Equity & Trusts: The Three Certainties

Certainty of Object
1. 'Objects' means beneficiaries
2. Fixed trusts
  1. E.g. £10,000 to be divided equally between my two nephews, Joe and Bill.
  2. When the settlor specifies the shares of the beneficiaries.
  3. E.g. My residuary estate on trust for my wife during her lifetime and then to my children in equal shares.
    1. Called a successive interest fixed trust.
  4. Rule for CoB: the list principle/class ascertainability test
    1. Must be possible to draw up a complete list of all beneficiaries.
      1. Conceptual certainty
        No linguistic or semantic ambiguity
        E.g. 'my friends', 'useful employees', 'good customers' aren't conceptually certain
        Not capable of different interpretations
      2. Evidential certainty
        Should be possible to prove who the beneficiaries are.
3. Discretionary trusts
  1. E.g. £10,000 on trust for such of my siblings in such shares as my trustees shall decide
    1. Don't have to give something to every beneficiary
  2. Old rule was the same as that for fixed trusts
    1. List/ascertainability test
    2. IRC v Broadway Cottages Trust
  3. New test introduced in 1970s
    1. McPhail v Doulton
      1. House of Lords
      2. Appropriate test is the 'Is or is not test' or 'individual ascertainability test'.
        Must be able to say with certainty whether an individual is or is not in the class
        Test for certainty of objects for Powers
        Re Gestetner
        Re Baden No.1
        Lord Wilberforce: Conceptual certainty is most important factor
        Re Baden No.2
        Sachs LJ agreed with Lord Wilberforce about conceptual certainty
        Administrative unworkability
        When class of possible beneficiaries is too large for trustees to adequately survey and select from it
        R v District Auditor ex parte West Yorkshire MC
        Trust will fail
4. Gift with a condition precedent
  1. E.g. '£100 to each of my nephews with a NUFC season ticket'
  2. Viewed as a series of gifts rather than a trust.
  3. Re Barlow
    1. Correct test is 'one person test'
      1. Class description must be sufficiently clear so it is possible to identify at least one person who falls within the class
      2. Re Tuck is another example of the application of this test
5. Lack of certainty of objects creates a resulting trust of the property back to settlor
Certainty of Subject Matter
1. Property subject to the trust must be clearly defined
  1. Description used to identify property must be clear and unambiguous
    1. Shouldn't be subjective
      1. Only means something to the settlor
        Re Kolb's WT
        Re Golay
        'reasonable income' is sufficiently certain
    2. Remainder provisions
      1. E.g. A gift to A, and anything that is left to B'
      2. Palmer v Simmonds
        'The bulk' is too uncertain to create a trust
        Not clear which part should be passed on
        Resulted in an absolute gift to the husband
      3. E.g. To A for life, remainder to B'
        Known as a 'successive interest trust'
        If drafted correctly this will create a trust
        In the Estate of Last
    3. Trusts over unallocated assets
      1. Rule: subject matter must be segregated from general stock
        Tangible Property
        Re London Wine Company
        No trust, wine not segregated
        Re Goldcorp
        Intangible property
        Hunter v Moss
        Involved shares in a limited company
        Intangible property need not be specified as long as all items are identical
2. Beneficial interests in the property must be ascertainable and clear
  1. 'In equal shares'
    1. Valid
    2. Fixed trust
  2. 'In such shares as the trustees will decide'
    1. Valid
    2. Discretionary trust
  3. Problems caused by other methods of ascertainment
    1. Boyce v Boyce
      1. One sister had to choose which property she wanted but died before she could do this.
      2. Gift failed as court could not make the decision for her.
      3. Contrast with Re Knapton
        Right of selection followed order beneficiaries were named in the will
        Court applied a practical solution
3. Effect of uncertainty of Subject Matter
  1. Property would fall into residuary estate of testator OR
  2. Property would be an absolute gift to first person named in clause OR
  3. Property may never leave the settlors estate.
Certainty of Intention
1. Courts scrutinise the words used
  1. Orally or verbally
  2. Word 'trust' need not be used
    1. Paul v Constance
      1. Contrast with Jones v Lock
        'Loose conversations of this sort' didn't constitute intention.
        Case concerning cheque for a baby
      2. 'The money is as much yours as mine'
      3. Milroy v Lord
        Failed transfer to third party trustees
    2. Equity looks at substance rather than form
  3. Clear, unambiguous language showing a trust is intended
    1. Precatory words are not sufficient
      1. Lambe v Eames
      2. E.g. I hope, I wish, I desire
      3. Re Adams v Kensington Vestry
        'In full confidence'
        Held: Did not demonstrate intention
      4. Comiskey v Bowring Hanbury
        'In full confidence' were the words used
        Provision went on to give additional instructions
        Known as a 'gift over in default'
        Held: A trust was intended
    2. Increase in cases in a commercial context
      1. Re Kayford
        Mail order company in financial difficulty
        Placed customer money deposits in 'The customers trust deposit account'
        Held: Express trust created
      2. Freeman v Commissioners for Customs and Excise
        Restriction placed on how money is used
        Express trust created in favour of transferor
2. Intention must be genuine
  1. Midland Bank v Wyatt
  2. Sham trusts not acknowledged by courts

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Equity & Trusts: The Three Certainties

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