss determined that where the property is money, shares or choses in action (intangible assets of identical value), then it does not need to be segregated. In determining so, the Court of Appeal distinguished Re London Wine on the basis that whilst the shares in Hunter v Moss were identical, the wines of bottles in Re London Wine were not identical.
Dillon LJ distanced himself from Re London Wine Co and concluded that “as a person can give by will a specified number of shares in a certain company, so equally, in my judgment, he can declare himself a trustee of 50 of his ordinary shares and that is effective to give a beneficial proprietary interest to the beneficiary under the trust.

Question 25

Criticisms of Hunter v Moss

Answer 25

The case met a mixed reaction from academics. Jill Martin, in an article in the Conveyancer and Property Lawyer, argued that the case was “fair, sensible and workable… [it] is a welcome example of the court’s policy of preventing a clearly intended trust from failing for uncertainty”. Alison Jones, in a different article for the same journal, said that “Logically the decision in Hunter v Moss appears a sensible one”, but noted that it did create “difficult questions”. Other academics were more critical, with David Hayton writing in the Law Quarterly Review that “the unreserved judgment of Dillon LJ…. may well come to be stigmatised”.

Alastair Hudson wrote that “doctrinally, it is suggested that the decision in Hunter v Moss is wrong and should not be relied upon”. Firstly, it contradicts an element of property law which requires there be “specific and identifiable property” to be subject to a property right. Secondly, he suggests it is difficult to see why there should be a dividing line between intangible and tangible property, since there are some principles which apply to both. 500 ball bearings are tangible, but identical; under Hunter, there is no reason these should also not require separation, so the distinction between tangible and intangible is thus “spurious”.

Question 26

Re Harvard Securities Ltd (1997)

Answer 26

The decision of Hunter v Moss has been reluctantly applied in subsequent cases, such as Re Harvard Securities Ltd (In Liquidation), where it was held that there is not a necessity of segregation when the trust in question is intangible, identical property.

Question 27

Boyce v Boyce [1849]

Answer 27

UNIDENTIFIED TANGIBLE PROPERTY = TRUST WILL FAIL… THEREFORE = RESULTING TRUST, BACK TO FATHER’S ESTATE
Testator devised his houses to trustees on trust for his widow for life and after her death in trust to convey to his daughter Maria one of the houses ‘whichever she should choose’ and to convey all his other houses to his daughter Charlotted.
Unfortunately, Maria died in the testator’s lifetime and so could not choose a particular house.
Consequently, the trust in favour of Charlotte was void as it was uncertain what property the trust applied to (because no one knew what property Maria would have chosen, so couldn’t say which properties were left for Charlotte)

Question 28

Re Golay’s Will Trusts [1965]

Answer 28

EXCEPTION TO THE RULE THE UNIDENTIFIED TANGIBLE PROPERTY = TRUST WILL FAIL
IF THE UNIDENTIFIED PROPERTY CAN BE OBJECTIVELY ASCERTAINED, THE TRUST/GIFT WILL BE VALID
Testator directed his executors to allow the beneficiary (his housekeeper) to ‘enjoy one of his flats during her lifetime and to receive a reasonable income from his other properties’.
It was held that the trustees could select a flat. However, the question arose as to whether the direction for a ‘reasonable income’ ought to be void for uncertainty.
HELD - it was possible to objectively discern what a ‘reasonable income’ was for a housekeeper. Therefore, the gift was held to be valid.

Question 29

What happens if the property which is due to be subject to a trust is left uncertain?

Answer 29

The trust will fail, no trust is created. (as in Re London Wine & Goldcorp Exchange)

Question 30

What happens if the purported trust is grafted onto a gift (e.g. kind of like a gift and a pathetic attempt to direct where the gift will go after the beneficiaries lie)

Answer 30

The beneficiary/donee takes the gift absolutely. (as in Sprange & Palmer)

Question 31

What happens if the beneficial interests are uncertain (as in… there is certainty of subject matter, but it is unclear who is to receive what)

Answer 31

There is a resulting trust (back to testator’s estate) as in Boyce & Re London Wine.

Question 32

What are the three ways in which there will be no uncertainty of subject matter, where the testator/settlor has failed to provide certainty of subject matter?

Answer 32

1) Where trustees are given a discretion to determine the beneficial interest
2) It is possible to apply the maxim ‘equality is equity’
3) Settlor lays down an effective determinant as in Re Golay (reasonable income for a housekeeper)

Question 33

Re Kayford Ltd (1975) - Insolvency

Answer 33

Concerned a mail order company that subsequently went into liquidation. Customers of the company would usually pay either the full money or a deposit in advance for their goods. After the company became aware of their liquidation, they were advised by their accountants to set up a separate bank account to hold customers’ money and deposits. This account was known as the “Customers’ Trust Deposit Account”. The company had decided that if they went into liquidation and could not fulfil the orders, they would refund the customers’ money in this separate bank account to the customers themselves. The question arose, as expressed by the leading Judge in this case, Justice Megarry: “whether the money in the bank account…is held on trust for those who paid it, or whether it forms part of the general assets of the company.” This case was substantive in establishing that a trust can be used to protect beneficiaries from the effects of insolvency on its trustee. The courts can be seen to look at the intention to create an express trust in these circumstances. The parties’ segregation of the property into a separate bank account gave the inference that the company’s intention was to declare a trust to those customers who had made prepayments.

Question 34

Macjordan Construction Ltd v Brookmount (1994) - Insolvency

Answer 34

Reflects the idea that a company cannot create a trust of its money until it has segregated the amount supposed to be subjected to the trust. Therefore, although there is a formal general rule, the courts would look at the circumstances of the case and overall whether there is intention to create a trust. In practice, ‘the question of certainty of subject is often associated with that of certainty of words