The creation of trusts - Certainty Flashcards
(30 cards)
What is required in order to make a valid trust? Knight v Knight (1840)
3 principles:
- Certainty of Intention
- Certainty of Subject Matter
- Certainty of Object/Beneficiaries
What is meant by certainty of intention?
This looks at whether the settlor has used such words as to clearly show that he intended to impose a trust obligation on the purpose trustees that can be enforced by the courts of equity
How do you prove certainty of intention? And what equitable maxim is this based upon?
‘Equity looks to intent rather than form’ - Maxim
You do not need to use the word trust. Words used must be imperative, ‘I direct that’, ‘I instruct that’ ‘require that’ as they clearly impose an obligation.
Can trusts also be construed from actions as opposed to just words? What cases demonstrate this?
Yes they can -
Paul v Constance [1977] - Declaring from time to time that the money in an account ‘is as much as yours as mine’ plus circumstances is sufficient
Midland Bank Plc v Wyatt [1995] - a husband and a wife entered into a deed of trust in relation to their property in order to defeat husband’s creditors
Why can problems arise when establishing certainty of intention through the use of precatory words? (what are precatory words)
Precatory words are words of hope and desire - ‘hoping that’, ‘wishing that’, ‘believing that’ ‘in full confidence that’. These words are deemed as an expression, what the settlor hopes the purported trustees will do with the property not what the trustees have to do.
What is the history related to precatory words and what is the position now?
Histroically, precatory words were accepted as demonstrated in Harding v Glyn (1739) - if executors could not dispose of all the testators property then they would keep it for themselves - court would bend over backwards to now allow this.
Now - Lambe v Eames 1871 - Where there are precatory words, there is prima facie assumption that such words DO NOT create a valid trust. Testator gave his estate to his widow to ‘be at her disposal in any way she may think best for the benefit of herself and the family’ - those words imposed no trust on the widow in favour of the family. The widow took the gift absolutely
What is the contrast between Adams & Kensington Vestry 1884 with Comiskey v Bowring-Hanbury 1905?
(Precatory words)
Adams - the words ‘in full confidence’ did not create a valid trust.
Comiskey - a gift to wife ‘in full confidence’ that she would use the gift as the testator would have done and at her death it to be devised to the testators nieces in shares as the wife saw fit was a gift held to be certain. This is because there was a gift over in default so the testator intended the property to go to the nieces and not the wife beneficially.
What is the modern test?
Re Hamilton 1895 - Consider each case on independent facts, if you think no trust was intended you say so even if previous judges have said a trust was intended on similar facts. Case by facts/scenario situation
Re Steele’s WT 1948 - Doubted Re Hamilton - Construe each disposition on its individual merits. You should look and see if that facts are similar as previous cases and go along with the previous decision unless it was clearly incorrect - case takes a mechanical approach to determining certainty and takes no account that meanings of words change over time. (Considered judicial precedent)
What if there is no certainty of intention?
There will be no trust and the gift will be taken absolutely or if no gift is construed the property will remain in the settlor/testators estate
What is meant by certainty of subject matter?
This refers to what property is being given - the gift in question.
Certainty of subject matter case examples -
Palmer v Simmonds (1854)
Sprange v Bernard (1789)
Re Golay’s Will trusts [1965]
Palmer - ‘‘the bulk of my residuary property’ failed for uncertainty as you cannot ascertain what bulk is
Sprange - ‘the remaining part of what is left’ - failed for uncertainty
Re Golay’s Will trusts - A trust to pay a ‘reasonable income’ would not fail as a reasonable income was something which the court could quantify - objective standard.
What if there is certainty of the subject matter of the trust but not the beneficial share?
Unless the trustee have a discretion to determine the amounts, the trust will fail and the property will be held on resulting trust for the settlor
What was held in Boyce v Boyce 1849?
Testator left four properties to his wife for life and then after her death one property to Marie (whichever she should choose) and then remaining three to Charlotte. Marie died before the testator, the trust failed for uncertainty as without Marie making her choice, you could not say for certain which 3 Charlotte would receive.
What is the issue with unascertained property and sale of goods?
Purchasers have paid for good but not taken delivery and seller has gone into insolvency - trusts are attempted to be established, however, where the purchasers of goods had not been segregated from the mass these claims failed. There cannot be a trust of unidentifiable chattels.
What was held in Re London Wine 1986 and Re Goldcorp Exchange [1995]?
If the trust property is chattels it must be segregated from the mass as all chattels are not identical. This case concerned whether a trust for a number of wine bottles would satisfy certainty of subject matter. This was NOT CERTAIN as the chattels were not all the same.
Re Goldcorp - Confirmed the view in Re London. Purchasers of bullion had paid but not taken delivery and attempted to ascertain rights due to insolvency of the company. These claims were rejected save for a group of customers whose bullion had been segregated
What was held in Re Clifford [1972]?
The rule regarding segregation does not apply to testamentary trusts
What is the rule of property rights under Sale of Goods Amendment Act 1995?
If you have paid for unascertained goods you have property rights in them regardless of segregation
Does the chattels rule apply to money, shares, and other choses in action?
No - there is no difference between them
What happened in Hunter v Moss 1994 and MacJordan Construction Ltd v Brookmount Erostin Ltd [1992]?
Hunter - a settlor declared a trust of 5% of shares in a company which was upheld by the CA. Distinguished London Wine, the wine bottles were chattels whereas in this case the shares were of the same class within the same company
MacJordan - There was no identifiable subject matter - Settlor attempted to to create a trust of money but the source of the money was not identifiable - later confirmed in Re Goldcorp, encouraged many to believe Hunter was incorrect
What if there is no certainty of subject matter?
- Gift to donee absolutely - (Rule in Hancock v Watson) - If there had been an absolute gift initially to a donee which was then to be a subject to a trust, if the trust fails the property is taken beneficially by the original donee. In Palmer v Simmonds, where the bulk could not be ascertained, the original donee get the lot.
- Resulting trust for settlor - In circumstances other than those stated above, the gift goes back and is held on resulting trust for the settlor
What is meant by certainty of objects?
Can we ascertain whom the beneficiaries are to the trust
Different tests apply to different forms of property
What is the test for certainty of objects for fixed trusts?
Beneficiary automatically has an equitable interest
The test is - Complete List test - You must be able to ascertain every beneficiary or the trust will be void (Morice v Bishop of Durham 1804). Does not matter of the whereabouts for the beneficiaries as their share can be paid in courts
What is the test for certainty of objects for mere powers?
There is a power of appointment impose don a trustee but no duty to distribute. The Is or Is Not Test - Re Gestetners - If there be no duty to distribute but only to consider, there is no difficulty in ascertaining whether any given postulant is a member of the specified class.
HOL followed this case ^ in Re Gulbenkian’s Settlement 1970 - The test requires that you can say with certainty whether any individual is or is not a member of the class of potential objects
What is the test for certainty of objects for discretionary trusts?
The trustees are given a discretion to select who should benefit out of a specified class. They MUST distribute, not optional.
Prior to 1971 - the trust was the same as ford fixed trusts - IRC v Broadway Cottages 1955: Complete List test for three reasons:
- Trustee is under a duty to consider all beneficiaries before making a distribution
- If the trustee didnt make a distribution then the court would do so in its place, The distribution would have to be equal and so the court needed to know who all the beneficiaries were
- The rule in Saunders v Vautier that when there is a trust power the beneficiaries can demand the trust property
Through applying this test - many discretionary trusts failed as it was impossible to draw a complete list of all beneficiaries. Therefore, the test for certainty of objects with powers was less rigid, so the courts pretended discretionary trusts were mere powers.
