Three certainties

For a valid express private trust, the three certainties of intention, subject matter and objects
must be satisfied: Knight v Knight
> These need to be present so that a trust can be practicable, enforceable and capable of
supervision by the court
CERTAINTY OF INTENTION
> It is necessary for settlor to create a trust (as opposed to gift or power)
> Trusts can be expressly declared or inferred from conduct of parties or surrounding
circumstances
> No general requirement for a trust to be created or evidenced in writing, the exception being
express trusts of land which need to be evidenced in writing and signed on behalf of the settlor
> Test: is there a clear intention that property is to be held on trust for the benefit of a third
party from construction of words used and/or behaviour of the parties
> Intention must be to separate legal and equitable ownership and to impose obligations of
trusteeship on the holder of the title: Wright v Atkyns
> Paul v Constance possible to create a trust w/o you knowing what a trust is
- court can infer that you intended to create a trust
- fact that the money is held by one person but more than one person is intended to be the
beneficial owner this makes it look like a trust
> Re Kayford mail order business in difficulties and accountant decided customers pay in
advance for goods
- company did go into insolvency and customers wanted their money back
- held that intention that accountants had demonstrated was an intention to segregate money so
that it could be attributed to the customers
Problem of precatory words
> There can be no trust based on precatory words alone: Mussoorie Bank Ltd v Raynor
> A mere expression of desire to make a gift or to confer a benefit is insufficient
> A mere obligation or mere request is not enough: Sweeny v Coghill
> Where there is doubt, the burden lies on the CL to establish the necessary intention on a
balance of probabilities: Re Snowden
> Re Adams + Kensington Vestry: testators estate was devised by will to the absolute use of
his widow in full confidence that she will do what is right as to the disposal thereof between
my children, either in her lifetime or by will after her decease
- this is merely a moral obligation and did not impose a legal obligation on the widow
- it was an absolute gift, she was entitled to use the property other than benefiting the children
> Lambe v Eames: - testator left his estate to his widow to be at her disposal in any way she
may think best, for the benefit of her and her family
- held this was an precatory expression and did not connote the necessary intention to create a
trust
> Mussorie Bank v Raynor: - where a husband left land to his widow, feeling confident that
she will act justly to our children in dividing the same when no longer required by her
- widow mortgaged the land and eventually the bank sough to sell it to recoup the loan
- she argues that as she was a trustee, the mortgage was invalid
- HL held no trust existed because the husband had used precatory words
- she was legal and beneficial owner of the property and the mortgagee could sell the property
> Comiskey v Bowring-Hanbury: - legacy was left to a widow in full confidence that she
would leave the property on her death to one or more of the testators nieces
- the precatory words were in themselves ineffective to create a trust
- this will, however, went on to declare that in default of any disposition by here thereof by her
will, I hereby direct that all my estate and property acquired by her under my will shall at her
death by equally divided among the surviving said nieces
- HL held in looking for certainty of intention, it was necessary to consider trust document as a
whole
- imperative wording of the gift over imposed the mandatory obligation upon the widow
> More liberal approach: James LJ: I could not help feeling that the officious kindness of the Court
of Chancery in interposing trusts where in many cases the father of the family never meant to
create trusts must have been a very cruel kindness indeed
> (Sham) Midland Bank v Wyatt a husband and wife declared a trust in respect of the
matrimonial home

- beneficial interest was to be shared equally between the wife and their daughters
- property was mortgaged to the Midland Bank and the husband continued to borrow on the
security of the family home
- he did not inform the bank of the trust and bank eventually sought to sell the property in order
to recover the husbands outstanding debt
- HC held that husband had never had the intention to truly divest himself of his interest in the
property
- had had declared the trust merely as a means of shielding the family home from claims of the
Bank
- there was no real intention to create trust, the declaration was a mere pretence and the trust
was void
- sham trust will fail and title to the property remains with the settlor
Law or construction?
> Re Steeles Will Trust involved a solicitor drafting a trust deed for a client, but unfortunately
utilising an outmoded precedent that featured precatory words: I request my said son to do in
all his power
- in the more contemporary setting, there should have been no trust because of lack of certainty
- nevertheless, judge concluded that the deliberate use of the precedent demonstrated the
necessary intention to declare a trust of a diamond necklace
- Langan: describes this as a rouge decision and thoroughly unsafe
- disregards the actual wording of the deed, imputes an artificial intention to the settlor and
departs from the general rule that extrinsic evidence is inadmissible in the construction of a trust
deed
Quistclose Trust
> Intention may be inferred where the property is transferred and segregated from other funds
on the shared understanding (of both the payer and the recipient) that is to be held on trust:
Barclays Bank v Quistclose Investments Ltd Rolls Razor borrowed 209,000 from Quistclose
investments under and arrangement whereby the loan was to be paid only for the purposes of
providing a dividend for shareholders that the company had already announced
- money was deposited in a specially created bank account at Barclays, to whom Rolls was
already heavily indebted
- before payment of dividends, Rolls went into voluntary liquidation
- Quistclose claimed the money in the special account on the ground that the parties had created
a trust and that, as its purpose had failed, the funds were to result back to itself
- HL held that the shared intention (of payer and recipient) had been that the money was to be
held on trust unless it was employed for the specified purpose
- as specific purpose had failed, money would be held for benefit of Quistclose
> Intention may be inferred from a unilateral act (pre payment): Re Kayford the unilateral act
of the company paying the payments into a trust account demonstrated its intention to create a
trust (Meggary J)
- not Quistclose trust due to absence of bilateral understanding between the parties
- but is Quistclose due to segregation of funds
> Intention may arise where both payer and recipient have expressly attached restrictions to the
recipients use of funds: Carreras Rothmans v Freemans Matthews Treasure Ltd Carreras
(manufacturer of cigs) employed advertising firm (Freeman) to place ads in media
- firm incurred substantial expenses and invoiced Carreras for liabilities it incurred on their behalf
- firm experienced financial difficulties and Carreras insisted they open a special bank account
into which payments were made, firm agreed
- firm became insolvent
- HC held a trust arose as soon as money was paid into special account
- key factor was that Carreras intended the firm be subject to an enforceable obligation to apply
the money for specified purpose
Consequences for lack of certainty: alternative options as to what will become of the
property

given or banqueted to a 3rd party, it will be viewed as an absolute gift to that person
legal and beneficial title will be transferred without recipient being subject to any legal
obligations to do anything with property
settlor retained legal title to the property, it will simply remain in settlors estate Re TXU
Europe Group Plc

CERTAINTY OF SUBJECT MATTER

> All trust property must be identifiable
> Settlor must provide means by which the interests of beneficiaries can be ascertained
With regard to trust property
> Words employed by settlor must be such that they identify with clarity the property to be held
on trust or at least provide machinery through which such property can be ascertained
> Palmer v Simmonds testatrix (by will) left residue of her estate to her friend subject to
proviso that, if he died childless, he will leave the bulk of my said residuary estate unto
four named persons
- reference to bulk was ineffective to create a trust
- no clear meaning and thoroughly uncertain
- she had failed to identify a definite, clear, certain part of her estate
> Re Golay testator set up trust under which Tossy was to enjoy one of my flats during her
lifetime and to receive a reasonable income from my other properties
- difficulty concerned calculation of reasonable income
- held that reasonable offered an objective determinant
- court could look at Tossys age, her present income and current outgoings and conjure up a
figure that was reasonable for her
> Re Jones a trust of such parts of my estates as she shall not have sold failed for
uncertainty of subject matter
- viewed as being an absolute gift to the legatee
> Sprange v Bernard remaining part of what is left no certainty of subject matter
because it would be uncertain what would be left on the husbands death
> In the Estate of Last - anything that is left court took a different approach to Sprange
because brother was given merely a life interest in property
- trust created on death of testatrix, and trust property was sufficiently certain at that date
> Degree of certainty for intangible assets (shares, money in bank accounts, debts) is different
for that required of tangible assets
- Hayton: describes this as an old fashioned, but surely spacious, distinction
- Hunter v Moss H was entitled, under his contract of employment with M, to claim 50 shares
out of 950 shares in a particular company held by M
- although this showed intention to increate trust, M did not specify which shares were subject to
this arrangement
- M later sold 950 shares and kept proceeds for himself
- H claimed a proportion of those proceeds
- in orthodox approach, it would be impossible to identify precisely which 50 shares were to be
subject matter
- CA held there was a valid trust since shares were identical and indistinguishable, any 50 were
capable of forming subject matter
- commentators criticise approach of CA and see no logical distinction to justify divergent
treatment of tangibles and intangibles (eg 50 identical books)
- Hayton: suggest court was blinded by merits of donee, who had done awful lot for ungrateful
doner.
> After-acquired property cannot be the subject matter of a trust (property that may vest in the
future, but as regards which there is no certainty)
With regard to beneficial interest
> Curtis v Rippon: each beneficiarys share under the trust must be allocated in some way when
the trust is established
> Boyce v Boyce property consisted of two houses, out of which one of the beneficiaries was
going to chose which one she wanted.
- however, she pre-deceased testator and died without making a selection entire trust had to
fail for uncertainty of beneficial shares
- testator had prescribed a method of allocation that had subsequently become impossible
> Re Knapton no machinery provided through which the properties were to be divided between
beneficiaries
- HC held beneficiaries had a right to chose which house they wanted order of choice was
according to order their names appeared on will and others were worked out by the drawing of
lots
- court felt able to imply a right of selection in order to save bequests

> Fixed trust equity is equality can be applied where it does not declare the beneficial interest
to be taken by each beneficiary: Burrough v Philcox trust set up to benefit settlors son and
daughter, beneficial shares remained unspecified
- court was able to uphold trust by invoking equity is equality, each child deemed to have an
equal share
- maxim can only be invoked where there is no contrary intention demonstrated: Marguiles
> Discretionary trusts can only apply if trustees fail to exercise discretion
Consequences for lack of certainty: alternative possibilities

no certainty of trust property whatsoever there can be no trust and property will remain
with settlor/settlors estate (susceptible to claims of creditor)
lack of certainty as to beneficial share trust will fail and (if property has left the settlor)
trustee will hold property on resulting trust for settlor/settlors estate

CERTAINTY OF OBJECTS (BENEFICIARIES)

> There have to be beneficiaries who are certain in order for the trust to be effective must be
someone who can enforce the trust or someone in whose favour the court can enforce the trust:
Re Astor
> There must be human beneficiaries (except for charitable trusts)
> Beneficiaries must be individually identified or identified as a member of a clearly defined
class: Re TXU Europe Group
> This test varies between fixed trusts (beneficiaries and their shares have been identified) and
discretionary trusts (trustee selects who exactly is to benefit from a wider class specified by the
settlor)
> No need establish this for charitable trusts because the AG and the Charity Commission have
the legal authority to enforce charitable trusts
Fixed trusts
> Conceptual and evidential certainty fixed trust is to confer fixed benefits upon fixed
beneficiaries - you need to know who are all of the beneficiaries
> The finite lists test a fixed trust is void unless all beneficiaries are ascertainable
> IRC v Broadway Cottages Trust you must be able to compile a complete list of benefices in
advance for there to be certainty
- a trust in favour of customers was upheld because beneficiaries could be identified in context
of the payments made to them, but trust in favour of suppliers failed because of lack of certainty
of objects not possible to draw up a complete list of urgent suppliers
Discretionary trusts and powers of appointment
> there is no division of equal shares, trustees have a discretion so do not necessarily need a
complete list of the beneficiaries
> Re Gulbenkian where there are fiduciary powers (powers of appointment)
- the is or is not test
- Lord Reed thought is or is not test would be enough slightly less strict than complete list test
- Lord Hodson wanted complete list test to apply
- Lord Upjhon also appreaed to be in favour of complete list test but suggests we should use is
or is not test not clear which test he is in favour of
> McPhail v Doulton HL MUST APPLY these tests first
- applies the is or is not test to discretionary trusts
- it must be possible to say with certainty whether someone is or isnt a member of the class of
beneficiaries
- if there is anyone about whom they are unsure, then the trust fails
- Lord Wilberforce thought Lord Upjohn was in favour of is or is not
- Lord Hodson thought what Lord Upjohn wanted complete list - majority agreed with this
APPLY THE TEST eg can we say with certainty that X in within the class of friends
Exceptions/other approaches to the is or is not test:
> Re Badens Deed Trust No 2 CA definition of beneficiaries as relatives and dependants
- CA found these expressions to be conceptually certain
- relatives proved more problematic than dependants
Postulant/individual ascertainability test
- Stamp LJ term is synonymous to next of kin and nearest blood relations,
- if the answer to whether a person is part of the class is I dont know, then the discretionary
trust is void for uncertainty

- Sachs LJ said is or is not test should be applied in deciding this, if we reverse burden of
proof and place onus on the CL, if they fail to prove they fall in class, then we will deem that they
do not (but still important to recognise some terms will be so vague that they will be uncertain).
- takes a more lenient approach and thinks the McPhail test applies only to conceptual certainty
and not evidential certainty as long as it is theoretically possible for people to prove that they
are objects, then that is fine
- a pragmatic and sensible approach
- thought it didnt matter if it was I dont know as long as there was at least one beneficiary of
whom it could definitely be said yes (Denning also said this in relation to a test for powers, but
this was overruled)
- Megaw LJ a different approach is taken, all we should need to demonstrate is that there is a
substantial number of people of whom we are certain
- also thought it didnt matter if the answer was I dont know, but said there should be a
substantial number of beneficiaries in the yes category
- trying to make the test more flexible, does not still well with McPhail or Gulbenkian retreat
from is or is not test
> you still have to apply HL test, but structure answer to say there are alternative approaches
and how Sachs and Megaw may lead to different approaches.
Re Barlows WT paintings can be distrusted to any old friends, such expressions would
render a trust conceptually uncertain
- terms old and friends have so many shades of meaning, impossible to say who was intended to
benefit
- Browne Wilkinson LJ 1 says he can validate the testamentary dispositions it because he thinks
the testator intended to make a series of gift, if you can call it a gift then none of the trust rules
apply (unsatisfactory people involved are executives under a will trust and difficult to claim
they dont have any fiduciary duties that need to be satisfied, saying that we are going to make
gifts but what if we run out of paintings and more people claim to be friends surely we need to
know who are friends in advance), 2 saying that trustees suggest the people who are
beneficiaries on the basis that they have worked out who are the people are intended ie who the
friends are (suggests in particular circumstances, if you can be sure of the intended
beneficiaries, then there is certainty)
- however, if we have circumstances where it is not so clear who are the old friends/mere
acquaintances, then there is no certainty
Re Tucks ST - where property to be left as long as she marries someone of the Jewish faith
- what is meant by the Jewish faith or whether someone is a member of the Jewish faith?
- Denning thought it would be possible to appoint an expert (the chief Rabbi) who would be
able to determine any issues of fact
- particular factual circumstances where thought an expert could be used to decide whether
someone was part of the class
- ON THE FACTS is it possible to have such an expert?
Administrative unworkability and capriciousness
> Even if the class is sufficiently certain, it may still fail due to administrative unworkability
- Sachs LJ is clear to tell us that if concept involved is too uncertain, then nothing will validate it
> R v District Auditor ex p WY Met CC any or all or some of the inhabitants of the County of
West Yorkshire
- class was too large to be unworkable
> has rarely been applied to invalidate a trust
- Hardcastle: it is unclear whether it was meant to refer to practical problems of surveying a wide
class, administrative futility where a fund is deemed small in relation to the size of the class or
undesirability of granting large numbers of people locus standi to enforce the trust
> Re Hays ST a trust to benefit anyone in the world would be ineffective
- trustees duties are imperative and more stringent than those called upon to exercise a power
(so similar terms may be valid in eg a power of appointment)
> Re Endacott for the purpose of providing some suitable monument to myself
- unclear what the term suitable encompassed
> Consequences for lack of certainty:

if settlor is the trustee, nothing at all happens

if third party appointed as trustee property is to be held on automatic resulting trust for
the settlor/settlors estate

CONSTITUTION OF TRUSTS
> even where 3 certainties are present, express private trust is only enforceable when it is
completely constituted
> it is then enforceable by beneficiaries, settlor drops out of picture (unless expressly reserved
himself powers)
How is a trust completely constituted?
> Milroy v Lord: - there must be either 1 a transfer or property to the trustees or 2 a declaration
of self as trustee (in both cases, this must be accompanied by intention to create a trust)
- if you intended to make a gift, and failed to make it properly, you cannot simply call it a trust
instead: cannot perfect an imperfect gift
Declaration of self as trustee
> Jones v Lock look you here, I give this to the baby
- writes a cheque to himself
- wife argued that husband had intended to create a trust in favour of child
- court argues there was no trust, no intention to transfer money to child or hold it in trust - they
were having an argument and he wrote the cheque in the peak of the argument
- declaration but no intention
> Richards v Delbridge failure to effect transfer of the lease
- tenant sought to transfer business premises to son
- he did not execute conveyance necessary to effect a transfer of legal land
- grandson argued that court should discern an intention to create a trust court rejected
reasoning as they cannot regard failed transfer as amounting to a gift
> Paul v Constance an intention to create a trust, one trustee but intended to benefit two
beneficiaries
Transfer to trustee
> must be in the appropriate form to the particular type of trust property
> Richards v Delbridge
- he did not execute conveyance necessary to effect a transfer of legal land
FORMALITIES
> even when the above are present, there may still be formalities that need to be observed
Trusts created by will
> governed by s9 Wills Act 1837 (as amended by Administration of Justice Act 1982)
> must be in writing, signed by testator and witnessed by at least 2 people
> trust contained in will is bound to fail if will is void
Inter vivos trusts
> Trusts of personality require no formalities
> Trusts of Land
- s35(1)(b) LPA 1925
- a declaration of trust must be in writing and must be signed by a person able to create that
trust
- sanction = trust is void (applies to express trusts only)
- equity will not permit statute to be used as an instrument of fraud: Rochefoucauld v Bousted > Non express trusts
- s35(2) the section does not effect the creation or operation of resulting, implied or
constructive trusts
Dispositions of existing equitable interests
> s53(1)(c)
- must be in writing and signed by the person disposing of the equitable interest
TERMINATION OF TRUSTS
Revocation pursuant to retention by settlor of an express power to revoke
Rule in Saunders v Vautier
> collectively the beneficiaries can call for legal title and put an end to the trust
- beneficiary must be of full age (18) and sound mind

Re Rose Mr R intended to make transfer of property (Shares) to wife. Filled in form and posed to
comp he had dont everything required by him to make the transfer of shares. At that time,
board of directors had to give agreement.
CA held, at appropriate time, the shares had not been transferred and gift not completed. Time
imp because if transfer had taken effect when he submitted form, no tax payable.
CA held equity should treat the equitable interest as having passed, once Mr R had done
everything he was supposed to do. Pennington v Waine court prepared to stretch Re Rose
principle (as long as you have done everything necessary for you to do to transfer the property,
we can deem that property to have been transfer.)
Wanted to transfer shares to nephew. She completed share transfer form and sent to accountant.
He failed to forward form on to the company. She signed form consenting to nephew becoming
director but failed to transfer sufficient shares for him to be controlling director.
CA Held equitable interest in shares should be treated as passing to nephew because it would
have been unconscionable for her to refuse transfer of shares form of equitable assignment.
Unconscionable for her to go back on what she had promised.
Unlike Re Rose she hadnt done everything necessary for her to do. Problem equitable
interest has passed w/o board of directors agreeing that she should become a shareholder.
Unsatisfactory principal in which trust law is subverting a rule of company law.