Trusts 1+2
McPhail v Doulton [1971] AC 424 - certainty of intention
"9(a) 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 and ex-employees of the Company or any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit ... (b) The trustees shall not be bound to exhaust the income of any year'" Judges decided they created a mere power, not trust. Expressly on basis that law then stood as to certainty of objects, by deciding this clause, gave the settlors scheme a chance at survival. IF thought it was disc trust, would have condemned to failure. But if it was a power, then trustees could decide to not distribute which would not be settlor's intention, pointed out by Lord Guest.
Re Adams - Certainty of intention
"I give, devise and bequeath.... Absolute use of my wife... in full confidence that she will do what is right... thereof between my children" Gift, not a trust. As the words did not contain an intention to create a trust it could only be a gift
Re Golay's Will Trust [1965] 1 WLR 969
"Reasonable income" was certain because reasonable is a classic word that the courts have always bene called upon to interpret.
Re Weekes' Settlement [1897] 1 Ch 289
"and I give him power to dispose of all such property by will amongst our children" - Trust or power? Romer J 1) Looking at the terms, looks like power rather than trust 2) Bound by earlier authorities to say otherwise? Did not think so Looked more like a power
Sprange v Barnard (1789) 2 Bro CC 585
"remaining part of what is left" was too uncertain to be subject matter of a trust. Even though courts have could resolve at first sight what might appear to be uncertainty. It depends on other parts, such as, if the residue isn't uncertain, if it's the end of a number of specific requests.
Baden Type Discretionary Trust - Court decisions in case of default
- Compel Trustee to perform duty - Appoint new trustee who will perform obligations - Court can execute as sees fit. Tends to happen for Borough trusts and fixed trusts since there is little work the court needs to perform
Borough Type Discretionary Trust - Court decisions in case of default
- Compel Trustee to perform duty - Appoint new trustee who will perform obligations - Court can execute as sees fit. Tends to happen for Borough trusts and fixed trusts since there is little work the court needs to perform
Re Hay's Settlement - Administrative Workabiltiy
- Vice Chancellor McGarry suggested that a discretionary trust for "such persons except a named few that the trustees may select" may fail on the same ground.
Certainty of Objects - different aspects
1. Conceptual Certainty 2. Evidential Certainty 3. Ascertainabiltiy 4. Administrative Workability
Certainty of Intention questions
1. Consider if there is compulsion - is there an imposition of obligation or is it simply a power to? 2. Consider who now has ownership of the property 3. Is there any reason of equity to impose a fiduciary power?
Re Lehman Brothers International (Europe) [2012] UKSC 6
2008 collapse. LB required to segregate client money in separate trust accounts, temporarily authorized to defer it and deposit in current account. When LB went into administration, question of whether statutory trust of client money took effect upon receipt or only upon segregation of client money. SC held that the money was held on trust, even if not segregated.
Argument #2 for complete list test
All members of the class should be considered, even if not all members may benefit. View of Upjohn in Re Gulbenkian Note that this rejected in Mcphail v Doulton
Re Gulbenkian - Fixed Trust
Although the court may be faced with words that do not appear certain, it has the duty to give an interpretation which does satisfy the required precision/certainty..
Parkinson, 'Reconceptualising the Express Trust' [2002] CLJ 657
Believes that obligations of trustees must attach to identifiable property, but argues that this is satisfied if two conditions are met: 1) Must be identifiable subject matter within which the trust property is located. Must know where and what it is 2) Trust obligation should be defined with sufficient clarity thus that in event of dispute, court can determine how much of the subject matter is subject to the trust. Argues that that requirement of certainty of subject matter is actually certainty of intention. Like, in insolvency, lack of separation shows lack of intention of a trust and that it was to be creditor debtor.
Emery, 'The Most Hallowed Principle - Certainty of Beneficiaries of Trusts and Powers of Appointment' (1982) 98 LQR 55
Calls certainty of objects the cardinal principle
Re Ellenborough [1903] 1 Ch 697
Claimant purported to assign to trustees any property she would be entitled to under wills or intestacies from brother and sister. Held that she was assigning property that did not exist, and could not be part of a trust. Judges said that: - Any property can form subject matter of trust, but it must be specified with certainty - "remainder of my estate
OT Computers v First National Tricity Finance Ltd [2003]
Company told bank to make two separate accounts, one for customer deposits and one for urgent suppliers. Judge decided first was trust as it had conceptual and evidential certainty. Thought the second was not as it lacked both certainties. It was impossible to list the suppliers who might satisfy the description and urgent is also vague.
MacJordan Construction v Brookmount [1992] BCLC 350
Construction contract, money paid into single account during contract time, stage payments not segregated, amount owing under stage payments, held on trust? Court held similarly, that the money had to be segregated and identifiable.
Borough Type Discretionary Trust - in case of default
Court will divide equally among the beneficaries
Hunter v Moss [1994] 1 WLR 452
Differed from Macjordan. M held 950 shares, issued capital of 1000 shares. Pursuant to H's employment contract, M had declared self trustee for 5 percent of share capital, which this applied to 50 of M's shares. M applied for judgment to be set aside. LJ Dillion took different approach from Macjordan, held that there was valid trust as: 1) There was a contract between the employer and employee, finding a trust would enforce the terms 2) Made no practical difference which 50 shares subject to trust. Difference in wine, but not in shares. CA does seem to have said no need to separate if intangible, but, note that there was no explicit test between tangible and intangible. This case is also possibly still applicable because: (1) M attempted to go to HL to appeal, Goldcorp had already been decided by the privy council, yet, the privy council declined it. Suggesting that this case is not wrongly decided (2) Re Lehman brothers followed.
Fixed Trust - Evidential Certainty
Each and every member must be actually identified, otherwise the trustees cannot ascertain the number of shares. There must be sufficient evidence so that we can identify all the people identified by the description given by the settlor
Re Tuck's Settlement Trusts [1978] Ch 49 - settlor knew rabbi definition
Everett LJ presumed that the settlor knew of the Chief Rabbi's definition and that it was widely known
Rowe v Prance [1999] 2 FLR 787
Express trust created without document. Because: 1. Mr P was always talking about 'our' boat 2. when she asked about her financial security he always referred to the boat as being their property 3. Said that the registering in one name was just an excuse
Paul v Constance [1977] 1 WLR 527
Express trust created without documents. C always referred to money as both hers and his. No need for knowledge of trust as an instrument
Re Kayford Ltd [1975] - commercila context
Express trust implied based on intention from company instructing bank to create a customer trust deposit account after being advised to.
Re Harvard Securities Ltd [1997] 2 BCLC 369
Follows HvM tangible intangible decision. H purchased shares, sold to clients in parcels of shares. Shares held by H as nominee, individual shares not registered in name of relevant client. H went into liquidation. LJ Neuberger distinguished other two cases (Goldcorp and London wine) as chattel, applied HvM. For reasons: 1) Consistent with Dillion LJ's reliance on Re Rose (shares case) and ground for distinguishing London Wine. 'concerned with the appropriation of chattels and when property in chattels passes' 2) HvM explained on above grounds. 3) Atkin LJ in Wait, referred to ordinary preperaitons of buying and selling goods, showing policy grounds for there being one rule for chattel and one for shares.
Re Goldcorp Exchange Ltd [1995] 1 AC 74
Gold bullion exchange, acquired gold for clients. Standard for required company to physically acquire all bullion specified in orders. In practice, only took order for day to day operations (fluctuating mass). So, insufficient for all in insolvency. 3 categories of people 1) Company bought bullion matching order physically, certainty of subject matter satisfied, held on trust 2) Orders not segregated from bulk, unable to identify stock. So no trust. 3) Individual had ordered rare maple gold leaf coins. Claimant could not demonstrate that the coins company had were bought for him (also not separated) , no certainty of subject matter. Had to be logistically possible to identify but also need to be physically segregated.
Mere Power - Donee Obligations
If appoints beneficiary, do so within the class
Fixed Trust
Individually have proprietary right in property as share already decided. Collectively as Saunder applies
Ex Discretionary Trust - Proprietary rights of beneficiaries
Individually no, because some of them can have no share of the property at all. Collectively, probably. Saunders probably applies. Since it could be said that the class of people who can receive the property collectively have an interest in the entire property
Non-Ex Discretionary Trust - Proprietary rights of beneficiaries
Individually no, because some of them can have no share of the property at all. Collectively, probably. Saunders probably applies. Since it could be said that the class of people who can receive the property collectively have an interest in the entire property
IRC v Broadway Cottages Trust [1955] Ch 20
Judge said that trust for such members of given objects as trustees may select is void for uncertainty unless the whole range of objects available for selection is ascertainable. It was said that a complete list was needed for both types of discretionary trusts.
Re Sayer- Fixed Trust
Judge says same degree of conceptual certainty required in all cases, from trusts to POA.
Baden Type Discretionary Trust - Size
Large class, more than couple hundred
Re Tuck's Settlement Trusts [1978] Ch 49 - third party fine
Lord Denning thought that as long as there was a third party, it was valid, since they weren't asking for a definition, were asking them to make a decision.
Power of Appointment - Ascertainability
Lord Reed and Lord Upjohn said that it as not necessary in Gulbenkian
Re Baden No2 [1972] 3 WLR 250 - Evidential Certainty - ' substantial number'
MeGaw LJ said that the test if whether a substantial number fall within the class. It is immaterial whether it is not possible to say with certainty that other objects are within/outside the class. Such a number is for courts to decide - advantage that gift remains valid, but would create a class within a class
Re Baden No2 [1972] 3 WLR 250
New test for baden discretionary trust
Re Kayford - word trust
No need for the word trust
Re Leek [1969] 1 Ch 563
Objects of trust were 'such other persons as the trustees may consider to have a moral claim upon..' Court said that it was not conceptually uncertain. This was because it was referencing he trustees, so it was the trustees' thoughts.
Fiduciary Power - Proprietary rights of beneficiaries
Ownership is with those who are entitled in default
Mere Power - Proprietary rights of beneficiaries
Ownership is with those who are entitled in default
Re London Wine Co (Shippers) Ltd [1986] PCC 121
Purchasers paid for some consignments from the company, company had sufficient wine(they had a fluctuating mass), but did not segregate specific cases. Did company become trustee of the wine? (In liquidation) Court said that it was not physically segregated, so no trust.
Don King Productions v Warren [1998] 2 All ER 608, affirmed [2000] Ch 291
Question of whether purported assignments can be effective as a declaration of trust. JFI said that despite provision saying non-assignable, intentions of parties had been to hold benefit derived on trust for the partnership. CA affirmed, but based on partnership law.
Power of Appointment - Evidential Certainty
Re Gulbenkian's Settlements - evidential certainty was not considered in the case. No complete list needed for purpose of distribution as there is no issue of surveying the class. There is no question of the court executing a power that has not been exercised.
Power of Appointment - Administrative Workability
Re Manisty and Re Hay's - judges in both expressed the view that administrative workability was not applicable to POA. But Templeman LJ in Manisty suggested that POa could be held void on grounds of capriciousness. A capricious power negatives a sensible consideration by the trustees of the power
d. Ex P West Yorkshire County Council
Re-organisation of local authority, found that it had 2m that it had not spent. Set up a trust for the benefit of any, all or sum of the inhabitants of West Yorkshire. Court struck it down on ground that the class was too large.
Certainties - Fixed Trust
Requires a Complete List
Re Tuck's Settlement Trusts [1978] Ch 49 - settlor=rabbi defn
Russel LJ said that the settlors view was the same as Chief Rabbi. That Chief Rabbi's word was not providing meaning, but evidence
Re Baden No2 [1972] 3 WLR 250 - Evidential Certainty - 'Question of fact'
Sachs LJ decided that once the definition is decided (he accepted the above definition from Brighton LJ) for evidential certainty, all that is to prove is facts. Said that trustees must distribute trust property only within beneficiaries and thus the cardinal principle is conceptual certainty.
Mcphail v Doulton [1971] AC 424 -Certainties Baden Trust
Settlor left property to trustees to apply net income in absolute discretion to officers, ex-officer, employees, ex-employees of a company and their relatives or dependents. This was a very large class and was thus too broad to satisfy the complete list test. HoL decided that the trust was valid and that the test for discretionary trusts was changed to whether the trustees may say with certainty that any given postulant is or is not a member of a class of objects, and there is no need to draw up a list for baden trusts.
Borough Type Discretionary Trust - Size
Small
Re Baden No2 [1972] 3 WLR 250 - Evidential Certainty - 'strict'
Stamp LJ believed that the ' any given postulant' test required trustees to be able to say of any individual, if he was clearly within or without the class.
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Started off as loan agreement, HL decided it could be a trust as well, running parallel to the loan.
Re Tepper [1987] Ch 358
Support for Re Tucks
Argument #1 for complete list test
The court can execute the trust if needed
Certainty of Subject Matter
The subject matter must be certain; it must be specific. 200k is specific. But, whatever remains after giving away some - isn't.
Discretionary Trust (Borough) - Evidential Certainty
Theoretical issues possible - Those that are entitled to residue would try to disqualify the others through the complete list rule
Certainty of Objects
This refers to beneficiaries or potential beneficiaries under a trust or a power with private trusts. Requires that the objects of a trust or power be sufficiently certain to enable the trustees or court to carry out the trust in accordance with settlor's intention.
Power of Appointment - Who likely to complain in default
Those who will have ownership in default. Complain that the power was wrongfully exercised
Fiduciary Power - Who likely to complain in default
Those who will have ownership in default.. Complaint of not having considered reasonably.
Non-Ex Discretionary Trust - Donee Obligations
To consider and appoint within the class. Must choose to at least accumulate
Ex discretionary Trust - Donee Obligations
To consider and exhaust the appointment
Fiduciary Power - Donee Obligations
To consider, and to appoint within class if appoints
Fixed Trust - Donee Obligations
To follow the settlor's instructions exactly
Re Baden No2 [1972] 3 WLR 250 - Ascertainability -
Trustees can never be said to be under a duty to consider property, or even consider, to beneficiaries whose status known, thus no consequence
Baden Type Discretionary Trust - in case of default
Unknown
Re Tuck's Settlement Trusts [1978] Ch 49 - facts
Use of third parties to deal with uncertainties Settlor wanted to ensure title that was hereditary was passed to those of jewish blood. Trustees were to pay the income to the holder as long as were of jewish faith and married an approved wife. If there was dispute, was to be conclusively decided by the Chief Rabbi. Earlier case law said this should not possible. But Lord Denning believed that a settlor should be able too do so. Other 2 members agreed on different grounds.
Gift - Proprietary rights of beneficiaries
Whoever received it
Re Barlow's Will Trusts [1979] 1 WLR 278 - Certainties POA
Will providing for family and friends to purchase her paintings at discounted prices. Issue of family and friends being vague term. Only blood relatives? Then what is a 'friend'? Court tried to mitigate effect of strict test, said this was a series of individual gifts and not a trust. No need to be able to identify all members of the class. To need to be able to say someone is clearly within the class narrows the class more than the settlor intended
Certainty of Intention
Words and Circumstances are key Note that the statement of the settlor may have more than one intention. Can create gift and POA or Trust or wtv at the same time
Administrative Workability
a. Coined in McPhail v Doulton - "it may be so wide that the meaning of the words is clear but the definition of the objects is so wide that it doesn't form anything like a class so that trust is administratively unworkable"
Fixed Trust - Administrative workability
appears to only be relevant in the context of disc trusts, where there is a duty of selection or where carrying out the trust would exhaust too much of the fund.
Re Baden No2 [1972] 3 WLR 250 - Administrative Workability
can invalidate baden trusts
Evidential Certaint
evidence of objects that they may fall within the class. It is an issue if the method of identification is impossible to verify
Borough Trust theoretical issue example
if someone make a will with several specific requests, further sum of money is left on a borough type discretionary trust to a description of family members and gift of residue to testator's estate. Possibility that those entitled to residue will try to make the trust void since they will be entitled to the whole of the property. And they would do this based on the complete list rule. Which might work, which would destroy a trust that was operating as intended by the settlor despite the reasoning being orthodox and is undesirable.
Fixed Trust - Conceptual Certainty
it must be defined in precise terms. Precise boundaries to meaning, so that all agree on criteria necessary for person to qualify as member of the class.
Re Baden No2 [1972] 3 WLR 250 - Conceptual Certainty
problem same as any other trust. In this case, for clause 9, had to decide what a relative was. What is the criteria to be a relative. Note that the CA did not keep evidential and conceptual certainty separate all the time. Came up with both descended from common ancestor.
Fixed Trust - Ascertainability
provided a complete list can be drawn up, trust valid. Trustees can pay into the court or declare the people dead if they are likely to be, so this heading is not an issue
Conceptual Certainty
regarding the meaning of the words or concepts used by the settlor in defining class of potential beneficiaries
Ascertainabiltiy
this is the ascertainment of the objects status or whereabouts. Their eligibility can be proven, but their status is unknown
Power of Appointment - Conceptual Certainty
those entitled to the fund in default of the appointment must be entitled to restrain trustees from use of the power outside the class. Conceptual certainty needed