Legal Effects Dispositions

(A)

According to Knight v Knight1 a fully constituted trust requires three certainties; certainty of words, certainty of subject matter and certainty as to the object. There must also be evidence of an intention to create a trust which is usually established through the use of mandatory words that Lord Hudson commented on in McPhail v Doultan2, although a trust can be declared through conduct of the settler.

The first issue arising in this scenario is the difficulty in establishing the property ascertained. Where intended property is of an unascertained nature, it will not be subject to a trust. This is to ensure the settler’s intention is followed with regards to the subject matter. By saying ‘six of my most expensive pieces of antique jewellery’, Myrtle has not specifically stated what jewellery she wishes to be included in this disposition. In Re London Wine Co (Shippers) Ltd3 it was held that tangible property subject to a trust must be segregated from other property, which in this case has not happened.

One possible solution could be to apply the principle in Re Golay4 whereby if the six most expensive pieces of jewellery could be established, the trust will be held to be valid. The court could appoint an acceptable expert in antique jewellery that was agreeable to all parties.

However, there are a number of problems with the Re Golay5approach. Firstly, it is not certain what Myrtle meant by ‘most expensive’ and ‘antique’. Prime facie ‘most expensive’ could be taken to mean what six items of jewellery have the greatest monetary value, however it could have been intended as what has the most sentimental value or measured in terms of something else. ‘Antique’ could mean either the oldest pieces of jewellery, family heirlooms, or items that have most sentimental value. The subjective interpretation element means there is no certainty of the settler’s intention and thus the segregation attempt would not prove successful.

1 (1840) 9 l.J.Ch 354

2 [1970] 2 All ER 228

3 [1986] PCC 121

4 [1965] 1 WLR 969

5 [ibid]

In Re Jones6 it was held that certainty must be judged at the time the trust was created. This provision cannot be met in this scenario. Myrtle could have bought more jewellery of more expense and antique status after she made the will. Myrtle would not have intended them to be included in the six items of jewellery, but because there is no express segregation, if the trustees were to attempt to establish which items of jewellery were the most expensive, they are likely to be included, thus breaching this provision.

Unless the issue of property is determined then this trust is likely to be invalid due to reasons of uncertainty. The reasons lie with failure to segregate property and therefore there is no certainty of subject matter.

(B)

The courts tend to take a flexible, more lenient approach to home-made wills compared to wills created by a legal professional, and focus more on the intention of the settler rather than the legal effect of the words used.

Looking at intention to create a trust, Jack has used a combination of mandatory words, such as ‘instruct’ and discretionary words, such as ‘try’. Mandatory words usually indicate the creation of a trust as opposed to the creation of a power. However, as discussed by Hopkins, the term ‘in default of appointment’ negates all mandatory words and excludes the possibility of a trust being created, creating a mere power7. This is because it allows some discretion as to a choice of whether to distribute or not, which is a characteristic of a power as opposed to a trust.

6 [1976] 1 All ER 593

7 Hopkins, J., 1971. Certain Uncertainties of Trusts and Powers. Cambridge Law Journal, 29(1), pg.73

A trustee occupying a mere power is under no obligation to exercise their power, however if they decide to exercise it, they must do so in accordance with the settler’s instructions. If exercised, there will be uncertainty of objects regarding ‘needy old drinking partners’. In Re Gelbenkian’s Settlements8 the House of Lords held that if it could be said with reasonable certainty that it would be possible to say that a given individual was or was not an object of the power then the power will be held to be valid. Also a power will not be invalid just because the donee cannot predict if an individual belongs to that class, but the court must have enough information from the disposition to make this prediction.

The test for determining whether or not an individual is considered to be within a set class is the ‘is or is not’ test from Re Gelbenkian Settlements9, i.e, ‘can it be said with certainty that any given individual is or is not a member of the class.’10. It is not clear from the words used who the intended drinking partners are, and who from that group are considered ‘needy’. To decide, the courts could use the “common sense” approach as to whether an individual belongs in a group as demonstrated in by Megaw J in McPhail v Doulton11 or the approach adopted by Goulding J in Re Locker’s Settlement Trusts12 whereby only individuals who were ‘needy’ at the time the will was written will be considered, thus creating a cut-off point. However, the case of Re Coates13 demonstrates how ‘friends’ as objects will not be deemed to be uncertain regardless of the degree of uncertainty, as most people will come up with a similar definition for the word. Therefore, using this case as precedence, ‘drinking partners’ is likely to be found as a valid description for the objects and the Gelbenkian test could be satisfied by asking barmaids who were aware of who Jack regularly drank with to decide whether or not a given individual was within the class of beneficiaries. This would provide the evidential certainty required.

8 [1970] AC 508

9 Ibid

10 [1971] A.C. 424 at 454

11 Supra note 2 at para 23, per Megaw LJ

12 [1978] 1 All ER 216

13 [1955] Ch 495

The problem that arises is the definition of the word ‘needy’, as no explanation as to how to interpret ‘needy’ has been attached to the word. Using the “common sense” approach to discover the settler’s intention, one could predict that by the word ‘needy’ Jack meant financial trouble, as he is distributing money. However, this could be contrary to the settler’s intention, thus the lack of explanation means the disposition is uncertain.

With regards to Jack’s mother, Pete has been given a fiduciary power, and if he chose to exercise, he is not under a duty to give her all the money as the disposition says to ‘provide for’ and this can be interpreted in different ways. However, a trustee occupying a fiduciary power is under a duty to consider exercising it from time to time, they must consider the range and beneficiaries and they must consider each beneficiary’s entitlement individually.

If he chose not to distribute at all, or only partially distribute, he can apply for letters of administration being the settler’s brother. This may allow him to keep the remainder of the money himself.

(C)

Roger has not stated which shares he is referring to, which does create an element of uncertainty regarding the subject matter. Segregation stems from Re London Wine Co (Shippers) Ltd14 and acts as a way of ensuring only property that the settler intended gets distributed. As with tangible property, intangible property must also be segregated in order to create certainty. The only exception to this is the decision in Hunter v Moss15 where it was held if all the shares were of the same value then regardless of no segregation, the trust will be deemed to be sufficiently certain. If this applied then this certainty is satisfied. If the shares were not all of the same value the disposition will be void for reasons of uncertainty relating to failure to segregate as Roger has not stated which shares the dividends should be taken from.

14 Supra note 3

15 [1994] 1 WLR 452

This trust could also be held to be void for being capricious due to the clause ‘for the middle classes of…Warrington.’ As suggested by Templman J. this is “because the terms of the power negative any sensible intention on the part of the settler”.16 However, in Re Hay’s Settlement Trusts17 it was held a trust would be valid if there is a rational reason for the objects, and in R v District Auditor No 3 Audit District of West Yorkshire Metropolitan County Council ex parte West Yorkshire Metropolitan County Council18 it was held there must be reason why the settler wishes to benefit the specific class of beneficiaries. Warrington being Roger’s home town is sufficient to fulfil the requirements of the Re Hay’s test19, however unless he himself was middle-class, he does not have a justifiable reason for narrowing down the class of beneficiaries to this extent. Unless this clause can be justified, the disposition will be void for reasons of capriciousness.

It is highly likely that the disposition of the trust could also be void due to administrative unworkability. This is because ‘…the meaning of the words used is clear but the definition of the beneficiaries is so wide as to form “anything like a class” so that the trust is administratively unworkable…’20. This is mainly due to the wide and subjective definition of ‘middle class’. Some people judge class from wealth, others from social status, and there is no clear cut off point between classes. For this problem to be overcome Roger would have had to have stated what he means by ‘middle class’, in order to ensure the trustee’s follow the settler’s intentions.

Due to the number of middle-class residents in Warrington, it would be more-or-less impossible for the trustees to distribute the property. Also, apart from saying ‘for the benefit of the middle classes’, Roger has not specifically stated how he intends the money to be distributed. With trusts, the trustees are obliged to follow the settler’s intentions and not treat the property as if it were their own. This would mean in order for trustees to follow the settler’s true intentions, Roger would have had to have indicated how he wishes to use the money to benefit the middle classes.

16 Re Manistys Settlement [1973] 2 All ER 1203, pg 27, per Templeman J

17 [1982] 1 WLR 202

18 [1986] RVR 24

19 Supra note 17

20 Baden’s Deed Trusts [1971] AC 424 at 457

(D)

When looking at Emily’s intention, the lack of mandatory words like ‘hope and expectation’ suggests Emily has created a power as opposed to a trust. However, and as in the first scenario response, the courts will also look at the settler’s intention and conduct when deciding if a trust or a power has been created. The usual situation of a mother leaving property to her children in her will is normally taken to be absolute, and the settler usually intends a trust to be created so that there is no discretion not to distribute. However the disposition will be treated as a power unless the court decides otherwise.

According to O’Hagan, although ‘at present, in equity an express trust over such future unascertained property cannot be created’, if the beneficiary obtains existing benefit as well as future property, the future property will be put under a constructive trust for them.21 This principle will apply to this scenario because Emily has stated Percival and Burton will receive property currently in existence as well as future property. Based upon this if the executors chose to exercise their power, Percival and Burton would get the existing property absolutely, and a constructive trust would be created for them for future property.

According to Neville v Benjamin22 if a trustee cannot find a beneficiary, and there is no evidence that they are still alive, they can apply to the court to be discharged of their duty as a trustee, and the property will be distributed accordingly. Depending on the length of time Burton has been missing, and the ability of a party to prove he was alive at the time of Emily’s death, the trustees can apply to the courts. In such circumstances, the entire property will pass to the other beneficiary, Percival. Burton will also be removed as a beneficiary from the constructive trust containing the future property, meaning Percival will be a lone beneficiary.

21 O’Hagan. P, 1994. Mutual Wills. New Law Journal, 144, pg 1.

22 [1902] 1 Ch 723

As a fiduciary power has been created as opposed to a trust, the trustees have a duty to consider all beneficiaries but are under no duty to distribute. As discussed above in the second scenario, trustees occupying a power in a fiduciary capacity are obliged to consider exercising it from time to time, as well as considering all beneficiaries and their individual entitlement according to appropriateness.

This trust could be held to be invalid for being a sham trust. This is because the express words of the trust suggest Emily intends the property to be settled after her death, which means it does not constitute a present gift of a future interest, and therefore Emily maintains the whole of the beneficial interest until her death when she wishes for it to be transferred. This means there will not be a valid formation of a constructive trust for which to hold the future property for Percival and Burton. This intention makes this disposition invalid.

To conclude, the issues dealt with regarding these dispositions demonstrate how important the wording is when creating a trust, so to reflect the three certainties required in order to create a fully constituted trust. As stated at the beginning of this essay the three certainties are; certainty of words, certainty of subject matter and certainty as to the object. I have explored at the possibility of the courts looking to the intention of the settler and thus with homemade will the courts prefer this approach. The problem with this is there can never be 100% sureness of what the settler’s intention was, and therefore this approach poses its own problems. On the plus side, the courts have recognised the problems associated with creating trusts and have tried to widen the ambit of validity, such as the creation of the Gelbenkian test23 which by applying the reasonableness test, allows for consideration of individuals being potential beneficiaries even though they have not been listed as beneficiaries. In my opinion the complexities with dispositions will continue to expand due to changes in society which will affect the ranges of potential objects and subject matters. The court will continue to take a flexible approach as to the interpretation of dispositions so to continue achieving the balance between legal certainty and the reflecting the settler’s intentions. Luckily, equity is an area of law which will allow for constant adaptation of the law as it is very much focused on fairness. This means in the future there is hope for more clarity and thus less confusion with the rules of creating valid dispositions.

23 Supra note 9

Bibliography

Harris. J. W, 1971. Trust, Power and Duty. Law Quarterly Review, volume 87, pages 31-65

Hayton. D, 1994. Uncertainty of subject-matter of trusts. Law Quarterly Review, volume 110, pages 335-340

Hopkins. J, 1971. Certain Uncertainties of Trusts and Powers. Cambridge Law Journal, 29(1), pages 68-103

Hudson. A, 2007. Equity and Trusts. 5th edition, Routledge-Cavendish, Oxon, England

O’Hagan. P, 1994. Mutual Wills. New Law Journal, volume 144, issue 6664

Pearce. R and Stevens. J, 2006, The Law of Trusts and Equitable Obligations, 4th edition, Oxford University Press, Oxford, England