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NOTE TAKING IN EQUITY & TRUSTS

Updated: Aug 5, 2022


When taking notes, jot down all you need to remember in several single lengthy paragraph. When students do this, they will know precisely how many pages they needed to review. This makes it much simpler to organise your revision, since you do not have to estimate how long it will take to memorise each subject. Instead, you might try dividing the total amount of pages you need to learn by the number of days you have allotted to yourself to learn them. This can help you better manage your time. See an example of how to compose revision notes further down the page. This seems very bizarre when considered in isolation.


Do not let yourself get overwhelmed to the point that you believe that this tactic is not for you. This may not be the most effective method for students who are more visual or creative in their learning style. In spite of this, I believe that you should give it a go since you could discover that it is a far more effective approach of learning big amounts of knowledge, as the vast majority of students undoubtedly do. If this is not the case, you are free to revert to the method of revision that you normally use without incurring any consequences.


Although you may need to go back to this after you have had a look at it, I believe that some explanation of this form of note taking is essential before you view them. To begin, you should compose your notes by first condensing all you believe you need to know about the topic into organised text.


There are spaces in between parts that are formatted as paragraphs, and the page is packed with content. Separate sections are devoted to each subject covered in a module. When making a note of academic criticism, you should start by writing the name of the academic, and then follow it with the year in which the piece was written (for example, Hayton (1994). Then, write all of your notes for all of your courses in this fashion; as a result, you will able to fit all your notes for an entire module into around 12 sides of A4 paper.


You are going to find that it is to your advantage since it indicates that you will be able to see precisely how much material there was to memorise, and you will also be aware of the amount of time it will take you to memorise each subject. In another post, I will go into more depth on how you may utilise your notes to help you memorise the information that is included inside the modules.


You can find a copy of an example of equity and trusts law notes farther down on this page. It covers the the "certainty" topic. The following are the main elements that will be shown by this example: 1) important general principles of the law; 2) the cases that are relevant to these principles; 3) application of the case 4) scholarly commentary; and 4) names of judges and courts.


NOTE TAKING WHEN STUDYING EQUITY & TRUSTS


  1. Certainty of intention

  2. Certainty of subject matter

  3. Certainty of objects

Certainty of intention


1. General Principle: Intention to create a trust does not require the adoption of formal words. Authority: Paul v Constance [1977] 1 WLR 527, CA


2. General Principle: Intention to create a trust must be assessed objectively by reference to the wording used by the settlor. Authority: Shah v Shah [2011] 1 P. & C.R. DG19, CA

Precatory Words

3. General Principle: The use of precatory words does not create a trust. When someone leaves something in a will and says ‘I hope and pray it will be used for a stated purpose’, this cannot be said to be a trust. Authority: Mugsoorie Bank v Raynor (1882) 7 App Cas 321


4. General Principle: There has been a gradual hardening of attitude by the courts as to how precatory words are to be construed. Authority: Lamb v Eames (1871) LR 6 Ch App 597


5. General Principle: Beneficiaries are not to be made trustees unless intended to be so by the testator. Authority: Re Adams and Kensington Vestry (1884) 27 Ch D 394


6. General Principle: The court will look at the meaning of the words, their true effect and at the intention of the testator as expressed in the will. Authority: Comisky v Bowring-Hanbury [1905] AC 84, HL


Failed gift


7. General Principle: If the attempt to make a gift fails, the court will not rescue the gift by making it a trust. Authority: Jones v Lock (1865) 1 Ch App 25


Certainty of subject matter


8. General Principle: There is no trust when a person failed in designing the subject of the trust properly. Authority: Palmer v Simmonds [1854] 2 Drew 221

9. General Principle: The property that is subject to the trust must be capable of satisfying the test for certainty. The main factor to look at is the description given by the settlor in order to identify the property. Authority: Sprange v Barnard (1789) 2 Bro CC 585


10. General Principle: Where the trust property is certain, but the interest to be acquired by the beneficiaries is uncertain, the trust fails. Authority: Boyce v Boyce (1849) 16 Sim

11. 476


Discussion of Re Kolb and Re Golay


12. General Principle: The certainties must at least be respected so as to define the basic parameters of the trust. If the settlor adopts a term that has not specific technical meaning, the trust may fail. Authority: Re Kolb's Will Trusts [1962] Ch. 531


13. General Principle: A gift of a reasonable income for life may be valid. Authority: Re Golay’s Will Trusts [1965] 1 WLR 969


14. General Principle: A different approach was adopted in the modern case of Ottaway v Norman [1972] Ch 698 where the court was willing to adopt a different interpretation, under which a similar type of situation could be valid. Authority: Ottaway v Norman [1972] Ch 698

Uncertainty of property cases


15. General Principle: There is no trust when the property cannot be identified in a mass of similar property. The absence of proper means to identify the trust property from a mass of similar properties may render the trust invalid. Authority: Re London Wine Co Ltd [1986] PCC 121; Authority: Re GoldcorpExchange Ltd [1995] 1 AC 74


16. General Principle: When the trust property consists of shares, the identification of them only requires the quantification of the interest on its own. Authority: Hunter v Moss [1994] 1 WLR 452; Authority: Re Harvard Securities [1998] BCC 567

Certainty of object - Who are the actors of the trust?

Fixed trust

17. General Principle: It is possible to attribute the equal shares expected only by knowing exactly how many beneficiaries are involved. It is essential to know who the beneficiaries are. Authority: Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch. 20.


Mere Powers


18. General Principle: The test is that a power would be valid if it could be said with certainty whether any given individual is or is not a member of the class. Authority: Re Gulbenkian’s Settlements[1970] AC 508

Discretionary trust

19. General Principle: The modern test for certainty of object for discretionary trusts is called ‘individual ascertainability test’. The power to appoint the beneficiaries is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class. Authority: McPhail v Doulton [1971] AC 424


20. General Principle: A trust, like a power, is valid if it can be said with certainty that any given individual is or is not a member of the class of beneficiaries. Authority: Re Baden Deed Trusts(No 2) [1973] Ch 9



Aspects of certainty

Conceptual Certainty,

Evidently Certainty,

Administrative Workability, or

Capriciousness.


21. General Principle: In order for a trust to be enforced, it must be administratively unworkable. A too large number of beneficiaries may result in the invalidation of the trust. Authority: R v District Auditor, ex p West Yorks MCC (1986) 26 RVR 24, noted [1986] CLJ 391


Resolution of uncertainty


22. General Principle: A settlor may validly empower his trustees to add to a class of beneficiaries of the settlement. A power is not void for uncertainty merely because wide in ambit. Authority: Re Manisty's ST [1974] Ch 17


23. General Principle: If an expression is uncertain, the trust will fail. Authority: Re Coxen [1948] Ch 747


24. General Principle: Where a trust gives rise to a power coupled with a duty and it is not possible to predict that the donee knows all persons who might be objects of the power (since such objects include any person whom the donee considers to have a moral claim) the trust will be void for uncertainty. Authority: Re Leek [1969] 1 Ch 563


25. General Principle: An ambiguous condition precedent may be valid by way of a benevolent construction of the condition. Authority: Re Tuck’s Settlement Trust [1978] Ch 49


26. General Principle: When the words used by the settlor are contained in a condition of defeasance, the court may hear extrinsic evidence of the surrounding circumstances to show the meaning attributed by the testator. Authority: Re Tepper's WT [1987] Ch 358


You can have a look at the full chapter in the book they have been provided here.



Chapter 3 - The Three Certainties


The Three Certainties

Introduction


The validity of a trust is usually the main issue courts have to deal with. Generally speaking, judges will always try to uphold a trust if they can. Nevertheless, it is fundamental that all the necessary requirements are satisfied in order for a trust to be considered valid. The requirements are the following: The three certainties, formalities and constitution. This chapter will analyse in details the first category such as the three certainties: certainty of intention, certainty of subject matter and certainty of object.


The three certainties


The courts have established that three are the certainties that need to be identified in order to have a valid trust: intention to create a trust, trust property and actors involved in the trust.


The standard authority is Knight v Knight (1840) 3 Beav 148 in which Lord Langdale MR stated that a transfer of property subject to a stipulation will create a trust, if the words used are imperative and if the property and objects (i.e. persons intended to be benefited) are sufficiently identified. This dictum is usually reduced to the phrase that the three certainties must be present: certainty of intention, subject matter and objects.


An express private trust cannot be created unless the three certainties are present:


· Certainty of Intention;

· Certainty of Subject Matter; and

· Certainty of Objects (Beneficiaries)


These certainties are decided as a matter of construction. Therefore, the presence of certainty in any one category largely depends on the words used and the circumstances in which they arise. Since “equity looks to the intention not to the form” the courts are willing to accept any form of words provided they convey the required information or intention.


Certainty of intention


Certainty of intention refers to the settlor’s intention to create a trust. The settlor must intend to make a trust. In order to determine whether the requirement is valid, the court will look at the peculiar circumstances of each case. When asking if a disposition exhibits certainty of intention, the court will examine the words and conduct of the proposed settlor to see if these conform to an intention to create a trust. Oral statements, conduct, documents, words used by the settlor etc. will be looked at in order to assess the presence of a trust relationship. For there to be a valid trust it has to be clear that the settlor intended to create a trust. It is not necessary that the settlor has a subjective intention to create a trust. It is sufficient that the settlor exhibits an intention which can be interpreted by the court, in accordance with the relevant legal principles, as an intention to create a trust. The words must impart an imperative obligation on the trustee; that is, the words must make it clear that a person holding the property is obliged to hold it for the benefit of others.


Any form of words may be used - there is no requirement to use the expression “trustee”. Thus in Re Kayford [1975] 1 All ER 604 Megarry J stated:

“It is well settled that a trust can be created without using the word ‘trust’ or ‘confidence’ or the like: the question is whether in substance a sufficient intention to create a trust has been manifested.”


General Principle: Intention to create a trust does not require the adoption of formal words such as the word “trust”.


Paul v Constance [1977] 1 WLR 527, CA Facts: The parties were the ex-wife of the deceased and his new partner before death. Mr Constance obtained a sum of money in compensation for certain injuries and later on he and the Claimant won at the bingo. Mr Constance put all the amount in a deposit account under his name, stating the money was as much Ms Paul’s as his. When Mr Constance died, Ms Paul contended that the money in the deposit account was the subject of an express trust for her benefit. The ex-wife, Mrs Constance, argued that the deposit account was part of the estate that she inherited. Ms Paul brought an action, claiming the sum deposited in the bank account. The issue for the court was whether or not there was an express declaration of trust. Ratio: To establish that an express trust has been created there must be clear evidence from what is said or done of an intention to create a trust. No particular form of expression is necessary for the creation of a trust, if on the whole it can be gathered that a trust was intended. Application: “The money is as much yours as mine,” amounted to an express declaration of trust for the benefit of both Mr Constance and Ms Paul. The court awarded the Claimant a half share of the trust fund.


General Principle: Intention to create a trust must be assessed objectively by reference to the wording used by the settlor.

Shah v Shah [2011] 1 P. & C.R. DG19, CA Facts: The parties were two brothers. The Claimant, Dinesh Shah, sent a letter in which he disposed 4,000 shares in favour of his brother, Mahendra Shah. The share certificate was not delivered, but Mahendra Shah was registered as new owner. Nevertheless, the Claimant tried to argue that the letter was not intended to create a trust, but it was meant to make a gift that was incomplete. Ratio: The issue was whether the letter signed by the Claimant was sufficient to validate the intention to create a trust. The court pinpointed that the interpretation of the document should not have had regard to the subjective intention of the settlor, but to the intention manifested by the words used. Application: The Court of Appeal confirmed the decision of the High Court. The letter showed a valid objective intention to create a trust so that the case went in favour of the Defendant.


Precatory Words


Difficulties with certainty of intention arise where a settlor or testator uses so-called “precatory” words. These are words which express a request, a hope, a desire, or a suggestion that the donee of the property will use in a particular way. The intention of the settlor must be certain otherwise the trust is not valid. The person in control of the property will be entitled to retain it beneficially.

General Principle: The use of precatory words does not create a trust. When someone leaves something in a will and says ‘I hope and pray it will be used for a stated purpose’, this cannot be said to be a trust.


Mugsoorie Bank v Raynor (1882) 7 App Cas 321 Facts: A man gave his widow the whole of his real and personal property, feeling confident that she would act justly to their children and divide the same whenever occasion required it of her. Ratio:To create a trust, it should clearly create a mandatory requirement, the words must be imperative, and a hope or prayer will not suffice. Application: The court held this was not a trust due to the absence of the element of obligation.


General Principle: There has been a gradual hardening of attitude by the courts as to how precatory words are to be construed.


Lamb v Eames (1871) LR 6 Ch App 597 Facts: Mr Lambe gave his estate to his widow “to be at her disposal in any way she may think best, for the benefit of herself and her family” After he died, one of his sons had an illegitimate son, born in the lifetime of the testator, but after the date of his will. The widow died and she devised the house to trustees upon trust for one of her daughters but charged with annuity for the illegitimate son. When the latter tried to obtain payment of the annuity, the daughter disputed on the ground that the widow had only a power of disposition amongst the family. On first instance, the judge held that the widow was entitled to devise to the illegitimate son. The daughter appealed. Ratio: The question for the court was whether those words created any trust affecting the property. By looking at the words the court must evaluate the intention of the testator. Application: The Court of Appeal in Chancery confirmed the decision at first instance. The widow took the property absolutely and she disposed of the power received in a legitimate way.


General Principle: Beneficiaries are not to be made trustees unless intended to be so by the testator.


Re Adams and Kensington Vestry (1884) 27 Ch D 394 Facts: The testator gave his real and personal estate “unto and to the absolute use of my dear wife, Harriet...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.” The question that arose was whether there was a trust for the children or did the widow take absolutely. Ratio: Under these words the widow took an absolute interest in the property, unfettered by any trust in favour of the children. Application: The widow took absolutely. The court stated that they had to “look at the whole of the will which he will have to construe.”

General Principle: The court will look at the meaning of the words, their true effect and at the intention of the testator as expressed in the will.

Comisky v Bowring-Hanbury [1905] AC 84, HL Facts: The testator gave to his wife “the whole of my real and personal estate...in full confidence that she will make such use of it as I should have made myself and that at her death she will devise it to such one or more or my nieces as she may think fit and in default of any disposition by her thereof by her will or testament I hereby direct that all my estate and property acquired by her under this my will shall at her death by equally divided among the surviving said nieces.” Ratio: In construing a will the word of the testator must first be construed irrespectively of rules of law, real or imaginary and the whole will must be looked at in order to find out what the testator's intention was. Application: It was held that the testator intended to make a gift to his wife, with a gift over of the whole property at her death to such of the nieces as should survive her, shared according to the wife’s will, and otherwise equally. The testator did not create a trust. He left the property to the wife absolutely.


Trust or power?


It may be unclear whether a settlor intends to impose a trust on the trustee or intends merely to give him a donee a power of appointment. Consider the following statement: “£100,000 to my trustees for distribution to my relations as my trustees shall in their absolute discretion think fit”. The issue is in the meaning of the word ‘distribution’: ‘It is an imperative and mandatory direction imposing an obligation upon them to distribute, or is it rather to be interpreted as ‘available for distribution’, thus creating no obligation but giving the trustees a power which they may exercise if they so choose. The distinction can become blurred depending on the words used in the will or trust instrument. Penner suggests:


‘The settlor’s use of the word ‘power’ is not determinative, but words such as ‘shall’ or ‘to be’, as in ‘shall distribute’ or ‘to be divided amongst’ seem quite clearly to be imperative and mandatory, strongly indicating the imposition of a duty, and thus a trust. Finally, where a trust is intended but fails for a reason that would not invalidate a similarly framed power, the court will not save the gift by treating it as a power’.


Failed gift


Where a gift or a declaration of trust is made, if it is not carried out as legally required, the court will not accept a declaration has been made.


General Principle: If the attempt to make a gift fails, the court will not rescue the gift.


Jones v Lock (1865) 1 Ch App 25 Facts: Mr Jones had children with a first wife and one son nine months old with the second wife. He came back from a business trip and put a cheque into the hand of his son of nine months saying ‘I give this to baby for himself and put the check into the safe’. Mr Jones also got in touch with his solicitor saying ‘I shall come to your office on Monday to alter my will, that I may take care of my son’. On the same day he died. The issue was whether Mr Jones intended to make a declaration that he held the cheque in trust for the child. Ratio: Lord Cranworth, L. C. said ‘I regret to say that I cannot bring myself to think that, either on principle or on authority, there has been any gift or any valid declaration of trust. The cheque was in the man’s name he had made no efforts to endorse the cheque over to his son or to a trustee for the baby’. Important transactions of this kind have to be carefully judged since the effect of declaration of trust may be very significant. The father had the intention to give something to the child but the facts had to be looked at in an objective way. Application: The father did intent to give something but he did not intent to enable the child to bring an action of trover for the cheque. The father simply meant to say that he could make a provision for the boy.


Certainty of subject matter


Certainty of subject matter refers to the trust property. In order for a trust to be valid it is essential that the settlor has properly described it in order to identify it. The question is: What property is the property subject to the trust? The trust property has to be specified at the outset along with the beneficial interest to be taken in the trust property. If the trust property is not defined with sufficient precision, the trust will be invalid.


General Principle: There is no trust when a person failed in designing the subject of the trust properly.


Palmer v Simmonds [1854] 2 Drew 221 Facts: A testatrix left on trust “the bulk” of her residuary estate to her heir. She had confidence in him that, if she should have died without lawful issue, he would have left ‘the bulk’ to four named persons equally. Ratio: “What is the meaning then of bulk? The appropriate meaning, according to its derivation, is something which bulges out… Its popular meaning, we all know. When a person is said to have given the bulk of his property, what is meant is not the whole but the greater part, and that is in fact consistent with its classical meaning. When, therefore, the testatrix uses that term, can I say that she has used a term expressing a definite, clear, certain part of her estate, or the whole of her estate? I am bound to say that she has not designated the subject as to which she expresses her confidence; and I am therefore of opinion that there is no trust created; that [the residuary legatee] took absolutely, and those claiming under him now take”. Application: Since it was not possible to carve out from the residue that portion which was to be held on trust, the trust failed and the lasting beneficiary took the whole property absolutely.


General Principle: The property that is subject to the trust must be capable of satisfying the test for certainty. The main factor to look at is the description given by the settlor in order to identify the property.


Sprange v Barnard (1789) 2 Bro CC 585 Facts: The case concerned a disposition of £300 in joint stock annuities (i.e., a wasting asset) left "for my husband (…) and at his death, the remaining part of what is left, that he does not want for his own wants and use, to be divided between my children". Ratio: The formula or mode of ascertainment of the trust property specified by the settlor must be sufficiently precise to enable the courts to identify the trust property. Application: The court held that the husband was absolutely entitled to the £300. The subject matter for the children was not specified and the husband was entitled to the £300, because the trust for the children had become void through not defining the subject of their benefit.


General Principle: Where the trust property is certain, but the interest to be acquired by the beneficiaries is uncertain, the trust fails.


Boyce v Boyce (1849) 16 Sim 476 Facts: A testator left four houses in trust ‘one for Maria, whatever she shall choose and the other three to Charlotte’. Maria predeceased the testator. The effect of this was to cause the gift to her to lapse (as it is a rule of succession law that the beneficiary must, subject to one or two exceptions, survive the testator). One of the houses thus fell into residue. Ratio: The issue for the court was whether Charlotte was entitled to acquire one of the properties. Since Maria was supposed to select the house and she could not do it, the intended express trust failed. Application: It was held that Charlotte’s gift failed for uncertainty as to her beneficial interest as it was impossible to decide which of the three houses she was entitled to. The result was that the four properties were held on resulting trust for the testator’s estate. Bear in mind that if Maria had survived the testator, even though only for a split second, then the trust would have been valid as Maria’s estate could have made the choice and Charlotte would have been certain as to her beneficial entitlement. This case demonstrates that judges in 1849 were maybe excessively concern with certainty in a very doctrinal way.


General Principle: The certainties must at least be respected so as to define the basic parameters of the trust. If the settlor adopts a term that has not specific technical meaning, the trust may fail.

Re Kolb's Will Trusts [1962] Ch. 531 Facts: A testator bequeathed the residue of his estate to his trustees on trust to invest the proceeds of sale in stocks, shares and debentures “in the blue chip category”. These directions were inserted in the will under clause 6. The trustees asked the court to give interpretation to the investment clause. They wanted to know whether the clause was validly created and possibly invest in other type of shares. Ratio: The issue for the court was in the construction of the investment clause in the will. In large public company the term ‘blue-chip- usually refers to safe shares, but it is not a precise term. Application: The court held the clause void because it was not objective and precise enough to satisfy the test of certainty. The direction to invest in blue chip shares was no certain to be enforceable.


General Principle: A gift of a reasonable income for life may be valid.


Re Golay’s Will Trusts [1965] 1 WLR 969 Facts: A testator directed that ‘Tossy’ (Mrs Florence Bridgewater) was "to enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties." Ratio: The words ‘reasonable income’ directed an objective determinant of amount, which the court could, if necessary, apply. ‘Reasonable’ is a test that the court deals with on a daily basis. Courts can objectively ascertain what a reasonable income is. Application:Ungoed-Thomas J upheld a direction to executors to let ‘Tossy’ (Mrs Florence Bridgewater) enjoy one of the testator’s flats during her lifetime ‘and to receive a reasonable income from my other properties.’ The court let the trustees decide which flat, the subject matter was uncertain although it was not so uncertain as to be unworkable.


Discussion of Re Kolb and Re Golay


In Re Golay’s Will Trust [1965] 1 WLR 969 the court decided that the case satisfied the certainty of subject matter since it contained a degree of objectivity. Nevertheless, it could be argued whether the judgment was in line with previous cases. In the last edition of Parker and Mellows the decision has been described as inconsistent with contemporaneous decisions on the same matter. Nevertheless, the case seems to be consistent with the practice the courts were trying to introduce in order to avoid to set aside too many trusts.


Todd highlights this


“case should be contrasted with Re Kolb ‘s WT, where the view appears to have been taken of the term ‘blue-chip’ securities. In Re Golay’s WT, the view appears to have been taken that the yardstick actively defined, since it was conceded that the court would have no difficulty in quantifying ‘reasonable income’. No doubt Golay was close to the line because different trustees might apply the yardstick differently, so as to reach different results, but that is no different from ‘residing’ in Gulbenkian (below). In both Golay and Gulbenkian there was only one test, whereas in Kolb different persons might reasonably differ as to the test to be applied”.


General Principle: A different approach was adopted in the modern case of Ottaway v Norman [1972] Ch 698 where the court was willing to adopt a different interpretation, under which a similar type of situation could be valid.


Ottaway v Norman [1972] Ch 698 Facts: A lived with his housekeeper, B, in a house, which he owned. A was a widower and had a son C by his former marriage, and A and B had for many years lived as man and wife. A made a will in which he left the house to B absolutely. There was clear evidence that, both before and after the will was made, A had informed B and C that his intention was that B should have the house for her life and that C should have it thereafter, and that B had always agreed. Immediately after A's death B made a will leaving the house to C. B later changed her will and left the house to D. After B's death C claimed the house from B's executor under a secret trust. Ratio: It is perfectly possible for a secret trust to confer a life interest on the trustee with an obligation on the trustee to dispose of the property in a certain way by will. Application: In view of the clear evidence that A had informed B of his intention that she should take the house subject to an obligation and that B had accepted the obligation, she was bound by it. The fact that the obligation involved B's leaving the property in a certain way by will and not an inter vivos transfer was irrelevant. Accordingly, B's executor was bound to transfer the house to C. In this case the trust was described as a floating or suspended trust because it the trust floated until the wife died and then it came into operation.


Uncertainty of Property Cases


A problem, which may arise in this type of case, which the courts did not have a chance to address: What if B had mixed her money she received from her husband, with her own money or money of a husband she has remarried, this would make it very difficult to identify which money constituted the trust and what was hers to leave for D. It has been suggested this case illustrates that modern judges nowadays are more inclined to try and find a way to validate a trust, than the judges in some of the older cases who may be more inclined to invalidate a trust for the sake of maintaining certain rules, maybe the modern judge is more confident that they can find a way to implement a trust, even though its meaning is not certain.


General Principle: There is no trust when the property cannot be identified in a mass of similar property. The absence of proper means to identify the trust property from a mass of similar properties may render the trust invalid.


Re London Wine Co Ltd [1986] PCC 121 Facts: The Defendant was a company dealing in wines. Purchasers were provided with a document of title confirming the title as sole and beneficial owner of the wine. According to the contract for sale, once the customer had bought the wine, it would have been stored for him by the vendor in the warehouse. The company went into liquidation. Customers claimed their wines on the ground that a trust was created. Ratio: Since there were no means of identifying the property acquired by the Claimants from the mass of similar property, the certainty of subject requirement failed. Application: It was not possible to work out which wine belonged to them. Oliver J – wine company, hold wines for some customers in the warehouse. The wine was never specifically separated. The general creditors wanted the wine to be sold to pay the debts, while the customers wanted the wine they paid for.


Re Goldcorp Exchange Ltd [1995] 1 AC 74 Facts: The Defendant was a company that dealt in gold and other precious metals. The company sold unascertained bullion for future delivery. Customers received an invoice or certificate verifying their ownerships. The company was supposed to maintain a separate and sufficient stick to meet the customers’ purchase, but it failed to do so. The cmpnay went into liquidation. Purchasers tried to recover their gold. Ratio: The court needs to know specifically which gold belongs to the customers. Notwithstanding that one bar of gold was worth as much as another one, you still need to have a proprietary right in a specific piece of property. Application: – Lord Mustill explained that“It is understandable that the claimants, having been badly let down in a transaction concerning bullion should believe that they must have rights over whatever bullion the company still happens to possess. Whilst sympathising with this notion their Lordships must reject it, for the remaining stock, having never been separated, is just another asset of the company, like its vehicles and office furniture. If the argument applies to the bullion it must apply to the latter as well, an obviously unsustainable idea.” Therefore, the court held that the purchasers had not acquired title since it was not known to what goods that title related.


General Principle: When the trust property consists of shares, the identification of them only requires the quantification of the interest on its own.


Hunter v Moss [1994] 1 WLR 452 Facts: A company, called Moss electronics, owned by Mr Moss director. Mr Hunter worked for the company. Mr Moss gave Mr Hunter 50 of the shares to be on trust for his employee. The shares were never segregated but Mr Moss gave Mr Hunter a proportion of dividends to reflect equitable ownership of 50 shares. The company got sold to a bigger company for a large profit. The shares were sold and Mr Hunter went to court to try and get his part. Ratio: When any 50 shares out of a total of 950 could satisfy a trust, an oral declaration was not void for uncertainty if the shares were indistinguishable from each other. Application: Dillon J held that there was a valid trust that there was no uncertainty of the subject matter. His main reason for this was that if the transfer of shares had been done by will when Moss had died then it would have been valid, so it must also be valid here by declaring himself trustee of the shares


Affirmed in

Re Harvard Securities [1998] BCC 567 Facts: The Defendant was a company dealing in stockbroking activities. The company went into liquidation and the issue was whether the company or its former clients held the beneficial interest in two groups of shares held by the company. Ratio: When the shares out of a total can satisfy a trust, it does not matter whether the shares are indistinguishable from each other. Neuberger J had to follow Hunter v Moss as binding precedent in English law. Application: The court held that a valid trust was created and that the former clients had a beneficial interest in the shares.

Certainty of object - Who are the beneficiaries of the trust?


‘Objects’ are a generic term, but here the term certainty of objects is used to describe or define the beneficiaries, more precisely who the objects are, what they are to receive and when they will receive it. The concern here is that basically the beneficiaries must be certain and identifiable. The basic rule was sent out by Lord Willberforce in McPhail v Doulton [1970] UKHL 1:


‘…a trust should be upheld if there is sufficient practical certainty in its definition for it to be carried out, if necessary with the administrative assistance of the court, according to the expressed intention of the settlor’.


Lord Willberforce points out that the object of a trust does not have to be absolutely certain, just ‘sufficient’ with ‘practical certainty’. Moreover, the ‘administrative assistance’ suggests where certain types of cases will go to court on a constructive summons and the court will provide constructive meaning of a trust instrument.


The certainty test varies according to the nature of the trust, for a fixed trust there is need for a greater degree of certainty, because the trustees are mechanically implementing the trust. Contrast to a discretionary trust, the trustees are exercising discretion anyway, thus it is not so important if the beneficiaries are not so well defined. Contrasted to powers, there is even less need for a sufficient practical certainty needed than with discretionary trusts.


The concern here is that basically the beneficiaries must be certain arid identifiable. This area is by no means clear. A bequest of ‘my house Blackacre and £25,000 on trust for my brother Jim’ creates no problems provided the testator has only one brother named Jim. In such a case it is clear who the beneficiary is. However, difficulties would arise if the testator had more than one brother with the same name. Unless resolved by the limited ability to admit extrinsic evidence, the gift will fail. Most of the problems that have arisen in this area have been encountered in relation to class gifts. Until recently it was important to distinguish into which category a particular gift or trust fell as the certainty requirements varied accordingly. The categories, which are important, are:

  • Fixed trust

  • A discretionary trust (or trust power);

  • A mere power


It should be understood at the outset that the courts have devised tests in relation to each category, which tests need to be satisfied in order to determine whether there is certainty of objects. Once the test for the particular category is satisfied, then there is certainty of objects. Otherwise the power or trust fails.


Fixed trust


In the case of fixed trusts, the trustees have no discretion at all. The shares to be taken in the trust by the beneficiaries are predetermined by the settlor or testator. It follows that a fixed trust must, for its execution, have beneficiaries, which are also known so that a complete list can be made of them (complete list test). Specifically, a complete list of all a trust’s beneficiaries must be capable of being drawn up. This is the view of Jenkins LJ in IRC v Broadway Cottages [1955] Ch 20. If the complete list is not capable of being drawn up then the trust fails for uncertainty of objects, and a resulting trust is set up.


For instance, ‘my trustees shall divide the property amongst my acquaintances of good moral character’. Such a trust would fail, as it would be a breach of trust to distribute only to those that the trustees could find if there were in fact others.


General Principle: It is possible to attribute the equal shares expected only by knowing exactly how many beneficiaries are involved. It is essential to know who the beneficiaries are.


Inland Revenue Commissioners v Broadway Cottages Trust [1955] Ch. 20 (overruled) Facts: The settlor was Mr Timpson that created a settlement whose subject was £80,000 to be held on trust for the wife of the settlor and the other persons specified in the schedule. The issue was that the beneficiaries were not identifiable when the trust came into operation. Ratio: Jenkins LJ “It must, we think, follow from the appellants’ concession to the effect that the class of ‘beneficiaries’ is incapable of ascertainment … that the trust of the capital of the settled fund for all the beneficiaries living or existing at the termination of the appointed period, and if more than one in equal shares, must be void for uncertainty, inasmuch as there can be no division in equal shares amongst a class of persons unless all the members of the class are known.” Application: The trusts were not such as the court could enforce. The trusts were void for uncertainty.


Mere Powers


These transfers are different from discretionary trusts. Discretionary trusts are to a certain extent imperative, while powers are entirely discretionary. For this reason, the court will never be involved in ordering or ensuring distribution. However, in the case of a ‘fiduciary power in the full sense’, the court may direct the donees of the power to consider the exercise of the power as in Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513. Moreover, if no appointment is made the property will revert to the settlor or to the testator or to their estates or to the persons designated as taking in default of appointment.


Thus, as powers are entirely discretionary, there is no need to have a complete list. Nevertheless, some form of certainty test is required in order to ensure that the trustees or donees of the power stay within the bounds of the power. In other words, there must be some criteria to ensure that there is no appointment to a non-object (that is, someone outside the class). If it is impossible to determine between objects and non-objects, then the power fails for uncertainty. The relevant test for certainty of objects is that laid down in Re Gulbenkian’s Settlements [1970] AC 508.


general Principle: The test is that a power would be valid if it could be said with certainty whether any given individual is or is not a member of the class.


Re Gulbenkian’s Settlements[1970] AC 508 Facts: The trustees were given a power to apply income from the trust fund to maintain, among others, any person in whose house or in whose company or in whose care Gulbenkian may from time to time be residing and there was a gift over in default of appointment. Ratio: per Lord Upjohn “…with respect to mere powers, while the court cannot compel the trustees to exercise their powers, yet those entitled to the fund in default must clearly be entitled to restrain the trustees from exercising it save among those within the power. So the trustees or the court must be able to say with certainty who is within and who is without the power.” The power would not fail merely because the donees of the power could not come up with a complete list (‘the any individual’ test). There must, therefore, be some criteria available to the donees or trustees, which enable them to decide in every case whether a person is within the class, or not. If these criteria can be satisfied, then the power is valid with regard to certainty of objects. Application: In upholding the power the House of Lords held that the individual ascertainability test was the applicable test for powers.


Discretionary trust


A discretionary trust is a trust for a class in which the trustee is given the ability to determine the individual shares within that class. Thus the appointment ‘all to one’ would be possible.


Before 1971, if no appointment was made, the court considered that it had to carry into effect the trust element, but could only do so by making an equal division amongst all the members. It thus followed that if no complete list could be drawn up the discretionary trust would fail. Further, it would fail even if the trustees were perfectly willing to exercise the power given to them. This meant that the mere possibility of future intervention by the court and the impossibility of drawing up a complete list rendered the trust void from the outset. The authority for this was IRC v Broadway Cottages Trust Ltd [1955] Ch 20.


After 1971, the change as to the test for certainty of objects in respect of discretionary trusts came about as a result of the case of McPhail v Doulton [1971] AC 424 (sub nom Re Baden). In that case the House of Lords had to consider the validity of the following clause: ‘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 and ex-employees of the company or to any relatives or dependants of any such persons in such amounts...’ It was accepted as a list. The House of Lords held that the distinction as to the tests for certainty of objects between mere powers and discretionary trusts was arbitrary, illogical and embarrassing. Accordingly, they overruled the complete list requirement with regard to discretionary trusts. They held that the appropriate test for this category is the Gulbenkian test for mere powers, namely the trust is valid if it can be said with certainty that any given individual is or is not a member of the class’. (Per Lord Wilberforce.)


General Principle: The modern test for certainty of object for discretionary trusts is called ‘individual ascertainability test’. The power to appoint the beneficiaries is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class.


McPhail v Doulton [1971] AC 424 Facts: The settlor transferred by deed to trustees shares in a company for the benefit of the employees of the company, their relatives and dependants. The issue was whether the trust satisfied the test for certainty of object. Ratio: In order to satisfy the test, the discretionary trust must say with certainty who is or is not a member of the class of objects. Application: The House of Lords held that there was a trust and laid down the test for certainty of object.


McPhail v Doulton was then remitted back to the Chancery Division where it became known as Re Baden Deed Trusts (No 2) [1973] Ch 9 in order to decide whether the clause in question was valid under the Gulbenkian test. It was held that it was valid and the next of kin appealed again to the Court of Appeal: Re Baden Deed Trusts (No 2) [1973] Ch 9. The Court of Appeal had difficulty in applying the Gulbenkian test. The majority appeared to start from the relatives meaning all blood relatives (i.e. however remote). This meant that there were some people who might be relatives or who, alternatively, might not be, it being the case that it is impossible to find out whether or not two people might be remotely related. It was argued that this meant that the trust failed on the test propounded by the House of Lords (i.e. could it be said with certainty of any person, no matter who, that he is or is not a member of the class?). Sachs LJ said that the House of Lords test was one of linguistic, not evidential certainty, and that a person who could not prove himself to be a relative in fact was not a relative. Megaw LJ seemed to agree but added that it must be possible to say of a substantial number of people whether or not they were within the class. Stamp LJ disagreed: he considered that the trust would fail unless the word ‘relatives’ was construed as meaning next of kin or nearest blood relatives.


General principle: A trust, like a power, is valid if it can be said with certainty that any given individual is or is not a member of the class of beneficiaries.


Re Baden Deed Trusts (No 2) [1973] Ch 9 Facts: A settlor created a trust for the benefit of the staff of his company. According to Clause 9 of the trust, the trustees had to 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. When the settlor died the executors alleged that the trusts were void for uncertainty. Ratio: Once the court had made that decision the trustee’s tried to implement the trust, but there was further litigation over what was actually meant, by the is or is not test. Each judge had a different opinion of what was meant by the is or is not test. The trust was upheld although each judge provided a distinct stance as to the is or is not test.


  • Lord J Sachs emphasised that the court was concerned only with conceptual certainty test and not evidential certainty. Sachs LJ was able to validate the trust only by adopting very wide definitions of both ‘relatives’ and ‘dependants’, enabling a clear line to be drawn between those who were within and without the class. He took the view that relatives were defined as any persons who are linked by a common ancestor. The meaning of people with a common ancestor is clear although, it is clear there may also be evidential problems, Sachs LJ believed evidential certainty was not an issue here. He observed that ‘dependants’ had already been defined by the courts, for example in relation to the Workmen’s Compensation Act 1897, but he was also able to adopt a bright line definition by taking the view ‘that any one wholly or partly dependent on the means of another is a “depend-ant”.’


  • Lord J Stamp emphasised that the is or is not test was not just about conceptual certainty, a class can be conceptually certain, but it can still fail the is or is not test because of evidential uncertainty. It must be possible for the trustees to make a comprehensive survey of the range of objects, but he did not think it would be fatal if, at the end of the survey, it was impossible to draw up a list of every single beneficiary. LJ Stamp took the view that relatives defined as any persons who are linked by a common ancestor, was evidentially uncertain. He would have taken the view that the trust failed, had he not felt compelled to follow an early House of Lords authority, which had held that a discretionary trust for ‘relations’ was valid, ‘relations’ being defined narrowly for distribution purposes as ‘next of kin’.


  • Lord J Megaw adopted a different solution, however, requiring that as regards a substantial number of people, it can be shown with certainty that they fall within the class. This is rather a vague test — clearly it is not enough to be able to show that one person is certainly within the class, as this test was rejected in Re Gulbenkian’s Settlements [1970] AC 508. Presumably, the test requires evidential, as well as conceptual certainty. For example, relatives defined as any persons who are linked by a common ancestor, LJ Megaw took the middle line and believed with that class if you could always show a substantial number of people, then they are relatives.

Application: The court held that the trust was valid. The reasoning behind the judgment was based on the differentiation between powers and trusts. The content of clause 9 amounted to a power so that it was valid. The test of certainty did not need to be applied to the clause.


Argument in favour of Lord J Stamp’s view - It would seem LJ Sachs would uphold a trust that cannot be carried out. It is very well saying all you need is conceptual certainty, but if you do not have any evidential certainty the trust will not be viable. LJ Stamp recognises the realities that a trust should not be validated if it cannot be carried out.


Argument against Lord J Stamp view - One objection is that the way LJ Stamp interpreted the is or is not test, seems to resurrect the complete list test for discretionary trusts which was rejected by the House of Lords as the incorrect test. According to Stamp’s view that you have to be able to establish evidential certainty and who is in the class and who is not, this makes it unnecessarily strict on the class, which more or less amounts to resurrecting the complete list test.


Aspects of certainty

The following analysis of types of certainty is quite helpful in understanding the rules the courts.

  • Conceptual or semantic certainty

  • Evidential certainty

  • Ascertainability

  • Administrative Workability or Capriciousness


Conceptual or semantic certainty


Conceptual certainty refers to the degree of precision in the language to define the class of beneficiaries. This refers to the definition of classes of beneficiaries and if that class of beneficiaries is well defined. If the language is well defined, conceptual certainty will be established. For instance, if it was stated ‘everyone born within the London metropolitan postal district’, the definition of the class of people would be considered clear and precise. Alternatively, if it was stated ‘everyone born in the vicinity of London’, the meaning would not be precise. The first expression is conceptually certain and the second expression is conceptually uncertain.


The description of the beneficiary must be certain. A further example stems from McPhail v Doulton [1970] 2 All ER 228. In the case there is reference to ‘my first cousins’ and to ‘people under a moral obligation to me’. If both of these classes are compared, the former statement is certain in meaning thus, conceptually precise but the second one is not conceptually certain because it is vague to say what counts as a moral obligation.


Each possible meaning might be precise. When the statement is ambiguous, it lacks conceptual certainty. With ambiguity it would be possible for the court to suggest which meaning, if there is an expression with two possible meanings both of which are precise, the court can usually say which was intended. But in the case of a vagueness there is not much the court can do, if something is too vague it is conceptually uncertain.


Sometimes, one-way of defining conceptual uncertainty, what is seen in case and literature, is to say, ‘can you say of any hypothetical person, where he falls into the class’. When you say hypothetical, you can then decide what features of that person are, if the meanings are clear then you can always say whether a hypothetical person falls into that class or not.

Evidential certainty


Evidential uncertainty refers to those circumstances where a class is well defined in meaning and is accordingly conceptually certain, but it may be impossible to say that the person belongs to the class due to lack of evidence. For instance, the expression ‘People born in the borough of Hillingdon between 1960 and 1962’ is conceptually certain, but it may not be straight forward to establish who exactly falls within the class. It is conceptually certain, but it may fall short of being evidentially certain, if an applicant beneficiary is unable to produce a birth certificate as evidence.


Ascertainability


The notion of ascertainability refers to the question of the whereabouts or continued existence of persons who are clearly members of a class. It does not refer to the question “who are members of the class”? For instance, a class may be defined in terms of indisputable conceptual clarity, e.g. “the brother and sisters of X.” There may in the particular case be no evidential difficulty whatever in so far as it may be possible to draw up a complete list of all those persons who have been born brothers and sisters of X. There may on the other hand be some doubt as to “the whereabouts or continued existence of some members [of the class].”


Administrative Workability or Capriciousness


Administrative workability refers to the problem of actually administering the trust, a meaning of a trust could be clear, it could be free of problems of evidential certainty and it is known who falls inside or outside the class along with their whereabouts, but nevertheless, the nature of the trust could be such, that it is practically unworkable to carry out the trust. In Re Baden (No. 1) [1970] UKHL 1 Lord Wilberforce said:


“There may be a third case where the meaning of the words used is clear but the definition of bene­ficiaries is so hopelessly wide as not so form ‘anything like a class,’ so that the trust is administratively unworkable…”


General Principle: In order for a trust to be enforced, it must be administratively unworkable. A too large number of beneficiaries may result in the invalidation of the trust.


R v District Auditor, ex p West Yorks MCC (1986) 26 RVR 24, noted [1986] CLJ 391 Facts: 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.' Ratio: The court focused on the fact that it was administratively unworkable for the court to distribute such small amounts to all people. Even though the trust was not ‘capricious’, it was too difficult and costly to enforce. Per LJ Wilberforce ‘The definition was hopelessly wide as to be incapable of forming anything like a class’. Application: The court held that since there might be as many as two-and-a-half million beneficiaries the trust would not take effect as an express private trust. It was unworkable since the proposed class was so wide as to be unascertainable in practical terms. Furthermore, the trust was a non-charitable purpose trust, and therefore void in law.


Resolution of uncertainty


Cases that illustrate the application of the aspects of certainty:


General Principle: A settlor may validly empower his trustees to add to a class of beneficiaries of the settlement. A power is not void for uncertainty merely because wide in ambit.


Re Manisty's ST [1974] Ch 17 Facts: By a settlement made in 1971, the settlor gave the trustees discretion to pay, apply, appoint or settle the trust funds for the benefit of any of the beneficiaries within 79 years of the date of the settlement. He also gave them power by any deed or deeds revocable or irrevocable to declare that any persons, corporations or charities should be included in the class of beneficiaries. In 1972 the trustees by deed purported to exercise the power by adding to the class the settlor's mother and any person who should for the time being be his widow. Doubts arose as to the validity of the power. They took out an originating summons to determine its validity. Ratio: A special power in favour of a class is valid if it can be said with certainty whether a given person is a member of the class, and an intermediate power is likewise valid. The mere width of the power does not render it uncertain. Application: The court held that the settlor was not precluded by the doctrine of non-delegation from conferring an intermediate power on his trustees. The power in question was not invalid for uncertainty. The settlor was entitled to confer absolute discretion on his trustees and was not obliged to provide guidance on how it was to be exercised.


General Principle: If an expression is uncertain, the trust will fail.


Re Coxen [1948] Ch 747 Facts: In the case there was a gift subject to a condition. According to the condition the person would receive the gift if in the opinion of the trustees he has ceased to reside in at a certain place. The first issue was whether this expression was conceptually certain. Ratio: Evidential uncertainty is where there is a question of fact it is impossible to answer, such as when a Claimant cannot prove he is a beneficiary. This does not necessarily invalidate the trust. Application: The court said this was a conceptually certain expression, it is not completely certain but it has sufficient practical certainty. The court also considered if the expression had not been certain, the trust would have been valid because the trustees had a power to decide.


General Principle: Where a trust gives rise to a power coupled with a duty and it is not possible to predict that the donee knows all persons who might be objects of the power (since such objects include any person whom the donee considers to have a moral claim) the trust will be void for uncertainty.


Re Leek [1969] 1 Ch 563 Facts: The deceased involved in the case was the managing director of a company. The company arranged for the taking out of an approved pension scheme insurance policy by the company as trustee for the deceased. The trust was subject to certain further trusts and provisions which included a statement that in the event of the death of the deceased before retirement age all benefits “shall be held by the company upon trust for the benefit of such …other persons as the company may consider to have a moral claim upon you.” Ratio: The trustees can always take a view on who have a moral claim on the testator. Application: The court held that the first part of the trust was void for uncertainty of objects by virtue of the inclusion of "persons the company may consider to have a moral claim upon" the deceased. Nevertheless, the court explained that the uncertainty could be resolved because of the trustees’ opinion.


General Principle: An ambiguous condition precedent may be valid by way of a benevolent construction of the condition.


Re Tuck’s Settlement Trust [1978] Ch 49 Facts: Mr Truck set up trusts in 1912 providing that an income should be paid to the successors to his baronetcy providing that each was of the Jewish faith and married and living with an "approved wife". If separated, the successors had to be certified by one of two designated chief rabbis as being so through no fault of his. Ratio: "Jewish blood" meant "some" Jewish blood and there was no uncertainty in the bequest. Normally a third party cannot resolve conceptual uncertainty, but in this particular case, a chief rabbi, who in the nature of his office has to take view of who counts as a Jewish person, can be taken into consideration in removing the uncertainty. Application: A settlement providing for payment of an income to a beneficiary so long as he is of the Jewish faith and married and living with an "approved wife " of Jewish blood from at least one parent brought up in and not having departed from the Jewish faith, any doubt to be resolved by one of two designated rabbis, was held not void for uncertainty.


General Principle: When the words used by the settlor are contained in a condition of defeasance, the court may hear extrinsic evidence of the surrounding circumstances to show the meaning attributed by the testator.


Re Tepper's WT [1987] Ch 358 Facts: Mr Tepper was a testator that left certain bequests to beneficiaries provided that "they shall not marry outside the Jewish faith." Ratio: The words "the Jewish faith" are not necessarily void for uncertainty when contained in a condition of defeasance, and the court may hear extrinsic evidence of the surrounding circumstances to show the meaning attributed by the testator. Application: Whether the beneficiaries' interests were vested but liable to be divested, or were contingent interests, the proviso was a condition of defeasance. However, the words were not necessarily void for uncertainty, and the court would adjourn the question for the parties to file extrinsic evidence of the surrounding circumstances to show the meaning attributed to the words by the testator.