The Three Certainties

Lord Langdale in Knight v Knight: there needs to be three certainties; language construes to show intent, identity of persons to benefiting and property of the trust.
Courts used to take a strict approach to interpreting certainty. Now follow Lord Wilberforce in McPhail v Doulton:settlor's intention to create a trust should be upheld where possible, where there is "sufficient practical certainty" in definition to be carried out.
1. Certainty of Intention
1. Moffat: "The hallmark of an express trust if the existence of an intention to crate a binding trust obligation."
  1. General Points: 1. Capacity (voidable if minor, void if mentally incapable) 2. It is construed from the trust document, and equity looks to the intent not the form. The aim is to uphold the trust. 3.Intent is shown by the intent for one to hold the property for the benefit of another so that they are under an obligation.
    1. It is Interpreted Objectively: from the perspective of a reasonable person. This means courts can infer intent from the document, th circumstances of the case and the conduct of the parties.
      1. Paul v Constance: the settlor doesn't have to know that a trust is what they are creating
      2. This is from Twinsectra v Yardley
      3. Precatory v Obligatory wording: Wording needs to show intent to impose an obligation, not a request not a moral obligation.
        Town Investments v Dept of Environment: the use of the word 'trust' does not automatically indicate a trust.This means the substance of the agreement is looked at.
        Re Diggles: "Desire"
        Re Hamilton "Wish"
        Mussorie Bnak v Raynor: "Confident"
        Re Adams & Kensington Vestry: "in full confidence" not sufficient because of the wording and because the context of the document showed there was no intention to create a trust.
        Re Comiskey: Suffienct intention to create a trust because it sid in full confidence and "I thereby direct" which shows obligatory wording. Moreover, the context of the document showed there was intent to create a binding obligation because if the wife dint distribute there would be equal distribution.
      4. Re Gulbenkian: Where there is ambiguity the court will exercise judicial knowledge, common sense and a desire to make sense of the settlor's intention in the best way.
        Self declaration can be particularly ambiguous: See Jones v Lock
        Lord Cranworth" Loose conversations" cannot be construed to create a proprietary interest.
        Paul v Constance: evidence supported a self-declaration of trust.
    2. Trust cannot be a sham: where purported intention is false.
2. No certainty of intention means the trust is invalid. If property has already been transferred then it is taken to be a gift absolutely
2. Certainty of Subject Matter
1. The subject matter of the trust needs to be identified with suffienct clarity.Bequests of "remaining parts", "bulk of" and "minimal part of estate to live off" are not certain.
  1. This is unless the court can determine criteria by which to determine the meaning of the words.
    1. Re Last: "anything that is left" and Re Golay's WT "reasonable income" was sufficient because the court could determine a way to identify what was meant.
2. The property itself needs to be identified with sufficient clarity. This can be difficult where it is part of a bulk
  1. See Re Goldcorp [1996]: only specific gold held on trust for specific customers was valid. The rest wasn't identified with certainty.
    1. The outcome would be different now fooling Sale of Goods Act 1995
  2. Hunter v Moss [1994]
    1. Where shares are identified in a will it will be valid because executors can resolve uncertainty.
    2. Certainty will depend on the nature of the property: specific certainty is needed if they can vary in quality and value
      1. Re London Wine [1986]
    3. Suggests intangible goods are more likely to enable a trust subject matter to be certain, because they are less likely to vary in value and quality (so long as the specific share value and fund is identified)
      1. Suggests all intangible property of the same type is the same, which is not necessarily true. For example in recovery of property, how do we distinguish ownership?
      2. A better analysis of bequests of shares is that B becomes a co-owner of a single indivisible set of shares. This fits with the analysis of trusts that B becomes beneficial owner of part of it. Also benefits B because any shortfall in the shares will be borne by all in proportion, so they won't be worse off.
        Affirmed in Pearson v Lehman Brohers Finance [2010]
3. Boyce v Boyce:Proportion of Beneficiary's share in the subject matter needs to be certain, unless there is a way to resolve uncertainty.
  1. discretionary trust
  2. "equity is equality"
  3. If this is uncertain and property has been transferred then it will be held on resulting trust for the settlor because there is no intention to make a gift.
4. Future certainty is permissible if the trust instrument identifies the subject matter of the future
5. If there is no certainty, there is nothing for trust to attach to. If property has been transferred it is gifted absolutely.
3. Certainty of Object
1. Needs to be certain so T or the court can carry out the trust according to S's wishes. If not resent the trust will be void.
2. Fixed Trust
  1. The proportion of each beneficiary's share is to be identified int he trust document.
  2. IRC v Broadway Cottages: The Complete List Test: it must be possible to identify who all the beneficiaries are at the time the trust is being distributed.
    1. Ascertainablity: will not defeat the trust. If one B cannot be found a Benjamin order can be used to pay their share into the court.
    2. Conceptual certainty is needed
      1. This can be names individuals, a class or a purpose (in a purpose trust)
      2. "friend" is not conceptually certain
    3. Evidential certainty is needed
    4. The size of the class and the capriciousness of the trust is not really relevant because the complete list test ensures it is sufficiently certain and administratively workable.
3. Fixed Trusts Subject to a Condition
  1. Trustees are obliged to distribute the property subject to a condition being satisfied.
  2. The condition must be conceptually certain
    1. For conditions precedent, it is certain if at least one person can be said to satisfy it.
      1. Re Barlow's WT: condition precedent was tha friends could purchase pictures from her estate for a lower price. Although friends is usually uncertain, at least one person could be said to fit the class.
      2. More lenient because trustees are not expected to survey the class of a fixed trust, and it is a threshold requirement to establish B is entitled to the trust.
      3. Lord Denning in Re Tuck's ST: Uncertainty will not render condition void
    2. For condition subsequent the test is stricter: it will only be valid if it can be said with certainty at the start of the event what is it.
      1. Clayton v Ramsden: "a person not of the Jewish faith" Uncertain
      2. Re Jones "a social or any other relationship with X" Uncertain, despite the trustees having authority to decide.
      3. Stricter because it is not a threshold requirement but a mechanism for removed an already established interest.
        Lack of certainty would render condition subsequent void.
      4. It is becoming less strict. Re Tepper's WT a person outside the Jewish faith was conceptually certain because Scott J had regard to extrinsic evidence to clarify uncertainty.
  3. It is the burden of the object to prove they are an object by fulfilling the condition.
    1. So size doesn't matter
    2. If no object is ascertainable it will lapse and pass too residue.
4. Discretionary Trust
  1. Trustees are given discretion about which objects and in what proportion. The test for certianty used t be the complete list test, but Lord Denning in Re Gulbenkian inn obiter said it shouldn't apply.
    1. McPhail v Doulton said neither the complete list test nor equity is equity may apply. The any given postulant test is the test used.
      1. McPhail v Doulton: trust for employees and ex-employees and their relatives and dependents. Lord Wilberforce said it unnecessary to determine every person of the class.
      2. Suffice for one person to say with certainty whether they are or are not a member of the class.
    2. Too impractical
    3. only applies where the trust says that in the absence of trustee selection it will be distributed equally or in different proportions. If there is no section made and the list of potential B's is small the court may share them equally in order to uphold the settlor's intention
  2. Re Baden: there needs o be conceptual certainty of the class. "relatives and dependents" was sufficiently certain because it can be defined by blood (Re Barlow's WT said this is the meaning of family) and financial dependence.
    1. Judges differed regarding evidential certainty
      1. Stamp LJ said it is needed. Any "don't knows" should be construed as "no's"
        Virgo argues this approach is closest to McPhail v Doulton
        Webb & Akkouh: whether this is the best approach depends on how far one thinks the law should go.
        Virgo argues Sach's approach is less harsh. Too harsh an approach would risk not upholding the settlor's intent.
        I argue Sach's approach fits best with the nature of discretionary trusts because it only necessary for any one person to prove they are or are not in the class. So it shouldn't invalidate the trust.
      2. Megaw LJ said some is needed. Common sense and judicial expertise should be sued.
      3. Sachs LJ said it is not required to validate the trust.
        Hudson argues this departs from McPhail v Doulton
  3. Lack of ascertain ability won't defeat the trust because each object is potential
  4. Re Gulkebkian: size cannot be too wide so it cannot be said to be anything like a class. Needs to be administratively workable. Trustees must be able to properly exercise their discretion, must not prevent the courts form distributing if they have to, and must prevent excessive delegation.
    1. R v District Auditor ex p West Yorkshire Met County Council, invalid trust.
    2. Re Hays ST said only a few specified people is valid.
    3. Re Baden said it could be hundreds of thousands
    4. Virgo and McKay argue this rule should be rejected. No constant reasoning and dent uphold settlor's intent.
      1. Any person who cannot prove they are in the class should be assumed outside of it.
  5. Capriciousness may be relevant, but not likely. Re Manisty'd Settlemtn said it cannot negative the sensible intention of the settlor for trustees to exercise their power.
Resolving Uncertainty
1. Uncertainty of object: S can give T express power to resolve it. But must avoid excessive delegation and decision making to the trustee, and so the court isn't excluded from declaring it invalid.
  1. Generally T can resolve evidential uncertainty but not conceptual uncertainty.
    1. Re Wright's WT invalid because the power given to T to resolve conceptual uncertainty was invalid. The defining concept was unclear.
    2. Re Leek: "moral claim" over the settlor was defined in the instrument, so there was sufficient conceptual uncertainty for T's to resolve evidentuial uncertainty.
  2. Re Tuck's ST cannot oust courts' jurisdiction
  3. Third parties can be nominated.
2. Severance: where a DT is established for two classes and one is conceptually certain and other isn't, they can be severed so one isn't void.
  1. courts are hesitant to do this.
  2. No reason why it shouldn't apply because it applies in contract and upholds settlor's intention as much as possible.
3. Letters of Wishes: non-binding but can help resolve uncertainty by assisting in T's exercise of power of appointment.

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The Three Certainties

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