Certainty of Words Subject Matter and Objects

A trust will only come into existence if there is ‘certainty of words, certainty of subject matter and certainty of objects’ per Lord Langdale MR in Knight v Knight (1840) 3 Beav 148 at 173.

Critically evaluate the significance of the three certainties in the modern law of trusts, commenting in particular upon the extent to which (if at all) the doctrine has developed to reflect changing circumstances.

Trusts in modern law are used as a measure of protecting a family or to establish ownership of properties within family arguments that could arise after a person’s death or within their lifetime.

In order to be able to talk about and evaluate the significance of a trust, it should first be established what exactly a trust is, though it would be easier to give description of what a trust is, because there has not been a successful definition of a trust. A trust is a binding obligation mapped out by a person who wants to create a trust, they are binding on an individual who is known as a ‘trustee’ and they are created to deal with property in a specific way, on behalf of one or more ‘beneficiaries’.

The classification of certainty of a trust is normally cited by Lord Langdale and can be seen in the case of ‘Knight v Knight’ [1] . This method has been criticised a great deal in the past, however it has been adopted by the Courts even so. A trust comes in a combination of forms and they provide for many different types of property but they all share the same essential characteristics. A trust involves both the legal title and the equitable title. The legal title is given to a character known as the ‘trustee’. The job of the trustee is to hold the trust property on behalf of the beneficiary, whoever that person is chosen to be. Although it rarely happens, a trustee can turn down the request if they wish to do so, because if they agree to be a trustee then they must follow what is asked of them.

The general rule regarding trusts is that legal title carries with it all rights, and this is evidenced in the case of Westdeutsche Landesbank Girozentrale v London Islington BC [2] . The case Westdeutsche Landesbank Girozentrale v Islington Borough Council was heard before Hobhouse J. “In a powerful judgment Hobhouse J. held that the plaintiffs (“the bank”) were entitled to recover from the defendants (“the council”) the net balance outstanding on the transaction between the parties. He decided that the bank’s right to restitution at common law arose from the fact that the payment made by the bank to the council was made under a purported contract which, unknown to both parties, was ultra vires the council and so was void, no consideration having been given for the making of the payment. The decision by the judge was affirmed by the Court of Appeal [3] . The basis for the bank’s equitable proprietary claim lay in the decision of this House in Sinclair v. Brougham [4]  . Since that decision has for long been controversial, the Appellate Committee invited argument on the question whether the House should depart from the decision despite the fact that it has stood for many years.” [5]

With regards to creating a trust, a trust can and will only come into existence if there are the three certainties. These, as mentioned above are, certainty of words, certainty of subject matter and certainty of objects. The first, certainty of words (intention) needs to show that the owner of the property did specifically intend to subject the property to a trust obligation. The words used in the trust must make it clear that the trustee is under a binding obligation to do what is being asked of them otherwise the trustee is not bound to carry out his obligations and could therefore after death refuse to do what he has agreed to do.

The word trust is not essential and does not have to be used, and this can be seen as set out by Megarry J in Re Krayford [6] but it is advantageous because it does make it a lot easier to determine that a trust has been created, although despite the fact that the term trust is used there are no guarantees that a trust will be recognized, for example Midland Bank v Wyatt [7] . Also if the words demonstrate a different intention then there has been no trust created, intention has to be clear and certain because anything else will not constitute a valid trust. This can be seen in the case of Jones v Lock [8] . This case held that because a cheque was not endorsed correctly in the name of the child, it could not be valid and did not create a valid trust. In this case it was said “I think it would be a very dangerous example if loose conversation of this sort… should have the effect of the declaration of a trust” [9] . The words used in creating a trust must always be certain, for example there was difficulty in uncertain words such as ‘hope’ or ‘desire’ and words such as these are now taken to be too uncertain to create a trust, as can be evidenced by Re Adams and the Kensington Vestry [10] .

Another thing that must be certain when creating a trust, is the decision, because if the courts think that the trust is left for another person to decide like in the case of Re Snowden [11] then they would also deem the trust to be void because it would be uncertain of the exact intentions of the person who created the trust, however the case of Comiskey v Bowring – Hanbury [12] shows that if uncertain words are used then there can maybe still be a trust created, although this is only if there is sufficient evidence to show this is what was wanted by the trust creator. The courts will only accept valid trusts that were intended to be acted upon honestly and will not enforce those that they believe to be shams that may be trying to cover an ulterior motive, such as in Midland Bank Plc v Wyatt. [13]

The second of the three certainties is the certainty of the subject matter, almost anything at all can be the subject matter of a trust just as long as the subject is recognized accurately, and this can be seen in the case of Swift v Dairywise Farms Ltd [14] in this case a milk quota was recognised and was allowed to be the subject of a trust, although it must be specifically stated what the subject of the trust is.

If the certainty of the subject matter is missing then there are two possible outcomes that can happen. The first outcome is that the gift will go absolutely to the first donee as seen in Sprange v Bernard [15] and this means that the property is an absolute gift to the person who should be a trustee, and it will not go to the person who it was actually meant for. The second outcome that can arise if the subject matter is missing, is that the gift will fail and then it will revert back on a resulting trust to the settlor’s estate. In the case of chattels if the specific property is not identified then a trust will not be created, and this is similar to the case of Palmer v Simmonds [16] . It was in this case in which the word bulk was not allowed to represent the amount of property left, because the word is too broad to define how much the ‘bulk’ of an estate is, there can also be problems identifying how the property is divided between the beneficiaries Re Golay’s Will Trusts [17] .

The third of the three certainties is the certainty of objects. This third certainty makes it clear that the trust has to specify who the beneficiary actually is, this is said by Lord Denning in Re Vandervell’s Trusts (No 2) [18] and if the beneficiary is not clear then the trust would be void for uncertainty of objects and the property that would have gone on trust would go back to the donor. Depending on the type of trust, there are different rules for certainty of objects. If there is a fixed trust then the share or the interest of the beneficiaries must be specified clearly in the trust. The test used for certainty of objects shows that you must be able to identify the beneficiaries. It doesn’t matter where they are, or even if it is known where they are, they just need to be identified.

The case of McPhail v Doulton [19] made the courts examine in detail the approach they were previously taking, as the House of Lords looked at the test of certainty of objects for powers because it was more generous than the test of certainty for trusts. It was often the case that an arrangement would be valid if characterised as a power but invalid if it was a trust. After examining this case they adopted an ‘any given postulant test’ which derived from the rules on power in the case of Re Gulbenkian [20] in this case it was said “Power is valid if it can be said with certainty whether any given individual is or is not a member of the class and does not fail simply because it is impossible to ascertain every member of the class” [21] . In the later case of Re Baden’s Deed Trust (No 2) [22] the court of appeal evaluated the test and distinguished between the conceptual and evidential certainty. In respect to a trust being unsuccessful for uncertainty it will be held that the trustee cannot take possession of the property and it will simply be held on a resulting trust for the settlor’s estate and if that trust arises from a will then the beneficiaries entitled will take possession.

The courts take a very strict approach on fixed trusts, meaning that if each and every beneficiary is not identified clearly then the trust will be void, Morice v Bishop of Durham [23] .

There are a few different approaches that the courts take when considering trusts. Sometimes the courts will favour a trust even if the trust is not very strong and it has weaknesses, they can on occasion authorize the trust like in the case of Burrough v Philcox [24] where an equitable maxim ‘equity is equality’ was used to determine whether a settlor’s son and daughter received anything from an otherwise invalid trust. In this case the courts gave the shares equally to the son and daughter so they both got the same as each other even though this was not actually specified in the trust. The courts take a slightly less strict method when it comes to discretionary trusts as it is known that they use the class test to find out if for certain that there is any potential claimants and that they are a member of ‘the class’.

The three certainties have their good points and their bad points. For example in the case of Knight v Knight [25] , the question of “whether in substance a sufficient intention to create a trust has been manifested” [26] was suggested. This question demonstrates that when a person intends to create a trust they must show that they have a real intention and that they are not just saying things on a purely moral basis. This is a very good benefit from two perspectives. It is good for those who are saying things on a moral basis and do not intend to follow up on their word because they will not have to go along with what they have said unless they have used specific words, but it will also be good for those who have been told that they are the beneficiaries or the trust holders because if settlor does use certain words then they will be bound by the trust they set up and will have to keep to their words.

WORD COUNT: 1953