Equity and Trusts - Gifts

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2012/13 Law 3240 and 5760

Equity and Trusts

Seminar 3

The Three Certainties: Certainty of Intention, Certainty of Subject Matter, and Introduction to Certainty of Objects

Essential Reading

Martin, Hanbury & Martin: Modern Equity (19th ed., Sweet & Maxwell, 2012) 97-107; or

Watt, Trusts and Equity (5th ed., Oxford University Press, 2012), 77-92; or

Wilson, Todd and Wilson’s Textbook on Trusts (10th ed. Oxford University Press, 2011), 53-72

AND

Harrison v Gibson [2006] 1 All ER 858

Supplementary Reading

Todd and Watt Cases and Materials on Equity and Trusts (8th ed., 2011) Ch. 3

S. Worthington (1999) ‘Sorting out ownership interests in a bulk: gifts, sales and trusts’, Journal of Business Law, 2

Blue = textbook reading
Guidance Notes

1. Introduction

Gratuitous disposition of property in favour of another = usually an absolute gift. But can sometimes be conditional gift/gift subject to a charge. Conditional – ie gift of a house to A on condition that B live there rent free for life. Subject to charge – gift of house to P, subject to P paying £10,000 to E. Also can make gift on trust ( eg transfer of property ‘to Terry on trust for Ben’. Terry = trustee; Ben = beneficiary. T = legal owner, B the equitable/beneficial owner. Note: not every express trust is created gratuitously – in the example, the settler may have been under a contractual obligation to create trust for Ben.

When settler creates a trust – free to define obligations of the trustees and entitlement of the beneficiaries as he sees fit, subject only to limitations imposed for reasons of public policy. He can provide that trustees should be bound to care for only part of the trust fund. If he intends that trustees should speculate recklessly with the fund with a view of doubling it or losing it all within a 2yr period, he may so provide and ‘no beneficiary can complain if the money is lost’.

This great freedom can lead to uncertainty. Even when disposition made in writing, not always clear that a trust has been created – and even when that is clear, not always clear what the terms are. Sometimes courts are to adjudicate between litigating parties with competing interpretations of terms of a disposition. Other times, trustees merely require guidance in a particular matter, so the court will make an ‘order for directions’. Where Q to be resolved = a fundamental one – disposition intended to be given effect by way of express trust or absolute gift? – courts hold absolute gift unless its certain from the context and expressions that the person making the disposition intended to create a trust. Usually the very fact that the court has been called upon, shows there is insufficient certainty that a trust will arise. If it is clear that a trust is intended – then secondary question – eg ‘who is entitled to the benefit of this trust and in what proportions?’ – court will try to interpret the words and conduct used as much as possible to give effect to the trust. Courts apply the rule of construction certum est quod certum redid potest – ‘that is certain which can be made certain’. Lord Langdale MR – about testamentary trust in Knight v Knight: “In the construction and execution of wills, it is undoubtedly the duty of this court to give effect to the intention of the testator whenever it can be ascertained”

The three certainties apply to both gifts and trusts although the concept was first propounded in relation to trusts (in Knight v Knight (1840) 3 Beav 148 – Lord Langdale identified the 3 certainties. These need to be satisfied before a court will acknowledge that a settlor/testator has created a private express trust). The certainty of intention referred to is that of the donor or settlor/testator, the certainty of subject matter refers to the property which is being transferred, and the certainty of object is the person or persons who will benefit from the gift or under the...
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