The Three Certainties Notes

The Three Certainties

• Knight v. Knight (1840); + Lord Langdale - To be valid as a trust there must be:

1. Certainty of intention to create a trust – Is a trust intended as a q. of fact?

2. Certainty of subject-matter – What property is to be subject to the trust and what are the beneficial interests?

3. Certainty of objects – Who are the beneficiaries of the trust? (charitable trusts do not need to satisfy this requirement)

• Why are these requirements necessary?

• The essential elements of the trust relationship must be defined with sufficient certainty to enable the T or donee of the power, or by default the court, to carry out his/her duties. Ts must know what their obligations are under the trust. The settlor cannot put the T under a duty to do something that is too vague to be legally enforceable or that is practically unworkable, given the nature of the trustee’s duties and their liability for breach. Certainties provide T with a degree of protection.

• The certainty rules have to strike a balance: the settlor’s freedom to express his or her intentions about how the trust is to work must be set against the need for the trust to be workable as a trust.

NB. A trust still has to comply with the extra formality requirements to be valid.

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1. Certainty of Intention to Create a Trust

Test: In all cases, it is a question of proving that the settlor intended to impose a legally binding obligation on the trustee to hold and manage the property on behalf of the B.

Equity looks to intent, rather than form. This is a question of construction of the relevant documents or of gathering inferences from the words or conduct of the alleged settlor, considering all the circumstances of the case.

Administration of Justice Act 1982, s.21: Extrinsic evidence, including evidence of the T’s intention, may be admitted to assist in the interpretation of a will.

Use of the word ‘trust’

• Kinloch v. S of S for India; There is no magic in the use of the word ‘trust’.

• Re Harrison (2005); In relation to a will Hart J said, that the mere facts that the words ‘in trust’ had been used was not, in itself, inconsistent with an intention that the testator’s wife should be the absolute beneficial owner. A strong context is required to deny the prima facie construction of the word ‘trust’.

• Re Harding [2007]; Lewison J noted that Hart J decided that the words ‘in trust’ in the will that he was considering were incompatible with an absolute gift.

Imperative or precatory language? Since Lambe v. Eames (1871), the courts have generally made a distinction:

• Imperative words express a command, a duty to do something. Use of such words indicates that a trust (or power) is intended.

• Precatory words express a hope, a wish, or a moral obligation that the donee will deal with testator’s property in a particular way. Use of such words typically indicates that a gift is intended. There is no intention to impose a binding trust on that person.

Modern attitude - No trust is created by precatory words:

• Lambe v. Eames (1871); ‘to be at her disposal in any way she may think best, for the benefit of herself and her family’.

• Re Adams (1884); Held there was no trust created by a testator who gave all of his property to his wife ‘in full confidence that she would do what is right as to the disposal thereof between my children, either in her lifetime, or by will after her death’.

+ Cotton LJ: ‘Undoubtedly confidence…may make a trust, but what we have to look at is

the whole of the will which we have to construe’.

• Re Diggles (1888); ‘it’s my desire that she allows A an annuity of 25 during her life’.

But note:

• Comiskey v. Bowring-Hanbury [1905]; The presence of precatory words will not necessarily prevent the court from finding that a trust exists, as long as it is satisfied that this was the donor’s intention. Here, reading the ‘full confidence’ section as precatory, later words suggested H intended to convey a life interest to W.

• Staden v. Jones [2008]; Ct may also take into account surrounding evidence which sheds light on the parties’ intentions. Here the CA looked to a solicitor’s covering letter to conclude that a divorcing couple’s arrangement that the W transferred her share in the family home to the H on the basis that their daughter should ultimately be entitled to her share amounted to a constructive trust.

Conduct:

• Paul v. Constance [1977]; An intention to create a trust can also be inferred from the donor’s conduct.

Facts: Dispute over whether Mr C’s wife (from whom he was separated but not divorced) or his new partner, Mrs P, was entitled to money held in a bank account in the deceased’s sole name. During their relationship Mr C had made arrangements for Mrs P to withdraw money with his permission. Only Mr C withdrew money once, which was split evenly between them and he often told Mrs P that the money was ‘as much yours as mine’. They also paid some joint bingo winnings into the account.

Decision: Held these actions were sufficient to infer that Mr C had made a declaration of trust of the money in the account and Mrs C was entitled to half of the account.

• Re Kayford Ltd (in liquidation) [1975]; The separation of customers’ money, paid for the future supply of goods, into a different bank account was deemed sufficient to demonstrate an intention to create a trust pending delivery.

The effect of lack of certainty of intention

• Lassence v. Tierney (1849); Donee will take property absolutely as a gift if no intention.

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2. Certainty of Subject-Matter

There are two elements to certainty of subject-matter:

1. It must be clear what property is held on trust; and

2. The beneficial interests of the cestuis que trust must be certain and clear.

Issue: + G. Williams (1940): Requirement of certainty of subject-matter is somewhat...

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