Introduction

* Three certainties

· Certainty of intention to create a trust

· Certainty of subject matter

· Certainty of object

* Foundations bedded into the law for centuries

· Knight v Knight

· Lord Chancellor Lord Eldon “…first the words must be imperative…; secondly…the subject matter must be certain…; and thirdly… the object must be as certain as the subject”

* Rationale

· Trustee needs to know what is required of them in carrying out the terms of the trust

· If the court is called up to intervene in a trusts dispute, it must be able to act with clarity and with a sensible understanding of what the settlor/testator/testatrix had attempted

Certainty of Intention to Create a Trust

* The words or actions of the settlor/testator/testatrix must be sufficiently clear in order to create a trust

* Precatory Words

· They must be imperative, especially in a discretionary trust. Precatory words may invalidate the trust

· Precatory words are not enough - Lambe v Eames

· Lambe v Eames

Husband left property for benefit of family. Wife gave money to non-relatives. Precatory words were less likely to form a trust as “imposing trusts where… never meant to create trusts is a very cruel kindness”. Held that there was no trust.

· Re Adams v The Kensington Vestry

Testator left property to his wife ‘in full confidence that she [would] do what is right’. The Court of Appeal held that the attempt to create a trust failed and the wife took the property absolutely.

· Cotton LJ made reference in the judgment to ‘older cases’ which treated certainty of intention far more flexibly. This may be the doing of the Executors’ Act 1830 which removed the rule that the undisposed part of the testator’s estate passed to his executors

· Comiskey v Bowring-Hanbury

Testator left property to his wife ‘in full confidence that she [would] make such use of it as [he] should have made [himself]…’. Held that the wording created a trust; the wife was to have a life interest with the remainder to pass to the nieces either by her will or to them equally if she did not so bequeath it

· Must determine the context of the words used and not give inflated importance to particular phrases

· Re Hamilton

You must look at the document as a whole

· Where there is no document purporting to create a trust, then the courts might infer intention from spoken words or conduct of the parties

· Paul v Constance

Constance had assured Paul, his new partner, that the money held in a bank account under his name was “as much yours as mine” multiple times over a long period of time. The intention to create a trust could be inferred from his conduct. The Court of Appeal held that a trust had been create which split the content of the bank account 50-50 between Mr Constance and Ms Paul.

· Jones v Lock

Father gave his baby a cheque without endorsing it. Held that ownership had not passed to the son. The statement was made ‘one off’ and as a consequence, was insufficient to manifest a clear intention the father was to give the money to the son. If a gift is not completed with the required formalities it will fail as ‘equity will not perfect an imperfect gift’.

· Moffatt (2009) suggests that the court gave a rather too benevolent construction to Mr Constance’s words. He concludes that the case blurs the distinction between trusts and gifts.

· There are distinguishable elements between the cases, specifically the independent and corroborative evidence of the bank manager in Paul v Constance, the fact the statement was repeated, and their mutual conduct

· Gardener (2011) suggests that the difference between the two cases is merely a reflection of changing judicial attitudes

· The word ‘trust’ is not conclusive and may not even be necessary to create a trust – Paul v Constance

* Sham Trusts

· The trust cannot be a sham = where the certainty of intention to create a trust seems perfectly clear on the face of the trust document, however, the intention is false – the creation of the trust is a ruse in order to fulfil an ulterior motive

· The motive does not need to be fraudulent or dishonest

· Shalson v Russo

The settlor and trustee, if different, must share the sham intention

· A v A

A trust may start out as a property trust, but subsequently become a sham

· Midland Bank v Wyatt

Wyatt borrowed security on their house from the bank but did not inform the bank of the trust which had been created on their home. Only when the bank started proceedings to recover the trust was it produced. It had been signed and ignored until it was convenient and it was held that it was a sham. Held that sham trusts are void and unenforceable

Certainty of Subject Matter

* This is the property over which the trust is declared

* Split into two parts; (a) certainty as to the property itself, and (b) how much of the property each of the beneficiaries is to receive

* Certainty as to Property itself

· Sprange v Barnard

"…for my husband Thomas Sprange, to bewill to him the sum of £300… for his sole use; and at his death, the remaining part of what is left, that he does not want for his own want and use, to be divided between [other named legatees]". Held that the husband was absolutely entitled, and therefore that there was no trust, the court said that the trust needed to be certain from the outset, and that the remaining part of what was left would not become certain when the husband died. Indeed, it could not be said that there would be any property left after the husband's death.

· Palmer v Simmonds

A clause which purported to leave the “bulk” of the testatrix’s estate to named individuals was void and that the purported trustee took the gift absolutely

* Tangible v Intangible Property

· Courts have seemed concerned to create a somewhat artificial distinction between tangible and intangible property

· Where the property is tangible, if the property is not identified, the trust will fail

· Re London Wine Co (Shippers) Ltd

Claimant’s had bought wine which were stored in various warehouses and were not segregated or identified. In order to create a trust it must be possible to ascertain with certainty the property of the beneficiary, therefore a trust of unidentified tangible property in bulk will not fail. Held that segregation was necessary.

· Re Goldcorp Exchange Ltd

Claimants had purchased gold bullion. Upon insolvency they sought to claim their share. There was no trust for those whom had not had their bars segregated as the property to which the trust would attach could not be identified. Those whose bullion had been segregated were successful in their claim, but those whose bullion had not were unsuccessful.

· Where the property is intangible, the approach seems somewhat different

· Hunter v Moss

Moss had promised Hunter a claim of shares in a company. However, Moss did not identify which shares were the subject of the arrangement nor did he segregate any of the shares for Hunter. Held that, if the property is unidentified in bulk and intangible, the trust will still succeed. Dillion LJ did not place the same emphasis on the tangible/intangible distinction though, rather emphasising the sameness of the shares.

· Clearly goes against Re Goldcorp Exchange Ltd as it could be argued that bars of gold bullion are indistinguishable

· Re Harvard Securities Ltd

Neuberger J reluctantly followed the decision in Hunter v Moss considering it binding upon him. Held that there is an intelligible distinction between intangible and tangible property.

* How Much of the Property each Beneficiary is to Receive

· Boyce v Boyce

Testamentary gift for two daughters: eldest daughter could choose between two houses leaving the other for the youngest but died before choosing. The daughter was not entitled to choose one for herself. The identity forming the subject matter of the trust must be certain where the amount of property to be received is concerned. Held that the whole gift was invalid on the basis that it was impossible to determine which house the first daughter would have chosen.

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Equity and the Law of Trusts Notiz am Three Certainties, erstellt von jo.sindle am 27/04/2014.