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  • Created by: Nikki
  • Created on: 12-04-16 18:28

Requirements of a valid express trust

(1) the trust must be sufficiently certain

(2) the trust must comply with, or fall iwthin one of the exceptions to, the beneficiary principle

(3) the trust must comply with the rule against perpetuities


(1) Intention

(2) Subject matter

(3) Objects

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Possible to create a trust wihtou metnioning word 'trust' or having any notion of trust as a legal concept --> substance of what you intend, not the language you use to express the intention, which is important (Re Kayford)

Traditionally courts have said that a failed outright transfer will not be construed as an effective declaration of trust (Jones v Lock) --> settlor must intend to create a trust rather than simply have intended to benefit the beneficiary in some way
Some cases display a more indulgent attitude --> Paul v Constance --> simple people who are unaware of the subtleties of law, take their behaviour and their circumstances 

Courts have used objective approach to intention --> but this is questionable approach 
(1) as a matter of principle generally no good reason for disregarding overriding settlor's true (subj) intentions int his way
(2) line of cases which shows that, where subj and obj approaches give different answers to the question of wehther a trust was intended, courts will take subj line

Precatory words --> such expressions impose no legal obligation in respect of recipient's use of relevant property and so creating no trust (but bear in mind importance of construing whole document (Comiskey v Bowring Hanbury)

Segregation of trust property --> if trust property mixed...
(1) with trustee --> trust cannot have been intended
(2) with other beneficiaries --> not inconsistent with intention to create trust

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Forms of uncertainty

Conceptual uncertainty --> where definition of objects or subject matter provided by settlor is imprecise or ambiguous

Evidential uncertainty --> how definitions can be applied in practice --> if we have the right info at hand to determine what people or property match the definitions the settlor has given

Enumerability --> sometimes not enough to be able to identify individual items of trust property and objects when called on to do so --> may be necessary to know form outset how many things or people match the settlor's definitions

Ascertainability --> even where we know of people who match the definition of objects, we may not know where to find them

DEGREES OF UNCERTAINTY --> less degree of uncertainty may be remediable
- desire to effect settlor's intentions, where at all possible, supports the courts lending a helping hand in such cases
- legitimate?
- settlor's intentions are no guide as the uncertainty stems from us being unclear as to what it is the settlor wants --> any choice court makes runs the risk of appearing arbitrary

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Subject matter

Any asset that can be transferred outright can be the subject matter of a trust --> tangible or intangible

Problems where settlor hasn't made it clear what he wants the trust asset to be 

Different problem where settlor has idnetified source and quanity of property to be held on trust but has failed to identify which of the specific interests from that source should be the trust property --> Re London Wine Co

Where all individual assets are identical (fungible) even if settlor has not said which specific items are to be held on trust, can court or trustees themselves pirck out the relevant number from the source? -->

  • CA in Hunter v Moss held that whether identification of specific assets was required depends on what sort of property is involved 
  • implication that no application to tangible property where segregation is possible --> intangible property only
  • identification of sepcific trust assets still required where trust is of tangible property, even where property is to come from identical assets --> but why?
    • usual worry that we need to know what sepcific property belongs to beneficiary if some are lost or stolen --> but doubtful that we cannot find solutions to these or that mere possibility of such dififculties arising give sus sufficient reasons to treat all such trusts as ineffective
  • rule set down in HvM and any possible extension of that approach to cases of homogeneous tnagibles can apply only where settlor identifies sources of relevant property among his exisitng stock of assets
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Floating trusts

S transfers money to T on terms that T may use as much of it as he likes during his lifetime but must on his death leave what is left of it on trust for B

Sprange v Barnard

Clear taht at ouset we don't know what property will be received by B as we do not know how much trustee will spend in his lifetime --> uncertain --> but B has no claim to property until T dies and at that time we should be able to determine what is left and so what B is to receive?

Maybe trust object isn't uncertainty of subject matter but perception that it is incompatible with existence of a trust that trustee is free to use and dispose of property however he wishes --> but T may take benefit if S provides --> so no good reason to prevent S from creating floating trust if this is what they want?

Does not seem to be any sufficiently storn gargument for holding that such trusts must fail 

Re Lehman Bros

Settlor's failure to identify which assets are to go to a particular beneificary will not be fatal to the validity of the trust if he has left this to T to decide --> e.g. Re Golay's Will Trusts

S may leave such decisions to B --> e.g. Boyce v Boyce

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Objects: fixed trusts (1)

Type 1 --> each B's entitlement may be defined so as to be independent of and distinct form those of other beneficiaries

  • once B has established himself to be within class he can claim his beneficial interest --> doesn't matter whether there is any ucnertainty as to who or where others in the class are
  • test for certainty --> 'one person test'
    • all that C needs to establsih is an entitlement to his part of trust property is that he satisfies the trustees that he falls withint he class set down by settlor
    • effective provides for a series of discrete dispositions
    • trust will fail only if T have absolutely no idea of what words used by settlor meant, such that they could not find even one person who they could be certain fell within the class of beneficiaries


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Objects: fixed trusts (2)

Type 2 --> B interests may be defined referentially so that any individual's entitlement cannot be ascertained or quantified without identifying and quantifying the others

  • once B has established he falls withint he class we know he is entitled to something but we do not now what until we know how many other Bs there are --> quantum of share depends on trustees being able tot make out claims of other Bs too
  • test for certainty --> list certainty
    • T must be able to compile a list of all members of the class defined by S in order for trust to be valid
    • trust fails eitehr if there is ambiguity in definition of class or iff there is insufficient evidence --> needs conceptual and evdiential certainty
    • some indication test may be relaxed where we know the max number of people inteh class, but do not know if there are in fact fewer than this
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Discretionary trusts and powers of appointment (1)

Traditional test for discretionary trusts = list certainty test

Re Gulbenkian's Settlements --> CA endorsed recent CA authority that, in relation to powers of appointmen there was no need for list certainty and that objects were sufficiently certain so long as it could be said of any given individual that he was or was not a member of the class, thereby rejecting the need for list certainty

McPhail v Douton --> Wilberforce emphasised similarity betweendiscretionary trusts and powers and hence the undesirability of their having different certainty tests 

Single test of certainty of objects now applies to both trusts and powers -->
- Any given postulant/is or is not test
- Can it be said with certainty that any given individual is or is not a member of the class of beneficiaries

What does this require?
- must be able to say of any indivdiual who happens to come our way whether he falls within the class or outside it
- test not satisfied if people of whom we are not sure wehther they are beneficiaries
- suggestion that this requires both conceptual and evidenctial certainty 
- complications with test --> Re Baden's Deed Trusts
- conceptual certainty is definitely necessary, but some evidential certainty may be acceptable

Re Wrights Will Trusts --> conceptual uncertainty in any aspect of class definition will cause trust to fail --> court has no power to sever ambiguous part from unambiguous part of definition 

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Discretionary trusts and powers of appointment (2)

Point of certainty of objects requirement to ensure that trustees and court have info they need to administer the trust

  • can be argued that is or is not test = inadequate
  • reactive in nature, requiring only that we are able to identify beneficiaries and non=beneficiaries when they fall for consdieration
  • but trustees will need to do more than pick out beneficiaires as and when they appear
  • proper exercise of trustees' dispositive discretion will require them first to weigh up the merits of competing claims of various beneficiaries
  • requires some knowledge of both size of class and what sort of people comprise it
  • one factor in favour of list certainty is that it provides trustees with raw material they need to be able to condcut this sort of survey
  • McPhail test can be satisfied without T having any real idea of the size of the class of beneficiaries, let alone who these people actually are
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Administrative unworkability

Wilberforce at end of McPhail v Doulton
- talks about definition of beneficiaries being to wide
- interpreted as meaning that a trust will be administratively unworkable where nmber of beneficiaries is too wide
- District Auditor case --> trust with up to 2.5m potential beneficiaries was declared administratively unworkable

But why should big trusts fail?

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Administrative unworkability doesn't apply to powers (therefore despite adoption of is or is not test in McPhail, the validity requirements of discretionary trusts and powers are not compeltely aligned)

Re Manisty's Settlement --> Templeman --> power will fail if it is capricious --> where the terms 'negative any sensible intention on part of settlor' such that the objects constitute 'an accidential conglomeration of persons who have no discernible link with settlor or any institution'

Distinct from administrative unworkability --> clear from Manisty, and confirmed in District Auditor case where trust failed for admin unworkability but held not to be capricious 

Specific problem is not breadth of definitoin of class but rather who these people are and why the settlor picked them --> idea appears to be that S should have good reaosn for choosing objects he has chosen, for if class appears to be arbitrarily defined then T will not be able to pick among them on any sensible basis when it comes to distribution
- but this doesn't follow --> fact that objects are an arbitrary collection of individuals doesn't mean tha the trustees will be compelled to act arbitrarily when they have to decide whom to pay
- however class is defined and whoever is within it, the trustees should be able to formulate sensible and coherent criteria for exercise of their distributive discretion

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Resolving uncertainty (1)

Settlor may attempt to rescue trust from uncertainty and invalidity by providing that uncertainties are to be resolved conclusively by a named TP or by trustees themselves

Originally held that such provision were capable of resolving evidential certainty but not conceptual uncertainty on basis tha tthis would effectively oust the jurisdiction of the court on this matter and was thus contrary to public policy 

Now unclear whether can be used to solve conceptual uncertainty --> Re Tuck's Settlement Trusts - Denning held that provision effective to resolve conceptual uncertainty

Possible appraoch which gather some support from cases --> 2 diff ways in which TP may be called in aid of potential uncertainty in definition of class -->
(1) Tp could be called in aid of potential uncertainty in the definition of a class (e.g. £100 to all my friends and where there is any uncertainty matters are to be resolved conclusively by X)
(2) TP opinion may itself form part of definition of class provided by settlor (e.g. £100 to those who in the opinion of X are my friends) --> conceptual uncertainty avoided 

See notes for points which follow from this

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Resolving uncertainty (2)

Courts intervening to avoid uncertainty

  • - Re Bulbenkian - 
    • HL held that such difficulties related to word 'residing' could be overcome and that, if necessary, the court coudl determine whether a given individual matched the description
  • Re Baden's Trusts (No 2)
    • court held that 'dependants' was sufficiently certaint 

More generally the courts ahv eoften expresed their unwillingness to defeat trusts on basis of uncertainty

  • Jessel MR in RE Roberts --> modern doctrine not to hold will void for uncertainty unless utterly impossible to put a meaning on it
  • later cases make it clear that this approach is not limited to wills but applies to other forms of documents too
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Consequences of uncertainty

If no certainty of intention then whoever has legal title to relevant property keeps it beneficially

If uncertainty of subject amtter or objects and settlor sought to create trust by declaring himself trustee --> no trust arises and settlor remains absolutely entitled to property

If he sought to create trust by transferring the property to another perosn then T will hold that property on resulting trust for S, unless S can be regarded as having intended that, in such circumstances, beneficial interest should go to someone else

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