Equity & Trusts: The Three Certainties - created from Mind Map

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Certainty of Object

Certainty of Subject Matter

Certainty of Intention

'Objects' means beneficiaries

Fixed trusts

Discretionary trusts

Gift with a condition precedent

Lack of certainty of objects creates a resulting trust of the property back to settlor

E.g. £10,000 to be divided equally between my two nephews, Joe and Bill.

When the settlor specifies the shares of the beneficiaries.

E.g. My residuary estate on trust for my wife during her lifetime and then to my children in equal shares.

Rule for CoB: the list principle/class ascertainability test

Called a successive interest fixed trust.

Must be possible to draw up a complete list of all beneficiaries.

Conceptual certainty

Evidential certainty

No linguistic or semantic ambiguity

E.g. 'my friends', 'useful employees', 'good customers' aren't conceptually certain

Not capable of different interpretations

Should be possible to prove who the beneficiaries are.

E.g. £10,000 on trust for such of my siblings in such shares as my trustees shall decide

Old rule was the same as that for fixed trusts

New test introduced in 1970s

Don't have to give something to every beneficiary

List/ascertainability test

IRC v Broadway Cottages Trust

McPhail v Doulton

House of Lords

Appropriate test is the 'Is or is not test' or 'individual ascertainability test'.

Must be able to say with certainty whether an individual is or is not in the class

Test for certainty of objects for Powers

Re Baden No.1

Re Gestetner

Lord Wilberforce: Conceptual certainty is most important factor

Re Baden No.2

Administrative unworkability

Sachs LJ agreed with Lord Wilberforce about conceptual certainty

When class of possible beneficiaries is too large for trustees to adequately survey and select from it

Trust will fail

R v District Auditor ex parte West Yorkshire MC

E.g. '£100 to each of my nephews with a NUFC season ticket'

Viewed as a series of gifts rather than a trust.

Re Barlow

Correct test is 'one person test'

Class description must be sufficiently clear so it is possible to identify at least one person who falls within the class

Re Tuck is another example of the application of this test

Property subject to the trust must be clearly defined

Beneficial interests in the property must be ascertainable and clear

Effect of uncertainty of Subject Matter

Description used to identify property must be clear and unambiguous

Shouldn't be subjective

Remainder provisions

Trusts over unallocated assets

Only means something to the settlor

Re Kolb's WT

Re Golay

'reasonable income' is sufficiently certain

E.g. A gift to A, and anything that is left to B'

Palmer v Simmonds

E.g. To A for life, remainder to B'

'The bulk' is too uncertain to create a trust

Resulted in an absolute gift to the husband

Not clear which part should be passed on

Known as a 'successive interest trust'

If drafted correctly this will create a trust

In the Estate of Last

Rule: subject matter must be segregated from general stock

Tangible Property

Intangible property

Re London Wine Company

Re Goldcorp

No trust, wine not segregated

Hunter v Moss

Involved shares in a limited company

Intangible property need not be specified as long as all items are identical

'In equal shares'

'In such shares as the trustees will decide'

Problems caused by other methods of ascertainment

Valid

Fixed trust

Valid

Discretionary trust

Boyce v Boyce

One sister had to choose which property she wanted but died before she could do this.

Gift failed as court could not make the decision for her.

Contrast with Re Knapton

Right of selection followed order beneficiaries were named in the will

Court applied a practical solution

Property would fall into residuary estate of testator OR

Property would be an absolute gift to first person named in clause OR

Property may never leave the settlors estate.

Courts scrutinise the words used

Intention must be genuine

Orally or verbally

Word 'trust' need not be used

Clear, unambiguous language showing a trust is intended

Paul v Constance

Equity looks at substance rather than form

Contrast with Jones v Lock

'The money is as much yours as mine'

Milroy v Lord

'Loose conversations of this sort' didn't constitute intention.

Case concerning cheque for a baby

Failed transfer to third party trustees

Precatory words are not sufficient

Increase in cases in a commercial context

Lambe v Eames

E.g. I hope, I wish, I desire

Re Adams v Kensington Vestry

Comiskey v Bowring Hanbury

'In full confidence'

Held: Did not demonstrate intention

'In full confidence' were the words used

Provision went on to give additional instructions

Held: A trust was intended

Known as a 'gift over in default'

Re Kayford

Freeman v Commissioners for Customs and Excise

Mail order company in financial difficulty

Placed customer money deposits in 'The customers trust deposit account'

Held: Express trust created

Restriction placed on how money is used

Express trust created in favour of transferor

Midland Bank v Wyatt

Sham trusts not acknowledged by courts