Equity & Trusts: The Three Certainties

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Created by tinkerbell.441 about 5 years ago


An explaination of the three certaintais in terms of trusts law in the uk

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Equity & Trusts: The Three Certainties
1 Certainty of Object
1.1 'Objects' means beneficiaries
1.2 Fixed trusts
1.2.1 E.g. £10,000 to be divided equally between my two nephews, Joe and Bill.
1.2.2 When the settlor specifies the shares of the beneficiaries.
1.2.3 E.g. My residuary estate on trust for my wife during her lifetime and then to my children in equal shares. Called a successive interest fixed trust.
1.2.4 Rule for CoB: the list principle/class ascertainability test Must be possible to draw up a complete list of all beneficiaries. Conceptual certainty No linguistic or semantic ambiguity E.g. 'my friends', 'useful employees', 'good customers' aren't conceptually certain Not capable of different interpretations Evidential certainty Should be possible to prove who the beneficiaries are.
1.3 Discretionary trusts
1.3.1 E.g. £10,000 on trust for such of my siblings in such shares as my trustees shall decide Don't have to give something to every beneficiary
1.3.2 Old rule was the same as that for fixed trusts List/ascertainability test IRC v Broadway Cottages Trust
1.3.3 New test introduced in 1970s 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 Gestetner Re Baden No.1 Lord Wilberforce: Conceptual certainty is most important factor Re Baden No.2 Sachs LJ agreed with Lord Wilberforce about conceptual certainty Administrative unworkability When class of possible beneficiaries is too large for trustees to adequately survey and select from it R v District Auditor ex parte West Yorkshire MC Trust will fail
1.4 Gift with a condition precedent
1.4.1 E.g. '£100 to each of my nephews with a NUFC season ticket'
1.4.2 Viewed as a series of gifts rather than a trust.
1.4.3 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
1.5 Lack of certainty of objects creates a resulting trust of the property back to settlor
2 Certainty of Subject Matter
2.1 Property subject to the trust must be clearly defined
2.1.1 Description used to identify property must be clear and unambiguous Shouldn't be subjective Only means something to the settlor Re Kolb's WT Re Golay 'reasonable income' is sufficiently certain Remainder provisions E.g. A gift to A, and anything that is left to B' Palmer v Simmonds 'The bulk' is too uncertain to create a trust Not clear which part should be passed on Resulted in an absolute gift to the husband E.g. To A for life, remainder to B' Known as a 'successive interest trust' If drafted correctly this will create a trust In the Estate of Last Trusts over unallocated assets Rule: subject matter must be segregated from general stock Tangible Property Re London Wine Company No trust, wine not segregated Re Goldcorp Intangible property Hunter v Moss Involved shares in a limited company Intangible property need not be specified as long as all items are identical
2.2 Beneficial interests in the property must be ascertainable and clear
2.2.1 'In equal shares' Valid Fixed trust
2.2.2 'In such shares as the trustees will decide' Valid Discretionary trust
2.2.3 Problems caused by other methods of ascertainment 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
2.3 Effect of uncertainty of Subject Matter
2.3.1 Property would fall into residuary estate of testator OR
2.3.2 Property would be an absolute gift to first person named in clause OR
2.3.3 Property may never leave the settlors estate.
3 Certainty of Intention
3.1 Courts scrutinise the words used
3.1.1 Orally or verbally
3.1.2 Word 'trust' need not be used Paul v Constance Contrast with Jones v Lock 'Loose conversations of this sort' didn't constitute intention. Case concerning cheque for a baby 'The money is as much yours as mine' Milroy v Lord Failed transfer to third party trustees Equity looks at substance rather than form
3.1.3 Clear, unambiguous language showing a trust is intended Precatory words are not sufficient Lambe v Eames E.g. I hope, I wish, I desire Re Adams v Kensington Vestry 'In full confidence' Held: Did not demonstrate intention Comiskey v Bowring Hanbury 'In full confidence' were the words used Provision went on to give additional instructions Known as a 'gift over in default' Held: A trust was intended Increase in cases in a commercial context Re Kayford Mail order company in financial difficulty Placed customer money deposits in 'The customers trust deposit account' Held: Express trust created Freeman v Commissioners for Customs and Excise Restriction placed on how money is used Express trust created in favour of transferor
3.2 Intention must be genuine
3.2.1 Midland Bank v Wyatt
3.2.2 Sham trusts not acknowledged by courts
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