Three Certainties Flashcards
What is the importance of the three certainties?
Every trust, except charitable ones, must satisfy the three certainties.
What are the three certainties?
- Certainty of Intention
- Certainty of Subject Matter
- Certainty of Objects
Why do trusts need to satisfy the three certainties?
- Trustees must know what their obligations are under the trust
- Allows the court will be able to administer the trust
What is the certainty of intention?
Intention is established considering all the circumstances of the case.
What are the indictors of intention that are looked out for?
Imperative or precatory language
Conduct
What do precatory words suggest?
A hope, wish or moral obligation. Usually state a gift is intended
What to imperative words suggest?
A command - a duty to do something. Usually state a trust is intended
What wording is preferred and favoured by courts?
Precatory
What was found in the case of Comiskey v Bowring-Hanbury [1905]?
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.
What was found in the case of Staden v Jones [2008]?
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.
How is conduct relevant?
An intention to create a trust can also be inferred from the conduct of the donor.
What happened in the case of Paul v Constance [1977]?
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.
What happened in the case of Re Kayford [1975]?
The separation of customers’ money into separate bank accounts was deemed sufficient to demonstrate an intention to create a trust.
What is the effect of lack of certainty of intention?
There is no intention to create a trust, the donee will take the property absolutely, as a gift.
What are the two elements of certainty of subject matter?
- It must be clear what property is held on trust
2. The beneficial interests must be clear
What are the two parts to the property held on trust must be certain?
Vague or general descriptions of the trust property
Trusts of part of property
What would happen if there are vague or general descriptions of the trust property?
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.
What is the situation of trusts of part of property?
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
What happened in the case of Re London Wine [1986]?
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.
Why would the Re London Wine case be decided differently now?
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.
What happened in Hunter v Moss?
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.
What happened in Boyce v Boyce [1849]?
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.
What happened in the case of Re Golay’s [1965]?
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.
What is the link between certainty of intention and certainty of subject matter?
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
What is the effect of lack of certainty of subject matter?
The trust fails and the property will return to the settlor or state on resulting trust
What is certainty of objects (beneficiaries)?
Every trust, with the exception of charitable trusts, must satisfy the certainty of objects requirement.
How is the certainty of objects different for fixed trusts and discretionary trusts?
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.
What was test was created in McPhail v Doulton [1971]?
- Is this a trust or a power
2. Appropriate test for the certainty of objects requirements
What was said in Re Baden (No2)?
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.
What is conceptual certainty?
A class of beneficiaries will be conceptually certainty when the description enables the group to be clearly defined
Do gifts subject to a condition precedent?
Do not require the same degree of conceptual certainty as discretionary trusts
Why is it important t say whether any given individual is or is not member of a class?
Objects are only entitled to a share of the property
What is the difference between conceptual uncertainty and evidential uncertainty?
Conceptual certainty - certainty of the class Evidential certainty - whether or not the individual can be proven to be a member of the class
Will a trust still be valid if the class is conceptually certain?
The trust will be void
Will a trust still be valid if the class is evidential uncertainty?
Will not defeat a trust
What is the effect of lack of certainty of objects?
Will be void and return on resulting trust to the settlor or his or her estate
Under discretionary trusts what duties do the trustees have?
- To survey the field to identify the width of the class
- To distribute the income of the trust
Under fiduciary powers what duties do the fiduciaries have?
- To consider periodically whether to exercise the power
- To consider the range of possible objects (beneficiaries)
- To consider the appropriateness of appointments made
What rights do the beneficiaries have under discretionary trusts?
They are not beneficiaries until they are appointed to the trust - until that time they hold a spec of benefitting.
On what basis can the decisions of the trustees be challenged?
The trustees have
- appointed outside the class
- failed to consider their reasons for appointment
- acted in bad faith in making an appointment
What rights do the beneficiaries have under fiduciary powers?
Not beneficiaries until they are appointed to the trust
On what basis can the decision of the fiduciaries be challenged?
The fiduciaries have:
- appointed outside the class
- failed to carry out their fiduciary obligations
