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The Three Certainties Notes

GDL Law Notes > GDL Equity and Trusts Notes

This is an extract of our The Three Certainties document, which we sell as part of our GDL Equity and Trusts Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.

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THE THREE CERTAINTIES

In order to create a trust:
o A) The settlor must have legal capacity to create the trust.
o B) Any statutory formalities, that may apply depending on the nature of property, must be met and

C) The trust must be properly constituted.
o D) Three certainties must be satisfied.
Formally declared in Wright v Atkyns (1823) and Confirmed in
Knight v Knight (1840)
o 1) Certainty of Intention

2) Certainty of Subject Matter

3) Certainty of Object

CERTAINTY

OF

INTENTION

For the trust to be valid, the settlor must have intended to impose a legal (as opposed to a mere moral) obligation to act and deal with the property in accordance to the trust instrument.
Intention to create a trust can be shown easily with words or conduct

But you don't have to understand that you are creating a trust in order to create a trust - What we are looking at is the consequences
The words 'on trust' is not required (Re Kayford [1975])
o Neither does the usage of the word trust guarantee the creation of a trust (e.g. I trust you…).
Distinction drawn between

(i) imperative words, which show an intention to create a legally binding obligation. This will generally create a trust.
o (ii) precatory words, which merely express a mere hope or a wish. E.g. 'in full confidence' 'trusting' 'hoping'. This may but do not have to create a trust
Precatory Words:
o Historically they always created a trust (before Executors Act 1830), court was more inclined to create trusts as otherwise the executors got the estate.
o Lamb v Eames (1871) "to be at her disposal in any way she may think best, for the benefit of herself and her family"
 Court: 'it is a cruel kindness indeed to impose a trust when none was intended.' Held this was a gift.
o For short period court stopped awarding trusts, but later a more balanced approach came in

Re Adams and Kensington Vestry (1884) "in full confidence that she will do what is right"
 Took into account the fact that this was for the wife,
therefore a gift.
o Comiskey v Bowring-Hanbury [1905] "in full confidence that she will devise it to such one or more of my nieces as she 

may think fit…in default of any disposition by her thereof by her will or testament I hereby direct that"
 Mandatory nature of the instruction, trust imposed.
o Re Steele's Will Trust [1948]
 Will had been professionally prepared. Same words used as in the case of Shelley v Shelley (1868): "I
request that…"
 As identical clause is used then the same outcome must be applied

Re Hamilton [1895] - context of provision vs that of the whole instrument
 Lindley LJ: 'take the will you have to construe and see what it means, and if you come to the conclusion that no trust was intended then you say so'
 Eg if there is a clear intention to create a trust in one clause, but not in another clause, it is unlikely that the second clause was intended as creating a trust.
o Marguiles v Marguiles (2000) 'knowing his wishes…giving what is appropriate" too vague to demonstrate intention.
Intention by Conduct

Re Kayford [1975]
 Kayford, a mail order company, was holding money from his customers in a separate bank account named
'Customer Trust Deposit Account'
 The court held that the money had been held in trust and so could be claimed by creditors

Re Challoner Club Ltd (1997)
 Set the money of members aside, but there was no clear prerogative as to it being set aside for a specific reason. There was the possibility that they could use the money for their own benefit not for the benefit of the members. Thus in retaining the right to decide a trust was not created.
o Paul v Constance [1977] - Cash in the bank account was used for bingo winnings of Claimant and her deceased partner. These had been shared. Deemed held on trust.
 Conduct of sharing a bank account and depositing joint winnings is sufficient to demonstrate intention.
Quisclose Trusts

Barclays Bank Ltd. v Quistclose Investment Ltd [1970]
 A creditor has lent money to a debtor for a particular purpose - the purpose is a condition of that loan.
 In the event that the debtor uses the money for any other purpose, it is held on trust for the creditor.

CERTAINTY

OF

SUBJECT

Refers to the property that is subject to the trust obligation
Two problems:
o 1) Vague Descriptions

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