Three Certainties Flashcards
When will the Courts declare an express trust?
Lassence v Tierney: the Courts will hold that an absolute gift was intended unless it is certain from the context and expressions used that the settlor intended to create a trust.
Knight v Knight: the three certainties
- Certainty of Intention
- Certainty of Subject (property)
- Certainty of Object (beneficiaries/purpose)
Explain Certainty of Intention
Re Kayford: No need to use the words “trust” or “In confidence”
Richards v Delbridge: but must use words with equivalent meaning
Precatory words (words of prayer or petition) do not give rise to trusts.
Re Diggles: Testatrix left all real and personal property to daughter with expressed desire that she pay a relative an annuity of £25.
Bowman LJ held: there was merely a “moral duty to pay reasonable attention to the wishes of the testatrix”
How do Courts construe intention from formal documents of trust?
Re Osoba: when disposing of property by formal document the court ascertains settlor intention “from the words he has used in the light of such knowledge of relevant facts as he must have had” (Goff LJ)
Words are given their natural contextual meaning.
Extraneous evidence (opinions of barristers, correspondence with settlor in preparation of deed) is inadmissible: Rabin v Gerson.
Court reluctant to take into account construction used in the past: Lambe v Eames.
Can a settlor’s detailed instructions demonstrate intention?
Yes.
Comiskey v Bowing Hanbury: bequeathed estate to widow “absolutely in full confidence” that nieces would receive a beneficial interest regardless of the circumstances. Demonstrated sufficient intention to create a trust.
How do Courts construe intention from informal dealings?
Where a disposition does not appear in a formal document, extra significance is attached to the context in which it is expressed.
Jones v Lock: put cheque in baby’s hand, saying “I give this to baby, it is for himself.” Took cheque away for safekeeping. CA: held no valid gift or declaration of trust.
“Very dangerous example if loose conversations of this sort should have the effect of declarations of trust.”
Paul v Constance: Deceased separated from his wife and cohabited, unmarried, with P. Set up bank account in sole name to deposit £950. Told P “this money is as much yours as mine” repeatedly.
Scarman LJ: “The words he did use on more than one occasion convey clearly a present declaration that the fund belonged as much to her as it did him.”
How do the Courts construe intent from commercial contexts?
Re Kayford: mail-order company feared insolvency. Upon advice, wanted to set up a Customers Trust Deposit Account into which further payments for goods not yet delivered would be paid. MD gave telephone instructions to bank. Used a dormant deposit account instead of a separate, new one.
Held: intention to create a trust was “manifestly clear” despite the failure to use a separated, nominated trust account.
What are the general rules for certainty of subject?
As long as the subject matter is capable of being found, mere evidential uncertainty of its location will not fail the trust. Certum est quod certum redid potest: that is certain which can be made certain.
The subject matter must be identifiable. Conceptual/linguistic uncertainty will avoid/fail a trust.
I.e. Palmer v Simmonds: “the bulk of my estate” was conceptually uncertain and failed.
Explain Certainty of Subject for non-homogenous mass
If a subject matter left to beneficiaries is non-homogenous, the gift will fail if there are no means of ascertaining the specific destiny of each part.
Boyce v Boyce: testator left 2 houses on trust for his 2 daughters. Youngest should have house remaining after eldest makes her choice. Trust for younger fails if eldest dies before making her choice.
Explain Certainty of Subject for homogenous mass
No difficulty where trust is for whole mass or fixed percentage of it.
Oliver J, Re London Wine: If a mass of property comprises a number of substantially distinct but apparently identical parts, a trust of the constituent parts will fail unless relevant parts are specifically identified.
Explain Certainty of Subject: company shares
Hunter v Moss: D and C had conversation where D declared self as turstee for C of 5% of issued share capital of a company. Company totalled 1,000 shares. Alleged trust of 50 shares.
CA: requirement of certainty of subject did not require segregation of 50 shares from the total body. Shares held by D were indistinguishable.
Lord Neuberger, Harvard Securities: The trust fails if the total mass and claimed share cannot be identified with certainty.
Criticise the decision of Hunter v Moss
Hayton: a trust of an unspecified 50 shares in a homogenous bulk is too uncertain. The Trustee could sell 50 shares and the purchaser would not know if those shares were subject to a trust or if they were owned absolutely.
Worthington: Hunter v Moss was a success. All that is required for practical workability is for the size of total bulk and the proportion held on trust to be identified. The Trustee can then be held to their fiduciary duty to keep trust property separate.
Watt: However, identical shares may exhibit substantial differences according to the number held. Suppose S declared a trust of 50 shares in X Co Ltd and then sells his controlling shareholding of 1,000 shares at a great profit. The remaining 50 shares confer no power and are worth very little. The beneficiary could argue 50 trust shares were sold as part of the 1,000 controlling bulk and claim proceeds of sale. S would argue the retained shares are on trust.
The requirement of certainty of subject was meant to avoid disputes of this kind.
Was Hunter v Moss decided wrongly?
Watt: No. The trust was quite rightly binding. The Settlor had the power to segregate and therefore to ascertain the particular 50 shares.
If a trustee is not permitted to escape his trust by creating a homogeneous amass, then a trustee of 50 shares in a homogeneous mass should not be permitted to deny the trust when he has the power to segregate.
For Certainty of Subject, what is the rule for tangible assets in a homogeneous bulk?
Tangible property must be separated from bulk to be sufficiently certain.
Re London Wine: declared to hold parts of stock on trust for buyers. No steps to segregate the wine from the bulk were taken. Oliver J: failure to segregate rendered the subject uncertain.
Re Goldcorp: C sought delivery of bullion he thought was held “on trust.” Privy Council: no trust existed. No segregation or specific identification. Allowing C to abstract from body available to creditors and get priority over them was “devoid of foundation in logic and justice.”
What effect has the Sale of Goods (Amendment Act) 1995 had on homogeneous bulks?
SoG(A)A 1995 applies when goods are not specifically identified but are part of a homogeneous bulk.
A contract for sale of a specified quantity of unascertained goods in an identified bulk transfers property in an undivided share of the bulk to the buyer. The buyer must have paid the price for some or all.
The buyer becomes a co-owner of the bulk under a tenancy in common with a share proportionate to the quantity of goods paid for.
Explain disposing of residue (certainty of subject)
Something may be conceptually certain even if it is practically unquantifiable.
Re Last: left all property to brother. “Anything that is left” to pass to husband’s grandkids. Succeeded.
