Three Certainties

Question 1

What is the importance of the three certainties?

Answer 1

Every trust, except charitable ones, must satisfy the three certainties.

Question 2

What are the three certainties?

Answer 2

1. Certainty of Intention
2. Certainty of Subject Matter
3. Certainty of Objects

Question 3

Why do trusts need to satisfy the three certainties?

Answer 3

• Trustees must know what their obligations are under the trust
• Allows the court will be able to administer the trust

Question 4

What is the certainty of intention?

Answer 4

Intention is established considering all the circumstances of the case.

Question 5

What are the indictors of intention that are looked out for?

Answer 5

Imperative or precatory language

Conduct

Question 6

What do precatory words suggest?

Answer 6

A hope, wish or moral obligation. Usually state a gift is intended

Question 7

What to imperative words suggest?

Answer 7

A command - a duty to do something. Usually state a trust is intended

Question 8

What wording is preferred and favoured by courts?

Answer 8

Precatory

Question 9

What was found in the case of Comiskey v Bowring-Hanbury [1905]?

Answer 9

The presence of precatory wording will not necessarily prevent the court from finding that a trust exists, as long as it is satisfied with the intention of the donor.

Question 10

What was found in the case of Staden v Jones [2008]?

Answer 10

Court of Appeal looked into solicitor’s covering letter to conclude that a divorcing couple’s arrangement that the wife had transferred her share in the family home to her husband on the basis that their daughter should be entitled to her share amounted to a constructive trust.

Question 11

How is conduct relevant?

Answer 11

An intention to create a trust can also be inferred from the conduct of the donor.

Question 12

What happened in the case of Paul v Constance [1977]?

Answer 12

C died and P stated half the money in the bank account was hers. They had put bingo winnings in the account and he has said that the money was as much hers and it was his. This conduct was enough to infer that C had made a declaration of trust of the money in the bank account and she was entitled to his half of the account under intestacy.

Question 13

What happened in the case of Re Kayford [1975]?

Answer 13

The separation of customers’ money into separate bank accounts was deemed sufficient to demonstrate an intention to create a trust.

Question 14

What is the effect of lack of certainty of intention?

Answer 14

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

Question 15

What are the two elements of certainty of subject matter?

Answer 15

1. It must be clear what property is held on trust

2. The beneficial interests must be clear

Question 16

What are the two parts to the property held on trust must be certain?

Answer 16

Vague or general descriptions of the trust property

Trusts of part of property

Question 17

What would happen if there are vague or general descriptions of the trust property?

Answer 17

The donor must make it clear what property is to be held on trust, or the trust will be void as the trustees, beneficiaries and ultimately the court will be unable to determine what is held on trust.

Question 18

What is the situation of trusts of part of property?

Answer 18

Arises where there is an attempt to create a trust over part of a bulk tangible property (furniture in a home). The trust will only be certain if it has been separated from the rest

Question 19

What happened in the case of Re London Wine [1986]?

Answer 19

LWC stocked cases of wine in various warehouses. When wine was purchased by the customer they received a certificate to say the wine was being held on trust by them until dispatched. It was held there was no trust as the wine ordered by customers had not been separated from the general stock and therefore the subject matter of each trust could not be identified.

Question 20

Why would the Re London Wine case be decided differently now?

Answer 20

The Sale of Goods Act 1979 now offers protection to purchasers of an unsegregated part of a larger bulk of property. The purchasers will be considered tenants in common of the whole property.

Question 21

What happened in Hunter v Moss?

Answer 21

M owned 950 shares in a company and was found to have declared himself trustee of 50 of those shares for H. M sold all his shares and kept the proceeds for himself. When H sought share of the proceeds M argued that the trust was void because he had not separated the shares. It was held that no segregation was required as the shares are identical and they would each achieve the same thing.

Question 22

What happened in Boyce v Boyce [1849]?

Answer 22

Houses held on trust for B daughters, M and C. M was to choose which house she wanted and the other three would be held on trust for C. M died before making her choice. The trust was held invalid, the property had been clearly identified however the beneficial interest had not. If the trustees had been given the power to appoint property then it would have succeeded.

Question 23

What happened in the case of Re Golay’s [1965]?

Answer 23

A trust was set up for the beneficiary to ‘receive a reasonable income’ from the testators property. The trust was held as sufficiently certain as the income the beneficiary would receive would depend on her circumstances. However it could have failed as there is no way to establish what would be reasonable.

Question 24

What is the link between certainty of intention and certainty of subject matter?

Answer 24

If there is lack of certainty as to the subject matter of the trust, this will cast doubt on whether the settlor truly intended to create a trust

Question 25

What is the effect of lack of certainty of subject matter?

Answer 25

The trust fails and the property will return to the settlor or state on resulting trust

Question 26

What is certainty of objects (beneficiaries)?

Answer 26

Every trust, with the exception of charitable trusts, must satisfy the certainty of objects requirement.

Question 27

How is the certainty of objects different for fixed trusts and discretionary trusts?

Answer 27

Fixed trusts - beneficial interests are fixed (to benefit A and B in equal shares)
Discretionary trusts - trustees are given the power to appoint people as beneficiaries of the trust. Members of the class do not hold any beneficial interest until trustees exercise their discretion to appoint to the beneficiaries' favour.

Question 28

What was test was created in McPhail v Doulton [1971]?

Answer 28

1. Is this a trust or a power

2. Appropriate test for the certainty of objects requirements

Question 29

What was said in Re Baden (No2)?

Answer 29

Only if a class of beneficiaries is conceptually certain will it be possible to satisfy the test of whether it can be said with certainty that any given individual is or is not a member of the class.

Question 30

What is conceptual certainty?

Answer 30

A class of beneficiaries will be conceptually certainty when the description enables the group to be clearly defined

Question 31

Do gifts subject to a condition precedent?

Answer 31

Do not require the same degree of conceptual certainty as discretionary trusts

Question 32

Why is it important t say whether any given individual is or is not member of a class?

Answer 32

Objects are only entitled to a share of the property

Question 33

What is the difference between conceptual uncertainty and evidential uncertainty?

Answer 33

Conceptual certainty - certainty of the class 
Evidential certainty - whether or not the individual can be proven to be a member of the class

Question 34

Will a trust still be valid if the class is conceptually certain?

Answer 34

The trust will be void

Question 35

Will a trust still be valid if the class is evidential uncertainty?

Answer 35

Will not defeat a trust

Question 36

What is the effect of lack of certainty of objects?

Answer 36

Will be void and return on resulting trust to the settlor or his or her estate

Question 37

Under discretionary trusts what duties do the trustees have?

Answer 37

• To survey the field to identify the width of the class

- To distribute the income of the trust

Question 38

Under fiduciary powers what duties do the fiduciaries have?

Answer 38

• To consider periodically whether to exercise the power
• To consider the range of possible objects (beneficiaries)
• To consider the appropriateness of appointments made

Question 39

What rights do the beneficiaries have under discretionary trusts?

Answer 39

They are not beneficiaries until they are appointed to the trust - until that time they hold a spec of benefitting.

Question 40

On what basis can the decisions of the trustees be challenged?

Answer 40

The trustees have

• appointed outside the class
• failed to consider their reasons for appointment
• acted in bad faith in making an appointment

Question 41

What rights do the beneficiaries have under fiduciary powers?

Answer 41

Not beneficiaries until they are appointed to the trust

Question 42

On what basis can the decision of the fiduciaries be challenged?

Answer 42

The fiduciaries have:

• appointed outside the class
• failed to carry out their fiduciary obligations