Trusts - 3 Certainties

What is the requisite intention?

To impose or assume the duty which is characteristic of a trust - a duty to hold property for, or apply it for the benefit of a beneficiary.

Does a 'desire' for someone to make provision for someone else show intention?

No - it shows no obligation but a moral one.

How can intention be ascertained?

From words or conduct

What approach do the courts take to determining intention?

Objective approach

Is it relevant whether someone subjectively intended to create a trust or is unaware of the existence of a trust?

No = if they manifest an intention to impose/assume duty characteristic of a trust, they intend to create one.

How is intention ascertained from a written document?

By identifying the meaning of the words used.

What is the meaning of words used ascertained in reference to?

Their natural/ordinary meaning, relevant contextual features of the document , facts known or assumed by the author of the doc when created, common sense.

Is the use of the word 'trust' a conclusive indicator of intention?

No, but its presence is a good indicator. What matters more is the substance

Is the fact a transaction is characterised by the parties as a trust conclusive?

No

Is the fact a transaction is characterised as something other than trust by the parties conclusive?

How is the nature of a relationship/transaction determined?

By reference to the substantive rights & duties it create, not by how it has been characterised.

What is a good evidence of an intention to create a trust?

Segregating funds in a separate account which has been earmarked for a particular person or purpose.

Is segregating/earmarking funds conclusive evidence of intention?

No - it is not necessary for creation or conclusive. Must be considered in context.

What is key to determining intention?

Context

Was there a trust when a bank account was held on trust jointly for the legal owner & his partner when the owner used the words 'this money is as much yours as mine' repeatedly?

Yes - shared contributions (bingo winnings) + joint use of the funds + the holder didn't know the correct terminology to use, this sufficed.

Will someone have intended to create a duty if the duty is vague?

No

A owned land that was let to tenants. K collected rent on her behalf. After A died intestate and before the heir was identified, K continued collecting rent, paid the money into a separate bank account, and told people the money would go to A's heir once identified. Later, K claimed the money for himself. Was there an intention to create a trust, and what indicators did the court rely on?

Yes. K held the money on trust for A's heir - K separated money from his own funds in a distinct bank account., expressly acknowledged the money belonged to A's heir, conduct showed he was acting in a fiduciary capacity, not for personal gain.

What does conduct showing separation and recognition of another's ownership show?

clear intention to hold on trust.:

Certainty of intention can be inferred from words and conduct?

Yes, even in informal domestic situations.

K a business facing financial trouble, was advised to open a separate bank account labelled "Customers' Trust Deposit Account" to hold prepayments for goods, so customers could be refunded if the company failed. The company later went into liquidation. Was there an intention to create a trust, and what evidence showed this?

Yes. Money in account separately designated for customer deposits, purpose of segregation was to protect customer funds from company creditors., directors acted on legal advice to set up the account specifically for customers' benefit.

LB held securities on trust for clients and received payments related to those securities. LB & Client agree that LB had "full ownership" of such payments to use in its business, and clients would be general creditors on liquidation. After LB entered administration and stopped trading, it received $1.8 billion in payments. Was there an intention to create a trust over these post-administration receipts, and what indicated this?

Yes, A trust may be implied from commercial agreements where necessary to protect parties' proprietary interests. Courts infer intention consistent with the purpose of the transaction — here, safeguarding client assets.

M sold cardboard sheets to OB on credit, retaining ownership until payment. The contract said that if OB sold goods made from unpaid sheets, it would hold the sale proceeds "in trust" for M. OB sold such goods before paying M. Was there an intention to create a trust, and what indicated this?

No. There was no true trust — only a charge securing payment to M. Arrangement was commercially inconsistent with a trust, OB was free to use and sell goods in its business, relationship was one of debtor and creditor, not trustee and beneficiary. The label "trust" in a commercial contract is not conclusive.

What are the two requirements for certainty of subject matter?

- Must be able to identify trust property

- must be able to ascertain the beneficiaries' interest in the trust property.

When is trust property easily identified?

When a trust is created by transferring assets to a trustee - it is the assets which are transferred.

What is the general rule when trust property is identified by description?

It will fail for uncertainty if it is not possible to ascertain the property from the description

Give examples of vague description words?

The 'bulk' of my estate, of the 'net assets'

Is it possible to create a trust over some items from a larger quantity of similar (or identical) items without identifying the specific items which are to be held on trust

Is a trust of fractional interests of a wider mass sufficiently certain?

Yes - providing the wider mass has been clearly identified

Give an example of a sufficiently certain fractional interest?

20% of settlors 100 ordinary shares in a company.

Is a trust of a specific number of items from a larger mass sufficiently certain?

No - more difficulty

What are tangible assets?

Physical assets e.g. cash, diamonds

What are intangible assets?

Assets that do not exist in physical form e.g. shares, IP rights, debts

What are fungible assets?

Identifiable & readily exchangeable assets e.g. shares

What are non-fungible assets?

Assets which are not interchangeable - distinguishable, may not have the same value.

Can a trust of a specific number of items of fungible & intangible assets from a larger mass be sufficiently certain?

Yes, as long as the larger mass is clearly identified & the bulk comprises of identical assets.

Can a trust of a specific number of items of non-fungible & tangible assets from a larger mass be sufficiently certain?

Not as they are not exactly interchangeable, can be if the property is segregated, earmarked or otherwise specifically described/designated.

Can a trust of a specific number of items of fungible & tangible assets from a larger mass/bulk be sufficiently certain?

Not without identifying them

Is a trust of 20 out of 100 bottles of wine all of the same vintage wine sufficiently certain?

No - although they appear identical, the contents may be different - some may be corked.

Is a trust of 1 out of 5 1kg bars of gold sufficiently certain?

No - the specific bars must be identified.

Is a trust of 1 of 5 one-carat diamonds sufficiently certain?

No these are non-fungible tangible assets and will differ slightly - each diamond is unique in terms of cut., clarity etc.

This affects their value and so they must be specifically identified.

What is the beneficial entitlement requirement?

It must be possible to ascertain the nature & extent of the beneficiaries interest in that trust property.

What happens where a trustees hold on trust 2 cars for A & B, with power to C to determine which car should be held for A and which for B, but C dies before making their selection?

The trust fails as it is not possible to ascertain which beneficiary is entitled to which car.

When can a trust fail for uncertainty?

Both when it is declared and subsequently

Is a trust in which the trustees hold a sum of money on trust out of which they are directed to pay a 'reasonable income' to a beneficiary sufficiently certain?

YES!!! 'reasonable income' held to be an objective yardstick.

For which kind of assets can you find certainty of subject when there is a specified number of them within a larger bulk without identifying the specific assets?

Intangible, fungible assets.

A wine merchant sold bottles of wine to customers and promised to store them until delivery was requested.

Customers were issued "certificates of title" stating they were the sole and beneficial owners of their purchased wine.

However, the company never set aside or identified specific bottles for each buyer — all wine remained in the general stock.

Was there sufficient certainty of subject matter to establish a trust over the wine, why?

No - the specific bottles of wine were not identifiable. Company did not segregate/earmark any bottles, wine remained part of a general bulk, certificates of title could not cure the lack of identification of actual goods.

GE sold gold bullion to customers and promised to keep it in storage for them. The company failed to allocate particular gold bars to individual buyers.

When it went into receivership, customers claimed that the bullion was held on trust for them.

Was there certainty of subject matter, and what did the court decide?

No, because the specific gold bullion had never been segregated or identified for each purchaser. Without segregation, customers cannot claim a proprietary interest — they are merely unsecured creditors.

D owned 950 ordinary shares in a company and declared himself trustee of 50 of those shares for the plaintiff.

However, he did not specify which 50.

Given all 950 shares were of the same class and carried identical rights, was there sufficient certainty of subject matter, and on what basis?

Yes.

All 950 shares were intangible and identical in nature — each share had the same rights and value, no practical difference between one share and another.

What is the rule for Tangible property of a trust, even if identical?

It must be specifically identified

LB held securities and related funds for clients and, as part of its operations, often pooled or mixed client property. How did courts interpret the issue of certainty of subject matter, and what new approach was proposed?

Certainty existed - A trust over part of a homogeneous mass of identical items may operate as a trust of a fractional interest in the entire mass.

What is the rule for a fixed trust with one beneficiary?

The trust will be valid if there is certainty as to who the settlor intended to benefit.

What is the rule for a fixed trust with multiple beneficiaries?

If there is uncertainty as to the identity of ONE or more beneficiaries the trust will fail in part.

If beneficiary interests are dependant on each other, the trust will fail.

If the identifiable beneficiaries interests are independent of the entitlement of the uncertain beneficiaries, they can still take their interest.

Is there sufficient certainty in a trust to the settlor's wife for life, remainder to their 'favourite daughter'?

No - but the lack of certainty of ID of remainderman will not prevent the wife's life interest taking effect.

What is the test for certainty of object for a fixed trust?

The complete list test - must be possible to draw up a complete list of all beneficiaries and how much they are to receive.

What kinds of certainty does a class of beneficiaries for a fixed trust require?

Conceptual & evidential certainty

What is conceptual certainty?

Linguistic certainty - the precision of language used by the settlor to define the class of beneficiaries.

What is evidential certainty?

The extent to which the evidence in a particular case enables the trustees to identify the objects of the trust

What is the test for certainty of object for a discretionary trust?

Is/is not test, with clear conceptual certainty of the definition of the class of objects - who IS/ can be objects of the trust.

Give examples of classes of objects which pass the is/is not test?

Employees - legal meaning, conceptually certain

Children - legal meaning, is conceptually certain

What is the test for evidential certainty of the objects of a discretionary trust?

It is for the claimant to prove to the trustees' satisfaction that they are within the class. If they cannot prove that they are in the class, they are considered to be outside it.

Does a trust fail if a person claims to be an object but cannot prove it?

No - they are just treated as being outside the class.

When might a discretionary trust fail for lack of certainty of objects?

When the class of objects is too wide so that the trust is administratively unworkable.

Give an example of a class of objects deemed too wide & administratively unworkable?

All the residents of Greater London, the inhabitants of West Yorkshire

What is the likely result of the absence of all 3 certainties of trust?

A resulting trust for the settlor - unless they can show they intended a gift.

What is the result of uncertainty of a lifetime gift is the legal title was not transferred?

No change in beneficial ownership either

What is the result of uncertainty of a lifetime gift is the legal title was transferred?

No intention = resulting trust

Intention but no subject matter or object = automatic resulting trust

What is the result of absence of all 3 certainties of trust in a will?

It will create a gift

What is the result of uncertainty of subject matter or object of a trust in a will?

Trust fails & will become part of the residuary estate.