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Definition of Express Private Trust

According to the definition adopted in Green v Russell, a trust is an equitable obligation which binds
a person (trustee) to deal with certain property of which he has control (trust property) for the
benefit of certain persons (beneficiaries). Generally, as explained in Ho Min Hao & Anor v Ho Yee
Chin & Anor, an express trust comes into existence when the settlor consciously or intentionally
declares himself or some other person to be trustee of the property for identified beneficiaries and
subsequently transfers legal title in the trust property to the trustee. An express trust can be divided
into two types, namely private trust and public trust based on the case of Datuk M Kayveas v See
Hong Chen & Sons Sdn Bhd & Ors. The definition of a private trust can be found in Lim Kim Huat v
Datuk Johari bin Abdul Ghani & Anor (Pauline Soo Wei Ling, third party), where the court described
it as a trust for persons, that is the beneficiaries, rather than for public purposes such as charitable
purposes or public objects. Accordingly, an express private trust refers to a trust created deliberately
by the express declaration of the settlor for the private benefits of the beneficiaries, which can be
achieved by way of deed, will, other forms of writing, or even orally. In our instant case, the issues
arising clearly involve an express private trust as (reasons based on the facts).

Duty of Trustee

As an express trustee, a person in that capacity is bound by some basic duties, the so-called
“irreducible core”, which the settlor himself cannot modify or exclude if he wants the person to be
bound by the law regulating trusts. The three basic cores refer to a duty not to act fraudulently
towards the beneficiary; to be legally accountable to the beneficiary for the management of the
trust asset; and to preserve the integrity of the trust property as fund unconnected with his own
asset. If the settlor includes any terms inconsistent with the three cores, the trust will be rendered
void and unenforceable.

The Three Certainties

To advise the potential beneficiaries (name of the beneficiaries) as to whether a trust has been
formed in their favour with (name of the trustee) as a trustee, it is necessary to first understand how
an express trust is created and the ingredients required to form such a trust.

The ways of which an express private trust can be created were laid down by Richardson J in the
New Zealand case of Foreman v Hazard, that is by one of the two ways, either by a self-declaration
which involves only a change in equitable title but not in legal title because the settlor has declared
himself to be the trustee; or by a transfer of property which involves a change in both legal and
equitable titles because the property is to be held in trust for the beneficiaries by some other person
being the trustee instead of the settlor himself. He further explained that regardless of the way it is
created, the ingredients necessary in forming an express private trust remain the same, that is, the
presence of three certainties, namely certainty of intention, certainty of subject matter and certainty
of object, followed by the compliance with legal formalities should they exist upon which the trust
will be fully constituted.

Therefore, no express private trust can be validly created unless the three certainties, that is, the
certainty of intention, certainty of subject matter and certainty of object are satisfied. This
requirement of three certainties was laid down by Lord Langdale MR in Knight v Knight where he
specified that for a valid trust to be created, three certainties are required. First, there must be
certainty of intention, that is it must be clear that the settlor intends to create a trust; second, there
must be certainty of subject matter, that is the assets or property constituting the trust must be
readily and clearly determinable; and third, there must be certainty of object, that is the objects or
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persons intended to have benefits from the trust who are known as the beneficiaries must also be
readily and clearly determinable. In the Malaysian case of Yeong Ah Chee v Lee Chong Hai & Anor
and other appeals, the court also affirmed that it is a settled principle of law that in order for
an express private trusts to come into existence, three essential features must be present, namely
certainty of intention, certainty of subject matter, and certainty of object.

Potential Outcome

In our instant case, it is most likely that an express private trust was created in favour of the
potential beneficiaries, (name of the beneficiaries).

The discussion below is to show how the ingredients of express private trust, particularly the three
certainties are fulfilled.

Certainty of Intention

The issue is whether certainty of intention on the part of the settlor failed for the reason that the
trust was made/declared orally.

Certainty of intention is a characteristic feature of an express private trust. It is a distinguishing

factor between an implied trust and an express trust. The essence of this requirement is that an
express private trust will only arise if the owner of the property has shown a clear intention to
subject the property to a trust obligation. Certainty of intention was regarded by Sir Andrew Morritt
VC in the case of Tanna v Tanna as the most important certainty, and therefore, the court will strive
to validate the trust if it is satisfied that the alleged declarant had the requisite intention.

Since equity looks to the intent rather than the form, the law thus requires no particular form to
create a trust, meaning that it can be done by words either in writing or orally; or can be inferred
from the conduct or action of the parties and the surrounding circumstances. As stated by Romilly
MR in Grant v Grant, words declaring a trust need not be in writing and it is not necessary to use any
technical words, but they must be clear, unequivocal and irrevocable. This means that an oral
declaration is sufficient and good in law to create a trust provided that the words are clear,
unequivocal and irrevocable.

The issue is whether certainty of intention on the part of the settlor failed for the reason that the
trust was created by inference. / The issue is whether certainty of intention on the part of the
settlor failed for the reason that the trust was inferred from the conduct of the
parties/surrounding circumstances.

Certainty of intention is a characteristic feature of an express private trust. It is a distinguishing

factor between an implied trust and an express trust. The essence of this requirement is that an
express private trust will only arise if the owner of the property has shown a clear intention to
subject the property to a trust obligation. Certainty of intention was regarded by Sir Andrew Morritt
VC in the case of Tanna v Tanna as the most important certainty, and therefore, the court will strive
to validate the trust if it is satisfied that the alleged declarant had the requisite intention.

Since equity looks to the intent rather than the form, the law thus requires no particular form to
create a trust, meaning that it can be done by words either in writing or orally; or can be inferred
from the conduct or action of the parties and the surrounding circumstances. The premise that a
trust may be created by inference is notable in two situations.

The first is when payments are made for a specific purpose. However, the question arises as to
whether a trust can be established as a result of an advance of a specific amount of money from A to
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B for a specific purpose, making B the legal trustee of that money. In Barclays Bank Ltd v Quistclose
Investments Ltd, the respondents lent money to Rolls (company) on the condition that it was to be
used solely to pay dividends. However, the company went into liquidation before the dividend was
paid, and the money was in fact deposited in a special account, namely share dividend account, in
appellant’s bank. The appellant claimed that the money held in that special account shall be treated
as the company’s general asset, and it shall be used to settle overdraft which the company had over
its bank account. Later, the respondents brought an action against the appellant, arguing that the
money was in fact held on trust for them. The court held that there was a valid trust created by the
respondent upon the company as their intention was that the money was to be used by the
company solely for paying dividend but never become part of the company’s general asset. In
addition, there was also an implied term on the loan contract that the money would be returned to
the respondents in the event that the money was not used for the purpose for which it was
specifically lent. Since the purpose could not be carried out anymore, the trust was then in favor of
the respondents. From this case, it can be seen that an express private trust can be created without
words, but rather by inferring from the surrounding circumstances and purpose , such as when A
takes out a loan from B and B in no clear terms tells A specifically that they money is to be used only
to pay A’s debt to C, then A may hold the money on trust in favour of C.

In R v Prestney, the accused had used the money belonged to his client to pay for his debt, despite
the fact that the client’s actual intention of giving the money was solely for the purpose of
investment in a Korean Stocks. Hence, the court held that there was a trust created upon the
accused, as the client gave the said money to him was to oblige him to use for a particular purpose,
namely investment. In addition, the Court also mentioned that if the money was not being used for
the intended purpose, the accused should then return the money held on trust by him to the client.

Under this context, another issue arises as to whether A who has received money from B could
declare a trust over the money for the benefit of B without the knowledge of B. In Re Kayford Ltd, a
mail order company, facing financial difficulties, opened a separate deposit account called
“Customers’ Trust Deposit Account” in which clients’ purchase money was deposited for the purpose
of safeguarding the customers’ money in the event that the company become insolvent. The court
held that there was a valid trust created from a debt since the company had taken sufficient action
to transform its obligation from debt to trust. By this, the money was not the company’s money and
as such, could not in law amount to assets of the company in law. Megarry J further held that a trust
can be created without using the word ‘trust’ or ‘confidence’ or the like as the question is whether in
substance a sufficient intention to create a trust has been manifested. Nevertheless, the court had
also made an obiter dictum based on the case of Re Nanwa Gold Mines Ltd where it stated that
payment being made into a separate bank account is a useful indication but it did not amount to
conclusive indication of an intention to create a trust. It was further held that there was nothing to
prevent a company to form a trust even if there is no such banking arrangement was made. All in all,
the intention to create trust must be determined according to the surrounding circumstances.

In Re Goldcorp Exchange Ltd (In Receivership), Lord Mustill for the Privy Council explained the
principles to be derived from Barclays Bank Ltd v Quistclose Investments Ltd and Re Kayford Ltd that
a sum of money paid by the purchaser under a contract for the sale of goods is capable in principle
of being the subject of a trust in the hands of the vendor is clear. For this purpose, it is necessary to
show either a mutual intention that the moneys should not fall within the general fund of the
company’s assets but should be applied for a special designated purpose, or that having originally
been paid over without restriction the recipient has later constituted himself a trustee of the money.
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The case Re Kayford Ltd was referred to by the Court of Appeal in the case of Qimonda Malaysia Sdn
Bhd (in liquidation) v Sediabena Sdn Bhd. In this case, pursuant to a building contract, a sum in
excess of RM6 million was paid by the respondent to the appellant as retention money to cover
defects in the construction for the defect liability period. The issue was the status of this money
when the appellant voluntarily wound up. On the appellant’s behalf, it was argued that the money
was not trust money since, among others: first, it was not expressly provided in the contract that the
money was trust money, and secondly, the said money was not kept in a separate account. The
Court of Appeal rejected both arguments and affirmed that in the present instance a trust may
appropriately be implied, and the fact that a separate account was not maintained was not fatal to
the creation of a trust. On the general law, Zainun JCA said that there are a number of authorities to
suggest that until such time when the retention monies are actually disbursed to the employer for
the rectification of defects, the property in the monies even while they are being held by the
employer, reside with the contractor.

The decision in Qimonda Malaysia Sdn Bhd (in liquidation) v Sediabena Sdn Bhd should be
contrasted with another Court of Appeal decision, that is, in AIMB Marketing Sdn Bhd v Malaysian
Trustees Bhd. In this case, a supermarket and departmental store chain was wound up, and a
considerable amount of money was in a bank. Several parties claimed entitlement to them, including
the appellants who were suppliers of the goods delivered to the store, arguing that the sale
proceeds which had not been paid were held on trust in their favour. The Court of Appeal held that
no trust existed, and that the relationship between the store and the suppliers comprised no more
than ordinary trade transactions. Azhar Ma’ah JCA noted some factors that may be relevant to
determine whether a trust or a debt relationship exists between buyers and sellers in a commercial
context. Firstly, the court would generally be reluctant to introduce trust into commercial
transactions. Secondly, the frequency of transaction where the proceeds from sale may be held on
trust if it arises from an isolated transaction. Thirdly, there is no trust if there is no obligation to keep
sales money separate from other accounts. Fourthly, if a party holding the money has the right to
mix the money with other monies, this is incompatible with the existence of a fiduciary relationship .
Nevertheless, no single factor or a combination of these four factors is always conclusive. The test
remains that of the intention of the parties, which has to be assessed in the context of the relevant
relationship.

In SK M&E Bersekutu Sdn Bhd v Pembinaan Legenda Unggul Sdn Bhd, the appellant was hired by
the respondent for a sub-contract work. After completion of the work, the respondent still retained
part of the money. This was mainly due to a clause in the contract which in relation of the deduction
and release of the retention amount during the liability period of a construction project. Sadly, the
respondent later wounded up the company, and 128 of the creditors came to claim the appellant’s
retention money which was not separately deposited in another bank account. Hence, the main
issue was whether there is an implied law that the retention sum is held as trust money, if there is
only a contract mentioning that there is a percentage of sum of work is retained only until all
condition of the construction is made. Eventually, it was held that the retention money was not trust
money on the ground that there was no trust at the first place. In addition, the Federal court laid
down 5 principles in determining the existence of a trust in relation to the retention money. Firstly,
the agreement must sufficiently and unambiguously show that there is a trust created and the
contractor is the beneficiary. However, it must be noted that absence of a clause (agreement) will
not necessarily negate the existence of trust. Moreover, money held in a separate account also does
not necessarily amount to trust money. Instead, the court will rely on the specific intention of the
parties in the construction contract. Even if there is a fiduciary duty, not every fiduciary duty can
form a trust relationship. Since there was no evidence in the contract to show that the party
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intended to require the retention sum to be held as a trust and there was absence of clause to
mandate the sum to be separately out from the asset of the respondent. Hence, there was no trust.

The second is in the context of the possible rights of third parties to benefit under a trust device so
as to circumvent the doctrine of privity of contract.

The issue is whether certainty of intention on the part of the settlor failed for the use of precatory
words. / The issue is whether the word ‘trust’ constituted a precatory word that negates certainty
of intention.

Certainty of intention is a characteristic feature of an express private trust. It is a distinguishing

factor between an implied trust and an express trust. The essence of this requirement is that an
express private trust will only arise if the owner of the property has shown a clear intention to
subject the property to a trust obligation. Certainty of intention was regarded by Sir Andrew Morritt
VC in the case of Tanna v Tanna as the most important certainty, and therefore, the court will strive
to validate the trust if it is satisfied that the alleged declarant had the requisite intention.

Accordingly, the first principle when deciding if there is certainty of intention is the nature of the
language used, in which the words must be imperative as said in Wright v Atkyns. Similarly, Lord
Longdale MR in Knight v Knight held that the words used in creating a trust ought to be construed as
imperative to satisfy certainty of intention.

According to the court in ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd, where parties
to a transaction use clearly imperative words, they must be taken to have intended to create the
relationship of trustee and beneficiary. The court further explained that imperative words, as
opposed to precatory words, are not mere words of hope, desire, confidence or entreaty which are
not imperative. Therefore, precatory words mean the opposite, which include words such as “in full
confidence”, “hope”, “desire”, “want”, “in full belief”, “wish”, “recommend”, and “faith”.

In declaring a trust, the word usually and technically employed is ‘trust’. In Bath and North East
Somerset Council v A-G, it was held that if the word ‘trust’ is used, it will normally be a strong
indicator that a trust was intended.

Nevertheless, a trust may be created by the general tenor of the language without using the word
‘trust’.  This is affirmed in Lim Eow Thoon v Lim Keng Chuan, where Hepworth J held that no
technical expressions are necessary for the creation of an express trust. It is sufficient if the settlor
evinces an intention to create a trust. This shows that a trust can be created by any language which
is clear enough to show an intention to create it as emphasized in Re Williams, Williams v Williams.

This is because equity looks to the intent rather than the form, and therefore, the law requires no
particular form or word to create a trust. As stated by Romilly MR in  Grant v Grant, words declaring
a trust need not be in writing and it is not necessary to use any technical words, to say ‘I hold the
property in trust for you’, or to say ‘I hold the same for your separate use’, but the words must be
clear, unequivocal and irrevocable. This means that a declaration of trust may be made quite
informally, provided that the words used are clear and unequivocal.

In the case of Quah Eng Hock v Ang Hooi Kiam, the plaintiff purchased a house which was partially
under his name and partially under his mistress’s name. The plaintiff then claimed himself to be the
beneficiary owner of the house and his mistress was regarded as a trustee for him by holding half of
the shares of the house in trust for him. The plaintiff added that the only reason he gave half of the
shares to his mistress was to ensure she stayed with him. However, the defendant failed to appear in
court and the existence of such arrangement was unable to be proven. It was held that to satisfy the
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certainty of intention, the words used must be clear and unequivocal to indicate the intention of the
donor to divest himself of the beneficial interest. This means that the use of the word “trust” is not
mandatory, instead the words that indicate that the donor intended to divest himself of the
beneficial interest would be sufficient for the purpose. However, since there was no proof of the
plaintiff’s words, intention thus was not proven, resulting in no trust being created.

The principle that the use of the word “trust” is not mandatory is affirmed in Staden v Jones, where
Lady Justice Arden stated that there is no special formula to show an intention to create a trust, and
reiterated that the creation of a trust does not require the express use of the word “trust” to show
the certainty of intention, and this indicates that the absence of the word ‘trust’ normally is not
fatal.

In Kishabai v Jaikishan, the testator had agreed that neither he, his agents nor his heirs would be
entitled to “any of the money or moneys that will be paid on the insurance policies … that have been
assigned” to the defendant. Later, the testator reassigned the benefits of the policies to himself and
to the plaintiff. The court affirmed that no particular form of expression is necessary to create a
trust, and on the facts of the case, a trust was clearly intended in favour of the defendant.

In Re Chionh Ke Hu, the expression used was “I direct my executor to distribute … among such
persons professing or practising the Buddhist religion...”. The statement was held to be sufficiently
imperative as to create a trust, although it failed as there was uncertainty in relation to the object.

In Yap Joyce v Tee Molly, the court held that the words used to convey the intention must be
sufficiently expressive, that is, showing an intention to place a legal obligation on the donee rather
than a merely moral obligation. In this case, the settlor was an old lady who had executed a trust for
the benefit of her infant grandson. In the trust deed, it was stated that plaintiff, as the trustee,
agrees, confirms and declares to be the trustee for the infant absolutely. Besides, the settlor also
transferred the property to the plaintiff using Form 14A. Having possession of the property being
held in trust by the plaintiff, the plaintiff attempted to sell the property. When the settlor and the
beneficiary filed a caveat to prevent the sale, the plaintiff denied her agreement and signature on
the documents. The court took into consideration of the execution of Form 14A and the words used
by the settlor, and held that a valid trust was created because there was an intention on the part of
the settlor to create trust and a mandatory obligation for the trustee to observe had been created.

Accordingly, precatory words generally do not constitute certainty of intention as they merely
impose a moral obligation rather than a legal obligation on the donee. This is illustrated in Re Adams
and Kensington Vestry, where a testator left property to his wife by will “in full confidence that she
would do what was right by his children”. It was argued on behalf of the children that the moral
obligation imposed on the wife in the will created a trust. However, it was held that the property
passed to the wife absolutely as a gift and it was not given as a trust because the prerequisite
intention was missing. The court interpreted the statement in the will to have added only a moral
obligation on the wife to use the money in a way which would benefit the children and not to place
her under an obligation to hold that money as a trustee for the children. The property bequeathed
to the mother was assumed to be passed on and enjoyed to her children. The judges believe that a
mother and child relationship is a strong one and need not have a trust obligation in place to pass on
the testator’s property to the children. Where a statement is analysed as being merely a statement
of wishes in this way, it is precarious and will not have the force of a trust.

In Dean v Cole, the case involved a gift by will to the wife “trusting to her that she will divide in fair,
just and equal shares between my children … all such part and portion of my estate as she may be in
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the use and enjoyment of”. Knox CJ, Gavan Duffy and Rich JJ held that the words “trusting to her”
should be construed as an expression of the testator’s confidence that the wife would make a just,
fair and equal division of the property which he left to her, and not as imposing on her a binding
trust to make an equal division of property between the named children, making the words
appeared precarious. The court further held that the testator did not clearly show whether his
intention was actually for his wife to enjoy the property or to divide it to the children . Therefore,
there was no binding trust created upon the wife, and the wife accordingly was entitled to own and
use the property for herself.

In Margulies v Margulies, a legacy of the residuary estate was left to one son and expressed to be in
confidence that, “if in the interests of family harmony”, he would make provision for his brother and
sister. The court held that the language of the testator did not disclose a sufficient certainty of
intention to create a trust. As the words used were precatory in nature, the son could keep the
money for himself.

In Mussoorie Bank v Raynor, a husband left a land to his widow with the word, “feeling confident
that she will act justly to our children in dividing the same when she no longer required”. The widow
mortgaged the land and, eventually, the Bank sought to sell it to recoup the loan. She argued that, as
she was a trustee of the land, the mortgage was invalid. The House of Lords held that no trust
existed because the husband had used precatory words. She was the legal and beneficial owner of
the property and, hence, the mortgagee could sell the property.

Nevertheless, precatory words will not negate a trust if the proper construction of the language
leads the court to believe that this was the testator’s intention. In Comiskey v Bowring-Hanbury, the
testator bequeathed the whole of his real and personal estate “in full confidence” to his wife
trusting that she will make use of it as he would have, and upon the wife’s death, she will devise the
property to one or more of the testator’s nieces as the wife deems fit. If the wife is in default of any
disposition, the testator directed all the estate and property acquired by the wife under the will shall
be divided among any surviving nieces upon her death. The House of Lords in majority held that
there was a valid trust being created after considering the whole instrument and not the phrase
used in isolation, namely “in full confidence”. It was found that there was a trust obligation because
the phrase "full confidence" was followed by a sentence containing the word “direct”, showing that
the testator further directed the property to be held on trust. This particular term swayed the judges
into deciding that the testator was leaving behind a set of concrete instructions that are mandatory
and imperative. This clearly demonstrated his intention to create a trust which was legally
enforceable and not just a moral obligation, nor to donate a gift. Moreover, the relationship
between the bequeathed and the potential beneficiaries in this was one of aunt and nieces . The
judges believe that such a relationship did not strongly evidence that the bequeathed will share the
property with the potential beneficiaries., and it was therefore the intention of the testator to create
a trust to ensure that his property was passed on to his nieces. Therefore, on the death of the
widow, the property would pass to the nieces as provided for in the will.

In Datuk M Kayveas v See Hong Chen & Sons Sdn Bhd & Ors, the court stated that a trust is still an
express trust however ambiguous or clumsy the language has been used by the settlor, subject to
the court being satisfied that such is a trust was intended. Such intention may be oral or written.
Once the property is transferred to the trustee on trust for a third party or even the transferor, the
trust is complete. Thus, words of entreaty, prayer or expectation (precatory words) may be held to
create an express trust if on the whole instrument the court considers that the person using them
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intended them to be imperative and binding. Therefore, it can be concluded that the court will look
at the whole circumstances of the case and construe the intention of the settlor or testator.

In Brett Andrew Macnamara v Kam Lee Kuan, the issue revolved on the construction of
a trust deed. The High Court held that upon construing the words of the trust deed, the intentions of
the parties were clear. When the words used are clear and unambiguous, it is not the court’s
business to go behind those written terms or read new terms to it. In this case, there was not the
slightest doubt about the intention of the parties. Both the plaintiff and the defendant were very
conscious of the fact about the ownership of the property which was purchased on the very same
day of the execution of the trust deed, and both knew their relative positions, one being the trustee
and the other the beneficiary of the trust. 

In Parmeshiri Devi v Pure Life Society, the plaintiff executed a free-of-rent lease of Kishan Dial
School and its premises in favour of the defendant society in exchange for the society maintaining
and managing the school, with the express condition that the society continues to operate, manage,
and run the school in the manner and style of Kishan Dial School. Later, the society constructed
another school on a piece of land and it was named Satyananda School which eventually replaced
Kishan Dial School. Not satisfied with the situation, the plaintiff sought the return of a $179,400
secret profit as well as further damages for breach of trust. The court held that there was no
declaration of trust in this case as the document executed by the plaintiff was merely a contract
under which the parties had agreed to bind themselves and there was no element of trust, and there
was no indication of an intention to create a trust by the donor. Therefore, there was no trust
created and it could not be any breach of trust by the society. [Merely a contract, not a trust]

In Hsu Yik Chai v Hsu Yaw Tang & Anor, the deceased made a will to give a piece of land to his
brothers, the respondents, and his wife ‘to take rightful possession so as to assist them towards the
expenses of bringing up and educating my children until they became matured’. However, the wife
left the children to be raised by the respondents and got married to another man. The children
continued living with the respondents. Subsequently, the elder son who became mature claimed for
the land against the respondents. The court held that there was no trust created as the intention of
the deceased was to create a conditional gift, to which the condition was to bring up his children
until they became mature. Since the respondents had accepted and fulfilled the condition imposed
by the will, but not the mother who left the children behind, then the respondents were entitled to
keep the land. [Conditional gift, not a trust]

Certainty of subject matter

Another essential ingredient for the effective creation of a trust is certainty of subject matter. In
order to create a valid trust, the property subject to the trust must be expressly designated or
defined in such a way that it is definitely capable of being ascertained from the facts existing at the
time the trust was created as held in Herdegen v FCT; otherwise the trust is void for uncertainty.
This means that the property subject to the trust has to be defined in objective terms rather than
subjective terms to avoid differing opinions. Accordingly, a trustee must be able to identify precisely
the trust property he is to hold on to satisfy certainty of subject matter. Not only that, even the
slightest of doubts about the property may result in the trust failing to satisfy the requirement.

There are two key aspects in certainty of subject matter. Firstly, the trust property itself must be
sufficiently certain. The situation with tangible property is relatively clear where it has been
established that the trust property must be identifiable, and a trust in which the trust property is
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mixed with other property so that it is impossible to identify precisely which property is held on
trust, will be invalid.

The situation with tangible property is relatively clear where it has been established that the trust
property must be identifiable, and a trust in which the trust property is mixed with other property so
that it is impossible to identify precisely which property is held on trust, will be invalid.

In Palmer v Simmonds, a testatrix left her residuary estate to her husband “for his own use and
benefit” but subject to a trust on his death “to leave the bulk of my residuary estate” to four named
relatives. Sir Kindersley VC consulted a dictionary and concluded that the word ‘bulk’ was
inadequate to specify any portion of property as trust property, and it is not possible to carve out
from the residue itself is to be held as trust. By using the term “bulk”, the testatrix did not clearly
identify as to which part of the property was to be included in the said “bulk” to be held on trust,
and therefore, there was no trust created since the subject matter was uncertain. As such, the
residuary legatee was entitled to the residuary estate. It is valid and commonplace to have a
residuary legatee. This case indicates that the residuary property must be quantifiable.

In Sprange v Barnard, the testatrix left the sum of 300 pounds to her husband for his sole use, and
“the remaining part of what is left” in the sum, that he has not necessary use for, to be equally
divided between her brother and sisters. Sir Richard Arden held that the statement “the remaining
part of what is left” is conceptually uncertain because the expression does not sufficiently define
what the remaining part of the property is, and therefore, this trust was held to fail for uncertainty
of subject matter.

In Peck v Halsey, a testatrix by will bequeathed to her two grandchildren some of her best linen. The
court held that the words “some of my best linen” did not sufficiently show the certainty of subject
matter, and therefore, there was no valid trust created. The court further suggested that it would be
better if the testatrix used the words such as “so much of my best linen, as they should choose, or as
my executors should choose for them”, as the property is reducible to a certainty by the choice of
the legatees or executors.

In Re Kolb’s Will Trust, the testator directed his trustees to invest in “blue chip” securities, being a
“first-class” investment. The court held that the trust failed for uncertainty of subject matter
because the term “blue clip” has no specific technical meaning, and therefore, it is uncertain. Cross J
explained that the term “first class” or “blue chip” in investment is subjective, in which its meaning
varies and depends essentially on the standards of the testator, and therefore, it is not an objective
quality of investment. Here, the testator might have allowed his trustees to be the judge on the
investment so that the court could interpret the term with certainty, but since he had not done so,
the term was thus deemed uncertain for a trust. This case has therefore demonstrated an exception
in that the full rigour of the principle may attract some flexibility if the testator clearly intended the
trustees to be the judge on the subject matter. Consequently, the trust could still be saved if
discretion is in fact conferred on the trustee to determine the subject matter of the trust, and the
court could interpret the words with certainty. [discretion to the trustee]

This may be illustrated by Re Golay’s Will Trust. In this case, the testator directed his executors to
allow the beneficiary to enjoy one of her flats and to receive a reasonable income from her other
properties. It was held that the trustees could select a flat but the question arose as to whether the
direction for a reasonable income was void for uncertainty. The court held that a provision that
a provision that a ‘reasonable income’ to be provided out of a fund can be deemed valid if it is
possible to make an objective measurement of what would constitute a reasonable income in any
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particular case. As intended by the testator, “reasonable amount” will be the yardstick which the
court could and would apply in quantifying the amount the so that the direction in the will is not
defeated by uncertainty. Thomas J said that “the court is constantly involved in making such
objective assessments of what is reasonable and is not to be deterred from doing so”. As such, the
court held that the trust was valid since the subject matter was ascertainable. [so long as it is able to
determine what amounts to a reasonable income, then there is certainty.]

In Proprietors of Wakatu and others v Attorney-General, the customary landowners of the Nelson
Tenths Reserves (the Tenths’ Owner) were guaranteed that one-tenth (15,100 acres) of the land
purchased by the New Zealand Company would be retained and held in trust by the Crown for the
benefit of the customary landowners and their descendants, but this did not happen and a claim was
therefore brought against the Crown for failing to act in the best interests as trustee of the land.
Nevertheless, there was no documentation plotting that which section of the entire land referred to
the area of one-tenth of the land. The court held that there was no conceptual uncertainty of subject
matter, because there was clear entitlement of a fixed proportion of an identified geographical area
and a ballot system for selecting the sections. As such, there was a valid express trust in relation to
one-tenth of the land, and the Crown owed fiduciary duties to reserve 15,100 acres of land for the
benefit of the customary Māori owners.

When it comes to intangible property, the position is different. It is viewed that if it appears that
where the property is intangible property made up of identical units, such as shares, it will not be
necessary to segregate the trust property from other property.

This can be seen in Hunter v Moss, where an employee of a company was entitled to 50 shares out
of 950 shares held by the employer under the employee’s contract of employment. The employer
did not transfer the shares to the employee, nor were any attempts made to identify those shares
which were to be subject to the arrangement. The Court of Appeal held that there was no
uncertainty of subject matter as it was not necessary to segregate the property comprising the trust
fund if the property was intangible property, like ordinary shares, with each unit being
indistinguishable from another unit. As such, there was a trust created over the shares since the
subject matter was certain.

The decision had been followed in Re Harvard Securities (Holland v Newbury), where a dealer in
financial securities held securities as nominee for his clients. While the terms of the contracts
suggested that the dealer held the securities on bare trust for each of his clients, the securities were
not numbered and were not segregated. In consequence, none of the clients were able to identify
which securities were held on bare trust for which client. It was held that the trusts were not invalid
for uncertainty of subject matter because the securities were intangible property and therefore did
not require segregation. The requirement of certainty of subject matter in fungible shares only
entails the need to describe the type of shares subject to the trust in words clearly, and the amount
of the beneficiary’s interest. This requirement is known as semantic certainty.

Hunter v Moss was accepted and followed in Malaysia, which means that there is no uncertainty of
subject matter when a trust is declared over an unidentified portion of unascertained fungible
shares. All that is required in a trust involving this such kind of subject matter is semantic certainty of
the trust property. This is seen in Rofia Sdn Bhd v Taraf Dimensi (M) Sdn Bhd & Ors where the Court
of Appeal decided that a trust could be created over 260,000 shares which were not identified out of
a bulk of 1,200,000 shares of the same type and same company as there is semantic certainty.
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In ESPL (M) Sdn Bhd v Radio & General Engineering Sdn Bhd, the plaintiff and defendant agreed to
open a joint bank account where all monies received in respect of its mechanical works will be
deposited into the said account. Following the decision in Hunter v Moss, the court held that a trust
was validly constituted as the corpus of the trust property and the extent of the defendant’s
beneficial interest is sufficiently certain, in which there is there is semantic certainty and there is no
need to segregate the monies held on trust.

In Yeong Ah Chee v Lee Chong Hai & Anor and other Appeals, the court had to determine the
validity of seven trust deeds. It was held that there was no certainty of subject matter involving six of
them because the respondents had in fact disposed of the land to the appellants who purchased
them before the trust deeds were executed. Since the respondents were no longer the landowners
in both law and equity, they could not make the land the subject matter of trust and vest the land in
themselves as trustees at the time of the signing of the trust deeds. Therefore, in asserting the
existence of trust, there must be clear and firm evidence to prove the existence and identification of
the subject matter. [property was not in the ownership of settlor]

The second key aspect in certainty of subject matter is that the interest of the beneficiary in the
subject matter must be sufficiently certain.

In Boyce v Boyce, the testator bequeathed his cottages to his two daughters. He wrote in the will
that Maria, his elder daughter, had to choose whichever of the two out of his four cottages she
wanted. The other two cottages would then be conveyed to Charlotte, his second daughter.
However, Maria died without making a selection. The court held that the trust failed for uncertainty
of subject matter because there was no way of knowing which two properties Maria would have
chosen, and the interest of Charlotte as beneficiary was not sufficiently clear. Therefore, the court
would not be able to decide which two cottages should be conveyed to Charlotte. 

Certainty of Object

Another essential ingredient for the effective creation of a trust is certainty of object, that is the
objects or beneficiaries who will receive the benefit must be clearly certain or ascertainable. The
general rule is a trust must be in favour of human beneficiaries or be charitable in law.

The rule that a trust must be in favour of human beneficiaries, which is also known as the
“beneficiary principle” was established in the case Morice v Bishop of Durham where this principle
was explained by Grant MR that it is a necessary part of any trust that there is a definite object or a
beneficiary capable of enforcing the trustees’ performance of their duties under the trust. Thus, non-
charitable purpose trusts are invalid unless they fall within the limited exceptions.

In Re Gestetner Settlement, the court considered a discretionary distribution power given to

trustees. Harman J said that the trustees were bound ‘to consider at all times during which the trust
is to continue whether or not to distribute any and if so what part of the fund , and, if so, to whom
they should distribute it’. If all the beneficiaries being of full capacity are agreed among themselves
to equal division, they may compel the trustees to distribute the whole fund.

The requirement of certainty of object can be viewed from two different forms of power which are
given to the trustees in a fixed trust and discretionary trust. In our instant case, the trust in question
is a fixed trust / discretionary trust.

(a) Fixed Trust

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A fixed trust is a trust in which the share or interest of the beneficiaries is specified in the
instrument. In relation to establishing the certainty of objects under a fixed trust, it is necessary for
the trustees to be able to compile a complete list of the beneficiaries, and the test in relation to the
certainty of object in a fixed trust is called the “complete list test” or the “fixed list test”. This
“complete list test” was established by the House of Lords in Inland Revenue Commissioners v
Broadway Cottage Trust where Jenkins LJ relying on the maxim “equality is equity” said that there
shall be no division in equal share amongst a class of individuals unless all the members under the
class are known. This indicates that the trustee must be able to name each possible beneficiary or
identify all the members of the appropriate class in order to compile a complete list, or else the trust
will be void for uncertainty. Accordingly, the description of beneficiaries should neither involve
conceptual nor evidential uncertainty. [Fixed trust will fail for conceptual and evidential
uncertainties]

With regard to the position in Malaysia, according to Halsbury’s Laws of Malaysia, if a trust requires
division between all the members of a class, for example, in equal shares, it will be void for
uncertainty if it is not possible to provide a complete list of the beneficiaries, as the size of each
equal share cannot be ascertained unless the precise number of the beneficiaries is known.

(b) Discretionary trust

A discretionary trust is a trust where the trustees hold the trust property on trust for a member or
members of a class of beneficiaries as they shall in their absolute discretion determine. In this
situation, no beneficiary owns any part of the trust fund unless and until the trustees have exercised
their discretion in his favour.

The test for certainty of object in the context of discretionary trusts is the so-called “criterion
certainty test” or the “in or out test”, where the trustee ought to be able to determine with certainty
whether any given claimant is or is not within the description of the relevant class. This test was
established by the House of Lords in McPhail v Doulton, where the House of Lords held that the test
applied to trust powers, as it did to mere powers. It has been established in this case that in a
discretionary trust, it is enough if the creator of the trust described the objects so that it is possible
to decide whether a particular person falls within or outside of the class of people described in the
trust deed with certainty, provided that where objects are not individually named, they constitute a
class which is not so hopelessly wide as to make the trust administratively unworkable.

In Re Gulbenkian’s Settlement Trust, the House of Lords held that the trustee does not have to
necessarily know all the objects of a trust. Objects of a trust are deemed sufficiently certain as long
as it can be said with certainty that any given individual is or is not a member of the specified class of
beneficiaries.

(i) Conceptual uncertainty

Conceptual uncertainty is also referred to as linguistic or semantic uncertainty. This involves

uncertainty or vagueness in defining the class or classes of individuals over whom the trustees are
entitled or required to exercise their discretion. The presence of conceptual uncertainty would
render the “in or out test” inapplicable because the words being used are too vague and
ambiguous which will surely result in uncertainty as to whether the relevant disposition falls
within the criteria or not, and therefore, the trust will fail for uncertainty.

In Re Gulbenkian’s Settlement Trust, Lord Upjohn had stated that the class of object must be
identified clearly and it is not for the court to make inference . To illustrate, he had further
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provided an example where a donor directs his fund to be distributed equally between “my old
friends”. He stated that this trust will be regarded as invalid as the term “friends” lacked precise
definition and therefore was conceptually uncertain, unless it can be proven that the donor had
given a special dictionary meaning to such phrase which allow the trustees to identify the class of
people with certainty.

In Re Barlow’s Will Trust, Lord Browne-Wilkinson J used the word “friends” to explain conceptual
uncertainty. He stated that the word “friends” itself has a great range of meaning because its
exact meaning varies from person to person.

In McPhail v Doulton, the words used were “my relatives and dependants of staff”. The court
held that there was conceptual certainty as in the case of a discretionary trust, there is certainty
of object if you can determine whether any given person is a beneficiary or not.

Bequest subject to condition precedent

Where a bequest is subject to a condition precedent instead of discretionary trust or power, the
“in or out test” will not be applied to the full rigour, but a less stringent test will be applied as
adopted in Re Allen where it was held that a gift remains valid if it can be said that one or more
persons qualify, even if there are difficulties in respect of others.

The principle is exemplified in the judgment of Browne-Wilkinson J in Re Barlow’s Will Trusts

where the testatrix, in her will, bequeathed some pictures with the remainder to be held by the
executor on trust for sale provided that the latter permitted any member of the former’s family
and friends to purchase any of the pictures, at valuation or probate whichever was lower of the
two. The issue to be decided by the court was the validity of the said direction in respect of family
and friends. The direction of testatrix in allowing her friends to purchase was held valid and shall
not void for uncertainty of object. This was because such direction did not require all members of
class to be ascertained, it would be sufficient as long as one or more persons undoubtedly
qualified.

According to Halsbury’s Laws of Malaysia, if a trust is construed as conferring individual gifts to

persons qualifying under some condition precedent, then it is valid if one or more persons
undoubtedly qualify, even though the conceptual uncertainty makes it impossible to determine
whether other persons qualify.

(ii) Evidential uncertainty

Evidential uncertainty arises where there is an absence of evidence to show who was intended to
benefit under the trust. It refers not to the meaning of the words involved, but rather to the
question whether or not the claimant can prove that she falls within the class of beneficiaries.

In McPhail v Doulton, Lord Wilberforce emphasised that in respect of the difficulty to ascertain
the existence or whereabouts of members of the class, this is a matter with which the court can
appropriately deal upon an application for directions. The uncertainty of this nature should not
affect the validity of the disposition. This means that where it is impossible to prove whether or
not potential beneficiaries succeed in falling within the category, this will not invalidate a trust.

In Re Gulbenkian’s Settlement Trust, the court also held that evidential uncertainty will not affect
the validity of a trust. Lord Upjohn further opined that even though it may be difficult to
determine the whereabouts or existence of some of the members of class at the material time,
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the trustee can always apply to the court for directions, provided that the class has sufficiently
defined by the donor.

(iii) Administrative unworkability/uncertainty

Administrative unworkability involves situations where the testator or settlor expressed the class
of objects so broadly that it is difficult for the court to ascertain any sensible exercise of the
discretion. In McPhail v Doulton, Lord Wilberforce defined “administrative uncertainty” as the
situation where the meaning of the words used is clear but the definition of beneficiaries is so
hopelessly wide as not to form “anything like a class” so that the trust is administratively
unworkable or cannot be executed. To illustrate, the Court further gave an example like “all the
residents of Greater London”.

Administrative uncertainty does not affect the validity of powers of appointment but may
invalidate discretionary trusts. In R v District Auditors exp West Yorkshire, a trust intended for
2.5 million people in West Yorkshire was held to be administratively unworkable and therefore
void.