Exam (elaborations)
Equity and Trusts Revision Notes - Distinction
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I achieved a distinction with these revision notes for Equity and Trusts at a Russell Group University.
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EXPRESS PRIVATE TRUSTS Trust over part of a mass of similar goodsUnascertainable tangible property à Legal title doesn’t pass until delivery
• Emery (1982): 4 certainty issues -
1) Conceptual uncertainty: Language must be precise to define class = FATAL for trusts + powers *
• Strict approach § “Old friend”: Age/long-term friend? Degree of friendship?
Why do trusts need certainty? Re London Wine (1986) § “Neighbour”: How broad is your neighbourhood?
Lambe (1871) - Purchased wine stored in warehouse until delivery § “Red-haired children of Bow”: Natural/dyed? What age is “child”? Children live/born/present in Bow?
1) “Cruel kindness” to impose a trust, unless it’s clearly intended, b/c trusteeship = onerous task - When company became insolvent, these particular bottles ≠ segregated from general stock of wine 2) Evidential uncertainty: Requires evidence to identify members of class, e.g. DNA, financially dependent ≠ fatal
Morice (1805) - No trust, b/c unclear which bottles were specifically allocated to each customer § Hard to establish who’s a “cousin”, but not a bar to X coming forward + proving they are
2) Grant MR: Court’s need to control + enforce trust § Reconciled w/ Hunter, Martin (1996): Each bottle is distinct, e.g. corked, damaged, sick vs. healthy sheep 3) Unascertainability: Existence + location of members of class ≠ fatal
4) Administratively unworkable: Impractical for trustee to carry out obligations
Goldcorp (1995) à Privy Council = merely persuasive authority
Knight v Knight (1840)
- Purchased gold bullion, but Bullion exchange became insolvent before delivery • If broad size of class makes it administratively unworkable for trustee to carry out obligations, trust ≠ enforced
- Lord Langdale: To be an express private trust -
- Few customers succeeded in their claims, b/c their gold was set aside. But, most failed. West Yorkshire (1986) - Trust of £400k for inhabitants of WY: 2.5 million people ≠ practical ∴ void
§ Certainty of intention (to create a trust) > gift w/ moral duty ≠ binding
= Pragmatic decision, b/c far more claims than there was property
§ Certainty of subject matter • Must be good faith, not capricious
§ If it were labelled w/ specific serial numbers = specific
§ Certainty of object (beneficiaries) Re Manistry (1974)
• Enacted s1(3) Sale of Goods (Amendment) Act 1995 for contracts: Multiple purchasers of unascertained - Templeman J: If specifies large class b/c no intention to create trust = bad faith, e.g. “residents of Greater London”
CERTAINTY OF INTENTION: Words/conduct create imperative obligation *If not a trust, call it a “disposition”
goods kept in bulk acquire interests as TiC at law of goods ∴ certain = no longer relies on equity Approaches to individual ascertainability test
• “Equity looks to the intent > the form”
• Precatory words (request, hope, desire) ≠ certainty Re Baden (No 2) (1973) *Before DNA testing existed
Intangible property
Re Adams (1884) - Sachs LJ: “Relatives” = conceptually certain b/c descent from “common ancestor”
• ↑ Flexible: If identical shares = valid trust
- Testator’s will left estate to wife “in full confidence” she’d do what was right = precatory, moral direction - Once class if conceptually certain, Q of fact whether individual proves to be within class
Hunter v Moss (1994)
- No trust created for children ∴ wife entitled to absolute gift - Megaw LJ: If evidence that substantial no. of beneficiaries fall within class = valid, despite incapable of definition
- M owned 950 shares for which he orally declared a trust of 50 shares in favour of H
- Stamp LJ: Too wide ≠ conceptually certain
- Unclear which 50 shares were held on trust
Staden (2008) - Court: Valid trust - Narrow scope: Requires precise definition to define class e.g. “legal next-of-kin”
- The word “trust” ≠ necessary - Identical shares ∴ unnecessary to identify which particular shares were subject to trust Powers of appointment
§ Martin (1996): “Fair + sensible” decision to prevent a clearly intended trust from failing for uncertainty • Power to dispose of property in favour of an object
Contextual Interpretation
§ Dillon LJ: Re London concerned w/ title in chattels vs. Hunter = declaring trust over shares o No obligation for donee to exercise that power
• Depends on whole wording of will + surrounding circumstances = Artificial distinction between tangible + intangible property
Comiskey (1905) o Power created in trust instrument ∴ must act within confines of what’s authorised
§ Hudson (2009): Mass produced tangible goods = essentially identical ∴ same principles should apply to both • Mere/bare power: No duty to consider/exercise power + may release himself from power
- Directed wife “in full confidence” she’ll divide property equally among nieces “as she may think fit” § Hayton (1994): Uncertainty as to which 50/950 shares the trust relates
- Despite precatory words, additional direction = imperative ∴ intention to create trust o Power is granted to donee as an individual, not trustee
∴ if M sold some shares, is he selling his own shares/H’s shares ∴ who does Revenue charge? • Fiduciary power: Must consider exercising that power, e.g. is or is not “friend” ∴ see if they fit within class of objects
Informal dealings o Megarry VC in Re Hay (1982): Consider what class of persons are objects within definition, then consider individual cases
White v Shorthall (2006) à Australian case = merely persuasive
Jones v Lock (1865) Re Gulbenkian (1970)
- Australian SC rejected Dillon LJ’s approach
- Left £900 cheque to son: “I give this to baby for himself” - Testator gave fiduciary power to consider who had connection w/ his son, but not compelled to exercise
- Adopted diff approach: Trust would be treated as 1/19th of the 950 shares > 50 fixed shares
- If created trust, funds = segregated ∴ creditors can’t claim ££ - Individual ascertainability test: Consider if X supported son
- Here, valid trust of 222,000 shares carved out of 1,500,000 shares
- Court: Loose conversations ≠ intention to create trust - If within class = benefits from exercise of that power, but not entitled
∴ settlor free to deal w/ shares, provided he kept 222,000 shares which could be transferred
- Planned to make financial arrangements w/ solicitor ∴ even J didn’t think it was enough to to beneficiary at anytime Power to cure uncertainty = gives effect to settlor’s intention
create a trust Condition precedent e.g. “only use for X purpose”
• Hunter remains good law + upheld by subsequent cases • Gift subject to a condition ≠ class of objects, but series of independent, conditional gifts
Duggan (2004) Harvard (1997) Re Barlow (1979) *Common mistake: If discretionary trust to “share among friends” = falls under McPhail
- Prisoners’ ££ put in a fund under governor’s control - Neuberger J bound by Hunter decision - Testatrix will: Any friends/family may purchase one of her valuable paintings at discount
- Court: Debtor/creditor relationship ≠ intention to create trust - No need to segregate, b/c financial securities = identical ∴ valid trust - “Friend” ≠ conceptually certain *
• Subsequent dealings may create trust: Re Lehman Brothers (2009) didn’t apply Hunter - Court: Valid gift b/c exercising fiduciary power to decide whether or not to favour objects to buy at discount
Paul v Constance (1977) § Goode (2003): Trust creates beneficial co-ownership share in the fund ∴ any reduction in value of - Lord Brown-Wilkinson: Requirements of a “friend” -
- Bank account opened in C’s name, but both paid into joint account + “money is as much yours as mine” i) Longstanding friendship
fund is divided between beneficiaries in relation to their interests in the fund
- Estranged wife argued she was entitled to funds ii) Social > business relationship
∴ LB beneficiaries received proportionate share of whatever shares were left in the fund
- CoA: Words + subsequent dealings = intention to create trust iii) Friends met frequently, when circumstances permitted
- Lack of word “trust” ≠ fatal BENEFICIAL INTEREST iv) Trustees may apply to court when in doubt
§ Casual conversation = hard to reconcile w/ Jones v Lock • If beneficial interest ≠ certain, then intended trust fails ∴ property held on resulting trust for transferor Opinion clauses
• E.g. Imposes personal obligation on individual to specify interests to be acquired by beneficiaries, but doesn’t • If uncertainty on particular fact, 3 rd party may be judge of this
Commercial context Boyce (1849) o Depends on authority of decision-maker: expert?
• In commercial context, courts reluctant to find a trust - Testator left 2 houses on trust to 2 daughters: The house Maria didn’t choose goes to Charlotte o But may argue opinion ≠ great ∴ not compelled to exercise
Re Kayford (1975) - Maria died before testator + didn’t make selection
Re Tuck (1978)
- Before liquidation, set up account to deposit customer funds until goods delivered - Court: It’s uncertain which house would have remained after Maria’s selection
- Any dispute over whether wife was of “Jewish blood” + “Jewish faith” = determined by Chief Rabbi
- Court: Conduct of opening account = intention to create trust to protect them from insolvency ∴ property held on resulting trust for testator’s estate - Lord Denning: “Who better to decide the Q than Chief Rabbi?” = more expert than court
- Allowed if the 3 rd party really understands what the testator intended
• Effect: 1) If transferor disposes property to transferee to hold on trust + no trust = absolute gift • Effect: 1) If uncertain trust property ∴ no trust = absolute gift
2) If failed to transfer = deceased’s estate entitled to property 2) If uncertain beneficial interest, intended trust fails ∴ resulting trust • Effect: 1) If uncertain object = resulting trust
CERTAINTY OF SUBJECT MATTER CERTAINTY OF OBJECT (Beneficiaries): Someone must enforce the trust
TRUST PROPERTY
• Subject matter must exist at the time the trust was created: Future property ≠ valid trust
• Must identify what property is held on trust
Fixed trusts à Evidential + conceptual certainty
• Trustee has no discretion as to objects of trust/how trust fund is divided among objects, e.g. to all my
children equally / to A + B in 1/3 and 2/3 shares respectively
PRIVATE PURPOSE TRUSTS
Palmer v Simmonds (1854) • Class ascertainability/complete list test: If possible to draw up list containing every beneficiary = valid trust
- “Bulk of my estate” ≠ certain o E.g. “A leaves on trust for children” à If woman = easy to identify children, if male = hard BENEFICIARY PRINCIPLE
- How much is “bulk”, most/part? • May identify by reference to complete class of objects: e.g. children/relatives of settlor • Beneficiary principle: Must have ascertainable (human) beneficiaries to enforce trust, or else void
IRC v Broadway (1955) Morice (1804)
Sprange v Barnard (1789) - Trust for members of class of objects = void for uncertainty, unless whole class = capable of ascertainment - Bequest on trust for objects of “benevolence + liberality” ≠ exclusively charitable purposes
- Testatrix’s will left £300 to S for his “sole use” + remainder of what he didn’t want = divided equally - Construed as private trust. But failed, b/c no ascertainable beneficiaries to enforce trust.
between 2 siblings OT Computers (2003)
- Court didn’t know what part of £300 that S didn’t want ∴ uncertain subject matter = absolute gift to S - Before receivership, company set up account for payment of customer deposits + “urgent suppliers” • Generally, non-charitable purpose trusts offend beneficiary principle
VS. Leahy (1959)
- Court: “Urgent suppliers” ≠ possible to identify whole class ∴ trust failed = resulting trust for creditors
Re Last (1958) - Private trusts created for an ascertainable person, not abstract purpose
- Testatrix left property to brother directing that “upon his death, anything left = pass to grandchildren” Discretionary trusts (Trust power)
Re Astor (1953)
- Treasury solicitor argued absolute gift ∴ Crown entitled to residue • Trustees must consider + distribute, but discretion as to who/when/how much funds a beneficiary may enjoy
- Settlor sought to create trust for “maintaining good understanding between nations + preserving
- Court considers will as a whole + surrounding circumstances • Before, “list test” ≠ possible to list all objects + if distributes equally, get small amounts ≠ settlor’s intention
independent & integrity of newspapers”
= Clear intention for brother’s interest to be life interest ∴ grandchildren entitled to estate • Individual ascertainability test/is or is not test: - Void for uncertainty, b/c for non-charitable purposes that no one could enforce
§ Reconciled w/ Sprange: Testatrix wouldn’t intend for Crown to have estate o Duty to make a reasonable survey of class, but no need to draw up list of objects - Must be somebody to compel performance of trust
McPhail (1971) § Economic efficiency: A lot of unmanaged money ≠ enforced / enforce trust for benefit of right-holder
• May use external evidence: e.g. beneficiary’s financial situation - Baden’s income trust of certain shares at absolute discretion for benefit of present/former employees,
Re Golay (1965) relatives, dependents Public Trusts
- Will directed housekeeper “to receive reasonable income from other properties” - Lord Wilberforce: Valid trust b/c individual ascertainability test • Before, court dealt w/ trusts for exclusively charitable purposes
- Courts regularly determine what’s objectively reasonable ∴ could quantify “reasonable income” by - Can trustee say w/ certainty that any given postulant is/is not a member of the class? E.g. cousin Pemsel’s Case (1891)
referring to beneficiary’s previous living standard § Thomas (1998): Unrealistic test, b/c validates trusts w/o a real basis to them - 4 heads - poverty, education, religion, benefit community
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