Equity and Trusts and the Certainty of Intention

Equity and Trusts and the Certainty of Intention

Equity and Trusts and the Certainty of Intention

The Modern judges nowadays are more inclined to try and find a way to validate a trust, than the judges in some of the older cases, who may be more inclined to invalidate a trust for the sake of maintaining certain rules. Maybe the modern judge is more confident that they can find a way to implement a trust, even though its meaning is not certain? This will be considered below.

The need for certainty

Certainty is a condition of validity for a trust. Normally one can deduce from the provisions of a will or a trust the testator’s desire that all his property be held on ‘trust’’. Certainty of intention is the first certainty of three and necessitates that, in order to form a trust, a settlor’s actions or words must be appropriately clear.[1] In order to form a trust, these actions or words are vital.[2] The rationale behind this is first the trustee must be in a position where they understand their duty. Second, if the trust is ever disputed by the settlor’s estate, the court has to act in clarity, with a comprehensive knowledge regarding the settlor’s intentions.  Therefore, when determining whether a disposition possesses certainty of intention, the courts will evaluate a settlor’s actions and phrases in order to decide whether these qualify as an intention to form a trust.[3]  The settlor does not need to possess a subjective desire to form a trust; instead, they must merely show intent that could be viewed as an intention to form a trust through the context of appropriate legal doctrines.[4]

The Precatory Words Contradiction

However, traditionally, courts were reluctant to acknowledge the presence of a trust when a manifest intention of the settlor is cast into doubt, if and when the settlor uses precatory words. The word ‘precatory’ originates in the Latin term for ‘request.’ In circumstances where a testator holds something within a trust or will, if he uses the words or expression that are merely of‘hope, prayer, wish, desire, recommendation’ etc., then court will not be impulsive to superimpose an intention to create a trust nor a binding obligation upon the trustee.[5] To do otherwise in the view of James L.J in Lambes v Eames[6] amount to ‘officious kindness’. InMugsoorie Bank v Raynor [7], a widow was given all of her late husband’s estate, with the husband’s belief that his wife would be fair to heir children and share the property when needed. It was determined that, without the necessary element of obligation, this did not constitute a trust.  In order for it to be a trust, there must be more than hopeful expectation; there must be mandatory conditions enforced by clear phrasing.[8]

The contrast between imperative and precatory words is best seen in a comparison between two differing cases.  The Court of Appeal in Re Adams and the Kensington Vestry[9] was tasked with evaluating certainty of intention, a key issue, in a situation where the property owned by a testator was given, “…to the absolute use of [his] wife, … in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease”. Here, it was determined that the wife’s receipt of the property was in the form of a gift, instead of a trust.  A trust was not formed in this case.  Cotton LJ followed with the statement: “I have no hesitation in saying myself, that I think some of the older authorities went a great deal too far in holding that some particular words appearing in a will were sufficient to create a trust.”[10]Here, Cotton LJ cited ‘older cases’ that viewed certainty of intention less rigidly than what is currently typical.  This flexible perspective may be due, in part, to the Executor’s Act 1830.[11]  This Act rescinded the mandate that a piece of the estate that was undisposed be given to the estate’s executors.  After the 1830 statute circumvented this rule, courts were empowered to assume a more practical perspective regarding certainty of intention.  This change in judicial reasoning was seen in Lambe v Eames,[12] Hutchinson and Tenant,[13] andMussoorie Bank v Raynor.[14] In Raynor the Privy Council noted: “current of decisions now prevalent for many years in the Court of Chancery shews that the doctrine of precatory trusts is not to be extended.”[15]

Re Adams is often viewed in opposition to Comiskey v Bowring-Hanbury.[16] Here, the House decided the wife was entitled to a life interest; the above phrase had successfully created a trust.  The nieces were to receive anything left from the estate as a function of the wife’s will; alternatively, the nieces could receive an equal portion if the wife did not succeed in giving it to them. It should be observed that both Re Adams and Comiskey had clauses that used an identical phrase, in full confidence.  That being said, despite the fact that this was followed in earlier cases, the weight attributed to these phrases had been minimised.  It was no longer advised to assign special significance to certain phrases; instead, a phrase’s context is seen as paramount.  Lindley LJ explained this within the context of Re Hamilton:[17]

“You must take the [document] which you have to construe and see what it means, and if you come to the conclusion that no trust was intended, you say so, although previous judges have said the contrary on some wills more or less similar to the one which you have to construe.”[18]

If a document needs to be interpreted, no matter if it is a will or a trust deed, a court’s attempt to substantiate the intention of a settlor is a rather forthright endeavour.  A case where a trust is not validated by a document becomes far more complex.  In Paul v Constance,[19] the courts were faced with this difficulty of finding evidence of intention in the vocal conversations between the two parties.  In this case, Mr Constance began an adulterous affair with Ms Paul, during which the two moved in together.  After failing to open a joint bank account, Mr Constance told Ms Paul that the money in his account was equally hers as it was his.  The two used the account’s money for joint purchases and also deposited shared bingo winnings into the same account.  However, upon Mr Constance’s death, his wife was legally entitled to the money in his account under the Administration of Estates Act 1925; regardless of his intentions.  Believing the money in the account to be hers, Ms Paul made a claim for it.

The Court of Appeal determined that a trust had been created that divided the money in the account equally between Mr Constance and Ms Paul.  Apart from the clear reminder to provide a comprehensive will before one’s demise, this case also brings multiple legal issues to light.  One of those being whether there was an intention to create a trust. In this circumstance, the court determined that a trust existed without explicit mention of the word ‘trust’. This case can be argued to have a mythical intention, inferred by the court.[20]

“The question, therefore, is whether, in all the circumstances, the use of those words on numerous occasions as between the deceased and the plaintiff constituted an express declaration of trust. The judge found that they did.”[21]

This case, for a variety of reasons, is not simple; Scarman LJ conceded that it was challenging to determine when the declaration of trust was, in fact, created.  Because of this, the ambulatory nature of the declaration of trust could have potentially created challenges for Mr Constance, the trustee; there was no clear point in time where he assumed the responsibilities of a trustee.  Additionally, a broad intention to benefit should not be construed as an explicit intent to form a trust.  This opinion is affirmed by Moffat, who stated that this particular case assigned unfounded specificity to Mr Constance’s statements, thereby muddying the division between gifts and trusts.[22]

It is also difficult to accept Paul v Constance in the context of Jones v Lock,[23] an earlier case where a father gave a £900 cheque to his son but died before he could indorse it.  Despite his statement, “I give this to baby. It is for himself,” the court did not agree that the father had transferred his entitlement to the check to his child.  Instead, the court categorised the father’s words as a “one-off,” and maintained that the phrase was not enough to show the father clearly intended to give the cheque to his child.[24]  The similarity between the phrasing used in Paul v Constance and Jones v Lock is problematic; both cases utilised words that were generic in content, indicating a possibility that intention may not have been specific enough in either case.[25]  That being said, there are notable differences between the two cases; the words used inPaul v Constance were mutually agreed, repeated more than once, and were separately evidenced by the bank manager. In this particular circumstance, their behaviour held precedence over their actual words.  Gardner adds an additional perspective to this situation, proposing that the distinctions between Paul v Constance and Jones v Lock simply represented a change in the courts’ perspective over time.[26]

Bibliography

Gardner, Simon. An introduction to the law of trusts. Oxford University Press, 2011

Glover, Nicola, and Paul Todd. “The myth of common intention.” Legal Studies 16.3 (1996): 325-347

Hopkins, John. “Constitution of Trusts. A Novel Point.” The Cambridge Law Journal (2001): 483-486

Moffat, Graham, and Gerard MD Bean. Trusts law: text and materials. Cambridge University Press, 2005

Schiavo, Frank L. “Does the Use of” Request,”” Wish,” or” Desire” Create a Precatory Trust or Not?.” Real Property, Probate and Trust Journal (2006): 647-666

Smith, Will C. “Precatory Trusts.” Jurid. Rev. 17 (1905): 145

Thornton, R. E. “Precatory Words—Effect on Absolute Devise or Bequest.” Tex. L. Rev. 30 (1952): 644

Williams, Glanville L. “The Three Certainties.” The Modern Law Review 4.1 (1940): 20-26

Unger, J. “The Inheritance Act and the Family.” The Modern Law Review 6.4 (1943): 215-228

 


[1] Knight v. Knight (1840) 3 Beav 148

[2] Smith, Will C. “Precatory Trusts.” Jurid. Rev. 17 (1905): 145.

[3] Schiavo, Frank L. “Does the Use of” Request,”” Wish,” or” Desire” Create a Precatory Trust or Not?.” Real Property, Probate and Trust Journal (2006): 647-666

[4] Thornton, R. E. “Precatory Words—Effect on Absolute Devise or Bequest.” Tex. L. Rev. 30 (1952): 644

[5] Schiavo, Frank L. “The Use Of” Request,”” Wish,”” Desire”: Precatory Trust Or Not?.” bepress Legal Series (2005): 744

[6] ( 1871 ) 6 Ch App 597

[7] (1882) 7 App Cas 321

[8] Williams, Glanville L. “The Three Certainties.” The Modern Law Review 4.1 (1940): 20-26

[9] (1884) 27 ChD 394

[10] (1884) 27 ChD 394 at page 409

[11] Unger, J. “The Inheritance Act and the Family.” The Modern Law Review 6.4 (1943): 215-228

[12] (1871) LR 6 Ch 597 38

[13] 8 ChD 540

[14] (1882) 7 App Cas 321

[15] (1882) 7 App Cas 321 at p. 330

[16] [1905] AC 84

[17] [1895] 2 Ch 370

[18] [1895] 2 Ch 370 at page 373

[19] [1977] 1 WLR 527

[20] Glover, Nicola, and Paul Todd. “The myth of common intention.” Legal Studies 16.3 (1996): 325-347

[21][1977] 1 WLR 527 at page 532

[22] Moffat, Graham, and Gerard MD Bean. Trusts law: text and materials. Cambridge University Press, 2005

[23] (1865) 1 Ch App 25

[24] Hopkins, John. “Constitution of Trusts. A Novel Point.” The Cambridge Law Journal (2001): 483-486

[25] Glover, Nicola, and Paul Todd. “The myth of common intention.” Legal Studies 16.3 (1996): 325-347

[26] Gardner, Simon. An introduction to the law of trusts. Oxford University Press, 2011

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