Introduction
The law of trusts, a cornerstone of English equity, hinges on the principle of property as its central concern. This is reflected in the requirement for certainty of subject matter, one of the three certainties essential for the valid creation of a trust, as established in Knight v Knight (1840). This principle ensures that the property intended to be held on trust is clearly identifiable, whether tangible or intangible. Over time, the judiciary has demonstrated adaptability by recognising distinctions between different forms of property, such as bottles of wine and company shares. However, the rapid pace of technological advancements in the 21st century poses significant challenges to the traditional framework of trust law. This essay explores the evolution of the certainty of subject matter requirement, examines judicial responses to various property types, and critically assesses whether the law remains applicable to contemporary needs in light of technological developments such as cryptocurrencies and digital assets. The argument will focus on the tension between established legal principles and emerging forms of property, highlighting the need for reform to maintain relevance.
The Importance of Certainty of Subject Matter in Trust Law
Certainty of subject matter is a fundamental requirement for the creation of a valid trust under English law. As articulated by Lord Langdale MR in Knight v Knight (1840), a trust must clearly define the property subject to the trust arrangement to ensure enforceability. This requirement serves a practical purpose: trustees must know precisely what assets they are responsible for managing, and beneficiaries must be able to identify what they are entitled to claim. Without such clarity, disputes are inevitable, and the trust risks being declared void for uncertainty.
Historically, the courts have applied this principle stringently, particularly in cases involving tangible property. For example, in Palmer v Simmonds (1854), a trust failed due to uncertainty over the term “bulk of my estate,” as it was impossible to determine the exact proportion of property intended. This strict approach underscores the judiciary’s commitment to precision in trust creation. However, challenges arise when property is less clearly defined, such as in cases of fungible or intangible assets, prompting judicial innovation to uphold trusts where possible.
Judicial Adaptation to Tangible and Intangible Property
The courts have generally been responsive to the nuances of different property types, distinguishing between tangible and intangible assets with varying degrees of flexibility. For tangible property, issues of identification often arise when the subject matter is part of a larger, undifferentiated mass. In Re Goldcorp Exchange Ltd (1995), for instance, the Privy Council held that a trust over unallocated bullion failed for lack of certainty, as the specific property could not be identified. Conversely, in Hunter v Moss (1994), the Court of Appeal upheld a trust over a percentage of shares in a company, despite the shares being indistinguishable, reasoning that intangible property does not require the same level of segregation as tangible goods.
This distinction highlights a pragmatic judicial approach, recognising that intangible assets like shares operate differently from tangible goods such as bottles of wine. Shares, being fungible and often held electronically, can be apportioned without physical separation, whereas tangible items typically require specific identification. Such adaptability demonstrates the law’s capacity to evolve within its traditional framework, ensuring that trusts remain functional across diverse property types. Nevertheless, while these judicial distinctions have kept the law relevant to some extent, they are increasingly tested by modern technological developments.
Technological Developments and the Strain on Trust Law
The 21st century has witnessed an unprecedented rise in digital and virtual forms of property, such as cryptocurrencies (e.g., Bitcoin), non-fungible tokens (NFTs), and other blockchain-based assets. These assets, often decentralised and lacking a physical presence, challenge the traditional categorisation of property under trust law. The question of whether they satisfy the certainty of subject matter requirement remains unresolved, as their unique characteristics—volatility, anonymity, and intangibility—do not align neatly with existing legal principles.
For instance, cryptocurrencies are stored in digital wallets and exist as encrypted data on a blockchain. Unlike shares, which are registered and traceable through corporate records, cryptocurrencies can be difficult to segregate or identify in the event of a trust dispute. In AA v Persons Unknown (2019), the English High Court recognised Bitcoin as property for the purposes of granting an injunction, marking a significant step towards acknowledging digital assets within the legal framework. However, this case did not address the issue of trusts specifically, leaving uncertainty as to how such assets would fare under the certainty of subject matter test.
Moreover, the transient and borderless nature of digital property raises jurisdictional and enforcement issues. If a trust involves cryptocurrency held on a decentralised network, how can trustees ensure control, and how can beneficiaries enforce their rights? The current legal framework, rooted in 19th-century principles, arguably lacks the mechanisms to address these complexities, rendering trust law ill-equipped for contemporary needs. Indeed, while judicial creativity has historically bridged gaps, the pace and scale of technological change may outstrip the courts’ ability to adapt without legislative intervention.
The Need for Reform and Modernisation
The challenges posed by technological developments suggest that reliance on judicial interpretation alone may be insufficient to keep trust law up-to-date. Statutory reform could provide clearer guidelines on the classification and treatment of digital assets as trust property. The Law Commission of England and Wales has initiated consultations on digital assets, acknowledging their growing significance in property law (Law Commission, 2021). Proposals include recognising digital assets as a distinct category of property, potentially with tailored rules for certainty and transferability.
Furthermore, international harmonisation of laws governing digital property could address cross-border issues inherent in technologies like blockchain. Without such reforms, there is a risk that trust law becomes increasingly inapplicable, undermining confidence in legal mechanisms for managing wealth in the digital age. While the courts have shown flexibility with traditional intangible assets, the novel nature of digital property demands a more proactive approach to ensure that the law remains fit for purpose.
Conclusion
In conclusion, the requirement for certainty of subject matter is central to the law of trusts, ensuring clarity and enforceability in property arrangements. The judiciary has historically adapted to distinctions between tangible and intangible property, as seen in cases like Hunter v Moss, demonstrating a capacity to evolve with changing circumstances. However, technological developments, particularly the emergence of digital assets like cryptocurrencies, expose significant limitations in the current legal framework. These innovations challenge traditional notions of property and necessitate urgent reform to address issues of identification, jurisdiction, and enforcement in trusts. While judicial innovation has kept the law relevant to some degree, the scale of 21st-century challenges suggests that legislative intervention is essential to prevent trust law from becoming obsolete. The ongoing work of bodies like the Law Commission offers hope, but until reforms are enacted, the applicability of trust law to modern needs remains in question. This tension between tradition and innovation underscores the need for a balanced approach to preserve the integrity of trusts in an increasingly digital world.
References
- Hudson, A. (2016) Equity and Trusts. 9th edn. Routledge.
- Law Commission (2021) Digital Assets: Consultation Paper. Law Commission.
- Penner, J.E. (2019) The Law of Trusts. 11th edn. Oxford University Press.
- Virgo, G. (2020) The Principles of Equity and Trusts. 4th edn. Oxford University Press.
(Note: Case law references such as Knight v Knight (1840), Palmer v Simmonds (1854), Re Goldcorp Exchange Ltd (1995), Hunter v Moss (1994), and AA v Persons Unknown (2019) are primary sources widely recognised in legal scholarship and are not listed in the reference list as per standard Harvard referencing for case law. They are cited in-text as per academic convention in law essays.)
