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Equity and Trusts The chapter

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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.

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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]

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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

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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. Surgeons. COMPARE with Grey v IRC

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THE THREE CERTAINTIES

ADDITIONAL CASES

CASE FACTS PRINCIPLE

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

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

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

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

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

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

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

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THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

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

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

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

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

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

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

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

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THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

A “reasonable income” was held to A settlor directed that a person be a sufficiently objective Re Golay’s Will could live in one of his properties “yardstick” certain enough to form Trust after his death and declared that she the basis of a trust. This was not void [1965] should receive “a reasonable for uncertainty. income” from his other properties. COMPARE with

An elderly woman left her estate absolutely to her brother. She told There was no evidence of a trust her solicitor that her brother would here as there was no indication that Re Snowden "split up as he thought best" the testatrix intended a court to be between nephews and nieces. Her able to execute her wishes. Case [1979] brother died immediately after her confirmed view that extrinsic or and his estate vested in his son. A parole evidence may not be declaration was sought as to how to produced to vary or contradict a will. apply the testatrix's money.

The testatrix left her diamond necklace to her son "to go on and be The testatrix will was held to create held as an heirloom by hm and by his a trust for life for her son and then Re Steele's eldest son on his decease and to go to his son and so on. Her son held Will Trust and descend to the eldest son of the the necklace only for life and could eldest son" and so on. On his death [1948] not dispose of it by will. APPLIED the son purported to leave the Shelley v Shelley. necklace to his son for life and to his grandson absolutely.

A settlement was made in 1912 by The third baronet divorced an the first baronet. This provided that "approved wife" and married a non- all subsequent baronets should approved wife. The court had to Re Tuck's marry an "approved wife”, defined determine whether the limitation Settlement as a wife "of Jewish blood" by one or was valid. The limitation was not Trusts both of her parents. She had to have void. The restriction was not wholly been raised in and never departed [1977] uncertain and the Chief Rabbi clause from the Jewish faith. In an event of provided a valid decision making a dispute the decision of the Chief process in the event of a dispute. Rabbi was conclusive.

The legal ownership of shares cannot pass until the formalities of A man wrote " a declaration" to his transfer have been complied with, Shah v Shah brother purporting to transfer but beneficial ownership can pass. [2010] shares to him and enclosing a stock The "declaration" indicated the transfer form. intent to create a trust and the actions also showed that intention. A trust had been created.

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THE THREE CERTAINTIES

CASE FACTS PRINCIPLE

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

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

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