Three Certainties Notes

Certainty

S = settlor, T = trustee, B = beneficiary

Three certainties necessary to create a valid express trust:

1. Certainty of intention

2. Certainty of subject-matter

3. Certainty of objects

Certainty of intention identifies the reason for recognising a trust.

Certainty of subject-matter and objects ensure that the trustees and the court have sufficient information to give effect to the trust intended by the settlor.

NB: Uncertainty in subject matter and/or objects may reflect a lack of intention to create a trust, i.e. that the purported settler did not intend his directions to have legal effect or that he had not fully made up his mind.

The courts have distinguished between different kinds of uncertainty:

1. Definitions

   1. Where the definition is imprecise or ambiguous, there is conceptual / semantic / linguistic uncertainty, e.g. a trust in favour of one’s “friends”.

2. Application

   1. Where there is insufficient factual information to determine what people or things match the definitions given, there is evidential / factual uncertainty.

      1. Where it is necessary to know from the outset how many things or people match the definitions, the issue is enumerability.

      2. Where the whereabouts or continued existence of Bs or potential Bs is unclear, there is the issue of ascertainability.

A complete lack of certainty about either subject-matter or objects will preclude a trust from arising, but a degree of uncertainty may be tolerated.

The three certainties…

1. Certainty of intention (Paul v Constance)

   1. There must be evidence of an intention to create a trust from “the various things that were said and done by [the parties] during their time together against their own background and in their own circumstances” (Scarman LJ in Paul v Constance, where S assured B that “the money is as much yours as mine” and they paid their joint bingo winnings into that bank account and also withdrew money which they split between them).

      1. The use of technical legal language is not necessary, but creates a strong presumption of an intention; “the question is whether in substance a sufficient intention to create a trust has been manifested” (Megarry J in Re Kayford).

      2. Precatory words expressing the wish/hope that the recipient will use the property for the benefit of some named individual is insufficient as it imposes no legal obligation (Lambe v Eames)

   2. An intention to make an outright gift is insufficient to establish an intention to create a trust (Richards v Delbridge) equity will not perfect an imperfect gift (outright transfer).

      1. BUT: In Choithram International v Pagarani, the use of the words “I give to the foundation” was held to create a trust, despite the use of the word ‘give’. The words were held to be an announcement that S was transferring his property to the trustees named in the trust deed.

   3. Bs’ property must be separated from T’s own property, but the Bs’ property can be mixed together.

      1. BUT: Exceptionally, a trust exists even where the trust property is mixed with T’s own property if S intended the trust property to be treated differently from his other property (Re Kayford, where S decided it would not make further deposits of its own money into the ‘trust’ account nor would it make withdrawals from that account for its own use and enjoyment).

      2. A duty to segregate the trust property is a good indication that a trust was intended (Channell J in Henry v Hammond), while “the absence of such a requirement, if there are no other indicators of a trust, normally negatives it” (Watkins LJ in R v Clowes).

   4. A contract for the benefit of a third party is not to be mistaken for a trust; “it is not legitimate to import into the contract the idea of a trust when the parties have given no indication that such was their intention” (Greene MR in Re Schebsman).

      1. Du Parcq LJ at (104) stressed the importance of keeping alive the parties’ CL right to vary the terms of the contract and only finding an intention where the language and circumstances clearly indicate one.

   5. Objective or subjective approach?

      1. Lord Millett in HoL at [71] of Twinsectra v Yardley asserted that an objective approach should be taken: would the reasonable person have inferred from S’s words and conduct an intention to create a trust?

         1. BUT: The case law shows the courts prefer a subjective approach, e.g. where proving the purported trust is a sham, e.g. Midland Bank v Wyatt.

         2. BUT: The reason for objectivity in contract law is to protect the other party, who will tend to rely on what he reasonably believes A’s intentions to be. A trustee will not rely in the same way.

2. Certainty of subject-matter (Re London Wine Co, Re Goldcorp)

   1. Any asset that can be transferred outright can form the subject-matter of a trust, e.g. physical things, debts, shares, IP, etc.

   2. Referring to ‘the bulk’ of S’s residuary estate is insufficiently certain (Palmer v Simmonds), but requiring ‘a reasonable income’ to be paid to B is sufficiently certain because S intended the term to be understood objectively (Re Golay)

   3. “To create a trust it must be possible to ascertain with certainty not only [1] what the interest of the beneficiary is to be, but [2] to what property it is to attach” (Oliver J in Re London Wine Co).

      1. It follows that S must identify BOTH the source of the trust property AND which individual assets from the source (Re London Wine Co, where there was nothing to identify which particular bottles of wine belonged to which purchaser, AFFIRMED by Re Goldcorp)

         1. BUT: When all the individual assets from the designated source are identical (i.e. fungible assets), there is no need to specify which individual assets are to be held on trust provided (i) S identifies the source of the relevant property among his existing assets, and (ii) the collection of assets from this source are homogenous (Hunter v Moss, applied in Re Harvard). For example, ‘50 of my shares’ is insufficient unless S only has shares in 1 company or S indicates which company he means.

            1. BUT...

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