Certainty of Intention

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Introduction to the three certainties

These certainties are fundamental to the validity of any trust (there is also a potential 4th certainty) → so if one of these certainties is uncertain the trust may be invalid

There are three certainties required for the creation of a valid express trust:

  • 1) The settlor must demonstrate a clear intention to create a trust as opposed to creating something else
  • 2) The trust property must be sufficiently segregated from other property so that the trust fund is certain
  • 3) The people who are to benefit from the trust must also be identified with sufficient certainty

These forms of certainty are commonly referred to, respectively, as certainty of intention, certainty of subject matter, and certainty of objects

Without such certainty, the trust will be held to be void → so an express trust must demonstrate these three certainties otherwise it will be void

Certainty of Intention

The words used or the circumstances in which the trust was formed must show that it was the intention of the settlor that the trustee have an enforceable obligation to carry out their wishes or instructions

  • So it must be shown that the settlor intended to create enforceable obligations on the legal owner of the property (i.e. the trustee)

‘Precatory’ words – desire, request – will not, under normal circumstances, impose more than a moral obligation on the owner. If the word ‘trust’ is used, then it will usually ensure that there is an enforceable obligation.

  • Before Knight v Knight (1840) the court was far more willing to recognise trusts, even where precatory words are used → but now precatory words will not create a trust; words now have to be imperative and unambiguous to create a trust!
  • And, the best way to make your words imperative and unambiguous, such as to create a trust, is to explicitly use the word ‘trust’
  • See the case of Lambe v Eames (1870) where the use of precatory words meant there was no clear intention to create a trust

‘In Full Confidence’

As a general rule, following Lambe v Eames, the Court will find intention to form a trust when the words are imperative rather than precatory. The use of words which impose a request on the owner to use the property for the benefit of another will not suffice to form a trust

  • The use of the phrase ‘in full confidence’ has two main cases: in one case it was held there was a trust and in the other case it was held to be a gift

In Re Adams and the Kensington Vestry (1884) a testator left property to his wife (W) by will “in full confidence that she would do what was right by his children”. It was held that the property passed to W absolutely and no trust had been created

  • The court interpreted the statement to have added only a moral obligation on the wife to use the money in a way which would benefit the children and not to place her under an obligation to hold that money as trustee for the children

In the case of Comiskey v Bowring-Hanbury [1905], however, the testator left property to his wife "in full confidence... she will devise it to one or more of my nieces as she may think fit”. So this appeared to be merely a moral obligation on the wife. However, the House of Lords held (by a majority) that a trust had been created

  • This is because the entire instrument must be construed (you must look at the whole document, and not just the phrase in isolation) → later words indicted that it was the intention of the settlor that a legally enforceable trust should be created and not just a moral obligation
  • So a trust was created because, having expressed that the property would be dealt with in full confidence (and thus looking like a moral obligation), the settlor went on to say that he directs that the property should be held on trust → so this showed there was not just a moral obligation
  • This is a fine distinction between the two cases → court will construe the will or instrument creating the trust in its entirety

S.22 of the Administration of Justice Act 1982

Except where a contrary intention is shown it shall be presumed that if a testator devises or bequeaths property to his spouse in terms which in themselves would give an absolute interest to the spouse, but by the same instrument purports to give his issue (i.e. lineal descendants) an interest in the same property, the gift to the spouse is absolute notwithstanding the purported gift to the issue.

  • This doesn't appear to ever have been applied
  • This section means that if a testator, under a will, leaves property to a spouse and then when the spouse dies the property is to go to that spouse’s children, this will NOT create a trust
  • Note: this section only applies to the testator’s spouse’s children → it doesn't apply to other relationships
    • So it has to be a will trust; it has to be the property left to the wife or husband; and the remainder, or purported trust, have to be in favour of the children → so a remainder to grandchildren, nephews, nieces, etc. would not fall under this section

So where there is a provision for the children in remainder, the part making the bequest to the beneficiary should be considered in isolation. If this part makes an absolute gift, then any subsequent qualification should not be considered as creating a trust.

E.g. “I leave my house to my wife and after her death to my children in equal shares” would not create a trust, notwithstanding the attempt to bequeath the house in remainder to the children.

  • This phrase would not create a trust because the first part is an absolute gift and the second part is an attempt to dispose of the remainder of the property – i.e. to dispose of the property given to the immediate beneficiary under the will dies
  • It does not create a trust if the original gift is to the wife and the remainder gift is to the children → so that would create an absolute bequest to the wife
  • She could therefore sell the house and abandon her children

See the case of Re Harrison (deceased); Harrison and another v Gibson and others [2005] → This case tried to apply s22 AJA 1982, but it wasn't applicable

It should be noted that s.22 is consistent with the decisions in both Comiskey v Bowring-Hanbury and Re Adams and the Kensington Vestry: in Re Adams, the gift in remainder was to the children, in which case the bequest fell within the terms of s.22 (i.e. the wife took an absolute gift and there was no obligation for her to dispose the propert to her children); in Comiskey, the gift in remainder was to the nieces, in which case s.22 does not apply.

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CONTENT

Inferred Intention

The court may infer intention to create an express trust from the words or actions of the legal owner (settlor) → there are not many cases in which the court has done this

In Twinsectra v Yardley [2002], Lord Millett said that intention is objective and NOT subjective i.e. intention is about whether the reasonable person believes the settlor intended to create an express trust

  • In other words, the settlor doesn't need to know they are creating a trust nor even know that a trust even exists
  • If their actions or words have the effect of creating a trust the court will infer intention from those words or actions

See the case of Paul v Constance [1977]: this is the best example of the court inferring intention

In the case of Re Kayford [1975] Megarry J said "it is well settled that a trust can be created without using the words 'trust' or 'confidence' or the like: the question is whether in substance a sufficient intention to create a trust has been manifested"

Note:where the circumstances are such that it would be unconscionable for the legal owner to deny the beneficial interest of the beneficiary, the court is likely to infer a constructive trust, rather than declare that there was an express trust created.

  • So, don't get confused between an inferred express trust and a constructive trust → they ARE both distinct and separate, but this distinction is not always clear!
  • So a constructive trust will be found where it would be unconscionable for the legal owner to deny a beneficial interest to a beneficiary, whereas an inferred express trust will be created where the court finds it was the settlors intention to create an express trust

The case of Jones v Lock (1865) shows that the finding of an intention to create a trust is based on the surrounding circumstances

Shams and Frauds

In some circumstances, an express declaration of trust may not form a trust, if the transaction is a sham or fraud.

  • When a purported trust is in fact a sham intended to achieve some ulterior purpose then that trust will not be valid
  • Sham trusts are used to avoid liability to tax by pretending that property is held on trust, or frequently so as to attempt to put property beyond the reach of creditors in an insolvency
  • There are a number of cases on resulting trusts in which the absolute owners of property have sought to disguise their ownership of that property, perhaps to avoid creditors, by purportedly transferring it to other people with the intention of recovering the property in the future, perhaps when their creditors have given up the chase

In Midland Bank v Wyatt [1995] a trust was attempted to be created so as to shield their property from their creditors (contrary to insolvency law)

Consequences

Where a trust fails for lack of certainty of intention, there is no trust and the legal owner takes the property absolutely. Thus in Lambe v Eames, where the widow had left the property outside the family, against the wishes of her late husband, there was no trust and the widow, who was the legal owner under the will, also held the beneficial title. Accordingly, the property was hers to dispose of as she wished.

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