Dear Alice, I hereby declare the trust for you

In Knight v. Knight [1840], Lord Langdale MR declared that three certainties were needed to establish a valid trust, that is, certainty of words or intention, subject matter and objects.1

Certainty of intention requires the settlor to use “imperative words” as mentioned in Wright v Atkyns [1823] in order to impose a binding mandatory obligation on the trustees to hold property for the benefit of someone else.2

In Paul v. Constance [1977], the use of words “this money is a much yours as mine” was held to be sufficient to find that there was an intention to create a trust.3

The wording “I hereby….hold….on trust for you” is sufficient to show an intention by Mary to create a trust, so there appears to be Certainty of intention.

For a trust to be valid certainty of subject matter must also be certain, meaning the settlor must properly identify what he intends to be subject matter under this trust.4 Once again, the words must have a clear meaning. In this situation, there is an initial uncertainty as to the subject matter of the trust as a whole. Mary said “most of my bottles of vintage claret”; this does not clearly state how many of the bottles of vintage claret are to be held on trust for Alice. Thus, the certainty of subject matter is not satisfied. This is similar to the case of Palmer v. Simmonds [1854], where a gift of “the bulk of my estate” failed for uncertainty.5

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (66)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (95)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, 2003, page (79)

Although there is a failure of certainty of subject matter it must now be consider whether there is certainty of object. The basic rule for certainty of object is that the beneficiaries must be objectively ascertainable as mentioned in the case of Re Endacott [1959].6 In this scenario, “Alice” is properly identified as the beneficiary; therefore this would be sufficient for certainty of object.

The formalities and constitution when creating a trust must now be considered. In Milroy v Lord [1862] Turner LJ stated that the settlor may constitute an express trust by either transferring the property to the trustee or by a self-declaration of trust.7 In this case, an informal two party trust has been created, which means the settlor “Mary” declared herself to be a trustee of the “bottles of vintage claret”, for the respective beneficiary “Alice”.

The property involved in this scenario is a personal property “chattels” and the general rule is that where a person declares himself trustee of personalty no formalities is needed: Re Vandervell’s Trusts (No 2) [1974] 8, therefore since Mary declared herself to be a trustee of the “bottles of vintage claret” formalities is not required, only intention to create a trust and as seen above this was made clear by the use of word such as “I hold…..On trust for you”.

All the requirements to create a trust are fulfilled; therefore Mary has created a valid trust.

Alastair Hudson, Equity & trusts, Pearson Education Ltd, 4th Edition, page (138)

Mohamed Ramjohn, Text, Cases and Materials on Equity and Trusts, Routledge-cavendish, 4th Edition, page (15-16)

Andrew Iwobi, Essential Trusts Law, Cavendish Publishing Ltd, 3rd Edition page (28)

To Betty, she wrote:

“Dear Betty,

Hold all of the £20,000, which I have transferred into your bank, on trust for Bill and Ben.

Best Wishes,

Mary.”

Certainty of intention refers to a specific intention by a person to create a trust whereby trustees which may include the settlor himself to hold property, not for their own benefit but for the benefit of another person. In Wright v Atkyns [1823] Lord Eldon said that words used by settlor should be “imperative words”.9

By using imperative word such as “hold……on trust”; Mary clearly indicates that a trust intended.

It must now be seen whether there is certainty of subject matter, Oliver J said in Re London Wine Co [1986] that “to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is, but also what property it is to attach”. 10 Thus, in order to create a trust, the settlor must identify the property he intends to be on subject matter of the trust. In this scenario, the subject matter can be identified, which is “all of the £20,000″.

Finally certainty of objects, that is the settlor, has to identify the persons who are to benefit the trust.11 In this case, “Bill and Ben” are clearly identified as the beneficiaries, therefore the beneficiaries are ascertained and this is in compliance with Re Endacott [1959].12

The three certainties are satisfied; now it must be seen whether the formalities and constitution of a trust have been complied with.

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

Andrew Iwobi, Essential Trusts Law, Cavendish Publishing Ltd, 3rd Edition page (14)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (98)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page

The legal requirement for constituting the transfer of an interest in property depends on the nature of the trust property involved. In this scenario, “Mary” created a formal three party trust, which involves a transfer of legal title in the trust property to the trustee.13 For a valid transfer of “money”, it merely requires delivery.14 In this case; the fact that Mary has already transferred the “all of the £20,000″ into Betty’s bank account would be enough to satisfy the delivery requirement.

While there are formal requirements for the creation of trusts in relation to land, there are no formalities required for a valid creation of trust over personal property. The most important thing that must be established is the certainty of intention to create a trust.

For example, in Re Kayford [1975], a mail order Company, which was experiencing financial difficulty, paid cheque received from customers into a distinct dormant account which was called “Customers’ Trust Deposit Account”.15

The Court held that “the property is a pure personalty and so writing though desirable is not essential”.16

Applying these principles to the question, given that money can be considered as personal property, no formalities is need for creation of this trust a mere certainty of intention which can be demonstrated by use of the words “hold…..on trust for you” is sufficient.

Milroy v Lord [1862]

Mohamed Ramjohn, Text, Cases and Materials on Equity and Trusts, Routledge-cavendish, 4th Edition, page (15-16)

Alastair Hudson, Equity & trusts, Pearson Education Ltd, 4th Edition, page (173-174)

Alastair Hudson, Equity & trusts, Pearson Education Ltd, 4th Edition, page (174)

To Charles, she wrote:

“Dear Charles,

I have today instructed the trustee holding ‘Hill House’, Sheffield S11 9VP, who was holding the legal estate on trust for me, to hold it on trust for you instead of me.

Best Wishes,

Mary.”

The decision in Knight v. Knight [1840] established that three certainties, namely certainty of intention, certainty of subject matter and certainty of objects or beneficiaries must be present in order for there to be a valid trust.17

Certainty of intention means that the settlor must intend to create something that amounts to a trust, and must express such an intention by using imperative words as illustrated in Wright v Atkyns [1823].18 The use of the word “instructed….to hold….on trust for you” show an intention by Mary to create a trust, therefore certainty of intention is satisfied.

Regarding certainty of subject matter, the property to be held on trust must be capable of adequate identification.19 In this case, unlike in the case of Re Kolb [1962] 20 the subject matter is ascertainable since it is a land with a unique address “Hill House”, Sheffield S11 9VP”.

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (66)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (78)

Andrew Iwobi, Essential Trusts Law, Cavendish Publishing Ltd, 3rd Edition page (16)

Finally, certainty of objects requires the beneficiaries to be objectively ascertainable, in order for the trustees to be able to know the identity of the beneficiaries under a trust.21 In Mary’s case, the beneficiary is named “Charles”, and therefore it is objectively ascertainable.

Now the three certainties have been looked at, it must be seen whether the constitution and formalities are satisfied. In this scenario, the property involved is land; therefore the Law of Property Act 1925 must be considered.22 Also it must be noted that on creation of the trust Mary only holds the equitable interest, therefore the legal title remains with the trustee.

The statutory requirements for creating a trust of an interest in land are set out in s.53 (1) (b) of the Law of Property Act 1925.23 Section 53 (1) (b) provides that: “A declaration of trusts respecting land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will”.24 The declaration evidenced by the letter signed by Mary would be sufficient for the purpose of Section 53 (1) (b).

The Law of Property Act 1925, s.53 (1) (c) must also be applied as Mary holds the equitable interest. It was held by the House of Lords in Grey v IRC [1960], “that an instruction by a beneficiary to trustee to hold his interest in trust for a third party is in substance a disposition, and must therefore comply within Law of Property Act 1925, s.53 (1) c”.25 Section 53 (1) c states that “a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing and signed by the disponor or by his agent thereunto lawfully authorised in writing”.26

On the fact, it is unclear how Mary instructed the trustee, therefore unless the transfer beneficial interest was in writing and signed by the disponor “Mary” or by a person who is lawfully authorized to do so, the disposition will be void because it has not satisfy S.53 (1) (c) purpose.

Re Endacott [1959]

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 4th Edition, page (173)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 4th Edition, page (173)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 4th Edition, page (173)

Mohamed Ramjohn, Text, Cases and Materials on Equity and Trusts, Routledge-cavendish, 4th Edition, page (22-23)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

To David, she wrote:

“Dear David,

I have today transferred £800,000 into your bank account. I am instructing you to hold this money on trust for my colleagues in equal shares”.

Best Wishes,

Mary”

For a valid express trust to exist the three certainty must be present, that is certainty of intention, certainty of subject matter and certainty of objects: Knight v Knight [1840]27

Certainty of intention requires the settlor to express himself in terms which are sufficiently certain in order for his intended trustees to know that they are under an obligation to carry out his wishes. In Wright v Atkyns [1823] Lord Eldon said that words used by settlor should be “imperative words”.28 In this case, the use word “I am instructing you ….. Hold……. on trust” has indicated a sufficient intention to create a trust.

Regarding certainty of subject matter, the settlor must make clear what property is to be subject to the trust. Unlike in the case of Palmer v Simmonds [1854] where it was held that the subject matter could not be identified because of the settlor used word “the bulk of my estate”29, in this scenario, Mary has clearly identified the subject matter as the “£800,000″. This would suffice for certainty of subject matter.

As for the certainty of object, the beneficiary must be ascertained or ascertainable as mentioned in Re Endacott [1959].30 In this case, a fixed trust would be applicable because of the word “for my colleagues in equal shares” which implies that the beneficiaries and the interests are already identified by the settlor “Mary”. Hence, it is necessary to be able to draw up a list of all the beneficiaries in order for division to be made. The rule in IRC v Broadway Cottages Trust [1955] applies.31

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (66)

Richards Edwards and Nigel Stockwell, , Equity and Trusts, Pearson Education Ltd, 8th Edition, page (93)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, 2003, page (79)

Alastair Hudson, Equity & trusts, Pearson Education Ltd, 4th Edition, page (138)

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (97)

The Oxford English dictionary conceptually defined colleagues as “a person that you work with”; in McPhail v Doulton [1971] the term “employee” satisfied the class list test. It is therefore probable that “colleagues” would also satisfy the test.32 If “colleagues” were conceptually certain, potential beneficiaries must prove that they are Mary’s colleagues, a contract of employment for example can help them to prove they fall within this class of beneficiaries. As for the administrative workability, if “colleagues” might to mean people with whom Mary worked directly, the trust might well be administratively workable.

The legal requirement for constituting the transfer of an interest in property depends on the nature of the trust property involved. In this scenario, “Mary” created a formal three party trust, which is a transfer of legal title in the trust property to the trustee.33 For a valid transfer of “money”, a mere delivery is required.34 In this case, Mary has transferred “£800,000″ David’s bank account, thus this would satisfy the delivery requirement.

The general rule is that for a valid creation trust over personal property, no formalities needed, a general intention to create a trust will be sufficient. In Paul v Constance [1977], the use of the words “the money is as much yours as mine” in relation to money paid into bank account held only in one party’s name was found to be sufficient intention to create a trust of the account over which the parties were equitable tenants in common.35

Applying these principles the case at hand, given that money can be considered as personal property, no formalities is need for creation of this trust a mere fact that Mary has intention is sufficient, and this is shown by use of the words “I am instructing you to hold this money on trust”.

Words counts: 1.982

Alastair Hudson, Equity and Trusts, Cavendish Publishing Ltd, 3rd Edition, page (97-99)

Milroy v Lord [1862]

Mohamed Ramjohn, Text, Cases and Materials on Equity and Trusts, Routledge-cavendish, 4th Edition, page (15-16)

Alastair Hudson, Equity & trusts, Pearson Education Ltd, 4th Edition, page (174)