Three certainties

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LAW OF TRUST (DR.ZURAIDAH
ALI) 1
CREATION OF TRUST :
THREE CERTAINTIES

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ALI) 2
LEARNING OUTCOME
Students will be able to
 appreciate and analyse methods of
creating a valid trust.
 understand the concept of three
certainties and how it is different from
one another.
 apply any of the tests to determine the
class of beneficiaries.
 differentiate between fixed trust and
discretionary trust

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ALI) 3
Private Express Trust:
Meaning
An express declaration by the person
who want to create trust
during is lifetime
Trust
Will Other form
Deed -writing
-verbal

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Charitable Trust
Private Family Trust
Bare Trust
Fixed Interest Trust
Discretionary Trust
Protective Trust
Secret @ Floating Trust Trading Trust
Unit & Investment Trust
Assets in Unincorporated Associations
TYPES OF EXPRESS TRUST

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THREE
CERTAINTIES
INTENTION
SUBJECT
MATTER OBJECT
IMPERATIVE
PRECATORY
TRUST
PROPERTY
BENEFICIAL
INTEREST
FIXED TRUST
DISCRETIONAR
Y
TRUST
Conceptual
Uncertainties
Evidential
Difficulaties

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ALI) 6

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 3 points that must be certain before
an express private trust must be
created
 1) Certainty of intention
 2) Certainty of subject matter
 3) Certainty of objects

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KNIGHT V KNIGHT (1840) 3 Beav 148
 “As a general rule, it has been laid down that
when property is given absolutely to
command, recommended or entreated or
wished, to dispose of that property in favour
of another, the recommendation entreaty, or
wish shall be held to created a trust. First, if
the words are so used, that upon the
whole they ought to be construed as
imperative.

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 Secondly, if the subject of the
recommendation or wish be
certain and thirdly, if the objects
or persons intended to have the
benefit of the recommendations or
wish be also certain.

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Certainty of Intention
 Certainty of intention on part of
 the settlor/testator to create trust

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 No particular words are essential
 Imperative words
 Equity looks to the substance
rather than form
 Trust may be created without using
the word ‘trust’.
 It all depends on the construction of
the language used.

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IMPERATIVES
 Clear technical language = one party’s
interest is safeguarded as much as
possible.
 Words must be imperative in nature in
order to construe the essentials to create
trust.
 Eg: 1) : I direct my trustee…/ I instruct
my trustee./ in full confidence that/ fully
trusting that/ in firm expectation that/ it
is my heartfelt desire that….

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Precatory words
 An expression of hope or desire is not
sufficient.
 Examples: “It is my sincere wish’, ‘ it
is my hope…’
 There is a need to see and examine
the construction of trust as a whole.
 To show intention on part of
settlor/testator.

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ALI) 14
RE HAMILTON (1895) 2 Ch 270 (Lindley
L.J)
 “You must take the will which you
have to construe and see what it
means and if you come to the
conclusion that no trust was
intended you say so, although
previous judge have said to the
contrary on some wills more or less
similar to the one you have
construe.”

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ALI) 15
Lambes v Eames (1871) LR 6 Ch. 597
 Ttor gave his estate to his widow
‘to be at her disposal in any way
she may think best, for the benefit
of herself and her family.”
 By will she gave part of the estate
to outsider
 Ct: She had been absolutely entitled
to the property and the gift was
valid.

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Re Adams and The Kensington Vestry
(1884) 27 CH.D 395
 Ttor gave his real and personal estate
to his wife ‘absolutely in full
confidence that she will do what is
right as to the disposal thereof
between my children, either in her life
time or by will after her death.”
 Ct: No trust. The world absolutely
indicated that the property was left to
the wife alone.

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Comiskey v Bowring Hanbury (1905) AC 84
 Ttor left his property to his wife; ‘in
full confidence that she will make
such use of it as I would myself and
at my death she will devise it to
such one or more of the nieces as
she may think fit.”
 Held : There was a gift to the wife
and with trust in favour of the
nieces after her death,

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 Peculiar situation : If the intention
to create a trust is clear it will be
upheld although the word trust is
not expressly used.

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PAUL V CONSTANCE (1977) 1 WLR 527
 Mrs Paul lived with Mr Constance as
his wife, He opened an account and
told Mrs Paul ; ‘ The money is as
much as yours as mine. It was
repeated in a nbr of situations.
 Held : Effective declaration of trust
in favour of the plaintiff (Mrs Paul)

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 RE KAYFORD (1975) 1 WLR 279
 De Fonseka v De Fonseka & Ors
[1971] 2 MLJ 155
 Ct : Ct would give effect to the
intention of the author of the
trust as expressed in the trust
instrument.

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ALI) 21
HAMEEDA BEE V MRS P SEENIVASAGAM [1950]
1 MLJ267
- Held : Clear and unequivocal
language must be used to establish
a trust

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KISHABAI V JAIKISHAN[1981] 2 MLJ 289
 - no particular form of expression
is necessary for the creation of a
trust,
 if on the whole it can be gathered
that a trust was intended;

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CERTAINTY OF SUBJECT
MATTER
 Certainty of subject matter falls
under two heads;
 A) trust property –
 B) beneficial interest –

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EXAMPLES OF SUBJECT MATTER
A bungalow at Kota Damansara
 a bungalow in 5 acres of land: Mohan’s holiday get
away staying.
 a shop lot at Damansara Height
 an apartment at Ampang Villa
 20 acres of agricultural land at Ulu Yam
 cash $1000 million at RHB Bank Jalan Ipoh
 Shares in Angkok Ware Composites (M) Sdn. Bhd.
worth $ 50million
 Jewelleries worth $ 100 million.
 Trust property
& Beneficial Interest

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PALMER V SIMMONDS (1854) 2 DREW
221
 A ttrix by her will gave her residuary
to Thomas Harrison “for his own use
and benefit as I have full confidence in
him, that if he should die without
lawful issue he will leave the bulk of
my said residuary estate unto B,C, D
and E.(certain named persons)”
 Whether the subject matter of trust
was sufficiently certain

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Kindersley V.C : No trust as there was uncertainty of
subject matter of trust
 “What is the meaning of the bulk.
The appropriate meaning according
to its derivation is something which
bulges out. It is a popular meaning.
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….”

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RE GOLAY’S WILL TRUST (1965) 1 WLR
969
 The testator directed his executor ‘
to let Tossy to enjoy one of my flats
during her lifetime and to a
reasonable income form my other
property.”
 Whether the gift of income was void
for uncertainty?
 Held : VALID

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 Ct: Reasonable income; there will
be the yardstick in which the Court
could and would apply in
quantifying amount.

 Abrahams v Trustee in bankruptcy
of Abrahams [1999] BPIR 637
 Swift v Dairywise Fans Ltd [2000] 1
All ER 320
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Labuan Offshore Trust Act 1997
 Section 7(1) A trust is an offshore
where-
 (b) the trust property does not
include any immovable property in
Malaysia unless allowed by relevant
authorities

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Effect of lack of certainty of subject
matter
 If a settlor failed to specify the trust
property at all – there will be no trust.
 If the settlor failed to specify the
beneficial shares @ there will be
resulting trust for the settlor’s estate.
 A (settlor) ----B (trustee) -------C(bene)
resulting trust

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Certainty of Object
 Object of the trust : Human
 Wife / girlfriend/ mistress
 Children : Mother &Father,
brother /sister
 Best Friends
 Nephew & nieces

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Certainty of Object
 The Rules :
 Trust must be for human beneficiaries.
 Ascertainable beneficiaries is a must for a
trust other than a charitable trust.
 Lack of certainty of objects : Trust will be
void.
 the beneficiaries must be identifiable :
they can be given their appropriate
shares of their for his beneficial interest.

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Labuan Offshore Trust Act 1997
 Section 7(1): A trust is an offshore trust
where-
 (c)all beneficiaries are qualified persons
 Section 8(1) :An offshore trust is created
by a will or other instrument in writing
including a unilateral declaration of trust….
 (2) A unilateral declaration of trust is a
declaration in writing by a trust company
stating-
 (d) the names or information enabling the
identification of all beneficiaries.

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Re Endacott [1960] Ch 232;
 Evershed MR :
 “No principle has greater sanction
or authority behind it than the
general proposition that a trust by
English Law, not being charitable
trust, must be ascertained or
ascertainable beneficiaries.”

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The test
 Depends upon the nature of trust.
 Need to differentiate between:
 A fixed trust and discretionary
trust.
 Trustees are given discretion: to
carry out of the trust.

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A Fixed trust
 A trust where the trust instrument
specifies the share which each
beneficiary is to take
 The beneficial interest of potential
beneficiaries are fixed.
 Trustee(s) must identify each and
every object.

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 Beneficiaries is equitable owner of his
interest.
 The test : the list principle.
 Need to know each and every
beneficiaries.
 Eg: ‘a trust of RM 1,000 to the
members of my family in equal share :
a fixed trust requiring the trustees to
determine all beneficiaries

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What is Discretionary Trust
 It is an express Private Trust.
 A flexible type of trust- an attractive vehicle
for family money.
 Trustee has some form of power or
discretion.
 May involved a wide variety of discretion.
And deals with all situations: eg : power of
appointments, the power to choose
 Trustee has a choice and discretions to
exercise to determine the class of object

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 To -lack prudence in dealing with
money
 The trustees can pay out income or
capital to any one or more of the
beneficiaries entirely at their own
discretion.

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Role of the Discretionary Trust
a) Protect trust property
 A useful device for a settlor who wishes to
protect family property against
spendthrift.
 Prevent and to safeguard the trust fund
from dissipation by the beneficiaries- who
are financially inexperienced
b) Adaptability to changing
circumstances- family, fiscal & economic
 - It lies in its flexibility.

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 Allows/enables trustees to provide such
sums as the future circumstances of the
beneficiaries require
 3) The trustees own the trust's property
on behalf of the beneficiaries.
- The trustees are given discretion as to
who shall receive income and / or capital
from the trust, and in some cases, what
amounts, if any, they shall.
- The beneficiaries need not all even be
born at the time the trust is created

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4) Beneficiary-is not the equitable
owner of the interest
- The beneficial interest is in suspense
until the trustees exercise the
discretion Trustees decide both who
shall benefit and what the benefit
shall be
 Beneficiary cannot claim any right
over the interest unlike

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Trustee & the test
 Need to determine the object with
certainty.
 Failure – Breach of trust
 Two tests:
a) Criterion certainty test
b) in and out test
 Trustee need to determine whether
a person is or is not within the
description of relevant class

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ALI) 45
Mc Phail v. Doulton (1970) 2 All ER
228.- HOL
 Settlor executed a deed for a fund
to be held upon trust : in favour of
the staff of Matthew Hall Co Ltd
and their relatives and dependants.
 Whether this is a trust or power?
 Void for uncertainty?
 If not what is the test

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 - Under clause 9(a) it is stated :
The trustee shall apply the net
income of the fund in making at
their absolute discretion grants to
or for the benefit of any of the
officers and employees of the
company or to any relatives or
dependants of any persons in such
amounts at such times and or such
conditions as they think fit.

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Judgment
 Ct of 1st
instance: It was power and not a trust.
 COA : It was power and not a trust.
 HOL : The deed created the trust and not
power.
 Trustee should not approach their duty in a
narrow way. Instead they ought to make a
survey of the range of objects or possible
beneficiaries as will enable them to carry out
their fiduciary duty.

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ALI) 48
Re Baden Deed Trust (No 2)
[1973.] Ch 9.
COA had to apply the test by the HOL in
deciding and consider in particular
whether the words ‘dependents’ and
‘relatives’ were too uncertain.
The test : Can it be said with certainty that
any given individual is or is not a member
of the class. (HOL test – applied by the
Chancery & COA later)

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 Sachs LJ stated that in applying the
test it is essential to bear in mind
the difference between conceptual
uncertainty and evidential
difficulties

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Three kinds of uncertainty
1) Semantic, conceptual or linguistic
uncertainty
2) Evidential uncertainty
3) Administrative uncertainty

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Conceptual Uncertainty
 It is also known as administrative
uncertain/ semantic, linguistic uncertain
 Problem in the vagueness of language used
by the testator to express his intention.
 It will be administratively unworkable. Eg:
‘someone under a moral obligation
 My shorter employee.
 For my old friends and business associate
 For my fans
 For my friends who are good citizens.

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 Effect : Express trust fails.
 It will be held on resulting trust

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Halsbury’s Law of Malaysia.
 “If a trust accords trustees discretion to
elect among a class of beneficiaries, it no
longer fails if a list of every member of
the class cannot be drawn up, it suffices if
it is possible to predicate of any proposed
beneficiary that he is or is not a member
of that class. If there remain a number of
persons who cannot be proved to be
inside or outside the class, for example
old friends of the testator, then the trust
fails

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Cases
 Re Barlow’s Will Trust

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Evidential Difficulties/
Uncertainty
 Language used is precise.
 Trustee will have to find evidence
to carry out the settlor’s
instruction.
 It does not invalidate a
discretionary trust.
 The court is never defeated by
evidential uncertainty

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Judgment
 a)       Stamps LJ : ‘Relatives” meant next
of kin or nearest blood relation.
 b)       Megaw LJ : ‘Relatives’ meant
dependants from a common ancestor
although giving rise to evidential
uncertainty.
 c)      Sachs LJ : opts for wider meaning of
the former and thought that the trustee
ought not to pay an individual who failed
to prove that he was a relative.

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ALI) 57
Administrative uncertainty
 Lord Wilberforce in Mc Phail v Doulton;
 “There may be a third case where the
meaning of the words used is clear but
the definition is so hopelessly wide as not
to form “anything like a class” so that the
trust is administratively unworkable or ..
one that cannot be executed. I hesitate to
give examples for they may prejudice
future cases but perhaps “all residents of
Greater London will serve. I do not think
that a discretionary trust for “relatives”
even of a living person falls within this
category.”

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ESTATE & TRUST AGENCIES (1927) LTD V TUNGKU MERIAM
BINTE ALMARHOUM SULTAN AHMAD OF PEKAN & ANOR[1948 -
1949] SUPP MLJ 82
 The last question was whether the word "issue" of
Tungku Omar and Tungku Meriam comprise all
the descendants of Tungku Omar and Tungku
Meriam or whether it is limited to their children.
Held: in this case the word "issue" was intended
to include only the children of Tungku Omar and
Tungku Meriam.

Three certainties

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