The Three Certainties Notes

Topic 2 – ‘The Three Certainties’

• A trust may be sufficiently certain to be valid and so enforceable (Knight v Knight), the three certainties are required, namely certainty of:

  • 1. Certainty of words or intention (to create a trust)

  • 2. Certainty of Subject-matter (the property subject to the trust)

  • 3. Certainty of Objects (beneficiaries)

  • = All present the court can enforce the trust if necessary, where the trustee fails to do so.

• Failure to comply with certainty requirements can render the disposition void.

• Note: ‘certainties’ discussed separately.

• Knight v Knight = Cited as authority – that the 3 certainties are needed/essential for express trusts.

Why are 3 Certainties are enforced so strictly:

Implementation:

• If you’re a trustee (asked and accepted) – Unless absolutely clear that was the intention of the settlor [it would be for you to be a trustee], you need to know what the property subject to the trust is, and who the beneficiaries are = without this information, you cannot implement the trust; you wouldn’t know who to give the property to nor what the property was.

• = Trust cannot be implemented unless you have the 3Cs in place.

Certainty:

• Courts don’t like uncertainty and redundant. Unless its clear on (intention, what the property subject to the trust is, and who the beneficiaries are) – there could exist ambiguity as its difficult to overcome. Lead to intricate legal arguments, wasting time and money.

• Courts like to have absolute certainty, to avoid potential legal entanglements.

Insolvency:

• Important – when an individual goes insolvent, an individuals property is sold off and liquidated to their creditors. Trusts will complicate this. E.g. If an individual is holding property that is supposed to be on trust for another, then that property cannot be used by the liquidator or trustee in bankruptcy to settle their debts.

• = Trust can have real detrimental effects upon creditors and problem with insolvency – courts will not therefore impose that trust vehicle unless its absolutely clear it was intended, and know what the property is, and for whom it is held on trust for.

• Become more important (with recent economic troubles) – at forefront.

• 1. Certainty of Words/Intentions:

• = Whether settlor shown clear intention to create a trust. Court will construe words used to find settlor’s intention.

  • (Trust = legally binding obligation and powerful rights/obligations, so court will not impose trust obligation against trustee or grant beneficiaries those powers, unless absolutely clear (the settlor) he absolutely intended to create that obligation).

• = Technical words are not required (maxim: ‘equity looks to intent rather than to form’):

  • i.e. word ‘trust’ need not necessarily be used for trust to be created. Question only whether in substance sufficient intention to create a trust has been manifested (Re Kayford).

  • Use of word ‘trust’ suggests trust, not conclusive.

• Precatory words (how ‘certain’ is certain)

  • Distinction drawn between

  • Imperative words = showing an intention to create a legally binding obligations, which will create a trust.

  • Precatory words = merely express hope/wish, rather than imposing an obligation, will not generally create a trust.

    • Attitude to interpretation:

      • Older cases = lean towards finding a trust.

      • Newer cases = against finding a trust when precatory words used.

  • Construction of words:

  • Re Adams and the Kensington Vestry; Comiskey v Bowring-Hanbury

  • Phrases ‘in full confidence’ = may/may not impose a trust. Crucially depends on context of will to indicate testator’s intention.

    • Re Adams = testator left property ‘in full confidence… to disposal between’ children. Held – took property free from any trust in favour of children.

      • = Words don’t impose a trust = Donee takes absolutely

    • Comiskey v Bowring-Hanbury = ‘in full confidence’ context created trust.

  • Old Words:

  • Words interpreted in context of document, rather than to previous cases = same words may not have the same effect.

    • Re Hamilton = even if previous judges found same word not intended to create a trust, you can find a trust if that’s what it means.

  • Problem when words used to create trust, before change in attitude. Identical words from older case may be interpreted in same way if whole gift identically worded, because they may have been used as precedent.

    • Re Steele’s Will Trust = earlier decision followed unless clearly wrong.

  • Evidence of Intention:

  • = where no ‘document’ creating a trust, court must look at words and/or conduct of parties to see if there was an intention to create a trust:

    • Paul v Constance = Judge found intention to create trust when man told cohabitant that money in his bank was as much hers as his, so passed to her on death and not his wife. Scarman = borderline case where no ‘specific moment of declaration’ - but all discussions constituted an express declaration of trust.

  • = no trust where relevant language reveals payer of money to payee only intended debtor-creditor relationship. The payee free to mix money with own and use as he pleases rather than retain in separate fund.

    • Azam v Iqbal = mingling money with others consistent with mixed fund (segregated mixed fund held as pooled investment on trust for payers in proportionate co-owned shares).

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• Did the settlor intend to create a trust?

• = key question court asks – basic question but answer is complicated. Sometimes can’t ask settlor what they intended (mostly dead). In order to decide whether settlor did intend to create a trust, the court needs to look at evidence before them:

• Words – left before by purported settlor. In writing or parole (oral).

  • A. Look for certainty of intention in Imperative Words:

    • Powerful words that convey/impose an obligation to do something (‘you must do this’, ‘you shall do this’).

    • Or ‘I leave this property on trust’/’To my Trustees’ – imperative.

    • Don’t have to use ‘Trust’ anywhere:

      • Re Kayford = demonstrates how trust doesn’t need to be mentioned to...

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