The Three Certainties

Question 1

What are the three certainties? What is the authority for this?

Answer 1

1. Intention
2. Subject Matter
3. Objects

Knight v Knight (1840)

Question 2

What does having certainty of intention mean?

Answer 2

It must be clear that a trust was intended to be created by the settlor rather than a gift or anything else

Question 3

What is the difference between imperative and precatory words?

Answer 3

Precatory words simply express a hope, wish or a moral obligation.
Imperative words express a command - a duty to do something. The use of imperative words indicates that a trust is intended.

Question 4

Which case is good authority for the fact that precatory words are not sufficient to establish certainty of intention? What were the words used in the case?

Answer 4

Lambe v Eames (1871)

‘To be at her disposal in any way she may think best, for the benefit of herself and her family’

Question 5

In which case did the court hold that the phrase ‘in full confidence that she would do what is right’ was precatory and not sufficient to establish certainty of intention?

Answer 5

Re Adams and Kensington Vestry (1884)

Question 6

In which case did the court hold that the phrase ‘And it is my desire’ that the beneficiary paid some money each year to someone else was not sufficient to establish certainty of intention?

Answer 6

Re Diggles (1888)

Question 7

In which case were seemingly precatory words interpreted as actually giving the wife a life interest because of the in default clause? What did the case concern?

Answer 7

Comiskey v Bowring-Hanbury [1905]
Testator left wife estate ‘in full confidence that she will make such use of it as I should have made myself and that at her death she will devise it to such one or more of my nieces as she may think fit’ and in default to be divided equally between the nieces.

Question 8

In which case did the court suggest that its role is to construe the actual words in each case and that it should not be bound by precedent?

Answer 8

Re Hamilton (1895)

Question 9

Can you also infer certainty of intention through conduct?

Answer 9

Yes

Question 10

Which case is authority for the fact that certainty of intention to create a trust can be established through conduct and oral words?

Answer 10

Paul v Constance [1977]

Question 11

Which case demonstrates that not all conduct will lead to the inference of a trust?

Answer 11

Jones v Lock (1865)

Question 12

In which case was a purchased yacht held to have been held on trust by a husband for himself and his mistress from repeated references to it as ‘ours’?

Answer 12

Lowe v Prance [1999]

Question 13

Which case demonstrates that conduct can be sufficient to demonstrate certainty of intention in commercial contexts too? What did the case concern?

Answer 13

Re Kayford [1975]
The separation of customers’ money into a different bank account was deemed sufficient to demonstrate an intention to create a trust.

Question 14

Which case confirmed that use of the word trust is not necessarily conclusive of the certainty of intention to create a trust?

Answer 14

Tito v Waddell (No. 2) [1977]

Question 15

Which case is authority for the fact that a court won’t find certainty of intention if trust used as sham device or for tax avoidance? What were the facts?

Answer 15

Midland Bank PLC v Wyatt [1995]
Self declaration as trustee of house for wife and daughter but did not tell them (even when divorced wife) but when business venture failed and became bankrupt tried to enforce. Court held that sham trust to stop creditors so no trust.

Question 16

What are the consequences of lacking certainty of intention?

Answer 16

There is no trust.

Often just outright gift instead, or if trying to declare self as trustee then both titles result back to them.

Question 17

What does having certainty of subject matter mean?

Answer 17

It must be clear what property is held on trust and the beneficial interests must be clear.

Question 18

Is the term ‘residue of my estate’ sufficient for certainty of subject matter?

Answer 18

Yes

Question 19

Is the phrase ‘the bulk of my residuary estate’ sufficient for certainty of subject matter? Which case established this?

Answer 19

No

Palmer v Simmons (1854)

Question 20

What was the phrase in Jubber v Jubber (1839) that was not sufficient for certainty of subject matter?

Answer 20

‘A handsome gratuity’

Question 21

In which case were instructions to purchase ‘blue chip’ investments deemed to fail for certainty of subject matter? Why did this phrase fail?

Answer 21

Re Kolb’s WT [1962]
Blue chip investments refer to those that are sound and reliable but difficult to know what meant by that as differing opinions.

Question 22

What did the case of Boyce v Boyce concern regarding certainty of subject matter?

Answer 22

Trust for four houses, with one daughter to pick one first and then other to gain the remaining three. But first daughter died before making choice and so trust failed as uncertain which houses would be held on trust for the other daughter without her choice. Trust would have succeeded if trustees had power to choose the house.

Question 23

What was the decision in Re Golay’s WT [1965] concerning certainty of subject matter?

Answer 23

Trust for beneficiary to receive a ‘reasonable income’ from the testator’s properties was valid as allowed trustees to make objective assessment based on beneficiary’s circumstances.

Question 24

What is the effect of lacking certainty of subject matter?

Answer 24

No trust. Property results back to ownership of settlor.

Question 25

Can you have a trust for property you might own in the future? What is the authority for this?

Answer 25

No

Re Ellenborough [1903]

Question 26

Which case established that you cannot have certainty of subject matter where there is a bulk of unsegregated assets? What did the case concern?

Answer 26

Re London Wine Co [1986]
Wine ordered by customers and stored in warehouse had not been separated from general stock and so subject matter could not be identified. Would need to have bottles picked out or identified in some way.

Question 27

What was the ruling in Re Goldcorp [1995] concerning certainty of subject matter?

Answer 27

Those customers who had their gold bullions separated and labelled had established certainty of subject matter for a trust over them but those who had not had their gold separated lost out to the liquidators.

Question 28

What was the ruling and facts in Hunter v Moss [1994]?

Answer 28

Court held that a valid trust even though shares had not been segregated. 
M declared self trustee for 50 out of his 950 shares for H. Shares of the same class were held to be indistinguishable.

Question 29

What did Neuberger J suggest in Re Harvard Securities [1997] about the basis of the ruling in Hunter v Moss [1994]?

Answer 29

The ruling was based on a distinction between chattels (tangibles) and intangibles (shares)

Question 30

What is the significance of Pearson v Lehman Brothers [2010] concerning certainty of subject matter?

Answer 30

Rather than finding a trust over the shares (intangible property) the judge held that the shares were co-owned and that you could have a trust over the percentage of the whole. Therefore any sales would entitle you to that percentage of the proceeds.

Question 31

Why do you need to have certainty of objects?

Answer 31

You need to know who the beneficiaries are so that trustees can distribute

Question 32

What is the consequence of a trust that fails for lacking certainty of objects?

Answer 32

The trust money goes back on resulting trust to the settlor or to his estate if he has died.

Question 33

What is a fixed trust?

Answer 33

Where the exact beneficiaries and their shares are specified in the trust.

Question 34

What is the test for certainty of objects under a fixed trust and what is the authority for this?

Answer 34

The complete list test. You must be able to draw up a complete list of all the beneficiaries - IRC v Broadway Cottages [1955]

Question 35

What were the facts in IRC v Broadway Cottages [1952]?

Answer 35

The beneficiaries under the trust included a whole schedule of persons including those that were or had ever been employed by the settlor, his wife, his father, his mother or any employees of any company he had ever been director of, etc. The trust was void for uncertainty as it was impossible to draw up a complete list of all the beneficiaries.

Question 36

In which case was a trust for ‘urgent suppliers’ held void for lacking certainty of objects?

Answer 36

OT Computers Ltd v First National Trinity Finance Ltd [2003]

Question 37

What is a discretionary trust?

Answer 37

Where the trustees are given discretion how to apportion trust amongst beneficiaries.

Question 38

What is the test for certainty of objects for a discretionary trust? What is the authority?

Answer 38

The given postulant test. You have to be able to say whether it could be said with certainty that any given individual is or is not a member of the class - McPhail v Doulton [1971]

Question 39

What are the facts of McPhail v Doulton [1971]?

Answer 39

Concerned a trust for the benefit of staff of a company and former staff, their relatives and dependants. But it was not possible to draw up a complete list of beneficiaries (old test). The court held that the test is the same as for fiduciary powers in Re Gulbenkian’s Settlement [1970], namely whether it could be said with certainty whether any given individual is or is not a member of he class. The HoL stressed the need for conceptual certainty.

Question 40

Why will administrative unworkability cause trusts to fail for certainty of objects?

Answer 40

The class of beneficiaries can be too wide to be actually workable in practice when distributing the trust.

Question 41

What was the example that Lord Wilberforce gave in obiter dictum in McPhail v Doulton [1971] that would constitute administrative unworkability?

Answer 41

A trust for all residents of Greater London

Question 42

Why did the court hold the trust in ex p. West Yorkshire Metropolitan County Council [1986] void for administrative unworkability?

Answer 42

Trust for all the inhabitants in the County Council but this could be up to 2.5 million people so the class of beneficiaries was too wide.

Question 43

Which case is authority for the fact that a trust will fail if it is capricious? What did the court say in the case?

Answer 43

Re Manisty Settlement [1974] - the court will not uphold a trust if the terms negative any sensible part of the settlor.

Question 44

How can conceptual uncertainty in a class of beneficiaries be cured?

Answer 44

(1) By giving trustees the power to decide if evidential certainty would exist
(2) By appointing a third party to decide

Question 45

In which case did the court hold that where trustees were given the power to decide when someone ceased to permanently reside in a house, this cured the conceptual uncertainty as they were able to make a determinative decision on this and aspect of evidence?

Answer 45

Re Coxen [1948]

Question 46

In which case did appointing trustees as the deciders of whether daughter had a social relationship with specified man fail to cure conceptual uncertainty as it still remained unclear what a social relationship meant?

Answer 46

Re Jones [1953]

Question 47

In which case did the court hold that directing trustees to seek the opinion of the Chief Rabbi as to the pure Jewish blood and faith of son’s future wife was permissible to cure conceptual uncertainty?

Answer 47

Re Tuck’s Settlement Trusts [1978]

Question 48

What was Denning LJ’s approach to Re Tuck’s Settlement Trusts [1978]?

Answer 48

Suggested that seeking the opinion of the Chief Rabbi would cure the conceptual uncertainty concerning the wife’s pure Jewishness that was required for the gift.

Question 49

What was Eveleigh LJ’s approach to Re Tuck’s Settlement Trusts [1978]?

Answer 49

He felt that seeking the opinion of the Chief Rabbi meant that his opinion formed part of the definition of the class of beneficiaries under the gift subject to condition precedent rather than curing the conceptual uncertainty.

Question 50

In which case did the court have to consider whether the terms ‘relatives’ and ‘dependants’ were conceptually certain under the given postulant test? What did the court decide?

Answer 50

Re Baden’s Trusts (No.2)

Court held that both terms were conceptually certain.

Question 51

What was Sachs LJ reasoning in Re Baden’s Trusts (No 2) concerning the conceptual certainty of relatives?

Answer 51

Defined relatives as ‘descendants of a common ancestor’ but potential limitless class limited by evidential certainty issues - person coming forward has to show that they are a relative.

Question 52

What was Megaw LJ’s reasoning in finding that relatives was conceptually certain in Re Baden’s Trusts (No 2)?

Answer 52

Defined relatives as ‘descendants of a common ancestor’ but said that class would be conceptually certain if a substantial number of objects fell within the class

Question 53

What was Stamp LJ’s reasoning in holding that relatives was conceptually certain in Re Baden’s Trusts (No 2)?

Answer 53

Argued that relatives would only be valid if defined as next-of-kin. But this strict approach has been questioned as contradicts idea that trust should not fail because it is impossible to ascertain all the members of the class under the given postulant test.