The Three Certainties

Question 1

Saunders v Vautier

Answer 1

Ratio: 1. An absolutely entitled beneficiary can collapse a trust, even if that was not the intention of the settlor. 2. This rule does not apply to powers of appointment

Question 2

Curtis v Luken

Answer 2

Ratio: If there are multiple beneficiaries, as long as they are all in agreement and sui juris, they can collapse the trust

Question 3

Re Smith

Answer 3

Ratio: In a discretionary trust, if there is a closed group of beneficiaries and all of the beneficiaries, who between them are all absolutely beneficially entitled to the whole equitable interest, are all sui juris and agree to collapse the trust they can do so

Question 4

Gartside v IRC

Answer 4

Ratio: Potential beneficiaries under a discretionary trust have no proprietary interest in the property until selected by the trustees

Question 5

Sainsbury v IRC

Answer 5

Ratio: Potential beneficiaries under a discretionary trust have no proprietary interest in the property until selected by the trustees

Question 6

Knight v Knight

Answer 6

Ratio: The three certainties are intention, subject-matter and object.

Facts: ‘It is well settled that a trust can be created without using the words ‘trust’ or ‘confidence’ or the like; the question is whether in substance a sufficient intention to create a trust has been manifested’

Question 7

Re Kayford

Answer 7

Ratio: No particular words are necessary for the formation of a trust.

Question 8

Lambe v Emes

Answer 8

Ratio: The turning point at which the court refused to recognise precatory wording in creating a trust.

Facts: Property was left by a testator to his widow ‘to be at her disposal in any way she may think best, for the benefit of herself and her family’. The court held that this was not a trust and the widow was entitled to take absolutely.

Question 9

Re Adams and the Kensington Vestry

Answer 9

Ratio: Example of the phrase ‘in full confidence’ not being mandatory enough to create a trust as a result of the words around it

Facts: Testator left property to his wife absolutely, ‘… in full confidence that she will do what is right as to the disposal thereof’. Court held this to be not sufficiently mandatory enough to create a trust.

Question 10

Comiskey v Bowring-Hanbury

Answer 10

Ratio: Example of the phrase ‘in full confidence’ being mandatory enough to create a trust

Facts: A testator left his estate and property to his wife: ‘…absolutely, 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 of any disposition by her thereof by her will or testament I hereby direct that all my estate and property acquired by her under this my will shall at her death be divided among the surviving said nieces’.

Question 11

Re Hamilton

Answer 11

Ratio: Words in each document should be interpreted in their context, rather than according to previous cases – so the same words may not have the same effect.

Facts: ‘You must take the will which you have to construe and see what it means, and if you come to the conclusion that no trust was intended, you say so, although previous judges have said the contrary on some wills more or less similar to the one you have to construe’

Question 12

Re Steele’s Will Trust

Answer 12

Ratio: If a gift is worded identically to an older case, the older decision should be followed unless it is clearly wrong

Facts: The court followed the interpretation given to words in Shelley v Shelley, a case in which the will had been prepared with professional help and had stood for 80 years.

Question 13

Paul v Constance

Answer 13

Ratio: No written formalities are necessary to create an inter vivos trust, it can be created orally or through conduct.

Facts: An unmarried couple wanted to open a bank account together but were unable to do so because they were unmarried. The man opened an account for both of them into which they paid their bingo winnings in order to fund joint holidays. The man regularly reassured the women that the money was as much hers as his. Court held that Mr Constance had done something equivalent to declaring himself a trustee over the monies in the account for himself and Mrs Paul in equal shares. Thus, the court found sufficient intention to create a trust despite no formal arrangement.

Question 14

Sprange v Barnard

Answer 14

Ratio: All certainties must be satisfied for a trust to be valid.

Question 15

Palmer v Simmonds

Answer 15

Ratio: It must be possible to identify the property which forms the subject matter of the trust.

Facts: A testatrix tried to leave ‘the bulk of [her] estate’ on trust. This was held not to have sufficient certainty of subject matter.

Question 16

Boyce v Boyce

Answer 16

Ratio: There must be certainty of beneficial entitlements

Facts: Father left houses on trust to his widow for life, remainder to daughters Maria and Charlotte. Will said Maria should have house of her choosing and all others should be conveyed to Charlotte. Maria died in testator’s lifetime and so could not choose any house. This means there was no trust in favour of Charlotte as her interest could not be determined until Maria had chosen and as this was no longer possible, the trust was void for uncertainty of subject matter.

Question 17

Re Golay’s Will Trusts

Answer 17

Ratio: A trust may be enforced if the subject matter is not clear if the court can objectively determine the subject matter.

Facts: Testator directed his executors to allow the beneficiary to ‘enjoy one of [his] flats during her lifetime and to receive a reasonable income from [his]] other properties’. Court held that ‘reasonable income’ could be objectively determined and so the trust was valid.

Question 18

Re London Wine Co (Shippers) Ltd

Answer 18

Ratio: For a trust to be established over a bulk of tangible property it must be segregated or identified in some way.

Facts: Buyers of wine sought to establish a trust over bottles of wine stored in the seller’s warehouse. Court held no such trust had been created as the wine had not been separated or identified in any way. When the seller went into liquidation, customers could not claim priority over other creditors by saying that certain bottles of wine were held on trust for them.

Question 19

Re Goldcorp Exchange Ltd

Answer 19

Ratio: For a trust to be established over a bulk of tangible property it must be segregated or identified in some way.

Facts: Purchasers of gold bullion sought to claim rights over it on the company’s insolvency. Only a group whose bullion had been separated was able to claim it. The others could not because there was no identifiable property to which the trust could attach.

Question 20

Hunter v Moss

Answer 20

Ratio: If shares are identical, the executor does not need to be told exactly which shares are to be given to each beneficiary.

Facts: Owner of 950 of the 1000 shares in a private company orally declared himself a trustee of 5% of the issued shares. This amounted to 50 shares. This was held to be sufficiently certain even though no specific 50 shares had been identified. Court held there was no need to identify which shares are being held on trust as long as the shares are of the same class and therefore fungible (interchangeable).

Question 21

Mac-Jordan Construction Ltd v Brookmount Erostin Ltd

Answer 21

Ratio: There must be an ascertainable fund over which the trust is declared.

Facts: Building contract included a clause requiring the client to hold 3% of the purchase price on trust for the builder until the client had approved the building works. Client was meant to put this money into a separate account, but failed to do so. When the client became insolvent, the builder tried to claim a trust over and equivalent amount of money in the client’s own bank account. This claim failed for uncertainty of subject matter.

Question 22

Morice v Bishop of Durham

Answer 22

Ratio: The beneficiary principle: A trust must be for ascertainable beneficiaries.

Question 23

IRC v Broadway Cottages Trust

Answer 23

Ratio: The test for certainty of object in a fixed trust is the ‘complete list test’. This means it must be possible to draw up a complete list of all the beneficiaries.

Question 24

Re Gulbenkian’s Settlement Trusts

Answer 24

Ratio: The test for certainty of object for powers of appointment is the ‘in/out test’ or the ‘is/is not’ test.

Facts: ‘The power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail because it is impossible to ascertain every member of the class’.

Question 25

McPhail v Doulton

Answer 25

Ratio: The test for certainty of object for a discretionary trust is the ‘is/is not test’.

Facts: After the HoL confirmed the test for certainty of object in this case it left it to the chancery division to apply it which resulted in an appeal to the Court of Appeal which became known as Re Baden’s Deed Trusts (No.2). There was much debate over whether a discretionary trust requires both evidential and conceptual certainty. 
Stamp LJ considered evidential uncertainty would render a discretionary trust void.
Megaw LJ believed a discretionary trust would be certain if it could be shown that a substantial number of persons definitely fell within the class.
Sachs LJ gave what is considered the most pragmatic judgement.  Having accepted the class was conceptually certain, he concluded that it is necessary for individual claimants to prove whether or they are in the class.

Question 26

R v District Auditor ex p West Yorkshire Metropolitan County Council

Answer 26

Ratio: If a discretionary trust has too many beneficiaries, it can be declared administratively unworkable.

Facts: In this case the potential beneficiaries were ‘the inhabitants of West Yorkshire’.

Question 27

Re Manisty’s Settlement

Answer 27

Ratio: A power cannot be uncertain merely because it is wide in ambit.

Question 28

Re Barlow’s WT

Answer 28

Ratio: 1. It must be distinguished whether a particular disposition is a discretionary trust or simply a gift subject to a condition precedent.
2. No need for conceptual certainty in the case of a gift or trust subject to condition precedent.

Facts: Testatrix left her collection of artwork on trust to her executor subject to a direction that ‘all or any member of my family or friends of mine who wise to do so may purchase any such pictures’ at the lower of probate value or 1970 catalogue price.
This was held to be a gift subject to condition precedent as the trustee had no obligation to choose people to buy a picture.

Question 29

Re Allen

Answer 29

Ratio: A gift subject to condition precedent is valid if it is possible to say of one or more persons that they qualify.