Trusts – LC1: The Three Certainties
Aims:
Explain how and why the three certainties are essential to the creation of an express trust
Demonstrate a sound understanding of the requirements of the three certainties in trusts law
in relation to different forms of property and different types of express trust
Demonstrate the ability to identify relevant information and select and apply relevant law
on the three certainties to determine whether an express trust has been created and the
consequences of this
1. The Three Certainties: introduction and context
You need the three certainties to enforce the trust.
Where does the requirement of the three certainties come from?
Knight v Knight
“…First, if the words are so used, that upon the whole, they ought to be construed as
imperative; secondly, if the subject of the recommendation or wish be certain; and,
thirdly, if the objects or persons intended to have the benefit of the recommendation
or wish be also certain.” Lord Langdale MR
(1) We must have certainty of intention with the words used and the conduct of the parties, and
the question here is whether the settlor or the testator intended to create a trust, a legally
binding obligation.
(2) Certainty of subject matter = concerned with the property subject to the trust. We need to be
certain of the property subject of the trust. There are two things to look at: (a) can we say for
certain what the property is; (b) what is the beneficial entitlement of that property?
(3) Certainty of object = we need to be clear who benefits from the trust. Typically, in an express
trust we are looking at who the beneficiaries are, can we say for certain who benefits from the
trust, who holds equitable title, and who can enforce the trust?
All three certainties must be present for a trust to be upheld.
Certainty of intention; certainty of subject matter; certainty of object.
What is the relationship between the certainties?
They are distinct. When you are tackling a PQ, you will typically need to explore each in
turn. However, quite often, uncertainty in one area can cast doubt on the others.
“Uncertainty in the subject of the gift has a reflex action upon the previous words, and throws
doubt upon the intention of the testator, and seems to show that he could not possible have
intended his words of confidence, hope, or whatever they may be – his appeal to the
conscience of the first taker – to be imperative words.”
Sir Arthur Hobhouse in Mussoorie Bank v Raynor
Broadly speaking, the modern tendency of the courts has shifted toward trying to uphold a
trust wherever possible.
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2. Certainty of Intention – Video
We are looking for an existence of intention to create a legally binding obligation.
Equitable maxim – “equity looks to intent rather than form”: it is the intent of the parties
rather than the form or the way it manifests itself. Because a trust can be created by the most
untechnical of words. It is easy to create a trust (verbally, in writing, and even by conduct
alone). There are some formalities when it comes to trusts of land, which needs to be
manifested or proved by some writing under s.53(1)(b) of the LPA 1925.
How does court find intention?
It may appear from the words used or the wider circumstances.
The words and circumstances must show the settlor’s intention that the trustee is to have an
enforceable obligation to carry out their wishes or instructions.
Courts will do their best to give reasonable meaning to the words used, however obscure and
ambiguous the language (Gulbenkian).
Problem of courts – particularly when it comes to testamentary trusts, is that people quite
often write their own wills, not using the most precise language.
The settlor must intend the outcome to create a legally binding obligation but need not
appreciate that he was creating a trust.
Twinsectra v Yardley – Lord Millet says that ‘a settlor must, of course, possess the necessary
intention to create a trust. But his subjective intentions are irrelevant. If he enters into
arrangements which have the effect of creating a trust, it is not necessary that he should
appreciate that he do so. It is sufficient that he intends to enter into them’.
Looking at the words used – but keep in mind equity looks to intent rather than form.
In Re Kayford, Meggary J states that ‘[…] it is well settled that a trust can be created without
using words such as ‘trust’ or ‘confidence’ or the like: the question is whether in substance a
sufficient intention to create a trust has been manifested’.
Paul v Constance – ‘as much yours as mine’ was deemed sufficient to show the intention to
create a legally binding obligation;
Shah v Shah – ‘1 am from today holding 4000 shares […] for you’ was deemed sufficient to
show the intention to create a legally binding obligation;
Re Freud – giving assets to people in a will identified as ‘trustees’ does not necessarily
impose a trust if it is clear no trust was intended;
Town Investments v Dept of Environment; Tito v Waddell – the use of the word ‘trust’ is not
necessarily sufficient in itself to indicate intention to create a trust;
Jones v Lock; Richards v Delbridge – ‘loose conversations’ will not be sufficient.
o Richards v Delbridge – Jessel MR states that ‘you need not use the words ‘I declare
myself a trustee’, but you must do something which is equivalent to it and use
expressions which have that meaning’.
The courts tend to make a distinction between precatory and imperative wording.
Precatory words express a desire, wish, or moral (rather than legal) obligation;
o Normally insufficient to show the necessary certainty of intention;
Re Diggles: ‘it is my desire that’ (insufficient)
Re Johnson: ‘I request that’ (insufficient)
Re Adams and the Kensington Vestry: ‘in full confidence’ (insufficient)
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Imperative words convey an intention to create a legally binding obligation.
o Lambe v Eames – property had been left by the settlor to his widow ‘to be at her
disposal in any way she may think best, for the benefit for herself and her family’.
The widow gave away some property to a non-family member. The courts held she
was absolutely entitled to the property.
Context and past precedent:
Re Adams and the Kensington Vestry – The testator left property to his wife ‘in full
confidence that she will do what is right’ by their children. The question was whether this
created a trust or merely a non-binding wish.
Did this create a trust, or is it just an absolute gift with a non-binding wish?
The court decided that there was not enough to find certainty of intention.
Cominsky v Bowring-Hanbury – In this case a testator left property to his wife:
“absolutely, in full confidence that she will make such use of it as I should have made myself,
and at her death she will devise it [to our nieces], in default of any disposition by her […] I
hereby direct that all my estate and property […] shall at her death be divided among the
surviving nieces.”
The court held there was sufficient intention to create a legally binding obligation.
‘in default of…’ – further instructions. This is a key distinction, where we have that kind of
imperative language being used, the additional mandatory direction.
What happens if a case follows previous precedent (historic precedent) that would now be
considered as precatory?
Re Steele’s WT – a provision in the testator will used specific wording using old precedent
from Shelley v Shelley. The argument was that the wording in Shelley itself was outdated and
would now be considered precatory. However, the fact that old precedent was directly used to
the letter, with obviously the intention to create a legally binding obligation, was enough in
itself to demonstrate certainty of intention.
Lack of certainty of intention = there is no trust.
Question remaining is what happens to the property – two things can happen:
(1) If property is transferred to another that person will take absolutely (Lambe v Eames);
(2) If insufficiently certain purported declaration of trust than the owner remains absolute owner.
3. Certainty of Intention – Readings
Virgo, pp.74-79, 88
Capacity to create a trust – no child, no mentally incapacitated person.
Whether a trust was intended is to be assessed objectively rather than subjectively, by
reference to the terms of any agreement or the relationship between the parties. This means
that rather than being concerned with what the creator of the trust actually intended; we are
concerned with what the reasonable person would conclude that the creator of the trust
intended. So, the court can infer an intent to create of the trust intended.
Lord Upjohn in Re Gulbenkian – “It is then the duty of the court by the exercise of its judicial
knowledge and experience in the relevant matter, innate common sense and desire to make
sense of the settlor’s … expressed intentions, however obscure and ambiguous the language
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