2CopyRequirements For The Creation of An Express Private Trust - Law Equity, Trusts Probate I

INTRODUCTION TO THE
LAW OF TRUST
Introduction
Definitions of Trust
Terms Associated with Trusts
Legal and Equitable Ownership
Nature of Beneficiarys Interests
Trusts Distinguished from other
Relationships/Concepts
Conclusion
1
INTRODUCTION TO THE
LAW OF TRUST
Introduction:
Many attempts to define the term trust, but none have been wholly
successful.
A trust is, therefore, easier to describe than to define.
A trust involves the fragmentation (break into small pieces) of legal title
(legal ownership) and equitable title (beneficial ownership).
The legal title is vested in trustee and the trustee holds the trust
property on behalf of the beneficiary as equitable title.
The trust is dependent upon identifiable property (whether tangible or
intangible) being transferred from its legal owner to one or more trustees
to hold and manage property for the benefit of ascertainable
beneficiaries.
The trust may be created inter vivos (i.e. during the lifetime of the
settlor) or may be post-mortem/testamentary (i.e. on the death of the
settlor).
2
INTRODUCTION TO THE
LAW OF TRUST
Introduction: (Continuation)
The trustee owes a fiduciary duty (i.e. a duty of utmost good faith) to
both the settlor and the beneficiary.
The entitlement of the beneficiaries will normally be set out in the
document creating the trust (the trust instrument), and if it is not
stated, the rights of the beneficiaries can be implied by equity.
Trusts can be of any sort of property: land, money, chattels, cheques and
debts, etc.
3
INTRODUCTION TO THE
LAW OF TRUST
Definitions of Trust:
(1) Halsburys Laws of Malaysia
Meaning of trust. Where a person has property or rights which he holds or is
bound to exercise for or on behalf of another or others, or for the accomplishment of
some particular or particular purposes, he is said to hold property or rights in trust
for the other or those others, or for that purpose or those purposes, and he is called a
trustee. A trust is a purely equitable obligation and is enforceable in the High Court.
(2) Maitland
I should define a trust in some way as the following- When a person has rights
which he is bound to exercise upon behalf of another or for the accomplishment of
some particular purpose he is said to have those rights in trust for that other and for
that purpose and he is called a trustee.
4
INTRODUCTION TO THE
LAW OF TRUST
Terms used in Trusts:
Trust Instrument: This is the document which creates a trust, vesting the trust
property in the trustees.
Settlor: The person who actually creates a trust by donating property to be
managed and administered by a trustee whereby all profits would go to a
beneficiary.
Trustee: The person in whom the trust property is vested. He is concerned with
the administration and management of the trust for the benefit of the
beneficiaries.
Beneficiary or cestui que trust: The person who benefits from the trust property.
Trust Property: The subject matter of the trust which may include real property
(land) tangible property (cars, computers) and intangible property (company
shares, loans, intellectual property rights).
Note: A settlor can also be one of the trustees or one of the beneficiaries and a
trustee can also be one of the beneficiaries.
5
INTRODUCTION TO THE
LAW OF TRUST
Legal and Equitable Ownership:
The trustees who control and manage the trust property are treated as
legal owners whereas the beneficial or equitable ownership vests in
the beneficiaries.
Legal title represents to the world that the legal owner has a right to
retain and control the property, for example, the registered owners of
share certificates or persons named in the register of title relating to a
parcel of land.
While, equitable or beneficial title which is enforceable in equity is
the right to enjoy the trust property.
Cowan v Scargill [1985] Ch. 270: As long as the trustees are
managing the trust property as prudent and reasonable managers, the
beneficiaries, as equitable owners have no right to interfere with such
management.
6
INTRODUCTION TO THE
LAW OF TRUST
Nature of Beneficiarys Interests:
There is a controversy as to the nature of the equitable interest arising as

the result of the creation of a trust.
Does it involve a right in rem (available against the world at large, i.e.
persons generally) or a right in personam (that is, against a specific
person)?
There are three views ie traditional view, realist view & hybrid view. (to
be prepared in the students assignment).
7
INTRODUCTION TO THE
LAW OF TRUST
Trusts Distinguished from other Relationships/Concepts:
(a) Trust and Contract
A contract is a common law, personal obligation resulting from a
negotiation agreement between the parties. In other words, contract
developed under common law.
A trust arises from equity and confers property rights (rights in rem) on
the beneficiary that can be enforced against both the property itself and
third parties. Hence, trust is a creature of equity.
A contract is valid only if supported by consideration or made by deed.
In other words, valuable consideration is generally necessary to a
contract.
On the other hand, a beneficiary under a properly constituted trust,
however, can enforce trust even though he has not given any
consideration.
Thus, in a case of completely constituted trust the consideration need not
to be given.
8
In english law, a contract cannot usually be enforced by third parties
(privity of contract is necessary). This rule is, however, subject to
certain statutory exceptions as, for example, contained in the Contracts
(Right of Third Parties) Act 1999 and sec 56 of the English LPA 1925.
In contrast, a beneficiary can always enforce a trust even if he is not a
party to the agreement that created the trust. In other words,
beneficiaries who are strangers to the creation of the trust can
nevertheless sue to enforce it.
9
INTRODUCTION TO THE
LAW OF TRUST
Trusts Distinguished from other Relationships/Concepts: (Continuation)
(b) Trust and Bailment
Bailment is a common law relationship which arises when goods owned by A
are, with As permission, in the possession of B. This may be a contractual
relationship (e.g. if you leave your car in a secure airport car park while on
holiday or (e.g. when you store furniture in a relatives attic).
This is very different from a trust because there is no transfer of ownership
involved and the duties expected of the bailee are much less than those expected
from a trustee.
In other words, in bailment goods are delivered to a bailee to be held for a
particular purpose upon an express/implied condition that it will be redelivered
to the bailor when the purpose of the bailment has been carried out. Thus, the
legal and equitable ownership of property is vested in the bailor. On the other
hand, in a trust, the legal ownership of property is vested in the trustee and
equitable ownership is vested in the beneficiary.
10
INTRODUCTION TO THE
LAW OF TRUST
(c) Trust and Agency
An agency relationship comes into being when one person, called the
principal, authorises another, called the agent, to act on his behalf, and the
other agrees to do so. Generally, the relationship between the principal and
agent arises as a result of the agreement entered into between the parties. In
contrast, this is not so in the case of trustee and beneficiary (cestui que
trust).
An agent does not have title to the subject matter of the agency while a
trustee has the legal title of the trust property vested in him. In other words,
in contrast to a trusteeship, the title need not be with the agent. Hence, the
concept of trust necessarily involves the concept of trust property over
which the trustee has control, but an agent need not have any control over
property belonging to his principal.
11
INTRODUCTION TO THE
LAW OF TRUST
(d) Trust and Power of Appointment
A power of appointment is a power (usually conferred under a trust or
settlement) given to a person which enables him to dispose of real or
personal property which is not his.
Powers fall into three main categories:
(i) a general power: e.g. to X for life, remainder as he may appoint, this
enables X (the appointer/or donee) of the power to appoint in favour of any
person including himself.
In other words, the donee of the power is not subject to any restrictions as to
who he shall exercise the power in favour of. For example, a will or trust
may contain a devise to A for life with remainder (baki) to whomsoever he
shall appoint.
12
(ii) a special power (e.g. as he may appoint among the children of
Z) allows him to appoint only with reference of a particular class as the
objects of the power.
In other words, the donee of the power is restricted to exercising it
among a class or description of persons designated by the terms of the
power.
For example, 10,000 to such of As children as he shall appoint.
(iii) a hybrid power- these are powers under which the donee may
appoint to anyone except a certain class or certain description of persons
(e.g. 50,000 to X to whomsoever he shall appoint except my brothers
and sisters and their descendants.
13
INTRODUCTION TO THE
LAW OF TRUST
(d) Trust and Power of Appointment
A power is discretionary and permissive i.e. the donee may or may not
exercise the power and until the donee exercises power of appointment
in favour of the relevant objects, all they can hope for is that the
appointment will be in their favour.
14
In contrast, a trust is imperative and mandatory i.e. he or she must act
and beneficiaries own the beneficial ownership in the relevant property.
Eg of a power of appointment is where a trust is set up and the trustee is
given the power to donate up to 500 to charity.
If this power was not given, any donation would be unauthorised and in
breach of trust.
This power, therefore, allows the trustee lawfully to take some of the
trust fund away from the beneficiaries.
It is, however, purely up to the trustee to decide whether or not to give
any money to charity. The trustee must, however, address his mind to
whether or not to exercise the power.
15
THE THREE CERTAINTIES
Introduction
Rationale for the Requirement
What are the Three Certainties?
Certainty of Intention/Words
Certainty of Subject Matter
Certainty of Objects
Conclusion
16
Introduction:
In order to enforce the trust, it is necessary to make clear the trust was
intended, what property is subject to the trust and who the beneficiaries
are.
the law has developed a test known as the three certainties comprise
of certainty of intention, certainty of subject-matter and certainty of
objects. The court will not recognise a transaction unless the three
certainties are satisfied.
Knight v Knight (1830).the court will not acknowledge that an
express private trust has been created unless the three certainties are
shown. Except as to charitable trusts which do not need certainty of
objects, the three certainties need to be present so that a trust can be
workable and capable of supervision by the court.
17
Rationale for the Requirement:

1. To protect the trustees i.e. Trustees being put in a proper position
to deal with the trust property/fund. For example, knowing what
obligations is attached to the office of trusteeship.
2. To help the court in the process of adjudication. For example, the
court to have sufficient guidance as to the settlors intention.
Every settlor must intend to create a trust. His intention must be
clear. What is required is clarity and precision.
In Quah Eng Hock v Ang Hooi Kiam [2000] 5 CLJ 126
the court referred to the need for the words used to be clear and
unequivocal and;
held that words indicating the donor intended to divest himself or
herself of the beneficial interest would be sufficient for the
purpose.
18
What are the three certainties?

(a) Certainty of intention/words to create trust: Here the
settlor must be shown to have intended a trust before the
court will hold that the trust has been created.
(b) Certainty of subject matter: Here there are two aspects to
this requirement i.e. certainty as to what property is to be
held upon trust and certainty as to the extent of the
beneficial interest of each beneficiary.
(c) Certainty of objects: Here it is essential that the
beneficiaries under a trust should be clearly defined or
that a formula is put into the trust which enables the
trustee to ascertain them.
19
Certainty of Intention/Words:
Certainty of intention/words means:
The settlor has shown an intention to create a trust.
every settlor must intend to create a trust.
His or her intention must be clear.
What is needed is intention which creates legal obligation as opposed
to moral obligation.
Hence, the imposition of a moral (i.e. non-legal) obligation, sometimes
called an obligation binding in conscience alone will not count.
As Megarry J explained in re Snowden, the real question is, what did
[the author] intend to be the sanction? Was it to be the authority of a
Court of Justice, or the conscience of the devisee?
20
No magic formula necessary to show the intention to create a
trust.
Equity looks to the intent rather than to the form.
The court will look:
A) at words used in a trust deed or a will to see if they can be
construed as a trust .
B) or through words or conduct which create an imperative
(empowered to command or control) obligation.
21
Certainty of Intention/Words: (Continuation)

The word trust is not essential although desirable.
The settlor does not have to use the word trust itself as long as the
words used show that intention.
Re Kayford (1975) , Megarry J held: it is well settled that a trust can
be created without using the word trust or confidence or the like.
The question is whether in substance, a sufficient intention to create a
trust has been manifest.
In Re Kayford, the court had to consider the act of a Co reactivating a
dormant co a/c with a balance of 47.80 instead of opening a new one
and referred to the a/c as Customers Trust Deposit A/C.
22
References: [1975] 1 WLR 279, [1975] 1 All ER 604: Coram: Megarry J
The court considered what was meant by the certainty of words
requirement necessary to create a trust. Megarry J said:
The sender may create a trust by using appropriate words when he sends
the money (though I wonder how many do this, even if they are equity
lawyers), or the company may do it by taking suitable steps on or before
receiving the money. If either is done, the obligations in respect of the
money are transformed from contract to property, from debt to trust.
Payment into a separate bank account is a useful (though by no means
conclusive) indication of an intention to create a trust, but of course there
is nothing to prevent the company from binding itself by a trust even if
there are no effective banking arrangements.
23
Kishbai v Jaikishan [1982] 2 MLJ 289
Where the testator had agreed that neither he nor his agents nor his
heirs would claim any of the money or monies that will be paid on the
insurance policies... that have been assigned (to the defendant) of
which he is the sole beneficiary.
Subsequently, the testator had reassigned the benefits of the policies to
himself and on the same day absolutely assigned the same benefits to
the plaintiff.
It was held that no particular form of expression is necessary to create
a trust and a trust was clearly intended for the benefit of the defendant.
24

Even if the term is employed, this is no guarantee that a trust will be
discerned (recognised).
Midland Bank v Wyatt (1995), where a husband and wife executed a
declaration of trust when the husband was contemplating a new
business.
The husband apparently settled their only real asset on the wife and
daughters. The document was kept in a safe and the couple continued to
act as absolute owners of the property, in particular by mortgaging it.
The husbands business failed and the bank obtained a charging order
against the house. The husband then revealed the trust document. The
court held that it was a sham. The inference was that the husband had
kept it up his sleeve for rainy day in order to defeat future creditors).
25
An absolute gift is a gift of property that gives the recipient complete
possession and control over the property. Upon receipt of the gift, the
recipient owns the property and may do whatever he/she wants with it
(subject to local laws regarding the use of such property).
A trust is a confidence placed in a person by making that person the
nominal owner of property to be held or used for the benefit of one or
more others.
A will: A testamentary trust (sometimes referred to as a will trust or trust
under will) is a trust which arises upon the death of the testator, and
which is specified in his or her will. A will may contain more than one
testamentary trust, and may address all or any portion of the estate.
26
The use of precatory words:
Precatory word: Words in at trust document (such as a will) that
appear to express a wish or a desire rather than a clear command
direction to the trustee. Precatory words are often found in trusts
or wills and cause great difficulties when courts need to find the
real intention of the settlor or testator.
27

Lambe v Emes (1871):
testator left his entire estate to his widow to be at her disposal in any
way she may think best, for the benefit of herself and her family.
On her death, she left part of the testators estate to an illegitimate child
of one of the testators son.
The court held that there was an absolute gift to the widow, and not trust.
Held: similar words (precatory words) had in previous cases been held to
create a trust, but the will has finally been construed according to the
testators actual intention based on a true construction of the will.
Justify: To have found trust in favour of the widows family would have
deprived the testators illegitimate grandchild of the gift made by the
widow on her death.
28

Re Adams & Kensington Vestry (1884)
testator states in his will: all his property real and personal should pass to his
wife, her heirs, personal representatives and assign, in full confidence that she
would do what was right as to the disposal thereof between his children, either in
her lifetime or by will after decease.
The issue: whether the disposition in the will was an absolute gift in favour of
the wife or a trust in favour of her children.
The court held that the word created an absolute gift in favour of the widow,
unfettered by any trust.
The reference to the children merely to call to the widows attention the moral
obligations which had weighed upon the testator in making an absolute gift to
her. This was based on a proper construction of the whole will. No trust had
been intended.
29

The general rule is that precatory word does not give rise to trust but
only a mere power.
Whether precatory words could give rise to a creation of a trust.
Precatory words are words of prayers or request in a will. In other words,
precatory words are words merely of hope and desire.
For example, precatory refers to use of words like hopping, desiring,
feeling confident, requesting and as you should have, etc.
In the 18th and 19th century, the Court of Chancery quite readily construed
precatory words as creating a trust.
However, now modern courts are still at liberty to recognise a trust based
on precatory words if satisfied that the donor intended such a result.
The courts will not determine the issue of construction on the basis of the
precatory words alone, but it will give the disposition its natural
construction, taking the wording of the disposition as a whole.(Comiskey
v Bowring Hanbury).
30
Margulies v Margulies (1999)- where a legacy of the residuary estate
was left to one son and expressed to be in confidence (precatory words)
that, if in the interests of family harmony, he would make provision
for his brother and sister. The language of the testator did not disclose a
sufficient certainty of intention to create a trust. As the words used were
precatory in nature, the son could keep the money for himself.
Mussoorie Bank v Raynor (1882)- where a husband left land to his
widow with the word, feeling confident that she will act justly to our
children in dividing the same when she no longer required. The widow
mortgaged the land and, eventually, the Bank sought to sell it to recoup
the loan. She argued that, as she was a trustee of the land, the mortgage
was invalid. The House of Lords held that no trust existed because the
husband had used precatory words. She was the legal and beneficial
owner of the property and, hence, the mortgagee could sell the property.
31

Malaysian case: Parmeshiri Devi v Pure life Society [1971] 1 MLJ 142,
where the plaintiff executed a lease of Kishan Dial School and its premises in
favour of the defendant society free of rent in consideration of the society,
maintaining and managing the school and on the express condition that the
society continue to operate, manage and run the school in the manner and
style of Kishan Dial School.
Later the society constructed another school on a parcel of land and it was
named Satyananda School which then replaced Kishan Dial School.
Not satisfied with the situation, the plaintiff claimed $179,400 and further or
alternatively damages for breach of trust.
The court held that there was no effective declaration of trust. The document
executed by the parties took effect in contract. There was no indication of an
intention to create a trust by the donor.
32

See also the case of Re Chionh Ke Hu [1964] 1 MLJ 131, where the
words used I direct my executor to distribute... Such persons
professing or practising the Buddhist religion... were held to be
imperative words capable of creating the trust. (Although the trust
failed for another reason).
33

Refer to the words used.
Jones v Lock (1855), where a father placed a cheque in the sum of
900, payable to himself, in the hands of his baby son ( 9 months old)
saying:
I give this to baby; it is for himself, and I am going to put it away for
himself. He then placed the cheque in a safe and six days later he died.
The cheque was found among his possession. The issue before the court
was whether the baby was entitled to the 900.
The court held that there had been no valid gift or declaration of trust.
Maxim: Equity cannot be used to perfect an imperfect gift.
Also, the court held that it was an invalid gift because the cheque was on
his name (Jones).
Hence, the gift was invalid and trust cannot be used to validate the gift.
34

Paul v Constance [1977] 1 All ER 195
Mrs. Paul lived with and Mr. Constance as his wife to all appearances
(although not legally married).
When Mr. Constance received 950 in settlement of an action of
personal injuries they decided to deposit the amount in a bank a/c.
The bank a/c was opened in the sole name of Mr. Constance. This was to
avoid any embarrassment in view of the fact that Constance and Paul
were not married. Mr. Constance frequently said to Mrs. Paul: The
money is as much yours as it is mine. These words were repeated on a
number of occasions until the death of Mr. Constance.
Mr. Constance eventually died intestate and his executors closed the
bank a/c. Mrs Paul claimed that the money in the a/c had been held by
Mr. Constance on trust for both of them.
35
The court held that the absence of the word trust was not fatal.
It was an express declaration of trust taking into account the
unsophisticated character of the deceased and his relationship with
the plaintiff. The words used by Mr. Constance to assure Mrs. Paul of
her joint entitlement to the moneys in the a/c were sufficient to
constitute a declaration of trust.
36
Certainty of Subject Matter:

may comprise of cash; choses-in-action (hak pegangan dan
tuntutan) of all kinds including shares, debentures and other
investments, debts and other liabilities, copyright and other
intellectual property, etc.
Virtually all rights can form the subject matter of a trust.
Settlor must identify - what is to be the subject of the trust and
provide the means by which the interest of the beneficiaries can
be ascertained.
must be clear and certain of the property-moveable or
immoveable that he intends to dispose of.
It must be identifiable and ascertainable.
37
Hence, a trustee must be able to identify precisely the trust
property he is to hold on trust. (Yeong Ah Chee v Lee Chong
Chai [1994] 2 MLJ 614).
38
Certainty of Subject Matter: (Continuation)

Two aspects:
(a) certainty as to what property is to be held upon trust (i.e. trust
property- the subject matter of the trust must be certain).
(b) certainty as to the extent of the beneficial interest of each
beneficiary (i.e. beneficial interest- the size of the beneficial interest
to be taken by each person must be certain). (Eg 50k for A 40k for B
and 300k for C).
Certainty important: the trustees must know exactly what is and what
is not included in the trust.
A failure by trustee to deal with the property properly would lead to
breach of trust.
Even if the intention to create a trust is clear, no trust exists until the
subject-matter is ascertained.
39

A) What property is to be held on trust
Palmer v Simmonds (1854),
a testatrix left The bulk of her residuary estate to her husband for his
own use and benefit.
The court held that the bulk of my estate will be ineffective to create a
trust.
The word bulk is subjective and no objectivity to it. The problem lead
to uncertainty over the meaning of the word bulk.
40
Sprange v Barnard (1789),
where a testatrix left 300 to her husband for his sole use and at his
death, the remaining part of what is left, and he does not want for his
own wants and use, to be divided between my brother.... and my sister...
equally.
The court held that this was not a trust for the husband with remainders
over but rather an absolute gift.
There could be no certainty as to what would be left for the brother and
sister on the husbands death; so the husband was entitled to dissipate
the entire fund.
41

Re Kolbs WT [1961] 3 All ER 811-
where the testator (a stockbroker) died and instructed his trustees to sell
trust property and from the proceeds to buy first class and blue chips
investments.
The reference to first class and blue chip investments was too
subjective in meaning and, therefore, rendered the trust void of
uncertainty. As it did not establish an objective standard, the trustees
could not know what the testator intended.
Re Jones, the words used Anything that is left. It is very uncertain the
whole trust will fail.
Re Last, the words used To my brother... at his death anything that is left
that came from me. It is very uncertain the whole trust will fail.
42

Asha Bee & Ors v Mahomed Hashim & Anor (1887), where a testator
gave some land and $400 to his executor to be held on trust for the
maintenance of his wife and youngest son and to be spent on kenduris
for himself.
The court held the trust over land and money void as lack of certainty in
the subject-matter and in the ascertainable interest of $400.
The court held: ... it was also impossible to say how much was for
maintenance and how much for kenduris, the whole clause was void
for uncertainty.
43

Still on the case of Mahomed Ghouse v Hajee Mahomed Saiboo &
Anor (1885), perhaps it is important to point out very briefly as to what
transpired.
In this case, the testator possessed a large piece of land and there were
actually five lots comprised in five grants.
he believed the whole piece was comprised in four grants.
With such a belief the testator by his will declared that: ... of the four
grants of land situated in Toh Kramat, I have converted one grant into
Wakaf to bury my children and grandchildren and relations, and the
three grants are the portions
44
of my ten children [whom he designated]- they will take the produce
thereof, and divide and take in equal shares, but they shall not sell nor
mortgage the land.
Various questions arose for determination:
(a) whether there was an intention on the part of the testator to create a trust
over five pieces of land, given his mistaken belief of fact over the number of
pieces of land;
(b) whether the restraint on alienation (tak boleh jual atau gadai) was void
for uncertainty; and
(c) whether the whole clause was void as tending to a perpetuity.
(keberkekalan).
Note: please find out the outcome of the case. Please please!!!!
45

B) beneficial interest on the beneficiary (which must also be
certain) except in cases of discretionary trusts.
Boyce v Boyce (1849), where a testator left several houses on
trust for his wife for life and on her death to convey any one
house to his daughter A, as she might choose, and the remaining
houses to his daughter B. A died before she could make a choice;
this left uncertainty as to what particular houses B should receive.
The court held that the trust for B was void due to her beneficial
interest being uncertain.
46

Re Golay WT [1965] 1 WLR 969,
where a trust was established to provide a reasonable income for Tossy the
daughter of the testator.
Her beneficial interest was held to be certain because the use of the word
reasonable provided an objective yardstick that the court could employ to
calculate what a reasonable income for her would be.
This provided the court with a method of ascertaining her beneficial interest.
The court could look to her standard of living, income, needs, outgoings, etc. and
conjure up an appropriate sum of money.
This approach could not apply if the trust was of, say, a reasonable legacy,
reasonable share, reasonable amount or reasonable sum. The reasoning is that
a reasonable income for an individual will be the same regardless of how much
money is in the trust fund. It is capable of independent and objective assessment.
47

Estate & Trust Agencies (1927) Ltd v Tungku Meriam bte Al-
marhoum Sultan Ahmad of Pekan & Anor [1949] 15 MLJ 78,
an originating summons relating to a trust deed, one of which was the
meaning of the word issue.
The trust deed provided that after the death of Sultan Ahmad, the
trustees were to hold the property upon trust to divide the income
among the said Tungku Omar and Tungku Meriam or their issue as
shall from time to time be living during their respective lives in the
proportion of two shares to males and one share to females but that the
children or child of a deceased child shall take nothing during their or
his or her parents lifetime.
48
The problem was whether the word issue comprised all the
descendants of Tungku Omar and Tungku Meriam or whether it was
limited to their children.
The court said the word issue was intended to include only the children
of Tungku Omar and Tungku Meriam.
In as much as the children of Tungku Omar and Tungku Meriam were
beneficiaries, the court also ruled that Tungku Meriam herself was a
beneficiary and entitled according to the law on Mohammadan intestacy.
49

the issue of fixed trust.
In fixed trust, the equitable maxim Equity is Equality is applicable.
Burrough v Philcox (1840), where a trust was set up to benefit the
settlors son and daughter. Their shares, however, were not specified. By
relying upon the maxim, each was deemed to have an equal share. The
maxim can be invoked only where there is no contrary intention shown.
If the trust is to benefit my children unequally, the maxim could not
apply and the trust would necessarily fail.
50

Certainty of subject-matter in a commercial transaction
context:
Re London Wine Shippers Co (1986), where a purchaser
had already paid the purchase price for the sales of wine, but
delivery had not yet taken place, but the goods together with
the bulk were unsegregated and kept in the sellers
warehouse.
Upon the winding up of the seller, the purchaser sought to
claim the purchased wine in priority to the general creditors
claim by arguing the existence of trust.
51
The court held that due to the unsegregated wine which is to be
imprinted with the trust, the trust claim failed for want of certainty of
subject-matter.
It was stated that where the goods purchased have not been segregated
but form part of a bulk, the claim on trust will fail on grounds that there
cannot be a trust of unidentified chattels. In other words, the trust will
fail because there is uncertainty as to the identity of the subject-matter
which is to be imposed or imprinted with trust.
52

MacJordan Construction Ltd v Brookmount Erostin [1992] BCLC
350,
where the parties entered into a building contract that provided the
employer would retain 3% of the contract price as trustee for the builder.
The retention fund was never set up. The builder claimed entitlement to
the retention money on the employers insolvency.
The court held that the claim by the builder failed because there was no
identifiable assets that could be impressed with a trust for the builder.
There was merely a contractual right.
53

Whether the rule of segregation of the subject-matter applies to money,
shares and other choses-in-action.
Hunter v Moss [1994] 1 WLR 452,
the settlor owned 950 shares in M Co. M orally declared a trust of 50
shares to H. M later sold the 950 shares and keeping all the proceeds of
the sale to himself.
Issue: whether H claim to his proportionate share (50) of the proceeds of
that sale was valid.
Dillion LJ (COA) held that a trust can still be valid even though the
property has not been segregated provided the shares were of the same
class and in the same company, there was no need to segregate 50 shares
declaring the trust.
54
Certainty of Objects:
Beneficiaries (i.e. the objects of the trust) to be certain.
A trust must have a beneficiaries. Re Endacott (1950): No principle perhaps has
greater sanction or authority behind it than the general proposition that trust by
English law... in order to be effective, must have ascertained or ascertainable
beneficiaries.
The trust not enough to have beneficiaries. It must also show who those beneficiaries
are.
Sale v More where the testator used the words near relations, which were not clear.
the objects were not ascertained.
in the absence of certainty of objects although the other two certainties are present,
there will be a resulting trust for the settlor or his estate since the trust would be
declared void.
However, in cases of charitable trust, the certainty of objects does not apply since it
considered as public trusts.
55
Certainty of Objects: (Continuation)

The importance of ascertaining the beneficiaries:
- to enable the trustee to execute trust. stems from the need on the
part of the trustees to execute the trust.
- Trustee cannot do their duties if those for who the trust was
intended are defined in vague terms, leaving doubt as to who are
the beneficiaries.
- The trust not made to non-objects, trustee would be liable.
56

Certainty of objects differ according to whether it is a fixed or
discretionary trust:
(a) Fixed trust-
the settlor decides in advance the share each beneficiary is to receive
and the trustees have no authority to alter them.
Eg: a trust for my children in equal shares. so divide equally.
The test is: class ascertainability test or fixed list test.
IRC v Broadway Cottages Trust [1954] 3 All ER 120, where the court
held that in order to administer the trust, the trustees must have a
complete list of beneficiaries at the time of distribution.
57

(a) Fixed trust-
As to the position in Malaysia, reference could be made to Halsburys Laws of
Malaysia, which explains the position: If a trust requires division between all the
members of a class, for example in equal shares, it will be void for uncertainty if it is
not possible to provide a complete list of the beneficiaries, as the size of each equal
share cannot be ascertained unless the precise number of the beneficiaries is known.
Where the equal division is of capital and is to take place at some future date, it will
be necessary at the date of commencement of the trust to determine the description of
the beneficiaries to be certain. Otherwise is void.
58
Eg: old friends, business associates, customers of my company,
members of my family is void for uncertainty.
Khoo It Ghee v Khoo Tek Lip [1930] SSLR 260,
where the court held that under the circumstances, it was beyond the
scope of ordinary legal testimony to ascertain all those who were
members of a class by reference to which the trust of a settlement were
limited in point of time, and thus the settlement was bad for uncertainty.
59

(b)Discretionary trust- is one under which the trustees are
given a discretion as to who shall receive income and/or
capital from the trust, and in some cases what amount, if
any, they shall receive.
In the context of English law or position, the test or rule to
apply in determining the certainty of objects was laid down
in the case of McPhail v Doulton [1971] AC 422 by the
House of Lords as the Individual ascertainability test/rule
ie: Any given individual is or is not a member of the class.
60
(b) In Discretionary trust the test is not applied.
The trustees in a discretionary trust must make sure that certain requirements are fulfilled ie:
(i) Conceptual certainty (refers to the width of the class described by the settlor should not be too
wide or ambiguous or where it may cause difficulties for the trustees to identify whom the
beneficiaries are). In other words, it refers to semantic or linguistic expression (i.e. Precision of
language) as regards the class of beneficiaries. For example, in Re Barlow (1970) a trust to
benefit old friends was conceptually uncertain.
(ii) Administrative workability (members of such class should be able to be surveyed one by one).
McPhail v Doulton- where Lord Wilberforce said that a class of beneficiaries described as ... to
all residents of Greater London is too wide a class and it may fail.
61
(iii) The class must not be capricious (unpredictable)(a trust can be void
if it is capricious i.e. It reflects a nonsensical intention on the part of the
settlor and precludes any sensible consideration by the trustees.
For example, a trust to benefit bald men would be struck down as
capricious). See the case of Re Manistys ST, where Templeman gave an
example of a capricious power ... The residents of Greater London...
62
Certainty of objects: (Continuation)

(b) Discretionary trust
In Malaysia, for the ascertainment of beneficiaries in a discretionary trust
the test to be applied for certainty of objects is the: Completely
ascertainable list test laid down in:
English case of IRC v Broadway Cottages [1955] Ch 20:
where the court said that there must be a complete list of beneficiaries. If
the trustee was unable to list all the beneficiaries, the trust would fail for
uncertainty. This was the test used for certainty of objects for both
discretionary and fixed trusts.
However, in England, the courts have progressed from IRC v Broadway
Cottages to McPhail v Doulton.
63
Issue whether a discretionary trust could be defeated by conceptual
uncertainty (which arises from the settlors use of imprecise or vague
language to his intentions e.g. a trust to benefit my old friends, to
benefit my shorter employees.
The terms old and friends have so many shades of meaning that it is
impossible to say who is intended to benefit).
discretionary trust would fail in such circumstances.
64
Still on the issue of conceptual uncertainty in the context of
discretionary trust, reference could be made to the case of Re Wrights
WT- where a trust was designed to benefit such people and institutions
as have helped me or my late husband. Not surprisingly, this was held
to be conceptual uncertain. As the High Court concluded, help was a
term that, could mean anything from helping the testatrix across the
road to saving her from death, dishonour or bankruptcy.
65

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2CopyRequirements For The Creation of An Express Private Trust - Law Equity, Trusts Probate I

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INTRODUCTION TO THE

There is a controversy as to the nature of the equitable interest arising as

Rationale for the Requirement:

What are the three certainties?

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Intention/Words: (Continuation)

Certainty of Subject Matter:

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Subject Matter: (Continuation)

Certainty of Objects: (Continuation)

Certainty of Objects: (Continuation)

Certainty of Objects: (Continuation)

Certainty of Objects: (Continuation)

Certainty of objects: (Continuation)

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