The three certainties
Certainty of subject matter is one of the three legal ‘certainties’ which are essential for the establishment of a valid express trust, as outlined in Knight v Knight (1840) by Lord Langdale MR. These are:
- certainty of intention to create a trust;
- certainty of the subject matter of the trust;
- certainty of objects (ie, those who will benefit under the trust).
What is certainty of subject matter?
The certainty of subject matter is the requirement that the trust property left to the beneficiary must be easily identifiable, along with the interests gained by the beneficiary.
The trust is likely to fail if the property left on trust is unidentifiable or uncertain. If someone who owns several houses in London, for example, states that they wish to leave on trust ‘my house in London’ there is difficulty in establishing which house they meant and this could cause the trust to fail.
Trust property forming part of a larger quantity
A trust is liable to fail where the property in question cannot be identified or separated from a larger quantity. In London Wine Company (Shippers) Ltd (1986), for example, the question arose as to whether customers’ wine stored with a supplier’s stock could be available to the supplier’s creditors following insolvency. The court held that because it was impossible to distinguish the customers’ wine from the rest of the stock, no trust could arise.
This reasoning was upheld in Re Goldcorp Exchange Limited (1995) 1 AC 74 with regard to gold bullion, although the customers whose bullion had been segregated from the rest of the stock were able to assert that a trust had been created.
However, the situation is different when it comes to intangible assets such as shares (as opposed to tangible assets like the wine in London Wine Company (Shippers) Ltd). In Hunter v Moss (1994), Mr Hunter was entitled under his employment contract to 50 of 1000 shares held by Mr Moss. Mr Moss sold the shares and kept all the proceeds. The court held that since the shares were basically identical and indistinguishable, any 50 shares in the company were capable of forming the subject matter of the trust. There was, therefore, certainty of subject matter and a valid trust.
Where the words used to explain what the trust property are relative ones, and therefore could be interpreted to mean a number of different things, the trust is liable to fail.
If the testator, for example, leaves the ‘bulk’ of his property to someone, this would fail due to uncertainty of subject matter because ‘bulk’ cannot be readily defined (Palmer v Simmonds (1854)).
Conversely, in Re Last (1958) P 137, ‘anything that is left’ of the testator’s estate was held to be sufficiently clear.