SAMPLE NOTES FROM OUR LLB CASE BOOK: Equity and Trusts The Three Certainties chapter LLB Answered is a comprehensive, first-class set of exam-focused study notes for the Undergraduate Law Degree. This is a sample from one of our Case Books. We also offer dedicated Core Guides. Please visit lawanswered.com if you wish to purchase a copy. Notes for the LPC are also available via lawanswered.com. This chapter is provided by way of sample, for marketing purposes only. It does not constitute legal advice. No warranties as to its contents are provided. All rights reserved. Copyright © Answered Ltd. THE THREE CERTAINTIES KEY CASES CASE FACTS PRINCIPLE A disposition was made to the Example of language which was testator’s wife “absolutely in full sufficiently clear to show certainty Comiskey v confidence that she will make use of of intention. Language is to be Bowring it as I should have”, and “at her viewed as a whole. The existence of Hanbury death she will demise to one or more precatory language (“in full of my nieces”. This was held to give [1905] confidence”) will not necessarily her a life interest and to create a prevent certainty of intention. trust. Where property is intangible and A company director purported to interchangeable the subject matter Hunter v Moss create a trust over shares. The will be sufficiently certain without the specific shares having to be [1993] shares were inter-changeable with others in their class. segregated. COMPARE with Re London Wine It was held that the trust was void IRC v A trust was set up under which for uncertainty. Payments made Broadway some, but not all, beneficiaries could from the purported trust to Cottages be identified. It was possible to charities were therefore made [1954] identify whether a given individual under a resulting trust from the was a member of the relevant class. settlor's income. A man gave a cheque to his baby saying, “I give this to baby for himself”. He then took the cheque Example of a scenario where a trust will fail because equity will not Jones v Lock back and it was found when he died. He had not created a trust for the perfect an imperfect gift. [1865] child, he had not used imperative COMPARE with Mascall v Mascall words to subject the cheque to a and Pennington v Waine legally binding obligation for the benefit of the child. 1. Sets out the requirements for a Kasperbauer v secret trust: (i) communication; (ii) A man attempted to pass on Griffiths acceptance; and (iii) reliance. property in a secret trust established [2000] in his will by referencing his 2. The testator must clearly intend prospective fiancé and saying that to establish a secret trust. Here, (continued she “knows what she has to do”. “knows what she has to do” was held overleaf) not to demonstrate sufficiently clear intention. 3 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 A dispute over who inherited two Knight 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 A discretionary trust was McPhail v person is or is not part of the class of established, and the court Doulton objects. (The individual considered whether the list test ascertainability test). The test is [1970] 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 trust from what was said and done. deceased in his sole name to hold The deceased had been consistent in Paul v accident compensation. It was also what he said. Conduct can also Constance used for bingo winnings. The demonstrate intention. In this case, deceased always told his partner it sharing a bank account and using it [1977] was a shared account and money to deposit joint winnings withdrawn from it had been shared. 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 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 The trust established in McPhail was “relatives” should be restricted to Re Baden discussed further. Under “next of kin” so as to be evidentially consideration was whether (No. 2) certain; Sachs LJ stated that “relatives” was evidentially certain “relatives” could mean “all [1972] and so whether a discretionary trust descendants of a common requires evidential certainty. 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. A testator attempted to leave 2. Set out the exceptions to the money in his will to establish “some “beneficiary principle” (the rule that useful memorial to myself”. This was trusts must have ascertainable not a good charitable gift and it beneficiaries). Re Endacott failed for uncertainty. The words 3. A “memorial” did not come within [1959] created a form of trust. the exception for monuments This is an example of the equitable established in Re Hooper. The list of doctrine – “Equity looks at the exceptions is closed and narrowly intention rather than the form”. interpreted. APPLIED BY Bourne v Keane, Pettingall v Pettingall, Re Hooper and Re Thompson 1. Where a creditor has made a pre- A company established to allow payment to a company, their money customers to invest in gold was will be protected on insolvency if it wound up following a petition by a is deemed to be held on trust. Re Goldcorp creditor bank. The company did not 2. Gold bars and bullion here were [1995] have sufficient assets to cover its liabilities and had not kept gold not identifiable for each individual bullion separate so as to be able to investor, so a trust could not be identify individual owners. established. COMPARE with Re London Wine 5 THE THREE CERTAINTIES CASE FACTS PRINCIPLE A power of appointment was The trust was not void for Re created to give property to a very uncertainty. The “is / is not” test Gulbenkian’s wide class of beneficiaries including applies to powers of appointment. Settlement a wealthy businessman’s son and For any given individual it was clear Trust the son’s wife and heirs and whether they were, or were not, anybody with whom he might be [1969] 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 The question arose as to whether a Re Kayford coming in from customers. trust had been created. The court Instructions were given to the bank [1975] 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 from property that is tangible, it Re London create a trust over some of the wine must be possible to identify and Wine in its cellars but failed to separate segregate the specific property intended. Otherwise, the trust will [1986] out the wine which was to form the subject of the trust. 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.