Certainty Of Intention

Question 1

What is certainty of intention?

Answer 1

Clear intention to create a trust as opposed to creating something else.

Question 2

Certainty of words, subject-matter and objects are required to form a trust.

Answer 2

Knight v Knight (1840)

Question 3

What must the settlor show?

Answer 3

intention to create a trust.

Question 4

Twinsectra v Yardley [2002] UKHL

Answer 4

Solicitors acted in a loan, giving an undertaking as to its application. In breach of that undertaking they released it to the borrower. The appellants appealed a finding of liability as contributors to the breach.
Held: “Money in a solicitor’s client account is held on trust. The only question is the terms of that trust”.

Question 5

Why is certainty of intention required?

Answer 5

Positive obligations are automatically placed on trustee who then has a duty to carry out the said obligations to the best of their ability.

If these duties are breached they will be held personally liable.

Necessary that the settlor clearly identifies that they had an intention to create a trust, what property is subject to the trust and who the beneficiaries are.

Question 6

Must the word ‘trust’ be used to create a trust?

Answer 6

Re Kayford Ltd [1975]

There need not be precise use of the word trust when creating a trust.

The court will look at surrounding circumstances before concluding their judgement.

The use of the word ‘trust’ is indicative not probative.

Question 7

Re Kayford Ltd [1975]

- use of word trust

Answer 7

Identified that a trust can be manifested by the actions of companies/persons surrounding the creation of a trust.

Question 8

What does Re Kayford illustrate?

Answer 8

Illustrates the important role which the trust plays in protecting beneficiaries against the possibility of insolvency on the part of the trustee.

Question 9

Re Farepak Food and Gifts Ltd [2006]

Answer 9

Different approach to dealing with the insolvency of companies which purport a separate bank account for money’s received after the insolvency.

Said to be an unsatisfactory judgement as there is no mention of Re Kayford.

Question 10

What does manifestation of a trust include?

Answer 10

Taking advice from a solicitor and signing a formal declaration of trust in the form of a deed will show manifestation.

Question 11

Is the creation of a trust instrument necessary?

Answer 11

No. But, it does make it easy to show the intention of the settlor.

The nature of the intention will be inferred from all circumstances.

Question 12

How do you distinguish between a trust obligation and a moral obligation?

Answer 12

Precatory words.

Question 13

Precatory words

Answer 13

Do not create substantive trust obligations. Case by case basis.

Question 14

Knight v Knight (1840) Facts.

Answer 14

Testator left his estate to his brother, who in turn left it to his son. The will stated that the testator’s intention was for the estate to be settled on the next descendant in the direct male line of the testator’s grandfather. When his son died, he was childless and intestate. His brother settled the estate on persons who were not the next descendants in the direct male line of the testator’s grandfather.

Q: Did the testator impose a binding trust on his brother?

Held: The words of the testator were not imperative enough to create a trust that was binding.

He referred to the words as ‘precatory’.

Question 15

Lambe v Eames (1870-71)

Precatory words

Answer 15

“… to be at her disposal in any way she may think best, for the benefit for herself and her family.” - Precatory words.

Question 16

Re Diggles (1888)

Precatory words

Answer 16

“…it’s my desire that she allows A an annuity of £25 during her life”.

Question 17

Re Adams and Kensington Vestry (1884)

Precatory words

Answer 17

“… in full confidence that she would do what is right as to the disposal thereof between my children, either in her lifetime, or by will after her death”.

Question 18

Re Adams and Kensington Vestry (1884)

Facts.

Answer 18

A testator left his property to his wife by will “in full confidence” that she would do the right thing by his children.

Argued that on behalf of the children, the moral obligation imposed on the wife in the will created the trust.

Held: No trust. Strong moral obligation to do the right thing anyway.

No certainty of intention.

Question 19

Comiskey v Bowring - Hanbury [1905]

Answer 19

A testator left property by will to his wife subject to a provision for equal division amongst his nieces on his wife’s death.

“In full confidence that… she will devise it to one or more of my nieces as she may think fit”.

Held: Trust. It was held that there was an executory gift over the whole of his property which intended to give those nieces some rights in that property under a trust.

Certainty of Intention

Question 20

Why is there a difference between Adams and Comiskey?

Answer 20

Hudsons perspective: One distinction is that the mother of the child is more likely to ensure the well-being and best interests of her own children, and can therefore can be trusted to take the property absolutely beneficially whilst still providing for those children. Whereas a widow might not be so concerned to see the well-being of her deceased husband’s nieces, preferring to care for some other family member instead.

The less likely the nature of the original relationship is fiduciary, the more likely that there would be a trust.

Where do you draw the line between relationships?

Always use consistency as a point of analysis. Here it is clearly flawed.

Question 21

Paul v Constance [1977]

Answer 21

Constance left his wife to live with Paul. Joint bank account. At the meeting with the bank they were advised that due to their unmarried status, the name of the account should be in Constance.

Constance said to Paul “this money is as much yours as it is mine”. Constance died.

His wife sought to claim the money in the account. Paul argued that it was held on trust.

Held: Constance had declared a trust over the money in the bank account. Had manifested sufficient intention that Constance would hold the property on trust for them both. Also the fact that the money was to be seen as ‘joint’.

Question 22

Can you create an express trust without knowing the legal concept of trust?

Answer 22

Yes.
Paul v Constance.

The Court will consider your ‘real’ intention in deciding whether or not you intended to create something that the court will look upon as a trust.

Question 23

Surrounding circumstances

Answer 23

The court may also look at the surrounding circumstances and base their decision on these facts.

Question 24

Harrison v Gibson [2005]

Answer 24

The testator made an absolute gift to his widow of his financial assets.

Issue: Whether the testator will gave the widow an absolute interest so that the proceeds of the bungalow would pass to the children in unequal shares rather than equal shares as would have been the case.

Held: The conditions for the application of the statutory presumption of an absolute gift did not apply.

Question 25

Must the intention to create a trust be genuine?

Answer 25

Yes.
Trust used as a sham device will not be a valid trust.
It is possible that the court will look behind the creation of the trust to see whether or not the trust is a sham.

Question 26

What is a sham trust?

Answer 26

A sham is a scheme of action which seeks to create the impression that the state of affairs is X whereas it is actually Y.

Parties must intend to deceive others, as opposed to having just arranged their affairs in an advantageous way.

Midland Bank v Wyatt.

Question 27

What is the effect of failure for lack of certainty of intention?

Answer 27

There is no trust.