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Creation of Express Private Trusts
Before answering the problem question, state that the executors of a trust will need to know what they are
supposed to do to avoid being in breach of trust
...
And of most importance, we should assess whether there is a creation of express private trusts in
order for the testator’s wishes to be carried out
...

Note: It is an equitable interest in any form of
property - land or personalty

See diagram on handout (page 3)
But notes cases where s 53(1)(c) does not apply:
• Re Paradise Motor Co Ltd: A disclaimer did not
require any form of writing
• Vandervell v IRC

Page 2 of 31

Formalities required for Transfer of Assets
Has there been a successful transfer?
BY WILL

Testamentary dispositions

s 9, Wills Act 1837 (as amended by
Administration of Justice Act 1982, s 17):
“No will shall be valid unless
(a) It is in writing and signed by the testator or
someone in his presence and his direction, AND
(b) It appears that the testator intended by his
signature to give effect to the Will, AND
(c) In the presence of two or more witnesses
present at the time, AND
(d) Each witness either attests and signs the Will or
acknowledges his signature in the presence of
this testator
PARTICUARLY IMPORTANT WHERE A
SETTLOR/TESTATOR HAS DRAFTED THEIR
OWN WILL

Page 3 of 31

Formalities for Declaring a Trust
On Death

s 9, Wills Act 1837 (as amended by
Administration of Justice Act 1982, s 17):
(a) It is in writing and signed by the testator or
someone in his presence and his direction, AND
(b) It appears that the testator intended by his
signature to give effect to the Will, AND
(c) In the presence of two or more witnesses
present at the time, AND
(d) Each witness either attests and signs the Will or
acknowledges his signature in the presence of
this testator

Inter Vivos

Personalty:
Paul v Constance; Re Kayford: No written
formalities required
...
“Equity
looks to substance (intent) not form”
...
I
...
if these requirements aren’t met, a resulting, implied or
constructive trust can still arise
...


The Effect of a Valid Declaration of Trust
Once any formal rules have been complied with for the declaration of the trust, + the trust property has been
duly transferred by the correct means to the trustees, there is now a completely constituted trust
...
Beneficiaries have enforceable equitable
interest
...

Why does it matter?
• The settler may change his mind
• Bankruptcy of Settlor
• Death of Settlor
- Succession consequences
- Inheritance Tax consequences
• Divorce of Settlor


Page 4 of 31

Methods of transferring ownership
RULE: THREE mutually exclusive methods of transferring property inter vivos
Milroy v Lord: This requirements were put by Turner LJ and it was stated the settlor must comply with one
of the three methods
...


Which disposition is intended?
1
...
Settlor declares self a trustee
3
...
Outright gift
This is where the transferor inters to transfer property to the transferee absolutely so that the transferor
deprives himself as legal ownership and the other takes the property beneficially
...
A valid Transfer of Assets to donee
Imperfect gift
If the transferor agrees to give property to the transferee but fails to do so for example because an attempted
transfer failed or the transferor changed his or her mind, Equity will not, at least as a general rule, be in a
position to help the transferee
...
e
...
e
...

However the trust may be saved by operation of:
The “Every effort test”
If the settlor has made every effort to transfer the property, the transfer will be complete in equity
...
He also transferred the share certificate
...
Held
because the testator had done all that he needed to do to vest legal title to the shares to the donee,
Equity should treat this as having occurred
...
Here the father and son fell out after the transfer of asset’s
was signed and stamped but before registration at the Land Registry
...


• Further applied in Corin v Patton
But NOTE:

• Re Fry: A shareholder resident abroad needed treasury consent in addition to delivery of the Stock

Transfer Form and the share certificate
...

It was held that it was not possible to say that the donor had done everything necessary to effect the
transfer of the shares, because there was no guarantee that consent would be given
...
On the facts of this case, these considerations included:
- The donor intended to make an immediate gift and did so of her own free will;
- She had informed her nephew of the gift;
- Her agent had told the nephew that he did not need to take any action to register the shares;
- The nephew agreed to become director of the company, which required the shares to be transferred to
him
...
Settlor declares self as trustee
Need:
1
...
Transfer to trustees for them to hold on trust
Need:
1
...
A valid Declaration of Trust: Formalities required + Three Certainties

Loose conversation:
Jones v Lock: An intended outright absolute gift could not be effective declaration of trust
...

The lease therefore remained with the testator
...
He did not sign anything before he died
...
However the Privy Council believed:
‘Although equity will not aid a volunteer, it will not strive officiously to defeat a gift…
...


Regarding imperfect gifts:
Re Rose
Mascall v Mascall
Corin v Patton
Re Fry
Pennington v Waine

Page 7 of 31

So create a valid Express Private Trust:

(1)

A valid Declaration of Trust

(2)

A valid Transfer of Assets

These formalities together provide a completely constituted trust
...
You must assess what the settlor/testator intended to achieve
with each clause i
...
whether a gift, trust, a power etc in order to assess the effect and validity of each
disposition
...

Knight v Knight (1840): The rule was then applied in this case
...


Intention (to create a trust)

2
...


Objects (the beneficiaries)

Page 9 of 31

1
...

Objective assessment of Certainty of Intention
Twinsectra v Yardley: The court stated that what we are concerned with is what the reasonable person
would conclude that the creator of the trust intended
...
As put by
Megarry V-C, “one cannot seize upon the word ‘trust’”
Paul v Constance: Established the words “the money is as much yours as mine” was sufficient to evince an
intention to create an express trust
...

There must be imperative words used
...

Re Diggles: He or she “wishes”
Re Hamilton: “Requests”; “confident” that the party receiving property will hold it for somebody else
...
Held: There was an absolute gift
...


What if there is no written evidence?
Paul v Constance: The evidence supported the conclusion that the money was intended to be held on trust:
On a number of occasions, the deceased had confirmed that the money was the claimant’s as much as it was
his own
...
Held: There was certainty of an intention
to own the yacht together
...

Jones v Lock: Lord Cranworth stated it would be dangerous if ‘loose conversations of this sort’ were
sufficient to declare a trust
...
You know what to do
...
Don’t let that
get anything”
...



Page 10 of 31

Sham trusts
Snook v London and West Riding Investments: Defined a sham as being “acts done or documents
executed by the parties which are intended to create the appearance of creating” a trust
...
Before this, Mr Wyatt had purported to declare a trust of his interest in the home for the
benefit of his wide and children
...
Rather the trust was to safeguard his
interest if his company were to face financial difficulties
...
e
...


Certainty of Intention in a Commercial Context
Re Lewis’s of Leicester Ltd: A company which traded as a department store, licensed other traders to trade
within the shop
...
The company
entered into administration and the question was whether the money paid into the bank account was intended
to be held on trust for the concessionaires
...


IF THERE IS NO CERTAINTY OF INTENTION, THE TRUST WILL FAIL:
The property may be considered an outright gift OR the property will result back to the creator by
operation of a resulting trust
...
Certainty of Subject Matter
The property forming the subject matter of the trust has to be capable of being clearly defined
...

Palmer v Simmonds [1854]: ‘The bulk of my said residuary estate’
...
‘Bulk’ could mean anything between 51 per cent to 99 per
cent of the property, so the trust was not established
...

Boyce v Boyce: One beneficiary, Maria, could choose which house she wanted and Charlotte was to have the
other
...
It was held that the trust failed because
the beneficial shares were uncertain
...

Daughter could choose
...
with

Re Golay’s Will Trusts: In this case the will directed the executors ‘I direct my executors to let Tossy
enjoy one of my flats during her lifetime and to receive a reasonable income from my other properties’
...
Executors had to choose
...
A ‘reasonable income’ was held to be
sufficiently certain, because it was considered to be possible to determine what is objectively considered
as ‘reasonable’
...
The company went into receivership and the question was
whether the wine was held on trust for the customers
...

Cf with
Re Staplyton Fletcher Ltd: Some wine has been segregated and so was held on trust
...
Before it was delivered to
them, the company became insolvent
...


Page 12 of 31

Shares:
Hunter v Moss: A trust of part of a fungible mass, such as a shareholding, will not fail for uncertainty where
the mass itself is sufficiently identified and as long as the beneficiary’s proportionate share of the mass is not
uncertain
...

There was certainty of subject matter
...

Where there is no bank account:
MacJordan Construction Ltd v Brookmount: Retention account never set up
...
There was nothing
to which that money could be based
...
Court held there was no trust because there was no
identifiable subject matter - No money had been set aside
...


Future Property (or “after-acquired” property):
Can this be the subject matter of a trust?

- No: Re Ellenborough: It was held there was no subject matter (she did not acquire the property) and so
could no create a trust
...
Hayton (1994) 110 L
...
R
...
Martin, Hanbury & Martin, Modern Equity
Is there a distinction between trusts of tangible property and trust of intangibles?
Neuberger J in Re Harvard Securities thought so:
“It seems to me that the correct way for me, at first instance, to explain the difference between the result in
Hunter and that in … London Wine and Goldcorp, is on the ground that Hunter was concerned with shares,
as opposed to chattels”
Is ‘co-ownership’ a better approach?
Biggs J in Pearson v Lehman Brothers: Stated “trust works by creating a beneficial co-ownership share in
the identified fund, rather than in the conceptually much more difficult notion of seeking to identify a
particular part of that fund which the beneficiary owns outright”
Cf
...
e
...

Is a share really indistinguishable?
Shares each receive unique certificate numbers
...
If a company issues 1000 shares and I
purchase 100 shares, I am a co-owner in the share capital to the tune of 10%
...


It was recognised that if there had been a declaration of trust of 5% of the shares in a will, this would clearly
have been valid, because the executors of the will would have been able to resolve any uncertainty as to the
identity of the subject matter
...
Certainty of Objects
There must be ascertainable beneficiaries who can complain of any breach of trust
Must be people
Re Endacott: A testator left a large fund to provide some “useful memorial for myself”
...
The trust was void
...

Morice v
...


(1) Fixed trusts
Summary:
• Fixed shares
• Obligation trustees
• No discretion
A trust under which the trustees are required to distribute the trust property to the beneficiaries in the
proportions identified by the trust document
...


Beneficiary One ¼
Settlor

Trustee

Beneficiary Two ¼
Beneficiary Three ¼
Beneficiary Four ¼

OR
Successive interests:Testator

Life Interest

Remaindermen

Saunders v
...


Page 15 of 31

Discretionary Trusts
Summary
Obligation on trustees
Duty to exercise discretion
No pre-ordained Shares
Mettoy Pension Trustees Ltd v Evans, per Warner J: The Trustee “is under a duty to select from among a
class of beneficiaries those who are to receive, and the proportions in which they are to receive, income or
capital of the trust property”
Flexibility: No individual beneficial interest in the trust property until a beneficiary’s share is allocated
(“appointed”) to him
...

Gartside v
...

(2) Reasons for failure of Trusts for Uncertainty of Objects

Trustee

Trustees cannot carry out their duty to distribute the
trust fund to the right beneficiaries unless they know
who the beneficiaries are

Courts

If trustees do not perform their duties or breach
them, the Court has power to ensure compliance
with the trust
...


Beneficiaries

Beneficiaries can enforce the trustees’ duties and
have standing to complain to the Court
...
It does not matter that a complete list cannot be drawn up when the trust
is created
...
g
...

However a fixed trust for the settlor’s friends will be void for conceptual uncertainty, because it is not
possible to define clearly who is a ‘friend’
...
e
...
if Adam creates a trust of £1k to be divided equally amongst the people who
were in his schools football team with him, this will be conceptually certain
...

If it will not be possible to draw up a complete list of objects at the time of distribution, the trust will
be void
...
This ‘is or is not’ test (or
‘Given Postulant’ test)
• Re Gulkbenkian: The House of Lords confirmed this

TEST: The ‘Is or Is Not’ test
McPhail v Doulton: ‘Conceptual certainty’ is required
...

Conceptual certainty is required: The test of certainty of objects will not be satisfied if it is not possible to
define the description of the class with sufficient clarity
...


Page 17 of 31

A discretionary trust might still be invalid however, for reasons of
(1)

Administrative Unworkability

• If the class of objects is so wide that it cannot be considered to be anything like a class, the trust
will be considered to be administratively unworkable and will be void

- McPhail v Doulton: Lord Wilberforce tentatively suggested that a discretionary trust for the

benefit of ‘all the residents of Greater London’ would be administratively unworkable and so
void
...
District Auditor ex p West Yorkshire Council: It was held a court could not execute a
trust with a very large class of objects

- Re Hay’s Settlement Trust: Sir Robert Meggary V-C recognised that a discretionary trust
for anyone other than a few specified people would be administratively unworkable
...
ie
...


- Re Manisty Settlement: A power given to trustees to benefit the ‘residents of Greater

London’ would be capricious because there was no connection between the settlor and the
residents in the area of Greater London
...
Because the settlor was the county council
for hat area which was consequently especially interested in the needs of those living there
...

Sachs LJ: Defined ’relatives’ as descendants from a common ancestor whereas
...

Megaw LJ: Defined ’relatives’ as descendants from a common ancestor whereas
...
He concluded it was not necessary to show that a particular person either was or was nota
member of the class, because it was not necessary to ascertain that it was enough that it could be shown of a
substantial number of objects that they “is or is not” within the class
...

Stamp LJ: Defined them as the next o kin or nearest blood relations
...
It would be enough to show of anybody who might potentially be
an object that he or she is or is not an object
...


Page 18 of 31

Public Trustee v Butler: “To grant scholarships for education to my promising relatives” - Upholding Re
Baden, “promising relatives” was deemed conceptually certain
...

Re Allen: “Pure blooded Englishmen” was deemed conceptually certain

Curing Conceptual Uncertainty
Opinion of trustees:
Recognising that trustees are able to be arbiters about questions whether a condition of evidential certainty,
but not conceptual certainty i
...
the opinion of the trustees should be relevant to determine whether the
condition was satisfied not he facts
...

In this case the trustees held a house on trust to permit the testator’s wife to live in it, but the house was
transferred to those entitled to the residuary estate if the trustees considered that she had ceased to live there
permanently
...
The meaning of ‘ceasing
to live somewhere permanently’ was considered to be conceptually certain
...

In Re Jones a fund was held on trust for the testator’s daughter but she would forfeit had of her rights to the
fund if, in the opinion of the trustees, she had a ‘social or other relationship’ with a named person
...
Subsequently, this condition was held to be void
...

In Re Tuck’s: Uncertainty about whether a person was married to an ‘approved wife of Jewish blood’ who
worshipped according to the Jewish faith could legitimately be resolved by referring the matter to a chief
rabbi
...
As stated by Virgo
the test is a laxer test of certainty of objects
...

A class of beneficiaries in a trust described as “my friends” will cause problems with conceptual certainty friends would not pass the is or is not trust
...

The gift was upheld
...


Page 20 of 31

Powers (Powers “of Appointment”)
1
...

Special power: Can be amongst anyone in the room
General power: Exercisable amongst enough in the world
...

2
...
e
...

- Hillsdown Holdings v Pensions Ombudsman

- Intention of the Settlor
• Re Mills: Gift over in default = Power
- Failure to Exercise – Distinction is difficult to draw at times
• Burrough v
...
Virgo calls that “a power coupled with a trust”

• Re Weekes’ Settlement: Wife didn't leave an outright gift to husband
...
When giving her husband the life interest, she had given him a power of appointment
to dispose of the capital (in the fund) after he died, amongst their children (all 14 of them)
...

• Re Manisty’s Settlement

Page 21 of 31

IN BETWEEN TRUSTS AND MERE POWERS
3
...
This phrase
illustrates (or can be construed to illustrate) the intent of the settlor to create a trust
...
His duty is to at least consider
exercising the power from time to time
...

Turner v Turner: Concerned court intervention
...
80 year
old father and sister in law and husband
...
However they did not read anything he had sent them, they just followed his
direction
...
The Court intervened
Mettoy Pension Trustees Ltd v Evans: Possible erosion of difference between fiduciary powers and
discretionary trusts?
Mettoy, company that made cars
...
The company was the donee of the fid
...
as the company went into liquidation it couldn't exercise that
fid power
...
Lord
Wilberforce held the court can step in and deal with the distribution in place of the donee’s
...


So, is there a distinction between Fiduciary Powers and Discretionary Trusts?
A question of construction of the investment
Hanbury & Martin, Modern Equity: “Whereas the donee of a fiduciary power of appointment need only
consider exercising the power, the trustee of a discretionary trust must actually exercise it, although … this
duty may be satisfied by deciding to accumulate rather than to distribute”
...
However with a fiduciary power one simply needs to think about exercising
the power, with a discretionary trust exercising his power is mandatory
...


Page 22 of 31



Minimum discretion but
maximum actual
distributive activity
Fixed Trust: Trustee under an obligation to distribute
according to the terms of the trust — no discretion at
all
Discretionary Trust: Trustee under an obligation to
distribute at some point, but has discretion as to how
and when
...


- THE COMPLETE LIST TEST:
• The complete list test requires that a list can be complied of all beneficiaries at the time when the
trust property is to be distributed
...
g
...


• If it will not be possible to draw up a complete list of objects at the time of distribution, the trust
will be void from the start
...

• E
...
a fixed trust for the settlor’s fiends will be void for conceptual uncertainty, because it is not
possible to define clearly who is a ‘friend’
...

• E
...
if Adam creates a trust of £1000 to be divided equally amongst the people who were in his
school football team with him, this will be conceptually certain
...


• Ascertainability
- Re Gulbenkian [1970] AC 508, 524 (Lord Upjohn)
• It does not matter that the location or continued existence of particular beneficiaries cannot be
established
...

- This is possibly because all the necessary work is being done by the complete list test
• If it is possible to list all of the objects, there should be no concerns about the size of the class
being such that the trust cannot be administered
...


• Capriciousness
- There is no evidence to suggest that this is of any relevance to the validity of a fixed trust
...

- E
...
There is nothing inherently wrong with a settlor creating a trust of £1000 to be divided
equally amongst those members of his cricket club who have ginger hair
...


Trustee is also under an obligation periodically to consider whether to distribute
...
This is because there is an obligation to make an appointment, but
the trustee has a discretion as to who will benefit
...
If the trustees fail to do so, it will be exercised by the
court
- So, in order for the power to be exercised, it is essential that the trustees know from the outset who
the potential beneficiaries might be
...
in Re Gestetner
• Donees of a power have to be able to say with certainty of any given person that he is or is not within
the scope of the power
...


- Confirmed by H
...
in Re Gulbenkian
The rule was applied to discretionary trusts in the House of Lords in McPhail v Doulton [1971] AC 424
- The House of Lords decision in McPhail v Doulton
- Facts
• the settlor established a fund for the benefit of the employees and ex-employees of a company, and
their relatives and dependants
• It was recognised that the settlor had purported to create a discretionary trust, but the validity of
this trust turned now whether relatives and dependants were sufficiently certain objects
- Lord Wilberforce, giving the leading judgment:
• Held:
- Must be sufficient to say with certainty that any given individual ‘is or is not” a member
of the relevant class - This is the GIVEN POSTULANT test
...

- Whereabouts of that person does not matter
...
g
...

The trial judge and the Court of Appeal applied this test in Re Baden’s Deed Trusts (No
...


• Conceptual certainty
- The test of certainty of objects will not be satisfied if it is not possible to define the description of the
class with sufficient clarity (McPhail)

- Re Baden (No 2)
• The court of appeal recognised that both ‘relatives’ and ‘dependants’ were conceptually certain
...


Page 25 of 31

Which definition is adopted could be significant, since defining ‘relatives’ as blood relations creates a much
smaller potential class than defining them by reference to a common ancestor
...
It is therefore necessary to determine in each case whether the
concept is sufficiently certain:

• R v District Auditor, ex p West Yorkshire Metropolitan County Council
- Held:
• ’an inhabitant of West Yorkshire’ is conceptually certain
• Re Tuck’s Settlement Trust
- Held
• ‘being of Jewish blood’ was conceptually certain, defined as being of ‘some Jewish blood’
• Re Allen [1953] Ch 810
- Held:
• ‘pure blooded Englishmen’ - conceptually certain
• Re Barlow’s Wills Trusts
- Held:
• Browne-Wilkinson J provided some guidance as to the definition of ‘a friend’
...


Wilberforce LJ stated, obiter, even if a discretionary trust passes the is or is not test and has conceptual certainty, administrative
workability could nevertheless invalidate a discretionary trust
...

- In R v
...
p
...
5 million objects
...

It is the size of the class that makes a trust adimisntraively unworkable
...


- Re Hay’s Settlement Trust
• Sir Robert Megarry V-C recognised a discretionary trust for anyone other than a few
specified people would be administrable unworkable

(2)
Capriciousness
- Considerations should be given to the nature of the class to determine whether the settlor had a good
reason to benefit that particular class
...

- Why is benefiting the inhaibtants of West Yorkshire not capricious and Greater London is?
• Numbers - the connection between the settlor and the chosen objects must be significant as
well
...

If a settlor chooses to establish a trust for the residents of an area with which she has has no connection and
who he or she had no reason to benefit, it will be considered a capricious motive - This was recognised by
Templeman J in Re Manisty
...


Applying the is or is not test:- Re Baden’s Deeds Trust (No
...

Have to decide whether relatives pass the is or is not test:

- Stamp L
...

• Impressed with the argument that says you have to put a person in a “is” box or “is not” box for the
test to be passed
...


• Harland v Glin
- Talked about the word relations as “next of kin”
...


- Sachs L
...
He did think relatives meant decedents from a common
ancestry but he believed provided the concept is clear, it does not matter if there is evidential
difficulties, it is put to any person coming forward that he comes within the “is” part
...


- Megaw L
...

• Laid back
...
It was enough if it could be shown there is a substantial

number of people that clearly would be int he “is” class even if there was a lot of others that were in
the “dont knows”
...



Page 28 of 31

Gifts subject to a Condition Precedent
“fixed trusts subject to a condition precedent” - in the book
...

- This was recognised in Re Barlow’s Will Trusts [1979] 1 WLR 278
- The testator had left some pictures in her will on trust for sale
• But had directed that her executor should allow any members of her family or her friends to buy
them at a lower price - condition precent
- Was it clear who her ‘friends’ or was this direction void for uncertainty?
• It was held this was sufficiently clear
...


- Conceptual certainty
- Lord Denning in Re Tuck’s Settlment Trust
• Recognised that conceptual uncertainty would not render a condition precent void, whereas it

would invalidate a condition subsequent
...
e
...
- Although the conceptual authority may be resolved, for example by
referring the matter to a third party to define the concept
...


Page 29 of 31

1
...
State and explain the relevant certainty of objects test (because there are
different tests for different dispositions)
3
...
Mention Administrative unworkability and capriciousness
5
...

The consequence of this transfer will be the termination of the trust
Facts: Shares were held on trust for Vautier until he attained the age of 25
...

When Vautier attained adult age, which then was 21 but now is 18 (Family Law Reform Act 1969, s
...

Held: Because he was now an adult and had an absolute indefeasible interest in the trust, he could claim the
transfer of the trust property to himself even though he had not attained the age of 25
...
It is therefore important to carefully
construe the trust to determine whether the beneficiary’s interest is vested or is contingent upon a particular
condition
...
In such cases, it is possible to sever the interest of one party without harming
the remainder because on beneficiary will have an absolute right to that part
...


The rule applies even if the settlor purports to exclude it - Stokes v Cheek (1860)

Significance: The rule acknowledges that the property that is held on trust for the beneficiaries is their
property in Equity, so that they should be able to decide what they do with it
...
But, why should the creator of the trust prevail once the trust has been validly created,
bearing in mind that the property belongs to the beneficiary in Equity

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