Knight v Knight

A trust should be upheld if there is sufficient practical certainty in its definition for it to be carried out according to the expressed intention of the settlor. A question then arises: has the settlor expressed his intention with ‘sufficient practical certainty’?  Ultimately, the court should be able to say with certainty what the settlor intended: to be valid, a trust must be capable of being controlled and executed by the court, and capable of being enforced against the trustees; in order for that to happen, three certainties must be present: certainty of intention, subject and object.

The concept was defined in Knight v Knight, where the Court of the Chancery stated that when property is given absolutely to someone, a trust is created if the words used are imperative, and if the subject and object of the trust are certain. In the absence of sufficient certainty, a trust is not created. The court in Knight referred to ‘certainty of words’, but in modern equity law the term is referred to as ‘certainty of intention’. In essence, the requirement is to demonstrate that the owner of a property intended to submit it to a trust obligation and therefore, the words in a document are examined in order to ascertain if they intended to create a trust.

In Knight, the testator left his estates to his brother, who in turn left them to his son. The will stated that the testator’s intention was for the estates to be settled on the next descendant in the direct male line of the testator’s grandfather. When the son died, he was childless and intestate.  His brother settled the estate on persons who where not the next descendants in the direct male line to of the testator’s grandfather. The question asked to the court was: did the testator impose a binding trust on his brother?

The court in Knight ruled that the words of the testator were not imperative enough to create a trust that was binding. Lord Langdale said that not every wish or expectation expressed in a will can or ought to be executed or enforced as a trust. He also referred to the words in the will as ‘precatory words’. In the past, courts interpreted ‘precatory words’ in a will as words that imposed a legally enforceable trust, reflecting the inheritance law of the time. Inheritance laws changed, and in Lamb v Eames, this concept was reversed. The tendency of the courts is to interpret precatory words as not imposing a trust. The reason for the change in construction was that it was considered that precatory words did not impose an obligation on the transferee; they just expressed the wish of the transferor as to how he wanted the property to be used, which imposed a moral, rather than a binding obligation.

The court in Knight found that the certainty of subject matter was wanting: there were five distinct properties that could be the subject of the trust. As a trust exists only if the legal and equitable ownership of the property are separated, specific property must be identified. In Boyce v Boyce, the trust property could not be identified because one of the beneficiaries died without choosing a property, and the trust was void. When property is part of a larger bulk held on trust, it will not be identifiable unless it has been segregated or sufficiently earmarked, as was the case in London Wine Co.

Although certainty of intention and certainty of subject matter are two different aspects of certainty in a trust, they interrelate: doubt over the subject matter can increase doubts over the certainty of intention; this principle was established in Mussorie Bank. If the property forming the subject matter of the trust is not clearly recognised, the trust is void.  However if the property is clearly identifiable but the intention to create a trust is uncertain, the person entitled to the property holds it beneficially for himself, free of any trust.

Regarding certainty of objects, the court in Knight found the objects of the trust uncertain; they said that ‘the persons to take the extent of their interest, and the estates they are severally to enjoy is in no way defined. How is this Court to carry such a trust into execution?’. This third certainty requirement calls for clear identification of beneficiaries for the trust to be valid: a cestui que trust must exist: ‘he for whom is the trust’. The object of the trust must be human and have legal standing: the legal human beneficiary manifested in the beneficiary principle; if there is no human beneficiary but a purpose for which the trust is set up, a purpose trust arises and in English law, a purpose trust is void unless it is charitable.

The importance of the concept is that a beneficiary can legally enforce the performance of the trustees, who own the property in res. The trust itself does not impose a positive obligation on the trustee to perform, but the existence of a beneficiary with power of enforcement creates that obligation. Without accountability, the trustee would become, effectively, the beneficial owner of the trust; therefore, the court must have a beneficiary upon whom to bestow the trust.

Problems can arise when the beneficiaries constitute a class, in which case the settlor must use precise language to define the class of people who are to benefit from the trust, which is known as conceptual certainty. Furthermore, the trustees must identify the members of the class; this is known as evidential certainty. The beneficiaries must be ascertained, that is to say, their whereabouts and continued existence must be established, which is known as ascertainability. A final point to consider is administrative workability: how practical is it for the trustees to discharge their duties towards the beneficiaries.

In conclusion, the three certainties established in Knight are still applied by the courts today in order to determine the validity of a trust, which proves the flexibility of the concept. The trust remains one of equity’s most powerful legal creations: its application extends from family, tax and commercial matters to the use of a trust in finance through the creation of a unit-trust. Knight is therefore a seminal case and worth analysing in order to understand the validity and applicability of trusts.

Bibliography

Secondary Sources

Cassell E, Templeman Lord, Equity and Trusts, 150 Leading Cases (1st edn, Old Bailey Press, 1999)

Emery C T, The Most Hallowed Principle (1982) 98 Law Quarterly Review 551 – 586

Martin J, Hanbury &Martin, Modern Equity (18th edn, Sweet and Maxwell 2008)

McGhee J QC, Snell’s Equity (33rd edn, Sweet & Maxwell 2014). Available through Westlaw UK, search>Books, under S> Snell’s Equity. Accessed on 4 July 2015

Pearce R, Stevens J and Barr W, The Law of Trusts and Equitable Obligations (5th edn, OUP 2010) 185

Cases

IRC v Broadway Cottages Trust [1955] Ch 20

Knight v Knight (1840) 3 Beav 148

Lamb v Eames (1871) 6 Ch. App. 597

Mc Phail v Doulton [1971] AC 424

Mussorie Bank Limited v Raynor (1882) 7 App Cas 321

Re London Wine Co (Shippers) Ltd [1986] PCC 121

Footnotes

Mc Phail v Doulton [1971] AC 424 (Lord Wilberforce) 450

IRC v Broadway Cottages Trust [1955] Ch 20 (Jenkins LJ) 30

C T Emery, The Most Hallowed Principle (1982) 98 Law Quarterly Review 551 – 586

John McGhee QC, Snell’s Equity (33rd edn, Sweet & Maxwell 2014) Chapter 22, 22-012. Available through Westlaw UK, search>Books, under S> Snell’s Equity. Accessed on 4 July 2015

(1840) 3 Beav 148

ibid, 160

Robert Pearce, John Stevens and Warren Barr, The Law of Trusts and Equitable Obligations (5th edn, OUP 2010) 185

Elizabeth Cassell, Lord Templeman, Equity and Trusts, 150 Leading Cases (1st edn, Old Bailey Press, 1999) 9, 10

Knight (n 5) (Lord Langdale) 172

Knight (n 5) (Lord Langdale) 159

(1871) 6 Ch. App. 597

Snell’s (n 4) 22-014

Pearce (n 7) 186, 187

Knight (n 1) 67

Pearce (n 7) 190

(1849) 16 Sim 476

Pearce (n 7) 190

Pearce (n 7) 190, 191

Re London Wine Co (Shippers) Ltd [1986] PCC 121

Pearce (n 7) 193

Mussorie Bank Limited v Raynor (1882) 7 App Cas 321

Snell’s (n 4) 22-025

Knight (n 5) 169

Pearce (n 7) 458 -461

Jonathan Law, Elizabeth Martin, Oxford Dictionary of Law (7th edn, OUP 2009) 85

Pearce (n 7) 193

Jill Martin, Hanbury &Martin, Modern Equity (18th edn, Sweet and Maxwell 2008) 389-390

Emery (n 3) 552