Certainty of subject matter (trust property)

Can You Answer This?

Practice with real exam questions

Serena is a research scientist who invests in biotechnology companies and currently holds 1,000 shares of the same class in Zenova Biotech. She intends to establish a trust in favour of her nephew, Sam, setting aside 200 of those shares. In her trust deed, Serena declares 200 of her 1,000 Zenova Biotech shares on trust for Sam without specifying the exact share certificates. All shares are indistinguishable and carry identical rights, causing her concern about meeting the certainty of subject matter requirement. Serena recalls reading about the differing treatment of intangible assets in trust law, exemplified by certain leading cases.


Which of the following is the most accurate principle regarding certainty of subject matter in Serena’s proposed trust arrangement?

Introduction

Certainty of subject matter is an essential requirement for the creation of a valid express trust. It necessitates that the property intended to be held on trust is clearly identified and specific, ensuring that trustees know precisely what assets they are to manage and beneficiaries understand what interests they are entitled to. This principle serves to prevent ambiguity and disputes over trust assets, which is particularly important within the legal frameworks assessed in the SQE1 FLK2 exam.

The Principle of Certainty of Subject Matter

For an express trust to be valid, the trust property must be certain. This means the assets must be identifiable with clarity at the time the trust is created. Without this certainty, trustees cannot execute their duties effectively, and beneficiaries cannot ascertain their rights.

Identifying Trust Property

The requirement of certainty demands that the assets be clearly defined. Specificity ensures there's no confusion over what constitutes the trust property. For example, stating "my 500 shares in XYZ Company" provides a clear indication of the assets, whereas "some of my shares" would be too vague.

Defining Beneficial Interests

Not only must the property be certain, but the beneficial interests must also be specified. The trust instrument should delineate how the property is to be distributed among the beneficiaries. This clarity prevents disputes and facilitates the proper administration of the trust.

Key Legal Cases Illustrating Certainty of Subject Matter

Several significant cases have shaped the understanding of this principle. Examining these cases provides an understanding of how the courts interpret the requirement of certainty.

Re London Wine Co (Shippers) Ltd [1986] PCC 121

In Re London Wine Co, the company stored wine for customers without specifying which bottles belonged to each customer. You might be thinking, why is that a problem? Without precise identification, it's impossible to determine whose wine is whose. The court held that there was no trust because the specific bottles for each customer were not identified. This case highlights that when dealing with tangible assets, each item must be distinctly recognized to form a valid trust.

Re Goldcorp Exchange Ltd [1995] 1 AC 74

Similarly, in Re Goldcorp Exchange Ltd, customers claimed rights over unallocated gold bullion. The Privy Council ruled that without specific allocation, there was no trust. This decision reinforces the necessity for clear identification of tangible assets in a trust.

Hunter v Moss [1994] 1 WLR 452

In contrast, Hunter v Moss dealt with intangible assets. An employer declared a trust over 50 of his 950 shares but did not specify which shares. Now, you might wonder, doesn't that pose the same issue? Here's the thing: the Court of Appeal held that specificity was not required for fungible, intangible assets like shares of the same class. Since all shares were identical in nature and value, any 50 shares would satisfy the trust. This case distinguishes between tangible and intangible property concerning the requirement of certainty.

Practical Implications for Trustees and Settlors

Understanding the principle of certainty of subject matter is necessary for legal practitioners involved in drafting trust instruments and advising clients.

Drafting Trust Instruments

When drafting trusts, precise language must be used to define the trust property. Ambiguity can invalidate the trust or lead to litigation. Settlors should clearly specify the assets and the interests of the beneficiaries. For instance, instead of stating "some of my artworks," specifying "my Monet painting titled 'Water Lilies'" ensures compliance with the certainty requirement.

Trustee Responsibilities

Trustees have a duty to ensure that the trust property is clearly identified and appropriately segregated. They must maintain accurate records and manage the assets according to the terms of the trust. Failure to do so can result in breach of trust and personal liability.

Complex Scenarios Involving Certainty of Subject Matter

Certain situations present challenges in satisfying the requirement of certainty.

Fluctuating Assets

When dealing with assets that fluctuate in quantity or value, such as stock portfolios or commodities, additional care must be taken to define the trust property clearly. The trust instrument may include provisions detailing how such assets are to be identified and managed over time.

Mixed Funds

In cases where trust property is mixed with other assets, it's essential to use tracing methods to identify the trust assets. Without clear identification, the trust may fail for uncertainty. For example, if a settlor declares a trust over "£10,000 from my bank account" without segregating that amount, it can lead to complications.

Interaction with Other Legal Principles

Certainty of subject matter doesn't operate in isolation. It works in conjunction with other certainties required for a valid trust.

Certainty of Intention

A valid trust must demonstrate the settlor's intention to create a trust. Without a clear intention, even perfectly identified subject matter won't suffice. Both elements are essential; the settlor must intend to create a trust over specific property.

Certainty of Objects

Alongside the subject matter, the beneficiaries (objects) of the trust must be certain. The trust fails if the beneficiaries cannot be identified. Certainty of subject matter and certainty of objects together ensure that the trust can be properly executed.

Conclusion

The complexity surrounding the certainty of subject matter often hinges on distinguishing between tangible and intangible assets in trust law. The contrasting judgments in Re London Wine Co and Hunter v Moss illustrate the detailed approach courts take when assessing the identifiability of trust property. These cases emphasize the necessity for precise identification of assets, particularly when dealing with tangible property, whereas intangible assets may be treated with more flexibility regarding specificity. Understanding how the certainty of subject matter interacts with the certainties of intention and objects is essential, as all three certainties must align to form a valid express trust. Practitioners must ensure that trust instruments meticulously define both the trust property and the beneficial interests to satisfy legal requirements, thereby ensuring the trust's validity and effective administration.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Barbri SQE
One-time Fee
$3,800-6,900
BPP SQE
One-time Fee
$5,400-8,200
College of Legal P...
One-time Fee
$2,300-9,100
Job Test Prep
One-time Fee
$90-350
Law Training Centr...
One-time Fee
$500-6,200
QLTS SQE
One-time Fee
$2,500-3,800
University of Law...
One-time Fee
$6,200-22,400

Note the above prices are approximate and based on prices listed on the respective websites as of December 2024. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

Practice. Learn. Excel.

Features designed to support your job and test preparation

Question Bank

Access 100,000+ questions that adapt to your performance level and learning style.

Performance Analytics

Track your progress across topics and identify knowledge gaps with comprehensive analytics and insights.

Multi-Assessment Support

Prepare for multiple exams simultaneously, from academic tests to professional certifications.

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal