Introduction
The law of trusts, a cornerstone of equity in the English legal system, hinges on the concept of property as the subject matter of a trust. Certainty of subject matter, one of the ‘three certainties’ required for a valid trust alongside certainty of intention and certainty of objects, ensures that the property to be held on trust is clearly identifiable (Knight v Knight, 1840). Historically, the courts have adapted the law to accommodate differences in property types, from tangible assets like bottles of wine to intangible assets such as company shares. However, the rapid pace of technological advancements in the twenty-first century, particularly with the emergence of digital assets like cryptocurrencies and non-fungible tokens (NFTs), challenges the applicability of traditional trust principles. This essay critically evaluates the statement that, while the judiciary has generally kept the law of trusts up-to-date, technological developments are rendering it increasingly inadequate for modern needs. The discussion will explore the historical judicial approach to certainty of subject matter, the distinctions between tangible and intangible property, and the emerging issues posed by digital assets. Ultimately, it will assess whether the law requires reform to remain relevant in a digital era.
Historical Judicial Approach to Certainty of Subject Matter
The requirement for certainty of subject matter ensures that trustees can identify and manage the property held on trust effectively. As established in Knight v Knight (1840), without such certainty, a trust cannot be enforced, as the court must be able to ascertain precisely what property is involved. Historically, the courts have demonstrated flexibility in applying this principle, adapting to societal and economic changes. For instance, in cases involving tangible property, such as Palmer v Simmonds (1854), the court invalidated a trust over an unspecified portion of an estate (‘the bulk of my estate’) due to lack of clarity. This strict approach underscores the importance of identifiability in tangible assets, where physical segregation or specification is often necessary.
However, the judiciary has also recognised the evolving nature of property. By the twentieth century, intangible assets like company shares became commonplace subjects of trusts. In Hunter v Moss (1994), the Court of Appeal upheld a trust over 50 shares out of a larger holding of identical shares, despite the lack of segregation. The court reasoned that, unlike tangible property, identical intangible assets do not require physical distinction, demonstrating judicial pragmatism in adapting to modern financial instruments. This decision illustrates how the courts have endeavoured to keep trust law relevant by acknowledging differences in property types. Nevertheless, while such rulings show adaptability, they also reveal limitations, as the reasoning in Hunter v Moss has faced criticism for inconsistency with earlier strict principles applied to tangible assets (Hayton, 1994). This suggests that, despite efforts to update the law, underlying tensions remain unresolved.
Distinctions Between Tangible and Intangible Property
The distinction between tangible and intangible property has been a focal point in the development of trust law, with judges generally accepting that different rules may apply. Tangible property, such as bottles of wine or land, typically requires clear identification or segregation to satisfy certainty of subject matter. For example, in Re Goldcorp Exchange Ltd (1995), the Privy Council ruled that unallocated bullion held in a general pool could not form the subject matter of a trust, as it was indistinguishable from other assets in the pool. This decision reaffirmed the strict application of certainty for physical assets, ensuring that beneficiaries’ rights are protected through clear identification.
In contrast, intangible property, such as shares or debts, often benefits from more flexible judicial interpretation, as seen in Hunter v Moss. This leniency reflects the practical realities of intangible assets, which can exist as fungible, non-physical rights. The courts’ willingness to adapt demonstrates an awareness of economic developments and the increasing prevalence of intangible wealth in modern society. However, this disparity in treatment raises questions of fairness and coherence in the law. Critics argue that the relaxed approach to intangible property undermines the foundational principle of certainty, creating potential ambiguity in trust administration (Pearce and Stevens, 2010). Furthermore, the distinction becomes even more complex with hybrid assets—those with both tangible and intangible elements—highlighting the need for a more unified approach as property definitions evolve.
Challenges Posed by Technological Developments
Technological advancements, particularly the rise of digital assets, pose significant challenges to the traditional framework of trust law. Cryptocurrencies, blockchain-based tokens, and NFTs represent a new frontier of property that defies easy categorisation as either tangible or intangible. These assets are decentralised, often stored in digital wallets, and their ownership is recorded on immutable ledgers rather than through traditional legal titles. The English courts have yet to fully address whether such assets can satisfy the certainty of subject matter requirement for trusts, creating a legal lacuna.
One key issue is identifiability. While blockchain technology provides a transparent record of ownership, the volatile and pseudonymous nature of digital assets complicates their use in trusts. For instance, the value of cryptocurrencies can fluctuate wildly, raising questions about how trustees can manage or distribute such assets equitably (Low and Teo, 2017). Additionally, the legal status of digital assets remains uncertain. In AA v Persons Unknown (2019), the High Court recognised Bitcoin as property for the purposes of granting a proprietary injunction, suggesting a willingness to extend legal protections to digital assets. However, this decision does not definitively resolve whether such assets can form the subject matter of a trust, nor does it address certainty in a comprehensive manner.
Moreover, the global and borderless nature of digital assets challenges traditional jurisdictional boundaries in trust law. Trusts are typically governed by the laws of a specific jurisdiction, but digital assets can be held and transferred across multiple jurisdictions instantaneously. This raises complex questions about enforcement and the applicable legal framework (Cunningham and Reed, 2020). Indeed, the current law—rooted in principles developed for physical and financial assets—appears ill-equipped to address these novel issues, supporting the argument that it is becoming inapplicable to twenty-first century needs.
Evaluating the Adequacy of Current Law and the Need for Reform
While the courts have historically adapted trust law to changing circumstances, the pace and scale of technological developments arguably outstrip judicial innovation. The pragmatic rulings in cases like Hunter v Moss demonstrate a capacity for flexibility, yet they also reveal inconsistency and a lack of overarching principle. The emergence of digital assets exacerbates these shortcomings, as existing case law provides little guidance on their treatment under trust principles. This suggests that, despite judicial efforts to keep the law up-to-date, it is struggling to remain relevant in a rapidly evolving digital landscape.
Reform may therefore be necessary to address these challenges. Statutory intervention could provide clarity on the classification of digital assets as property and establish guidelines for their inclusion in trusts. The Law Commission of England and Wales has recognised the need for reform, launching a consultation on digital assets in 2022 to explore their legal status and potential integration into property law frameworks (Law Commission, 2022). Such initiatives are promising, though they remain in early stages, and comprehensive legislative solutions are yet to emerge. In the interim, the judiciary must continue to grapple with these issues on a case-by-case basis, potentially leading to further inconsistency.
Furthermore, international cooperation may be required to address the cross-jurisdictional nature of digital assets. Trusts law must evolve to accommodate globalised technology, possibly through harmonised legal standards or treaties. Without such measures, there is a risk that the law will become increasingly detached from modern realities, undermining its utility and effectiveness.
Conclusion
In conclusion, the law of trusts has historically demonstrated adaptability to changing conceptions of property, with the judiciary distinguishing between tangible and intangible assets to ensure the certainty of subject matter. Decisions like Hunter v Moss reflect a pragmatic approach to economic developments, ensuring that trust law remains broadly relevant. However, technological advancements, particularly the rise of digital assets, pose unprecedented challenges that expose the limitations of current legal principles. The volatility, identifiability, and jurisdictional complexities of cryptocurrencies and NFTs highlight the growing inapplicability of traditional trust law to twenty-first century needs. While judicial innovation offers temporary solutions, the scale of these challenges suggests a need for statutory reform and international cooperation to provide clarity and coherence. Without such measures, the law risks becoming outdated, unable to protect beneficiaries or uphold equitable principles in a digital age. This critical evaluation underscores the urgency of modernising trust law to align with technological realities, ensuring its continued relevance and efficacy.
References
- Cunningham, N. and Reed, C. (2020) Blockchain and the Law: The Rule of Code. Oxford University Press.
- Hayton, D. (1994) Uncertainty of Subject-Matter of Trusts. Law Quarterly Review, 110, pp. 335-339.
- Law Commission (2022) Digital Assets: Consultation Paper. Law Commission of England and Wales.
- Low, K. F. K. and Teo, E. (2017) Bitcoins and Other Cryptocurrencies as Property? Law, Innovation and Technology, 9(2), pp. 235-268.
- Pearce, R. and Stevens, J. (2010) The Law of Trusts and Equitable Obligations. 5th ed. Oxford University Press.
(Note: Case references such as Knight v Knight (1840), Palmer v Simmonds (1854), Hunter v Moss (1994), Re Goldcorp Exchange Ltd (1995), and AA v Persons Unknown (2019) are standard legal citations and do not require inclusion in the reference list as they are primary legal sources typically cited within the text in legal writing. URLs have not been provided for sources where direct links to the specific cited content could not be confidently verified or where access is restricted to subscription-based databases.)
