Express Trusts - three certainties Flashcards
(11 cards)
definition and equitable maxims
An express trust arises when a settlor intentionally creates a trust
Equity looks to intent rather than form – The court assesses whether a trust was intended. - intentions and actions of parties not wording used - no req to use the word “trust”
Equity will not allow a trust to fail for want of a trustee – Courts may appoint one. - if trustee dies or cannot be traced court will appoint a new one
Equity regards as done that which ought to be done – Courts enforce intended trusts.
3 certainties overview
knight v knight - lord langdale
‘First, if the words are so used, that upon the whole, they ought to be construed as imperative; - imperative language is not enough - certainty of intention
Secondly, if the subject of the recommendation or wish be certain; and, - subject = trust property itself must be certain - certainty of subject matter
Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.’ - objects = beneficiaries, intention has to be certain - certainty of objects
certainty of intention
settlor must demonstrate clear intention to create a trust
settlor must have capacity - must be of age of majority (Edwards v Carter) , not mentally incapacitated (Re Beaney)
intention assessed objectively - language such as ‘the money is as much yours is mine’ will suffice - paul v constance (husband said to wife that money in savings account repeatedly then passed away and in his will assigned it to another beneficiary)
vague and ambiguous words = generally insufficient - re adams
courts interpret intention based on language and context - re steele’s will trusts
If intention is ambiguous, courts may rely on extrinsic evidence - Twinsectra
Sham Trusts and Dishonest Intention
A trust may be deemed a sham if it was not genuinely intended - Midland Bank plc
Courts look for retained control by the settlor - Snook case - have they divested full control of trust property to trustees? If no then can say didn’t intend to fully part with property, tried to retain some control of yes then valid trust
A trustee must have independent discretion, or the arrangement may fail as a sham - Shalson v Russo
National Westminster Bank plc v Jones - confirmed that dishonesty is typically required to establish a sham trust.
Certainty of Subject Matter
trust property must be clearly identified - uncertainty leads to trust failure - Palmer v Simmonds - ‘bulk of my estate’ was too vague
distinction between tangible and intangible property - Re London Wine Co Shippers - Trust not valid where wine bottles held on trust were not clearly segregated from the wine bottles that were not - segregation from non trust property
Re Stapylton Fletcher Ltd - segregation is required for tangible property to ensure certainty
or can be through labelling - White v Shortall
Trusts must know ab initio what the property being held on trust is and a generic description is not sufficient and as established in case law it must be objectively identifiable.
Hunter v Moss - trust was valid for 50 out of 950 identical shares, as intangible assets do not require segregation as already labelled and separated e.g. documentation
Certainty of Objects
Carl Emery:
a. conceptual certainty - refers to precision of lang used by settlor to define class of person whom he intends to benefit (objects named in trust and looking at precision of language)
b. evidential certainty - refers to extent that evidence available in particular case enables specific persons to be identified as members of that class e.g. ppl get to show proof of residence of greater london
c. ascertainability - ability to identify and locate (potential) beneficiaries
d. administrative workability - extent to which it is practicable for trustees to discharge the duties laid upon them by settlors towards beneficiaries or potential ones - e.g. if millions of residents in greater london then not poss
a trust for ‘employees of a company’ and ‘relatives of the employees’ is typically manageable - McPhail v Doulton
Beneficiaries must be clearly identified or identifiable
Fixed Trusts: Complete list test - IRC – all beneficiaries must be ascertained - fixed trusts must be distrib in equal shares and no discretion for trustees to choose what goes to beneficiaries so logically how can you distribute equal shares unless know how much beneficiaries there are
fiduciary powers - is or is not test - Re Gulbenkian’s settlements - similar to discretionary trusts, but less strict. The trustee is not under the same obligation to ‘survey the field’ for postulants - evidential certainty the prospective beneficiary could come forward and prove if they are or are not a member of the class then that will be valid for certainty of objects
Discretionary Trusts: Given postulant test - McPhail v Doulton– a person must be determinable as ‘in or out’ of the class
if the trustees can clearly identify if a potential beneficiary (“postulant”) falls within the class or not, the trust is considered valid
Re Baden’s Deed Trusts (No 2) [1973]
examined ‘relatives’ as an object class - CoA held trust was valid but 3 diff approaches
Sachs LJ - postulant simply had to prove they were a member of the class - only need small group of ppl
Megaw LJ - Sufficient if a ‘substantial number’ of beneficiaries was ascertainable
Stamp LJ - Every postulant must be provable as within or outside the class - restrictive - all likely beneficiaries need to come forward and pass evidential certainty standard
Re Barlow’s Will Trusts - ‘Friends and family’ certain so long as evidence of either could be established
R v District Auditor, ex p West Yorkshire Metropolitan CC - A trust for 2.5 million people was ‘hopelessly wide’ and therefore invalid due to administrative unworkability
The Role of the Court in Certainty Issues
court can intervene where trustees fail to act - courts can compel them to and if no trustees courts can appoint new ones
Trustometer’ concept for assessing the reality of a trust: the more powers the settlor retains for themselves, the more likely the trust will be a sham and thus fail - in a perfect trust, legal title and all powers will be transferred as gen intend to part with property
Interpretation principles from contract law apply - Investors Compensation Scheme v West Bromwich - looking at intention to create legal relations, construction etc
Re Tucks Settlement trusts - if there is conceptual uncertainty can admit extrinsic evidence to clarify that then ascertains conceptual certainty for you if court not able to do that
Judicial Interpretation of Certainty Issues
Courts seek to uphold trust intentions where possible (Re Gulbenkian’s Settlements - try to make a trust valid and not fail it
If a term is ambiguous, courts may use contextual interpretation - Re Baden’s Deed Trusts (No 2)
Where uncertainty exists, courts may consider whether trust execution is practical - McPhail v Doulton
Re Last (1958): ‘Whatever is left’ was found sufficiently certain to create a trust (residue of an estate is sufficiently certain). - that was not accounted for in will be residuary estate - MUST be of ENTIRE estate
Ottaway v Norman (1972): A ‘floating trust’ conceptually allowed the subject matter to be determined at the testator’s death.- if not certain to predict what is left of a trust by time someone dies then this is allowed
The Consequences of Uncertainty
certainty of intention is lacking, no trust exists.
If certainty of subject matter or objects is missing:
A court may impute a presumed resulting trust, returning the trust property to the settlor - Vandepitte v Preferred Accident Insurance Corp [1933]).
Gift may fail entirely, or only partially (Re Wright’s Will Trusts [1999]). -
Courts may appoint trustees or administrators to carry out the trust where necessary (Re Hay’s Settlement Trusts [1982]).
