The Three Certainties Flashcards
Essential for the formation of a valid express private trust
- Certainty of intention (words)
- Certainty of subject matter
- Certainty of objects
Knight v Knight
For a valid express private trust, the three certainties of intention, subject matter and object must be satisfied
“Certainty of intention”
Certain that the settlor intended to create a trust, not something else (like a gift) –> person given the property shall hold it of trust i.e. settlor/testator intended to create mandatory obligation of trusteeship
Why do we need 3 certainties?
- Practicality: Trusteeship can be an onerous task and should not be imposed lightly unless it was clearly intended
- Need for the court to control the trust (Morice v Bishop of Durham)
“Precatory words”
Words of expectation not obligation
Re Adams and Kensington Vestry
“in full confidence” = precatory words
Re Hamilton
Lindley LJ: Were the words mandatory for THIS specific settlor? People use language differently - take the will, see what it means, do what it says
Re Steel’s Will Trust
Intention may be inferred where a precedent regarding the creation of a trust is exactly copied:
Perry J - attitude of the courts towards precatory words had changed since the case testatrix copied BUT the fact that she had copied the exact language afforded the strongest indication that she intended to create a trust for a diamond necklace to be held by her son as an heirloom
Re Diggles
“I desire” = precatory words
Comiskey v Bowring-Hanbury
“in full confidence” were precatory words (Re Adams), but looking at the meaning of the words taken as a whole –> he specified that should wife (trustee) fail, property divided equally between nieces
“ABSOLUTELY in full confidence” was constructed together
Re Kayford
Trust by CONDUCT where you are the trustee: steps taken by the company to pay the money (by customers for goods not yet delivered) into a separate bank account were evidence of an intention to create a trust - company had made it clear that they had no right to use money themselves
Re Challoner Club
Application of Re Kayford failed because there was no separate bank account: there was still money paid by new members of the club who had no benefit from their membership because of liquidation - they were just creditors in the end
Insolvency
If you can show a trust exists by words or conduct, then you have a proprietary claim –> you rights take precedent over creditors’
Power vs. Trust
Precatory words create a power (to give property). Powers are personal NOT OBLIGATORY –> gift
Certainty of subject matter
Trust property needs to be clearly defined or ascertainable
3 Problems within certainty of subject matter
1) People are too vague when writing their wills
2) Equity gets confused when similar things are stored together
3) Dangerous to give choice of what the trust property is to anyone who is not the trustee
Palmer v Simmonds
Husband was told to hold the “bulk” of the residue on trust for a relative –> trust failed on certainty of subject matter
Strange v Barnard
Property left to husband upon whose death the “remainder of what is left” was to be divided amongst other relatives –> trust failed on certainty of subject matter
Rule in Hancock v Watson
Usually, if trust fails on certainty, property would go back on resulting trust to the testator’s estate BUT where there is a valid gift and THEN a failed attempt to attach a trust onto it, the gift survives
Re Golay
Term which a court might think objective right pass certainty of subject matter.
Elderly man - “niece” Tossy: “Enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties”
- part –> fine
- part –> what is reasonable? what the judge thinks is reasonable!
Re London Wine
ARISES WHEN SETTLOR ATTEMPTS TO CERATE TRUST OF PART OF A BULK OF TANGIBLE PROPERTY
Company went into insolvency and customers who had paid in advance for wine argued they should receive wine before the other creditors –> no steps had been taken to segregate/separate/label any property
Re Goldcorp
Company was selling more gold bullion the they had, customers argued they were held on trust
Re London Wine rule: for tangible property, physical labelling required
One man had gold medallions, no-one else claimed them –> held on trust because segregated
Hunter v Moss
Moss held 50 of the 950 shares in a company on trust for Hunter (under Hunter’s contract for employment), Moss sold all 950 shares and Hunter claimed to be entitled to a proportion of the proceeds but the 50 shares had not been segregated
Dillon LJ: trusts of chattels (tangible property) vs. trusts of shares (intangible objects)
–> intangible - it doesn’t matter which ones you get –> ascertainable amount as long as you know the ratio/percentage
Dillon LJ’s motivations in Hunter v Moss
1) ensure employers didn’t renege on contract terms
2) no qualitative difference between shares (provided they were of the same class and in the same company)
Re Havard Securities
Confirmed Hunter v Moss
Problem with granting choice of what TP is
Who forces decision to be made?
Boyce v Boyce
Beneficiaries are under NO OBLIGATION to make a choice
To Maria “whichever house she amy think proper to choose or select”, sister Charlotte would get the one left over. Maria dies –> can’t be worked out which house is on trust for her
HOWEVER: law of intestacy - Charlotte gets both houses (from her father) and Maria’s because she didn’t make a will
Consequences of lack of certainty of TP
Resulting trust back to the estate unless the rule of Hancock v Watson applies
Certainty of objects
Certainty of beneficiaries
Trusts:
Charitable trusts - objects need not be certain
Non-charitable trusts - Objects must be certain
–> Fixed trusts vs. discretionary trusts
Non-charitable trusts
Private trusts
“Fixed Trust”
The settlor has diced who gets what –> no choice by trustee as to who gets which property
IRC v Broadway Cottages Trust
The "finite" or "complete list" test - must be possible for trustee to make a full list who gets what CONCEPTUAL certainty (doe we know who Bs are?) EVIDENTIAL certainty (proof that Bs exist/existed)
Conceptual certainty
“grandchildren” - cc
“friends”- not cc, uncertain
Evidential certainty
EXAMPLE: “to my present and past employees” –> record/evidence of this?
Ascertain ability will NOT defeat the trust
Fixed trusts will not fail simply because the whereabouts of a beneficiary cannot be established
CERTAINTY AS TO IDENTITY MATTERS
Trustees can
a) apply for Benjamin order (to distribute trust fund)
b) take out missing beneficiary insurance
Gift subject to condition precedent
One person test: valid gift if oner person in the world satisfies description, gifts don’t require conceptual certainty
Re Tuck’s Settlement
CONDITIONAL GIFT CASE
Being Jewish and having a jewish wife - chief rabbi could clarify
FOR TRUSTS: courts can appoint expert to determine class of people for certainty of object - CONCEPTUAL UNCERTAINTY MAY BE CURED
Re Barlow’s Will Trust
CONDITIONAL GIFT CASE
“any friends of mine may purchase paintings” - “friends” is an uncertain concept
Re District Auditor ex parte West Yorkshire
Possible to strike down trust because it is capricious (administratively unworkable):
Discretionary trust, beneficiaries being “West Yorkshire” - conceptually certain but a choice of 2.5 million residents
Brown v Burdett
Testatrix demanded her house to be sealed up with earth for 20 years and then go to her son –> CAPRICIOUS (no reason provided why)
MAYBE because a woman couldn’t disinherit her husband but leave it to her one-year old son when he is 21
McCaig v University of Glasgow
Money for memorials to unimportant poets - “a sheer waste of money”
Discretionary Trusts
Mandatory obligation on trustee to decide who gets what - MUST CHOOSE
Before McPhail v Dalton
Complete list test (from Broadway Cottages) was applied to discretionary trusts
McPhail v Dalton
Discretionary trusts: the “Any given postulant” or “is or is not” test –> overruling complete list test (still relevant in fixed trusts)
Can it be said with certainty that any given person is or is not a beneficiary?
Re Baden (applied McPhail v Dalton)
Different interpretations of the “any given postulant” test:
Stamp LJ (strict) - interpreted test literally, a category of “don’t know” shouldn’t be permitted - basically complete list
Sachs LJ (slack) - burden of proof on applicant –> failure means outside of class (no burden on trustee)
Megaw LJ (middle) - permitted a category of “don’t know”, provided a substantial number of claimants fell WITHIN the class
–> ALL 3 judges: classes of beneficiaries were conceptually certain –> valid trust
Example for discretionary trust: Tallness
Sachs: someone who wants to prove their claim would have to prove what tall is AND that they are tall
Stamp: You would have to work out everyone in the world is tall or un-tall
Megan: as long as we can say for a substantial number of people that they are tall, we have some people to choose
Re Hay’s Settlement Trust
Duties of the trustee: they must survey the field and at some point make a choice, duty to give reasons
Certain intention but uncertain subject matter
Trust is void (Palmer v Simmonds)
Certain subject matter but uncertain intention
Gift to trustee (Re Adams)
Uncertain objects
Resulting trust back to settlor (Vandervell v IRC)
“Dependants” and “Relatives”
Re Baden:
Dependant - financially dependent (all 3 judges)
Relative - common ancestor (Sachs and Megaw) vs. statutory next of kin (Stamp)
Re Leek
Validity of a discretionary trust - containing one certain and one certain class of beneficiaries –> Sachs: offending clause should be struck out /severed, leaving a valid trust
NOT BEEN ADOPTED YET THOUGH
Dillon LJ in Hunter v Moss - rights of the claimant = position of an executor on a testator’s death
On testator’s death, the executor is required to distribute the property to the legatees even before they have confirmed the ownership of the testator over all the property listed in will –> IMPOSSIBLE to say that there is no situation inEnglish law where the court would not allow the finding of a trust over unsegregated property
CONTRA Dillon LJ’s executor argument
Executor acquires legal title over all of the deceased’s property with the power to make a division, personal representative of the testator
Inter vivos trustee: acquires nothing more than legal title in those assets which the settlor makes subject to trust
Dillon LJ in Hunter v Moss: comparison to Re London Wine
Actually, Dillon LJ’s conclusion was much more limited in scope than tangible vs. intangible property, merely stated chattels vs. shares
ACTUAL distinctions tangible vs. intangible property
1) Hunter v Moss (first instance) - Judge Rimer QC:
referred to US decision Richardson v Shaw which held that some forms of chattels are in effect indistinguishable
2) Re Havard Securities - Neuberger J
distinguishing Re Wait, Re Goldcorp and Re London Wine, said he was bound to follow Hunter v Moss’s tangible vs. intangible distinction
White v Shortall
SC of New South Wales upheld validity of trust (over shares) but nevertheless DISTANCED itself from Hunter v Moss rationale
Reasoning for upholding trust in White v Shortall
Valid if settlor intended to create one single trust so that trustees would hold shares on trust for one beneficiary and the remainder for another - like under any other ordinary trust with two or more beneficiaries, trustees would have the power to allocate property –> all that matters is that trust property as a whole is segregated from any other goods - no internal segregation does not matter
White v Shortall’s critique of Dillon LJ’s arguments
To accept Dillon LJ’s distinction between tangible and intangible property would mean ignoring the Court of Appeal’s rejection of such a principle in MacJordan v Brookmount
Re Lehman Brothers International (Europe)
SC 3:2 decision: statutory trust over Lehman Bank’s single pool of cash, so as to give its clients priority over creditors.
Didn’t invokeWhite v Shortall all the like but did so because European law no longer required there to be a segregation of trust property
Minority judges Lord Walker and Lord Hope: relied on traditional trust law principles (invoking Re Goldcorp to argue that there was not a trust)
Hayton’s critique of Hunter v Moss
ESSENTIALLY in inter vivos trusts: settlor does everything necessary to create a trust (divest himself of his beneficial interest in the property) but until he has segregated the assets which are to be held on trust that subject matter of the trust is uncertain
What if settlor later decides to sell some shares - could these have been the purported subjected matter? SHOULD HAVE CAUSED TRUST TO FAIL
Martin’s support of Hunter v Moss
Problem arising in MacJordan v Brookmount (unsegregated money in bank account) did not arise here - identifiable fund of property (950)
Prof. Roy Goode’s approach
Pearson v Lehman Brothers adopted Prof. Goode’s approach:
Proportionality (i.e. 50/950 = 1/19th)
Hayton’s/Martin’s responses to Goode
declaring a trust of 1/19th of his shareholdings rather than a fixed amount of 50 shares distorted what the settlor did in fact intend
Hayton rejects the approach in Pearson v Lehman Brothers
Martin points out Prof. Goodes approach had already been rejected in Hunter - interest was in 50 shares not a proportionate amount of shares
