Equity and Trusts

Case List

The Three Certainties

Certainty of Intention

In Re Adams and the Kensington Vestry - In his will, George Smith

left his property “unto and to the absolute use of my wife Harriet, in
full confidence that she will do what is right as to the disposal
thereof between my children either in her lifetime or by will after her
decease.” The question was whether Harriet was absolutely entitled
to the property and thus able to sell it, or whether she held it on
trust for the children. It was held that the property was left as an
absolute gift as there was insufficient demonstration of intention to
create a trust.

Comiskey and Others v Bowring-Hanbury and Another - By his will,

Mr Hanbury left all his property to his wife Ellen “absolutely in full
confidence that she will make such use of it as I should have made
myself and that at her death she will devise it to such one or more
of my nieces as she may think fit and in default of any disposition by
her thereof by her will or testament I hereby direct that all my
estate and property acquired by her under this my will shall at her
death be equally divided among the surviving said nieces.” His
widow, Ellen, asked the court whether she took the property by way
of absolute gift, or whether her husband had intended her to hold it
on trust for his seven nieces. The Court of Appeal held, by a
majority, that no trust was created and that she took the
property by way of absolute gift. As the gift over to the nieces was
incompatible with an absolute gift to the widow, it was invalid. The
nieces appealed.
The House of Lords, by a majority, reversed this decision. Their
Lordships looked at the wording in the context of the will as a whole
to find that the testator intended a life interest for Ellen, and after
her death his nieces were entitled to the property equally, unless
Ellen selected differently.

Paul v Constance- Mrs Paul and Mr Constance lived together in the

late 1960s and early 1970s while Mr Constance was still married. He
received damages for a work-related injury which, as most people
did not know they were not married, he paid into a deposit account
in his sole name. Other money, including joint bingo winnings, was
paid in. Mrs Paul had authority to withdraw funds, and money was
used for joint purchases, then the remainder was shared. Mr
Constance said to Mrs Paul on several occasions, “the money is as
much mine as yours”. He died intestate and his widow was
administrator of his estate. Mrs Paul claimed the money in the
account, on the ground that it had been held on express trust by Mr
Constance for himself and Mrs Paul. The Court of Appeal upheld the
decision of the judge at first instance: Mr Constance’s words were
held to be a clear oral declaration of trust, for the benefit of himself
and Mrs Paul.

Re Kayford Ltd - A mail order company sold soft furnishings.

Customers paid in advance for goods ordered. The company had
financial problems and wanted to protect the customers’ money. It
was paid into a dormant deposit account in the company’s name,
which was changed to a Customers’ Trust Deposit account shortly
before the company went into liquidation. The liquidators wanted to
know whether the money in the account was part of the company’s
assets, or whether it was held on trust for the customers in
proportion to their contributions. This demonstrated intention to
create a trust and it was held that there was a trust.

Certainty of Object

Sprange v Barnard - Susannah Sprange made a valid will: “… for my

husband Thomas Sprange, to bewill to him the sum of £300, …for
his sole use; and, at his death, the remaining part of what is left,
that he does not want for his own wants and use, to be divided
between …[my brother and sisters].” Thomas Sprange applied for a
declaration that he was absolutely entitled to the £300. The court
held that the property subject to the purported trust was not
sufficiently certain to create a valid trust, and that therefore Thomas
took the money absolutely.

Palmer v Simmonds - Henrietta Roscoe made a will leaving the

residue of her estate 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, after providing for his widow during her life,
leave the bulk of my said residuary estate unto…[four named
people] equally.” The executors asked whether the property to be
subject to the trust was sufficiently certain. The Vice Chancellor
found that there was the requisite intention (an expression of
‘confidence’ being sufficient at the time) and certain objects.
However there was no certainty of subject-matter.

Re Golay’s Will Trusts - In his will, Golay directed his executors to let
his housekeeper enjoy one of his flats for her life and to receive a
‘reasonable income’ from his other properties. Although they had no
difficulty choosing which flat was subject to the trust, the executors
asked the court whether the direction as to ‘reasonable income’ was
void for uncertainty. The court found that the trust was valid,
because what was a reasonable income for a housekeeper can be
objectively identified and is therefore certain.

Boyce v Boyce - The testator left his several houses in trust for his
wife for her life. After the wife’s death, his daughter Maria was to
choose one of the houses to be conveyed to her. The will then
stated that “all the other of my freehold houses which my daughter
Maria shall not choose and elect” were to be conveyed to the
testator’s other daughter Charlotte. Maria died before her father, so
did not choose any house. The court held that there was no trust in
favour of Charlotte as the property to be subject to the trust was
uncertain. The houses therefore formed part of the testator’s
residuary estate.

Hunter v Moss - Moss held 490 ordinary shares in Moss Electrical

Company Limited. Moss said to Hunter, the financial director, that
he intended to give him 50 shares to put him on an equal footing
with the managing director, who had bought 50 shares with bonus
money. Moss had said he would hold 50 shares for Hunter and would
account for all dividends. The company was sold and the question
was whether the trust was void for uncertainty of subject matter.
The Court of Appeal upheld the trust. Lord Justice Dillon rejected the
analogy with Re London Wine Co (Shippers) Ltd where tangible
chattels were not segregated and therefore there was no certainty
of subject matter.

Re Harvard Securities Ltd - This case concerned a number of

unidentified and unsegregated shares of one particular class in one
particular company. Until 1988 Harvard Securities was a
stockbroking investment business. It purchased shares in a US
company and sold them to clients in parcels of shares. For costs and
time saving reasons it did not register these parcels in the names of
individual clients, but held the legal title under a nominee name.
Harvard wrote to clients referring to ‘your shares’ being ‘held to
your order’ by
the nominee. The liquidator of Harvard Securities wanted to know
whether the shares were held by the nominee for Harvard Securities
beneficially or for their clients beneficially. In his judgment
Neuberger J surveyed the authorities on certainty of subject matter,
beginning with Atkins LJ in the case of Re Wait . Wait bought 1,000
tons of wheat and by a sub-contract he sold 500 tons to sub-
purchasers. He went bankrupt without delivering the wheat to the
sub-purchasers, although they had paid for it. By a majority the
Court of Appeal held that there was no trust and that the sub
purchasers were merely ordinary creditors.

Certainty of Objects
Powers of Appointment

Re Gulbenkian’s Settlement Trusts - A 1929 Settlement contained a

power to appoint property “for the maintenance and personal
support or benefit of all or any one or more to the exclusion of the
other or others of the following persons, namely, the said Nubar
Sarkis Gulbenkian and any wife and his children or remoter issue for
the time being in existence whether minors or adults and any
person or persons in whose house or apartments or in whose
company or under whose care or control or by or with whom the
said Nubar Sarkis Gulbenkian
may from time to time be employed or residing.” The House of Lords
held, unanimously, that the power was valid as it could be said with
certainty that any given individual is or is not a member of the class.

Fixed Trusts

Inland Revenue Commissioner v Broadway Cottages Trust - The

settlor settled £80,000 upon trust and directed the trustees to apply
the income for the benefit of all or any of the objects set out in the
trust deed. Broadway Cottages Trust was a charity mentioned in the
deed, which received income and paid tax on it. The tax could only
be reclaimed if it could be shown that there was a valid trust. The
court held that there was not. This was a fixed trust, and to be valid,
the
objects had to be certain. The test for certainty of objects for a fixed
trust is whether it is possible to make a complete list of the
beneficiaries. In this particular case, it was not possible and the
trust failed.

Discretionary Trusts

McPhail v Doulton - In 1941, Mr Baden executed a deed setting up a

trust in favour of the staff of Matthew Hall & Co Limited and their
‘relatives and dependants’. Clause 9(a) of the deed said:‘9. (a) The
trustees 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 or ex-officers or ex-employees of the company or to
any relatives or dependants of any such persons in such amounts at
such times and on such conditions (if any) as they think fit” The
House of Lords, by a majority, held that Clause 9(a) constituted a
trust and not a power; and that the test for determining the validity
of a discretionary trust in terms of certainty of objects was that in re
Gulbenkian : the trust would be valid if it could be said with
certainty that any individual was or was not a member of the class.
The ‘complete list’ test in IRC v Broadway Cottages Trust [1955] Ch
20 was overruled.

Re Baden’s Trust - Following the House of Lords decision in McPhail v

Doulton, the case was sent back to the Chancery Division for the
‘is/is not’ test to be applied to find whether the discretionary trust
for ‘relatives and dependants’ was valid or void for uncertainty of
objects. Mr Justice Brightman in the Chancery Division found that
the test was satisfied for ‘relatives and dependants’.

Gifts Subject to a Condition Precedent

Re Allen - This case involved a gift subject to a condition precedent.

The testator, Allen, left certain property to the eldest of the sons of
his nephew Francis, ‘who shall be a member of the Church of
England and an adherent to the doctrine of that Church.’ There was
a gift over. The question for the Court of Appeal was whether the gift
was void for uncertainty of objects. The court held that gifts subject
to a condition precedent could be valid and were not automatically
void for uncertainty.

Re Barlow’s Will Trust - Helen Barlow had a large collection of

pictures, some of which she bequeathed to specific people in her
will. Her executors were directed to allow any of her family and
friends who wished to do so to buy one of the remaining pictures.
The executors asked the court whether this direction was void for
uncertainty. The court held that the case was not a gift to a
particular class, but a series of possible gifts to individuals who
answered the description of friend by any reasonable test.

Formalities

Creation of a Trust of Land

Re Vandervel’s Trusts (No.2) - The facts of this case are not directly
relevant to the application of s 53(1)(b). However, it is submitted
that the judgment by Lord Denning MR makes the clearest
distinction between declarations of trusts generally and declarations
of trusts of land. The entire panel of the Court of Appeal allowed the
appeal as this was a creation of a trust of shares, which fell outside
of the ambit of s 53(1)(b). Trusts of land can be created without
writing where they come within the ambit of s 53(2), which exempts
resulting or constructive trusts from the writing requirements of s
53(1)(b).

Hodgson v Marks - Mrs Hodgson was an elderly widow who had Mr

Evans as her lodger. Mrs Hodgson transferred legal title of her house
to Mr Evans to prevent her nephew from turning Mr Evans out of the
house. Mr Evans then sold the house to Mr Marks, who had acquired
a registered mortgage from a building society to finance the
purchase. Mrs Hodgson knew nothing of the sale or of the existence
of Mr Marks. When she found out what had happened Mrs Hodgson
sued Mr Marks and the building society, and asked the court to
reconvey the house to her free of the mortgage. It was held Mrs
Hodgson had a beneficial interest in the house under a resulting
trust, which fell within s 53(2) and therefore did not need to be
evidenced in writing.

Disposition of an Equitable Interest

Grey v IRC - In an attempt to avoid paying stamp duty on the

transfer of 18,000 shares from himself to his grandchildren, Mr
Hunter entered into a convoluted scheme of transfer. First, he
created six trusts in favour of his grandchildren, with Mr Grey as one
of the trustees. Each trust had as its subject matter a nominal sum
so that it could come into existence. Second, Mr Hunter got the
same trustees to hold the 18,000 shares with him as the beneficiary.
As a third step Mr Hunter then orally instructed the trustees to hold
the 18,000 shares in equal shares according to the terms of the
trusts for the grandchildren. Finally, five weeks after this oral
instruction, Mr Hunter and the trustees executed six deeds (one for
each trust) in which the oral instruction was evidenced as
having transferred the equitable interest from Mr Hunter to his
grandchildren. The issue before the House of Lords was whether this
type of transfer came within the meaning of “disposition” in the Law
of Property Act 1925 s 53(1)(c). It was held there was an effective
disposition of the equitable interest that was liable to be taxed.
Vandervell v IRC - Mr Vandervell was a successful engineer and had,
amongst other things, his own private company, Vandervell Products
Limited (“VPL”). He had nearly all the shares (100,000) in this
company, which were held on bare trust with him as beneficiary and
the National Provincial Bank as the trustee. Mr Vandervell wanted to
create a professorship of Pharmacology with the Royal College of
Surgeons (“RCS”). Meanwhile he also had a trustee company,
Vandervell Trustees Ltd. Following negotiations with the RCS, Mr
Vandervell orally instructed the National Provincial Bank to transfer
legal title of the shares to the RCS. The RCS were intended to be
absolute owners of the shares, so that when Mr Vandervell declared
dividends of the shares they could be retained by the RCS to fund
the professorship. When negotiating the funding of this
professorship with the RCS, it was agreed that Vandervell Trustees
Ltd would be granted a right to purchase the shares for £5,000 at
any time within five years of giving the shares to the RCS. After
three years Vandervell Trustees Ltd exercised the right to buy the
shares, but it was not stated who they were
trustees for. The first argument before the House of Lords was
whether this type of transfer counted as a “disposition” under s
53(1)(c). If the transfer made when Mr Vandervell instructed the
National Provincial Bank to transfer legal title of the shares to the
RCS came within s 53(1)(c) then it was a taxable disposition. If it did
not come within the ambit of s 53(1)(c) then there was no tax
liability on that specific transfer. If this transfer was not taxable,
then the second argument before the House of Lords was that Mr
Vandervell was liable to pay tax on the shares when Vandervell
Trustees Ltd took legal title of the shares, as there were no
appointed beneficiaries of the trust. It was held that the transfer of
the shares was not a transfer coming within the ambit of s 53(1)(c).
However, Mr Vandervell had not specified for whom Vandervell
Trustees Ltd was holding the shares on trust. Consequently, he had
an interest in those shares under a resulting trust and therefore he
was liable to be taxed on that interest.

Other situations where s 53(1)(c) of the Law of Property Act

1925 will not apply

Neville v Wilson - Before he died, Mr Neville had a private company,

J E Neville Ltd (“J.E.N”). During Mr Neville’s lifetime J.E.N acquired
the shares of another company, Universal Engineering Co.
(Ellesmere Port) Ltd (“U.E.C.”). After Mr Neville’s death J.E.N. was