According to the low case Milroy v Lord, there are two ways to create a trust. The first way is a self-declaration as trustee. The second way is transfer to trustees the property on trust. In both of these ways, according to Knight v Knight, the certainty of subject matter, certainty of invention, and certainty of objects must be presented to create a valid trust. If at least one of three certainties is default, a trust will be invalid. But according to Paul v Constance, only the certainty of intention will be sufficient to form a trust. In Hunter v Moss the certainty of subject matter is necessary to create a valid trust.
Certainty of Intention
This term means that both parties intend on creating a trust and do it in writing form. The establishing an intention does not need any particular formula or special words. But sometimes it is not enough to create a trust using the precatory words or the words, which express a wish or hope. The intention is present, if the word trust is written in the agreement. If this word is placed in the agreement, it helps clearly express the intention and will not give rise to a different meaning.
In Re Adams and Kensington Vestry, the testator gave all his property to his wife in full confidence that she will do what is right as the disposal thereof between my children either in her lifetime or by will after her decease. His words in full confidence did not clearly express his intention: to transfer his property to his wife absolutely, or to distribute it between his children. His wife took all his property as a gift, because the trust was not valid and the court decided that these words expressed only moral duty.
By contrast with this case, in Comiskey and others v Bowring-Hanbury and Another, there is other case about settlors will. The testator transferred his property to his wife: absolutely in full confidence that she will make such use by her will or testament I hereby direct that all my estate and property acquired by her under this my will shall at her death shall be equally divided among the surviving said nieces. This time the court held that his words in full confidence expressed his particular will and decided that it was a trust. The words I hereby direct, shall, shall be equally divided showed the intention of the settlor to give the property absolutely to his wife during her lifetime and, after her death, his nieces were entitled to benefit property to a selection by his wife. That is why, in this case, the trust was created.
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In Re Steels Trusts the settlors will was: I request my said son to do all in his power by his will or otherwise to give effect to this my wish. This form of words had been taken from Shelley v Shelley, which taught how to create a valid trust.
The case low, which is presented in Paul v Constance, is a very specific case. Mrs Constance brought the claim after the death of Mr Constance, because she thought that the money in a bank account should not pass her next of kin. At that moment she was living with Mrs Paul. Once, Mr Constance stated to Mrs Paul: the money is as much mine as yours. It was not a will or document. These words did not clearly show the intention of Mr Constance to create a trust. But the court held that on many occasions between Mrs Paul and Mr Constance constituted an express declaration of trust. It was very difficult to detect the moment of declaration and it was a borderline case. Mr Constance created a trust, perhaps even, unknowing about it. But his unknowing would not bear legal liability forhis words. The case Paul v Constance showed the efficacy of this certainty.
Certainty of Subject Matter
The settlor, creating a valid trust, first of all should make it certain. Then he must identify a definite, clear and certain part of his property. Also he needs to know that the trust will be valid, if it is possible to indentify the property subject to the trust.
In Re London Win Con Ltd, customers bought wine in a company, which retained the possession of the wine. They paid for it, as well as for warehouse charges. A company gave the customers certificates of title. According to these certificates, the costumers were the owners of the wine. But there was no physical segregation or actual earmarking of the wine, which was sold to the costumers. That is why a trust is not valid, because there is not any certain subject matter. The analogical situations are presented in Mac-Jordan Construction Ltd v BrookmountErstin Ltd and Re Goldcorp Exchange Ltd.
In Hunter v Moss, Moss held Hunter, who was his employee, fifty shares in his company on trust and could not provide them. The employee brought a claim against him. The shares were the subject of the trust and it was not possible to indentify them, but the court upheld the trust. The court made this decision, because there was the difference between intangible assets and tangible assets. The first are shares, and the second is, for example, wine. Also was a distinction between shares and trusts of chattels. The last argument has been criticised. Many people did not see a distinction between chattels and shares. According to this case, the property, which is intangible, does not need the certainty of subject matter.
Certainty of Objects
It is necessary that the beneficiaries or objects of a trust be certain. For determination of certainty of objects everybody need to know two rules. All depends on whether the trust is discretionary or fixed.
A fixed trust fixes the share of each beneficiary and gives them rights of ownership. The first rule is the list test, or list of individuals. It means that the trustees should have a list of all the beneficiaries, how it is written in IRC v Broadway Cottages Trust.
The case McPhail v Doulton or Re Baden's Deed Trusts is presented as a case about the certainty of beneficiaries. This case was remitted to the High Court for clearly determination to be a beneficiary, or not, whether the trust was valid or not. The settlor left all his property on trust and left also the instructions to the trustees to allot it according to their choice, and it meant that the sharing among the beneficiaries could not be equally.
In Mcphail v Doulton, the certainty of objects test for discretionary trusts and mere powers established in the two decisions of the House of Lord, which were in the words: it can be said with certainty that any given individual is or is not a member of the class?
The owner of a mere power is free to do this his property what he wants. But if the holder can not exercise his power, the court will bring him to do so. In Re Gulbenkians Settlement Trusts, the settlor said to the trustees to trust his property to his son and any person or persons in whos his apartment may be employed. It was very uncertain and could not be enforced.
For creating a valid trust it is necessary to know the three certainties:
- certainty of intention;
The first type of certainty means that the testator wants to create a trust. It is possible to do without the word trust and it does not need to use any particular language.
- subject matter;
The second type of certainty means that it should be clear what property is part of the trust. There is difference between intangible assets and tangible assets. The property, which is intangible, does not need the certainty of subject matter. That is why they do not need for segregation.
- certainty of objects;
The final type of certainty means that it is very important to specify who the beneficiaries are.
Four Types of Uncertainty
|Conceptual uncertainty||The conceptual uncertainty means that the trust is indistinct and unclear terms are used. For example: useful employees or good customers.|
|Evidential uncertainty||Evidential uncertainty is when an applicant cannot prove his beneficence.|
|Ascertainability||Ascertainability is when it is not possible to find the beneficiaries, because they moved, died or changed their names.|
|Administrative unworkability||The last type of the uncertainty is administrative unworkability, when the trust is so unreasonable that it is impossible for the trustees perform their duties.|
Three Ways for Resolving These Problems
- To find the expert, who can advise as to who is or is not a beneficiary,
- To allow the trustees to indentify who is or is not a beneficiary,
- To permit the trustees to give the property to anyone, it can help to lower the danger of uncertainty.