Three Certainties are Essential to Justify the Validity of an Express Trust. However, Surrounding case law has detrimentally affected their Efficacy.'
Introduction
Regarding to law, it is said that trust gives one of the strongest obligations on the trustee and therefore as an impact, no one should take the responsibilities of trust lightly. According to the la of equity, there is a requirement that the three involved formalities and certainties must be completed before the constitution of an express trust. The three certainties in trust could be well described as a set of conditions which exemplify the trust if fulfilled. These three certainties are very important in justifying the validity of an express trust. In order for a trust to be constituted effectively and efficiently a minimum set of requirements must be involved. These requirements include:
- Certainty of Intention
- Certainty of Subject
- Certainty of Object
The significance of these three certainties was well recognized in Knight vs. Knight by Lord Langdale whereby he placed forward a principle that clearly indicated that no trust can be perceived or exists without the three certainties. A trust is said to be a very important relationship that normally arises where one party or person who is then the trustee is compelled in equity to hold property for another’s benefit (Beneficiary) or for a reason where the law has permitted. It is therefore critical for a trust to be certain sufficiently in order to be described as valid and easily enforceable. These laws are used by different countries all over the world and each country. Due to the current world dependency it is obvious that most of the countries have amended their laws making them friendly according to their liking but ensuring that justice is served for the satisfaction of citizens.
Certainty of Intention
Nature of the used language is termed to be the first and major principle when making a decision of whether certainty is involved. As declared in Wright v Atkyns, the words must be very imperative. Direct interpretation of the requirement must be well stated. It is important also for the words to be clear and understandable when stating the laws of a trustee. There is however no requirement past this that a certain language should be used. Whichever language can be used depending on which country the laws are being practiced and which language is favorable for all parties including the judges.
A trust must be settled without the use of words confidence or trust or anything similar to these. This should be so in order to create a valid trust and not a void one and in order to satisfy both parties and ensure justice is done. What matters is whether the manifestation of the intention of creating trust in substance has been met. If there is evidence that some other intention was there when creating trust such as an intention of giving a gift then trust cannot be created. Other intentions will lead to the invalidity of the contract since it will not be under the interest of the trustee. According to history, validity was put into certain words such as it is desired and it is hoped which were said to be precatory words. Courts have adapted a certain approach that the statement reading and circumstances in general are factors and therefore no words in particular will impose or put a trust on their own.
It is not possible to create an express trust with lack of knowledge that you are doing so as long as the court can rule from the intention of the individual than an entitlement that is beneficial must be conferred which will be forced by law or equity. Courts have a way of bringing up evidence on the individuals intention and this is allowed in order to serve justice. If the intention of any of the parties is not trusted and well stated then it is evident that the contract may be termed as void thus favoring none of the parties.
An example is in Re Kayford Case. In order to protect the customers, the involved company took the action of transferring the funds to another separate account . The intention of the company had been in line with a trust purpose despite the fact that they had shown no indication on their desire to create trust and therefore the court considered the act valid. It is evident that wills form most of the trusts and these create more issues when determining intention.
Many trusts are formed through wills, which create additional issues when determining intention. The intention’s certainty is a clear indication that there must be surety that the testator wishes to deliver or create trust. If otherwise then there is no trust that is going to be created among the parties. This should therefore not be dependent on any specific language which must be used and that a trust can easily be created without using the word ‘trust” Starting 1950”s the courts have found it easier to make a conclusion that there was legal and valid intention of creating trust rather than hold or decided that the trust is considered void.
Certainty of Subjects
Certainty of subject means that it must be clear and open exactly what property is considered part of the trust. If the trustee has several properties and lacks to be specific on property in question, then there is no creation of trust and the beneficiary might not receive anything. It is therefore very essential for the specification of property to be done in order to differentiate and allow creation of trust. History states that property must whatsoever had undergone segregation from the none trust property. However, in recent years the courts have come into a conclusion and drawn a line between the intangibles and tangibles stating that the assets which are intangible do not always require a need for segregation.
It is a requirement for the certainty of the subject matter that the property which is meant to be put into the trust be put separate from other properties and thus must show clarity in the intentions meant for the trust property. The trust will always fail if there lacks a clear separation of property by clearly describing what should be given and what should be left out. Where there is failure in a trust of an unidentified chattels section or tangible section there will be validity in a trust of an unidentified section of property which is intangible. In a Wine Company case, the wine buyers lacked to establish trust of specific bottles in their favor because the bottles lacked identification in any way and therefore they could not claim any priority over the rest of the creditors through claiming that some of the wine bottles were held on trust for them.
There are cases of sections which are unidentified of intangible property such as Moss v Hunter which shows that a declaration which is oral of 5% trust of the shares issued of a certain private company was claimed to be certain sufficiently even though no shares in particular had been recognized as the trust’s subject. It was therefore held clearly that the intangible property are similar in certain cases where the shares are of similar class and there won’t be any reason for identification of what shares in particular are to be held on trust. Dillon LJ clearly stated that all the shares were identical though he did not specify any distinction or difference between the intangible and tangible.
Other cases have come to rise in certain cases where a testator devises his houses to be held on trust but for which first the beneficiary will pick and the remainder of the property given to the other beneficiary whereby before choosing the first beneficiary dies. In Boyce v Boyce, since it was not clear what property applied to the trust, the trust which was in favor of the second beneficiary was void. It is clear in these cases the court has a right of constantly getting involved in such objective assessments of stating what is not reasonable and what is and from this the testator by reasonable amount intended the application of yardstick which could be applied by the in quantifying the amount in order for the direction in the will not to be defeated through uncertainty.
Certainty of Objects
Certainty of objects means that clarity of the objects and who the beneficiary is must be very clear. For determination this there is a test which differs depending with the kind of trust and in most cases it can be that all those who are claimed as beneficiaries must be identified individually or that the trustees must declare with certainty if a claimant appears before them and whether he is truly a beneficiary or not. There is a major requirement that the trust beneficiary which are recognized as the objects be certain. This is however a very complex area within the express trust since the test which is normally used in determining uncertainty varies from:
- Discretionary trust
- Mere powers
- Fixed trust.
Fixed trust are said to be trusts which are for specific individuals in a named list. The test for a fixed trust is the fact that the trustees must always be in a position to give a full list of those that the trustee is not sure of, those who are going to benefit and the trust is also void for uncertainty if the trustee cannot provide a complete list. However, a test which is said to be more complex is found with mere powers. These are described when a person is given the ability to exercise without any obligation to do so to exercise a trust like power a good example being the trustee giving $ 1,000 to Y, or at this discretion the trustee could give $ 1,000 to Y as opposed to the trustee should then give $ 1,000 to Y.
There is a big difference between an ordinary trust obligation and a mere power. In normal cases the trustee is not bound in exercising mere power and the court can also not compel or allow him to do so. However, this does not mean that the trustee can just ignore it and fold his hands for in normal circumstances he must consider from time to time whether to exercise the power or not and the court at some point may give him directions to do so.
The mere power holder is declared free to carry out whichever exercise he is willing to with the property he holds and if at any point he lacks to consider his power exercise the court may however force him to do so. The major leading test for mere powers is the test of any given postulant which was laid down in Re Gubenkian. This clearly gives a statement that the trustee with all certainty must be able to say when there is an appearance of a potential beneficiary that he is either the beneficiary or not the beneficiary.
Discretionary trusts are trusts which asks for the trustee to effectively exercise their powers similarly as a fixed trust but otherwise allow some sort of discretion in how they do it in a similar way to that of mere powers. It is also true that the leading test for certainty of objects is any given postulant test which were applied in discretionary trust in Doulton v McPhail.
This test went through a mitigation in Re Baden (No.2) however all the court of appeal judges give separate new reasons and tests.
Stamp LJ had an approach based fully on the facts with less effect on certainty of objects. Sach LJ also did the approach that the proof of burden was on the claimants in order to prove that they were full beneficiaries and not o the trustees to prove on the validity of the trust. Megaw LJ also took a different approach that a trust can be termed valid even when the beneficiaries are claimed not to be valid and also with uncertainty beneficiaries if there was certain number of core beneficiaries. The following are the requirements of certainty of objects:
- A owes a duty to a specific individual or person
- A’s duty is certain enough to be enforced
The certainty of objects requirements can be seen as an obstacle which is not convenient sometimes and an obstacle than can trip a party that is trying its best to set up a trust. However at the same time it serves a very important purpose. It is clear that unless a duty is defined adequately the court cannot enforce a duty. To trusts this is not a peculiar point. In order to have a good understanding of certainty of objects, it is significant to have the knowledge of what the courts requires in order t enforce a particular duty. If there is lack of that information needed by the court the specific duty cannot be enforced and therefore the individual will be under no duty and therefore no trust is created.
Case Laws Surrounding Three Certainties
There are certain case laws that hinder effective effect of the three certainties. The Knight v Knight Law which was established in 1840 is known to be an English law case which embodies a simple statement of the principle of the three certainties. This case contains a determination of whether assets be disposed off in wills or whether the will’s wording is considered too vague to accept beneficiaries to collect what turns out before them as the will to be theirs. It is said that this case has sought attention and has been followed in most jurisdictions of common law. Hunter v Moss is another case under English trusts law which was created in 1994 from the Court of Appeal which was in regards to the certainty of subject matters which are necessary in forming a trust.
Hunter was promised 50 shares by Moss from his company as part contract of employment however Moss did not provide them. It is then that Hunter brought a claim for them against Moss’s arguing that a trust was created by Moss over the 50 shares. In order for the validity of the trust constitution requires segregation of trust property from that which is non trust property. However, in this case some judges felt that this case was not dealing with intangible property but tangible property the rule did not need to be applied. It did not matter on their segregation since all the shares were identical and therefore the trust was considered valid.
The application of decision was done in Re Harvard Securities which stated that segregation is not always very important when the trust consist of identical intangible property. Since 1950 the judiciary have put more will in the interpretation of documents of trust in such a way that instead f making the trust void they make them valid. To the three certainties, a constitution was developed that added a fourth certainty which is the property must be received by a trustee. If a settler has finished creating and developing a trust with the three tradition certainties, that are said to be very essential and then at the end refuses to transfer this property, then there is no trust. The legal experts call this “incompletely constituted trust”
Depending on a simple rule however, incompletely constituted trusts die or survive. This all depends on whether the trustee gave any valuable consideration for trust exchange. If he did, then the trust is enforceable against the settler who at some point can be forced to transfer the trusts’ property or in other terms pay the amounting damages to either the beneficiary or the trustee. If this does not happen then definitely it means that there is no luck for the beneficiary. Another case that affects the three certainties in the current courts is the acceptable mode of transfer. This in most cases will depend with the property in question.
Usually, land has rigid rules of registration which are legal and official changes to land titles. If the property is a chattel simply the property is handed over. For shares, patents and other necessary securities there is a requirement of written documents. A good example is the case of Re Rose 1952. The share certificates were given by the settler and also the forms of completed transfer of shares to the trustee but in order for the completion of transfer, it had to be endorsed and entered in the company’s books. This only happened after the death of the latter. However according to the English court, they held that there was occurrence of enough transfer which created trust since the settler did all that he could and therefore there were no further steps that he could have taken. Once completion of declaration of trust is through by transfer, the trust constitution is claimed to have occurred. This is so unless the settler puts in a clause of revocation, therefore the trust is declared final, irrevocable and binding.
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