Express Trusts and Three Certainties

What is a trust?

Re Scott [1948] SASR 193 at 196 - “trust” refers to the duty or aggregate accumulation of obligations that rest upon a person described as a trustee

What does it involve?

The legal interest and the equitable (beneficial) interest in a property. Settlor/Testator transfers property to a trustee or may self-declare as trustee, holding propert on trust for the benefit of the beneficiaries.

Can a settlor’s intention to create a trust be inferred from facts?

Yes, following Paul v Constance [1977] 1 All ER 195

Is consent required to be a trustee?

Yes, a trustee must provide consent to act as a trustee. However, the court my give effect to the trust following the equitable maxim that ‘Equity will not allow a trust to fail for want of a trustee’.

Can beneficiaries enforce the trust?

Yes, beneficiaries can bring action to endorce the trust or seek redress for mismanagement. If they are above 18 and legally competent (sui juris), then they require that the legal title be transferred to them.

Fixed trust

Trustees have no discretion as to who will benefit or how they will benefit. Example: A leaves farm to N on trust for his widow for life, and then on trust for his children in equal shares. Interests are fixed and certain from the beginning.

Discretionary Trust

Settlor creates a class of potential beneficiaries and ives the trustees discretion to decide who within the class benefits and in what shares. No individual beneficiary owns a specific share until the trustee exercises their discretion.

Discretionary Trust Example

A leaves £100,00 on trust to C and D ‘for the benefit of her children in such shares as the trustees, in their discretion, may decide.'

Resulting Trust

A trust that arises automatically out of an operation of law. For example, A transfers property to B without consideration and no intention of a gift.

Constructive Trust

A trust imposed by the court to reflect the parties’ conduct and achieve justice, often regardless of intention. Key case: Lloys Bank v Rosset [1991]

Public Trust

Created for the benefit of the public, such as a charitable trust.

Private Trust

Serve private purposes, usually familial or commercial.

What are the three certainties?

Certainty of intention, object and subject.

What is the leading authority on the three certainties?

Knight v Knight (1840), then appealed to Knight v Boughton (1844)

Certainty of Intention

True intention to create the trust, language must be clear and mandatory, not merely placatory. Whether arising by will or inter vivis, if there is no certainty of intention, there is simply no express trust.

Precatory Trust

Upheld language such as ‘desire’ ‘request’ and ‘in full confidence’ in the 19th century, through case such as Palmer v Simmonds (1854). But this was later rejected in Lambe v Eames (1871), which stated that it should be treated more as a gift not a trust.

Certainty of Subject Matter

Must be clear what property is held on trust. However, the case law is not entirely clear on the limits - see the comparison between Sprange v Barnard (1789), Re Last’s Estate [1958].

Issue of Certainty with Subject

Re London Wine Co (Shippers) Ltd [1986] - without segregation of product, there was no certainty as to which bottles of wine were held on trust. Must clearly indicate the subject.

Can an uncertain obligation be attached to a gift?

If the uncertain obligation is attached to a valid absolute gift, then the gift can stand even if the trust fails.

Certainty of Objects

Have to be able to identify the beneficiary. Difference for fixed and discretionary trusts.

Certainty of Object in a Fixed Trust

IRC v Broadway Cottages Trust [1955] - established the complete list test. Beneficiaries must be ascertainable, for example ‘to all of my first cousins’ - able to identify the group.

Certainty of Object in Discretionary Trust

Mcphail v Doulton [1971] established the ‘an given postulant’ test. Not necessary to list every beneficiary, but must be possible to say with certainty whether they are or are not in the identified class.

Administrative Workability

R v District Auditor, ex parte West Yorkshire MCC [1986] - even if thr group is conceptually certain, trust can fail if the class of persons is so large that it is impossible to carry out.

What happens if an express trust is not certain?

The trust fails. The trustees then hold the legal title on an automatic resulting trust for the settlor.

Other reasons a trust might fail?

If the trust is pointless (Brown v Burdett (1882)), if the trust is considered a ‘sheer waste of money’ (M’Caig v University of Glasgow (1907)) - how much sould the court interfere with the wishes of settlors?

What is a power?

An authority given to a donee to appoint property among potential beneficaries, but not compelled to.

What is a gift?

An outright transfer to a person, with no obligations or discretions.

Difference between a power and a gift

‘If A wishes, she may distribute some of the income to my daughter B’ = power

‘£700 to my neighbour C’ = gift