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Equity and Trust Law

Requirement of Certainty

Knight v. Knight 1840 establish the requirement of the so-called three certainties in order to create a valid trust
Lamb v. Eames 1871, Re Adams and Kensington Vestry 1884 the word must be sufficient to show an intention to create a trust. equity looks to intention not to form
Re Diggles 1888, Re Hamilton 1895 whether a trust is intended is a question of construction of the whole document in every individual case
Comiskey v. Bowring-Hanbury 1905 the court construed precatory words as creating a trust when on looking at the whole will it was clear that a trust was intended
Re Steele's WT 1948 the wording of the gift in the will was identical to an earlier case (Shelley v. Shelly 1868). the court stated that the settlor's intention in Re Steele must therefore have been to make a trust
Jones v. LOck 1865 the court will not treat a failed gift as a declaration of trust. there was no evidence that the father intended to splitthe ownership - essential for an express trust
Paul v. Constance 1977 words and conduct can amount to an intention to create a trust
Palmer v. Simmonds 1854, Re Kolb WT 1962 it must be clear what property is subject to the trust. the bulk of my residuary estate... was held to be incapable of meaning
Boyce and Boyce 1849 it must be clear which beneficiary is to inherit
Hunter v. Moss 1994, Re Harvard Securities 1997 where intangiable property is concerned there is no need to separate that amount from the bulk though the particular shares or particular bank account would need to be properly identifiable
Re Barlow's WT 1979 where there are named beneficiaries will only require a "one person test" i.e. is there a person who satisfies this criteria?
IRC v. Broadway Cottages Trust 1955 for certainty of object the trustees must be able to draw up a complete list of all the beneficiaries
McPhail v. Doulton 1970 "any given postulant" test ("is or is not test"). this test is "can it be said with certainty whether any given individual is or is not a member od the class"
Re Baden No.2 1972 - Sach LJ conceptual certainty only required for the trust to be valid
Re Baden No.2 1972 - Megaw LJ conceptual certainty required but also a measure of evidential certainty
Re Baden No.2 1972 - Stamp LJ conceptual and evidential certainty required
Re Gibbard 1966 'friend' was sufficiently certain, but the any given postulant test was not being applied
Brown v. Gould 1972 such a gift would not be sufficiently conceptually certain
R v. Distrct Auditor, ex p. West Yorks Met. C.C. 1986 the number of beneficiaries makes the class so wide that it is impossible for the court to ensure that the property is properly distributed amongst the class
Re Manistry 1974 both a trust and a power can fail because they are capricious, only a trust can fail because the class is too wide
Re Gestetner 1953, Re Guilbenkian's ST 1968 the test for certainty of object for powers of appointment is the an given postulant test
Re Goldcorp, Re London Wine tangible property has to be identifiable before it can create a trust
Re Golay the court applied a common sense approach and looked ate the beneficiary's previous standard of living and held the gift valid
CERTAINTY OF INTENTION There must be a clear intention to create a trust based on:the construction of the document; or if no document on the oral statements or conduct of, the parties
CONSTRUCTION OF THE DOCUMENT words used must impose a binding obligation
‘precatory words’: “I hope that…”“It is my desire that...”/Shelley v Shelley 1868
Lambe v Eames 1871 "…to be at her disposal in any way she may think best for the benefit of herself and her family…”
Re Adams and Kensington Vestry 1884 “…in full confidence that she will do what is right…between my children…”
Precatory words Even if precatory words are used a trust may still be inferred:if on proper construction a trust was intended; or wording very similar to early cases which have not been over-ruled
Comiskey v Bowring-Hanbury 1905 “in full confidence that at her death she will divide it between one or more of my nieces…in default that all the estate shall be divided at her death equally among my surviving nieces”
Re Steele’s Will Trust 1948 vertually identical to Shirley
ORAL STATEMENTS Paul v Constance 1977/ Rowe v Prance 1999/ Jones v Lock 1865
CONDUCT OF THE PARTIES Midland Bank plc v Wyatt 1995
CERTAINTY OF SUBJECT MATTER 1.The subject matter as a whole/2.The extent of the beneficial interests
The Subject Matter As A Whole any property can be the subject matter of a trust;but it must be specified in such a way that it can be identified;
issues regarding identification of subject (a) Where an absolute gift is given but with an attempted trust for any unused portion/(b)Where the wording appears uncertain/(c) Where a trust is declared of part of a larger holding
Palmer v Symonds 1854 “he will leave the bulk of my said residuary estate unto…[four named relatives]”
Sprange v Barnard 1789 “for his sole use and all that is remaining to be divided between my brothers and sisters”
BUT NOTE: Where only a life interest is given with a remainder interest:“£10,000 to X for life remainder to Y."Y’s interest is VALID as X only has entitlement to INCOME not CAPITAL./If a gift of residue is given this too is VALID
Re Kolb’s WT 1962 "blue chip securities"/ void
Re Golay’s WT 1965 “one of my flats”/reasonable income”
Certainty As To The Beneficial Interest the beneficial interest to be taken in the trust property must be identifiable
Boyce v Boyce 1849 “one for Maria, whatever she shall choose and the other to Charlotte"
CERTAINTY OF OBJECT There must be an identifiable beneficiary (or beneficiaries) in whose favour the courts can decree performance of the trust.(Morice v Bishop of Durham [1804])
Gifts to Specific Individuals “One Person Test”/“To George Bush of …”/“To my Son and my Daughter”
Re Barlow’s WT 1979 “allow any friend of mine to purchase [one of my paintings at below market value]”
Gift to a class depends on/ Objects Of Fixed Trusts/Objects of Powers/Objects of Discretionary Trusts
OBJECTS OF FIXED TRUSTS where the share or interest of the beneficiaries is specified (or implied by equity);“£1m on trust on behalf of my children in equal shares”
“COMPLETE LIST TEST” Re Baden, McPhail v Doulton 1970; “there cannot be equal division among a class unless all the members are known”
“COMPLETE LIST TEST” 2 certainties/ Conceptual Certainty/ Evidential Certainty
Conceptual Certainty the class itself is clearly ascertainable;“my children / my employees”,“my friends, persons of moral uprightness”/Re Barlow’s WT 1979
Evidential Certainty all the members of the class are ascertainable/Re Gestetner 1953
OBJECTS OF POWERS “£100,000 to A with power to appoint in favour of the residents of Brighton”
Test: “Any given postulent test / is or is not test”/(Re Gulbenkian’s ST 1970)
OBJECTS OF DISCRETIONARY TRUSTS “£1m to the employees and dependants of “X” company on such terms as the trustees in their absolute discretion think fit”
Pre 1970 Law IRC v Broadway Cottages Trust 1955/Same test as fixed trusts - “complete list” test
Reasons For “Complete List” Test Court must be able to exercise the trust/means equal division of funds between all potential beneficiaries/Trustee must be able to properly exercise discretion/therefore a complete list would have to be drawn up to decided how to allocate the funds
Criticisms Of “Complete List” Test Inappropriate for large class/impossible to do complete list and trust fails/Courts were interpreting trusts as powers/Court not given equal division in earlier cases;Hart v Tribe 1854/ Fails to take account of settlor’s intentions
POST 1970 Re Baden, McPhail v Doulton 1970/“trustees shall apply…income…for benefit of…employees…or ex-employees or to any relatives or dependants of such” “Relatives”; “Dependants”
Per Lord Wilberforce 1: “the trust is valid if it can be said with certainty that any given individual is or is not a member of the class”/“is or is not test”/ “any given postulant test”
Per Lord Wilberforce 2 “trustees have a duty to make a survey of the range of objects”/ “trustees shall apply…income…for benefit of…employees…or ex-employees or to any relatives or dependants of such”/
Per Lord Wilberforce 3 instead of a complete list, trustees must now decide whether, with certainty any given individual is or is not a member of the class of beneficiaries
Post 1970 Case was remitted back to the High Court and then the Court of Appeal to apply the new test to the trust/ Re Baden’s Trust Deed (No.2) 1973 CA
Re Baden’s Trust Deed (No.2) 1973 CA Counsel for the executors argued that the test had to be applied strictly/claimed trust was void - cannot be proved that a given person was not a relative
Interpreting the Test Sachs L.J/Megaw L.J/Stamp LJ
Sachs L.J 1 Important to distinguish between “conceptual uncertainty” and “evidential difficulties”/Relatives - was conceptually certain “descendants of common ancestor”/Not necessary to prove someone is not a relative;
Sachs L.J 2 Presumption that anyone not proved to be in the class must be outside of it.
Megaw L.J "Relative” conceptually certain -“descendant of common ancestor”/Evidentially - three groups;those definitely inside the class;those definitely outside the class;those not proved to be in or out; providing substantial number inside then trust is valid
Stamp LJ “Relative” conceptually certain - “next of kin”/Evidentially he followed the “any given postulant test” strictly/It must be proved with certainty that any given person is or is not within the class
2004/2005 EXAM PAPER; 6(d) £10,000 to my brother David to distribute as he sees fit and in his absolute discretion to people working in the manufacture of chess sets Baden Interpretation:1Is the class conceptually certain?
2004/2005 EXAM PAPER; 6(d) £10,000 to my brother David to distribute as he sees fit and in his absolute discretion to people working in the manufacture of chess sets 2 If yes then-the trust is valid; there is no need to prove someone is outside (Sachs LJ); or only proof that a substantial number is inside is required (Megaw LJ); or proof that any given person is either inside or outside is required. (Stamp LJ)
SUMMARY Fixed trusts-"complete list test”;conceptual uncertainty and evidential uncertainty will defeat the trust/Discretionary trust-“is or is not test” /“any given postulant test”/Defeated by conceptual uncertainty but possibly not by evidential uncertainty
where evidential uncertainty will defeat a discretionary trust Administrative Unworkability/Capriciousness
Administrative Unworkability Re Baden, McPhail v Doulton 1970 HL;“meaning clear but definition of beneficiaries is so wide as not to constitute anything like a class”
Capriciousness Where there is no rational reason for making the gift to that class and Person charged with allocating funds has no rational basis on which to make the allocation
Re Manisty’s Settlement 1974 “Residents of Greater London”
Created by: kudoak