Three Certainties

It can be seen that such words would not validate a trust, rather what the settler or testator wishes or would like to happen to the gift.

The second principle of certainty is the certainty as to the subject matter of the trust. All items whether real or personal can be made the subject of a trust. However the trust instrument must allow the property to be identified clearly. There are two elements of subject matter, trust property and beneficial interest. Unlike certainty of intention these latter two concepts are matters of law rather than questions of fact. Firstly, certainty of trust property it must be clear which property is to be put in the trust. In the case of Palmer v Simmonds , it was found “…the bulk of my said residuary estate” did not allow the subject matter to be identified although there was a clear intention to create a trust.  It can be asserted that no objective determination can be made of such words unless the context is known, e.g. in the latter mentioned case the courts assumed the ‘criterion’ to be the beneficiaries previous standard of living. Though it can be argued that Palmer should have failed because of a lack of subject matter it was nevertheless upheld. Significantly, difficulties will arise where there is a trust which is part of the same bulk, for instance ‘A’ holds 15% of the shares in company Z, but holding without setting aside any specific shares for the trust. In Re London Wine Co Ltd, customers bought wine from a wine company and contracted with the company to store the wine in its warehouse. When the company went insolvent the customers claimed a trust in their favour. It was held that there was no certainty of subject matter where the subject matter was not segregated from the bulk.  Similar outcome was reached in Re Staplyton, though it was stated in this case “must be very cautious in devising equitable interests and remedies which erode the statutory scheme for distribution on insolvency. It cannot do it because of some perceived injustice arising as a consequence only of the insolvency." This illustrates that the courts will no doubt look to achieve fairness before retreating from or creating remedies in such instances. If a plaintiff succeeds in establishing that some of the company’s assets are subject to a trust then these will not be open for distribution to its creditors, these belong to the beneficiaries and no the company.

A similar decision was reached in Re Goldcorp Exchange Ltd. However in the case of Hunter v Moss a valid trust was found where the subject matter was 50 shares out of 950 shares even though they had not been separated from the rest of the shares. The Court of Appeal ruled the appropriate test for certainty was whether, immediately after the declaration of the trust a court could attach an order to the property to enforce the trust. Nevertheless, the decision in Hunter has been criticised as they distinguish previous authority on the basis that in the cases of intangible property certainty of subject matter does not require segregation. Moreover, where the goods are not segregated and the property does not pass to the purchaser no trust will be in existence and the end result is that the property will remain with the settler in a resulting trust. Alison Jones asserts that there can be no logical reason to distinguish trusts of identical goods from trusts of intangible.  But I agree with Jones that abolishing such a distinction will make it difficult to decide if particular goods are distinguishable or indistinguishable and thus blur the ambit of the rules of certainty.

The second element of subject matter is certainty of beneficial interest. It has already been mentioned above that trust property itself has to be certain, but in addition to this the interests to be taken by the various beneficiaries also have to be certain. For example, a case where trustees acquire the trust property but some individual is required to divide the property between two or more beneficiaries, if this selection fails and the court cannot resolve this matter then the intended express trust will fail. In turn a resulting trust will arise, the settlor burdens the individual to specify the relevant interest to be acquired by the beneficiaries .In the case of Boyce v Boyce, a testator wished to leave houses on trust one for a Maria and one for a Charlotte. Maria was to make a selection from the houses but died before the testator. But it was held that the obligation was specifically on Maria to make the selection and therefore the trust had failed; resulting trust being the product for the testators estate. The assertion that the courts are too willing to disregard the necessary requirements can be countered with this case as authority that the courts have affirmed such rules. In this case the testator wished to dispose of houses but was not concerned which went to whom His desire could have been effected by allowing one house to go to his residual estate, chosen by his executor, leaving the others  to go to the named beneficiary. But the court chose to uphold the principle that the precise beneficial interest should be determinable. In this case, the uncertainty was not in the trust property - this was clearly the houses - but in the beneficial interest to be assigned.

The third certainty is certainty of objects. The beneficiaries of a trust must be identifiable. If they cannot be ascertained and the other two certainties are present then a resulting trust will arise for the settlers estate. Where there is doubt or ambiguity as to the class of beneficiaries e.g.’ my family’ or where a plaintiff cannot show that he falls into one of the classes then the trust will fail..

The test for certainty of objects differs with the type of express trust created. Firstly for fixed trusts, a comprehensive list of the beneficiaries should be specified and the extent of their interest in the trust instrument. If they are not referred to by name then they have to be identified by class e.g. ‘my wife’.

With discretionary trusts, the trustees exercise their discretion and select amongst a class of beneficiaries to determine the extent of the beneficiaries interests. This test was laid down in Mcphail v Doulton, a settlement was reached for the benefit of the employees of a company and its relatives. The trustees had discretion as to how and whether they should distribute the money. The executors argued the trust was void for uncertainty. The court ruled that the settlement created a trust and not merely a power. The test was whether it could be said with certainty whether any given person was or was not a member of the class. The test was drawn from the test set out for powers in Re Gulbenkian’s Settlement. The reasoning behind the test is that the trustees could discharge their duties within the terms of his or her discretion without knowing who the beneficiaries were.  Once more the claim that courts disregard the necessary requirements, this case demonstrates that the courts have amended a rule but nevertheless for the advantage of the trustees.

It must be noted that with the certainties being established the formalities must also be satisfied. With regard to land, evidence of writing is needed of the intent to create trust but not to declare it.Failure means trust is void it. The requirement of writing does not meant that other evidence of trust cannot be adduced in the absence of writing which is being used to deny the nature of the transaction. It can be asserted that since such a formality is to prevent fraud where a person to whom land is conveyed  knows it was conveyed and claims it as his own, the courts have good reason especially public policy consideration to move away from rules in order to achieve justice.

To conclude, from the above discussion it can be seen that the three certainty principles are indeed quite flexible and that being a benefit rather than a drawback to those who declare trusts. Since the cases are dealt on a case by case basis, giving courts the potential to decide upon merit of each case .The use of words for instance can be vague; the rules allow judges to achieve a rational decision in considering what the real ambit of the trust is.

Bibliography

Primary Sources

Law of Property Act 1925

Hodgson v Marks [1971] Ch 892

Vandervell v IRC [1967] 2AC 291

Paul v Constance [1977] 1WLR 527, CA

Palmer v Simmonds (1854) 2 Drew 221  

IRC v Broadway Cottages Trust [1955] Ch 20

Re Gulbenkian’s Settlement  [1970] 508

Mcphail v Doulton [1971]AC 424

Boyce v Boyce (1849) 16 Sim 476

Lambes v Eames (1871) 6 Ch. App. 597

Re Adams and the Kensington Vestry (1883) 27 Ch D 394

Re London Wine Co Ltd [1986] P.C.C 121

Re Staplyton, [1994]  1 WLR 1181

Re Goldcorp Exchange Ltd   [1994] 3 WLR 199

Hunter v Moss [1994] 1 WLR 452

Secondary Sources

J. E Martin, Modern Equity, 17th ed., (Sweet and Maxwell, London 2005)

M. Ramjohn, Unlocking trusts law, 1st ed.,(Hodder Arnold)

C. Chang and J. Weldon,  Equity and Trusts Nutcases, 4th ed., (Sweet and Maxwell, London 2007). Pearce & J.Stevens, The Law of Trusts and Equitable Obligations, 4th ed., (OUP 2006)

A Jones, ‘Creating a trust over an un ascertained part of a homogenous whole’ [1993] Conv. 466

 J Martin, ‘Certainty Of Subject Matter: A Defence of Hunter v Moss’ [1996] Conv. 223-227

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