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THREE CERTAINTIES All trusts must satisfy three certainties:
1. Certainty of intention: question of fact and the courts will consider the whole context.
2. Certainty of subject matter: certainty as to what property is held on trust / beneficial interests involved. Complicated when some of the trust property is unascertained goods.
3. Certainty of objects (charitable trusts are exempt from this requirement). o Fixed trust: will be certain as to its objects if a complete list of beneficiaries can be compiled. o Discretionary trust: will be certain as to its objects if it can be said with certainty that any given individual is / is not a member of the class. Important that a trust satisfies the three certainties for two reasons:
Trustees must know what their obligations are under the trust.
Satisfying three certainties ensures that, if necessary, the court will be able to administer the trust. Although we look at these separately, in many cases they overlap — for example, uncertainty as to the subject matter casts uncertainty on the intention to create a trust. CERTAINTY OF INTENTION The key requirement of an express trust is that the settlor intended to create a trust. In working out what was intended, a number of indicators should be looked for. If there is insufficient certainty of intention then the gift takes effect as an absolute gift and no trust will be held to exist.
Imperative / precatory language?
Question is whether, on a proper construction of the words, the settlor shows an intention to create a trust. His subjective intentions are irrelevant. In the older cases, the courts accepted that precatory words could evidence the necessary intention.
Precatory words express a hope / wish / moral obligation. The use of such words typically indicates that a gift is intended.
Imperative words: express a command — a duty to do something. The use of imperative words indicates that a trust (or power) is intended. However, the attitude of the courts changed in Lambe v Eames, where the CA found imperative words to be necessary:
Lambe v Eames : testator gave his estate to his widow "to be at her disposal in any way she may think best, for the benefit of herself and her family." The widow gave part of the estate to an illegitimate son. CA (Mellish LJ): there estate was a gift to the widow and not a trust, therefore her disposition to the son was valid. Whether a trust is intended is always a question of interpretation:
Re Adams and the Kensington Vestry : Testator provided in his will that he left his estate"to the absolute use of my wife… 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." Was it a gift or trust? CA (Cotton LJ): no trust — he intended to leave the property to his wife absolutely. Previous case law had gone too far in accepting precatory language as sufficient evidence of intention to create a trust." o Must look at true effect of words: "we must not rely upon the mere use of any particular words, but, considering all the words which are used, we have to see what is their true effect, and what was the intention of the testator as expressed in his will."
Although a contractual promise can form the subject matter of a trust, the mere fact that a third party is the beneficiary of such a promise does not mean that the promise is held on trust for them:
Re Schebsman : S was dismissed by employer and agreed to terms of compensation with employer — sums totalling £5,500 would be paid on an annual basis. Contract stated that, if S died before all sums were paid, his wife would be paid remaining sums. S died bankrupt. Did contract create a trust in favour of the wife, or did remaining money vest in trustee in bankruptcy. CA: contract did not create a trust in favour of the widow. No express intent to create a trust. "[Express] trusts can arise only from the intention to create a trust expressed by
… person to be considered its founder …. There must be an intention duly carried into effect." Although, note, that the money did not form part of S's estate — company was bound to pay money to Mrs. S. Conduct (objective test): The above cases concerned finding intention to create a trust in the wording of a document. However, in cases where there is no document to construe, conduct will show a trust if, objectively assessed, the conduct was enough to show that a trust was intended. Paul v Constance 
Facts: Deceased was separated from his wife and began a relationship with P until his death. Deceased deposited money in a bank account in his name, from which P could withdraw money. Some of P's money also deposited in account. Deceased said to P many times that "the money is as much yours as it is mine." P claimed the money was held on trust for her.
CA (Scarman LJ): there was a trust in favour of P. Conduct through repeated assertions that the money was both of theirs was enough to create an express trust. This is an objective test of whether the conduct is enough to show that a trust was intended. "There must be a clear declaration of trust and that means there must be clear evidence from what is said or done of an intention to create a trust". Limit: Scarman also noted that "it might, however, be thought that this was a borderline case. Virgo: suggests that this case is probably the limit of how far the courts will go to find a sufficiently certain intention to create a trust. Gardener: this case illustrates the importance of context — in family circumstances, where there is no legal advice, courts may be more ready to find necessary intention.
CERTAINTY OF SUBJECT MATTER There are two elements to the certainty of subject matter: (i) it must be clear what property is held on trust; (ii) the beneficial interest must be clear. If trust fails for lack of certainty of subject matter, the transaction is null — no property is transferred. Two areas of difficulty:
Vague or general descriptions of the trust property: settlor must make clear what property is held on trust, or the trust will be void as it will not be possible to determine what is held on trust.
Trusts of part of bulk property: where there is an attempt to create trust over part of a bulk of tangible property (e.g. wine). The trust property will only be certain if separated from the rest. Vague general descriptions Issue here is that subject matter must be identifiable on an objective construction of the language used
Palmer v Simmonds : in her will testatrix said she would leave the "bulk of her residuary estate" to named persons: trust failed. What was the meaning of 'bulk'
Re Golay's Will Trusts : testator left B "reasonable income from my other properties": valid trust: court could use 'reasonable income' as yardstick to quantify amount B was to receive. People could have different valid views about the 'bulk' of something, but 'reasonableness' is a concept with which lawyers and courts are familiar and can be ascertained to a higher degree. Nature of subject matter: Property is defined broadly and is not limited to tangible goods. E.g. shares in Hunter v Moss. Property in a larger bulk Tangible property must be segregated from the bulk in order to be sufficiently certain:
Re London Wine Co (Shippers) Ltd : LWC, owner of a large stock of wine, declared it would hold parts of the stock on trust for various buyers, but no steps were taken to set apart trust wine from the bulk of the stock. Oliver J: the trust was invalid — a failure to segregate the wine rendered the subject matter uncertain. When LWC became insolvent, buyers had no priority over its creditors (i.e. only a personal claim against LWC). Subject matter must be specific in that it is segregated / appropriated from the mass.
Re Goldcorp Exchange : dealer in gold went into liquidation and customer sought delivery of gold he had recently purchased (i.e. claimed it was on trust so would get priority over creditors). PC: there was no trust. Subject matter was uncertain as the bullion had not been
set aside / allocated. No subject matter to which trust could attached. C only had a contract claim against D. NB: cases would be different today — s.20A Sale of Goods Act 1979 (added in 1995), provides that the purchaser of part of a bulk of goods becomes an owner in common of a share of the bulk. Intangible property (e.g. shares) does not need to be segregated to be sufficiently certain:
Hunter v Moss : M owned 950 shares in a company and declared himself a trustee of 50 shares for H, without specifying which shares. CA (Dillon LJ): trust was valid, despite shares not being segregated, as the shares were intangible assets of identical value. o Distinguished Re London Wine: principle in applies only to tangible property as wine (and other chattels) is not completely identical — i.e. part of the wine could be damaged, so identification of specific shares is necessary. o Rejects idea that distinction should be between homogenous and non-homogenous mass: "Even tangible assets which are regarded as forming part of a homogeneous mass are physically separate, and so distinguishable, from other assets comprised within the same mass."
Re Harvard Securities  Facts: Stockbroker went bankrupt — question was whether the purchasers of shares have beneficial interests. Practice was to buy blocks of shares and sell them in parcels, though not registering them in the names of clients. Neuberger J: Clients had a beneficial interest under the trust, despite the shares not being segregated. As long as the total and proportions were clear, that was enough. Distinction between London Wine and Hunter approved. Where intangible property is not segregated, the correct analysis is that the trustee and beneficiary hold all the property as equitable tenants in common in the relevant proportions e.g. 1/20 in Hunter v Moss; it is not the case that 50 specific shares are the trust property and the other 950 shares belong to the trustee absolutely.
Pearson v Lehman Brothers : Briggs J commented on the application of Hunter: Notes that the courts have not been unanimous as to how a Hunter v Moss trust works: "the analysis which I have found the most persuasive is that such a trust works by creating a beneficial coownership share in the identified fund, rather than in the conceptually much more difficult notion of seeking to identify a particular part of that fund which the beneficiary owns outright." o Distinction should be drawn between fungible / non-fungible assets: "a trust of part of a fungible mass without the appropriation of any specific part of it for the beneficiary does not fail for uncertainty of subject matter, provided that the mass itself is sufficiently identified and provided also that the beneficiary's proportionate share of it is not itself uncertain." Analysis of Hunter and London Wine. Several ways of distinguishing the cases:
Neuberger in Re Harvard Securities: shares etc. are identical, whereas chattels are not
Parkinson: London Wine and Goldcorp involved a fluctuating mass, so the court could not identify the assets beneficially owned by each customer by reference to a proportion of the
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