This document covers the three certainties that are required for a validly constituted trust. Examples of where trusts were held valid or invalid, and the distinction between a trust and power are evident within the document. Reference is made to cases where marks for analysis can be given, and thi...
Creation of an Express Private Trust - The Three Certainties
1. Certainty of intention – you sure you want to open a trust?
2. Certainty of subject matter – what’s going inside
3. Certainty of objects – who is it for?
Certainty of Intention
Are we sure the settlor intended to create a trust or something else?
Compare:-
(a) Bill says to Bert “I am giving this money to you for you to hold on trust for your
children”.
(b) Bill says to Bert “I am giving this money to you and you can spend it as you wish on
yourself or your children”. – no legal enforceable duty and Bert can spend it without any
legal ramifications
Which of these do you think imposes a binding obligation, or duty, on Bert?
Examine the words used
IMPERATIVE WORDS – commanding words (I direct, It is your duty, I command – an
obligation of a trust is intended
VERSUS
PRECATORY WORDS – (I hope, I desire, I request, I beseech) – do not show enough certainty
to create a trust – you need more than a request to make a trust
EXAMPLES:
Lambe v Eames (1871) Ch App 597
A gift by Will to a wife “to be at her disposal in any way she may think best, for the
benefit of herself and her family?”
HELD: No trust created – not enough certainty of intention
Re Adams and Kensington Vestry (1884)
A gift by Will to a wife in full confidence that she will do what is right as to the
disposal thereof between my children
HELD: No trust
,Re Diggles (1888) 39 Ch D 253
A gift by Will to daughter, adding “And it is my desire” that she pays some money
each year to someone else
HELD: No trust – not enough certainty
Gold v Hill [1999] 1 FLR 54
Had life insurance policy – had a wife and children
Instruction to friend (who would receive some insurance moneys on death of client)
“If anything happens to me you will have to sort things out. You know what to do.
Look after Carol and the kids. Don’t let that bitch (wife) get anything”
HELD: YES – trust was created – there was an obligation on the friend
Shah v Shah [2010] EWCA Civ 1408
A letter written in the following terms:
“Dear Mahendra
Re Mister Dee International PLC
This letter is to confirm that out of my shareholding of current 12,500 in the above company
I am as from today holding 4,000 shares in the above company for you subject to you being
responsible for all tax consequences and liabilities [arising] from this declaration and letter.
Yours faithfully, Dinesh”
After sending the letter, he changed his mind and wanted to keep the shares
Tried using ‘every effort’ test and said because he hadn’t signed any stock transfer
form it was an imperfect gift – claimed it was failed gift
Q: are these words in the letter showed enough certainty of intention to create a
trust
HELD: He used words such as ‘I am holding’ – a trust was created – certainty of
intention was present
But note:-
Comiskey v Bowring-Hanbury [1905] AC 84
A gift by Will to wife “absolutely in full confidence that she will make such use of it as
I should have done myself and that at her death she will devise it to such one or
more of my nieces as she may think fit and in default to be divided equally between
the nieces”
HELD: trust was created – those words taken TOGETHER imposed a trust obligation
But note different construction of precatory words prior to Lamb v Eames.
Then courts were more willing to regard these precatory words as having certainty
of intention.
But this is no longer the correct approach.
, Precatory words nowadays do not show enough intention to create a trust
Re Hamilton (1895) 2 Ch 370 It is a question of construction in each case – it’s the court’s
job to construe the words in each case and NOT be bound by precedent
Nevertheless there are some inconsistencies with this:
Re Steele’s Will Trusts [1984] Ch 603
A testatrix directed one of her necklaces should be held on trust for the sons – like a
family heirloom
Words: I request my son to do all in his power to give effect to this wish
Solicitor copied these precatory words previously – so the judge in Re Steele said he
was bound by the earlier precedent, so he had to call it a trust
Cases where words are written down – e.g. in a will, letter or trust deed – you must look
carefully at the words to ascertain the intention behind them
Analyse words used to ascertain settlor’s/testator’s intention.
There is a rule of evidence that you’re not allowed extrinsic evidence as is not admissible
HOWEVER
(though note s21(1) Administration of Justice Act 1982 for wills, and now more willingness
to allow extrinsic evidence to resolve ambiguities)
Conversations and conduct can be analysed to ascertain whether there is
certainty of intention
What if NOTHING is written down?
Paul v Constance [1977] 1 WLR 527
They would look at conversations between the people
Oral words and conduct can be enough to show certainty of intention
Jones v Lock (1865) 1 Ch App 25
Court held he had not made an effective gift – however, had he shown enough
certainty of intention to declare himself a trustee of the cheque?
Court: NO TRUST – the words he used did not show certainty of intention
‘Loose conversations’ don’t create a trust – there were no imperative words
Rowe v Prance [1999] 2 F.L.R 787
Mr Prance – married man had been having affair for 14 years
He told her he would divorce his wife and sail around the world in the yacht
Yacht was purchased – but it was only registered in Mr Prance’s name
Always referred to it as ‘our yacht’
Mr Prance – did NOT divorce his wife – and fell out with Ms Rowe
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