CH 4 Flashcards
List the Three Certainties
Originally cited in Knight v Knight 1840
apply to both express trusts for persons and for purposes
All 5 elements of the creation of trusts apply
(i) the certainty of intention;
(ii) the certainty of subject matter; and
(iii) the certainty of objects
In a trust for persons the requirement of certainty of objects is normally expressed as a requirement of certainty of beneficiaries.
Discuss the Basic Rules Relating to the Certainty of Intention
The Certainty of Intention:
The intention of the settlor to create a trust
Intent by person either to transfer legal or equitable title to property to another person to hold for the benefit of persons or purposes OR for the intention by a person holding title to property that he holds that interest in property for the benefit of another.
Intention can be express either orally or in writing, it may also be inferred from words or inferred from the conduct of the parties or as combo of words conduct or circumstances
No formal requirements for certainty of intention except in testamentary trusts and transactions to which the statute of frauds applies.
No specific words are required to express an intention to create a trust.
The use of phrases such as “in trust” or “as trustee for” are likely to establish an intention to create a trust. Court looks at intent not form. Doesn’t necessarily establish intent.
Precatory expressions are usually not sufficient to create a trust “ my hope, my wish, my expectation, etc” unless sufficient intention is found based on other evidence/words to create the trust (Johnson v Farney, CA)
“Precatory trust” just means it is not a legal trust. If it is a precatory trust and a trust is found in the language, it is treated as a regular trust despite precatory language.
Re Walker: Testator left real/personal property to wife. Words didn’t show sufficient intent to create trust. One cannot make a gift of the whole interest in the property and then attempt to put a restraint on the alienation of the property, “remainder shall be divided”. Gift predominates, no sufficient intent for trust.
Underlying factors? Hard to find basis to impose legal obligation on wife. No reasonable expectation named persons to receive anything.
Re Shamas: always must consider intention when will made ie “testators armchair”. Not just a gift here because the intention of the settlor was to create a trust that created a legal obligation for the wife to care for the children with the capital. Wife held in trust but could encroach. “All to belong to wife until children come to 21 yrs old…..if marries again she has share like children but if not she keeps it all and ensures children get shares when she dies”
Underlying factors: stronger reasonable expectation of kids to receive? Appreciation in value of assets.
Johnson v Farney: “wish” if after wife dies shew ill leave to X.. the word wish here was just a suggestion and therefore the wife was entitled to the property absolutely. (Look at whole will).
Considered whether reasonable for fam to expect something, how much litigation will be required subsequently to enforce
Discuss the Basic Rules Relating to the Certainty of Subject Matter
The Certainty of Subject Matter: [trust res]
Two aspects to certainty of subject matter
(1) certainty of the property that is to be held on trust and
(2) certainty of the amount, or share, of the trust property that the beneficiaries of the trust are to receive.
Should know with reasonable certainty the property of the trust obligations and the distribution of income from the property
Why needed? Trustee must know to comply, court must know if there is a breach, court must know incase it has to administer the trust.
Linked with certainty of intent.
(1). The certainty of subject matter will occur where :
there is reference to a specific piece of property subject to the trust obligation
Reference to a specific fund or fixed amt of specific fund
A formula for determining the amount
ie. bank account: name of bank, name of account, account number etc
if the court can’t quantify on objective basis it will fail.
(2) Certainty of the amounts of the beneficiaries are entitled to receive
(a) clearly setting out the amount each beneficiary is to receive;
(b) providing a method for calculating the amount each beneficiary is to receive; or
(c) giving the trustee a discretion to decide the amounts the beneficiaries are to receive
Court may say to distribute equally if circumstances make this assumption reasonable
Generally an objective basis to find quantum is sufficient (Re Golays Will Trust- “a sufficient sum of money so as to provide a reasonable income for A” satisfied)
“The bulk of my residuary estate” or “80k to my wife, A, the bulk of which i entrust her to appoint btwn D, E and F” NOT sufficient.
% of residuary estate in testamentary trust is considered sufficient
Boyce: Four houses held in trust under will, daughter to choose one and remainder to other daughter. First chooser died before testator. Trust failed for lack of certainty because didn’t know how to distribute among bens ie which houses were to go to daughter a and which one to daughter b’s residuary.
Discussion: What could we do for daughter B here? Make an assumption that B would choose most valuable one. OR all go to B assuming contignency was just that A could choose one and B gets the rest so since no A we should give all to B.
Sprange: To husband and then what remains to others after his death…. trust would be impossible to execute due to lack of certainty (regarding how much husband can use) - all transferred to her husband
Similar to walker but here subject matter focus. Re walker was intent, but in both you could say it is pretty certain. Either way works if you look at underlying concerns reasonable expectations etc. impossible to execute.
Beardmore: separation agreement – husband agrees to hold three fifths of his net estate on his death for his wife for her life (or until she remarried) with the remainder to be held and paid out to two daughters over twenty years but with potential for remainders to children of the daughters if they died before end of twenty-year period. After wife died all daughters and husband wanted trust void, but minor grandchildren were appointed an official guardian to argue there is trust
Fine if this is a testamentary trust but the prob is it doesnt comply with leg for valid will, therefore cant operate as a valid testamentary trust.
Tried to argue inter vivos BUT ⅗ of estate is not known amt at time trust takes effect, wont know till husband dies - trustee needs to know what is to be held in trust in order to carry out trust obligations
Since they dont know what is to be held in trust, not valid
Similar to sprange in that amt is unknown.
Romaniuk: Left bank accounts in trust in will. However, had 4 bank accounts and only 3 were listed in will. Thus, ambiguity as to which bank accounts were to be held in trust - concludes it is not a valid trust
Discuss the Basic Rules re: Certainty of Objects
The Certainty of Objects: [trust ceste qui use]
Certainties of objects is referred to as certainty of beneficiaries in a trust for persons and certainty of purposes in a trust for purposes.
Link to certainty of intent - hard to tell intent if cant tell for whose benefit
The objects of the trust must be certain because the trustees must known what it is they are to do with the trust property, court also needs to know this whether the trustees are in breach of trust
Exception in the context of charitable purposes trusts, it requires only that the trust be held for a charitable intent – the court will provide a specific charitable purpose “administrative scheme” if unclear.
Certainty of Beneficiaries for Fixed Trust for Persons: the test for whether there is certainty of beneficiaries is that one must be able to:
Determine whether any given person is a member of that class; and
Identify every member of the class
“Class ascertainability test” / “complete list test”
Discretionary trust: the test for a discretionary trust only has to meet the first of the two parts of the fixed trust. “individual ascertain ability test” ie whether any given person is a member of the described class
the trustee needs to make a reasonable effort to identify the beneficiaries that fit within the class and to assess, in accordance with the discretion given, who among those beneficiaries should receive distributions from the trust – act in good faith.
The trustee must make a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty
Why? Perhaps consider intent of settlor, max of property values, other underlying values?
Conceptual vs. Evidentiary Uncertainty: trust doesnt fail bc evidence as to whether a person is a ben is limited or ambiguos, only fails when, once facts are determined on basis of available evidence, that the description of the class is too vague to determine whether a person is a member.
Conceptual certainty: means that the class is defined in a way that makes it clear enough to decide whether a person is within a class
Evidentiary uncertainty: is what the courts deal with (ex DNA test etc)
McPhail v Doulton/ Re Badens Deed Trusts: Word “relatives”, “dependants” certain?
Badens Deed Trusts 1: test, per Lord Wilberforce is whether “it can be said with certainty that any given individual is or is not a member of the class” – do not need to ascertain every member of the class
Badens Deed Trusts 2: persons are “relatives” if “both trace legal decent from a common ancestor” and “the use of the expression ‘relatives’ cannot cause the slightest difficulty”. “Dependent” means a person wholly or partially dependent upon means of another.
Note that gillen thinks the word relative is adminsitratively unworkable – relative can be a longggg way in the past.
CA agreed - certain
Notes on Badens Deed Trusts:
how can the words “relatives” and “dependants” be conceptually clear if three court of appeal judges can’t agree on what the words mean? (they all defined it kinda differently but still agreed it was sufficiently certain)
sixteen of seventeen judges who heard the case are of the view that Mr. Baden’s deed is valid and therefore the property does not revert to the estate – are there underlying factors that may have influenced them to come to this conclusion?
Reasonable expectations? -deed operated for 19 years – employees become aware of it and perhaps might expect to benefit from it (but it is discretionary so might reasonably expect to get nothing)
Intent of Mr. Baden seems clearly to have been to make a gift to employees and their relatives and dependents – in a deed (clear evidence of intent) – to “trustees” – who “shall distribute” – not finding it to be valid means property goes to persons (residuary legatees) who Mr. Baden clearly did not intend to benefit with the shares conveyed to the trustees under the deed (unjust enrichment of residuary legatees?)
Distributional element? – Mr. Baden was probably fairly wealthy – residuary legatees may have already benefitted substantially
Re Connor (1970): divide among close friends in way that trustee in their discretion should determine…
Judge says certain, small town, could determine
CA said need to ascertain whole class (this is one year before McPhail - Mcphail overruled case that this case relied on called broadway cottages that required a complete list test)
Comments: did small town approach of trial judge involve an overlap between conceptual certainty and evidentiary certainty? (i.e., conceptually a bit vague but evidence of close friendship in small town easier?) – or was it a question of whether the class description was what Lord Wilberforce referred to as “administratively workable” (but in very large city might be administratively unworkable)?
Jones v Executive Officers of the T Eaton Company / Re Bethel: $50k for any needy or deserving toronto members of the eaton quarter century club (a social club for T Eaton executives w over 25yrs service)
Toronto members – sufficiently certain? (municipalities nearby, live in city? Work there? etc)
SCC adopts McPhail, looks to context and accepts the submission of intended trustee that testator meant persons with whom he would have worked personally or would be working in the surroundings with which he was familiar and to which he was attached by personal experience.
