Business, Legal & Accounting Glossary
If the existence of a valid express Trust is disputed, a factor that the court will consider is whether there was sufficient certainty of intention; that is, whether the settlor genuinely intended to create a trust (see also three certainties). The party that wishes to assert the existence of the trust must provide evidence of the settlor’s intention in the form of written documents, words spoken by the settlor, or the conduct of the settlor.
Whether there was certainty of intention is a question of fact, not a question of law, and falls to be determined on the evidence provided to the court. Earlier decisions are, strictly speaking, not binding. Moreover, ‘intention’ in the law of trusts is an inherently subjective matter, more like intention in the criminal law than in the law of contract.
Consequently, the trial judge has a high degree of discretion in interpreting the evidence, and it is difficult (as well as risky) to read too much into the cases in this area of law. However, a few general principles are readily apparent.
Most importantly, it is not necessary that the settlor used the word ‘trust’, nor even that he knew what a trust was, provided the intention was 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.
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.
Although the word ‘trust’ need not be used, it must be clear to the court that the settlor’s intention was not to create an outright gift (Jones v Lock (1865)). If the court cannot distinguish between an intention to make a gift 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 (Milroy v Lord (1862)).
At one time it was the case that precatory words could create a trust. The modern position is that the creation of a trust imposes a burden on the trustee, and so a trust should not be inferred from precatory words alone. However, it is still possible to find a trust from the overall wording of a will or the conduct of the testator.
Not only is the word ‘trust’ not conclusive that a trust is to be created, but the presence of the word ‘trust’ does not necessarily imply a trust in the legal sense. For example, in Tito v Waddell (no 2) (1977) the words ‘held in trust for’, when used by the Crown, were held to mean that a certain legal obligation was to be imposed, not a trust in the textbook sense.
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.
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This glossary post was last updated: 5th April, 2020 | 31 Views.