SQE1 Equity & Trusts 1 — Questions and Answers
Question 1: Which three certainties must be satisfied to create a valid express trust, as established in Knight v Knight (1840)?
- Certainty of intention, subject matter, and objects (Correct answer)
- Certainty of intention, consideration, and capacity
- Certainty of parties, subject matter, and duration
- Certainty of objects, consideration, and writing
Correct answer: Certainty of intention, subject matter, and objects
Lord Langdale in Knight v Knight established that a valid express trust requires certainty of intention (to create a trust), certainty of subject matter (the trust property), and certainty of objects (the beneficiaries).
Question 2: In determining certainty of intention, which statement best reflects the current legal position after Re Adams and the Kensington Vestry?
- The word 'trust' must appear explicitly in the document
- Precatory words such as 'I hope' or 'I wish' are sufficient to create a binding trust
- Courts examine the substance of the language to determine whether a mandatory obligation was intended (Correct answer)
- A trust can only be validly created by deed
Correct answer: Courts examine the substance of the language to determine whether a mandatory obligation was intended
After Re Adams and the Kensington Vestry, precatory words are generally insufficient; courts look at the overall substance of the language to determine whether a mandatory, binding obligation was imposed on the recipient.
Question 3: In Re Golay's Will Trusts, why was a direction to pay a beneficiary 'a reasonable income' held to satisfy certainty of subject matter?
- The testator had provided a definition of 'reasonable' in the will
- A court could objectively assess what constituted a reasonable income (Correct answer)
- The beneficiary had agreed to the amount in advance
- The Trustee Act 2000 provides a default definition of reasonable income
Correct answer: A court could objectively assess what constituted a reasonable income
In Re Golay, the court held that 'reasonable income' was sufficiently certain because it provided an objective yardstick by which the court could determine the appropriate amount.
Question 4: What is the consequence where a trust fails for conceptual uncertainty in its objects?
- The court applies a 'wait and see' rule
- The trust is void (Correct answer)
- The trustees have a discretion to distribute as they see fit
- The court severs the uncertain part and upholds the remainder
Correct answer: The trust is void
If the class of beneficiaries cannot be defined with conceptual certainty, the trust is void because no court can determine who qualifies or administer the trust.
Question 5: For discretionary trusts, which test for certainty of objects was adopted by the House of Lords in McPhail v Doulton [1971]?
- The complete list test
- The is or is not test (Correct answer)
- The substantial number test
- The majority test
Correct answer: The is or is not test
In McPhail v Doulton the House of Lords applied the 'is or is not' test: a discretionary trust is valid if it can be said with certainty of any given person whether they are or are not within the class.
Question 6: Under the rule in Strong v Bird, when may an imperfect inter vivos gift be perfected on the donor's death?
- Where the donor made a written promise to give the property and that promise was witnessed
- Where the donor had a continuing intention to make the gift and the donee is appointed executor or administrator of the donor's estate (Correct answer)
- Where the donee gave consideration in reliance on the promised gift
- Where the gift is registered at the Land Registry before the donor's death
Correct answer: Where the donor had a continuing intention to make the gift and the donee is appointed executor or administrator of the donor's estate
The rule in Strong v Bird perfects an imperfect gift where the donor had a continuing intention to give and, on the donor's death, the donee is appointed as executor or administrator, thereby vesting legal title in them.
Question 7: The beneficiary principle requires a trust to have ascertainable human beneficiaries. Which of the following is a recognised anomalous exception to this principle?
- Trusts for the maintenance of specific private graves (Correct answer)
- Trusts for the promotion of political purposes
- Trusts for the general benefit of unincorporated associations
- Trusts for abstract purposes such as world peace
Correct answer: Trusts for the maintenance of specific private graves
Trusts for the upkeep of specific private graves are one of a small number of anomalous exceptions upheld despite having no human beneficiaries, provided they are limited in duration (e.g., Pettingall v Pettingall).
SQE1 Equity & Trusts 1
Which three certainties must be satisfied to create a valid express trust, as established in Knight v Knight (1840)?