Certainty Of Trusts

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In order for an express trust to be valid theso-called “three certainties” must be satisfied.

Identified by Lord Langdale in Knight vKnight (1840):

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• Certainty of Intention

• Certainty of Subject Matter

• Certainty of Objects (or of beneficiaries)

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Why are these requirements necessary?

•The essential elements of the trust relationship must be defined with sufficient certainty to enable the T to carry out his/her duties. Ts must know what their obligations are under the trust.

The settlor cannot put the T under a duty to do something that is too vague to be legally enforceable or that is practically unworkable, given the nature of the trustee's duties and their liability for breach. Certainties provide T with a degree of protection.

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•The certainty rules have to strike a balance: the settlor's freedom to express his or her intentions about how the trust is to work must be set against the need for the trust to be workable as a trust.

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A - Certainty of Intention

• Did the settlor/testator show an “intention” to create a trust?

1.Construction of words used.

2.Need not use word “trust” -->What kind of words were used? What was their conduct?
3.Even if used the word “trust”, need not be a trust.

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Paul v. Constance (1977) --> sometimes a formal declaration of trust was not required

F: “The money is as much yours as it is mine.” H: Valid trust.

· Criticised --> when you reach a right conclusion but you haven’t substantiated it with good reasoning --> when did the trust come into existence? --> When he said the money is as much hers or when they opened the account? --> court said it isn’t important to know when and all we need to know is that it happened and the trust exists

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Paul v Constance -->Mr Constance was married and started a relationship with Mrs P and they started to live together as husband and wife for like 7 years à Mr C got about 950 quid for a personal injury claim and he and Mrs P decided to open a joint account à bank advised them against it because it would create a scandal à they opened an account in his name only and he was like what’s mine is yours, b à they made joint deposits and joint withdrawals -->he died without making a will and was not divorced from wifey à wife said the dolla and property is hers à Mrs P said f*ck off m8 and a trust was created due to the fact that it was essentially a joint account à did Mr C through his conduct and words create a trust? --> court said he did declare himself a trustee on that account for himself and Mrs P jointly and the beneficiary was both him and Mrs P and so she’s entitled to 50% of the dolla --> equity looks at the intent and not the form and there was an intention and the words that Mr C used supports that intention as well as the joint deposits and withdrawals D�hb

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Jones v. Lock (1865) --> equity cannot perfectan imperfect gift

F: “I give this to baby; it is for himself, and I am going to put it awayfor him.”·

H: (Imperfect) gift nota trust.

·Robert Jones was a business man andsomeone paid him 900 squids --> had a kid and the wife said what did hebring for it? --> he took the checque and put it in the baby’s hand and said it’s yoursand then took it away to put away for safekeeping --> couple days later, he called the solicitor to change his will and onthe day he was gonna see him, he died à words he used to the baby were looseconversation and it would create a dangerous precedent if they allowed a trustto exist based on that convo --> what was he trying to do when he gavethe cheque? --> he was trying to make a gift and not a trust, not successful becausethat isn’t the way to make a trust (needs formalities; cheque was in the father's name without having been endorsed in favour of the baby )so it was an imperfect gift --> equity cannot perfect it

Note: Gardener thinks this case was harsher because of the judicial policy atthat time

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Duggan v. Governor of Full Sutton Prison(2004) --> the passing of ownership carried with it both legal and beneficial rights unless there was something in the circumstances which should lead equity to impose a trust

· F: Prisoner’s money was paid into an account under the Governor (as by prisonrules). Prisoners claimed Governor was trustee of the money, and that the moneyshould be paid into a separate interest bearing account.· H(CA): No trust. Noclear intention to create a trust in the prison rules. It was a banker-creditorrelationship.

Prisoner said the governor was a trustee and one of his duties is to try and make moremoney out of it --> courtsaid nah

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On reception into prison, the prison took cash from the claimant which was returned on his release. He claimed that it should have been invested.

Held: The credit of the receipt into the books of the prison created only a debt as between the prison and prisoner. No trust was created. What was taken was cash, and cash was returned. He had not been deprived of his property, and there was no rule against him making a request for the money to be paid into an interest bearing account. The right against interruption of the right to peaceful enjoyment had not been infringed.

That the relevant question was whether the circumstances under which the cash was taken from the prisoner pursuant to rule 43(3) of the 1999 rules were such as in equity to impose a trust on the governor; that the passing of ownership carried with it both legal and beneficial rights unless there were something in the circumstances that should lead equity to impose a trust; that there was nothing in the language of rule 43(3), or, more generally, in the circumstances in which cash was taken from a prisoner under that rule, which should lead to the imposition of a trust on the monies when they came into the hands of the governor; and that, accordingly, no trust was imposed on the governor.

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Precatory Words

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• Expressions of hope/desire that the donee will use property in a certain way. Past cases, “precatory” words sufficient to create a trust obligation

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Strange rule that if I create a trust under a will and it fails, the surplus money would go to the executors of the will rather than the next of kin à out of sympathy for the next of kin, courts used to find trusts through precatory words alone so they could get the property à Executors Act passed in 18000’s gave more protection to next of kin --> Now we are no longer willing to find a trust based on precatory words alone

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A strict rule prevailed as from Lambe v Eames (1871) 6 Ch App 597 at the latest.

James LJ regretted the “officious kindness” of older cases in allowing trusts where none was strictly intended.

“In hearing case after case cited, I could not help feeling that the officious kindness of the Court of Chancery in interposing trusts where in many cases the father of the family never meant to create trusts, must have been a very cruel kindness indeed.” James LJ in Lambe

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Lambe v Eames --> Dude left property to his widow to use in any way she may think best for her and the family --> these words do not show sufficient intention to create a trust

Testator left his estate to his widow “to be at herdisposal in any way she may think best,for the benefit of her and her family” - held this was an precatory expression and didnot connote the necessary intention to create a trust

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Certainty of Intention to Create a Trust Test: In all cases, it is a question of proving that the settlor intended to impose a legally binding obligation on the trustee to hold and manage the property on behalf of the B.

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Equity looks to intent, rather than form. This is a question of construction of the relevant documents or of gathering inferences from the words or conduct of the alleged settlor, considering all the circumstances of the case.

Administration of Justice Act 1982, s.21: Extrinsic evidence, including evidence of the T's intention, may be admitted to assist in the interpretation of a will. Use of the word 'trust'

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Imperative or precatory language?

Since Lambe v. Eames (1871), the courts have generally made a distinction:

•Imperative words express a command, a duty to do something. Use of such words indicates that a trust (or power) is intended.

Precatory words merely express a hope or a wish, rather than imposing an obligation. Imperative words show an intention to create a legally binding obligation.

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Precatory words express a hope, a wish, or a moral obligation that the donee will deal with testator's property in a particular way. Use of such words typically indicates that a gift is intended. There is no intention to impose a binding trust on that person.

Modern attitude - No trust is created by precatory words

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*Re Adams and the Kensington Vestry (1884)27 ChD 394- a strict rule as to the words “full confidence” that the recipientof property would do what was right as to its disposal (also cases such as Re Diggles (1888) 39 ChD 253; Re Johnson

· Cotton LJ in ReAdams and the Kensington Vestry (1884):

Ø The courts mustascertain what “upon a true construction, was the meaning of thetestator.”

Ø In this case thetestator’s “full confidence that (his widow) woulddo what is right as to the disposal thereof” did not impose a trust.

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Testator’s will: “I give, devise and bequeath all my real and personal estate and effects … to the absolute use of my dear wife Harriet Smith, her heirs, executors, administrators, and assigns in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease” -->only imposed a moral obligation on the widow

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Re Diggles (1888); 'it's my desire that she allows A an annuity of £25 during her life'.

But note:-Comiskey v. Bowring-Hanbury [1905]; The presence of precatory words will not necessarily prevent the court from finding that a trust exists, as long as it is satisfied that this was the donor's intention. Here, reading the 'full confidence' section as precatory, later words suggested H intended to convey a life interest to W.

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Staden v. Jones [2008]; Ct may also take into account surrounding evidence which sheds light on the parties' intentions. Here the CA looked to a solicitor's covering letter to conclude that a divorcing couple's arrangement that the W transferred her share in the family home to the H on the basis that their daughter should ultimately be entitled to her share amounted to a constructive trust.

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Conduct:-Paul v. Constance [1977]; An intention to create a trust can also be inferred from the donor's conduct. Facts: Dispute over whether Mr C's wife (from whom he was separated but not divorced) or his new partner, Mrs P, was entitled to money held in a bank account in the deceased's sole name. During their relationship Mr C had made arrangements for Mrs P to withdraw money with his permission. Only Mr C withdrew money once, which was split evenly between them and he often told Mrs P that the money was 'as much yours as mine'. They also paid some joint bingo winnings into the account.

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Decision: Held these actions were sufficient to infer that Mr C had made a declaration of trust of the money in the account and Mrs C was entitled to half of the account.

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Before Lambe v Eames --> courts tended to regard a gift accompanied by precatory words as being indicative of an intention to impose a trust on the donee

A change of approach was heralded by Lambe v Eames (1871) where a testator left property to his widow specifying that "it is to be at her disposal as she thinks fir for herself and her family"

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The Court took the view that these words were not intended to create a trust and held accordingly that the widow was absolutely entitled to the property with no more than a moral obligation in favour of her family

This decision has been reinforced in subsequent cases in which the courts have refused to enforce as trusts, gifts accompanied by one form of precatory words or another, including:

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Re Adams & Kensington Vesyry: "in full confidence that she will do what is right as to the disposal...as between my children"

Re Diggles: "It is my desire"

Re Hamilton: "I wish them..."

Re Williams: "Absolutely in the fullest confidence that she will carry out my wishes

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Re Connolly: "I specifically desire"

Re Johnson: "I request that"

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Exceptional cases where precatory words give rise to trusts

It is not an abosute rule that using precatory words in making a gift invariably precludes the possibility of a trust --> true position as summed up by Lopes LJ in Re Hamilton is that the court will not ordinarily enforce a declaration framed in precatory words as a trust "unless on the consideration of all the words employed it comes to the conclusion that it was the

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This position was well illustrated in Comiskey v Bowring-Hanbury

"They are words which may or may not create a trust, and whether they do so or not must be determined by the context of the particular will in which you find them."

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Other examples of notrust

· Mussoorie Bank Ltd v Raynor (1882): testator gave all ofhis estate to his wife ‘feeling confident that she will act justly toour children in dividing the same when no longer required by her’,

· Re Diggles (1888) :‘it is my desire that she allows X an annuity of £25’, --> For 15 years executors paid and then they eventually stopped à lady claimed there was a trust à court said it was an absolute gift with a moral obligation and Mrs Diggles expressed a desire for her daughter to act in a certain way and did not impose a trust

· Re Johnson [1939]: ‘I request that mymother will on her death leave the property or what remains of it…to myfour sisters.’

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· Re Hamilton [1895] 2 Ch 370 --> “You must take the will which you have to construe and see what it means, and if you come to the conclusion that no trust was intended you say so, although previous judges have said the contrary on some wills more or less similar to the one you have to construe[U2] .” Lindley LJ in Re Hamilton

Judges should look for intention on a case by case basis à if there are other things in the will that supports an intention to create a trust then precatory words can create a trust à BUT they alone cannot create a trust, precatory words need to be supported by other stuff

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Comiskey v Bowring-Hanbury [1905] AC 84.· F: The testator gave allhis property to his wife “absolutely in full confidence that she willmake such use of it as I would have made myself and that at her death she willdevice it to such one or more of my nieces as she may think fit and indefault of any disposition by her … I hereby direct that all my estate will beequally divided among the surviving nieces'

· H(HL): The wife held the property on trust forherself for life and then in remainder for the nieces.

· NOTE: RE Adams and Comiskeyshould be read together --> addedwords support the intention to create a trust

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The courts said although precatory words have been used, we need to look at the whole will --> he said the nieces are going to be benefitted anyway and that supports an intention to create a trust

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Re Steele’s Will Trusts (1948) --> direct use of an old precedent ·

T lefther diamond necklace to her son by will, requesting him to pass it down to hiseldest son and so on through each generation. à“I request mysaid son to do all in his power by his will or otherwise to give effect to thismy wish.” à the lady borrowed these words from an old case where the court found atrust à court said there must have been an intention to create a charge sinceshe copied it word for word·

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Held: Son held the necklace on trust for his eldest son. --> court followed interpretation given to words in Shelley v Shelley (80 years previously)

Re Steele's Will Trusts --> SOMETIMES, SETTELORS MAY LOOK AT PREVIOUS CASES TO DETERMINE WHAT WORDS THEY SHALL DO. THEREFORE, WHERE IDENTICAL WORDS FROM AN EARLIER CASE ARE USED, THE EARLIER DECISION SHOULD BE FOLLOWED - UNLESS THE EARLIER DECISION WAS CLEARLY WRONG.

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Harrison v Gibson 1 All ER 858•

Testatormade a home-made will. By it he gave: 'The Bungalow I leave in trust to mywife' and ‘on her death the Bungalow is to be sold and cash raised is to beequally divided between [his four children, J, M, P and E]’ --> Afterhis signature at the end of the will, the testator had written 'No doubt if mumruns into money problems you can sort something out. Like selling bungalow'. --> after his death, J died too àafter J died, wife died but she thought she received the property as a gift soshe could do whatevs àshe divided between the three remaining kids so J’s family got squat

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Did the will create a trust and a life interest to the widow? If so, then she cannot divide it in this way and has to follow the settlor’s instructions à some of the kids said it was an absolute gift (the c*nts got bigger shares) à relied on s 22 -->even if we invoke s 22, it is still not so because there is contrary evidence (the comment about his mum) --> he is saying that if mum runs into money problems, the kids can sell it --> this was seen as something to benefit the kids which displaced the presumption that it was an absolute gift --> it would have looked different if the comment said the wife had to sell it if the mother had money problems

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In Harrison v Gibson --> This can mean twothings:

Ø It can mean I amcreating a trust and giving my spouse a life interest --> not to be treated as his own propertyand when he dies it goes on Ø It can also mean that Ihave given it so my spouse absolutely to do as they pleasee

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Section 22 of theAdministration of Justice Act 1982: Except where a contrary intention was shown'it shall be presumed that if atestator devises or bequeaths property to his spouse in terms which inthemselves would give an absoluteinterest to the spouse, but by the same instrument purports to give hisissue an interest in the same property, thegift to the spouse is absolute notwithstanding the purported gift to theissue'.

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By a clause in his homemade will, the testator left property “in trust” to his wife, with the provision that on her death the proceeds of sale of the property were to be divided equally between his four children. The testator added: “No doubt if mum runs into money problems you can sort something out. Like selling the bungalow.” The wife, who died some years after her husband, willed the property on trust for sale with the proceeds to be divided between the children as to 41.67% each to the first and second claimants, and 16.66% to the second defendant, with nothing to the estate of the eldest child, who had died, represented by the third defendant.

The claimants sought the determination of the court on the proper construction of the bequest, relying on section 22 of the Administration of Justice Act 19821 which provided a statutory presumption applying where a testator had devised property to his or her spouse in terms which “in themselves” gave an absolute interest, subject to any contrary intention.

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Held, that when interpreting section 22 of the 1982 Act, the court was entitled to look beyond the words of the clause themselves to the context of the will as a whole; that since the testator had used the words “in trust” and had envisaged the sale of the property in the wife's lifetime but left it to the children to “sort something out”, the terms of the gift did not “in themselves” give the wife an absolute interest, so the presumption in section 22 did not apply; that the court could not infer a contrary intention simply because the testator had purported to give his issue an interest in the property; that although on the proper interpretation of section 22, if the court found itself in doubt as to whether an apparently absolute gift to the spouse was intended to be cut down by later words of gift to the issue, the doubt should be resolved in favour of the spouse, on a fair reading of the will as a whole, the testator had expressed a sufficient contrary intention to displace the statutory presumption; and that, accordingly, the wife had a life interest in the property which was held on trust for the children in equal shares

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Held :“Interpreting the words'in trust' having regard to the terms of the will as a whole, it was notpossible to describe the gift to the wife as a gift in terms which inthemselves would give her an absolute interest.”

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“[E]ven if the conditions for the application of s 22 had applied, the will demonstrated a sufficient contrary intention to displace the statutory presumption of an absolute gift.” “The testator's will had therefore given the widow a life interest in the bungalow.”

Hart J. : “Matters might have looked very different if the testator had concluded by saying 'if mum runs into money problems she may have to sell the house and use the cash to solve them'. Instead the testator has left that problem to be sorted out by his children, no doubt trusting them to do what was right in that eventuality. This seems to me to be decisive as to the way in which his mind was working.”

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Ordinarily the court goes by the documentpresented to it but note Midland Bank v Wyatt [1995]1 FLR 696 (a sham trust but issues also arose under bankruptcy legislation) --> to defraud thecreditors, I set up a trust ·

F: Declaration of trust executed by H&W where thefamily home was settled on the W & daughters. Home mortgaged, money usedfor H’s business. Businessfailed. Bank sought to obtain the house. --> he did not inform the bank about the trust ·

H: Thetrust was a “sham”. The court inferred, H had “kept it up his sleeve for a rainy day” to defeat future creditors

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Precatory words on their own are not enough and need to be supported by something else

· Read the thing as a whole ·

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B - Certainty of Subject-Matter

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The basic requirement is that no trust is created unless it is possible to specify from the relevant document or declaration the property to which the trust is to apply.

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Palmer v Simmonds [1854] 2 Drew 221

F: Testatrix made specific bequests, then leftresidue to Thomas Harrison for his own use with full confidence that ifhe should die without lawful issue that he would after providing for his widowduring her life leave the bulk of her residuary estate to B, C, D and Eequally. •

H: “The bulk of my estate” was unclear and did not identify the subject-matter.

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Boyce v Boyce (1849) 16 Sim 676 •

F: Settlor left two houses for two sisters. Maria was given power to choose, and the other was to go to Charlotte. Maria died before choosing.

H: Charlotte’s interest failed for lack of certainty.

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Re Golays’ WT [1965] 1 WLR 969 (noted (1965) 81 LQR 481).

Testator wanted a “Tossy” to “enjoy one of my flats during her lifetime” and receive “a reasonable incomefrom my other properties.”• H:The direction was sufficiently certain. •

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Re Knapton [1941] 2 All ER 573

The testatrix provided for a number of houses that she owned to be distributed among several relatives and friends, but did not specify either who was to receive which house or how any choices was to be exercised. • Held: Beneficiaries had a right to chose which house they wanted. Order of choice was according to order their names appeared on will and others were worked out by the drawing of lots. •

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Sprange v Barnard [1789] --> trust failed so gift took effect •

Testatrix left £300 worth of annuities to her husband ‘for his sole use; and at his death, the remaining part of what is left, that he does not want for his own wants and use to be divided between’ a number of beneficiaries.

• Trust failed. Money went to H as an outright gift.

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IF the property under trust forms under larger assets, youneed to segregate them --> if 20 bottles of wine and you want to create a trust over 10, you need tophysically separate them

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Re London Wine Co [1996] PCC 121 --> important for tangible goods to be separated

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F: LW were wine merchants. Customersbought 20 bottles of Lafite 1970 out of company’s 80 bottles holding. --> went bankrupt and there were stillbottles in their warehouse à bottles were not separated outaccording to order à customers said any bottles matchingtheir order should belong to them •

H:No trust of the 20 bottles. The subject-matter had not been removed from thecompany’s generalstock. Insufficient certainty of subject-matter.

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Re London Wine Co

LWC was a company dealing in wines that had substantial stocks of wines stored in various warehouses. LWC ran a scheme whereby persons could purchase quantities of wine for investment or laying down. The purchaser bought wine from LWC which would remain in the warehouse in bulk. The customer's purchase would be entered in LWC's stock book as such and allocated a reference number identifying its current warehouse location. The wine remained in bulk storage at the warehouse and was not divided up or allocated to any particular purchase.

LWC provided the purchaser with a document of title confirming the purchaser to be the sole and beneficial owner of the wine he had purchased. The contract for sale of the wine contemplated that the wine would belong to the purchaser and would be stored for him by the vendor. LWC's bank borrowings were secured by a floating charge over its assets. In August 1974 the bank appointed a receiver and the charge crystallised. The receiver sought directions from the court with respect to three categories of wines held for purchasers by LWC. In the first category S purchased a quantity of wine that at the time of purchase represented all LWC's stock of that particular wine. In the second category B and a number of others purchased wine of a particular description that exhausted LWC's stock of that wine held by a number of warehouses. The third category involved mortgages of the wine purchased by the purchaser. In such cases the warehouseman holding the wine in question provided an acknowledgment to the mortgagee that the wine purchased by the mortgagor would be held to the mortgagee's order. In each of the categories no appropriation had taken place and it was not possible to specify which particular cases of wine comprised in the bulk stored were attributable to any one contract of purchase.

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Held, that in each category the wine remained the property of LWC and thus formed as asset of LWC that the receiver was entitled to dispose of. The contention raised in all three categories that LWC held the bulk wine as a whole on trust in undivided shares for each of the purchasers failed.

To create such a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach. It was impossible to identify which particular cases of wine were held for each purchaser.

The cases of wine for each particular purchase were unascertained. In the first category it could not be said that the existing stock purchased by S was appropriated to that contract in the absence of anything to identify those particular cases as the subject matter of S's contract. It was open to LWC to obtain more wine of the same description for delivery to S should it wish so to do. Similarly there was nothing in the contracts contained in the second category to identify which particular cases were appropriated to the collected purchases. The mere fact that LWC sold quantities of wine that exhausted its stock did not have the effect of passing a proprietary interest in those stocks to the various purchases. It was not possible to ascertain which cases belonged to which purchaser.

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Re Goldcorp Exchange Ltd [1995] 1 AC 74 à-->three categories of customers:

a) goldbars were separated out and put in the company’s safety deposit box and thosecustomers could claim their gold

b) gold bars were not separated out --> these ones did not get a beneficialinterest over the gold because no certainty of subject matter

c)these customersordered a rare type of gold coin called the maple leaf coin, there were somecoins in the vault at the time of insolvency à company would not haveordered it for anyone else so it was clear that it was their order but courtstill said nah because they had not been separated •

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F: P paid for gold bullions but not taken delivery. Goldcorp went into liquidation. P asserted proprietary rights.

• H(PC): There was no trust on the gold, as there was no specific gold. No agreed specific bulk from which the gold was to be drawn.

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Held,allowing the appeal,(1) that since thenon-allocated claimants and the second respondent had contracted to purchaseunascertained generic goods no property in any bullion passed to them in law orin equity immediately upon the making of the purchases by virtue of the contractsbecause a purchaser could not acquire title until it was known to what goodsthat title related; and that the collateral promises made in the company'sbrochures and by its employees did not constitute a declaration of trust by thecompany in favour of the customers in relation to the company's current stockof bullion of the relevant type so as to immediately transfer title to them inrespect of that bullion

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Note Re Goldcorp was decideded by the Judicial Committee of the Privy Council decision on appeal from the Court of Appeal of New Zealand --> not binding in English Law but an example of the application of separation principle

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*Hunter v Moss [1994] 1 WLR 452 --> court said this isdifferent from London wine because that was dealing with tangible goods buthere, we are dealing with shares and the shares are identical and so there isno reason why they need to be separated out à only works when the shares are of the same value

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F: Moss owned 950 shares (of 1000 shares) in a private company. He orally declared himself trustee of 50 of them for the benefit of Hunter. Moss did not identify or separate the 50 shares. --> got sacked --> he said he was not bound to give him the shares because he had not separated them out

• H: All the shares were identical as the shares were of the same class and in the same company. Declaring trust of 50 shares did not lack certainty.

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In Hunter v Moss --> Held, dismissing the appeal, that in the case of a declaration of trust of personalty the requirement of certainty of subject matter did not necessarily entail segregation of the property which was to form the subject matter of the trust;

that the declaration of trust by the defendant was sufficiently certain as to subject matter, since the shares held by the defendant were of such a nature as to be indistinguishable from each other and were all therefore capable of satisfying the trust without identifying any particular 50 shares; and that, accordingly, the trust was not void for uncertainty of subject matter

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Re London Wine Co. (Shippers) Ltd. [1986] P.C.C. 121 distinguished in this case -->

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Hunter v Moss Principles --> Dillon LJ

"It is well established that for the creation of a trust there must be the three certainties referred to by Lord Langdale in Knight v. Knight (1840) 3 Beav. 148 . One of those is, of course, that there must be certainty of subject matter. All these shares were identical in one class: 5 per cent. was 50 shares and the defendant held personally more than 50 shares. It is well known that a trust of personalty can be created orally. We were referred to the well known passage in the judgment of Turner L.J. in Milroy v. Lord (1862) 4 De G.F. & J. 264 , 274–275, where he said:

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.David Hayton

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David Hayton on Hunter v Moss

The legal problem in issue arose from the intention of Moss to giveHunter 50 of Moss's 950 shares in a private company while (ineffectively, as aresult of this case) retaining scope to try and avoid his capital gains taxproblems. Of course, Moss could have sent to the company a duly executed sharetransfer form in favour of Hunter in respect of 50 shares, coupled with theshare certificate for 950 shares, and requested a new certificaterelating to 900 shares for himself.

Legal title to the 50 shares would onlypass on registration of Hunter as shareholder though, in equity, title wouldpass immediately Moss had done everything in his power to effect the transferby sending off the relevant documents: Re Rose [1952] Ch. 499.Alternatively, instead of specifically divesting himself of 50 shares, Mosscould in equity have declared himself trustee of one-nineteenth of his sharesin favour of Hunter, thereby enabling Hunter, if Moss wrongfully sold any ofthe 950 shares without Hunter's consent, to trace one-nineteenth of theproceeds of sale of any of the shares.However, if, as happened, Moss simply purported to declare himselftrustee of 50 of his shares, an obvious problem arises because there is nocertainty as to which 50 of the 950 shares the trust relates. Thus, if Mosssubsequently sells 50 shares how do the Revenue know whether he is selling hisown shares, so that he is chargeable to capital gains tax, or if he is sellingHunter's shares so that Hunter is so chargeable? If the proceeds of sale areprofitably or detrimentally reinvested does the new investment belong in equityto Hunter or Moss, bearing in mind that it is only if Moss is acting wrongfullyin respect of specific shares that Hunter can take advantage of the equitabletracing rules to apply whichever of them suits him best? Can Hunter obtain aninjunction to prevent Moss selling or mortgaging any shares or only more than900 shares? Does Hunter really have any specific proprietary interest capableof assignment?

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Fortunately, there is clear authority for the case where A contracts tosell 50 of his 950 bottles of Chateau Lafite 1961 to B, who pays A the price,or purports to declare himself trustee of 50 of those 950 bottles for B. OliverJ. in Re London Wine Co. (Shippers) Ltd [1986]PCC 121, held that until 50 bottles are specifically appropriated to meet thecontract, uncertainty of the specific subject matter thereof means that noproprietary interest passes to B.

He alsopointed out that such a conclusion could not be avoided by any allegedconstructive or express trust of 50 bottles because the subject matter of thetrust would be uncertain until 50 specific bottles were set aside for B. Onewould therefore have thought it obvious that the intended trust of 50 sharesfor Hunter would have failed for want of certainty, especially when he was nota purchaser but a donee and “Equity will not assist a volunteer”; “Equity willnot perfect an imperfect gift”. Indeed, “Equity follows the law”, so surely oneneeds a specific appropriation at law and in equity where concerned with assetsforming an unidentified part of a fungible bulk.

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Surprisingly, Dillon L.J. simply said of Re London Wine, “That case is a long way from the present. It is concerned with the appropriation of chattels and when property in chattels passes. We are concerned with a declaration of trust.” A possible, old-fashioned, but surely specious, distinction might be that one could distinguish tangibles from intangibles, but Dillon L.J. did not make this distinction and, indeed, Professor Goode in (1987) 103 L.Q.R. 438 at p. 459 accepts Re London Wine as requiring separate appropriation equally for tangibles and intangibles. Prima facie, it seems that while all shares of a particular class must be absolutely identical, the odd bottle or two in a batch of 950 might be defective. However, such an odd distinction does not seem sufficient to justify equity going out of its way to assist a volunteer by perfecting an imperfect gift of intangibles, even if one might also argue that sections 16--19 of the Sale of Goods Act 1979 contain a comprehensive code on passing of legal and equitable title to goods, so excluding liberal development of the equitable rules that is not similarly excluded for intangibles. Furthermore, will all shares in a consolidated holding of 950 shares really be identical if an incorporated parcel of 50 happens to represent a forged gratuitous transfer?

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It also reflects fundamental law underlying equitable tracingprinciples: that, as Re Diplock [1948] Ch. 465 shows, evenwhere there is at the outset a clear trust of a separate £X, that trust of £Xceases to exist once wrongfully mixed with the trustee's, or an innocentvolunteer's, own £Y, so that to disentangle matters the beneficiaries then havea charge over the £(X + Y) fund or its product for £X and interest or, if the £(X + Y) has been profitablyinvested, a share of each investment in the proportion X to X + Y.

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Martin supports the court --> whereas Hayton andSwadling think this is bullsh*t --> Swadling said there isone thing the court did not take into account à I have 100 shares andhave declared trust over 20 of them for your benefit à if I follow H v Mlogic, I don’t need to separate them out because they are intangible à if after that, I thengive 20 to my aunt as a xmas gift, whose shares am I giving away? Mine oryours? Can have serious consequences as I can be sued for breach of trust if Igive away your shares and aunt can’t keep them because she has provided noconsideration à how doyou decide? ·

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London Wine and Goldcorp both belonged to the commercial context à court probs felt that equitable principles had no place in the commercial world

· Also in London Wine and Re Goldcorp, court had to decide between two sets of creditors and treat them equally, whereas in Hunter v Moss, it was an employer and employee and Moss did not come with clean hands o

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· 1995 Sale of Goods Act passed which gave buyers certain rights overunsegregated properties

· Decidedbefore Re Goldcorp, but the court considered Re London WineCo. (Shippers) Ltd.

· Followedin Holland v. Newbury (1997), where Re Goldcorp wasdistinguished on the grounds that shares were a special case.·

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Re Harvard Securities Ltd [1997] BCLC 369 --> Dealer dealt in financial securities and held shares for his clients à terms of the K suggested that he held them on bare trust for each of his clients à shares were not numbered or segregated and none could identify which security was identified à Judge distinguished London Wine and applied Hunter v Moss because that case concerned intangible shares and held that the trusts were valid and so no uncertainty of subject matter

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Commentary by Jill Martin --> defends Hunter

(i) Chattels

Where purchasers have paid for goods but have not taken delivery priorto the seller's insolvency, they may seek to gain priority over generalcreditors by claiming a trust of the goods in their favour. Where the goodshave not been segregated but form part of a bulk, these claims failed (prior toa legislative reform mentioned below) on the ground that there cannot be atrust of unidentified chattels. Thus in Re London Wine Co. 2 the buyers of winestored in a warehouse and not segregated from the general stock of similar winecould not establish a trust. It was otherwise where the wine had beensegregated for a group of customers (even though not appropriated to eachindividual customer), as in Re Stapylton Fletcher Ltd, 3 although the judgewarned that the court “must be very cautious in devising equitable interestsand remedies which erode the statutory scheme for distribution on insolvency.It cannot do it because of some perceived injustice arising as a consequenceonly of the insolvency.”4 In that case theproperty (i.e. the legal title) had passed to the customers and there was noneed to consider the trust argument.

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The leading authority on chattels is Re Goldcorp Exchange Ltd, 5 where purchasersof gold bullion, who had paid but had not taken delivery, asserted proprietaryrights on the insolvency of the company. Save for a group of customers whosebullion had been segregated, these claims were rejected by the Privy Council.Legal title had not passed, nor was there any trust, as there was no identifiableproperty to which any trust could attach. Thus the customers were unsecuredcreditors.

Although no doubt some chattels can be regarded as identical to otherchattels of the same description, the rationale of the rule that there cannotbe a trust of chattels which have not been segregated from a mass of similarchattels is that they are not necessarily identical.6 Even bottles ofwine of the same label may not be identical; some may be “corked” andundrinkable.

Now, however, the Sale of Goods (Amendment) Act 1957 provides thatpurchasers who have paid for unascertained goods forming part of an identifiedbulk (where the goods are interchangeable) acquire property rights as tenantsin common of the bulk, subject to any contrary agreement. Thus they willprevail over general creditors in an insolvency. This provision will not, ofcourse, apply to the creation of express trusts of chattels.

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(ii) Choses in Action

The chattels rule does not apply to money, shares and other choses inaction because, in the nature of things, there is no difference between onepound and another pound, or one share and another share of the same class inthe same company. Difficult problems do, however, arise.

In Hunter v. Moss 8 the settlor owned950 shares in M Co., which had an issued share capital of 1000. He orallydeclared a trust of 5 per cent of the share capital, i.e. 50shares. The Court of Appeal, confirming the decision of the High Court9 upheld the trust.Provided the shares were of the same class and in the same company, there wasno need to segregate 50 shares before declaring the trust.

Re LondonWine Co. 10 was distinguishedas involving chattels. Cases upholding bequests of part of alarger shareholding showed that the chattels rule did not apply to choses inaction. Thus a declaration of trust of part of a larger shareholding or £50 outof a designated bank account with a larger balance would be valid. In fact thesettlor had subsequently sold the shares to B Co. in exchange for shares in BCo. and cash, and the judgment was for 5 per cent of the consideration. Ofcourse, there is no difficulty in a trust of a co-owned share, but that solution was rejected in Hunterv. Moss 12 : the plaintiffdid not have a tenancy in common interest in the whole but was an equitableowner of 50 shares.

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(iii) CriticismsCritics of Hunter v. Moss obviously do not claim thatthere is any difference between one pound and another pound or one ordinaryshare in M Co. and another. Rather, they point to the difficulties which couldarise on subsequent dealings with the shareholding or bank account of which anunsegregated part is subject to a trust. Before any such dealings, an adultbeneficiary could call for a transfer of the money or shares. But what wouldhappen if, after declaring a trust of 50 out of 950 shares, the settlor then sold50 shares and invested the proceeds (disastrously or profitably)? Whose 50shares were they? There seems no reason why the tracing rules relating to mixedassets should not apply. (Re Diplock)

Those rules normally deal with trustproperty which has subsequently become mixed with other property, but thereseems no reason why they should be so confined. In any event, it could be saidthat a settlor who declares a trust of part of his shareholding or bank balancebecomes under a duty to segregate the trust assets from his own. If so, hisposition hardly differs from that of a trustee who has wrongly mixed trustproperty with his own.

(iv) ConclusionIt is submitted that the Hunter v. Moss solution isfair, sensible and workable. Unlike the othercases, it did not involve a claim by unsecured creditors to gain priority oninsolvency. If the plaintiffs in Re London Wine Co. and ReGoldcorp Exchange Ltd had succeeded, the courts would have rewrittenthe insolvency rules and the rules then prevailing (before the 1995 amendment)as to the sale of goods, to the detriment of general creditors. To uphold adeclaration of trust of part of a shareholding or bank balance would notprejudice creditors, as such a trust could be set aside in the same way as atrust of the whole shareholding or bank balance on the settlor's insolvency.26In conclusion, Hunter v. Moss is a welcome example ofthe court's policy of preventing a clearly intended trust from failing foruncertainty.

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Ockleton on Hunter v Moss

The function of a trust is different from that of other superficially similar institutions. The principal function of the law relating to trusts is to govern proprietary interests and dealings with the trust property, for the protection of the beneficiaries, during the continuance of the trust. Although the duties of personal representatives have something in common with those of trustees, the basic function of the rules of sucession is to ensure a proper and efficient distribution of property rather than to regulate its retention. Vagueness as to the specification of the subject of a legacy may well not prevent an executor making a proper distribution, but it does not follow that a similar vagueness about property which is to a trust is of no account

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Secondly, it is an essential feature of a trust that, while it continues, the trust property belongs in equity to the beneficiaries. They have proprietary interests, amounting to ownership in equity, good (subject to statute) against anybody except a bona fide purchaser of the legal estate for value without notice of those interests. It is not by any means apparent how the trust in Hunter v. Moss can have had this characteristic. Suppose Moss, relenting of his generosity to Hunter, executes simul- taneous legal gifts of all 950 shares in equal portions to two bona fide transferees. The new owners not being purchasers for value, Hunter's proprietary interest (as sole beneficiary of a trust of 50 of the shares) must survive the transfer. But it is impossible to say which of the two transferees has the trust shares. The "tracing" rules, developed for the identification of money that has found its way into a mixed fund, are not to the point, because the shares, unlike money, have an earmark: each has a number by which it retains its identity in any holding of which it forms part. H's shares are not "mixed" so as to be potentially traceable; he must fail in any action against the new owners because he cannot prove which ofthe shares are his. H's proprietary interest is illusory. It cannot be sufficient to say that he could be, or could have been, given a definite proprietary interest on application to the court. Views may differ on constructive trusts and mutual wills, but it has surely never previously been suggested that the beneficiary of an express trust has no real interest until a court order. H's interest in 50 unidentified shares cannot have been that of a beneficiary of a trust

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The decision here noted may be compared with that of the Privy Council in Re Coldcorp Exchange Ltd. [19941 3 W.L.R. 199 .There, one of tlle claims was that on purchase of unascertained bullion, title to an appropriate portion of the seller's holding of bullion passed to the buyer. Giving the advice of the Board, Lord Mustill cited Blackburn, writing in 1845, that it was contrary to "the nature of things" for property to pass in unascertained goods, even if the sale is from stock: "the parties did not intend to transfer the property in one portion of the stock more than in another, and the law, which gives effect to their intention, does not transfer the property in any individual portion".

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Lord Mustill continued by saying that "the same conclusion applies, and for the same reason, to any argument that a title in equity was created by the sale". This view must surely be preferable to that adopted in Hunter v. Moss. My claim to ownership, whether legal or beneficial, is a nonsense unless I can say what it is that I own and, in consequence, that you don't.

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C - Certainty of Objects

In the case of a fixed trust it is almostcertainly still the case that all the cestuis que trust must be capable ofbeing listed or ascertained at the date of the trust - on pain of voidness ifnot. The issue of certainty has however arisen acutely in relation to“discretionary” trusts.

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The test for the validity of mere powers is givenin *Re Gulbenkian [1970] AC 508.

McPhail v Doulton [1971] AC 424 adopted the same test for discretionarytrusts.

McPhailv Doulton [1971] AC 424: whetherit can be said of any given postulant thats/he is or is not a member of the class of potential beneficiaries. (Also knownas the “given postulant” test)

The test was applied in *Re Baden’s Deed Trusts (No. 2) [1972] 3 WLR 250.

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In McPhail v. Doulton, consideration was given to the validity of a discretionary trust which listed the beneficiaries as officers, employees and ex-officers or employees of a certain company, together with their relatives and dependants.

In the subsequent case, Re Baden's Deed Trusts (No. 2), 22 the Court of Appeal, by majority, held that relatives meant “descendants from a common ancestor”. Such a definition would include an enormous number of people who are distantly related to employees or ex-employees of the company.

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Fixed Trusts

•Trustee obligated to distribute tonamed persons/beneficiaries.

•If named under the trust - noproblem with certainty.

•If identified as “members of aclass” it must be a clearly defined class.

•The “complete list” test - Trusteemust be able to draw up a list of all the Bs. -->IRCv Broadway Cottages Trust (1955)

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Powers

•The test for certainty of objectsin powers – “any given postulant” test.

•whether the doneeof the power may determine that any given individual “is or is not” a member ofthe class of objects.

•The test was laid down by the Houseof Lords in ReGulbenkian’sSettlement (1970).

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Re Gulbenkian's Settlements

•F: A special power of appointmentwas granted in favour of Gulbenkian, his wife and children and “anyperson…in whose hands or apartments or in whose company or under whose care andcontrol or by or with whom he may from time to time be employed or residing.”

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•Lord Upjohn stated: •“…a mere or bare power of appointment among a class is valid if you can with certainty say whether any given individual is or is not a member of the class: you do not have to be able to ascertain every member of the class.”

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DiscretionaryTrusts

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•Trustee has power to choose fromrange of possible beneficiaries.

•The test of certainty of objects:•1) Pre McPhailv. Doulton - same as the test for fixedtrusts, i.e. the “complete list” test.

•2) Post McPhailv. Doulton - the “any given postulant” test.

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* McPhail v. Doulton (1970)

•F: Trustees were directed to makegrants “at their absolute discretion to any of the officers or employees or ex-officers or ex-employees of the company or any relatives or dependants of anysuch persons.”•

H(HL): It is a trust not a power.Adopted the Gulbenkian test:“Whether any given individual “is or isnot” a member of the class of objects”.

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Thecase then had to go back to the HC to apply the new test (“any givenpostulant”/”is or is not test” test)

Thecase then went on appeal to CA again as ReBaden’s Deed Trust (No 2) [1973] Ch9

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The “any given postulant” test :*Re Baden (No.2)

•the Court of Appeal applied thetest. The words “relative” and “dependent” were considered.

•H(CA): To be valid, the class mustbe “conceptually” certain i.e. the terms must have a precisemeaning. The term “relative” and “dependent” had a precise meaning. •Note that “relative” was defineddifferently. Stamp LJ said it meant “next-of-kin”; Sachs and Megaw L.JJ. Saidit meant “descendants of a common ancestor.” --> more endorsed view

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Re Baden (No 2)

•1) “Conceptual” certainty.Depends on the precision of wordsto define the class the Settlor intends to benefit.

•2) “Evidential” certainty.The extent to which specific persons can be identified as members of the class.

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Note

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· Is or is not test for discretionarytrusts from Re Gulbenkian --> for fixed trusts, test remains the complete list test, power of appoints is oris not test and for discretionary trusts is the is or is not test

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In Baden

· MegawLJ:“In my judgment, much too great emphasis is placed in the executors'argument on the words 'or is not'. To my mind, the test is satisfied if, asregards at least substantial number of objects, it can be said with certaintythat they fall within the trust . . . What is a 'substantial number' maywell be a question of common sense and of degree in relation to the particulartrust.”

· Notmany academics support this view à trustees are not always sensible folkand not everyone does what they’re supposed to do à courts should be able to control the actions of the trustees and itcan’t do so based on such vague principles like substantial numbers à has not been overruled but this approach has not gained much academicsupport ?

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· Manyagree that the better approach is from Sachs·

SachsLJ: “Once the classof persons to be benefited is conceptually certain it then becomes aquestion of fact to be determined on evidence whether any postulant has on enquiry beenproved to be within it; if he is not so proved then he is not in it.” -->Canyou prove that this claimant/beneficiary is a member of that class?

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Re Baden No 2

(1) that in applying the test laid down by the House of Lords in In re Gulbenkian's Settlements as to the validity of a discretionary trust, i.e., whether it could be said with certainty that any given individual was or was not a member of a class, it was necessary to distinguish between conceptual uncertainty and evidential difficulty; ( per Sachs L.J. and Megaw L.J.) that when considering whether a candidate was or was not a member of a class, if he could not, on proper inquiry, establish that he was a member then he must be held not to be a member and there was in practice no evidential difficulty in ascertaining whether such a candidate was a dependant or a relative ( per Stamp L.J.) that the test was not satisfied unless one could say affirmatively either that a given individual was within the class of beneficiaries or that he was outside it and that test could not be satisfied if "relatives" fell to be construed as "all descendants of a common ancestor"

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(2) That there was no conceptual uncertainty in the word "dependants" upon the widest meaning attributable to it as to cause the clause to be void for uncertainty

.(3) That as regards "relatives" ( per Sachs L.J. and Megaw L.J.) that upon the widest meaning attributable (viz. "all descendants of a common ancestor") there was no conceptual uncertainty attaching to that word ( per Stamp L.J.) that a discretionary trust for "relations" was a valid trust to be executed by the court by distribution to the next of kin so that the class of beneficiaries became clearly defined and there was no difficulty in determining whether a given individual was within it or without it and accordingly no conceptual uncertainty attached to that word

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Re Barlow’s (1979)

• F:Testator gave collection of paintings to the local authority. She instructedthat her “family and friends” should be allowed to purchase at a fixed price.

• H: Sincethis was a series of individual gifts, anyone who could prove to be a“friend” could purchase the picture

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Gold v Hill [1999]

• F: Settlorhad stated to the trustee: “If anything happens to me…look after Carol and thekids.”

• H: Was theterm “kids” certain?• “Thechildren by Mr. Gilbert's previous marriages were grown up and would hardlyhave been referred to as 'kids'. In any event, Mr. Gilbert had been recentlyliving with and maintaining Carol's children…”R$l

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Sometimes there are ways to get around thecertainty problem by relying on the judgment of a third party or the trustee

• Where thesettlor leaves the term to be defined by a trustee or a third party.

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C: Re Coxen [1948] Ch. 747

• H: Testator can make the trustee’s opinion the criterion as long as trustee declares the basis of their opinion.

[U1]Testator left his house to the trustees with the direction that they should let his wife live in the property for as long as she wants and if she has ceased to live in the property, the house should go to his residual relatives à was the direction sufficiently certain? à what does “cease to reside” mean? à does it cover her going on holiday? à trust was valid because the testator made the trustees opinion the criteria à but it has to be a logical opinion and they have to declare the basis of said opinion

If it is a question of fact then the trustees opinion can resolve the problem, in this case money given to trustee for benefit for beneficiary living in a certain property, if trustee perceived that the beneficiary had ceased to permanently to reside in property then the trustee could give it to someone else --> Held, that the provision for the determination of the wife's interest was sufficiently defined to enable the trustees to come to a proper decision, and that it constituted a valid limitation of the gift.

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C: ReTuck [1978]

in this case,someone belonging to the Jewish faith isn’t that confusing and a chief rabbiwould be appropriate à whereas in other cases it might not work à this case does not resolve all kinds of conceptual uncertainty but incertain situations, certain people can resolve different uncertainties

• H:Requirement of being of Jewish faith and married to an “approved wife” wasdecided by a chief rabbi. --> Lord Denning said itwas valid to leave it a third party

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By a settlement made in 1912 the first baronet, who was of the Jewish race, set up trusts with the object of making provision for so long a period as the law allowed as might tend to keep the dignity in the hands of successors of Jewish blood and faith. The settlement provided for payment of an income to the baronet for the time being if and when and so long as he should be of the Jewish faith and married and living with an "approved wife" or, if separated, certified by one of two designated Chief Rabbis in London as being so separated through no fault of his. "An approved wife" was defined in clause 1 (3) as meaning "a wife of Jewish blood by one or both of her parents and who has been brought up in and has never departed from and at the date of her marriage continues to worship according to the Jewish faith as to which facts in case *50 of dispute or doubt the decision of the Chief Rabbi in London of either the Portuguese or Anglo German Community... shall be conclusive." By clause 3 (e) if the baronet for the time being should be a pervert from the Jewish faith or a bachelor or married to a non-approved wife or have been a widower for 18 months and under the age of 55 without male issue born of an approved wife, or separated from such a wife through his own fault (that question to be decided by one of the Chief Rabbis), the baronet was to receive an annual income of £400 and no more out of the trust fund.

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Re Tuck

In 1970 the trustees of the settlement - the Public Trustee and a surviving son of the settlor - took out an originating summons for the determination of the questions whether the trusts, particularly in relation to the conditions as to Jewish blood and faith in the definition of "approved wife" were void in law for uncertainty, and whether the provision making the opinion of a Chief Rabbi conclusive as to the facts on the relevant questions was void as purporting to oust the jurisdiction of the court. Whitford J. held that even if there was any uncertainty in law in the conditions attaching to the benefits under the trust, the settlor's entrusting to a Chief Rabbi of any decision to resolve disputes or doubts on facts was not an ouster of the court's jurisdiction and cured any uncertainty leaving the settlement valid.

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Held, dismissing the appeal, that the settlement was not void for uncertainty, for ( per Lord Russell and Eveleigh L.J.) the conditions in clause 1 (3) in the definition of "an approved wife" (as also those in clause 3 (e) ) were conditions precedent, and on their proper construction showed that the settlor by using the words "of Jewish blood by one or both of her parents" had not intended that "an approved wife" should be wholly of Jewish blood and might well have considered that the second condition as to Jewish faith was a sufficient safeguard against undue dilution of Jewish blood in the baronetcy

.Per Lord Denning M.R. I see no reason why the settlor should not delegate to a Chief Rabbi the decision as to facts in case of dispute or doubt; but if that provision is inoperative, I would agree that the conditions in the settlement are to be construed as having no such conceptual uncertainty as to render the settlement void

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“Administrative Workability” --> Dutyof survey

• In trusts, the Trustee has a duty to “survey theclass” before distribution. The trustee must have an idea of the size of theclass.

• Megarry VC in Re Hays: “Only when the trustee has applied his mindto the ‘size of the problem’ should he then consider in individual caseswhether, in relation to other possible claimants, a particular grant isappropriate.”

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R v.District Auditor, exp. West Yorkshire Metropolitan County Council (1985)

• F: CCsought to create a discretionary trust of £400k “for the benefitof any or all or some of the inhabitants of the County of West Yorkshire.”

• H: It wasa declaration of trust with conceptual certainty but administrativelyunworkable as the class was too large. --> Taylor J held that the trust was invalid, because it was administratively unworkable to distribute such small amounts to all people. The trust was not, however, ‘capricious’, but merely too difficult and costly for a court to enforce.

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Duties of a donee of a fiduciary power are lessstringent.

• C: Re Manisty (1973)

• H: A Power of Appointment can be for a very wideclass, but a discretionary trust would fail, even though conceptually andevidentially certain. Such a large class for discretionary trusts has no“administrative workability”.

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Capriciousness

• In a rare case powersand trusts may perhaps fail as being capricious

Does not show any sensible intention on the part of the settlor àif it is created for such class of beneficiaries that does not make sense, that can be struck down as capricious à rare because people don’t really make trusts that don’t make sense that often à no concrete examples of what is capricious

.• E.g. “all the residents of Greater London” by Templeman J in Re Manisty’s Settlement. --> caseinvolving power

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One uncertain category

• C: ReWright’s Will Trusts (1999)

• Classconsisted of identifiable charities and non-identifiable bodies.

• H(CA): Theuncertainty of one concept invalidated the whole trust. [

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If you create a discretionary trust for a class of people, some of them are not certain à the whole thing fails and you cannot save parts of it

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Quick Summary

Application of the test:

Conceptual certainty

Evidential certainty

Administrative workability

Capriciousness

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R v District Auditor, ex p West Yorkshire Metropolitan DC [1986] RVR 24 - --> administrative unworkability

Re Manisty [1974] Ch 17 --> capriciousness

Gold v Hill [1999] 1 FLR 54 (“the kids”)

Re Barlow [1979] 1 WLR 278 (“friends”)

. Relevance of opinion of a third party:

Re Coxen [1948] Ch 747

Re Tuck [1978] Ch 49.

Duty of survey: See notably Re Hay [1982] 1 WLR 202

One category uncertain Re Wright’s Will Trusts (1999) 13 TLI 48 (uncertainty in one concept may put the validity of the whole trust at risk).

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A trust is particularly useful in commercial situations to guard against the insolvency of the other party to a contract --> if a person holds property as a T then that property does not form part of their personal estate in the event that they go bankrupt but rather continues to be held on trust for the beneficiaries

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Re Kayford (1975)

A mail order company was known to be on the brink of insolvency by management and accountants --> company set up a separate bank account into which it paid its customers' money until such a time as each customer's order had been completed and goods sent off --> Megarry J held that because the money had been segregated from the other money for the purpose of protecting the position of these customers, the only inference was that there had been an intention to create a trust over the money in favour of the customers whose orders had not been fulfilled --> therefore an intention to create a trust was found

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In the CA in Hunter v Moss it was apparently accepted that there is no need for certainty of subject matter in circumstances in which the property in question is intangible --> this argument was also accepted in Re Harvard Securities (1997) that there should be a distinction between tangible and intangible property, following Hunter

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The reason why the Goldcorp approach is preferred by property lawyers is that its certainty avoids many problems --> the principle question is what should the law do when there are more claims than there is property to satisfy them? Answer: only allow claimants to have proprietary rights if they can demonstrate with sufficient certainty which property was being held separately for them

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A fixed trust is a form of trust in which the trust find is to be held on trust for a fixed group of beneficiaries e.g. 10k to be held for my two kids now living or 10k to be held on trust for everyone who bought my book on December 1st --> fixed trust

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For a fixed trust to be sufficient;y certain it must comply with the "complete list" test which requires a complete list of all the beneficiaries to be capable of being drawn up --> IRC v Broadway Cottages (1955)

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Discretionary trusts are trusts in which the Ts are obliged to make a distribution of prpertyto any persons drawn from a general class of beneficiaries e.g. my T shall pay 10k annually to my close friends --> discretionary in that the Ts have the ability to use their discretion to decide which of the class of Bs is to benefit --> discretionary trust rather than a mere power because the trustees "shall" (or are obliged to) pay the money

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Test is the "any given postulant" test from McPhail v Doulton --> test requires that it must be possible to say of any given claimant to the trust that the person either is or is not within the class of Bs (also called the "is or is not" test) --> this strict test will tend to invalidate many trusts where vague expressions like "good friends" are used to define a class

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Mere power --> a power given to the Ts which enables them to act if they choose to do so but which does not oblige them to act

E.g. my Ts may pay 1k annually to any of my good friends --> Ts are able to act on their own decvisions but they must be able to justify those decisions and cannoy act capriciously in the decisions they make (Re Hay's ST)

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The test is the same any given postulant test from McPhail and Re Gulbenkian

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Since McPhailv. Doulton [1971] A.C. 424, it has been settled that atrust power will not fail merely because a complete list of possibleobjects cannot be drawn up. The court asks first if it can say of anygiven person whether or not he is a member of the class of objects. If itcannot, it considers whether this is because the concept employed todefine the class is uncertain (in which case the trust will fail), orbecause of evidential difficulties of ascertainment (which are notnecessarily fatal and can be resolved on an application for directions).The difficulty with this "is/is not" test is that it is passive (reflecting itsorigin as the test of certainty for mere powers). Because a trust powermust be exercised, a trustee of such a power is obliged to carry out "awider and more comprehensive range of inquiry" ([1971] A.C. at 457)than need even a fiduciary donee of a mere power. These moreonerous obligations to survey the field led Lord Wilberforce inMcPhail to suggest that for a trust power to be valid, it had to beadministratively workable. The trustee needed sufficient definitionalcriteria to enable him to carry out his active duties.

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In the West Yorkshire case, the court was prepared to assume (withsome misgivings) that "an inhabitant of West Yorkshire" wasconceptually certain. A trust to benefit such inhabitants could not inthe circumstances be capricious, because the Council had every reasonfor wishing to do so. Nevertheless, the provision was void because itwas administratively unworkable. The range of objects was so widethat it was incapable of forming "anything like a class," and wasdirectly analogous to the example given by Lord Wilberforce inMcPhail of "all the residents of Greater London." What emergesclearly from the case is (i) that this requirement of administrativeworkability is distinct and separate from the requirement of certainty;(ii) that it applies only to trust powers and not to mere powers, and (iii)that it can vitiate a trust power even if there is no element ofcapriciousness (fickle) about it. Fundamentally, the case was concerned withthe boundaries between public and private trusts. The inference fromthe decision is that a trust of a public character will be upheld only if it ischaritable. It is not inconceivable that Lord Wilberforce's requirementof administrative workability was intended to preserve the distinctionbetween public and private trusts.

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(a) A provides in his will, "I bequeath£10,000 to my old friend B, fully confident that he will use the money tobenefit my infant grandson C." Has a trust been created? Give reasons foryour answer.

· Certainty of intention

· Used precatory words

· *Re Adams[U1] andthe Kensington Vestry (1884) 27ChD 394- a strict rule as to the words “full confidence” that the recipient ofproperty would do what was right as to its disposal

· The courts must ascertain what “upon a true construction, was the meaning of thetestator.”

Ø In this case the testator’s “full confidence that (his widow) woulddo what is right as to the disposal thereof” did not impose a trust.· Comiskey vBowring-Hanbury àHL heldtestator intended to make a gift to his wife, with a gift over of the propertyat her death to such of her nieces as should survive her, shared according tothe wife’s will, and otherwise equally

· · I think it is a moralobligation à closer to Adams as there is no added words which support theintention to create a trust [

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(b) A writes to B that “I wish you to know thatin this letter I declare myself a trustee of 25% of the shares I hold in three differentcompanies for your benefit.” Advise B whether a trust has been created.

· Clearly imposing a trusteeship on himself

· Certainty of subject matter isan issue

· The basicrequirement is that no trust is created unless it is possible to specify fromthe relevant document or declaration the property to which the trust is toapply.· Hunter v Moss à if the shares are identical, you don’t need to say

· 3different companies so unlikely to be identical so different from Hunter

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Note when answering problem questions on the certainties

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Knight v Knight à you need three certainties · Read the question and see what the most problematic one is à spend more time on that

· If you can find precatory words, say so and mention that on their own, they are not enough to create a trust

· Discuss specific cases Certainty of subject matter à if shares are identical, no separation needed à Palmer v Simmond Certainty of objects --> Find out what kind of trust à if fixed, are names listed à if discretionary, apply Re Baden and ish