What is the essence of this certainty? (certainty of intention)
An intention to create a trust is a necessary requirement
If A gives B a property and tells her that she desires B to make provisions for A’s son. Will there be a trust created?
No - a desire only carries out a moral obligation. This is different from telling someone to do it.
What approach do the courts adopt in determining whether a person intended to create a trust?
- an objective approach
- if a person manifests an intention to impose or assume the duty which is characteristic of a trust - the person intends to create a trust
Is it relevant if someone does not actually intend to create a trust/ is unaware that it exists?
No- their subjective intentions are irrelevant (Twinsectra Ltd v Yardley)
How is someone’s intention ascertained?
words and actions (Bellis v Challinor)
writing - contract or will (Rainy Sky SA v Kookmin BankandMarley v Rawlings). Meaning of the words, relevant context features, express and implied terms (Re Lehman Brothers International).
Paying to a specific account separated from their own money (Lyell v Kennedy)
Trust can be created without using the words “trust” (Re Kayford)
Even if the trust is characterised as something different (not a trust) (Don King Productions Inc v Warren) or even if labelled as a trust - doesn’t necessarily mean it is one (Modelboard)
What are the two distinct requirements for certainty of subject matter?
- trust property requirement (must be possible to identify the trust property)
- beneficial entitlement requirement (must be possible to ascertain the beneficiary’s interest in the trust property)
What will happen if someone tries to identify the subject matter by description?
- In cases where the trust property is identified by description, the trust will fail for uncertainty if it is not possible to ascertain the trust property from the description.
- For example, a person cannot create a testamentary trust of the ‘bulk’ of their residuary estate because it is not possible to ascertain how much of it constitutes the ‘bulk’ (Palmer v Simmonds)
- And a company cannot create a trust of its ‘net assets’ because ‘net assets’ does not describe any specific property of the company (Wilkinson v North)
What will happen if someone tries to identify the subject matter out of larger mass?
- fractional interests is fine (1/5th interest in each diamond)
- intangible assets (like shares) are also fine because they are identical assets (Hunter v Moss)
- if they are other things that are not identical (no object is 100% identical) - it will fail (In re London Wine Company)
What is the beneficial entitlement requirement?
It must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property
What are usually the objects of a trust?
People
What is a fixed trust?
A fixed trust is a trust in which the settlor sets out the entitlement of each beneficiary in the trust instrument. The beneficiaries and their individual entitlements are ‘fixed.’ It is the nature of a fixed trust that each beneficiary has a definable interest in the trust fund.
What is the test for certainty of objects for a fixed trust?
complete list test
- It must be possible to draw up a complete list of all the beneficiaries:IRC v Broadway Cottages Trust.
- must have both conceptual and evidential certainty
What is conceptual certainty?
- the precision of language used by the settlor to define the class of people who should be the beneficiaries
- if the objects of the trust are not clearly defined, it will not be possible to draw up a conclusive list and the trust will fail.
- ‘friends’ will fail - who are the friends?
What is evidential certainty?
proof/ evidence of whether something does or does not exist
What are powers of appointment?
- A power of appointment is a right to choose who, from within a specified class of objects, receives property.
- these powers can be given to anyone, they can choose whether to exercise the power at all
Must a power of appointment satisfy the certainty of objects test?
- yes in order to be valid, a power of appointment must satisfy test of certainty of objects
- the test = is/is not test (Re Gulbenkian’s Settlement Trusts)
What is the test for certainty of objects for a discretionary trust?
is/is not test (McPhail v Doulton)
- must have conceptual certainty but no evidential certainty
What is a discretionary trust?
- the trustees of a discretionary trust do have distributive discretion. Generally, they may decide which beneficiary is to receive what sum.
- flexible form of trust
What is the is/is not test?
The test is whether it can be said with certainty that any potential claimant is or is not a member of the class.
The size of class impacts which type of trust?
Discretionary trusts - a discretionary trust is void if the class of beneficiaries is too large as it would be administratively unworkable (McPhail)
