THREE CERTAINTIES

Question 1

Use of the word ‘trust’

Answer 1

• 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]

Question 2

Precatory words

Answer 2

• 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

Question 3

Lambe v Evans

Answer 3

• 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”

Question 4

Re Adams & Kensington Vestry

Answer 4

• 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

Question 5

Comiskey v Bowring-Hanbury

Answer 5

• We need to look at the other provisions of the will to find out if a trust is being intended

Question 6

Re Snowden

Answer 6

• 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

Question 7

Re Steele

Answer 7

• 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

Question 8

Paul v Constance

Answer 8

• 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”

Question 9

Don King Productions v Frank Warren

Answer 9

• 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

Question 10

Mills v SportsDirect.Com

Answer 10

Look at the meaning of the words in their relevant context

Question 11

Wilkinson v North

Answer 11

Even though legal jargon is being used, that does not mean a trust has been created

Question 12

Sham intentions

Answer 12

• 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?

Question 13

Gift or trust

Answer 13

• 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

Question 14

What do we need to have certainty of subject matter?

Answer 14

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

Question 15

Boyce v Boyce

Answer 15

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

Question 16

Problem of adjectives

Answer 16

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

Question 17

Tangible objects

Answer 17

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

Question 18

Palmer v Simmonds

Answer 18

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

Question 19

Re Goldcorp Exchange

Answer 19

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

Question 20

Re London Wine Co

Answer 20

• 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

Question 21

Intangible objects

Answer 21

• 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

Question 22

Identifiable fund

Answer 22

• 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

Question 23

Beneficiary principle

Answer 23

• 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

Question 24

What is fixed in a fixed trust

Answer 24

• 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

Question 25

Missing beneficiaries

Answer 25

* Re Benjamin Order [*Re Benjamin*]: gives the trustee the ability to administer the trust as if the missing beneficiary were dead * If the money is distributed and the missing person turns up, you can recover it from the people who the money was distributed to * NB: the court can authorise things that would otherwise be a breach of trust * You can take out insurance against the missing beneficiary turning up [*Re Evans*] * It is proper for the trustee to take out insurance to protect * The trust will not be defeated by uncertainty of beneficiaries

Question 26

What is discretionary in a discretionary trust?

Answer 26

* The trustees are given discretion as to the extent of each person’s beneficial interest, if any * It is up to the trustee to decide who within the class gets what * The language that indicates a discretionary trust: * To hold on trust at his discretion * In such shares as she thinks fit * For whichever of my relatives they may choose * We do not know what share, if any, each person has until the discretion is exercised * The trustee still needs to share the money

Question 27

*McPhail v Doulton*

Answer 27

* “T*he trust is valid if it can be said with certainty that any given individual is or is not a member of the class*” * **The ‘any given postulant’** * You need to have criteria to determine whether or not an individual is a member of the class * Adopting the test for powers of appointment * The fiduciary is expected to: “*examine the field, by class and category; might indeed make diligent and careful inquiries, depending on how much money he had to give away and the means at his disposal, as to the composition and needs of particular categories and of individuals within them; decide upon certain priorities or proportions, and then select individuals according to their needs or qualifications*” [*McPhail v Doulton*]

Question 28

Conceptual certainty and evidentiary certainty

Answer 28

* Conceptual certainty: can we give a sensible, workable meaning to the class? * Evidential certainty: how do we prove who falls within that definition? * A complete list will satisfy both

Question 29

*Re Baden (No 2)*

Answer 29

* Applying the *McPhail v Doulton* test, dependants and relatives are both sufficiently certain, but there was disagreement on how to apply the test * Majority – if you do not know if a person is in the class, then they are not in the class * *_The coming up with someone who poses a challenge of the definition does not defeat the certainty of the class_* overall [Megaw and Sachs LJJ] * Minority – you must show conclusively that you are or are not in the class * The is or is not test should require you to say either you are in the class or are not in the class; the existence of a ‘don’t know’ is problematic * Stamp LJ * Relatives and dependants are sufficiently certain

Question 30

Applying the 'is or is not' test in discretionary trusts

Answer 30

* What content do we give to the meaning of the class * Give the meaning of the word that gives it certainty

Question 31

Default position on discretionary trusts

Answer 31

* *Burrough v Philcox*: If no selection is made, is it sufficient to find that there is a general intention in favour of a class? * Where the intention fails because the selection has not been made, the court will carry into effect the general intention in favour of the class

Question 32

Administrative unworkability of a discretioary trust

Answer 32

* Where a class is sufficiently certain and there is still be a problem of administrative unworkability (as was the case in *McPhail v Doulton*), this is an obstacle to the trust * *R v District Auditor Ex p. West Yorkshire Metropolitan CC*: a trust was set up for any or all or some of the residents of West Yorkshire (2.5 million people) and the fund was £400,00 * The class was defined with sufficient clarity, but “*a trust with as any as 2.5 million potential beneficiaries is, in my judgment, quite simply unworkable,"* especially with regards to the amount of money involved

Question 33

Capriciousness of a discretionary trust

Answer 33

* It the trust is administratively workable and certain, but if you cannot impute a sensible intention to the settlor, this is an obstacle to the trust * In some cases, if an obscenely large class that is unworkable, it might suggest a lack of intention to create an express trust * “*A capricious power negatives a sensible consideration by the trustees of the exercise of the power*” [*Re Manisty*] * This does not overlap with administrative workability

Question 34

Resolving uncertainty in discretionary trusts

Answer 34

* One way for settlors to get around uncertainty is by reference to third parties (somebody else can decide the relevant meaning) * You cannot exclude the ability of the court to scrutinise the certainty of the terms and the operation of the trust; you cannot oust the jurisdiction of the court [*Re Wynn*] * Lord Denning’s view in *Re Tuck’s Settlement Trust*: “*if the appointed person is ready and willing to resolve the doubt or difficulty, I see no reason why he should not do so*” * The problem of conceptual and evidential certainty still needs to be solved

Question 35

Conditional gifts

Answer 35

* There is a more generous approach to objects than with trusts * In order to decide whether an individual is entitled to purchase, all that is requires is that the executors should be able to say of that individual whether he has proved that he is a friend [*Re Barlow’s Will Trusts*] * This is because of the nature of the gift in question (the paintings) * We do not need to be as strict and certain with gifts, we just need to be able to say that they count as the class