CERTAINTY

(INTENTION/SUBJMATTER/OBJECT)
Tuesday, 26 December, 2023 12:40 AM

Knight v Knight (1840)

- 3 Certainties required to create trust:
○ Settlor intended to create the trust as opposed to creating something else- Intention
○ Existence of trust property- Subject Matter
○ Identity of the beneficiary- Object
- In the absence of any, the trust is void

Reason behind three certainties:

- Ensure the workability of such trust
- Control conscience of the trustee
- Fulfill the intention of the settlor

1) CERTAINTY OF INTENTION

DETERMINING INTENTION NOTES CASES

Settlor must intend to create genuine trust • Shows intention to impose binding/legal obligations Case: ESPL Sdn Bhd v Radio & General Engineering
(not merely a gift) not just moral obligation. Sdn Bhd [2004]
• Can use any language as long as clear enough to - No particular form of words are necessary to create an
show genuine intention to create trust. express trust
• Most obvious way to show intention is to put the - Intention is a matter of evidence; can be established by
word 'trust' and make it clear that the parties clearly way of inference
intended to create a trust. - Trust does not need to be in writing, can be made orally
• However, it is not mandatory to use the word 'trust'
(as long as it shows intention- trust valid)

Question of construction • Whether through construction of words used, or from Case: Re Diggles (1888)
actions of the parties, there is clear intention that the - A gift by a will to a daughter adding "and it is my
property is to be held on trust for the benefit of the desire that she allows to AG an annuity of $25 during
beneficiary. her life" was declared not to be a valid trust
• Mere expression of desire to confer a benefit is
insufficient Case: Re Adams & Kensington (1884)
• Clear distinction must be drawn between legal - A testator left his property to his wife by will "in full
obligations. confidence she would do what was right by her
• Court may draw inference that the settlor has children"
intention to create a trust after analyzing the words - It was argued on behalf of the children that the moral
used [maxim: equity looks to substance rather obligation imposed on the wife in the will created a
than form] trust. However, it was held that the property was passed
to the wife absolutely.
- Court interpreted the statement in the will and declared
that there is only moral obligation on the wife to use the
money, in a way which would benefit the children, but
not a legal obligation for the wife to hold money as
trustee on behalf of the children.

Words must be clear, unequivocal and • Precatory words; expectation/hope and desire but Case: Wan Naimah v Wan Mohamad Nawawi [1974]
sufficiently expressive vague in the sense that they are not definitive in - "declaration of trust may be made informally, provided
explaining how testator's property should be deal that the words used are clear and unequivocal"
with- no exact intention expressed and could rise to a - Any words that the donor mean at the time he speaks
different meaning (which clearly shows intention) is sufficient for the
• Example; "I hope the property should be used in a purpose of creating the trust.
particular manner" // "I have every confidence the
property will be used in this way" Case: Quah Eng Hock v Ang Hooi Kiam [2000]
• Such words typically indicates that a gift is intended, - “Words used must be clear and unequivocal; indicating
intention to impose binding trust will not usually be the settlor’s intention to divest the property to the
found. beneficiary”
• Exception: If the instrument, read as a whole - The use of precatory words (words of hope and desire)
suggests a trust instead of a gift, court will allow essentially does not create trust obligations.
precatory words to form a trust in these
circumstances. Case: Yap Joyce v Tee Molly [2000]
- “The words used to convey the intention must be
sufficiently expressive. They must demonstrate an
intention to impose a mandatory and legal obligation on
the recipient of the property as opposed to purely moral
obligation”

Case: Comiskey v Bowring Hanbury [1905] (read as a

whole)
- The testator left property by will to the wife, and the
sentence used was "in full confidence that she will
devise it to one or more nieces as she may think fit...In
default, I hereby direct the whole of my real and
personal estate shall at her death be equally divided
among the surviving nieces. Make such use of it as I
should have myself”.
- The widow asked the court to determine whether there
was sufficient certainty of intention (trust in favour of
the nieces) or, whether the wording was precatory (she
took the property absolutely).
- The initial words are precatory words; they were in
 themselves ineffective to create a trust. But the trust
document must be considered and read as a WHOLE in
ascertaining certainty of intention.
- The intention of the testator was to give the nieces
property rights from the moment that the will came into
effect. As such, the wife was subject to the obligations
of a trustee and the property was held on trust for her
for life and then in remainder to her nieces equally.

Conduct and surrounding circumstances • Addition to words used in making a trust. Case: Jones v Lock (1865)
• Must look at the surrounding circumstances, as well - Robert Jones (in a fit of rage) placed a cheque into the
as the evidence as to what the parties intended, what hand of his baby, saying ‘I give this to my baby and I
was actually agreed and how the parties conducted am going to put it away for him.’ He then took the
themselves. cheque from the child and put the cheque in his safe. A
few days later, Jones died.
- The question in issue was whether a trust was created
over the cheque for the benefit of the baby, as
contended by Jones’s children.
- Held: There was nothing to indicate an intention to
create a trust over the cheque, rather the father’s
intention was to make a gift to the baby. He had not
made himself a trustee for the child.
Sham/Mere facade • The creation of trust must be genuine not a trust Case: Midland Bank v Wyatt (1995)
which is a sham or pretence. - Wyatt set a house on trust for wife and child. They
• A sham constitutes "acts done or documents were not told of the trust. His business became
executed by the parties to the 'sham' which are insolvent, and money were owed to the bank. When his
intended by them to give to third parties or to the business failed, he sought to protect his house from
court the appearance of creating between the parties creditors by relying on the trust settlement earlier
legal rights and obligations different from the actual executed, of which his wife was a trustee.
legal rights and obligations, which the parties - Consequently, he separated from his wife; wife’s
intended to create" beneficial interest in the house not mentioned in the
• This kind of trust may be set aside if the truth of the divorce settlement. The trust was a sham, its sole
matter is that the settlor retains full beneficial purpose was to defeat the creditors. Declaration of trust
entitlement and there is no intention that the apparent void.
beneficiaries shall obtain any benefit.
• Sham trusts are often used to avoid liability to tax by Case: Ho Min Hao v Ho Yee Chin (2016)
pretending that property is held on trust or an attempt - Trust was created for the purpose of ensuring that the
is made to put property beyond the reach of creditors shares were put beyond the reach of creditors in the
in an insolvency. event of bankruptcy. The said transaction which was on
the face of it lawful, had been entered into for an
unlawful purpose. As such the trust was unenforceable
as it was intended to defeat the creditors.

Case: Paul v Constance (1977)

- Mr Constance left his wife to live with Mrs Paul. He set
up a joint account under his name and represented to
Mrs Paul that “this money is as much yours as mine”.
He subsequently died.
- His wife claimed that the joint account belonged
entirely to her deceased husband, and that it therefore
passed to her as his widow and administrator of his
estate.
- Mrs Paul argued that the money was held on trust by
Mr Constance, as legal owner of the bank account, for
both of them as beneficiaries. Therefore, the bank
account should pass to her as the sole surviving
beneficiary, and it DID.
- The court held that Mr Constance had declared a trust
over the money in the bank account. The reasoning was
that the words ‘the money is as much yours as mine’
manifested sufficient intention that Mr Constance
would hold the property on trust for him and Mrs Paul.

Effect of failure • If the intention of the testator is uncertain, means no Case: Re Adams & Kensington (1884)
creation of a trust and no express trust is created - The wife received the property absolutely as a gift. She
• Effect: trust property become an absolute gift, and did not become the trustee, but a donee.
person who is in control of the property is entitled to
retain it beneficially.

2) CERTAINTY OF SUBJECT MATTER

NOTES CASES
• The property subject to the trust must either be clearly Case: Sprange v Bernard
defined or be capable of ascertainment. - The testatrix left stock to her husband to use absolutely but that
• There must be clear and firm evidence to prove the "all that is remaining in the stock, that he has not necessary use
existence and identification of the subject matter of the for, to be equally divided between my brother and sisters"
trust. - The trust was held to fail since it was uncertain what property
• The underlying principle is that a trust, to be valid, would be left on the death of her husband, who accordingly took
must be enforceable. If there is uncertainty as to the the property absolutely.
property hold on trust, then a court cannot enforce the
settlor's wishes or the trustees' obligations. Case: Palmer v Simmonds
- A testatrix left money to her husband for his own use and benefit
 but subject to a trust on his death "to leave the bulk of my
residuary estate to four named relatives"
- Kindersley VC in this case stated “When a person is said to have
given the bulk of his property, what is meant is not the whole but
the greater part, and that is in fact consistent with its classical
meaning".
- Hence, no trust was created as the subject matter was uncertain
and the husband took the estate absolutely.

• Issue of segregation: There is no valid trust for trust Case: Re London Wine Co Ltd (1986) [tangible-non fungible]
property that is mixed with other property, that it is - A wine merchant bought and held wine for clients to their order.
impossible to identify precisely which property is held The stock of wine was held together without distinguishing which
on trust. particular bottles were held for which client. The wine merchant
• Property that is intended to be held on trust must be company went into liquidation and the claimants argued that the
segregated from other property belonging to the settlor, wine they had ordered from the shipper was held on trust for them
in order to be identified. under the terms of their contracts. However, the creditors said it
• However, if it appears that where the property is belonged to the company and was part of the company’s assets in
intangible property, made up of identical units, it will insolvency
not be necessary to segregate the trust property from - Held: Since the wine in the stock was not individually marked (as
other property. to which batch belonged to whom) it was held that no trust has
been created because the bottles were not individually identifiable.
TANGIBLE Property that can be perceived - In order to create a trust, it must be possible to ascertain with
with sense certainty not only what the interest of the beneficiary is to be
out but also to what property it is to attach.
INTANGIBLE Property cannot be perceived
with sense
(shares/stocks/insurances) Case: Hunter v Moss (1994) [intangible-fungible]
FUNGIBLE Properties that are similar - An employee of a company was entitled to 50 shares out of 950
kind/classes and can be shares held by the employer under the employee's contract of
interchanged with another employment. The employer did not transfer the shares to the
(shares/bonds) employee, nor were any attempts made to identify those shares
NON- Properties that are of different which were to be subject to the arrangement.
FUNGIBLE kind/class, cannot be - The issue arose as to whether or not the employee could assert that
interchanged with another he had proprietary rights over 50 shares. The court held that it was
(land/house/cars) not necessary to segregate the property comprising the trust fund if
the property was intangible property, like ordinary shares, as each
• Formula: unit is indistinguishable from each other. Hence, in this case the
- Tangible + Fungible= Segregate employee has the right over the 50 shares.
- Intangible + Fungible= No need
- Tangible + Non- Fungible= Segregate Case: Re Harvard Securities (Holland v Newbury [1997])
- Intangible + Non-Fungible= Segregate - This case applied the rule drawn from Hunter v Moss. In this case,
a dealer in financial securities held securities as nominee for his
clients. While the terms of the contracts suggested that the dealer
held the securities on bare trust for each of his clients, the
securities were not numbered and were not separated. In
consequence, none of the clients were able to identify which
securities were held on bare trust for which client.
- Held: The trusts were not invalid for uncertainty of subject matter
because the securities were intangible property and therefore did
not require segregation.

Case: Re Goldcorp Exchange Ltd [1995]

- Customers of the exchange entered into contracts that required the
exchange to acquire bullion for their customers and to hold the
total amount of their order in their vaults. According to the terms
of their contracts the exchange was required to buy and to hold the
total amount of their customers’ orders.
- It would (in theory) have been possible for the customers to know
that the whole of their order and the whole of every customer’s
orders were held physically by the exchange in its vault so that
there could have been no question of the exchange failing to
satisfy an order.
- Those contracts purported to create proprietary obligations in
favour of the customers over the bullion that the exchange was
required to acquire on their behalf. Unfortunately, the exchange
broke its contracts. It only acquired enough bullion to meet the
usual requirements of its customers on any working day and did
not hold the entirety of the customers’ orders.
- Held: It was held that only those customers who could prove that
their order of bullion was in fact held separately from the general
store of bullion, would be entitled to enforce a trust against the
exchange and consequently be able to take their bullion orders
away as a secured creditors.

Case: Re Kayford [1975]

- A mail-order company used to receive money from customers
buying items from their catalogues. They bore the risk that they
had paid their money but that they might still need to receive the
items for which they had paid.
- The mail-order company realized it was in danger of insolvency
and therefore segregated all of its customers pre-payments into a
distinct bank account 'customers' trust deposit account'.
- Money was moved from that account only once the item had been
sent to the customer. When the company did go into insolvency,
the issue arose whether the money belonged to the company or
was it held on trust for its customer?
- It was held that no matter what the account was called so long as
 there was a separate account, the company, as legal owner of the
bank account, was the Trustee. The customers were the
Beneficiaries in the period between making a prepayment and
receiving their items.

• In some cases, the exact trust property is certain but the Case: Re Golay (1965)
beneficial entitlement is not. - A gift directing the executors to allow a beneficiary to "enjoy one
• The quantum or extent of the beneficial interest of each of my flats during her lifetime and to receive a reasonable income
beneficiary must also be ascertained, hence there must from my other properties" was upheld in this case.
be a clear indication as to what interest in the trust - The court held that the phrase 'reasonable income' was certain. The
property the beneficiaries are able to claim. court is constantly involved in objective assessments for
• This also happens in cases of trust over contingent determining what is reasonable and is not to be deterred from
beneficiary. A contingent beneficiary is a person/entity doing so.
who becomes entitled to receive trust assets ONLY IF - The court looked at the beneficiary’s previous standard of living
the primary beneficiary is unable and determined from this what income from the trust was
reasonable to maintain this standard. The trustees were given clear
discretion to determine ‘a reasonable income’ and also which flat
was to be gifted to the beneficiary.

Case: Boyce v Boyce (1849)

- A trust was set up by will on behalf of the testator’s two
daughters, Maria and Charlotte, consisting of four houses. Maria
was to choose first which houses she wanted, and the other two
were to be conveyed to Charlotte. Unfortunately, Maria died
without making any selection of the houses.
- The gift to Charlotte subsequently failed as it was not known
which house Maria would have chosen. The trust failed for
uncertainty as the court would not be able to decide which
cottages should be conveyed to Charlotte.

EFFECT OF FAILURE OF SUBJECT MATTER

- The property would result back to the estate of the testator and form part of the residuary estate which shall be distributed to the heirs, in accordance with the law of succession.
- If the trust property has been transferred to the trustee and it had failed for uncertainty of beneficial interests, it will be held on Resulting Trust for the settlor.

3) CERTAINTY OF OBJECT

BENEFICIARY PRINCIPLE
- Trust is only valid if it has a beneficiary
- Express trust must be for the benefit of a beneficiary who the trustees
can either ascertain or is at least ascertainable

PRINCIPLES OF CERTAINTY OF OBJECT

The Principles • Object must be certain or is capable of being Cases (Beneficiary Principle)
rendered certain - Bowmann v Secular Society Ltd (1917)- “A
• Trust must be in favour of human beneficiaries or trust, to be valid must be for the benefit of
be charitable in law individuals”.
• It is a necessary part of any trust that there us a The beneficial interest of trust properties rests on
beneficiary capable of enforcing the trustees the beneficiaries and it is only they who have the
performance of their duties under the trust. capacity to enforce the trust.

- Re Endacott (1960)- Testator left a gift of

£20,000 in his will to his local council “for the
purpose of providing some useful memorial to
myself.”
Lord Evershed: "No principle perhaps has greater
sanction or authority behind it
other than the general proposition that a trust, in
order to be effective must have ascertained
Or the beneficiary who will receive the benefit
must be clearly ascertained.

- Morice v Bishop of Durham (1805)- The testator

purported to make a trust for “such objects of
benevolence
and liberality as the trustee in his own discretion
shall most approve”. It is a trust that the Court
could not approve.
Every other trust must have a definite object
(beneficiary). Without an object, the trustees are
not subjected to the trust obligations.
Thus, there must be somebody, in whose favour
the court can decree performance in the event of
breach of trust obligations.

Fixed Trust • The share/interest of the beneficiaries is specified Case: IRC v Broadway Cottage Trust (1995)
in the instrument. - Trustees were to apply the income of £80,000 for
• The beneficiary is the owner of the equitable the benefit of all or any of a class of objects
interest allocated to him. including, inter alia, the settlor’s wife, specific
• It is necessary for the trustees to be able to relations of the settlor, all persons who have been
compile a complete list of the beneficiaries. in the past or during the appointed period shall be
employed by…The court decided that the trust
 (complete list test) employed by…The court decided that the trust
• The important principle us that if trust property is was void, as they could not identify the list of
to be divided among a class of beneficiaries in beneficiaries.
equal (or fixed shares), the trust cannot in the
nature of the things be administered unless the Case: Re Benjamin; Neville v Benjamin (1902)
number and identity of beneficiaries are known. - A court can order the redistribution of a deceased
The description of beneficiaries should neither estate when a missing beneficiary is presumed
involve conceptual nor evidential uncertainty. dead. In this case, the estate administrator found
no trace of one of the testator’s children, despite
Position in Malaysia extensive searches. The court gave the
• Halsbury's laws of Malaysia; if a trust requires administrator permission to distribute the
division between all the members of a class, it beneficiary’s share to the other children. Under a
will be void for uncertainty if it is not possible to Benjamin Order, the executor is not personally
provide a complete list of the beneficiaries. liable if the missing beneficiary later emerges,
• It is necessary to determine whether the although the other beneficiaries may have to repay
description of the beneficiaries is void for the bequest.
uncertainty in order to be able commence the
trust at some future date.

Missing beneficiary [Benjamin Order]

• A fixed trust will not fail simply because a
particular beneficiary cannot be found. The court
can authorize the trustees to distribute the trust
property among the known beneficiaries on the
assumption that the missing beneficiary is dead.
• Thus, a trust would not necessarily fail because of
untraceable or deceased beneficiaries, nor will it
disturb the entitlement of the unknown
beneficiaries should they reappear later.

Discretionary Trust • The trustee holds the trust property on trust for Case: McPhail v Doulton (1971)
such member of members of a class of - In this case, a settlement was made of shares for
beneficiaries as their absolute discretion the benefit of employees of the company and their
determine. relatives and defendants. The trustees had
• Trustee is vested with the power of selection absolute discretion as to how, whether or when
which allows him to choose from a range of they should distribute money from the fund.
possible beneficiaries. (who/when/how much - The executors of the settlor's estate argued that the
funds a beneficiary may enjoy) settlement was void for uncertainty. The HOL
• trustee ought to be able to determine with held that the settlement created a trust, not merely
certainty whether any given claimant is or is not a power.
within the description of the relevant class, and - The test for certainty of objects in a discretionary
not necessary for him to identify every potential trust was whether it could be said with certainty
beneficiary to be identified by the trustee. any given individual was or was not a member of
the class.

Case: Re Gulbenkian (1970)

- The HOL was posed with an issue as to whether
powers of appointment were void for uncertainty.
The case established a key principle that a power
of appointment is valid if it can be said with
certainty whether a person was within the class or
not.

Case: Re Baden's Deed Trust (1973)

- This Appeal came on the basis that the trust was
void for uncertainty, as ‘relatives’ and
‘dependants’ could not be defined with sufficient
certainty.
- It was concluded in the High Court that
‘dependants’ could be easily proved and that
‘relatives’ was sufficiently certain linguistically if
it was defined as ‘descendants from a common
ancestor’.
- On appeal, the question was how can a trustee
prove that a particular person is or is not a relative
of an employee? Each of the words ‘relatives’ and
‘dependants’ import such an uncertainty that the
trust ought to be void.
- It was held that the court could always determine
the potential objects by looking at how the
claimant prove positively that he is within a class,
be it just one. Suffice that the trustee could say, as
regards a substantial number of beneficiaries, that
they fell within the scope of the trust.

Case: Re Barlow's Will Trust

- Testatrix in her will gave an option to ‘any
members of my family and friends of mine’ to
purchase paintings well below their true value.
- At the time of her death, the unmarried testatrix’s
closest family were various nephews and nieces,
including also great and great-great nephews and
nieces. As a result, her executors sought directions
from the court.
 - Both concepts of family and friends could be
given a workable meaning. No legal necessity on
the part of trustee to inform those entitled, suffice
if any of them come forward.
- Anyone who could prove that they personally fell
within the class of beneficiaries intended would
have satisfied the test, hence establishing the trust.

FORMS OF UNCERTAINTY OF OBJECT

FORMS NOTES CASES

Conceptual uncertainty • Also referred to as linguistic or semantic Case: Brown v Gould
uncertainty. - A distribution by the trustees, in their discretion,
• This involves uncertainty or vagueness in defining in favour of "old friends of the settlor" was held
the class or classes of individuals that the trustees invalid.
are entitled/required to exercise their discretion. - In general, the term 'friends' has been considered
to be conceptually uncertain and therefore void

Case: Re Allen
- The court held that if the concept is certain, then
mere difficulty in tracing and discovering those
who are entitled normally does not invalidate the
gift.

Evidential uncertainty • Arises where there is an absence of evidence to *See Re Baden's case*
show who was intended to benefit under the trust.
• The question is whether or not the claimant can
prove that she falls within the class of
beneficiaries.

Administrative unworkability • Situation where the testator or settlor expressed Case: R v District Auditors
the class of objects so broadly that it is difficult - A local authority resolved to create a trust under
for the court to ascertain any sensible exercise of which trustees were to apply and expend the Trust
the discretion. Fund for the benefit of ‘any or all or some of the
• The group of class of beneficiaries is far too large, inhabitants of the County of West Yorkshire’.
rendering it impossible for trustees to perform - A trust with as many as 2.5million potential
their obligations. beneficiaries is quite simply unworkable. The
class is far too large to be workable!
Position in Malaysia:
- Based on Halsbury's laws of Malaysia; trust is
valid if it is possible to predicate any proposed
beneficiary that he is or is not a member of that
class. If there remain a number of people who
cannot be proved to be inside or outside of the
class, then the trust fails.

Effect of uncertainty • The property would result back to the estate of the
testator and form part of the residuary estate
which shall be distributed to the heirs, in
accordance with the law of succession.
• If the trust property has been transferred to the
trustee and it had failed for uncertainty of
beneficiaries, it will be held on Resulting Trust
for the settlor.