This advice will analyse the validity of two clauses drafted by Bex for Allistair, which purport to create trusts over his winnings. For an express trust to be valid, it must satisfy the ‘three certainties’ as established in Knight v Knight (1840) 49 ER 58: certainty of intention, certainty of subject matter, and certainty of objects. Each of the proposed dispositions will be examined against these requirements to determine if they create enforceable trusts.
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Clause 1: £90,000 on trust for my friends Igor, jasmine and kit in equal shares
This clause seeks to create a fixed trust, where the beneficiaries and their respective shares are specified from the outset. Its validity depends on whether it satisfies each of the three certainties.
Certainty of Intention
To create a trust, the settlor must show a clear intention to impose a mandatory obligation on the trustee, rather than merely expressing a hope or wish. The use of precatory words like ‘hope’ or ‘desire’ may indicate a mere moral obligation, which would create a gift rather than a trust (Lambe v Eames (1871) LR 6 Ch App 597). Here, Allistair has used the phrase "on trust". This is imperative language that clearly indicates an intention to create a binding legal obligation. There is no ambiguity, and therefore, the certainty of intention is satisfied.
Certainty of Subject Matter
There are two aspects to certainty of subject matter: the trust property itself must be certain, and the beneficial interests of the objects must also be certain.
Firstly, the property subject to the trust is "£90,000". This is a specific and identifiable sum of money, leaving no doubt as to what property is to be held on trust. This can be contrasted with vague descriptions such as "the bulk of my estate", which was held to be uncertain in Palmer v Simmonds (1854) 61 ER 704.
Secondly, the beneficial interests are also clearly defined. The property is to be held for the beneficiaries "in equal shares". This provides for a straightforward division of the £90,000 fund into three equal parts of £30,000 each. As both the trust property and the shares are certain, this requirement is met.
Certainty of Objects
The objects of a trust are the beneficiaries. For a fixed trust, as this clause creates, the trustees must be able to say who all the beneficiaries are. This is known as the ‘complete list’ test, as established in IRC v Broadway Cottages Trust [1955] Ch 20. The trustees must be able to draw up a complete list of each and every beneficiary.
The beneficiaries are named as "Igor, jasmine and kit". This constitutes a finite and identified list of three individuals. The term "my friends" is merely descriptive of Allistair’s relationship with them and does not introduce uncertainty, as the beneficiaries have been specified by name. The trustees can, therefore, easily draw up a complete list. Consequently, the certainty of objects is satisfied.
As all three certainties are present, the trust of £90,000 for Igor, Jasmine, and Kit is a valid and enforceable fixed trust.
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Clause 2: £200,000 on trust to be distributed… to the most loyal fans of kira soleil
This second clause is more complex. It appears to create a discretionary trust, where the trustees are given discretion to select which beneficiaries from a class will benefit. Its validity will again be assessed against the three certainties, with the main difficulty arising in relation to the certainty of objects.
Certainty of Intention and Subject Matter
As with the first clause, the use of the words "on trust" clearly demonstrates certainty of intention. The subject matter, "£200,000", is also a certain sum. These two certainties are therefore satisfied.
Certainty of Objects
The key issue is whether the class of objects, "the most loyal fans of kira soleil", is sufficiently certain. Before addressing this, it is necessary to dismiss the possibility that this is a purpose trust. The clause states the distribution is "for the purpose of promoting her worldwide". Generally, trusts for non-charitable purposes are void for lack of a beneficiary to enforce them (the beneficiary principle; Morice v Bishop of Durham (1804) 32 ER 656). However, the wording here directs the trustees to distribute the money to the fans. In such cases, the purpose is often interpreted as the settlor's motive for creating the trust, rather than the trust's objective itself (Re Sanderson's Trust (1857) 69 ER 1006). Therefore, this is a trust for persons, not a purpose trust.
As this is a discretionary trust, the test for certainty of objects is the ‘is or is not’ test, laid down by the House of Lords in McPhail v Doulton [1971] AC 424. This requires that it can be said with certainty of any given person whether they are or are not a member of the class of beneficiaries. This test requires conceptual certainty, but not necessarily evidential certainty.
The problem here lies with the conceptual certainty of the phrase "the most loyal fans". The Court of Appeal’s decision in Re Baden's Deed Trusts (No 2) [1973] Ch 9 provides guidance on this issue. The judges agreed that a trust for ‘relatives’ was conceptually certain, but they offered different approaches. Sachs LJ argued that as long as the class was conceptually certain, the trust would not fail simply because it was difficult to prove evidentially whether someone was in the class. By contrast, Stamp LJ took a stricter line, stating that the test required that one could say for certain of any individual that they were either in or out of the class.
Applying these approaches, the term "fans" might be conceptually certain, but the qualification "most loyal" introduces a fatal level of uncertainty. Loyalty is an abstract concept and a matter of subjective judgment. There are no objective criteria by which to measure who is a 'loyal' fan, let alone who is 'most loyal'. This introduces a comparative exercise that is impossible to perform with any certainty. It is a concept that is too vague for a court to be able to control or enforce the trust. On any of the judicial approaches in Re Baden (No 2), this description is likely to be held as conceptually uncertain.
The clause attempts to resolve this uncertainty by providing that "If there is any doubt… the matter is to be referred to my good friend leandro". The question is whether the opinion of a third party can cure conceptual uncertainty. In Re Tuck’s Settlement Trusts [1978] Ch 49, Lord Denning MR suggested (obiter) that a clause referring questions of Jewish faith and blood to a Chief Rabbi could resolve any uncertainty. However, the more orthodox view, expressed by Eveleigh LJ in the same case, is that a third party can only resolve evidential uncertainty (i.e., whether a person fits within a clear definition), but cannot cure conceptual uncertainty (i.e., define an unclear concept). If the underlying concept is unclear, the court cannot control the trust, and giving this power to a third party would be to oust the jurisdiction of the court (Re Wright's Will Trusts [1954] Ch 347). As "most loyal fans" is conceptually uncertain, it is highly unlikely that Leandro's opinion could save the trust.
Furthermore, even if the class were found to be conceptually certain, the trust could still fail for being administratively unworkable. Lord Wilberforce noted in McPhail v Doulton that a trust might be void if the class of beneficiaries is "so hopelessly wide as not to form anything like a class". A trust for all fans of a popular singer "worldwide" could encompass millions of people, making it impossible for the trustees to meaningfully survey the class and carry out their duties. In R v District Auditor, ex p West Yorkshire MCC [1986] RVR 24, a trust for the 2.5 million inhabitants of West Yorkshire was held void on this ground. A trust for Kira Soleil's worldwide fans is likely to suffer the same fate.
For these reasons, the second trust is almost certain to fail for uncertainty of objects.
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Conclusion
In summary, Allistair’s dispositions have mixed success.
- The trust of £90,000 for Igor, Jasmine, and Kit is valid. It is a fixed trust that satisfies the certainties of intention, subject matter, and objects. The trustees are obliged to distribute £30,000 to each of the three named beneficiaries.
- The trust of £200,000 for the most loyal fans of Kira Soleil is invalid. While intention and subject matter are certain, the class of objects is conceptually uncertain and likely to be administratively unworkable. The attempt to use a third party, Leandro, to resolve this uncertainty is unlikely to succeed.
Where an express trust fails, the property is held on a resulting trust for the settlor. Therefore, the £200,000 will be held on a resulting trust for Allistair (or his estate, should he have passed away).
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References
Cases
- IRC v Broadway Cottages Trust [1955] Ch 20
- Knight v Knight (1840) 49 ER 58
- Lambe v Eames (1871) LR 6 Ch App 597
- McPhail v Doulton [1971] AC 424
- Morice v Bishop of Durham (1804) 32 ER 656
- Palmer v Simmonds (1854) 61 ER 704
- R v District Auditor, ex p West Yorkshire MCC [1986] RVR 24
- Re Baden's Deed Trusts (No 2) [1973] Ch 9
- Re Sanderson's Trust (1857) 69 ER 1006
- Re Tuck’s Settlement Trusts [1978] Ch 49
- Re Wright's Will Trusts [1954] Ch 347
Books
- Hanbury, H.G. and Martin, J. (2021) Hanbury & Martin: Modern Equity. 22nd edn. Sweet & Maxwell.
