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Law Notes Trusts and Equity Notes

Certainties Notes

Updated Certainties Notes

Trusts and Equity Notes

Trusts and Equity

Approximately 1016 pages

Equity notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB trusts cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Equity and Trusts Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest re...

The following is a more accessible plain text extract of the PDF sample above, taken from our Trusts and Equity Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

THREE CERTAINTIES

All trusts must satisfy three certainties:

  1. Certainty of intention: question of fact and the courts will consider the whole context.

  2. Certainty of subject matter: certainty as to what property is held on trust / beneficial interests involved. Complicated when some of the trust property is unascertained goods.

  3. Certainty of objects (charitable trusts are exempt from this requirement).

  • Fixed trust: will be certain as to its objects if a complete list of beneficiaries can be compiled.

  • Discretionary trust: will be certain as to its objects if it can be said with certainty that any given individual is / is not a member of the class.

Important that a trust satisfies the three certainties for two reasons:

  • Trustees must know what their obligations are under the trust.

  • Satisfying three certainties ensures that, if necessary, the court will be able to administer the trust.

Although we look at these separately, in many cases they overlap—for example, uncertainty as to the subject matter casts uncertainty on the intention to create a trust.

CERTAINTY OF INTENTION

The key requirement of an express trust is that the settlor intended to create a trust. In working out what was intended, a number of indicators should be looked for. If there is insufficient certainty of intention then the gift takes effect as an absolute gift and no trust will be held to exist.

Imperative / precatory language?

Question is whether, on a proper construction of the words, the settlor shows an intention to create a trust. His subjective intentions are irrelevant.

In the older cases, the courts accepted that precatory words could evidence the necessary intention.

  • Precatory words express a hope / wish / moral obligation. The use of such words typically indicates that a gift is intended.

  • Imperative words: express a command —a duty to do something. The use of imperative words indicates that a trust (or power) is intended.

However, the attitude of the courts changed in Lambe v Eames, where the CA found imperative words to be necessary:

  • Lambe v Eames [1871]: testator gave his estate to his widow “to be at her disposal in any way she may think best, for the benefit of herself and her family.” The widow gave part of the estate to an illegitimate son. CA (Mellish LJ): there estate was a gift to the widow and not a trust, therefore her disposition to the son was valid.

Whether a trust is intended is always a question of interpretation:

  • Re Adams and the Kensington Vestry [1884]: Testator provided in his will that he left his estate“to the absolute use of my wife… in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease.” Was it a gift or trust? CA (Cotton LJ): no trust —he intended to leave the property to his wife absolutely. Previous case law had gone too far in accepting precatory language as sufficient evidence of intention to create a trust.”

  • Must look at true effect of words: “we must not rely upon the mere use of any particular words, but, considering all the words which are used, we have to see what is their true effect, and what was the intention of the testator as expressed in his will.”

Although a contractual promise can form the subject matter of a trust, the mere fact that a third party is the beneficiary of such a promise does not mean that the promise is held on trust for them:

  • Re Schebsman [1944]: S was dismissed by employer and agreed to terms of compensation with employer —sums totalling 5,500 would be paid on an annual basis. Contract stated that, if S died before all sums were paid, his wife would be paid remaining sums. S died bankrupt. Did contract create a trust in favour of the wife, or did remaining money vest in trustee in bankruptcy. CA: contract did not create a trust in favour of the widow. No express intent to create a trust. [Express] trusts can arise only from the intention to create a trust expressed by … person to be considered its founder …. There must be an intention duly carried into effect.” Although, note, that the money did not form part of S’s estate —company was bound to pay money to Mrs. S.

Conduct (objective test):

The above cases concerned finding intention to create a trust in the wording of a document. However, in cases where there is no document to construe, conduct will show a trust if, objectively assessed, the conduct was enough to show that a trust was intended.

Paul v Constance [1977]

  • Facts: Deceased was separated from his wife and began a relationship with P until his death. Deceased deposited money in a bank account in his name, from which P could withdraw money. Some of P’s money also deposited in account. Deceased said to P many times that “the money is as much yours as it is mine.” P claimed the money was held on trust for her.

  • CA (Scarman LJ): there was a trust in favour of P. Conduct through repeated assertions that the money was both of theirs was enough to create an express trust. This is an objective test of whether the conduct is enough to show that a trust was intended. “There must be a clear declaration of trust and that means there must be clear evidence from what is said or done of an intention to create a trust”.

Limit: Scarman also noted that “it might, however, be thought that this was a borderline case. Virgo: suggests that this case is probably the limit of how far the courts will go to find a sufficiently certain intention to create a trust. Gardener: this case illustrates the importance of context —in family circumstances, where there is no legal advice, courts may be more ready to find necessary intention.

CERTAINTY OF SUBJECT MATTER

There are two elements to the certainty of subject matter: (i) it must be clear what property is held on trust; (ii) the beneficial interest must be clear.

If trust fails for lack of certainty of subject matter, the transaction is null —no property is transferred.

Two areas of difficulty:

  • Vague or...

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