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Equity and Trusts

THE THREE CERTAINTIES
All trusts must satisfy the three certainties (except charitable trusts – do not need to satisfy the
certainty of objects requirement)
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Certainty of subject matter – requires certainty as to what property is held on trust and the
beneficial interests involved
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Certainty of objects – beneficiaries
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Every trust (except charitable trusts) must satisfy the three certainties as set out by KNIGHT V
KNIGHT (1840):
a) Certainty of intention – Is a trust intended?
b) Certainty of subject matter – What property is to be subject to the trust and what are the
beneficial interests?
c) Certainty of objects – Who are the beneficiaries of the trust?
Trusts can be declared orally or in writing
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CERTAINTY OF INTENTION
Intention is established by considering all the circumstances of the case – equity looks to the intent
rather than the form
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Precatory words express a hope, a wish or a moral obligation
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Precatory words are not regarded as creating a binding trust
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LAMBE V EAMES (1871) – ‘to be at her disposal in any way she may think best, for the benefit of
herself and her family
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It was not a trust so the property
was hers to do with as she liked
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’
There are no special words that create a trust
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COMISKEY V BOWRING (1905) – ‘in full confidence and ‘in default of any disposition’- when read as
a whole, the court concluded that the testator had intended a trust, under which the wife held a life
interest
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b) Conduct
An intention to create a trust can also be inferred from the conduct of the donor
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He often told Mrs P that the money was ‘as
much yours as mine
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It was held that
these actions were sufficient to infer that Mr C had made a declaration of trust of the money in the
bank account and Mrs C was entitled to his half of the account under intestacy
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1000 shares had been issued, so 5% = 50 shares
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Intangible things
cannot be destroyed
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LASSENCE V TIERNEY (1849)
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CERTAINTY OF SUBJECT MATTER
There are two elements to certainty of subject matter:
1) It must be certain/clear what property is held on trust; and
2) The beneficial interests must be clear/certain
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PALMER V SIMMONDS (1854) – The testatrix had left ‘the bulk of my said residuary estate’ to
Thomas Harrison to hold on trust for various people
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Bulk could mean anything, so trust was not established
and it also had to be clear which property went to which beneficiary
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RE GOLAY’S WILL TRUST (1965) – ‘reasonable income’ did not cause the trust to fail for uncertainty
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This phrase also indicates an objective yardstick
which the courts can apply
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However, where the subject matter is certain, but the beneficial share in that property is not then
the trust will fail and will be held on resulting trust for the settlor
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’
The type of property:
Certainty of subject matter can depend upon the type of property
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g
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Where
there is a trust of part of a bulk of tangible property, the trust property will only be certain if it has
been separated from the rest
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RE LONDON WINE CO (1986) – Buyers of wine stored in various warehouses could not establish a
trust of particular bottles in their favour as the bottles had not been segregated or identified in any
way
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Tangible things can
be exposed to legal problems
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g
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HUNTER V MOSS (1994)
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Equity and Trusts
b) The beneficial interests must be clear/certain:
BOYCE V BOYCE (1849) – Testator established a trust of four houses for his widow for life and after
her death in trust to convey to his daughter Maria one of the houses ‘whichever she should choose’
and to convey all his other houses to his daughter Charlotte
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The property had been clearly identified but the beneficial interest had not
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RE GOLAY’S WILL TRUSTS (1965) – The question in this case was whether the instructions given to
the trustees were certain enough to allow them to carry out the terms of the trust
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If there is a lack of certainty as to the subject matter of the trust, this will cast doubt on whether the
settlor truly intended to create a trust – MUSSOORIE BANK LTD V RAYNOR (1882)
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If there is a lack of certainty as to the subject matter, the trust fails and the property will return to
the settlor or the estate on resulting trust
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Every trust (except for charitable
trusts) must satisfy this requirement
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The Court needs to know who the beneficiaries are as the property will belong
to them; therefore courts need to know who has the right to sue the trustees
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Fixed trusts – beneficial interests are fixed, e
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‘in equal shares
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The amount the beneficiaries receive is at the discretion of the trustees
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It is known as The ‘list certainty’ test – IRC V BROADWAY COTTAGES TRUST (1955) – all
the beneficiaries must be able to be identified (as the size and share each person gets will depend on
the number of beneficiaries
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Conceptual: Relates to the definition of the class of potential beneficiaries
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Evidential Certainty: Relates to the issue of whether or not an individual can be found or proven to
be a member of the class
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OT COMPUTERS LTD V FIRST NATIONAL TRICITY FINANCE LTD (2003) – ‘customers’ and ‘urgent
suppliers’ – There was no difficulty about the customers’ trust as the beneficiaries could be clearly
identified and the company had actually created a list of customers
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GOLD V HILL (1999) – ‘carol and the kids’ – there is ambiguity but the general intention is clear – it is
to provide help for Carol to look after herself and her children
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The donee of a fiduciary power is not under a duty to distribute the property
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If an arrangement refers to a ‘gift over in default of appointment’ or a direction that remaining
money is to return to the settlor’s estate, this will be a fiduciary power as the wording demonstrates
that there is not a duty to distribute
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MCPHAIL V DOULTON (1971) – The House of Lords held that the test for discretionary trusts is to be
the less strict test
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RE BADEN’S TRUSTS (No2) (1973) – The Court of Appeal held that only if a class of beneficiaries is
conceptually certain will it be possible to satisfy the test of whether it can be said with certainty that
any given individual is or is not a member of the class
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g
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Administrative Unworkability
As suggested in McPhail v Doulton, even if a discretionary trust passes the certainty of objects test, it
can still be struck down for administrative unworkability – there are too many beneficiaries in the
class
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’ This was
held to be void for administrative unworkability
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’ RE MANISTY (1973)
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In individual gifts cases, the courts only have to be satisfied that someone can claim the gift
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RE ALLEN
(1953) – There is sufficient certainty if you can find at least one who satisfied the condition
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g
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RE BARLOW’S WT (1979)
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If there is no intention to create a trust, the only interpretation must be that an outright gift was
intended
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