THREE CERTAINTIES Flashcards
Use of the word ‘trust’
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Normally, using the word ‘trust’ will indicate an intention to create a trust
- We have to bear in mind the context
- An exception is when the word trust is not being used in the specific legal context; usually the word will indicate a trust, but it is not an absolute rule [Tito v Waddell]
Precatory words
- Precatory words (praying) alone do not establish certainty of intention
- By themselves, precatory words (words expressing hope, confidence, wish, belief and expectation) do not by themselves suffice to establish an intention to create a trust
- Without context or other wording, they will not indicate a certainty of intention
- They will impose only a moral obligation
Lambe v Evans
- Estate left to widow “to be at her disposal in any way she may think best, for the benefit of herself and her family”
- Ask, did the settlor intend a trust to be created
- “I am satisfied that no such trust was intended, and that it would be a violation of the clearest and plainest wishes of the testator if we decide otherwise”
Re Adams & Kensington Vestry
- Precatory words do not by themselves suffice to establish a trust
- Even strong language is not enough, it is not the same as imposing a legal obligation
Comiskey v Bowring-Hanbury
- We need to look at the other provisions of the will to find out if a trust is being intended
Re Snowden
- A lady leaves her property to her property to split up the remainder as he thought best
- Vague language is not sufficient to establish a trust in and of itself
Re Steele
- We can look at conduct to support the use of precatory words
- Do not overuse this case
- In this case, it was held that the fact the settlor looked for a case which demonstrated that precatory words will suffice to create a trust showed the intention to do so
- Conduct + use of precatory words can create the serious intention a trust
Paul v Constance
- You do not need to understand the legal subtleties of making a trust, but you must understand your domestic situation and financial relationship.
- “It is, of course, right that one should consider various things that were said and done by the plaintiff and the deceased during their time together against their own background and in their own circumstances”
Don King Productions v Frank Warren
- In the agreement the language of trust was not used, but the fact that the parties were sharing the profits meant that the parties were in a trust (this was the only way of making sense of the relationship).
- The test is what the parties intended and how this would be achieved legally
Mills v SportsDirect.Com
Look at the meaning of the words in their relevant context
Wilkinson v North
Even though legal jargon is being used, that does not mean a trust has been created
Sham intentions
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Midland Bank v Wyatt: although Wyatt had declared a trust and complied with the necessary formalities, his conduct showed that he did not actually intend the trust
- You cannot use a trust as a get out of jail free card
- Ask, did the settlor have a serious intention to create the legal relationship known as a trust?
Gift or trust
- Whether it is a gift or trust goes to the existence of intention
- If you did not intend a trust, you must intend a gift
- In order for it to be a trust
- There must be certainty of subject matter
- There must be certainty of objects
What do we need to have certainty of subject matter?
We need to be able to say with sufficient certainty what property is subject to the trust
Lehman Brothers v CRC Credit Fund: “a trust cannot be created without property to which it can attach. Where there is no property which is sufficiently identified the subject matter of a trust, no trust is created”
Without certainty of subject matter, there cannot be a trust
Boyce v Boyce
The testator owned some houses, which he left to his wife to give to his first daughter and the other houses to their other daughter. Could the second daughter say which houses she was entitled to?
The second persons entitlement is contingent on the first one
Problem of adjectives
Adjectives introduce a problem of subjectivity and uncertainty as to what the testator or settlor meant by using the word
Re Golay’s provision – “to enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties.” What did the testator mean by reasonable?“The yardstick indicated by the testator is not what he or some other specified person subjectively considers to be reasonable but what he identifies objectively as “reasonable income” … in my view the testator intended by “reasonable income” the yardstick which the court could and would apply in quantifying the amount so that the direction in the will is not in my view defeated by uncertainty”
The word reasonable is essentially objective
Generally, there is a problem of adjectives, but the court can judge what is objectively a reasonable income
Tangible objects
Capable of being touched; physical things in the real world
Can we identify the property we are dealing with for the trust?
The language must be precise and definite
Palmer v Simmonds
Can we say with certainty whether the “bulk of my said residuary estate” is tangible
We are asking whether the object is certain at the time of death
Estate is certain, residue is sufficiently certain (it will be determined at the time it is gotten to)
On the facts, the ‘bulk’ of the residue or the estate was unclear
“The testatrix has here used a term which is not a legal term; a term which has not in law any appropriate meaning”
The language must be precise and definite
Re Goldcorp Exchange
The company would buy bullion on a non-allocated basis and store it. There was not enough gold to satisfy the claims when the company went bust
One claimant bought 52 specific coins before 1,000 coins on a non-allocated basis
Goldcorp misused the money; there were more claims than there were coins
The privy council held that the customers could not establish entitlement to any of the gold bars themselves in terms of a proprietary interest, nor could they establish that the company was holding the bars on trust for them, because at no point could we say who is the beneficial owner of each gold bar
In the insolvency context, the only right the customer has as against Goldcorp was a personal one, they were unsecured contractual creditors who joined the pool of creditors and thus could not assert priority
“There never was a separate and sufficient stock of bullion in which a proprietary interest could be created. What the non-allocated claimants are really trying to achieve is to attach the proprietary interest, which they maintain should have been created on the non-existent stock, to wholly different assets”
There is a need for separate stock, but it does not mean that you need physical separation, but there must be a way to identify who owns what
Re London Wine Co
- The company would buy wine and stock it in various stock houses, but the wine was never allocated and divided for the customers. Could the customers establish which wine they were entitled to?
- Because it was tangible property, it was necessary to say which bottle belongs to who. Because this was not possible, the customers could not claim the wine
Intangible objects
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Hunter v Moss: there was a trust of 50 of 950 shares
- Where there are shares of the same class (or any interchangeable intangible property), this can be separated with words
- Re Harvard: “It seems to me that the correct way for me … to explain the difference between the result in Hunter, and that in … London Wine and Goldcorp, is on the ground that Hunter was concerned with shares, as opposed to chattels”
- Lehman Bros: on the facts, there was not enough sufficient certainty because of the fluidity of the relevant funds.
“The shareholding was in existence, the shares were fungible and thus the trust property could be identified,” confirming the decision of Hunter v Moss”
Physical things are vulnerable in a way that intangible property is not
Identifiable fund
- If there is any uncertainty on the facts as to the source of the fund can create issues
- MacJordan Construction Brookmount Erostin: an agreement to set up an account pursuant to a building transaction; the developer was meant to retain moneys on the behalf of the contractors acting and trustee, and the money was meant to put in a separate bank account, but no such account was set up
- “The plaintiff has no equity as against the bank to require the bank to make available”
- You cannot point to the funds which are to be held on trust
- Hemmens v Wilson Browne: there was no certainty of subject matter; a future right to ask for a certain amount of money from an unspecified source is not good enough
- Wilkinson v North: although the subject matter is sufficiently certain, the fact that the arrangement was made without thinking of the practicalities casts doubt on whether the trust was created
Beneficiary principle
- Morice v Bishop of Durham: “every other trust [which is not charitable] must have a definite object. There must be somebody in whose favour the court can decree performance”
- The beneficiary are the people who can come to court and complain about what the trustee is doing
- They have rights, by virtue of the trust, which can be enforced by the Court, and we need to know who they are
- Similarly, the trustee needs to know in whose interests they must act
What is fixed in a fixed trust
- The extent / amount of each beneficiaries interest is fixed
- A fixed trust does not require the shares to be equal
- Rather, the thing that is fixed is the extent of each beneficiary’s share: depending on what the subject matter is, you need to know who is entitled to what
- The default of specified shares: “equity is equality”
- The default rule will divide equally
- You cannot define something equally unless we know how many beneficiaries there are
- Therefore, we must have a complete list, we must be able to identify all beneficiaries
