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Certainty Of Intention Essay Examples

There are several types of trust and the most common is an express trust. Within this category of trusts are both fixed trusts and discretionary trusts. A fixed trust is where the trustees have no choice as to who the beneficiaries are or how much they receive. With a discretionary trust, they distribute the trust property as they see fit however, they must distribute it as they cannot keep it for themselves.

For an express trust to be valid there has to be three certainties. These are certainty of intention, certainty of subject matter, and certainty of objects. Without these certainties, an express trust will not be valid. The purpose of these certainties is to ensure the trust is properly controlled and enforced.

Certainty of intention

The key test established whether the requisite intention is present is to consider whether the creator of the trust wanted someone to be under a duty to hold property for the benefit of another person. The use of the word ‘trust’ need not be present to show certainty of intention. However, when it is used, it may not show certainty of intention depending on the context. The court will look at the substance of the creator’s intent to see if they wanted to impose an obligation or request the trustees do something. If it is merely a request, precatory words will be evident, for example ‘wishes’, ‘requests’, ‘confident’. The question of intention is assessed objectively, having regards to the opinion of the reasonable person.

In Re Gulbenkian [1970] AC 508, Lord Upjohn said that in cases of ambiguity the court must use ‘innate common sense and desire to make sense of the settlor’s… expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language’. Certainty of intention is a problem in situations where there is a self-declaration of trust. In Jones v Lock [1865] 1 Ch App 25, a father received a cheque for £900 and said he would ‘put it away for’ his son. This was held not to show sufficient intent to create an express trust. Lord Cranworth noted that it would be dangerous ‘if loose conversations of this sort’ declared a trust. In relation to commercial matters, there is a reluctance of the courts to find a trust arising from a commercial relationship. However, if the necessary intention is present, a trust will be found.

If there is an absence of certainty of intent to create a trust, there will be no valid declaration of a trust. If the creator of the purported trust transferred property to someone else, the trustees, they may take the property beneficially. However, if the creator intended a self-declaration of trust, this is of no legal effect at all.

Certainty of subject matter

Trusts can be declared over all kinds of property, including intangible property such as covenants or debts. However, the subject matter must be clearly defined in the trust instrument. This is a question of fact. If the creator has described the property as the ‘bulk’ of something, Palmer v Simmonds [1854] 2 Drew 221 said this was not sufficient to constitute a certain subject matter. This is because ‘bulk’ cannot be defined. However, according to the decision in Re Last [1958] P 137, ‘anything that is left’ of the testator’s estate was held to be sufficiently clear.

As well as the property being defined, the property must be able to be identified; if it cannot be identified the trust will be void for uncertainty. The leading case on this area is Hunter v Moss [1994] which provides a distinction between tangible and intangible property. This is distinguished from Re London Wine Co (Shippers) Ltd [1986] PCC 121, because Hunter v Moss was concerned with intangible property (shares in a company), and Re London Wine was concerned with the appropriation of chattels and the passing of the legal title. However, the principle in Hunter v Moss can be practically difficult as it is not possible to identify the rationale behind how the trust works in practice.

If there is an absence of certainty of subject matter, the consequences will depend on the kind of uncertainty. If the identity of the trust property is not certain, the trust cannot be attached to any property. Therefore if part of a property is to be held on trust for a beneficiary, and the identity is uncertain, the trustee will obtain the property absolutely. However, if it fails for uncertainty in the way the property is divided up between the beneficiaries, a resulting trust will occur as it is evident that the creator of the trust did not want to give the property to the trustee outright.

Certainty of objects

The objects of a trust will depend on the type of express trust in question. This is quite a complicated area so I will just explain the different tests used to ascertain certainty of objects. For fixed trusts, it must be possible to identify exactly who all of the beneficiaries are in order for the trustees to distribute the property correctly. This is known as the ‘complete list test’. What this means is that a full list of all the beneficiaries must be able to be drawn up when the property is to be distributed, it is not necessary to draw up a complete list when the trust is created.

For fixed trusts subject to a condition, the test of certainty will vary depending on whether it is a condition subsequent or a condition precedent. For a condition subsequent, that is a condition which if it is satisfied, the beneficiary is no longer entitled to the trust property, there must be certainty as to the condition from the outset of the trust. For a condition precedent, that is a condition which must be satisfied before the property is distributed, it will be valid if it can be said that just one person satisfies the condition.

For discretionary trusts, it is important to have certainty of objects so the trustees know who to consider when deciding how to distribute the trust property. Originally the test for discretionary trusts was the same as that for fixed trusts – the ‘complete list test’. However, this caused many problems for discretionary trusts as there are usually more potential beneficiaries for discretionary trusts compared with fixed trusts. This led to the creation of, as some call it, the ‘is or is not’ test. This means that the potential beneficiary will have to show that they fit within the description of the objects. This is easier than the complete list test because if one person cannot prove they are a potential beneficiary the trust does not fail for uncertainty, it is just the individual who did not satisfy the requisite criteria is not entitled to be considered to receive the trust property.

If no certainty of objects can be ascertained, the trustee will hold the property on trust for the settlor – this is a resulting trust. This means the settlor can demand the legal title back from the trustee and then create another, this time valid, trust. If the trust is testamentary, the trustee will hold the property on trust for the benefit of those entitled to the residuary estate of the deceased.

This article looks at the requirements and formalities for a valid trust. In UK law, a trust is an arrangement involving three classes of people; a Settlor, Trustees and Beneficiaries. The Settlor is the person who transfers property to the Trust.

The Trustees are people who legally own the Trust Property and administer it for the Beneficiaries. The Trustees’ powers are determined by law and may be defined by a trust agreement. The Beneficiaries are the people for whose benefit the trust property is held, and may receive income or capital from the Trust.

“No particular form of expression is necessary for the creation of a trust, if on the whole it can be gathered that a trust was intended”. This statement gives the impression that no formalities are needed, and could be misleading. Although equity generally does look to intent rather than form, mere intention in the mind of the property owner is not enough. For a valid trust to exist, the Settlor must have the capacity to create a trust. He must validly transfer the trust property to a third party trustee or declare himself trustee. Further, he must intend to create a trust, and must define the trust property and beneficiaries clearly. This is known as the ‘three certainties’; certainty of subject matter, certainty of objects and certainty of intention.

Certainty of intention refers to a specific intention by a person to create a trust arrangement whereby Trustees (which may include himself) hold property, not for their own benefit but for the benefit of another person.

It is clear when trusts are created in writing and on the advice of legal professionals that intention is present [Re Steele’s Will Trusts 1948]. However, no particular form of words is needed for the creation of a trust and here the equitable maxim, “Equity looks to intent rather than form”, applies. It is therefore sometimes necessary for the Courts to examine the words used by the owner of the Property, and what obligations if any the Owner intended to impose upon those receiving the Property.

It is not necessary that the Owner expressly calls the arrangement a trust, or declares himself a trustee. He must however by his conduct demonstrate this intention, and use words which are to the same effect [Richards v Delbridge 1874]. For example, in Paul v Constance 1977, Mr Constance did not expressly declare a trust for himself and his wife, but he did assure his wife that the money was “as much yours as mine”. Additionally, their joint bingo winnings were paid into the account and withdrawals were regarded as their joint money. The Court therefore found from Mr Constance’s words and conduct that he intended a trust.

Certainty of intention is also known as certainty of words, although it has been suggested a trust may be inferred just from conduct. Looking at Re Kayford 1975 1All ER 604, Megarry J says of certainty of words, “the question is whether in substance a sufficient intention to create a trust has been manifested”. In this case, Kayford Ltd deposited customer’s money into a separate bank account and this was held to be a “useful” indication of an intention to create a trust, although not conclusive. There was held to be a trust on the basis of conversations between the Company’s managing director, accountant and manager so words were necessary for the conclusion.

In contrast, where the word ‘trust’ is expressly used, this is not conclusive evidence of the existence of a Trust – the arrangement may in fact constitute something very different [Stamp Duties Comr (Queensland) v Jolliffe (1920)]. For example, the deed may contain wording such as “On trust, with power to appoint my nephews in such shares as my Trustee, Wilfred, shall in his absolute discretion decide, and in default of appointment, to my friend George”. Although professing to be a trust, Wilfred is not under an obligation to appoint the nephews and provision is made for the property to pass to George if he does not. This is therefore a power of appointment, not a trust [eg. Re Leek (deceased) Darwen v Leek and Others [1968] 1 All ER 793].

Sometimes in a will, the owner of Property will use ‘precatory’ words such as expressing a ‘wish, hope, belief or desire’ that the receiver of property will handle it a certain way. For example, in Re Adams and Kensington Vestry 1884, a husband gave all of his property to his wife, “in full confidence that she will do what is right as to the disposal thereof between my children…”. The Court held that the wife may have been under a moral obligation to treat the Property a certain way but this was not sufficient to create a binding trust. Precatory words can still sometimes create a trust. In Comiskey v Bowring-Hanbury 1905, the words ‘in full confidence’ were again used, but the will also included further clauses, which were interpreted to create a trust. The Court will look at the whole of the document to ascertain the testator’s intention, rather than dismissing the trust because of individual clauses.

There are further formalities required for certain types of trust property, and for a trust to be valid, title to the trust property must vest in the Trustees, or, the trust must be “constituted”. This might be done for example, by delivery for chattels or by deed for land. If the trust is not properly constituted, the supposed beneficiaries have no right to compel the Settlor to properly transfer the Property, as ‘equity will not assist a volunteer’. The exception to this is where the beneficiary has provided consideration (including marriage) for the Settlor’s promise, in which case, there would be a valid contract and the Beneficiary could sue for breach.

Where a testamentary trust of land or personalty is purported, the will in which it is contained must be in writing and executed in accordance with Section 9 of the Wills Act 1837, which means the Will must be signed by the Testator in the joint presence of two witnesses, and then signed by the two witnesses in the presence of the Testator.

Where a Settlor wishes to create an inter vivos trust of personalty, the formalities are minimal. Besides the usual requirements for a trust (capacity, the three certainties e.t.c), the Settlor must observe any formalities required to properly transfer the Property to the trustees – for example, the execution and delivery of a stock transfer form for shares.

To create an inter vivos trust of land or of an equitable interest in land, in addition to the formalities of transferring the land, the declaration of trust must be in writing and must be signed by the person able to create the trust – i.e., the Settlor or his attorney [S.53(1)(b) Law Property Act 1925]. Where this formality is not complied, the Trustee would hold the land on trust for the Settlor rather than the Beneficiary. The exception is where the rule in Strong v Bird 1874 applies – the Settlor intended to make an immediate unconditional transfer to the Trustees, the intention to do this was unchanged until the Settlor’s death, and at least one of the Trustees is the Settlor’s administrator or executor. In this case, as the property is automatically vested in the Settlor’s personal representatives and the trust is constituted.

It is sometimes stated that no particular form of expression is necessary to create a trust if intention was present. Clearly this is not the case. There are formalities for creating inter vivos land trusts and testamentary trusts and if these are not followed, the trust will fail unless consideration has been provided or the rule in Strong v Bird 1874 applies, even if the Trustee had the best intentions. Further, the form of words used in those formalities must be clear and unambiguous, or they may not amount to a trust. He goes on to say that ‘a trust may be created without using the word “trust”‘ and this is true in that other words and conduct to that effect are sufficient. However, the Court does not just regard the ‘substance’ of the words. If the wording used does not meet the ‘three certainties’ or, for example, the person making the declaration does not have the capacity to make a trust, the trust will fail. This is clearly not the desired ‘effect’ and not the owner’s intention.

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