3 certainties

paul v constance

Certainity of Intent

FACTS: A man held bingo winnings in a bank account solely in his name. He repeatedly told his partner the money was 'as much yours as mine.' He had no knowledge of the legal concept of a trust.

HOLDING: Valid declaration of trust in the partner's favour. The words, considered cumulatively in context, were sufficient — even though the settlor did not know what a trust was.

PRINCIPLE: A trust may be created even where the settlor does not know what a trust is. Technical language is not required — the test is whether words and conduct, assessed objectively, indicate a serious intention to create the legal relationship recognised as a trust

re goldcorp exchange

certainity of subject matter

FACTS Purchasers of gold bullion paid in full but did not take delivery before the company's insolvency. Most buyers' bullion had not been segregated from general stock. A small group had segregated bullion

HELD: Privy Council: no trust for non-segregated purchasers — no identifiable property to which a trust could attach; they were unsecured creditors. Proprietary rights recognised only for the segregated group

PRINCIPLE: A trust of tangible chattels requires the specific property to be segregated and identifiable. Goods forming part of an unappropriated bulk cannot be the subject matter of a trust.

Contrast Hunter v Moss: for intangible/fungible property (e.g. shares of the same class), segregation is not required as each unit is legally identical.

hunter v moss

certainity of subject matter

facts: settlor owned sgares in a compny → set portion of the shares on trust (identical) → did not segregate these shares

held: trust is valid. shares are identical and fungible. The portion is NOT a diff kind of share and hence, segregation is not req

principle: fungible/tangible assets do not require sep like physical propert (refer re london wine); if assets in bulk are identical—no need to segregate for a valid trust

mcphail v doulton

certainity of object

facts: trust established for employees; ex employees of a company and their relatives/dependants with trustees having absolute discretion of the distribution. Complete list of beneficiaries could not be drawn up

held: test for certainity of objects is- can it be said w certainity that this member is or is not a member of this class

principle:

1. CoT for fixed trusts: complete list (all beneficiaries must be ascertainable);

2. discretionary trusts: is/is not test

re baden’s deed trusts (no 2)

certainity of object

facts: applying the is/is not test

held: relatives & dependants are sufficiently certain

principle: Conceptual certainty = the description is clear enough to apply. Evidential certainty = it may be hard in practice to prove. Only the former is required. Three approaches to proof: Sachs LJ — claimant proves inclusion (failure to prove = exclusion). Megaw LJ — satisfied if a substantial number clearly fall within the class. Stamp LJ (minority) — must be possible to say positively of any person that they are in or out

english v keats

certainity of intent

facts: Six deeds of appointment each required all four trustees to sign. Due to confusion between settlor/trustee roles, each deed was only signed by three. June (a trustee and mother of the claimants) died without rectifying her failure to sign deeds 4–6.

held: equity would remedy the defective execution: there was genuine intention to exercise the power, an attempted execution by three trustees, and only a formal (not substantive) defect. The claimants were June's children

principle: Equity distinguishes defective execution from non-execution and will remedy the former.

Conditions:

(1) intention to exercise the power;

(2) attempted execution;

(3) formal defect only;

(4) proper exercise (not breach of trust/fraud);

(5) claimant is a purchaser for value

re hay’s settlement trusts

certainity of objects

facts: The case concerned the exercise of a wide discretionary power of appointment. The question was what duties trustees were under when deciding whether and how to exercise the power

held: trustees exercising a power must (1) survey the field — consider what persons/classes are objects; (2) appreciate the width — form a view of whether selection is from dozens or millions; (3) only then consider individual grants relative to other possible claimants. A complete list is not required

principle: trustees of a discretionary power must 'survey the field' — form an appreciation of the size and nature of the class — before making individual selections. They need not, and cannot, consider every possible object individually.

OT computers v first national tricity finance

facts:

held:

principle:

north v wilkinson

certainity of intent

facts: The Court of Appeal considered how the three certainties relate to one another, and what follows once a trust is validly created.

held: three certainties can affect and cast doubt on one another — uncertainty in subject matter can have a 'reflex action' on whether intention existed at all. The certainties are not assessed in isolation. Once a valid trust is created it is irrevocable and the trustee is subject to onerous duties.

principle: The certainties are not assessed in isolation. Once a valid trust is created it is irrevocable and the trustee is subject to onerous duties.

mills v sportsdirect.com

inferring intent through conduct—certainity of intent

principle: if one can hold an asset in a segregated client account and there is an understanding between parties that the asset is secure, the necessary obligation may be present to create a trust.

knight v knight

facts: what is required for a valid trust?

principle: For a trust to be valid, three things must be certain: (1) intention to create a trust, (2) subject matter, and (3) objects (beneficiaries)

midland bank v wyatt

certainity of intent

facts: A husband and wife executed a declaration of trust over the family home in 1987. The document was kept in a safe; they continued to mortgage the property as absolute owners. The husband only produced the document when his business failed

held: Sham trust. The husband had 'kept it up his sleeve for a rainy day' to defeat future creditors. He had not genuinely intended the declaration to have any effect

principle: The intention to create a trust must be genuine. A trust entered into for an ulterior motive (e.g. defeating creditors) and never acted upon is a sham and will not be recognised. Key limits: (i) No fraud needed — mistaken advice suffices. (ii) No sham unless trustees also shared the intention (iii) A genuine trust cannot later become a sham. (iv) A sham may become genuine if new trustees exercise powers bona fide

don king productions v warren

certainity of intent

facts: Two parties entered a partnership over personal, non-assignable boxing promotion contracts. No trust language was used and neither party intended or knew they were creating a trust

held: A trust was found. The arrangement would only function legally if one party held the benefit of the contracts on trust for the partnership — that was the only way to make it work

principle: Trusts can be created even if the parties did not know they were creating one. If the arrangements the parties intended to enter into would only work if a trust existed, equity will recognise a trust regardless of the absence of trust language or subjective intention

boyce v boyce

certainity of subject matter

facts: A testator gave one beneficiary power to select which properties she would take; whatever she did not select would pass to other named beneficiaries. She died before making any selection

held: The remainder gift failed for uncertainty of subject matter. It was impossible to ascertain what property the remainder beneficiaries were to receive. The property was held on resulting trust for the testator's estate

principle: Where the subject matter depends on a choice to be made by a beneficiary who dies without choosing, the beneficial interests are unascertainable and the gift fails. Property results back to the settlor/estate

re golay’s wills trusts

certainity of subject matter

facts: A testator directed executors to allow a beneficiary to enjoy one of his flats (executors to select which) and to receive 'a reasonable income' from his other properties

held: The gift was upheld. 'Reasonable income' was not purely subjective — it provided a sufficient objective determinant to allow the court to quantify the amount if necessary

principle: Exception to the general rule: where subject matter is to be determined by a trustee/executor, apparent uncertainty can be saved if an objective external standard exists by which the court can assess the amount. 'Reasonable income' meets this threshold; purely subjective formulations (e.g. 'such part as she shall not have sold') do not.

re barlow’s will trusts

certainity of objects

facts: A testatrix left a collection of paintings directing that 'any friends of mine who may wish to do so' should be allowed to purchase at below market value before any general sale

held: Disposition sufficiently certain. Total ascertainment of all friends was not required — any claimant who could prove on a reasonable test that they were a 'friend' could purchase. A 'friend' = long-standing, social (not business) relationship, meeting frequently when circumstances permitted.

principle: Less strict test applies to gifts subject to a condition precedent (as opposed to discretionary trusts or powers): the gift is valid if it is possible to say that one or more persons qualify, even though there may be difficulty as to others (Re Allen). A discretionary trust for "friends" would be void.

r v district auditor ex p west yorkshire metropoliton

certainity of objects

facts: A local authority resolved to set up a trust 'for the benefit of any or all of the inhabitants of the County of West Yorkshire' — approximately 2,500,000 people. 'Inhabitant' was assumed to be conceptually certain.

held: Trust void for administrative unworkability. The class was far too large for the trust to be sensibly administered, applying Lord Wilberforce's dictum in McPhail v Doulton

principle: A discretionary trust for a class so wide that it cannot sensibly be administered is void for administrative unworkability, even if the description is conceptually certain

re tuck’s settlement trusts

certainity of objects

facts: A trust for Jewish male beneficiaries required them to marry an 'approved wife' (Jewish faith). The settlor gave the Chief Rabbi power to determine who qualified as an 'approved wife' in case of dispute

held: Trust valid. The Chief Rabbi's determination would stand provided it was not unreasonable or made in bad faith

principle: Conceptual uncertainty can in some cases be cured by giving a third party (or the trustees) power to resolve the uncertain term, provided: (i) the settlor has sufficiently defined the state of affairs on which the third party must form their opinion; (ii) the third party defines the term (adopts their own meaning) rather than merely interprets what the settlor meant

OT Computers Ltd v First National Tricity Finance Ltd [2007] WTLR 165

certainity of object

a trust for "urgent suppliers" of a struggling company failed because "urgent" was not defined — it was impossible to draw up a complete list of who qualified.