Three Certainty Structure

Law (Manchester Metropolitan University)

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Three Certainties

i) Do not use footnotes and a bibliography is not required.

ii) Exam style referencing is required, and a single case name identifier is
sufficient, placed in brackets directly after the legal principle e.g.
A private trust requires three certainties (Knight).
The test for certainty of objects in a discretionary trust is the any given individual test
(McPhail).
Every effort rule requires that…. (Rose)

Problem question structure:

For each of the certainties:

o State the legal principle
o Explain the rationale for the principle
o Give authority
o Apply to the facts
o Conclude
o Critique where relevant

Introduce the topic area and signpost your answer.

In order to make a valid trust, you need the three certainties: knight v knight.
Look at whether they are dead or no so working will fit the advising.
Knight v Knight holds the three certainties: intention, subject matter and objects.

First, the settlor must demonstrate a clear intention to create a trust as opposed to
creating something else: 2 this is known as ‘certainty of intention’. Second, the trust
property must be sufficiently segregated from other property so that the trust fund is
certain: 3 this known as ‘certainty of subject matter’. Third, the people who are to
benefit from the trust must also be identified with sufficient certainty: 4 this is known
as ‘certainty of objects.

CA: the word certainty denotes lack of flexibility, but equity is the flexible and variable
branch of the legal system but the courts help with flexibility in certainties.
Eventhough certainty denotes lack of flexibility and equity is the opposite, the courts
can distinguish decisions to help beneficiaries.
• Deal with each clause in turn - a), b), c), d) e).

• Deal with each certainty in turn:

Certainty of intention:

Need to see firstly if it is:

 outright gift
 trust
 gift with trust attached
 power of appointment
 gifts with condition precedent

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A trust only comes into existence if this is the owner’s intention. It is necessary,
therefore, to examine the words used by the owner.

It cannot be vague. It has to have a certain mandate. ‘the words must be

imperative.’ Wright v Atkyns case said Lord Eldon.

No need for technical expression. Therefore, it doesn’t need to have the word trust,
but it needs a substance of sufficient intention says Megarry in Re Kayford. Since
Equity "looks to the intent rather than the form", there is no need for any technical
expression to be used in order to create a trust.

Express trust based on interference by the court: - the courts can interfere and look
at the circumstance.

Paul v Constance. Unmarried couple put bank into the man’s name. Mrs Paul had no
legal right to the account. The bulk of the money was the mans but the couple put
both of their bingo winnings in there and spent the money on a joint holiday. He had
also said on numerous occasions, Infront of the bank manager, ‘this money is much
yours as mine.’ Wife came along, as he hadn’t divorced, wanted the money. Mistress
argued it was held on trust for them two and was entitled in equity to the bank
account. Courts said he had declared a trust as they treated the money jointly. This
was held as an express trust. An example of creating a trust without knowing you are
creating an express trust. Actions and words can cause intention. Courts said it was
a trust. – Demonstrated sufficient intention?
Decision based on surrounding circumstances.

Jones v Lock- came home from a business trip. Wife hit him as he didn’t bring back a
present for the baby. He left and wrote cheque for himself, ‘I give this to baby for
himself’ and give it to baby. He took it back as he started to rip it. He left it with his
personal affects. He then died. Issue for court was whether a trust in the cheque was
made. It was found no as his language was ‘I give this to baby’, so it sounded like he
intended a gift, but he didn’t write his name on the cheque. He couldn’t be trustee,
and his intentions didn’t match his actions.

Trusts in a commercial situation:

Re Kayford: protecting customers money until they send money. They were advised
to open another bank account for customers bank. Bank misunderstood and used an
existing account for that purpose. Wasn’t labelled customers trust deposit count.
Business hit liquidation. Courts had to decide whether they were on trust for
customers or apart if the businesses assets. Court held there was a valid trust as
there was intention to hold on trust for customers and told bank that. This case
illustrates the important role which the trust plays in protecting the beneficiary
against the possibility of insolvency on the part of the trustee.

Precatory words. These are words that aren’t sufficiently certain like hope/ wish/
desire. These wouldn’t suffice intention. There needs not to be a moral obligation.

e.g. of precatory words.

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Lambe v Eames: A testator’s gift of 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’. Held: No trust as there was no clear intention. Has to have a clear
imperative obligation.

Gift to widow:

Re Adams and Kensington Vestry (1884)

“to the absolute use of my dear wife in full confidence that she will do what is right as
to the disposal thereof between my children, either in her lifetime or by her will after
her decease”. Courts said no imperative intention. So, it’s a gift.

Comiskey v Bowring-Hanbury [1905] is a case that used ‘in full confidence’ which
was classed as precatory. However, the rest of the trust was clear, so the courts
allowed the trust. Its because of the additional wording. Goes with equity that goes
with substance rather than the form.

Re Hamilton: Whole of the words as circumstances. So look at whole words together

even if one precatory word.
Lopez LJ summed up the post 1830 approach:
“It seems to me perfectly clear that the current of decisions with regard to precatory
trusts is now changed…the court will not allow a precatory trust to be raised unless
on consideration of all the words employed it comes to the conclusion that it was the
intention of the testator to create a trust.”

Certainty of subject matter:

Breaks down in to two elements: (If issue say what this is required)
 the property as a whole
 the beneficial interests in the property (not required for
discretionary trusts).

First part: property as a whole:

Where the property itself is uncertain there is no trust.
Palmer v Simmonds- ‘the bulk of my residuary estate.’ Held no trust as the property
is uncertain due to the word bulk. Bulk is the majority is from 50% to 100%.

Sprange v Barnard- ‘the remaining part of what is left and what he does not want for
his own.’ Again uncertain, there is no certainty of how much was to go on trust so
cannot say it was intended in the first place.

Rule from Hancock v Watson.

The rule provides that, in circumstances in which property has been left to a legatee
(someone who has been left a gift) as an absolute gift but subject to some trust

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which has failed, then the legatee takes the property absolutely. So, where a trust
fails but there is a gift, it becomes a gift. It is an outright transfer.

Examples on subject matter: (inter vivos trusts- between the living so lifetime
transactions)

Re London Wine Company [1986]

Buyers of wine stored in a warehouse where the wine was not segregated. Held: No
trust as they couldn’t identify what wine was for what customer so here is uncertainty
of subject matter. This is the orthodox approach.

Also followed in MacJordan Construction Ltd v Brookmount Erostin Ltd

Intangible as it involved intangible money but also had the segregation principle.

Hunter v Moss

Oral declaration of trust over 50 shares (out of 950 issued share capital). Court of
Appeal held there to be a valid trust even though no segregation with no
specification.
They distinguished this from Re London Wines because they concerned chattels.
Here the property was intangible property. It wasn’t a problem that there was no
segregation the specific share didn’t matter as they just needed 50 of them.

But the English property law requires there to be specific and identifiable property
which is the subject of the property right.

Second part: the beneficial interest.

Where the settlor fails to make the beneficial interest plain, the property will be held
on resulting trust for the settlor. This was when one daughter was said to have
whatever and give the rest to sister, but she died so became uncertain– Boyce v
Boyce (1849)

Testator directed mistress enjoy one of my flats in her lifetime and then have
reasonable choice of my houses. The courts didn’t follow Boyce as they couldn’t
argue with the word reasonable as it is a legal term. So, as long as he showed
intention, then reasonable can be used. Still needs to be objectively term able. – Re
Golays Will Trusts.
Talk about there is doubt on subject matter and there are criticisms of this case.
English property law requires there to be specific and identifiable property which is
the subject of the property right. (Hudson)

Certainty of objects:

This is the people in the trust.

Fixed trusts

Property is specified to be divided amongst beneficiaries in predetermined shares

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e.g. “on trust for my children in equal shares”

Discretionary trusts

An example: Amount 3: so that Timothy shall divide the £1,000 between any of my
sons who become unemployed and whom he considers to be in difficulties.
‘Shall’ indicates compulsion and thereby a discretionary trust power rather than a
mere power.
Share of each member of a class of beneficiaries will be determined by the discretion
of the trustee. Any given podulent test. For mcphail
e.g. “to X on trust for such of my children as X may select”- trustee has discretion but
still under obligation to act.

Power of appointment

The holder of the power (the donee) if he thinks fit, may allocate property by
exercising the power placed in his hands
e.g. “to X, with power to select in favour of my children and in such proportions as he
sees fit”
So, a trust has mandatory obligations that you must do. A power is only a mere
permission that you may do.

Fixed trust test:

IRC v Broadway Cottages [1955]

‘Complete list’ test

It must be possible to draw up a complete list of all beneficiaries.
The definition of beneficiaries must be conceptually certain and there must be
evidential certainty of who is within the class.
Basically, needs to:
1. Be clear
2. Needs evidence of being a beneficiary

Powers test:

Re Gulbenkian

‘Any given individual’ test

A complete test was hard to draw up. The being of a power is to allow whoever to do
whatever with whatever with what the will allows.
“Can it be said with certainty whether any given individual is or is not a member of
the class and it does not fail simply because it is impossible to ascertain every
member of the class.”

Discretionary trusts

McPhail v Doulton
Authority for discretionary trust. Less onerous to the power.

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‘Any given individual’ test: House of Lords held that test for certainty of beneficiaries
in discretionary trusts should be “similar” to the test accepted in Re Gulbenkian for
powers. It must be possible to say of any given individual that he is or is not within
the class.

Re Baden’s Deed Trusts- Discretionary trust valid if beneficiaries are defined with
‘conceptual certainty’ and not invalidated by the absence of universal ‘evidential
certainty.’ The terms ‘relatives’ and ‘dependants’ were not conceptually uncertain.
Basically, just needs to be in the same class which can be certain.

Administrative workability?

R v District Auditors, ex parte West Yorkshire Metropolitan County Council

A discretionary trust will be invalid if it is administratively unworkable because of the

sheer size of the class of potential beneficiaries
Here, 2,500,000 inhabitants of West Yorkshire
Held: Uncertain. This would lead to a resulting trust.
Criticism: Lord Wilder force laughed at this but then the Yorkshire case
come.

Resolving uncertainty

Provide that some expert party should be able to adjudicate on evidence as to those
persons who will or will not fall within the class of beneficiaries. E.g. ‘must be
catholic,’- Priest can only adjudicate can only appoint on evidence not concept.

Give the trustees a power to decide who will or will not fall within the class in the
event of any alleged uncertainty – problematic. E.g. Re Coxen- ‘old friend’ cannot
describe to that to uncertain.
Trustees can never resolve uncertainty.

The term ‘friends’ has been held sufficiently certain in some contexts but not in
others. In Re Gulbenkian Lord Upjohn simply accepted, without discussion, that the
word ‘friends’ was an axiomatic example of something that would be uncertain. In
Brown v Gould a trust in favour of ‘old friends’ was found to have been invalid by
Megarry.
Megarry J has held: Friendship . . . is a concept with almost infinite shades of
meaning.

Individual gifts

Re Barlow [1979]
Paintings given to local authority with instructions to allow family and friends each to
purchase a painting at a decreased price.
Would have failed as trust because term “friend” has no conceptual certainty.
As a series of gifts, a lower standard of certainty was required.
No need to survey the class, as with a trust.
Need to prove they satisfy.

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