Express Trusts

“First, if the words are so used, that upon the whole, they ought to be construed as imperative; secondly, if the subject of the recommendation or wish be certain; and, thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain."

1. Certainty of Intention:

The test requires that the “intention to create a trust is clearly to be allocated from the language used and the circumstances of the case” as stated by du Parq in re Schebsman. The court will consider the words used by Brad and all the surrounding circumstances, including his conduct, in order to ascertain whether he intended to impose the obligations of trusteeship in respect of property for the benefit of the beneficiaries. The narrow issue here is whether Brad “has gone further and declared his intention to impose an equitable obligation” on T&T in respect of the property. It is a question of fact and degree. On the true construction of this Will, it is possible to find clear intention in clause 7 of the Will to create a trust by reference to the language used “I appoint Terry and Tony as my trustees.” The use of the word ‘trust’ is nearly always conclusive and judges have moved from using a literal reading of the trust documents to adopt a more purposive approach to interpreting them. Therefore, the disposition is certainly intended to be in the nature of a trust.

2. Certainty of Subject-matter:

In this scenario, Brad stated that T&T “ are to sell one third of my collection of Buddha images, and use the proceeds of sale”.

Firstly, in regard to the third of the Buddha images, Brad didn’t specify enough which third is he referring to. This is very similar to the Re London Wine Co in which Oliver J held the trust is valid only if each creditors could demonstrate that particular, identifiable bottles of wine has been segregated form the general stock held in the cellar and held separately to their account. This stands as the orthodox approach in which it is vital for the item in question to be identified, isolated, segregated and separated. The important of this stringent requirement in this scenario is that the third of images is to be sold. As the value of each image is different based on it’s artistic and historical value., the total proceeds of the sale will be different inevitably. This pragmatic view is backed up by the case of Re Goldcorp, in which the Privy Council affirmed the principle that property must be separately identified before it can be held on a valid trust and went further to explain that the rule revolves not simply around it being logistically possible to identify the property, but rather that the property itself has actually been segregated for the purpose of subjecting it to the trust arrangement.

This approach is similar to the one taken by Dillon LJ in Hunter v Moss by holding that there was a valid trust over the shares as no practical difference which 50 shares were subject to the trust given that there is no qualitative difference between one ordinary share and another ordinary share (shares are on the same class and in the same company). However, in this case, there are practical and qualitative differences between the images as explained above. The CA held that it is not necessary to segregate the property comprising the trust fund if the property was intangible property, like ordinary shares, with each unit being indistinguishable from another unit. However, it is clear from this scenario, that the images are tangible and distinguishable from each other. It is inevitable in this case to turn to the executor who is expected to distribute the property. T&T cannot know which property falls under their remit, whereas the executor knows that he has a title in the whole of the property formerly bested in Brad.

Secondly, Whether the proceeds of the sale are hold as money “tangible” or money in a bank account “intangible property”, it seems difficult to see why there ought to be a specific rule for intangible property as seen in the Court of Appeal case of Hunter v Moss.  It is possible for tangible property to potentially be subject to the same principle as the persuasive US case of Caswell v. Putnam suggests that the distinction between the basis of tangible and intangible property is spurious. The certainty of the subject-matter ( the images) is still questionable.

3. Certainty of Objects:

This is a fixed trust in which the number of the objects (i.e. beneficiaries) and the extent of their interests are specified in the trust instrument (Will ). The test for certainty of objects is whether the objects are ascertained or capable of being ascertained. In other words, at the time of the creation of the trust, the trustees are required to draw up a comprehensive list of all the beneficiaries. This is known as the ‘list test’ or the ‘Broadway cottages test’ following the judgment of the IRC v Broadway Cottages case and dicta of Lord Upjohn in Re Gulbenkian. “The rationale behind the test certainty rule is that, if all of the beneficiaries cannot be listed, then a trustee will be unaware of whom he may be acting, and a court will be unaware who holds and enforce the equitable beneficial interest in the trust."

The London directory represents the list of intended beneficiaries, however, it is necessary for T&T to be able to produce a complete list of all the potential beneficiaries for there to be sufficient certainty as to the beneficiaries. T&T are also required to distribute the property “ must distribute the property of the trust to each of the beneficiaries in a fixed proportion”that is one pound sterling each.

A possible problem that could arise is that the number of beneficiaries exceeds the number of one pound sterling available or the same name mentioned few times in the directory, which raises a possible problem that is parallel in its logic with administrative unworkability that is “a principle which demonstrates the pragmatism which underpins the law of trusts.” Some academics examined the workability criterion as suggested by Lord Wilberforce in McPhail v. Doulton as a method of invaliding discretionary trust and questioned whether the mere size of the class of objects alone is sufficient to invalidate a trust and submit that the idea is “based on a potentially innumerable class of beneficiaries coupled with a lack of provable definitional criteria. Hardcastle takes the view that administrative unworkability is extended to fixed trusts.” 

Furthermore, the list of the beneficiaries is to be drawn up from the 2007 edition of the London Directory, while Brad died in Oct 2008. The year lapse means that some of the beneficiaries might be impossible to be found as some might have died, remarried, changed names, moved abroad, etc. This might raise an issue of evidential uncertainty as explained by Lord Wilberforce in McPhail v Doulton to mean the existence of limitations in ascertaining the existence or the whereabouts of the objects. In this event, T&T could apply to the courts for directions and the courts may make such order as appropriate in the circumstances. “ The mere fact that it may be practically difficult to discover all the beneficiaries under a fixed interest trust will not necessarily mean the list certainty is not satisfied. Furthermore, it is not necessary for all of the objects of a fixed interest trust to be specifically identifiable at the date when the trust comes into effect, provided it is clear who the objects will be.” This means that even if such uncertainty is found, it will not deem the trust invalid. T&T could apply for a Re Benjamin order in which it will not necessarily render a trust invalid. T&T could discharge their obligations by placing advertisements in newspapers in which the beneficiary is thought likely to find them. If T&T applies for a Re Benjamin it will demonstrate that they have taken sufficiently strenuous steps to find the lost member of the class of objects, then the court will order that the property be divided among the ascertained objects.

4. Conclusion:

For the aforementioned, it is highly likely that the trust will be found void for uncertainty of subject-matter. If this occurs, then there are some possible scenarios:

(1) The trust is completely void and the property is held for the settlor on a resulting trust

(2) The validation of other parts of the will in spite of the invalidity of a particular trust power on ground of uncertainty. The previous cases of Sprange v. Barnard (CA) and Lassence v. Tierney, provided for particular means of allocating property in circumstances in which property has been left to a legatee as an absolute gift but subject to some trust which has failed, the legatee (Oxfam) takes the property absolutely. This position was confirmed, as the House of Lords case of Hancock v. Watson provided for the gifts to continue in effect, even though the trusts attached to them were held to have been void for uncertainty. Meaning that clauses 2-6 of the Will will still go ahead even if the trust under clause 7 fails.

5. Bibliography:

Berryman, J.B. Woodman, F. Gillen, M. Law of Trusts: A Contextual Approach. Emond Montgomery Publication, 2006. P. 83

Hardcastle, IM, ‘ Administrative unworkability: a reassessment of an abiding problem’ 91990] Conv 24

Hepburn, S.J. Principles of Equity and Trusts: Equity and Trusts, Routledge, 2001, p292

Hepburn, S.J. Principles of Equity and Trusts: Equity and Trusts, Routledge, 2001, p293

Hudson, A. Understanding Equity & Trusts. Routledge Cavendish, 2004, p.39

Oakley ,A. J. Trends in Contemporary Trust Law. Oxford University Press, 1996, p. 69

Ramjohn, M. Cases & Materials on Trusts. Routledge Cavendish, 2004, p. 45

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