Three Certainties

Question 1

What are the three certainties? What authority do they come from?

Answer 1

1. Words or intention to create the trust
2. Subjects ie the property subject to the trust
3. Objects ie the persons benefiting from the trust
   Knight v Knight

Question 2

What happens to the trust if one of the three certainties fail?

Answer 2

The trust is void

Question 3

Does the word ‘trust’ need to appear to create a trust?

Answer 3

No, in fact even if the word ‘trust’ is in a document, that one is created is not certain.

Question 4

Megarry J said in which case: ‘…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.’

Answer 4

Re Kayford

Question 5

What do we mean by precatory wording?

Answer 5

Words that express a hope or wish

Question 6

Do modern cases look for or against finding a trust where precatory wording is used?

Answer 6

Against

Question 7

Which case is considered to be the turning point at which courts began not to uphold trusts based on precatory wording?

Answer 7

Lambe v Eames (1871) which said ‘to be at her disposal in any way she may think best, for the benefit of herself and her family.’

Question 8

In which of the two cases, Re Adams and Comiskey v Bowring-Hanbury, did ‘in full confidence’ create a trust in the context of what was said? Why?

Answer 8

Comiskey v Bowring-Hanbury, because the testator had also given direction as to how to dispose of his property.

Question 9

If no trust is imposed what is the effect?

Answer 9

The settlor retains the property or the intended beneficiary becomes a donee and receives an absolute gift.

Question 10

Should judges treat the words in their context or follow judgments from old cases when determining if there is sufficient intention to create a trust?

Answer 10

They should look at the context in front of them and not be swayed by old cases (Re Hamilton), but identical wording to an old precedent should only be rejected if it is clearly wrong (Re Steele’s Will Trust).

Question 11

How may courts construe a trust if there is no document?

Answer 11

Words and/or conduct of the parties (Paul v Constance).

Question 12

Why did Scarman LJ call Paul v Constance a borderline case?

Answer 12

There was no specific moment of declaration, but instead the husband had on multiple occasions told his cohabitant (not his wife who he had never divorced) that the money in his bank account was as much her as it was his.

Question 13

Can a trust arise if what is intended is a creditor-debtor relationship?

Answer 13

No (Azam v Iqbal)

Question 14

Can a mixed fund constitute a trust?

Answer 14

Yes, if it is possible to calculate each person’s proportionate share (Re Lewis’s of Leicester Ltd)

Question 15

How was the trust created in Re Kayford?

Answer 15

The mail-order company had gone into liquidation but beforehand had put customers’ money into a separate bank account.

Question 16

If a customer paid his money into an overdrawn bank account would there be a trust?

Answer 16

No (Moriarty v Various Customers of BA Peters plc)

Question 17

How was a trust created in Shah v Shah?

Answer 17

The appellant had transferred shares to his brother with a letter, described as a “declaration” and in which he described himself as “holding” the shares for his brother.

Question 18

Subject matter of a trust is made up of two separate but related aspects. What are they?

Answer 18

1. What property is subject to the trust?

2. In a fixed trust, what proportion of that property belongs to each beneficiary?

Question 19

Why was Mrs. Sprange’s money not able to go to her brother and sisters? What was the final outcome?

Answer 19

She had left £300 to her husband for life, and her brothers and sisters in remainder, but she had directed her husband to pass on anything that was left, so it was not clear whether there would be any of the £300 left by the time her husband had died, and it was not certain how much he and the others were entitled to. The court granted him absolute title.

Question 20

What were the offending words in In the Estate of Last?

Answer 20

“anything that is left”

Question 21

What does the case of Sprange v Barnard tell us about when certainty must be evident?

Answer 21

At the point of creation of the trust.

Question 22

What the words in Palmer v Simmonds that meant the trust failed?

Answer 22

“he will … leave the bulk of my residuary estate”

Question 23

What type of subject matter must be specifically identified? What type of property does not have to be identified?

Answer 23

Tangible property must be identified (Re London Wine Co (Shippers) Ltd or Re Goldcorp Exchange Ltd). Intangible property does not have to be identified (Hunter v Moss).

Question 24

Why does intangible property not have to be identified?

Answer 24

There is no difference in value between intangible property eg all shares in a company are equal.

Question 25

In Boyce v Boyce, a testator devised his houses to his widow for life and to his daughters Maria and Charlotte, but why was Charlotte not able to get any of the houses?

Answer 25

The will specified Maria should choose whichever house she wanted and Charlotte would get the rest. However, Maria died without choosing one. At that point the trust was uncertain and became void.

Question 26

What was held to be a valid gift by Ungoed-Thomas J in Re Golay’s Will Trust?

Answer 26

A reasonable income

Question 27

What are the three possible effects of a trust failing for lack of certainty in subject matter?

Answer 27

1. If the property itself is uncertain, the trust is void (Re London Wine Co (Shipping) Ltd);
2. If a purported trust is grafted onto a gift, then the donee takes absolutely (Sprange v Barnard);
3. If the beneficial interests are uncertain, there will be a resulting trust (Boyce v Boyce).

Question 28

Apart from clearly stating the shares, there are three ways a settlor can determine the shares of subject matter. What are they?

Answer 28

1. Give discretion to the trustees to determine the beneficial interest;
2. Lay down an effective determinant (Re Golay’s Will Trust)
3. Equity is equality (although this is a last resort)

Question 29

What is the effect of a trust failing due to uncertainty of object?

Answer 29

Resulting trust

Question 30

What is the difference between ‘discretionary powers’ and ‘powers of appointment’?

Answer 30

Discretionary powers = action must be taken

Powers of appointment = action may be taken at the discretion of the trustee

Question 31

The test for certainty of objects with powers of appointment comes from which case?

Answer 31

Re Gulbenkian’s Settlement Trust

Question 32

In which case did Lord Wilberforce apply the test for certainty of objects with powers of appointment to discretionary trusts also, calling the distinction artificial?

Answer 32

McPhail v Doulton

Question 33

What is the test for certainty of objects with powers of appointment?

Answer 33

The in/out test ie per Lord Upjohn in Re Gulbenkian’s ST “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 [the trust] does not fail because it is impossible to ascertain every member of the class.”

Question 34

In Public Trustee v Butler what word did not convey certainty of objects? What word did?

Answer 34

“deserving” - who is a “deserving” relative?

“promising”, in the context of a scholarship was certain.

Question 35

What test for certainty of objects applies to fixed trusts?

Answer 35

The list test (IRC v Broadway Cottages Trust)

Question 36

What test applied to discretionary trusts before the in/out test?

Answer 36

The list test

Question 37

What was the justification for Lord Wilberforce applying the in/out test to discretionary trusts?

Answer 37

Distribution should be allowed to apply unequally to beneficiaries.
It should not be necessary to evidence every member of a class.
Discretionary trusts were in essence an offshoot of trust powers.

Question 38

Lord Wilberforce drew a distinction between conceptual certainty and evidential certainty. What did he mean?

Answer 38

Conceptual certainty refers to the precision of language used by the settlor in defining a group of people.
Evidential certainty refers to factual evidence that can show a person is a member of a certain class.

Question 39

Why is the distinction between conceptual and evidential certainty important?

Answer 39

Evidential certainty is only required in fixed trusts where the list test is used to identify beneficiaries.

Question 40

What did Lord Wilberforce say would defeat a discretionary trust even where there was conceptual certainty?

Answer 40

Administrative unworkability

Question 41

In Re Baden’s Deed Trust (No 2) three justices gave different tests to the discretionary trust. What were they?

Answer 41

Sachs LJ - after a class has been decided as conceptually certain it is up to each person to prove they were within a class;
Megaw LJ - conceptual certainty would occur where one or more persons ie a substantial number, could fall within the class;
Stamp LJ - one should know the size of the class before upholding conceptual certainty.

Question 42

What class of people was held to be administratively unworkable in R v District Auditor ex p West Yorkshire Metropolitan County Council?

Answer 42

The inhabitants of West Yorkshire

Question 43

Can powers of appointment suffer from administrative unworkability?

Answer 43

No, “a power cannot be uncertain merely because it is wide in ambit” (per Templeman J in Re Manisty’s Settlement)

Question 44

When is a trust for everyone in the world save for an excepted class valid?

Answer 44

When the trustees are given powers of appointment.

Question 45

May a trustee add persons to a class in a discretionary trust?

Answer 45

Yes, unless that person is a member of an excepted class.

Question 46

Can a trust instrument opt out of equitable duties?

Answer 46

Yes, unless it benefits a member of an excepted class.

Question 47

In Re Barlow’s WT the trust was not discretionary. What was it?

Answer 47

Gift subject to a condition precedent

Question 48

There was a question over certainty of objects in Re Barlow’s WT. What was the class? Was it certain? Would it have been certain if the trust was discretionary?

Answer 48

The class ‘friends’ was held to be certain in the context of a gift subject to a condition precedent, because it was said that people could prove themselves to be a friend by some reasonable test. If the trust were a discretionary test, ‘friends’ would be uncertain (Re Gulbenkian’s ST).

Question 49

Where did the test for a gift subject to a condition precedent originally come from?

Answer 49

Re Allen