#15545 - 3 Certainties Formalities Constitution - GDL Equity and Trusts

Equity & Trusts : The 3 Certainties; Formalities; Constitution

Structure

• Type of property (realty/personalty)

• Transferor’s title: legal or equitable or absolutely entitled.

• Type of disposition:

  • Gift: constitution only

  • Self-declaration of trust

  • Transfer of trust

  • [[could be will/testamentary Wills Act]]

• 3 Certainties

• Any formalities? (if involves moving equitable title):

  • applies to self-declaration trust; transfer of trust; and wills (even if gifts).

  • No formalities for gift [[though if testamentary must comply with Wills Act]].

• If formalities not fulfilled, any exceptions:

  • Vandervell, Grey etc.

• Constitution requirements: Re legal title (none for self-declaration of trust)

• if not valid constitution, any exceptions to Milroy v Lord?

  • Re Rose

  • Mascall v Mascall

  • Strong v Bird

• Conclusion: what happens to the property

Type of property

• realty/personalty; chattel, shares; chose in action; land etc

Transferor’s title

• legal or equitable or absolutely entitled.

(intended) Type of disposition:

• Gift: need constitution only

• Self-declaration of trust: declaration only

• Transfer of trust: need declaration & constitution)

• Power of appointment

• Gift subject to condition precedent

• [[could be will/testamentary Wills Act]]

The 3 Certainties

• Knight v Knight, an express trust needs 3 certainties: (1) Intention; (2) Subject matter; (3) Object

(1) Intention

• Re Kayford: whether in substance there is intention

• Imperative v precatory, Eg ‘In full confidence’, depends on context:

  • Look at words in context of whole document (Re Adams; Comiskey)

  • Do they suggest a command (Comiskey) or merely a hope (Re Adams).

  • Precatory: Re Adams & Kensington Vestry: ‘in full confidence that she will do what is right’, re disposal between his children in her lifetime or by her will; precatory, an expectation, only a moral obligation no intention to create trust.

  • Cf Imperative: Comiskey v Bowring-Hanbury: also ‘in full confidence’ ‘that she will devise it to one or more of my nieces, imperative, certainty. Key factor: direction that if she didn’t dispose of it, estate would, on her death, go to nieces in equal shares intention/command.

• Use old cases re same language:

  • Not necessarily, depends on context (Re Hamilton)

  • CF, if working identical, follow older case as may have been deliberately used as precedent (Re Steel’s WT).

• Conduct:

  • Paul v Constance: didn’t use technical language; didn’t know what trust was; conduct sufficient: created essentially joint-interest bank account; told her money is ‘as much yours as mine’; held on trust for both.

  • Re Kayford: segregated customers’ funds = intention by conduct.

(2)(a) subject matter, trust property itself

• Sprange v Barnard: ‘remaining part of what is left’ not certainty, uncertain what will be left.

• Palmer v Simmonds: ‘bulk’ of my estate—not certain.

• Re Golay’s WT: ‘reasonable’ = certain, objectively ascertainable

• Boyce v Boyce: need objective determinant.

• Bulk property, tangible must be segregated/identifiable:

  • Re London Wine: no trust, bottles not segregated.

  • Re Goldcorp Exchange: gold bars, not segregated (one investor has asked to set aside).

• Bulk property, intangible doesn’t need to be identifiable

  • Hunter v Moss: electronic shares; don’t need to identify [[re settlor declares hold 50 of her 950 shares on trust for B, doesn’t specify which]].

  • Rationale: all shares identical (cf wine bottles)

  • Critique: if settlor sold 50 of his shares, how would we know whether they were his own or the 50 held on trust?

  • Harvard Securities: explained Hunter with factional/co-ownership theory (Neuberger J): backed by Prof Goode

  • [also NB factual difference in reasoning: Hunter didn’t involve insolvency, so finding trust didn’t mean giving priority over other creditors, CF Goldcorp & London Wine].

  • MacJordan v Brookmount: even if assets intangible, still need ascertainable fund.

(2)(b) subject matter, certainty of beneficial entitlement

• Boyce v Boyce: houses left to 2 daughters; first got to choose, remaining to other daughter; died before choosing—no certainty re beneficial entitlement.

• CF Re Golay’s WT: ‘enjoy one of my flats during her lifetime’ + ‘reasonable income’: sufficiently certain (CF Boyce, shows can go either way); re ‘reasonable’ point, see above—objectively ascertainable.

(3) Certainty of object

• (need certainty of object —Morice v Bishop of Durham --> beneficiary principle need a definite object or trust void, unless charitable)

• (a) Fixed Trusts—‘Fixed/Complete List test’ (IRC v Broadway Cottages): can draw up complete list of class of beneficiaries (or class ascertainability for gift).

• Need conceptual & evidential certainty to draw up complete list.

• (b) Powers of appointment (‘Is/Is Not’ test), Re Gulbenkian’s ST: if can look at anyone and say with certainty whether ‘is or is not’ member of class.

• (c) Discretionary trust, ‘Is/Is not’ test, McPhail v Doulton:

  • [[Used to be same as for fixed trusts, Broadway Cottages ‘fixed list’ test. But then HL, McPhail:

  • McPhail v Doulton (AKA Baden No 1), HL: ‘Is/Is Not’ test (same as for powers): can it be said with certainty that any given individual ‘is or is not’ a member of the class (Lord Wilberforce).

  • Re Baden’s DT (No 2), CA:

  • Conceptual certainty, all 3 judges say you need it to satisfy ‘Is/Is Not’ (re ‘relatives’):

    • Megaw & Sachs LLJ, relatives = ‘common ancestor’

    • Stamp LJ,relatives = ‘next of kin’

  • Evidential certainty, Megaw and Sachs say ‘don’t knows’ doesn’t void trust:

    • Stamp LJ: need evidential certainty for discretionary trust, any don’t knows = void. Literal/strict Is/Is not test application.

    • Megaw LJ: not void, if can show ‘substantial number’ definitely fall within.

    • Sachs LJ: it is for individual claimants to prove they are within class.

    • [so 2/1 majority: don’t need evidential certainty, trust still valid--> can have don’t knows, so not strictly applying Is/Is Not test]].

  • ‘Friends’ not good enough for discretionary trust (Re Barlow’s WT)

• Administrative unworkability (only once applied):

  • Recognised as possibility in McPhail v Doulton, Lord Wilberforce.

  • Ex p West Yorkshire MCC: left to ‘inhabitants of West Yorkshire’ (around 2.5m)

  • [doesn’t apply to powers-Re Manisty’s, because donee has no obligation to exercise the power, so no obligation to properly survey the class].

• (d) Gift subject to condition precedent (Re Allen/Re Barlow—test = if possible to identify 1+ persons that definitely qualify):

  • Re Allen: if can be said of 1+ persons that they qualify = valid, even if difficult to say of others.

  • Re Barlow

  • Re art collection, could be bought by ‘friends’ at below market price (gift with condition precedent: condition of being a ‘friend’).

  • Don’t need conceptual certainty; friends good enough (cf for discretionary trust), if can identify 1+ who defeinitely quality.

  • Applied ‘reasonable test’ re qualifying as friend (i.e. can assess objectively). Factors eg: (1) long-standing relationship; (2) social (not business) relationship; (3) have met frequently when possible.

• capriciousness (irrationality) voids discretionary trust & powers (Re Manisty): ‘residents of greater London’ = ‘negatives a sensible consideration by the trustees of the exercise of the power’.

• Effects of uncertainty:

  • Failed intention: turns into gift (if was a failed transfer of trust; if a failed self-declaration of trust, no effect).

  • Failed certainty of object (or administrative unworkability or failed beneficial entitlements): Resulting Trust back to settlor (or his estate if trust is testamentary) equitable interest held by trustee for the settlor (or his estate) (eg, Vandervell v IRC).

    • So the settlor then has equitable interest, the trustee has legal title; held on bare trust; if settlor then tries to transfer it to someone else, is an attempted disposition of equitable interest.

  • Failed subject-matter: makes no difference, trust cannot be attached to any property.

  • [[NB: If a potential trust is grafted onto a gift, and trust fails for certainty then you just have a straightforward gift.]]

Formalities (if involves moving equitable title):

• Formalities apply to: self-declaration trust; transfer of trust; and wills (even if gifts).

• No formalities for gift, as not equitable title moving [[though if testamentary must comply with Wills Act]].

• Testamentary—s9 Wills Act 1837 (applies to gifts)

• Inter vivos trusts (other than land): no formalities, Paul v Constance: inter vivos trust can be informally created, orally or even by conduct

• Trust of land—s53(1)(b) LPA: proved by signed writing—non compliance = unenforceable, not void. If later writing, trust takes effect from original oral declaration.

  • EXCEPTION: implied trusts: s53(2) LPA; Hodgson v Marks: no formalities for implied trust of land.

  • Hodgson: Mrs H had a beneficial interest under a RT; no need for s53(1)(b); was protected by an OI on sale, was in actual occupation.

• Disposition of existing equitable interest—s53(1)(c) LPA: (1) in writing at time created; (2) signed by disposer.

  • Effect of non-compliance = void

If formalities not fulfilled, any exceptions/when do you need s53(1)(c)/what is ‘disposition’ of equitable title

• Timpson’s Executor’s v Yerbury, 4 methods of disposing equitable interest:

  • (1) direct assign to 3^rd P; (2) contract for valuable consideration; (3) direct to T to hold property for new beneficiary; (4) declare himself trustee for 3P (sub-trust)

• (1) assign directly to 3P: s53(1)(c) applies

• (2) Sell: contract for valuable consideration to assign interest: Neville v Watson: if specifically enforceable contract, no...