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Equity and Trusts

The Three Certainties chapter

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 THE THREE CERTAINTIES
KEY CASES
CASE FACTS
A disposition was made to the
testator’s wife “absolutely in full
Comiskey v
confidence that she will make use of
Bowring
it as I should have”, and “at her
Hanbury
death she will demise to one or more
[1905] of my nieces”. This was held to give
her a life interest and to create a
trust.
A company director purported to
Hunter v Moss create a trust over shares. The
shares were inter-changeable with
[1993]
others in their class.
IRC v A trust was set up under which
Broadway some, but not all, beneficiaries could
Cottages be identified. It was possible to
[1954] identify whether a given individual
was a member of the relevant class.
A man gave a cheque to his baby
saying, “I give this to baby for
himself”. He then took the cheque
back and it was found when he died.
Jones v Lock
He had not created a trust for the
[1865] child, he had not used imperative
words to subject the cheque to a
legally binding obligation for the
benefit of the child.
Kasperbauer v
A man attempted to pass on
Griffiths
property in a secret trust established
[2000] in his will by referencing his
prospective fiancé and saying that
(continued
she “knows what she has to do”.
overleaf)
3
PRINCIPLE
Example of language which was
sufficiently clear to show certainty
of intention. Language is to be
viewed as a whole. The existence of
precatory language (“in full
confidence”) will not necessarily
prevent certainty of intention.
Where property is intangible and
interchangeable the subject matter
will be sufficiently certain without
the specific shares having to be
segregated.
COMPARE with Re London Wine
It was held that the trust was void
for uncertainty. Payments made
from the purported trust to
charities were therefore made
under a resulting trust from the
settlor's income.
Example of a scenario where a trust
will fail because equity will not
perfect an imperfect gift.
COMPARE with Mascall v Mascall
and Pennington v Waine
1. Sets out the requirements for a
secret trust: (i) communication; (ii)
acceptance; and (iii) reliance.
2. The testator must clearly intend
to establish a secret trust. Here,
“knows what she has to do” was held
not to demonstrate sufficiently clear
intention.
THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

3. States obiter that secret trusts are

upheld to prevent them being used
as instruments of fraud, so arguably
secret trusts are constructive trusts,
Kasperbauer v
meaning a secret trust of land does
Griffiths
not need to comply with the s.
(continued) 53(1)(b) formalities, as per s. 53(2)
LPA 1925.
COMPARE with Kasperbauer v
Griffiths and Re Baillie

Knight v For a valid trust to exist, the three

Knight A dispute over who inherited two
certainties (intention, subject
castles in Downton, Herefordshire.
[1840] matter and object) must be satisfied.

For a discretionary trust, it is only

necessary to establish whether a
McPhail v A discretionary trust was
person is or is not part of the class of
Doulton established, and the court
objects. (The individual
considered whether the list test
[1970] ascertainability test). The test is
needed to be satisfied.
whether the definitions in the
settlement are conceptually clear.

Morice v A trust was established to disperse A trust that offends the “beneficiary
Bishop of property among “such objects of principle” (the rule that trusts must
Durham benevolence as the Bishop shall have ascertainable beneficiaries)
[1805] approve of”. will generally fail, as it did here.

There had to be clear evidence of a

A bank account was set up by the
deceased in his sole name to hold
Paul v accident compensation. It was also
Constance used for bingo winnings. The
deceased always told his partner it
[1977]
was a shared account and money
withdrawn from it had been shared.
trust from what was said and done.
The deceased had been consistent in
what he said. Conduct can also
demonstrate intention. In this case,
sharing a bank account and using it
to deposit joint winnings
demonstrated sufficient intention to
create a trust.

R v District
Auditor ex A trust was created to benefit “any Where a trust is administratively
parte West or some of the inhabitants of West unworkable, it will not be upheld,
Yorkshire CC Yorkshire”. even if it has certainty.
[1986]

4
THE THREE CERTAINTIES
CASE FACTS
The trust established in McPhail was
Re Baden discussed further. Under
consideration was whether
(No. 2)
“relatives” was evidentially certain
[1972] and so whether a discretionary trust
requires evidential certainty.
A testator attempted to leave
money in his will to establish “some
useful memorial to myself”. This was
not a good charitable gift and it
Re Endacott
failed for uncertainty. The words
[1959] created a form of trust.
This is an example of the equitable
doctrine – “Equity looks at the
intention rather than the form”.
A company established to allow
customers to invest in gold was
wound up following a petition by a
Re Goldcorp creditor bank. The company did not
have sufficient assets to cover its
[1995]
liabilities and had not kept gold
bullion separate so as to be able to
identify individual owners.
5
PRINCIPLE
1. It does not defeat a trust if a
person cannot prove they are not a
member; it is only necessary to
prove they are a member of the
class.
2. Applied the “is / is not” test to the
term “relative”. In this case, Stamp
LJ said that the meaning of
“relatives” should be restricted to
“next of kin” so as to be evidentially
certain; Sachs LJ stated that
“relatives” could mean “all
descendants of a common
ancestor”, which is too wide for
evidential certainty, but the trust
was workable if a person claiming to
be in the class were able to prove
that they were in the class; and
Megaw LJ held that if a substantial
number could prove themselves to
be within the class it could stand as
a trust.
1. “Some useful memorial” was
deemed too uncertain to satisfy
certainty of object.
2. Set out the exceptions to the
“beneficiary principle” (the rule that
trusts must have ascertainable
beneficiaries).
3. A “memorial” did not come within
the exception for monuments
established in Re Hooper. The list of
exceptions is closed and narrowly
interpreted.
APPLIED BY Bourne v Keane,
Pettingall v Pettingall, Re Hooper
and Re Thompson
1. Where a creditor has made a pre-
payment to a company, their money
will be protected on insolvency if it
is deemed to be held on trust.
2. Gold bars and bullion here were
not identifiable for each individual
investor, so a trust could not be
established.
COMPARE with Re London Wine
THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

A power of appointment was

Re The trust was not void for
created to give property to a very
Gulbenkian’s uncertainty. The “is / is not” test
wide class of beneficiaries including
Settlement applies to powers of appointment.
a wealthy businessman’s son and
Trust For any given individual it was clear
the son’s wife and heirs and
whether they were, or were not,
[1969] anybody with whom he might be
within the group of beneficiaries.
living,

When the company went into

A company was in financial difficulty
liquidation it asked the bank to
and was advised to set up a separate
change the name on the account.
trust account to accept money
Re Kayford The question arose as to whether a
coming in from customers.
trust had been created. The court
[1975] Instructions were given to the bank
held that the intention was clear and
which re-designated (without
that it was not required that
renaming) an old account for the
something be labelled a “trust” for a
purpose.
trust to be found.

Where the trust property is selected

A wine company attempted to
Re London create a trust over some of the wine
Wine in its cellars but failed to separate
out the wine which was to form the
[1986]
subject of the trust.
from property that is tangible, it
must be possible to identify and
segregate the specific property
intended. Otherwise, the trust will
fail, as it did here.
COMPARE with Hunter v Moss

A £300 annuity was left by a testatrix

Sprange v to her husband in a will. The will The subject matter (property and
Barnard stated that whatever was left or size of share) of the trust must be
whatever the husband did not want certain. It was not sufficiently
[1789} was to be given to other certain here, so the trust failed.
beneficiaries.

Where legal and equitable title are

Vandervell transferred shares to a transferred together, it is not
Vandervell v trustee company which would hold necessary for the transferor to
Inland the shares in favour of himself as the comply with the formalities in s.
Revenue beneficiary. He then orally 53(1)(c) LPA 1925. The beneficiary of
Commiss-ioner instructed the trustee company to a bare trust is able to collapse the
transfer both legal and equitable trust under the rule in Saunders v
[1967] title to the Royal College of Vautier.
Surgeons.
COMPARE with Grey v IRC

6
THE THREE CERTAINTIES

ADDITIONAL CASES

CASE FACTS PRINCIPLE

The beneficial entitlement must be

A testator left two houses on trust
capable of determination or the
Boyce v Boyce for his daughters. One daughter was
trust will fail for uncertainty. Here
to choose one, and the other would
[1849] which house would have been
take the remainder. However, the
chosen by the first daughter could
first daughter died before choosing.
not be known, the trust failed.

CRC Credit The court had to look at statutory

The court was asked to rule on the
Fund Ltd v GLG trusts applying to client money
entitlement of creditors of Lehman
Investments obtained for the purpose of
Brothers to receive distributions
plc investment business and to decide
from different asset pots held by the
when they arose and what assets
[2010] administrators.
were held in them.

It was held that a nomination like

The claimant was nominated as the
this operated as a secret trust, the
Gold v Hill beneficiary under a life assurance
purpose of the trust had been
policy, and was told by the deceased
[1999] sufficiently communicated and the
to apply the funds for the benefit of
interest was created at the time of
the deceased's wife and children.
death.

There were some complexities due

The firm was a dealer in securities
Harvard and had purchased shares for clients
Securities which had not been registered to
[1997] those clients. The court had to
determine whether those shares
were held on trust.
to jurisdiction, but the court held
that it was possible for there to be a
trust over a particular number of a
particular class of shares being part
of a larger holding. FOLLOWED
Hunter v Moss.

Lambe v A disposition was made to a man’s

This was held to be an absolute gift
Eames widow “to be at her disposal in any
to the widow, rather than a trust.
way she may think best, for herself
[1871] There was no certainty of intention.
and her family”.

The three certainties are required

Margulies v A son argued that his father had
for secret trusts. “Knowing his
Margulies intended to establish a secret trust
wishes” and “giving what is
in his favour with his brother as
[2000] appropriate” were too vague to
trustee.
demonstrate sufficient intention.

The defendant and his wife had

bought a property. The defendant
Midland Bank then purported to put the property
v Wyatt into a trust for the benefit of his wife
and family. He continued to use the
[1995] property as collateral security for
business loans. His bank was
unaware.
When the business became
insolvent the bank argued that the
trust was a sham and should be set
aside. The trust could be a sham
without a need to demonstrate
fraud.

7
THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

The case turned on the wording of a

Mussoorie will whereby the testator left his It was held that uncertainty as to the
Bank v Raynor property to his wife "feeling subject matter reflects doubts on
[1882] confident that she will act justly to the intention of the settlor.
our children…"

OT Computers The courts were asked to determine

Ltd v First A company was in financial if the trusts were valid. The trust for
National difficulties. It set up two trust customers was valid as the
Tricity Finance accounts, one for customers and beneficiaries were clearly
Ltd one for "urgent suppliers". It identifiable. The trust for suppliers
subsequently went into liquidation. failed because of the uncertainty of
[2003] the meaning of "urgent suppliers."

The testatrix left her residuary Example of an unclear subject

Palmer v estate to an individual, specifying matter that could not be the basis of
Simmonds that if he died without issue he a trust.
[1854] should leave “the bulk” of her estate COMPARE with Re Golay’s Will
on trust for named others. Trust

Pearson v
Lehman The case concerned the beneficial The court allowed the trusts and
Brothers holdings of shares following the found that there was a beneficial co-
Finance SA collapse of Lehman Brothers. ownership in an identified fund.
[2011]

A will granted a power of

Public Trustee appointment to give educational Example of a power of appointment
v Butler scholarships to “promising” relatives which was deemed too broad to be
[2012] and referred to a list which had upheld.
never been created.

A land lease contained a covenant

that the lessee and his executors
Re Adams and and assigns could purchase the fee
the simple of the demised land for a set
Kensington price. The lessee died and nearly 20
Vestry years later his administrator
[1884] exercised the option under the
covenant and the fee simple was
delivered.
Problems arose when the
administrator tried to sell the
property. The option to purchase
was attached to the lease and the
administrator could not give good
title on a sale without the consent of
the next of kin of the lessee.

“Friend” was certain enough for a

Re Barlow’s gift subject to condition precedent
Will Trust A testatrix allowed her “friends” first to be upheld, as only reasonable
refusal on a sale of paintings evidence is required of friendship. It
[1979] was possible to identify those who
did fall into the class.

8
THE THREE CERTAINTIES
CASE FACTS
A settlor directed that a person
Re Golay’s Will could live in one of his properties
Trust after his death and declared that she
[1965] should receive “a reasonable
income” from his other properties.
An elderly woman left her estate
absolutely to her brother. She told
her solicitor that her brother would
Re Snowden "split up as he thought best"
between nephews and nieces. Her
[1979] brother died immediately after her
and his estate vested in his son. A
declaration was sought as to how to
apply the testatrix's money.
The testatrix left her diamond
necklace to her son "to go on and be
held as an heirloom by hm and by his
Re Steele's
eldest son on his decease and to go
Will Trust
and descend to the eldest son of the
[1948] eldest son" and so on. On his death
the son purported to leave the
necklace to his son for life and to his
grandson absolutely.
A settlement was made in 1912 by
the first baronet. This provided that
all subsequent baronets should
Re Tuck's
marry an "approved wife”, defined
Settlement
as a wife "of Jewish blood" by one or
Trusts
both of her parents. She had to have
[1977] been raised in and never departed
from the Jewish faith. In an event of
a dispute the decision of the Chief
Rabbi was conclusive.
A man wrote " a declaration" to his
Shah v Shah brother purporting to transfer
[2010] shares to him and enclosing a stock
transfer form.
9
PRINCIPLE
A “reasonable income” was held to
be a sufficiently objective
“yardstick” certain enough to form
the basis of a trust. This was not void
for uncertainty.
COMPARE with Palmer v Simmonds
There was no evidence of a trust
here as there was no indication that
the testatrix intended a court to be
able to execute her wishes. Case
confirmed view that extrinsic or
parole evidence may not be
produced to vary or contradict a will.
The testatrix will was held to create
a trust for life for her son and then
to his son and so on. Her son held
the necklace only for life and could
not dispose of it by will. APPLIED
Shelley v Shelley.
The third baronet divorced an
"approved wife" and married a non-
approved wife. The court had to
determine whether the limitation
was valid. The limitation was not
void. The restriction was not wholly
uncertain and the Chief Rabbi clause
provided a valid decision making
process in the event of a dispute.
The legal ownership of shares
cannot pass until the formalities of
transfer have been complied with,
but beneficial ownership can pass.
The "declaration" indicated the
intent to create a trust and the
actions also showed that intention.
A trust had been created.
THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

Shelley v The testatrix left property on a trust

Shelley for her nephew with remainder to
The trust was held to be valid.
his son and continuing subject to
[1868] perpetuity rules.

White v This was an Australian case

Shorthall regarding beneficial ownership of The subject matter of the trust was
shares in a company as between a held to be sufficiently clear.
[2006] couple who had been cohabiting.

10