Substantive Requirements of a Trust

What are the the requirements to create an enforceable trust? - Justin Santiago

1. Substantive Requirements i.e. - 3 certainties - certainty of intention, certainty of subject matter, certainty of objects.

a. Certainty of intention

Whether there was certainty of intention is a question of fact, not a question of law. If the test for certainty of intention fails, there cannot be a valid trust, and the person to whom the property is transferred becomes the legal and beneficial owner.

The test of certainty of intention is "Can the words be construed as having the effect on the trustee’s conscience? Christian LJ in McCormick v Grogan.

The use of the word “wish” can be construed as being precatory i.e. exhibiting a desire which only has the effect that the trustee acts according to his conscience which would merely amount to an allegation of a trust : Re Adams & Kensington Vestry.

Also the word “trust” does not necessarily imply a trust in the legal sense. For example, in Tito v Waddell the words “held in trust for” did not mean that a certain legal obligation was to be imposed. Where certainty of intention is evidenced by conduct, the conduct must manifest a clear intention to deal with the trust property in the form of a trust Re Kayford 1975 although, again, no reference need be made specifically to a trust

The modern approach does not look at words alone to determine an intention but conduct as well. It is not necessary that the settlor used the word “trust”', nor even that he knew what a trust was, provided the intention is clear. For example, in Paul v Constance 1976 the words “This money is a much yours as mine”, combined with the behaviour of the settlor, were held to be sufficient to find that a trust had been created.

Was the intention to transfer rights? Failed attempts to transfer rights cannot be construed as a self declaration of a trust – Richards v Delbridge.

If the court cannot distinguish between an intention to benefit another and an intention to create a trust, then the result is that neither of these outcomes will obtain, and the property will remain with the settlor : Jones v Lock.

b.Certainty of subject matter - there are two limbs to certainty of subject matter in order to ensure that there is holding of rights on behalf of another :-

i) the trust property must be certain
ii) the beneficial interest must be defined/ascertainable

Failure of a trust where relative words are employed in defining the property for example – a gift by a testatrix of “the bulk: of her residuary estate : Palmer v Simmonds and Re Kolb which concerned a direction to hold “blue chip securities” on trust. Also Anthony v Donges where the testator directed that his widow receive such minimal part of the estate as she might be entitled under English law was void for uncertainty.

Consequences of inability to identify trust rights would result in the recepient taking the rights outright : Palmer v Simonds the rationale is that the uncertainty as to subject matter feeds back into uncertainty as to intention to create a trust in the first place.

Note however the trend of courts to not take the too literal approach in Re Golay with regard to a trust to pay a reasonable income to a named beneficiary.

c.Certainty of objects

The beneficiary principle requires that all trusts be made for the benefit of human beneficiaries who will be able to apply to the court to enforce the trust : Morice v Bishop of Durham. The principle is also framed as the ‘no purpose trust’ rule and that with the exception of charitable trusts, nearly all trusts for a purpose are void : re Endacott – a testamentary trust for the purpose of providing some good useful memorial to myself failed for want of a human beneficiary

The beneficiary principle can be viewed as a rights principle or an enforcer principle – re Astor’s Settlement Trusts. If there are no persons with rights against the trustee then there is no trust. It also follows that if there is no one with the ability to enforce the trust then there is also no trust. The law of trusts are devices of private law and for a private law to have any legal effect it must actually confer rights or create enforceable duties. Dedicating rights to a purpose does neither.

However whether the conferring of rights creates the enforceable duty is unclear as it may be possible for the settlor to nominate someone else to serve as the enforcer of those beneficiaries’ rights. In Re Denley, a trust for the maintenance of a sports ground (a purpose) for use by the employees of a company was valid on the ground that the purpose was not of such an abstract kind as to fall foul of the beneficiary principle and the employees had locus standi to ensure that the trustees put the purpose into effect.