Introduction to the three certainties PDF

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thorough lecture notes with detailed case notes and explanations...

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PART A: Introduction Re- cap: The Essence of the Trust The trust device allows more than one person to have an interest in property simultaneously.  It does this by dividing legal and equitable ownership as shown in the below diagram:

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T

Trustee – holds legal title – has a proprietary right in law – trust management

B

Beneficiary – has a beneficial (equitable) interest – has a proprietary right in equity – benefits from the trust fund.

The trust mechanism: The first way of creating a trust is where the settlor (absolute owner) declares that she holds her property on trust for the benefit of another ( the beneficiary) . She then holds legal title to the trust fund as trustee but the equitable interest in the property passes to the beneficiary.  Settlor declares a trust – this splits the legal title and equitable interest. The settlor retains legal title as the trustee  The equitable interest in the trust property passes to the beneficiary  The beneficiary now holds an interest in the trust property The second way of creating a trust is where the settlor transfers legal title to property to a third party (the trustee). The trustee holds the property on trust for the benefit of the beneficiary who holds an equitable interest in the trust fund.  Settlor (absolute owner) passes legal title to the trust property to the trustee.  The trustee now holds legal title  The beneficiary holds equitable interest now as it is passed from the settlor.  When the settlor declares a trust this splits the property into legal title and equitable interest.  Types of Express Trusts Whilst trusts may be express or implied today, we are concentrating on the requirements for a valid (thus enforceable) EXPRESS trust. Express trusts are trusts which have been intentionally created by the settlor declaring himself as trustee or transferring property to a trustee Subcategories of express trusts include: • Fixed trusts: where the beneficiaries and their shares are stipulated expressly by the settlor

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Discretionary trusts: where the settlor gives the trustee the discretion to select who from a class people receives the trust property and the quantity of their share Exhaustive: where the trustees must distribute all income accruing to the trust fund; and Non-Exhaustive: where the trustees have a power to accumulate income.

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To create a valid express trust you must have … ****The three certainties + Constitution (Formalities) = A valid and enforceable express trust ****

The 3 Certainties Certainty is important for the court to be able to advise the trustee how he can discharge his obligations if there are problems with the administration of the trust. 1. CERTAINTY OF INTENTION – the settlor/testator intended to create a trust (not a gift or power) 2. CERTAINTY OF SUBJECT MATTER – what property is to comprise the trust fund 3. CERTAINTY OF OBJECT – have to be certain about who the beneficiaries are under the trust •

Knight v. Knight (1840) 3 Beav 148, Lord Langdale had noted:

“First, if the words are so used, that upon the whole, they ought to be construed as imperative; •

Secondly, if the subject of the recommendation or wish be certain; and,

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Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.

In simple cases there is no difficulty in the application of the rule thus stated.” What are the 3 Certainties? For the court to give directions it has to be certain that; 1. The settlor intended to create a trust (not a gift or power) – this is called certainty of intention 2. What property is to comprise the trust fund – this is what we mean by certainty of subject matter 3. Finally the third certainty is certainty of object, (object means beneficiaries), so this means that we have to be certain about who the beneficiaries are under the trust....