Creation and requirements of express trusts - The three certainties: intention, subject matter, and objects

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Overview

Creating express trusts is a key concept in trust law, affecting property management and beneficiary rights. For the SQE1 FLK2 exam, candidates must thoroughly understand the three certainties: intention, subject matter, and objects. These components are essential for forming valid express trusts and are commonly tested in complex scenarios. This article delves into each certainty, including relevant cases and practical applications, to prepare students for the exam.

Certainty of Intention

Intention is the first requirement for a valid express trust, requiring clear evidence that the settlor aimed to establish a trust rather than a gift or moral obligation.

Express Declarations and Implied Intentions

Explicit trust declarations are straightforward, but courts may deduce intention from behavior and circumstances.

For instance, in Paul v Constance [1977], Mr. Constance told his partner, "The money is as much yours as mine," which, combined with their actions, sufficed to establish a trust.

Key Considerations for Intention

  1. Precatory Words: Words like "wish" or "hope" might not constitute a trust. In Re Adams and the Kensington Vestry (1884), such expressions did not create trust duties.

  2. Conduct: Courts look at the settlor's overall actions. In Staden v Jones [2008], financial arrangements and discussions were analyzed to decide on trust intention.

  3. Gifts vs. Trusts: Distinguishing between trust intention and gifting is vital. Richards v Delbridge (1874) showed that a failed gift doesn't automatically mean a trust was intended.

Exam Focus: Analyzing Intention

Candidates should:

  • Examine settlor language
  • Consider the context and actions
  • Differentiate between trusts and gifts

Certainty of Subject Matter

This certainty requires that the property for the trust is clearly defined. It involves identifying both the trust property and the beneficiaries' interests.

Identifying Trust Property

The property must be explicitly identified or described.

In Re London Wine Co (Shippers) Ltd [1986], wine bottles weren't specific enough as trust property, lacking clear identification.

Certainty of Beneficial Interests

Beneficiaries' interests must be clear, though not necessarily fixed.

Boyce v Boyce (1849) failed due to uncertain interests after the testator's wife didn't make a choice.

Key Considerations for Subject Matter

  1. Asset Segregation: Trust property needs to be distinct from other assets.

  2. Fungible Goods: Special care is needed with fungibles like shares or money. In Hunter v Moss [1994], a trust over non-segregated shares was valid due to their fungibility.

  3. Future Property: Trusts over future property aren't valid until acquired.

Exam Focus: Evaluating Subject Matter

Candidates should:

  • Identify trust property clearly
  • Assess mixed funds or fungibles
  • Evaluate beneficiaries' interest clarity

Certainty of Objects

Beneficiaries (objects) must be clearly defined or identifiable. Requirements vary between fixed and discretionary trusts.

Fixed Trusts

In fixed trusts, all beneficiaries must be clearly identifiable.

IRC v Broadway Cottages Trust [1955] established this with the "complete list test."

Discretionary Trusts

For these trusts, the "is or is not" test from McPhail v Doulton [1971] applies, requiring it to be clear if one is a beneficiary.

Conceptual and Evidential Certainty

  1. Conceptual Certainty: Criteria for membership must be clear. In Re Baden's Deed Trusts (No 2) [1973], "relatives" was clear, unlike "friends."

  2. Evidential Certainty: Evidence must confirm if criteria are met, vital for discretionary trusts.

Key Considerations for Objects

  1. Capricious Trusts: Trusts deemed whimsical may be invalid. Re Manisty's Settlement [1974] highlighted this difference.

  2. Administrative Workability: Trusts may fail if the beneficiary class is impractical. McPhail v Doulton and Re Hay's Settlement Trusts discuss this.

  3. Power of Addition: Trustees adding beneficiaries affects certainty.

Exam Focus: Analyzing Objects

Candidates should:

  • Differentiate between fixed and discretionary trusts
  • Apply relevant tests for object certainty
  • Address concerns of capriciousness or unworkability

Advanced Concepts and Modern Developments

Interplay Between the Three Certainties

The certainties impact each other. Unclear subject matter can affect objects, as shown in Re Golay's Will Trusts [1965].

Conclusion

Understanding and applying the certainties of intention, subject matter, and objects is key to forming valid express trusts. These elements ensure that trusts operate according to the settlor's intentions while safeguarding the beneficiaries' rights. For FLK2 students, understanding these certainties is vital for mastering trust law principles and facilitating successful trust management.