trusts Flashcards
Lambe v Eames
‘in any way she may think best’
The words are precatory so did not impose a legal obligation of a trust
Three Certainties
Certainty of:
Intention - settlor’s acts or words to make a trust
Subject Matter - identifiable property
Object - beneficial interests
Why did Comisky succeed whilst Re Adams failed to create an express trust?
Comisky although precatory was on the whole imperative. Re Adams ‘do what is right’ was too vague to infer a trust. (Failure of intention).
Paul v Constance and Intention
Look at the “substance” not the “form” - reads the text as a whole
“as much as hers as is mine” - oral declaration of trust
Certainty of Intention
Intention is assessed objectively (Staden v Jones)
Through words or actions
Trust and confidence not needed (Re Krayford)
Certainty of Subject Matter
Property specified Objectively (Moore)
and how shares are to be divided
Certainty of Object
Class of individuals identifiable with degrees of discretion
Emery’s points for certainty of object
Conceptual Certainty - precision of language
Evidential Certainty - allows specific persons to be identified
Ascertainability - extent of “whereabouts or continued existence”
Administrative Unworkability - extent of practicability for trustees to discharge duties
Duty to Survey the Field
Hawkesley v May -
trustee must inform beneficiaries of their rights (except fixed trusts)
Discretionary Trusts:
Re Baden - ‘diligent and careful’ enquiries must be made
Fiduciary Powers (lesser):
merits of each person - do they fit?
Re Hay’s - appreciation of the WIDTH
IRC v Broadway Cottages
Complete list needed:
“Siblings” and “Employees” was too vague to identify
Constitution of Trust
- A makes an outright gift to B
- A declares himself a trustee, to hold property on trust for B
- A transfers the property to C as a trustee to hold on trust for B
Re Kolb’s WT
‘residue’ was a legal term thus subject matter that could be identified
Palmer v Simmons
‘bulk of my estate’ was insufficient in certainty of subject matter
Hunter v Moss
Bulk
Certainty of subject matter - although 50 shares were not identified as all 950 were the same this did not matter
Re Sayer
Failed on ‘in or out’ test for employees as needed records to apply it
Re Baden
Administrative Unworkability
Administrative Unworkability definition of beneficiaries: "hopelessly wide" to form a class e.g. all the residents in Greater London Apply: ex p Yorkshire 'any...inhabitants in West Yorkshire'
Re Krayford
no need for “magic” words of “trust” or “confidence”
Re London Wine Shippers
Failure of certainty of subject matter
Ascertainability
Type of wine was not specified
Re Gulbenkian
Facts:
Nubar Sarkis Gulbenkian wives and his children or…for the time being in existence under whose care or control or…be employed or residing“.
- Too uncertain to make a trust = gift over
Administrative Unworkability
‘Does cost outweigh the benefits’
“any given postulant” test - needs to be able to identify whether they “fit” the category
Tito v Waddell
“trust” can mean different things
Jones v Lock
Whereby no provisions have been made it is difficult/not possible to construe a trust on words
McPhail v Doulton
Facts:
The trustees shall apply the net income of the fund in making ‘at their absolute discretion’ to or for the benefit of any of the officers... ex-employees of the company. Clause 9(a) - "shall" + power of selection = discretionary trust
Re Coxen
‘in the opinion of my trustees’
McPhail ‘in or out’ test
Goodman v Gallant
The TR1 conveyancing form was changed from 1 April 1998 - purchasers to declare their interests in writing. Declarations in writing that comply with the formalities, absent duress, fraud, undue influence, misrepresentation = conclusive
Re Steele
Precatory words but old precedent
Umpire
Re Wynn - trustee cannot decide
Re Coxen - opinions of my trustees she shall…
Re Tuck’s ST - ‘an approved wife’
Knight v Knight
- if the words are so used, that upon the whole, they ought to be construed as imperative;
- if the subject of the recommendation or wish be certain; and,
- if the objects or persons intended to have the benefit of the recommendation or wish be also certain.
Trust Definition
legal and equitable title separated
McPhail v Doulton Purpose
powers separate from trusts (fixed list)
Attempt to fudge the law to encourage a discretionary trust to a fiduciary power in order for no need of complete list/certainty of object
Mere Power
capacity to do legal things but no compulsion (gift over)
e.g. “the trustee MAY advance £1,000 to X”
Re Hay’s ST, Megarry VC:
A mere power is very different [from an ordinary trust obligation]. Normally the trustee is not bound to exercise it, and the court will not compel him to do so. That, however, does not mean that he can simply fold his hands and ignore it, for normally he must from time to time consider whether or not to exercise the power, and the court may direct him to do this.
All trusts need certainty of beneficiaries and no discretion
IRC v Broadway Cottages
Burrough v Philcox
Beneficial shares - divided equally
McPhail:
Changes to Discretionary Trust
After McPhail, in a discretionary trust, the trustee has the discretion to appoint within a class of potential objects and the trust will fail only if the definition of the class is “conceptually uncertain”. Providing the meaning of the words in the trust are sufficiently clear, so it can be said of any given person whether they would be or not a member of the class, it does not matter if every potential member cannot be identified by evidence
Emery: McPhail Conceptual certainty
Settlor to define the class; the words he employ can either be very precise and ‘admit of little or no argument’ or can be highly imprecise,
The crucial point: Conceptual certainty is different from evidential certainty; the former refers to the fact that the class defined by the settlor has a precise boundary of meaning, in the sense that it is possible to state the necessary criteria for a person to be a member of that class
McPhail v Doulton
Lord Wilberforce
It is striking how narrow and in a sense artificial is the distinction, in cases such as the
present, between trusts or as the particular type of trust is called, trust powers, and powers
…
Equal division is surely the last thing the settlor ever intended: equal division among all may,
probably would, produce a result beneficial to none
Maxim equity is equality
Gissing v Gissing 1971
Husband paid mortgage and gave wife an allowance. Wife paid for furniture and clothing etc. Did not constitute as a financial contribution. No beneficial interest, despite her and her son living there until the divorce.
Sarah Worthington
Lord Diplock
Midland Bank v Wyatt
Sham
[T]he trust deed was executed by him, not to be acted upon but to be put in the safe for a rainy day … as a safeguard to protect his family from long-term commercial risk should he set up his own company.
Sarah Worthington
Bulk Re London Wine + Re Goldcorp (no identifiable property as chattels) - must be fungible e.g. shares which can be objectively assessed
Re Baden (No 2): In or out
Re Baden’s Deed Trusts (No 2) [1973] Ch 9 (CA):
Sachs LJ: Enough to be able to prove X is in the class. No need to positively prove X is not in the class. (Treat don’t knows as out)
Megaw LJ: And a substantial number of objects required (not good enough to have a few relatives, need a ‘substantial number’)
Stamp LJ; Must be able to positively prove whether X is in or out of the class. (need to prove both – almost complete list test?)
3 possibilities: In, out, don’t know
Discretionary Trust
They have to exercise the trust but has the discretion in how this is determined (which beneficiaries to share it to)
In or out Test
Alastair Hudson gives the example of a trust “that [the trustee] shall divide the £1,000 between any of my sons who become unemployed, with the power to retain the whole of that £1,000 for the remainder beneficiary”. This is a discretionary trust; the word “shall” means the trustee is forced to exercise his power, while the “power to retain the whole of that £1,000” gives him discretion over whether to retain the money.
Mere and Trust Power Difference
In practice = little substantive difference
Between trustee is exercising a permissive mere power and the trustee is exercising a discretionary trust power, therefore can use the same is or is not test.
In both:
T cannot act capriciously and is obliged to consider the exercise of her power in accordance with scope of power.
Each potential B of a discretionary trust has the right to be considered as a potential recipient of the benefit and can ask the court to enforce this right
Re Gestetner’s Settlement
[T]here is no obligation on the trustees to do more than consider – from time to time, I suppose – the merits of such persons of the specified class as are known to them and, if they think fit, to give them something
Re Golay ST
one of my flats in her lifetime
Series of Gifts Subject to a Condition Precedent
Most lenient test
donee does not acquire an interest in the property until he satisfies the relevant condition
e.g. a gift of £500 to A provided that he passes his year one LLB examinations
Re Allen - member of the CofE
Re Barlow ‘family and friends’ - uncertain but valid
McPhail v Doulton (1971); Re Baden No1 (HL)
The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit.
McPhail: Goff J
Power not a trust (apply test for certainty in CoA Re Gulbenkian)
