The three certainties compose a rule within English trusts law on the creation of express trusts that, to be valid, the trust instrument must show certainty of intention, subject matter and object. "Certainty of intention" means that it must be clear that the donor or testator wishes to create a trust; this is not dependent on any particular language used, and a trust can be created without the word "trust" being used, or even the donor knowing he is creating a trust. Since the 1950s, the courts have been more willing to conclude that there was intention to create a trust, rather than hold that the trust is void. "Certainty of subject matter" means that it must be clear what property is part of the trust. Historically the property must have been segregated from non-trust property; more recently, the courts have drawn a line between tangible and intangible assets, holding that with intangible assets there is not always a need for segregation. "Certainty of objects" means that it must be clear who the beneficiaries, or objects, are. The test for determining this differs depending on the type of trust; it can be that all beneficiaries must be individually identified, or that the trustees must be able to say with certainty, if a claimant comes before them whether; they are or are not a beneficiary.
There are four categories of uncertainty that can affect the validity of a trust: conceptual uncertainty, evidential uncertainty, ascertainability and administrative unworkability. "Conceptual uncertainty" is where the language is unclear, something which leads to the trust being declared invalid. "Evidential uncertainty" is where a question of fact, such as whether a claimant is a beneficiary, cannot be answered; this does not always lead to invalidity. "Ascertainability" is where a beneficiary cannot be found, while "administrative unworkability" is where the nature of the trust is such that it cannot realistically be carried out. Trustees and the courts have developed various ways of getting around uncertainties, including the appointment of experts to work out evidential uncertainty, and giving trustees the power to decide who is or is not a beneficiary.
The rule came out of the case of Knight v Knight.[1] The testator, after giving away his personal and real property, added to the end of his will that "I trust to the justice of my successors, in continuing the estates in the male succession, according to the will of the founder of the family". Langdale MR, hearing the case, held that this was not specific enough to create a valid trust;[2] furthermore, to be held as valid, trust instruments would have to have:
Certainty of intention: it must be clear that the testator intends to create a trust
Certainty of subject matter: it must be clear what property is part of the trust and property, including sum of money, cannot be separated.
Certainty of objects: it must be clear who the beneficiaries (objects) are.[3]
Note: The 'Three certainties' rule is not novel to Knight v Knight. It was first stated in Wright v Atkyns,[4] by Earl Eldon LC.
Certainty of intention
The first principle when deciding if there is certainty of intention is the nature of the language used; the words, as said in Wright v Atkyns,[5] "must be imperative". Past this, there is no requirement that particular language be used. In Re Kayford,[6]Megarry J held that "it is well settled that a trust can be created without using the word "trust" or "confidence" or the like; the question is whether in substance a sufficient intention to create a trust has been manifested". In Paul v Constance,[7] it was held that the phrase "the money is as much yours as it is mine" was sufficient to translate to a trust. A trust will not be formed if it is clear that some other intention was there, such as the intention to make a pure gift, as in Jones v Lock.[8][9] Historically, precatory words such as "it is hoped" and "it is desired" were held to be valid. Since Lambe v Eames,[10] the courts have instead taken the approach that the circumstances and the reading of the statement as a whole are the factors, and that no particular words will impose a trust on their own.[11]
It is possible to create an express trust without being aware that one is doing so, so long as the court can determine from the person's intention that a beneficial entitlement should be conferred which the law (or equity) will enforce. In the Constance case, Constance was described as a man of "unsophisticated character" who did not know he was creating a trust[12]– nevertheless, the courts found that was what he had done. In Re Kayford, the company involved took actions to protect its customers by moving their funds into a separate bank account. Even though they had never indicated a desire to create a trust, their intention had been in line with the purpose of a trust, and thus it was considered valid.[6] Many trusts are formed through wills, which create additional issues when determining intention. In Re Hamilton,[13]Lindley LJ set out the standard rule that to "take the will you have to construe and see what it means, and if you come to the conclusion that no trust was intended you say so"; essentially that judges should not simply assume that there is a trust. This literal approach was followed until the 1950s; since then, the judiciary have been more willing to interpret trust documents in such a way as to make the trusts valid rather than void.[14] According to Byrnes v Kendle, the question that needs to be answered in determining whether a certainty of intention exists is "What is the meaning of what the parties have said?" and not "What did the parties mean to say?"[15]
Certainty of subject matter
It is a requirement that the subject matter be certain — that the property intended to be in the trust be separated from other property, showing clarity in what is intended to be trust property. If there is no clear separation, the trust will fail, as in Re Goldcorp Exchange Ltd.[16][17] This point was illustrated by Re London Wine Co (Shippers) Ltd,[18] where creditors of a bankrupt wine trading company argued that they should be able to claim the wine they had paid for. The problem was that these bottles were not individually identifiable, and Oliver J held that:
I appreciate the point taken that the subject matter is a part of a homogeneous mass so that specific identity is of as little as importance as it is, for instance, in the case of money. Nevertheless, as it seems to me, to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach.
A sum of money, say 10,000, does not satisfy the requirement, rendering uncertainty.
This is part of the "orthodox" or "strict" rule, along with Re Goldcorp. The exception to this rule is found in Hunter v Moss,[19] which concerned 50 shares meant to be transferred to an employee out of a total holding of 950. These shares were not individually identified, but Dillon LJ held that this was irrelevant because the shares were all of the same type and in the same company, and so it made no difference which particular shares were transferred.[20] This was applied in Re Harvard Securities,[21] where Neuberger J held that there was a difference between tangible property, such as wine, and intangible property, such as shares. Intangible property, by its very nature, does not require segregation.[22] A failure in the formality of this head would lead to the property being result back to the estate on resulting trust.
Certainty of objects
There is a requirement that the beneficiaries of a trust, known as the objects, be certain. Within express trusts this is a particularly complex area, because the test used to determine certainty varies between fixed trusts, mere powers and discretionary trusts.[23] Fixed trusts are trusts for a specific, named list of individuals, with Alastair Hudson giving the example of "£10,000 to be held upon trust equally for the complete team of 11 Sunderland Football Club players who started the 1992 Cup Final at Wembley". The test for fixed trusts is that the trustees must be able to give a complete list of the beneficiaries, as laid down in IRC v Broadway Cottages.[24] If there are any potential beneficiaries who the trustees are not certain of, or the trustees cannot compile a complete list, the trust is void for uncertainty.[25]
A more complex test is found with mere powers. These are where a person is granted the power (the ability) to exercise a trust-like power, but without any obligation to do so, such as "the trustee may give £1,000 to X", or "the trustee can, at his discretion, give £1,000 to X" as opposed to "the trustee shall give £1,000 to X". In Re Hay's ST,[26] Megarry VC said that:
A mere power is very different [from an ordinary trust obligation]. Normally the trustee is not bound to exercise it, and the court will not compel him to do so. That, however, does not mean that he can simply fold his hands and ignore it, for normally he must from time to time consider whether or not to exercise the power, and the court may direct him to do this.
The holder of a mere power is therefore free to do what he wants with the property he holds; if he fails to consider his exercise of the power, the courts may force him to do so. The leading test for mere powers is the "any given postulant" test, laid down in Re Gulbenkian.[27] This states that the trustees must be able to say with certainty, when a potential beneficiary comes before them, that he either is or is not a beneficiary.[28]
Discretionary trusts are trusts which require that the trustees exercise their powers, in the same way as a fixed trust, but allow some discretion in how to do so, in a similar manner to mere powers. Since trustees hold the discretionary power to choose how to act under an established boundary set out by the settlor of a trust, evidential certainty is not relevant and does not affect discretionary trusts anyway. The leading test of certainty of objects here is also the "any given postulant test", applied to discretionary trusts in McPhail v Doulton.[29] The courts attempted to mitigate this test in Re Baden’s Deed Trusts (no 2);[30] however, all three judges of the Court of Appeal gave separate reasons. Stamp LJ had an approach based entirely on the facts, with no greater impact on certainty of objects. Sachs LJ took the approach that the burden of proof was on the claimants to prove they were beneficiaries, not on the trustees to prove the trust was valid.[31]Megaw LJ, however, took the approach that a trust could be valid, even with uncertain beneficiaries, if there was a "core number" of beneficiaries who were certain.[32] Megaw LJ's stand reflects the current position. Otherwise, trusts would have been failed if there is one individual who cannot be said to be the "given postulant".
Uncertainty
Where there is not sufficient clarity, the trust may be held void as uncertain. The applicable forms of uncertainty have been categorised as:
Conceptual uncertainty is the "most fundamental in the validity of a trust or power", and is where the language used in the trust is unclear. Examples include where familiar but overly vague terms are used, such as "good customers" or "useful employees"; if the concept cannot be certain, the trust fails.[34] Evidential uncertainty, on the other hand, is where there is a question of fact that is impossible to answer, such as when a claimant cannot prove he is a beneficiary. This does not necessarily invalidate the trust, as Jenkins J (as he was then) said in Re Coxen:[35]
I must keep in mind the distinction between uncertainty as to the events prescribed by the testator...in which the condition...is to operate (which is generally speaking fatal to the validity of such a condition) and difficulty in ascertaining whether those events...have happened or not, which is not necessarily fatal to such a validity.
The next type of uncertainty, ascertainability, is where it is impossible to find the beneficiaries, either because they have died, moved or changed names. This is not necessarily fatal; the test for deciding if it is or not was laid out by Wynn-Parry J as: "mere difficulty of ascertainment is not of itself fatal to the validity of the gift. As has been pointed out, it is a matter of degree, and it is only when one reaches, on the evidence, a conclusion that it is so vague or that the difficulty is so great that it must be treated as virtually incapable of resolution, that one is entitled, to my mind, to say that a gift of that nature is void for uncertainty".[36] If a beneficiary cannot be found despite strenuous steps to find one, the trustees can apply for a Benjamin Order, named after the case of Re Benjamin,[37] which authorises them to distribute the property as if the beneficiary is dead.[36] The final type of uncertainty is administrative unworkability — where the trust is, by its very nature, so impractical that the trustees cannot carry out their duties. Where this prevents the trustees carrying out their duties, the trust will be declared invalid, and not applied.[38]
Resolving uncertainties
Drafters use three principal devices to resolve problems of potential uncertainty. These are:
To provide that an expert can give advice as to who is or is not a beneficiary;
to give the trustees power to decide who is or is not a beneficiary;
and to allow the trustees to grant property to almost anyone, hoping this will reduce the risk of uncertainty.[39]
The first device has been approved by the courts: in Re Tuck's Settlement Trusts,[40]Lord Denning allowed the court and trustees to engage a Chief Rabbi to determine whether a beneficiary's wife was "of the Jewish faith" which determined the beneficiary's eligibility to the trust. Though this condition was conceptually uncertain, owing to the court's inability to determine with certainty whether someone is of a particular faith, the trust document explicitly set out that a Chief Rabbi could determine it. Lord Denning stating "any conceptual uncertainty" was "cured by the Chief Rabbi clause".
The second device was condemned as ineffective by Jenkins J in Re Coxen, when he wrote:
If the testator had sufficiently defined the state of affairs in which the trustees were to form their opinion he would not have saved the condition from invalidity on the ground of uncertainty merely by making their opinion the criterion.[41]
As such, simply giving the trustees this power was not enough to defeat uncertainties. If, however, the testator "had sufficiently defined" the way in which trustees should exercise their judgement, it would be valid.[42] The final device is to give the trustees the power to give trust property to "anyone in the world" or to "anyone whom the trustees consider appropriate". This has two problems; firstly, the class could be too broad to be administratively workable, and second, the courts are unable to judge if the power has been exercised appropriately. However, in Re Hay's Settlement Trust, Megarry V-C held that, exercised properly, this sort of agreement could be administratively workable, and would not be immediately void.[43] But if the gift were given to a wide class of people for a charitable purpose, it will be valid.[44]
A trust is a legal relationship in which the owner of property, or any transferable right, gives it to another to manage and use solely for the benefit of a designated person. In the English common law, the party who entrusts the property is known as the "settlor", the party to whom it is entrusted is known as the "trustee", the party for whose benefit the property is entrusted is known as the "beneficiary", and the entrusted property is known as the "corpus" or "trust property". A testamentary trust is an irrevocable trust established and funded pursuant to the terms of a deceased person's will. An inter vivos trust is a trust created during the settlor's life.
Joint wills and mutual wills are closely related terms used in the law of wills to describe two types of testamentary writing that may be executed by a married couple to ensure that their property is disposed of identically. Neither should be confused with mirror wills which means two separate, identical wills, which may or may not also be mutual wills.
In trust law, an express trust is a trust created "in express terms, and usually in writing, as distinguished from one inferred by the law from the conduct or dealings of the parties." Property is transferred by a person to a transferee, who holds the property for the benefit of one or more persons, called beneficiaries. The trustee may distribute the property, or the income from that property, to the beneficiaries. Express trusts are frequently used in common law jurisdictions as methods of wealth preservation or enhancement.
A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind. In most jurisdictions, such trusts are not enforceable outside of certain limited and anomalous exceptions, but some countries have enacted legislation specifically to promote the use of non-charitable purpose trusts. Trusts for charitable purposes are also technically purpose trusts, but they are usually referred to simply as charitable trusts. People referring to purpose trusts are usually taken to be referring to non-charitable purpose trusts.
McPhail v Doulton[1970] UKHL 1, also known as Re Baden's Deed Trusts is a leading English trusts law case by the House of Lords on the certainty of beneficiaries. It held that so long as any given claimant can clearly be determined to be a beneficiary, or not, a trust is valid. The Lords also remanded the case to the Court of Appeal to be decided on this new legal principle as Re Baden's Deed Trusts .
In trust law, a settlor is a person who settles their property for the benefit of the beneficiary. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator. The settlor may also be the trustee of the trust or a third party may be the trustee. In the common law of England and Wales, it has been held, controversially, that where a trustee declares an intention to transfer trust property to a trust of which he is one of several trustees, that is a valid settlement notwithstanding the property is not vested in the other trustees.
Saunders v Vautier[1841] EWHC J82, (1841) 4 Beav 115 is a leading English trusts law case. It laid down the rule of equity which provides that, if all of the beneficiaries in the trust are of adult age and under no disability, the beneficiaries may require the trustee to transfer the legal estate to them and thereby terminate the trust. The rule has been repeatedly affirmed in common law jurisdictions, and is commonly referred to as "the rule in Saunders v Vautier" for shorthand.
In the trust law of England, Australia, Canada, and other common law jurisdictions, a discretionary trust is a trust where the beneficiaries and their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor. It is sometimes referred to as a family trust in Australia or New Zealand. Where the discretionary trust is a testamentary trust, it is common for the settlor to leave a letter of wishes for the trustees to guide them as to the settlor's wishes in the exercise of their discretion. Letters of wishes are not legally binding documents.
English trust law concerns the protection of assets, usually when they are held by one party for another's benefit. Trusts were a creation of the English law of property and obligations, and share a subsequent history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the King's behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery, commonly referred as equity. Historically, trusts have mostly been used where people have left money in a will, or created family settlements, charities, or some types of business venture. After the Judicature Act 1873, England's courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investment, especially in unit trusts and in pension trusts. Although people are generally free to set the terms of trusts in any way they like, there is a growing body of legislation to protect beneficiaries or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and Charities Act 2011.
Schmidt v Rosewood Trust Ltd[2003] UKPC 26 is a judicial decision concerning the information rights of a beneficiary under a discretionary trust. Although the judgment involved a question as to the law of the Isle of Man, the Privy Council's judgment in Schmidt v Rosewood was adopted into English law by Briggs J in Breakspear v Ackland[2008] EWHC 220 (Ch).
Charitable trusts in English law are a form of express trust dedicated to charitable goals. There are various advantages to charitable trust status, including exemption from most forms of tax and freedom for the trustees not found in other types of English trusts. To be a valid charitable trust, the organization must demonstrate both a charitable purpose and a public benefit. Applicable charitable purposes are normally divided into categories for public benefit, including the relief of poverty, the promotion of education, the advancement of health and saving of lives, the promotion of religion, and all other types of trusts recognized by the law. There is also a requirement that the trust's purposes benefit the public, and not simply a group of private individuals.
Hunter v Moss [1994] 1 WLR 452 is an English trusts law case from the Court of Appeal concerning the certainty of subject matter necessary to form a trust. Moss promised Hunter 50 shares in his company as part of an employment contract, but failed to provide them. Hunter brought a claim against Moss for them, arguing that Moss's promise had created a trust over those 50 shares. The constitution of trusts normally requires that trust property be segregated from non-trust property for the trust to be valid, as in Re London Wine Co (Shippers) Ltd. On this occasion, however, both Colin Rimer in the High Court of Justice and Dillon, Mann and Hirst LJJ in the Court of Appeal felt that, because this case dealt with intangible rather than tangible property, this rule did not have to be applied. Because all the shares were identical, it did not matter that they were not segregated, and the trust was valid. The decision was applied in Re Harvard Securities, creating a rule that segregation is not always necessary when the trust concerns intangible, identical property.
The creation of express trusts in English law must involve four elements for the trust to be valid: capacity, certainty, constitution and formality. Capacity refers to the settlor's ability to create a trust in the first place; generally speaking, anyone capable of holding property can create a trust. There are exceptions for statutory bodies and corporations, and minors who usually cannot hold property can, in some circumstances, create trusts. Certainty refers to the three certainties required for a trust to be valid. The trust instrument must show certainty of intention to create a trust, certainty of what the subject matter of the trust is, and certainty of who the beneficiaries are. Where there is uncertainty for whatever reason, the trust will fail, although the courts have developed ways around this. Constitution means that for the trust to be valid, the property must have been transferred from the settlor to the trustees.
In English law, a purpose trust is a trust created for the fulfillment of a purpose, not for the benefit of a person. These are normally considered invalid by the courts because they have no legally recognized beneficiaries, therefore nobody to enforce the trust, with the exception of charitable trusts, which are enforceable by the Attorney General as they represent the public interest. As well as charitable trusts, there are several exceptions to the rule against purpose trusts. If the requirement to fulfill a purpose is a request, rather than an obligation, the trust is valid; a trust will also be found valid if, while being for a purpose, it involves beneficiaries in some respect. Purpose trusts can also be valid if they are for the erection or maintenance of tombs and memorials, the maintenance of animals, and arguably the saying of masses, although these must all obey the rule against perpetuities and not continue for more than 21 years after the testator's death.
In English law, secret trusts are a class of trust defined as an arrangement between a testator and a trustee, made to come into force after death, that aims to benefit a person without having been written in a formal will. The property is given to the trustee in the will, and he would then be expected to pass it on to the real beneficiary. For these to be valid, the person seeking to enforce the trust must prove that the testator intended to form a trust, that this intention was communicated to the trustee, and that the trustee accepted his office. There are two types of secret trust — fully secret and half-secret. A fully secret trust is one with no mention in the will whatsoever. In the case of a half-secret trust, the face of the will names the trustee as trustee, but does not give the trust's terms, including the beneficiary. The most important difference lies in communication of the trust: the terms of a half-secret trust must be communicated to the trustee before the execution of the will, whereas in the case of a fully secret trust the terms may be communicated after the execution of the will, as long as this is before the testator's death.
Discretionary trusts and powers in English law are elements of the English law of trusts, specifically of express trusts. Express trusts are trusts expressly declared by the settlor; normally this is intended, although there are situations where the settlor's intentions create a trust accidentally. Normal express trusts are described as "fixed" trusts; the trustees are obliged to distribute property, with no discretion, to the fixed number of beneficiaries. Discretionary trusts, however, are where the trustee has discretion over his actions, although he is obliged to act. The advantages of discretionary trusts are that they provide flexibility, and that the beneficiaries hold no claim to the property; as such, they cannot seek to control it, and it cannot be claimed for their debts. A power, or "mere power", on the other hand, is where not only does the holder have discretion over his actions, he has discretion over whether to act in the first place.
Re Tuck's Settlement Trusts[1977] EWCA Civ 11 is a leading English trusts law case, concerning the certainty of trusts.
Re Barlow's Will Trusts [1979] 1 WLR 278 is an English trusts law case, concerning certainty of the words "family" and "friends" in a will.
Re Gulbenkian’s Settlements Trusts [1968] is an English trusts law case, concerning the certainty of trusts. It held that while the 'is or is not' test was suitable for mere powers, the complete list test remained the appropriate test for discretionary trusts. It was only a year later in McPhail v Doulton that the 'is or is not' test was considered appropriate for discretionary trusts by a different panel of their lordships.
Morice v Bishop of Durham [1805] EWHC Ch J80 is an English trusts law case, concerning the policy of the beneficiary principle.
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