Tutorial 2

1. Explain the facts of the following cases in the context of the meaning of a trust:

In a general sense, equity means fairness. Unfortunately, this definition won’t get you very far in
any essays or exams. Historically, the difference between common law and equity was that
where common law rulings were based on interpretation of statutes and previous precedents,
equity is more related to natural law or moral principles. This is a wee bit vague, so there are
maxims of equity that have been developed over time which can still be applied today. For
example, “He who comes into equity must come with clean hands”, meaning that if you ask for
help about the actions of someone else, but have acted wrongly yourself, you may not receive
the help. A classic example would be if a landlord wanted a tenant to vacate a property but they
had violated the tenant’s rights.

A trust is a relationship that arises when a property is vested in a person… called the trustees,
which those trustees are obliged to hold for the benefit of other personas called the…
beneficiaries.” Therefore, beneficiaries have an equitable interest in trust property.

a. Ong and others v Ping [2015] EWHC 1742 (Ch)

INTRODUCTION

[1] Although the facts involved in this dispute are lengthy and detailed, I will give a basic account of
what the dispute is about. The claim concerns a substantial house at 39 Sheldon Avenue, London,
N6 and the proceeds of sale of that house. In early 1986, the house was bought by Madam Lim, who
was the mother of the Defendant ("Ping"), the mother in law of the First Claimant ("Jane") and the
grandmother of the other Claimants (to whom I will refer as "the children"). At that time, Jane was
married to Tjoan Ong ("Tjoan"), another son of Madam Lim. When the house was bought, the
intention was that it would be a home for Tjoan and Jane and the children. However, later in 1986,
Tjoan and Jane separated and Tjoan never returned to live in the house. Jane and the children
continued to live there.

[2] By late 1987 or early 1988, Madam Lim wanted to get Jane and the children out of the house.
Jane asserted that the house was held by Madam Lim on trust for Tjoan and/or Jane and Jane began
divorce proceedings seeking ancillary relief against Tjoan. Jane also started proceedings in the
Chancery Division in which she put forward her claim to a trust of the house. Madam Lim
counterclaimed an order for possession of the house. The proceedings took a considerable time and
were complicated by Jane initiating proceedings in Singapore as to the administration of the estate
of Madam Lim's late husband, Tjoan's father. In all this litigation, Jane's case was that Madam Lim
held the house on trust for Tjoan and/or Jane.

[3] In 1995, Madam Lim obtained an order in the Chancery Division that Jane give up possession of
the house. That order was stayed pending proceedings in the Family Division. The Family Division
 proceedings effectively came to an end in 2005, the stay on the order for possession was lifted and
Jane and the children were required to vacate the house. Madam Lim then sold the house in 2006.
The present whereabouts of the proceeds of sale is unknown.

[4] By 2012, Jane discovered that Madam Lim had in April 1986 signed a trust deed. If that trust
deed created a trust of the house, then it would not be a trust under which Jane had any interest. It
would be a discretionary trust under which the named beneficiaries included Tjoan and the children
and another son of Madam Lim, but not Jane.

[5] Eventually, the present proceedings began. The children seek a declaration that the house was
the subject of a trust created by the document signed by Madam Lim in 1986. Madam Lim has now
died and her son, Ping, defends that claim on the ground that the document was ineffective to
create any trust and/or should be set aside for mistake. The trial of those issues involves an
investigation of the facts in 1986 and perhaps up to 1988.

[6] However, this dispute is much wider than a dispute about the legal consequences of what was
done in 1986. There was litigation between Jane and Madam Lim from 1988 onwards. A number of
orders were made on the basis that Madam Lim was the beneficial owner of the house. In particular,
there were orders made in 1995, 2005 and 2007. Jane and the children now seek to have those
orders set aside. They say that the orders were obtained as a result of the fraud of Madam Lim. That
claim involves an examination of litigation, here and in Singapore, which took place over a 20 year
period.

[7] Mr Twigger QC and Mr Hilton appeared on behalf of Jane and the children and Mr Warwick QC
and Mr Webb appeared on behalf of Ping. The case was very well argued and I am grateful to
counsel for their considerable assistance.

b. Ong and others v Ping [2017] EWCA Civ 2069

Introduction

1. On 17 June 2015, following an eight day trial in the Chancery Division in February and
March, Morgan J delivered a reserved judgment occupying 342 paragraphs. It dealt with
many issues in a dispute between members of the Ong family. The claim related to a house
at 39 Sheldon Avenue, London N6 ('the house') and its proceeds of sale. The four claimants
(now respondents) had, amongst other things, sought a declaration that the house was the
subject of a trust created by the late Lim Lie Hoa ('Madam Lim') in 1986.
 2. The judge's order of 20 July 2015 occupied 12 pages. It is necessary only to say that
paragraph 1 declared that Madam Lim had, until her death in 2009, held the house, its
proceeds of sale and certain other rights relating to it upon the trusts declared in, and on
the terms of, a settlement dated 14 December 1985 signed by her and by the defendant
(now appellant), Ong Siauw Ping (known as Ping), her son. Paragraph 2 declared that Ping
was, and continued to be, a trustee of the house, its proceeds and other rights on the
same trusts and terms. Paragraph 4 declared that the only trust of the house that ever
existed was that declared in paragraph 1 and that the first claimant, Jane Ong, was not a
beneficiary of it.

3. Ping had opposed the claim that the house was held upon either the declared or any
trust. The judge refused him permission to appeal as also, on 27 November 2015, did Davis
LJ on the papers. On 25 October 2016, however, upon a renewed application at an oral
hearing, Patten and David Richards LJJ gave permission. The only issues raised by the
appeal are: (i) whether Madam Lim made a declaration of trust in respect of the house;
and, if she did, (ii) whether it was 'manifested and proved' by the writing requirements of
section 53(1)(b) of the Law of Property Act 1925. The disposal of the appeal involves the
consideration of a series of documents created between December 1985 and July 1988,
most of them in early 1986. There is no alternative but to tell the story and summarise the
documents.

2. Explain the facts of the following cases in the context of the formalities required in the
creation of a trust:
a. Knight v Knight (1840) 49 ER 58

A trust should be upheld if there is sufficient practical certainty in its definition for it to be carried out
according to the expressed intention of the settlor. A question then arises: has the settlor expressed his
intention with ‘sufficient practical certainty’? Ultimately, the court should be able to say with certainty
what the settlor intended: to be valid, a trust must be capable of being controlled and executed by the
court, and capable of being enforced against the trustees; in order for that to happen, three certainties
must be present: certainty of intention, subject and object.

The concept was defined in Knight v Knight, where the Court of the Chancery stated that when property
is given absolutely to someone, a trust is created if the words used are imperative, and if the subject and
object of the trust are certain. In the absence of sufficient certainty, a trust is not created. The court in
Knight referred to ‘certainty of words’, but in modern equity law the term is referred to as ‘certainty of
intention’. In essence, the requirement is to demonstrate that the owner of a property intended to
submit it to a trust obligation and therefore, the words in a document are examined in order to
ascertain if they intended to create a trust.

In Knight, the testator left his estates to his brother, who in turn left them to his son. The will stated that
the testator’s intention was for the estates to be settled on the next descendant in the direct male line
of the testator’s grandfather. When the son died, he was childless and intestate. His brother settled the
estate on persons who where not the next descendants in the direct male line to of the testator’s
grandfather. The question asked to the court was: did the testator impose a binding trust on his
brother?
The court in Knight ruled that the words of the testator were not imperative enough to create a trust
that was binding. Lord Langdale said that not every wish or expectation expressed in a will can or ought
to be executed or enforced as a trust. He also referred to the words in the will as ‘precatory words’. In
the past, courts interpreted ‘precatory words’ in a will as words that imposed a legally enforceable trust,
reflecting the inheritance law of the time. Inheritance laws changed, and in Lamb v Eames, this concept
was reversed. The tendency of the courts is to interpret precatory words as not imposing a trust. The
reason for the change in construction was that it was considered that precatory words did not impose
an obligation on the transferee; they just expressed the wish of the transferor as to how he wanted the
property to be used, which imposed a moral, rather than a binding obligation.

The court in Knight found that the certainty of subject matter was wanting: there were five distinct
properties that could be the subject of the trust. As a trust exists only if the legal and equitable
ownership of the property are separated, specific property must be identified. In Boyce v Boyce, the
trust property could not be identified because one of the beneficiaries died without choosing a
property, and the trust was void. When property is part of a larger bulk held on trust, it will not be
identifiable unless it has been segregated or sufficiently earmarked, as was the case in London Wine Co.

Although certainty of intention and certainty of subject matter are two different aspects of certainty in a
trust, they interrelate: doubt over the subject matter can increase doubts over the certainty of
intention; this principle was established in Mussorie Bank. If the property forming the subject matter of
the trust is not clearly recognised, the trust is void. However if the property is clearly identifiable but
the intention to create a trust is uncertain, the person entitled to the property holds it beneficially for
himself, free of any trust.

Regarding certainty of objects, the court in Knight found the objects of the trust uncertain; they said
that ‘the persons to take the extent of their interest, and the estates they are severally to enjoy is in no
way defined. How is this Court to carry such a trust into execution?’. This third certainty requirement
calls for clear identification of beneficiaries for the trust to be valid: a cestui que trust must exist: ‘he for
whom is the trust’. The object of the trust must be human and have legal standing: the legal human
beneficiary manifested in the beneficiary principle; if there is no human beneficiary but a purpose for
which the trust is set up, a purpose trust arises and in English law, a purpose trust is void unless it is
charitable.

The importance of the concept is that a beneficiary can legally enforce the performance of the trustees,
who own the property in res. The trust itself does not impose a positive obligation on the trustee to
perform, but the existence of a beneficiary with power of enforcement creates that obligation. Without
accountability, the trustee would become, effectively, the beneficial owner of the trust; therefore, the
court must have a beneficiary upon whom to bestow the trust.

Problems can arise when the beneficiaries constitute a class, in which case the settlor must use precise
language to define the class of people who are to benefit from the trust, which is known as conceptual
certainty. Furthermore, the trustees must identify the members of the class; this is known as evidential
certainty. The beneficiaries must be ascertained, that is to say, their whereabouts and continued
existence must be established, which is known as ascertainability. A final point to consider is
administrative workability: how practical is it for the trustees to discharge their duties towards the
beneficiaries.
In conclusion, the three certainties established in Knight are still applied by the courts today in order to
determine the validity of a trust, which proves the flexibility of the concept. The trust remains one of
equity’s most powerful legal creations: its application extends from family, tax and commercial matters
to the use of a trust in finance through the creation of a unit-trust. Knight is therefore a seminal case
and worth analysing in order to understand the validity and applicability of trusts.

b. In Re Adams and the Kensington Vestry [1883 A. 625.]

testator left property to his wife absolutely ‘in full confidence that she will do what is right as to the
disposal thereof between’ his children in her lifetime or by her will - it was held that she took the
property free from any trust in favour of the children

c. Palmer v Simmonds (1854) 61 ER 704

d. Re Hain's Settlement [1961] 1 All ER 848

In May, 1954, a settlor, who was then thirty-four years of age, settled a trust fund on trust (by cl 3)
that the trustees should pay or apply the income of the trust fund for the benefit of all or one or
more of "the beneficiaries" as the trustees should think fit, or should accumulate the whole or part
of the income. The settlement defined (by cl 2) "the beneficiaries" to mean such of the following
persons as should for the time being be in existence, namely, the children and remoter issue of the
settlor and the past present or future employees of the settlor. At the time of the settlement the
settlor had had in his employment only indoor and outdoor domestic servants, of whom there
would have been in all about two dozen persons, but it was deposed that at the date of the
proceedings in 1960 he would be unable to compile a complete list of all his present and past
employees. It was not established that such a list could not have been made at the date of the
settlement. On the question whether cl 3 was valid or was void for uncertainty,

Held - Assuming that cl 3 of the settlement constituted a trust and not a power, the question was
whether at the date of the settlement, which was the relevant date, the class of beneficiaries
defined in cl 2 was incapable of being ascertained, for, if the trust were valid at the date of the
settlement, it would not be rendered invalid by the subsequent disappearance of some members of
the class; there was no difficulty of ascertainment save in regard to past employees, and, as on the
evidence it was not proved that they were unascertainable, the trust was valid.