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Equity - Three Certainties (Subject Matter- must be certain what property…
Equity - Three Certainties
Knight v Knight (1840)
intention 2. subject matter 3. objects - all three are necessary for creation of express trust
Intention
- fundamentally means it must be clear that there is meant to be a trust at all. There are no set formalities for the declaration of a trust e.g. no writing requirements. In rare cases, a trust may be created by conduct alone. It is more usual, though, to look at words used by the settlor to ascertain their intention -
Re Kayford [1975]
- It is well settled that a trust can be created without using the words 'trust ' or 'confidence'
a distinction is drawn between imperative words (which show an intention to create legally binding obligation) and precatory words (expressing a mere hope or wish)
Precatory - older case were inclined towards finding a trust, whereas more modern cases lean against finding a trust. The leading case for this is said to be Lambe v Eames (1871) where property had been left by the testator to his widow
Re Adams and Kensington Vestry (1884)
a testator left his property to his wife absolutely 'in full confidence that she will do what is right. Court held that the wife should take the estate absolutely as the words did not indicate an intention to impose a legally binding obligation on her.
Comiskey v Bowring-Hanbury [1905]
a testator left his estate and property to his wife but it was held that he had shown such an intention in favour of his nieces and the provisions of the will created a trust. Both this case and Adams show that phrases such as 'in full confidence' may or may not impose a trust. the crucial factor is whether the context of the will as a whole indicates that this was the testator's intention
Words and conduct - where there is no written document creating a trust, the court must look at the words and conduct of the parties to see if there was sufficient intention -
Paul v Constance [1977
]
re Kayford [1975]
- a mail order company paid customer's moneys into a separate bank in an attempt to prevent them ranking as unsecured creditors of the company if it went insolvent. The court concluded that by segregating the customers' funds, the company had envinced an intention to create a trust over those funds
Subject Matter
- must be certain what property is subject to trust for there to be a valid trust. if not clear, then the Bs will not know what they have rights over
Sprange v Barnard {1789}
a will stated 'for my husband TS, to be weill him the sum of £300.. for his sole use; and at his death, the remaining part of what is left, that he does not want for his own want and use, to be divided between...'
COurt held that TS was entitled absolutely and it was not certain that any property would be left at his death, let alone what it could be. Certainty of subjects needs to be certain at the moment of creation. It was not certain that the husband had an obligation to preserve any property. OVERLAP BETWEEN 3 CERTAINTIES
Palmer v Simmonds (1854)
- an example of it not being possible to identify the property. The court held that 'the bulk of the estate' was insufficiently certain so the man took absolutely.
Boyce v Boyce (1849)
- property itself clear but uncertain how divided between Bs. (BENEFICIAL ENTITLEMENTS). a testator left a no. of houses on trust for his widow for life, with the remainder to his daughters. The will stated that Maria (daughter 1) should receive a house of her choosing and all the other houses should be conveyed by Charlotte. MAria died in the testator's lifetime and so could not choose any house. Court held no trust in favour of Charlotte. Her interest could not be determinded until Maria had chosen. Trust was VOID for Certainty of mater.
Re Golays Will Trusts [1965]
contrasts this. Court upheld trust. Testator directed his execs to allow the B to 'enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties'. Although it was uncertain which flat it should be, this was not raised as an issue in the case. An argument that WAS raised was the direction to pay the B a 'reasonable income' - this was void for uncertainty
Property forming part of a bulk - court draws a distinction between trusts of intangible and tangible property
Tangible-
Re London Wine Co (shippers) Ltd [1986]
. This related to buyers of wine, who wishes to establish a trust over bottles of wine stored in the seller's warehouses. Court held that no trust had been created as the bottles had not been segregated or identified in anyway. When the seller went into liquidation, the customers could not claim priority over other creditors by saying that particular bottles of wine were held on trust for the. Similarly in
Re Goldcopr Exchange Ltd [1995]
purchasers of gold bullion claimed rights to it on the insolvency of the company. Their claims were rejected apart from a group whose buillion had been segregated. No trust as no identifiable property - all fundamentally identical.
Intangible-
Hunter v Moss [1994]
owner of 950 of 1000 shares in a prvate company declared himself trustee of 5% of the issued shares. This amounted to 50 shares. This was held to be suff certain enough even though no particular 50 shares had been identified as subject to the trust so was unclear which shares he was to keep for himself. Colin Rimer QC considered that there is no need to identify which shares are being held on trust as long as the shares are of the same class and are fungible.
Dillon LT in CofA also noted the shares as identical. He held that iner vivos trust was valid because there would have been a valid testamentary trust is Moss had died and left 50 shares for X and the remaining 900 to Y. In such a case it would be for the Testator's executor to divide the shares between X and Y. As identicial, the E does not need to be told exatly which are to be given to each B.
Critics of HvM have pointed out that the judgement causes problems of enforcement. E.g. if the settlor were to sell 5 of his 950 shares, how would we know whether they were his own 50 or the 50 held on trust
Objects
- a trust must be for ascertainable Bs. Objects of a trust need to be certain so that the trust can be enforced in their favour by the court.
Morice v Bishop of Durham (1804)
If it is impossible to say who Bs are, it cab be possible to properly enforce the trust. It may be difficult to prevent payments to non-Bs either because the trustee does not realise that they are making a payment to the wrong person or beause the true Bs are not able to prove that they have standing to enforce the trust and prevent the wrongful payment. If trust property has been transferred to a trustee but the trust fails for certainty of objects, the trustee will hold the property on resulting trust for the settlor.
Test - a greater degree of certainty needed for fixed than disc trusts. Same test of certainty is now applied to both powers of appointment and disc trusts while fixed trusts have a separate test
Fixed - complete list test
IRC v Broadway Cottages Trust [1955]
. In case of a class gift, this test is sometimes referred to as the 'class ascertainability test' because it must be possible to ascertain who all the memvers of the class are.
Fixed trusts require conceptual and evidential certainty.
COnceptual
- precision of language used by the settlor to define the class of persons whom they intend to benefit. If the objects of the trust are not clearly defined, it will not be possible to draw up a conclusive list and the trust will fail.
Evidential
- refers to the extent to which the evidence in a particular case enables the trustees to identify the objects of the trust. E.g. there may be cases where the class of objects is conceptually certain but no evidence exists allowing the Ts to actually draw up a list of those objects.
Trust can remain valid and the court has the power to make an appropriate order as to the distribution of the trust fund.
Powers of Appointment
Test -
Re Gulbenkian's Settlement Trusts [1970]
. In/out test, is/is not test, given postulant test', 'individual ascertainability test'.
Discretionary Trusts
- Before
McPhail v Doulton [1971]
it was thought that the complete list test applied to disc trusts. It was accepted that if the trustees refued to exercise their trust, the court would do so by ordering equal division among the Bs, relying on the maxim 'equity is equality'
Kemp v Kemp (1801)
. Lord Wilberforce rejected M v D and emphasised that the court should try to give effect to the settlor's intentions. In his opinion, equal division would often not be the most appropriate. Although the trustees have a duty to consider the range of possible Bs and select from the class, this does not mean that they must have before them a complete list of all possible objects. Wilberforce deliberately characterised the powers of trustees of a disc trust as trust powers, because of the trustees being under duty to exercise those powers
Conceptual certainty -
Re Baden's Deed Trusts [1973]
. E.g. 'relatives; defined as 'descent from common ancestor