Trusts & Equity - The Three Certainties
Trusts & Equity - The Three Certainties
Certainties important for...
Implementation - trustees must know their obligations in order to carry out
Certainty - to minimise disputes
Insolvency (on part of trustee) - creditors can't touch assets held on trust for another
Must be clear on...
Trust property itself - what is the property?
Palmer v Simmons (1854) - "bulk of estate" - no certainty - portion needs to be objectively defined as part of larger estate
Re Golay's WT (1965) - "reasonable income" - certainty - court found could be objectively determined as law uses concept of "reasonable" all the time - also had yardstick of housekeeper's previous income
Controversial distinction between...
Re London Wine (1986) - no certainty as to which bottles belonged to who
Re Goldcorp Exchange (1995) - again no certainty - despite every piece of gold bullion being essentially identical - could even have differed in quality as with wine
Cf. Hunter v Moss (1994) - certainty - 50 shares out of 500 - no difference
Beneficial entitlement - how much is owed?
Boyce v Boyce (194() - no certainty - Maria, daughter able to choose first house before leaving her sister the others, died - no way of ascertaining - discretionary trust
Different attitudes seen in different cases - equity v rules
If any missing, can't be valid
Rule solidified in Knight v Knight (1840) - idea was around before
Often overlap between them
Sprange v Barnard (1789) - subject matter would have been certain on death of recipient, but as trust creates duties at moment of creation, had to be certain then - lack of certainty in subject matter indicated lack of intention
Re Kayford - look to substance, not form
Words and conduct
Written instructions can either be...
Imperative - intention to create legally binding obligation
Lambe v Eames - turning point in courts being less inclined to find trusts where precatory words used
Precatory - expressing a hope or a wish and only indicating moral obligation - can't be enforced in courts
Paul v Constance (1977) - don't need intention to be in writing (exception for trust of land) - can ascertain through conduct - don't need the word "trust" or even to know what a trust is
Bridge LJ: "Mr Constance had done something which was equivalent to declaring himself a trustee"
Scarman LJ - said it was a borderline case because not possible to pinpoint specific moment trust was declared
Compare Comiskey v Bowring-Hanbury (found to be a trust) with Re Adams & Kensington Vestry (found not to be) - "in full confidence" - shows that must look at the whole picture - even with seemingly precatory language, context can impost a trust
Megarry J: "a trust can be created without using the words 'trust' or 'confidence'... the question is whether in substance a sufficient intention to create a trust has been manifested"
Re Hamilton (1895) - words in each document are interpreted in their context, rather than according to previous cases, so same words may not have same effect
But identical words from older case may be interpreted in same way because may have been used as precedent - Re Steele's WT (1948) - in this circumstance older decision should be followed unless clear wrong
Followed interpretation of Shelley v Shelley (1868)
Morice v Bishop of Durham (1804) - unless it is a charitable trust, need certainty of beneficiaries
Different tests for different arrangements/classes of beneficiary
Fixed trust - complete list test - need complete list of beneficiaries
IRC v Broadway Cottages
Always need conceptual and evidential certainty
Discretionary trust - is or is not test - for any given person, need to be able to say whether is or is not part of class of beneficiaries - Re Gulbenkian (1970)
Always need conceptual certainty but need for evidential certainty depends
McPhail v Doulton - conceptual and evidential certainty
Re Baden's Deed trusts - test applied by judges in different ways in coming to same conclusion
Megaw LJ - object made clear by substantial (doesn't define) number in class - define relative as "trace descent from common ancestor"
Sachs LJ - onus on claimant to prove he is in that class - doesn't want trust to fail on that basis - defined relative in same way as Megaw
Stamp LJ - purest interpretation - no "don't knows" allowed - if not sure, then can't be satisfied - whole trust fails otherwise - evidential uncertainty renders trust void - defined relative as "next of kin" as had specific legal definition in intestacy context
Limitations include administrative unworkability - R v District Auditor, ex p, West Yorks MCC (1986)
Gift subject to condition precedent
Re Barlow's WT (1979) - expanded from Re Allen (1953) - can be a point where no matter what test applies, still satisfies - object test less strict than with discretionary trust
Gift valid if is possible to say of one or more persons that they qualify - even if difficult to say of others if they qualify or note