Module code: LLB020X301A

Module title: Equity and Trusts

Module tutor: Sunit Tejura

FHEQ Level: 6

Assessment release date: 22 October 2021

Type of assessment: In-course assessment

The three certainties of trust

Certainty of intention refers to the creation of a valid trust. Enough proof is needed that the settlor or the testator intended to create trust. The addition of trust could show that the testator intended a trust. Distributional certainty makes it easier to recognize certainty; this is needed when dividing property between beneficiaries. In this case, every share must be clear.

Similarly, a valid trust requires three certainties. When one certainty is absent, the trust becomes void ab initio. The three certainties required to create trust were stated in Knight vs. Knight.

Wilde states that a valid trust is created when the settlor indicates the intention of creating the trust. In this case, the settlor shows that the trust was intended.¹ Also, the settlor must indicate the subject matter by showing the property going into the trust. Finally, the settlor must show the object; that is by identifying the beneficiary or beneficiaries. 

As a general rule in Knight vs. Knight, if a property is given to a person, and the same person given by the giver wishes to dispose of the property, the trust must be intended. Lord Langlade states that creating a valid trust entails certainty of words, subject matter, and certainty of object. There should be sufficient certainty as to the beneficiaries’ shares. 

Certainty of words or intention

Certainty of words or intention indicates that the settlor must have shown the intention to create a trust or intended to create a trust, and before the court, he must indicate that he intended to create a trust. Under certainty of words, the obligation of the trusteeship is intended in respect of the property. The court will later construe written or oral statements to determine if the trust has been created. The court believes that the words used must make it plain that the intention was to create trust. Lawyers and trust professionals have helped develop documents that help understand the intention of the trust. In the court, the context will determine whether trustees created a clear trust or not. Insufficient certainty could result in no trust. 

Certainty of subject-matter

Certainty of subject matter refers to what property is to be held upon trust and certainty as to the extent of the beneficial interest of each beneficiary. 

Trustees must understand what is included and not included in the trust². In this case, they help avoid the breach of trust. The beneficiaries must know what they will be entitled to after the division of the property. There will not be uncertainty when there is discretion regarding what each beneficiary should receive when there is a discretionary trust.

Also, there will be no uncertainty when the trustee does not consider the beneficiary’s interest, and it is possible to divide the property equally between beneficiaries. That means the application of the maxim, “equity is equality.” Likewise, when the settlor declares trust regarding a bank account, which is later changed and becomes unknown to the settlor. For example, changing a cheque account to a deposit account could fail certainty. If uncertainty persists, the give will become absolute. 

Certainty of object

Certainty of object states that the beneficiary under trust must be clearly defined. states that distribution to non-objects could fail uncertainty. Certainty of objects could be tested using a fixed trust, which the trustee has no right to change since it shows all beneficiaries and ensure that the trust is not void. Discretion trust provided information on who to receive that gift and in what amount. The settlor must intend equal distribution of gifts. When exercising their discretion, trustees must determine whether beneficiaries must be beneficial or not; it helps when creating the trust.³ The three certainties must coincide or be available for the creation of a valid trust. If one certainty is a mission, the certainty of trust will be void. The exception of the three certainty requirements is the certainty of purpose. 

The three certainties have lost almost their former relevance. For example, when the trust of a statement can be valid concerning private express trust, equity may bring up other forms of trust that construe trust that leads to lenience when using the rules of the three certainties. Suppose constructive trust fails to adhere to the rules of the three certainties. The royal courts have used other evidence since the constructive trust does not comply with the three certainties of trust, especially in private property distribution. 

The courts have used inferring intentions to resolve redistribution uncertainties; the court makes a subjective assessment, which does not comply with the three rules of certainties; this is because of subjective influence that cannot be wholly excluded. God vs. Hill case showed the failure in the use of the three certainties of trust. The court uses any slight evidence to benefit others. At some point, the Royal court only looks at the settlor’s intention to provide a ruling. The court claims that if the intention of the trustee is unclear, the court uses slight evidence to infer the probable intention of the trustee to make the trust certain. 

Similarly, the three certainties to create trust have lost almost all the former relevance. In cases of ambiguity, the court applies common senses; this is evident in Re Gulbenkian [1970] AC 508.⁴ During this case, it was argued that the court should use innate common sense and the desire to make sense of the settlor in expressing an intention. Trust is used to show the certainty of the intention, but that did not apply to this content. In this case, there was a challenge in the certainty of intention because of the self-declaration of trust. The court has always exercised its judicial knowledge without adhering to the three certainties of trust. The court can see if a clause is relevant using the three certainties of trust, but that does not stop it from making sense of the clause. 

The court has also used the slightest evidence of intention to benefit others in relation to an unidentified class of assets. In Richard vs. Delbridge 1874 case, the court never applied trust. Instead, it applied something that could result in the effect. The court did not reinterpret the words to the declaration of trust. In this case, Mr. Richard employed his family member in his business. He wanted to hand over his business to Edward and even evidenced his intention by creating a short memorandum. The gift failed because it was imperfect. In this case, there was no valid declaration of trust. The court believes that an individual can transfer property without valuable consideration by assigning the property to another person; this way, he does not need to use the words such I declare myself trustee but can use words similar to it. The three certainties of trust have lost their former relevance. 

Similarly, the court argues that a trust can be created using the word trust. The court claims that evidence that gives sufficient intention to create trust can be manifested; this is evident in Paul and Constance. In this court case, the judge said that the use of the phrase, “the money is much yours as it is mine,” showed that it was enough proof to translate into trust. The husband had given Mrs. Paul a belief that the money would be hers; the court had done what was right. The court also uses words such as “it is hoped or it is desired” will be held valid. The court believes that the state of circumstances and the reading of the statement as a whole are the factors. The court makes decisions when the words used are much closer to Lord Langdale’s interpretation. 

The three certainties of trust have become almost irrelevant because the court tries to understand the trustee’s intention. In Re Kayford, the company wanted to protect its customers by moving the funds to a separate back; this way, the court understood the intention; thus, it failed to adhere to the three certainties of trust rule. The court believed that the intention was in line with the purpose of the trust. In Re Kayford, the court used the certainty of words to create trust.⁵ Trust can be created using appropriate words when sending money. Nothing can prevent the company from binding itself by trust; there is no need for any appropriate bank arrangement. 

Accordingly, when the requisite is present, there is no need to bring up the question of trust; the court applied the rule in Re Lewis Leicester Ltd. The court has drifted away from the original deference of the words used, bringing a more practical and emotional result. The court can deviate from the three certainty rules to achieve justice. It can also use the maxim, “equity is equality,” and fail to follow the rule of three certainties of trust; the court will ensure there is the provision of equal shares. The court believes that equity is quality promotes equal division; thus, there is no need to follow the three certainties of trust.

The court looks at what circumstances it can infer or impute a common intention to vary equal beneficial interests. The court could impute or infer beneficial interests based on the parties’ conduct. In Thwaites vs. Ryan case, the court used less stringent evidence. 

The case of John vs. Locke (1865) shows that the intention to create trust can rely on circumstances. John had a son with his first wife and an infant son with a second woman in this court case. John gave his son a cheque of nine hundred euros. John died before he amended the will; thus, the court argued that the imperfect could not be perfected. If the court claims that there were some intentions, then trust will not be formed. The intention, in this case, was to make a clear gift. The court uses judicial knowledge and slight evidence because equity could not perfect an imperfect gift.⁶  

In the case of Saunders vs. Vautier, the court argued that an adult of sound mind could take the property out;⁷ this reasoning violates the terms of the trust. In this court case, the rights of the beneficiaries outweighed that of the settlor as indicated in the trust instrument. Sometimes the court does not use the words of trust to make decisions. Instead, it uses the slightest evidence to support the ruling. The court used evidence such as age during the ruling. When the beneficiary turned twenty-five years old, he had the right over the property. 

Currently, the court uses several ways to solve problems related to distributional uncertainty. Similarly, in the beneficiary right of selection, the court can use slight evidence in its ruling; for example, in unidentified items among several. When a settlor says “one of my houses;” this can be made a certain share. In this case, the beneficiary has the right to select from class A to Z. Sometimes, and the trust fails because there are no criteria for selecting from a large population of beneficiaries. A specific item included could create a valid trust of the item. For example, when a parent divides his property and states, “this house is your,” it shows that trust has been created. The court can use the evidence to make its ruling. 

A settlor who was just about to die used the phrase, “all my wealth.” When delivering the judgment, the court stated that a gift for “all my wealth” was a void uncertainty because it argued that only a certain amount of property helps them create trust. The three certainties of trust have lost almost all of their relevance. The royal court believes that when a property is dealt with in full confidence, it uses the slightest evidence to deliver judgment.

The court argues that certainty of intention will be met when there is sufficient evidence. When the intent to create trust is transparent, the court uses the slightest evidence to make decisions. Sometimes the court refutes words or accepts words to show that the settlor created a trust. Imposing a legally binding obligation on the trustee shows that the settlor created a trust. The court refuses to use precatory words because they are presumed to be vague. On the contrary, the court has deviated from the three certainties of trust by claiming that if the instrument as a whole shows a trust instead of a gift, then it is an indication of a binding obligation that creates trust. The actions of words are enough to infer that somebody made a declaration of trust; therefore, entitled to the property. 

Currently, trust is a word used to return the property to the settlor when the ownership of the property is in doubt. In this case, the court uses jurisdictional knowledge to understand the circumstance without using the three certainties of trust. There is the presumed and automatic trust used by the court when delivering judgment. The court claims that the inherent presumptions are true; thus, it only needs slight evidence to give a verdict. 

The court interprets all the circumstances and direct evidence of intention following the general rule that governs the creation of a will when dealing with issues of trust created by will. Someone can create a trust without knowing, but after the court understands the settlor’s intention, it will use the slightest evidence in the ruling. The judiciary has tried to interpret the words and statements to make the trust valid and not void. The court argues that simply giving a trustee the power to trust does not mean that trust has been created. The court determines the true effect of the trust and the intention of the settlor. After the Executor’s Act 1830, the court has become more liberal and realistic when handling issues of certainty of intention.⁸ The court also states that the absence of the “trust” does not mean that trust does not exist. If the intention is sufficient, then trust is created. 

In a nutshell, the three certainties of trust are crucial because they help create trust. In the case of Knight vs. Knight, the court adhered to the three certainties of trust. Currently, the royal court does not adhere to the rules of trust as it did before. Instead, it uses the slightest evidence provided the intentions are clear; this way, it does not have to adhere to the three certainties of trust. When delivering judgment, the court must understand the difference between an intention to make a gift and an intention to create trust. Currently, the existence of the word trust does not mean trust has been created. The court will always use the slightest evidence to solve the case. A disposition expressed using the words of full confidence may not create trust, but the court claims that reading a disposition as a whole can ascertain the settlor’s intention. 

References

Brown J, and Pawlowski M, ‘Re-Thinking Administrative Unworkability In Discretionary Trusts’ (2021) 27 Trusts & Trustees

Gulbenkian [1970] AC 508 2021

Keat E, ‘Beware The ‘Gifted’ Trojan Horse: Analysing The Equitable Maxim—‘Equity Will Not Perfect An Imperfect Gift’’ (2021) 27 Trusts & Trustees

Leung Y, ‘Rethinking The Common Intention Constructive Trusts In Stack V Dowden And Jones V Kernott – Should The Resulting Trusts Be Preferred?’ (2019) 0 IALS Student Law Review

Wilde D, ‘THE THREE CERTAINTIES REQUIRED TO DECLARE A TRUST – OR IS IT FOUR? “DISTRIBUTIONAL CERTAINTY”’ (2020) 79 The Cambridge Law Journal