Courts and rational set of rules

Courts are required to apply a rational set of rules in order to determine whether a trust has been validly created or not. So it is almost settled law that an express trust should be consist of the following characteristics;

  • Certainty of intention,
  • Certainty of subject matter and

  • Certainty of object

Although these are established rules but sometimes courts adopt variety of different approaches to prove the certainty in an uncertain way.

Now we will look all the certainties and also look at what's the intention of the court to go for different approaches in an uncertain way to prove that certainty is present.

Certainty Of Intention:

Intention is the first and foremost criteria to establish the express trust. It must be shown that the transferor intended the transferee to be legally obliged to hold the rights in question for others. The established rule is that equity looks to the substance not the form. So it is necessary to find the intention rather than expression. The use of word trust is not mandatory. Sometimes it happened that the word trust was used but trust did not form.

We must not confuse between the intention to create the trust and intention to benefit the others in various ways like gift, will etc. Although in both cases intention is to benefit the others. Here in our given fact the question is whether the settler had intention to benefit another by way of trust or not? If intention is for gift, there is nothing that the court can do as “equity will not assist a volunteer”

In the case of Jones vs. lock it was held that it was a failed gift and could not be stand as a trust because no intention was found to create a trust for the benefit of the child.

Sometimes the settler uses the precatory words to create a trust but use of precatory words do not form a trust as it indicates a moral duty rather than a legal obligation towards the trustee which is insufficient to create a trust.In the case of Lambe vs. Eames it was held that precatory words do not work to create a trust.

Re Hamilton, Margulies vs. Margulies and Masoorie Bank vs. Rynor all are examples of precatory words and in all the cases trusts were failed.

Although the uses of precatory words do not create the trust but mere existence of precatory words do not negate the trust. Though it sounds quite contradictory but case law will make it clear. In Comiskey vs. Bowring -Banbury the HL found that precatory words did not negate the existence of trust and states that on a true construction of the will, the testator wanted his wife to have a gift over his nieces on her death in accordance to such share as the wife would stipulate in her will or otherwise equally. This case shows that the court is trying to prove the certainty in uncertain process. If we analyse this case it is clear that there is mandatory words used by the settler and at the same time precatory words. If both words are present then court always favour the mandatory words. Courts intention is always to favour the trust. So that's why may be its saying that court is trying to prove the certainty in uncertain way. If intention is uncertain no trust is created and the person who is in the control of the property is entitled to retain it.

Certainty Of Subject-Matter:

The second requirement is subject-matter and that must be certain and specific otherwise the intended trusts will fail. In the cases of Hemmens vs. Wilson Browne and Mac Jordan construction Ltd vs. Brook mount vs. Erostin [1991].

Because of unidentifiable subject-matter trusts were failed in Re London Wine and Re Gold Cap cases. In Re-London Winethe issue was whether the wine was held on trust for the customers or whether the wine was available to the company's creditors. Oliver J. held that because the property sold was not singled out in any way from the remainder of the company's stock, a customer could not say of any bottle of wine that he had bought that bottle. Hence, no trust could be created in favour of the customers” it seems to him that in order to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be out but also to what property it is to attach. The decision f Re-London Wine was followed in Re-Goldcorp exchange. In this case Lord Mustill states that “a right in the property whether legal or equitable can not exit in the air, it can only exist in specific property.

But a contradictory decision was given in the case of Hunter vs. Moss. In this case defendant gave 50 of his 950 shares, in a particular company on trust for plaintiff. Defendant did not identify which of the 50 share was for the plaintiff. When plaintiff tried to enforce the trust, the defendant relies on Re-London Wine and said that the trust would fail because of uncertainty of subject matter. Interestingly in this case the CA did not follow the precedent but gave a contradictory opinion and held that trust was created. The court distinguished the two cases and said share is a tangible property but wine is not and each share carries the identical value. But this was not the satisfactory answer and were criticised by different scholars.

According to me there is no special circumstance like Hunter pays the consideration that's why court declared the same decision. Courts decision is still put a question marks and it's again confirmed that court is trying to prove the certainty in an uncertain way.

In the case of Re-Harvard Securities Ltd, the times, 18th July 1997 similar result was found. If subject-matter (trust property) is uncertain the transferee retains the property and if beneficial interest is uncertain the intended trust will fail but resulting trust created.

Certainty Of Object:

The 3rd fundamental principle is the certainty of objet. Object means the person in whose favour trust was created. That means the beneficiary. There must have ascertainable beneficiary without which trust will fail. The beneficiary must be defined as individually or as a class/group.

Trust can be fixed or discretionary but both must be conceptually certain. In both trust certainty differs from each other.

Fixed trust:

The identity and beneficial interest is sort out in the fixed trust document. The test for the fixed trust is complete list test.

In the case of fixed trust the matter of conceptual certainty satisfy if the trustee is able to find out the complete list. In the case of IRC vs. Broadway cottage, Jenkins L.J states that “there can be no division in equal share amongst a clam of persons unless all the members of the class are known”. In the case of Re Barlow's Will Trust the terms old friends were held conceptually uncertain. Same approach had been taken in the case of Re Wrights Will trust.Conceptual certainty differs from evidential certainty. Evidential certainty concerns that whether a person is within the class or not?

Discretionary Trust:

Under a discretionary trust, the trustee has the discretion to benefit the beneficiary according to his choice .Before the Mcphaill case the test for this trust was complete list test. After this case the test is called “any given postulant test” or “is or is not test”. In the Mcphill Lord Wilberforce rejected the traditional rule and states that in a discretionary trust, the trustee is required to act as a reasonable trustee and survey the potential beneficiaries. Unfortunately the House of Lords in Mcphill felt unable to apply this test on the evidence before it and instead referred the case back to the high court to determine whether the test was satisfied .The referred case is Re Badden's Deed Trust (no.2)

For example a trust to distribute moneys to adherents of Anglican Church might be fail, according to Sachs test. But pass the Megaw's test. Again it is difficult to say that whether 3rd party's opinion is permissible or not? In the case of Re Tuck's settlement Lord Denning referred the Scottish case and held that that provision was certain.

So it's really a matter of uncertainty to find out the certainty in the case of trust as courts are constantly trying to find out the certainty in an uncertain way and sometimes adopting various uncertain methods. In the case of uncertainty of object the resulting trust will created.

Bibliography

1 M ramjohn (2005) Unlocking the trust ,3 certinity test, 25-45 Hodder Arnold Publishers

2 J.E.Penner (2004)The law of trust, certinity,834-219,Oxford university press,

3 Michael haley and lara mcmutry(2006) Equity and Trust,3 certinity, 2.02- 2.50 Sweet Maxwell publisher

4 Edward stockwell,Trust and equity,9th edition(2009) pearson

% Hanbury and Martin,modern equity,18th edition(2009) Sweet and Maxell.

5 Alison Jones, creating a trust over an unascertained part of a homogeneous whole (1993)