The 3 certainties

1. Need to distinguish between conceptual and evidential uncertainty. Where there is conceptual uncertainty, i.e., when the words used are unclear, for example, "friends", the trust will fail. Where it is impossible to prove whether or not potential beneficiaries succeed in falling within the class, there is evidential uncertainty which, in most cases, will not invalidate the trust (note that such evidential uncertainty can invalidate a fixed trust).

'old friends' is too conceptually unclear, but it could 'friends' could be coneptually clear in soe situations ie 'friends of ine who have served in the navy' Megary J- "Friendship [...] is a concept with almost infinite shades of meaning"

Sham trusts. *Midland Bank plc v. Wyatt [1995]

(d) Where a settlor has no intention to create a trust of the kind that the written terms represent, this is known as a sham trust and is unenforceable. In such a case, the settlor is intending to deceive third parties, often Her Majesty's Revenue and Customs (HMRC). Mr Wyatt settled his family home on trust for the benefit of his wife and daughter, so as to immunise it from any business failure he might suffer. When his business did fail, he sought to protect his house from creditors by relying on the settlement earlier executed, of which his wife was a trustee. It emerged that Mr Wyatt's wife had had no knowledge of the effect or nature of the declaration she signed as 'trustee'. Held: There was a sham, and the declaration of trust was void and could not be enforced. Where a trustee goes along with a settlor neither knowing nor caring what he or she is signing, this constitutes sufficient intention to create a sham.

Knight v Knight (1840) 3 Beav 148

1. Certainty of intention - it must be shown that the settlor intend to create a trust. 2. Certainty of subject matter - the property that is subject to the trust must be identifiable. 3. Certainty of objects - the objects of the trust, the beneficiaries, must be defined with sufficient certainty to enable the trustees t execute the trust according to the intention of the settlor.

C. Fiduciary powers of appointment and Discretionary Trusts. McPhail v Doulton [1971] AC 424

Bertram Baden executed a deed settling a non-charitable trust for the benefit of the staff of Matthew Hall & Co Ltd and their relatives and dependents. The objects clause provided that: The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit. The validity of the trust was challenged, averring that the objects were insufficiently certain. The case fundamentally restated the law in relation to certainty of objects for discretionary trusts, one of the three certainties required to form a trust.[2] For a trust to be valid, "It is clear law that a trust (other than a charitable trust) must be for ascertainable beneficiaries".[3] Prior to McPhail, the law was that for a discretionary trust one also had to be able to draw up a complete list of beneficiaries.[4] However, in McPhail the House of Lords restated the law, abandoning the "complete list" test in favour of an "is or is not" test. Lord Wilberforce phrased the new test of certainty thus: Can it be said with certainty that any given individual is or is not a member of the class.[5] This was the same test which the courts had previously applied to powers.[6]

2. The subject matter of the trust must also be identifiable. A particular problem arises (especially in a commercial context) in identifying which specific goods out of a larger class of goods are to be held as the subject matter of the trust. MacJordan Construction Ltd v Brookmount Erostin Ltd [1992] BCLC 35

Brookmount was a property developer who entered into a building contract where interim payments were subject to retention at 3%. No separate fund for the retention was set aside and when Brookmount experienced financial difficulty MacJordan sought to recover its retention money. As there was no separate fund, it was ruled there was merely a general bank account with no identifiable assets specific to the retention money. MacJordan was therefore unable to recover his money.

Re Golay's Will Trusts (1965 UKCA) 1. The subject matter of the trust must be sufficiently described.

CERTAINTY OF SUBJECT-MATTER - GIFT: Will-maker's will directed his executors to gift a "reasonable income" from his properties to a friend. Was 'reasonable income' too vague to perfect the gift? The Court said that, as no-one had been specified to quantify what a reasonable income was, an objective yardstick was needed to determine the will-makers intention. Held: The Court could use an objective yardstick to determine what 'reasonable income' meant. The gift did not fail for uncertainty.

(e) A seller of goods who permits a buyer to buy on credit may use a clause reserving to the seller the legal title in the sale goods. No trust is created in such circumstances.

Clough Mill v Martin [1984] 3 All ER 982

White v Shortall [2006] NSWSC 1379 3. In considering whether the subject matter of the trust is certain, is there a difference between tangible and intangible property?

Facts: A single trust took effect over the entire holding of 1.5 million shares such that the trustees had the power to elect which 222,000 shares out of that entire shareholding were to be treated as being held for the claimant. Held: This avoided the problem of certainty of subject matter because the trust took effect over the identified fund of 1.5 million shares, but there was no need to segregate out 222,000 shares under a separate trust if the trustees were to have a power to split off that number of shares from the valid trust fund: therefore, the claimant had an equitable interest in the large trust equal to 222,000 shares and the defendant was deemed to have an equitable interest equal to the remaining shares In effect, the claimant and the defemdamt were treated as being beneficiaries under one trust in the ratio 1,500:222

Sprange v Barnard (1789) 2 Bro.C.C. 585. Certainty of subject matter

Facts: A testatrix provided that property would be left to her husband to use absolutely but that "the remaining part of what is left, that he does not want for his own wants and use" was to be held on defined trusts Held: This statement was too uncertain for the trust to take effect over any part of the property because the property was not sufficiently clearly identified by the expression "the remaining part of what is left"

1. The subject matter of the trust must be sufficiently described. Palmer v Simmonds (1854

Henrietta Rosco, the settlor, said she wanted to create a trust for various people over her property, and then to 'leave the bulk of my said residuary estate unto the said William Fountain Simmonds, James Simmonds, Thomas Elrington Simmonds and Henrietta Rosco Markham equally.' Judgment[edit] Sir RT Kindersley held that because the court could not be sure which parts of the residue were meant to be held on trust, the trust failed. The term "bulk" was too uncertain for the court to determine what was mean

Need to distinguish between conceptual and evidential uncertainty. Where there is conceptual uncertainty, i.e., when the words used are unclear, for example, "friends", the trust will fail. Where it is impossible to prove whether or not potential beneficiaries succeed in falling within the class, there is evidential uncertainty which, in most cases, will not invalidate the trust (note that such evidential uncertainty can invalidate a fixed trust).

It followed on from McPhail v Doulton,[1] where the House of Lords affirmed that upholding the settlor's intentions was of paramount importance. Mr Bertram Baden settled a trust for the employees, relatives and dependants of his company, Megaw LJ viewed the position to be as follows. " the test is satisfied if, as regards at least a substantial number of objects, it can be said with certainty that they fall within the trust; even though, as regards a substantial number of other persons, if they ever for some fanciful reason fell to be considered, the answer would have to be, not 'they are outside the trust', but 'it is not proven whether they are in or out'. " He said that requiring complete conceptual certainty would amount to a return to the list certainty test. Sachs LJ held the test required only clarity in the concept. He put it as follows. " The court is never defeated by evidential uncertainty... Once the class of persons to be benefited is conceptually certain it then becomes a question of fact to be determined on evidence whether any postulant has on inquiry been proved to be within it: if it is not so proved, then he is not in it. Sachs LJ gave some examples of conceptually certain classes of beneficiaries as 'first cousins', 'members of the X trade Union', and 'those who have served in the Royal Navy'. In contrast, an example of a conceptually uncertain class of beneficiaries would be 'friends' as the meaning of this word changes subjectively.

C. Fiduciary powers of appointment and Discretionary Trusts *Re Gulbenkian's Settlement

It held that while the 'is or is not' test was suitable for mere powers, the complete list test remained the appropriate test for discretionary trusts. It was only a year later in McPhail v Doulton[1] that the 'is or is not' test was considered appropriate for discretionary trusts by a different panel of their lordships. Lord Denning: In all these cases if there is some particular person at hand, of whom you can say that he is fairly and squarely within the class intended to be benefited, then the clause is good. You should not hold it to be bad simply because you can envisage borderline cases in which it would be difficult to say whether or no a person was within the class. House of Lords[edit] The House of Lords held for powers of appointment, objects were sufficiently certain if any given individual could be said to be in, or not in, the class. (So this was more relaxed than list certainty, which requires everyone to be said to be in the class.)

(a) The intention must be to impose a duty on the trustee as distinguished from a moral obligation.

Lambe v. Eames (1871) L.R. 6 Ch. 597 ("to be at her disposal in any way she may think best, for the benefit of herself and her family" = merely moral obligation). Re Adams and the Kensington Vestry (1884) 27 Ch. D. 394 ("unto and to the absolute use of my dear wife ... in full confidence that she will do what is right as to the disposal thereof between my children" = a merely moral obligation). Cf. Comiskey v. Bowring-Hanbury [1905] A.C. 84 (HL) ("in full confidence that... she will devise it to one or more of my nieces as she may think fit..." = a trust). Re Hamilton [1895] 2 Ch 370 ("take the will you have to construe and see what it means, and if you come to the conclusion that no trust was intended you say so", per Lindley LJ)

2. If the gift can be construed as a series of gifts to individuals rather than a gift to a class, the "is or is not" test may be avoided. *Re Barlow [1979] 1 WLR 278

Miss Helen Alice Dorothy Barlow, the testatrix had a large collection of pictures. She specifically bequeathed some. For the remainder, she declared them to be held by her executor on trust to sell them, but that her 'family and friends' could buy them first 2. If the gift can be construed as a series of gifts to individuals rather than a gift to a class, the "is or is not" test may be avoided. I therefore hold that the disposition does not fail for uncertainty, but that anyone who can prove that by any reasonable test he or she must have been a friend of the testatrix is entitled to exercise the option.

3. In considering whether the subject matter of the trust is certain, is there a difference between tangible and intangible property? Hunter v. Moss [1994] 1 W.L.R. 452

Moss promised Hunter 50 shares in his company as part of an employment contract, but failed to provide them. Hunter brought a claim against Moss for them, arguing that Moss's promise had created a trust over those 50 shares. The constitution of trusts normally requires that trust property be segregated from non-trust property for the trust to be valid, as in Re London Wine Co (Shippers) Ltd.[1] On this occasion, however, both Colin Rimer in the High Court of Justice and Dillon, Mann and Hirst LJJ in the Court of Appeal felt that, because this case dealt with intangible rather than tangible property, this rule did not have to be applied. Because all the shares were identical, it did not matter that they were not segregated, and the trust was valid. Alastair Hudson heavily criticised this decision a lot: he suggests it is difficult to see why there should be a dividing line between intangible and tangible property, since there are some principles which apply to both.[5] 500 ball bearings are tangible, but identical; under Hunter, there is no reason these should also not require separation, so the distinction between tangible and intangible is thus "spurious"

An intention to create a trust can be inferred from the circumstances. Paul v Constance 1977

Paul v Constance [1977] 1 WLR 527 Court of Appeal Mr Constance was married to the defendant. He left his wife in 1965 and later met the claimant and moved in with her in 1967. He never divorced his first wife. In 1973 Mr Constance received £950 in relation to a personal injury claim from his employer. He discussed what to do with the money with the claimant and decided to open a bank account. As they were not married the bank advised him to open the account in his own name but assured him that the claimant would be able to draw on the account if she had a signed note from him. Mr Constance had told the claimant that the money was as much hers as it was his. There were three further deposits into the account which came from the couple's bingo winnings which they played as a joint venture. The was one withdrawal from the account of £150 which was used to buy Christmas presents and food. Mr Constance died intestate in 1974 and his wife as administratrix of his estate closed the account and claimed the sums contained in the account formed part of his estate. The claimant argued that the sums contained in the account were held on trust for the benefit of her and Mr Constance jointly. Held: There was an express declaration of trust and the claimant was entitled to the money in the account. Lord Justice Scarman: "When one bears in mind the unsophisticated character of the deceased and his relationship with the plaintiff during the last few years or his life, the words that he did use on more than one occasion, "This money is as much yours as mine," convey clearly a present declaration that the existing fund was as much the plaintiff's as his own."

2. The subject matter of the trust must also be identifiable. A particular problem arises (especially in a commercial context) in identifying which specific goods out of a larger class of goods are to be held as the subject matter of the trust. Re Goldcorp [1995] 1 A.C. 74

Privy Council decision on appeal from the Court of Appeal of New Zealand. Customers of the exchange entered into contracts that required the exchange to acquire bullion for their customers and to hold the total amount of their order in their vaults. According to the terms of their contracts the customers should have been very happy with the arrangements; because the exchange was required to buy and to hold the total amount of their customers' orders, it would (in theory) have been possible for the customers to know that the whole of their order and the whole of every customer's orders were held physically by the exchange in its vault so that there could have been no question of the exchange failing to satisfy an order ⇒ Those contracts purported to create proprietary obligations in favour of the customers over the bullion that the exchange was required to acquire on their behalf. Unfortunately, the exchange broke its contracts → it only acquired enough bullion to meet the usual requirements of its customers on any working day and did not hold the entirety of the customers' orders It was held that only those customers who could prove that their order of bullion was in fact held separately from the general store of bullion would be entitled to enforce a trust against the exchange and consequently be able to take their bullion orders away as secured creditors Those customers who could not demonstrate that their orders had been segregated from the general store of bullion could not demonstrate that they were bens under a trust because the subject matter of that trust was uncertain

3. In considering whether the subject matter of the trust is certain, is there a difference between tangible and intangible property? *Re Harvard Securities [1997] 2 BCLC 369

Re Harvard Securities (Holland v Newbury) [1997] 2 BCLC 369 Facts: This case appears to have applied the rule drawn from the Court of Appeal in Hunter v Moss: A dealer in financial securities held securities as nominee for his clients. While the terms of the contracts suggested that the dealer held the securities on bare trust for each of his clients, the securities were not numbered and were not separated. In consequence, none of the clients were able to identify which securities were held on bare trust for which client Held: Neuberger distinguished Re Wait, Re London Wine and Re Goldcorp on the basis that those cases concerned chattels and considered himself obliged by the doctrine of precedent to apply Hunter v Moss because that case similarly concerned intangible securities It was therefore held that the trusts were not invalid for uncertainty of subject matter because the securities were intangible property and therefore did not require segregation This means that in English law Hunter v Moss remains good law!

"It is well settled that a trust can be created without using the words 'trust' or 'confidence' or the like."

Re Kayford per Megarry J

Richards v Delbridge. Imperfect gift shall not automatically be made into a trust. Unless it is clearly intentionally meant to be trust.

Sir George Jessel MR: "If it is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.....It is true he need not use the words 'I declare myself a trustee,' but he must do something which is equivalent to it, and use expressions which have that meaning, for, however anxious the court may be to carry out a man's intentions, it is not at liberty to construe words otherwise than according to their proper meaning."

5. If the settlor has no sensible intent in establishing a fiduciary power of appointment or, possibly, a discretionary trust, the trust or power may be treated as void for capriciousness.

The council wished to create a discretionary trust of £400,000 to be applied for a list of purposes 'for the benefit of any or all or some of the inhabitants of the county of West Yorkshire.' Taylor J held that the trust was invalid, because it was administratively unworkable to distribute such small amounts to all people. The trust was not, however, 'capricious', but merely too difficult and costly for a court to enforce. " A trust with as many as 2 ½ million potential beneficiaries is, in my judgment, quite simply unworkable. The class is far too large...

Annabel's (Berkeley Square) Ltd v Revenue and Customs Comrs. intention to create a trust

Tips were held to be held on trust by the employers for the beneficiary of the workers.

2. The subject matter of the trust must also be identifiable. A particular problem arises (especially in a commercial context) in identifying which specific goods out of a larger class of goods are to be held as the subject matter of the trust.

Unsecured creditors of a bankrupt wine trading company, London Wine Co (Shippers) Ltd, argued that they should be able to claim the bottles of wine they had paid for. The bottles that the customers had bought had not yet been individually identified. The company had not even promised to provide wine from its current stocks Lord Oliver: Nevertheless, as it seems to me, to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach. I cannot see how, for instance, a farmers who declares himself to be a trustee of two sheep (without identifying them) can be said to have created a perfect and complete trust... And it would seem to me to be immaterial that at the time he has a flock of sheep out of which he could satisfy the interest. Oliver J held that even if the company had said the wine was to come from current stocks, the trust would in any event have been uncertain

E. Resulting Trust on failure of express trust

Where an express trust is void for want of certainty, the property is held on resulting trust for the settlor.

Certainty of Objects. Fixed trusts.

Where the beneficiaries and the extent of their interests are fixed, the test for certainty is satisfied only if a complete list of beneficiaries can be drawn up. In order for this to be achieved, it follows that there has to exist both conceptual and evidential certainty.

Re Kayford Ltd [1975] 1 WLR 279 High Court. Intention to create a trust can be inferred from the circumstances. Seperate bank account

ayford Ltd were a mail order company. They received pre-payments from customers and was concerned that they may be facing insolvency. On taking legal advice they opened a separate bank account to deposit the customer's pre-payments. The account was named 'Customer Trust Deposit Account'. Kayford Ltd subsequently did become insolvent and the creditors sought to claim the money in the separate account as part of the company assets. Held: Kayford Ltd held the money in the account on trust for its clients. Megarry J: "There is no doubt about the so-called "three certainties" of a trust. The subject-matter to be held on trust is clear, and so are the beneficial interests therein, as well as the beneficiaries. As for the requisite certainty of words, it is well settled that a trust can be created without using the words "trust" or "confidence" or the like: the question is whether in substance a sufficient intention to create a trust has been manifested." In cases concerning the public, it seems to me that where money in advance is being paid to a company in return for the future supply of goods or services, it is an entirely proper and honourable thing for a company to do what this company did, upon skilled advice, namely, to start to pay the money into a trust account as soon as there begin to be doubts as to the company's ability to fulfil its obligations to deliver the goods or provide the services. I wish that, sitting in this court, I had heard of this occurring more frequently; and I can only hope that I shall hear more of it in the future. Payment into a separate bank account is a useful (though by no means conclusive) indication of an intention to create a trust, but of course there is nothing to prevent the company from binding itself by a trust even if there are no effective banking arrangements.'

*IRC v Broadway Cottages Trust [1955] Ch 20 certainty of object

complete list test: determining whether settlor's description of beneficiaries is sufficiently certain complete list test requires comprehensive list of all beneficiaries or fixed trust fails conceptual uncertainty: if description of beneficiaries lacks sufficient criteria/precise meaning difficulty tracing a beneficiary: not cause a trust to fail as possible if possible to compile complete list of known beneficiaries (Ts can apply to court for directions in relation to missing beneficiaries)

(c) No intention to create a trust can be read into a failed gift.. Jones v Lock (1865) 1 Ch App 25

concerning the formality for creating a gift, and the possibility that if the gift were not properly completed with the required legal form, a trust could be found. A father returned from a business trip without a gift for his son. When the family told him off, he put a £900 cheque in the baby's hand, and said " look you here, I give this to baby; it is for himself and I am going to put it away for him, and will give him a great deal more along with it. " The wife said the baby might tear it, and the father said, 'it is his own, and he may do what he likes with it'. He locked it in the safe and died six days later. It was argued that although there was never an outright transfer, because he had not actually endorsed the cheque by signing it, there was no trust of the cheque for the baby. [T]he case turns on the very short question whether Jones intended to make a declaration that he held the property in trust for the child; and I cannot come to any other conclusion than that he did not. I think it would be a very dangerous example if loose conversations of this sort, in important transactions of this kind, should have the effect of declarations of trust.' Lord Cranworth LC

3. If the settlor/testator has provided for an "expert" to resolve any uncertainty, the trust may yet be valid. Re Tuck's Settlement Trusts [1978] 2 WLR 411

created a trust for future baronets who were married to a wife 'of Jewish blood' and who 'continues to worship according to the Jewish faith'. If in doubt, 'the decision of the Chief Rabbi in London of either the Portuguese or Anglo German Community... shall be conclusive'. It was contended that the concepts of being of Jewish faith and of Jewish blood were too uncertain for the trust to be valid. Eveleigh LJ said the trust was valid, but only because the Chief Rabbi's opinion of who was Jewish was part of the definition of the class of beneficiaries

Powers of appointment:

empower the trustee to appoint property among a class of potential beneficiaries.

Managerial or administrative powers

facilitate the trustees' administration of the property, including the power to invest trust funds

Bare power of appointment:

gives a discretion to appoint trust property among the specified class of beneficiaries but places no obligation on the trustee to exercise this obligation.