Trident General Insurance v McNiece Brothers Pty Ltd

Facts: Contractor took out insurance policy for itself and its sub-contractors. An employee of the sub-contractors was injured, could he enforce the contract agaist the insurance company.

Issue: The problem with the trust solution to the problem of third party benefits

Held: The uncertainty should be resolved by recognising the existence of a trust  where the court can infer or impute intention of both parties from the language employed by the parties, looking at the nature of the transaction and the circumstances (including commercial necessity). If there is intention on the part of the insurer and the assured that these employees are covered, then despite the lack of privity and although consideration has not moved from the third party (employee), the third party can sue on the contract.  Per Mason CJ

“The requisite intention should be inferred if it clearly appears that it was the intention of the promisee that the third party should himself be entitled to insist upon performance and receipt of the benefit and if trust is, in the circumstances the appropriate legal mechanism for giving effect to that intention…Equity’s requirement of an intention to create a trust will be at least prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of the promisor and promisee”.  per Deane J

(C)    The Three Certainties
The Three Certainties

•    We are concerned here with Express Private Trusts
•    There are three certainties

1.    Intention: there must be an intention to create a trust and not some other kind of relationship or obligation (this is discussed above in (B))
2.    Subject (Property): there can be no trust unless there is separation of legal and equitable title to property. Which property? Unless a court can identify the property impressed by the trust, there can be no trust.
3.    Objects: it must be possible to identify which people (or charitable purposes) are to benefit from the trust – or at least it must be possible to identify sufficiently clear criteria for selecting beneficiaries to a discretionary trust.

Certainty of Intention
•    Before you can have a trust, you need to see there is an intention to create a trust (separation of legal and equitable ownership) not an equitable charge.
•    The person settling the property on trust must have the intention that it be a trust.
•    This will be obvious if a deed of trust is executed, but otherwise have to identify an intention that a trust operates rather than, say, a debt.

Re Williams

Facts: Testator bequeathed residue of his estate to his wife “absolutely, in the fullest confidence”. He gave wife instructions to give proceeds to the daughter. Issue was whether the arrangement between the parties created a trust which the court had jurisdiction to administer or was it merely an exchange of wishes that bounds the wife in honour and conscience only.

Held: Although the court will try to carry out testator’s wishes, there is no presumption in favour of finding a trust. Analysing the language in the will, and nature of property and the transaction etc it was held that there was no intention to create a trust. The word “absolutely” made it an absolute gift and did not allow the daughter a beneficial interest. The husband could no longer provide directions on a gift that is no longer his.
Furthermore, husband used precatory words (words in a will expressing a desire that a thing be done). These words did not create a trust or equitable obligation on the wife. Court will not add words in to create a trust.

•    See earlier Countess of Bective: words used opened up a wider range of alternatives.

Comr Stamp Duties (CSD) v Joliffe (HCA)

Facts: Banking in these days was highly regulated. A banking regulation stated that an individual could only have one savings
account in a State bank but may hold more than was if held on trust for others. Regulation also allowed interest to be paid only on a certain amount. To get around this, J opened an account for himself and one on trust for his wife so he wouldn’t suffer the loss of interest having the money in one account.  Wife died and J withdrew the money from the account. CSD charged wife’s estate, including money in that account, with a duty.

Held: J did not intend to create a trust, even though the word ‘trust’ was used. In substance J intended only to procure interest and not to benefit his wife. The account name was a disguise for J’s complete dominion over the money. The court will not impute a trust where none was in fact contemplated. So J could lead the evidence of his intention even though the word trust was used

Dissent (Isaacs J): An open declaration of trust is a declaration of intention that is final and beyond recall.
 
Certainty of Subject
•    Must be able to identify the particular property to be held on trust
•    Identify the extent of the benficiaries’ interest in that property.
•    Requirements are not concrete.

An objective determinant
Re Golay’s Will Trusts

Facts: Testator directed executors to give a proprietary interest in an apartment to a woman named Tossy, who was his associate (concubine), not a family member, before he died. He also left a requirement in the will for “reasonable income” to be paid to Tossy.
Issue: Was the testator’s discretion that they pay a “reasonable income” to Tossy invalid for uncertainty?

Held: “The court is constantly involved in making such objective assessments of what is reasonable and it is not to be deterred form doing so because subjective influences can never be wholly excluded.” This discretion was not uncertain. Court has to exercise some discretion in determining what is reasonable but this doesn’t make it invalid for uncertainty. Court avoids a rigid and arid view of what is “reasonable”.

What if property is part of a larger pool of assets?

Hunter v Moss
Facts: Defendant declared themselves trustee over 50 of his 950 shares. Plaintiff argued 50 unidentified and similar shares out of 950 didn’t sufficiently identify specific property to be held on trust and should thus fail for uncertainty of subject.

Issue: Was trust invalid because each share has its own identification number and he didn’t specify which particular subset of the 950 shares he was declaring trust over.

Held: The subject matter was sufficiently certain and segregating the property was not necessary. They could identify that the shares existed and that the settlor owned the shares at the time. Hence the beneficial interest could be identified (could identify shares through the tracing rules). It did not matter which 50/950 shares he declared trust over.

Certainty of Objects

•    Not a problem if all the beneficiaries are named, but often the trusts are not fixed trusts
•    Discretionary trusts  settlor doesn’t want to be legal owner of property anymore for tax purposes etc. They also don’t know who beneficiaries are and don’t want anyone to know who the beneficiaries are straight away. Don’t want Saunders v Gautier scenario, they want to be able to make flexible decisions and hold power to confer benefit.
•    Trust is still valid but doesn’t confer any immediate beneficial interest.
•    How is such a case sufficiently certain of objects?

Where a trustee is given a special power to select beneficiaries from among a class, the class must be sufficiently certain to enable the trustee to make the selection. Must the trustee be able to make a complete list of beneficiaries (“list certainty”)? Or is it sufficient that the trust can tell, of any given candidate, that he or she is “in” or “out” (“criterion certainty”)?

•    Consider Re Gulbenkian and Re Badens

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