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Creating a Trust: Requirements a) Capacity ● Over 18 ● Mentally capable b) Three certainties ● Knight v Knight, Lord Langdale 1. Certainty of words o Certainty of intention Requires the existence of specific intention to create a trust Includes rules for determining whether the person intends to constitute himself as a trustee, by conduct or otherwise rules for determining whether ‘precatory words’ are intended to be legally or morally binding Is using the word trust decisive?

2. Certainty of Subject Matter Ambiguous Certainty in i. Property ● Palmer v Simmonds: “ the bulk of my estate” - precatory words ● Re Last: “anything left” will be past to the late husbands children - yes ○ pragmatism and policy? the intestate estate would have reverted back to the crown ● Re Golay: ‘reasonable income to live on’ ○ yes ○ objectively accessible ii. Quantum of each beneficiary’s interest in the trust Boyce v Boyce: property was certain but individual entitlement was not - non homogenous property remedy this uncertainty 1. discretionary trusts: the settlor can confer a discretion on trustees to apply the trust funds among a class of persons

e.g. a trust for such of my children and in such shares as my trustees shall in their absolute discretion decide 2. in certain circumstances, the court will assume that property is to be divided equally among beneficiaries applying the maxim: “equality is equity” both these possibilities demonstrate the overlap between certainty of subject matter and certainty of object 3. language used permits a generous interpretation of what is meant by certainty Re Golay: the requirement of subject matter to be sufficiently certain. “ The court is constantly involved in making such objective assessments of what is reasonable and it is not to be deterred from doing so because subjective influences can never be wholly excluded. In my view the testator intended by ‘reasonable income’ the yardstick which the court could and would apply in quantifying the amount so that the direction in the will is not in my view defeated by uncertainty.”

Homogenous Mass - Property in Large Bulk ● Re London Wine: there must be identification of specific property - must be able to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach the principle is applicable to all trusts over a homogenous mass known as the orthodox approach ● Re Goldcorp: Subject matter was uncertain as the bullion had not been set aside / allocated. No subject matter to which trust could attached. C only had a contract claim against D. the payments were not put into a separate bank account intangible Property ● Hunter v Moss: declaration of trust for shares were not void - shares are intangible assets the reasoning L shares are essentially identical and indistinguishable hence there is unnecessary to segregate or appropriate shares

● Distinguished Re London Wine: principle in applies only to tangible property as wine (and other chattels) is not completely identical — i.e. part of the wine could be damaged, so identification of specific shares is necessary. ● Rejects idea that distinction should be between homogenous and non-homogenous mass: “Even tangible assets which are regarded as forming part of a homogeneous mass are physically separate, and so distinguishable, from other assets comprised within the same mass.” ● Re Harvard Securities [1998] Facts: Stockbroker went bankrupt — question was whether the purchasers of shares have beneficial interests. Practice was to buy blocks of shares and sell them in parcels, though not registering them in the names of clients. Neuberger J: Clients had a beneficial interest under the trust, despite the shares not being segregated. As long as the total and proportions were clear, that was enough. Distinction between London Wine and Hunter approved. Where intangible property is not segregated, the correct analysis is that the trustee and beneficiary hold all the property as equitable tenants in common in the relevant proportions e.g. 1/20 in Hunter v Moss; it is not the case that 50 specific shares are the trust property and the other 950 shares belong to the trustee absolutely. ● criticism: the decision was hurried, an inter vivos trust is not the same as a testamentary trust. With the latter, the testator does everything necessary to divest himself of all his legal and equitable title in favour of the executor ... no problem with non-segregation of trust property arises. With an inter vivos trust, the settlor does everything necessary to create a trust (divest himself of his beneficial interest in the property) but until he has segreagted the assets which are to be held on trust that subject matter of the trust is uncertain. ○ The settlor should have separated the 50 shares from the remainder of his residual 900 shares and notify the company registrar of this at the time. ○ What if the settlor later sells 50 (or more) shares, how can it be determined whether these are th 50 shares which were the purported subject matter of the 'trust' or a portion of the settlor's remaining 900 shares. This uncertainty MUST CAUSE THE TRUST TO FAIL, ● ‘

3.

Certainty of Objects Identity of the beneficiaries should be stated with sufficient clarity May be extended to the beneficiary principle Requires that every non valid non-charitable trust to have one or more beneficiaries Trusts for non-charitable purposes will be invalid c) Necessary formalities must be observed ● Inter vivos trust of personality can be created without deed, without writing, without formality of any kind by mere word of mouth’ ● Testamentary trust – must be in writing d) Must be supported or completely constituted by valuable consideration ● The common way to create a trust: the settlor to convey property to trustees to hold on trust ● Two elements o The declaration of trust o Transfer of property to the trustees ● Both elements must be present for a trust to be validly created and until the property is properly conveyed to trustees the trust remains incompletely constituted ● The trust in this state cannot be enforced by the beneficiaries, nor can the trustee compel the settlor to make the transfer unless consideration of a type is recognised by equity from the beneficiaries or trustees e) Must not infringe the rules relating to perpetuity, inalienability and accumulation f) Must not intend to defraud creditors or otherwise be contrary to public policy

● Re Astor principle that non-charitable trusts must be for beneficiaries and not abstract purposes.

a gift can be made to persons but it cannot be made to a purpose or to an object unless it is charitable

THE BENEFICIARY PRINCIPLE A. THE BENEFICIARY PRINCIPLE ● General rule- a trust generally needs human beneficiaries unless it’s a Charitable Trust or a trust for purposes. ● Nothing do with certainty of object which is conceptual ● Companies count as human beneficiaries ● Someone needs the locus standi to enforce the trust in court and hold trustees accountable

1. THE BENEFICIARY PRINCIPLE MORICE V BISHOP OF DURHAM (1804) 9 VES JUN 399 ● Facts: Bishop of Durham created a trust and the trust deed said the trust was for objects that the trustee should approve in their own absolute discretion ○ No conceptual certainty ○ Sir William Grant- there can’t be a trust over which the court can’t exercise control as an uncontrollable disposition is ownership not a trust. ■ Beneficiary controls trust as they are true owners. No beneficiaries=no one to bring trustee to court ● if a trustee is given discretion to decide the courts will not interfere. however, if called upon to enforce a trust, the court will rely on the maxim equality is equity and order that property to be distributed (Kemp v Kemp) ● all beneficiaries must be identifiable ● Principle: private trusts need human beneficiaries

● Doesn’t apply to Charitable Trusts○ Charities Act 2006: gives you a list of purposes that are charitable, public benefit test must be satisfied i.e. a trust won’t be charitable if it doesn’t serve for the public benefit. Attorney General or Charity Commission monitor and therefore can enforce such trusts. ○ Bowman v Secular Society ○ a trust must be valid for the benefit of individuals or must be in the class of gifts that benefits the public which the courts and the country recognises as charitable in the legal sense

2. ANOMALOUS CASES ● Trusts of imperfect obligation as the trustees aren’t obliged to carry out the trusts in the absence of anyone able to apply to the court to enforce the trust ○ Trusts are subject to the rules against inalienability and so must be restricted directly or indirect to the common law perpetuity period ○ Exception created by courts to the principle that they won't treat words creating a trust as if only creating a power ( IRC v Broadway Cottages) ● Significant exception to the no purpose trusts rule: ○ Charitable trusts ○ Testamentary trusts- trusts (Re Endacott):

RE ENDACOTT [1960] CH 252 ● Principle: anomalous cases are not to be extended, where testamentary trusts infringing the beneficiary principle have been held valid as concessions to human sentiment only apply in the following examples: ● endorse the general approach that the courts will not recognise a valid trust which it cannot both enforce and control and in particular to follow ‘anomalous and exceptional’ cases ● The list will not be extended further and trust for charitable purposes are likely to fail unless contained within these narrow boundaries

A.

MAINTENANCE OF PARTICULAR ANIMALS

PETTINGALL V PETTINGALL (1842) 11 LJ CH 176 RE DEAN (1889) 41 CH D 552 ● Hounds and horses ● Construction and maintenance of graves and funeral monuments MUSSET V BINGLE [1976] WN 170 RE HOOPER

UNINCORPORATED ASSOCIATIONS LEAHY V A-G FOR NSW [1959] AC 457 ● Leading case on applying beneficiary principle to unincorporated associations. ● Gift in question was of large estate called Elmslea- ‘upon trust for such order of nuns of the catholic church or Christian brothers as my executor and trustees shall select.’ ○ Wide power of selection allowed trustees to select nuns that weren’t charitable under law- saved by application of New South Wales statute which restricted the power of selection to charitable objects. But for the statute, the gift would have failed ○ It’s ok as long as the trust purpose/objects are charitable. ○ a gift must be made to persons but it cannot be made to a purpose or to an object

3. THE RULE IN RE DENLEY’S ‘Purpose Trusts’, the performance of which endures to the benefit of persons.

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The BP is the notion that non-charitable trusts can be divided into trusts for persons and trusts for purposes - what about a combination of both - Re Abbott Funds Trusts ● In Re Denley’s Goff J upheld a trust of a corporate settlor’s land ‘to be maintained and used as and for the purposes of a recreation or sports ground primarily for the benefit of employees of the company and secondarily for the benefit of such other person (if any) as the trustees may allow to use the same.” ○ Re Denley’s trusts not subject to the strict rule against alienability. ○ Such trusts typically involve a large fluctuating class of beneficiaries never intended to have, and never capable of having absolute ownership of the trust property, and only having a positive right to the performance of the trustees duties in the form prescribed by the settlor. ○ applied IRC v Broadways Cottage: the individuals for whose benefit it is designed must be ascertained or capable of ascertainment at any given time ○ it is a trust for individuals ○ What about if there is a small class??? ■ St Andrew’s Trust 1905- a trust fund set up for the education of 7 children of a deceased clergyman. Once their formal education was over Kekewich J held this to be an absolute gift with the reference to education merely expressing the motive of the gift ■ He applied the well established and difficult to rebut presumption of construction(Sanderson’s Trust): ‘If a gross sum be given, or if the whole income of property be given, and a special purpose be assigned for this gift this court regards the gift as absolute and the purpose merely as the motive of the gift, and therefore holds that the gift takes effect as to the whole sum or the whole income as the case may be.’ The case where the limits of the beneficiary principle were pushed but be hesitant to say that it’s an anomalous trust case RE DENLEY’S TRUST DEED [1969] 1 CH 379 ● Facts: A company set up a trust for the maintenance of sports ground, for the benefit of its employees and any others that the trustees may allow to use.

● If case decided nowadays it might be a charitable trust instead ○ The money was given for the maintenance of the sports ground. The question arises it looks like a purposes trust ○ First Problem: This isn’t Lord Robert Goff, but Reginald Goff J- held that this trust was valid (no wonder he didn’t become a lord). His reasoning was that the beneficiary principle exists to invalidate abstract or impersonal trusts ■ He said that here, there is a group of humans who have a locus standi to sue the trustees for any breach of the trust, this is valid and therefore the purpose of maintenance of the sports ground is secondary as the employees have locus standi. ■ Goff’s interpretation of the settlors words, is it accurate- NO from an objective point of view he’s got it wrong ○ Second problem; if we say that Goff was right, that the purpose was secondary, then essentially we are saying that the money could be used for something else, so long as the employees can come together and enforce their Saunders v Vautier right, he’s saying the money is for them. But that’s not what Goff has in mind; all he’s really saying is that they can sue. ■ But is this what the beneficiary principle is about? Is it only about locus standi to sue only? ● Maybe there’s an argument that says since there are so many beneficiaries, maybe in practice it means nothing to say they own the trust property because it is unlikely/ practically impossible for them to exercise their Saunders v Vautier rights. If they’re not the true owners what’s left?- locus standi ● NB: In this case there was a perpetuity period; it wasn’t set up to last forever.

JUSTICE GOFF: ● Quoted Viscount Simmonds in Leahy- a gift can be made to persons but it cannot be made to a purpose or an object: a trust may be created for the benefit of persons as cestuis que trusts but not for a purpose or object unless the purpose or object be charitable. For a purpose or object cannot sue, but if it be charitable, the AG can sue to enforce it. ● Where then the trust though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals it seems to me that its in general outside the mischief of the beneficiary principle.

● Argued that the trust in the present case was limited in point of time so as to avoid any infringement of the rule against perpetuities so doesn’t offend against beneficiary principle and unless it be void for uncertainty, it is a valid trust. ● In this case the court can execute the trust both negatively by restraining any improper disposition or use of the land, and positively by ordering trustees to allow the employees and such any other persons (if any) to use the land for the purpose of a recreation or sports ground.

4. SANDERSON TRUSTS AND TRUSTS LIMITED BY A PURPOSE RE SANDERSON’S TRUST (1857) 3 K&J 497 ● Principle: this is a principle of construction, a means by which a court construe the words of the settlor: ○ If a trust is set up for the benefit of beneficiaries plus a purpose then the court will construe that to be an absolute gift to the beneficiaries, if the court can interpret the purpose as merely being the motive of the gift, which renders the purpose optional. ○ if the whole income or a gross sum be given and a special purpose is assigned for that gift, the court regards the gift as absolute, the purpose is the motive of the gift RE OSOBA [1979] 2 ALL ER 393 ● Testator gave money to his widow to hold for the purpose of: 1- maintenance and training of their daughter up until she goes to university, 2- maintenance of aged mother, 3 and herself. ● And the court said, the trust was valid and all three women owned the trust property absolutely because the purpose which is maintenance, was merely the motive for the gift, it was merely a wish. ● applied Re Sanderson: the trust was for the benefit of the three women as joint tenants in effect for the daughter as the sole survivor ● Any other interpretation of the gift would frustrate the testator's expressed intention that the whole subject matter shall be applied for the benefit of the beneficiary. ● the court should ‘endeavour to ascertain his intention from the words he has used … in the light of such knowledge of relevant facts as we know he must have had’.

RE BOWES [1896] 1 CH 507 ● Tricky- not a lot of people agree with it ● A trust was created over £5000 for the purposes of planting trees for shelter on an estate.CoA said the estate owners own the money absolutely and so could do whatever they wanted with the money as planting trees was only a motive ○ Question here- are we just thwarting what the settlor intended? ● Because the Sanderson trust cases are set up in a situation where there are only a few beneficiaries and it's more personal , there is more weight to the view that the settlor could have well intended that they benefit rather than the trust be invalid completely. It’s more likely that that interpretation would count.

AN ENFORCER PRINCIPLE? DJ HAYTON ‘DEVELOPING THE OBLIGATION CHARACTERISTIC OF THE TRUST’ (2001) 117 LQR 96 P MATTHEWS ‘FROM OBLIGATION TO PROPERTY, AND BACK AGAIN’ IN DJ HAYTON (ED) EXTENDING THE BOUNDARIES OF TRUSTS AND SIMILAR RING FENCED FUNDS (2002) The Basic Rule ● A trust must be directly or indirectly for the benefit of persons- someone has to have the appropriate locus standi to enforce the trust in court and hold the trustees accountable ● There seem to be exemptions however to this basic rule ○ Charitable trusts ○ Enforcer principle

An Enforcer Principle?= fills a gap in the trusts ‘market’ by enacting legislation validating non-charitable purpose trusts so long as the trust instrument appoints an enforcer ( who could be the settlor or an independent or related 3rd party.)

● This principle mainly recognized in other jurisdictions however an English court won’t hold a foreign jurisdiction trust to be invalid simply because it uses the enforcer principle. ● Thus the trustee must have legal beneficial ownership of the trust property but subject to fiduciary and equitable duties owed to the enforcer. ● It doesn’t matter that the enforcer only has a power and not a duty to enforce the trustee’s obligations: a beneficiary is in exactly the same position.

DOES THE LAW ALLOW PRIVATE PURPOSE TRUSTS OR SHOULD IT? ● Hayton 2001: argues that the cases should be read to reveal an enforcer principle rather than a beneficiary principle in such cases. ○ An enforcer principle would allow a settlor to create a private purpose trust so long as the trust revealed a person or class of persons who could enforce the trust against the trustee e.g. employees who factually benefited from the trust in Re Denley’s, OR the settlor named a particular individual as one who should have standing to enforce the trust. ● Several difficulties with this view in so far as it can be genuinely treated as the creation of a true private purpose trust. ○ No one could insist the enforcer exercise his power to make the trustee apply the money to the purpose. The extent of the trustees duty is the extent to which that duty will be enforced against him by the enforcer- if the enforcer has no interest in seeing the purpose carried out he could easily cut a deal with the trustee to split the money between themselves in the same way that beneficiaries could consent t a distribution of trust funds that would otherwise be a breach of trust. ○ Th...