Introduction
The concept of trusts in English law is intrinsically linked to the idea of property, necessitating a clear and ascertainable subject matter to ensure enforceability. The principle of certainty of subject matter, one of the three certainties required for a valid trust as established in Knight v Knight (1840), ensures that the property forming the trust is identifiable, whether tangible or intangible. Historically, the courts have demonstrated adaptability in applying this requirement, distinguishing between various forms of property such as bottles of wine and company shares. However, the rapid advancement of technology in the twenty-first century, particularly with the rise of digital assets like cryptocurrencies and non-fungible tokens (NFTs), poses significant challenges to the traditional legal framework. This essay critically evaluates the statement that while trusts concern property and the law has generally kept pace with societal changes, technological developments are rendering the law increasingly inapplicable to modern needs. It explores the historical application of certainty of subject matter, examines judicial adaptability to different property types, and assesses whether the law can adequately address emerging digital assets.
ThePrinciple of Certainty of Subject Matter in Trusts
The requirement for certainty of subject matter is foundational to the creation of a valid trust. As articulated in Knight v Knight (1840), alongside certainty of intention and certainty of objects, the subject matter must be clearly defined so that trustees can ascertain what property they are obligated to manage. Without such clarity, a trust may fail, as the court cannot enforce vague or ambiguous arrangements. For tangible property, this requirement is often straightforward—identifying specific items such as “my gold watch” poses little difficulty (Sprange v Barnard, 1789). However, challenges arise with intangible property or bulk goods, where precise identification is less intuitive. For instance, in Re London Wine Co (Shippers) Ltd (1986), the court held that a trust over a portion of undifferentiated wine bottles failed for lack of certainty, as the specific bottles could not be identified. This demonstrates the judiciary’s strict adherence to ensuring identifiable property, even when the practical implications may seem harsh.
The rationale behind this requirement lies in the need for accountability and enforceability. If the subject matter is uncertain, trustees cannot fulfill their duties, and beneficiaries cannot claim their entitlements. This principle, while rooted in traditional property concepts, sets the stage for examining how the courts have adapted to evolving forms of property over time.
Judicial Adaptability: Tangible versus Intangible Property
The judiciary has shown considerable flexibility in addressing the differences between tangible and intangible property when applying the certainty of subject matter rule. For tangible items, such as specific goods or land, the law often requires physical segregation or clear description to avoid ambiguity, as seen in Re London Wine Co. In contrast, intangible property, such as shares or financial instruments, has been treated with a degree of pragmatism. In Hunter v Moss (1994), the court upheld a trust over a portion of indistinguishable shares, reasoning that the lack of segregation did not prevent the subject matter from being certain, as the shares were fungible and interchangeable. This decision marked a departure from stricter requirements for tangible goods and illustrated the courts’ willingness to adapt legal principles to the nature of the property in question.
Indeed, the distinction between tangible and intangible assets reflects an awareness of practical realities. Unlike bottles of wine, shares do not require physical separation to be effectively managed or transferred. This judicial sensitivity to context suggests that the law has, to some extent, kept up-to-date with societal and economic changes. However, while such adaptability is commendable, it remains rooted in relatively traditional categories of property. The question arises whether this flexibility can extend to entirely new forms of property emerging from technological innovation.
Technological Developments and the Challenge of Digital Assets
The advent of digital assets, such as cryptocurrencies (e.g., Bitcoin) and NFTs, represents a significant challenge to the traditional framework of trusts law, particularly regarding certainty of subject matter. Unlike tangible property or even conventional intangibles like shares, digital assets exist in a virtual realm, often without a physical counterpart or centralised ownership record. This raises fundamental questions about how such assets can be identified and held in trust. For instance, cryptocurrencies are typically stored in digital wallets, identified by private keys rather than physical possession. If a settlor declares a trust over “my Bitcoin holdings,” the lack of a tangible referent or clear ownership documentation could render the subject matter uncertain under current legal principles.
Recent case law indicates that the courts are beginning to grapple with these issues, though solutions remain piecemeal. In AA v Persons Unknown (2019), the English High Court recognised Bitcoin as property for the purposes of granting a proprietary injunction, suggesting that digital assets can, in principle, form the subject matter of a trust. However, the court did not address how certainty of subject matter should be established for such assets, leaving significant ambiguity. Furthermore, NFTs, which represent unique digital items on a blockchain, add another layer of complexity. Their uniqueness may align more closely with tangible property, yet their virtual nature complicates identification and enforcement in a trust context.
Arguably, the existing legal framework struggles to accommodate these innovations because it was developed in an era predating such technology. The principles applied to physical goods or conventional intangibles are not always directly transferrable to decentralised, blockchain-based assets. Therefore, while the judiciary has demonstrated adaptability in the past, the pace and nature of technological change may outstrip the law’s capacity to respond effectively.
Critical Evaluation: Is the Law Becoming Inapplicable?
The statement that the law is fast becoming inapplicable to twenty-first century needs holds considerable weight when viewed through the lens of technological developments. The traditional requirement for certainty of subject matter, while logical for conventional property, appears ill-suited to digital assets. For instance, the decentralised nature of cryptocurrencies means that ownership is often pseudonymous, and assets may not be easily traceable or identifiable in the way that physical property or registered shares are. This creates a risk that trusts over such assets could fail for uncertainty, undermining the utility of trusts as a legal mechanism in the digital age.
However, it would be premature to conclude that the law is entirely outdated. The judiciary’s history of adaptability, as evidenced by Hunter v Moss, suggests that incremental changes in legal interpretation could address some of these challenges. Furthermore, legislative intervention could play a crucial role. The Law Commission, for example, is currently examining the legal status of digital assets and their treatment under property law, which may lead to reforms that clarify the application of trusts law in this context (Law Commission, 2022). Such developments indicate that, while the law currently lags behind technology, it is not wholly incapable of catching up.
Nevertheless, there are limitations to relying solely on judicial or legislative updates. The global and borderless nature of digital assets means that domestic legal solutions may struggle to address cross-jurisdictional issues. Additionally, the rapid evolution of technology could render even updated laws obsolete within a short timeframe. Thus, while the law has generally kept pace with societal changes in the past, the unique challenges posed by digital assets suggest that more fundamental reform may be necessary to maintain relevance.
Conclusion
In summary, the requirement for certainty of subject matter remains a cornerstone of trusts law, ensuring that property held on trust is identifiable and enforceable. Historically, the courts have demonstrated adaptability in applying this principle to both tangible and intangible property, as seen in cases like Hunter v Moss. However, the rise of digital assets, driven by technological developments, poses unprecedented challenges to the traditional legal framework. While early judicial recognition of assets like Bitcoin as property offers some hope, significant uncertainties persist regarding how certainty of subject matter can be achieved in a virtual context. Critically, although the law is not yet entirely inapplicable to twenty-first century needs, its current state reveals a growing disconnect with modern realities. Future reform, whether through judicial innovation or legislative action, is essential to ensure that trusts law remains relevant in an increasingly digital world. The implications of failing to adapt are profound, potentially limiting the utility of trusts as a mechanism for managing emerging forms of wealth and property.
References
- Hudson, A. (2016) Equity and Trusts. 9th ed. Routledge.
- Law Commission (2022) Digital Assets: Consultation Paper. Law Commission.
- Penner, J.E. (2019) The Law of Trusts. 11th ed. Oxford University Press.
- Virgo, G. (2018) The Principles of Equity and Trusts. 3rd ed. Oxford University Press.
Note: Case law references such as Knight v Knight (1840), Sprange v Barnard (1789), Re London Wine Co (Shippers) Ltd (1986), Hunter v Moss (1994), and AA v Persons Unknown (2019) are cited in-text as per academic convention in law essays. They are not included in the reference list as they are primary legal sources typically referenced directly in the text rather than as secondary sources.
