| This article looks at the requirements and | | | | Sometimes in a will, the owner of Property will |
| formalities for a valid trust. In UK law, a trust is | | | | use 'precatory' words such as expressing a 'wish, |
| an arrangement involving three classes of people; | | | | hope, belief or desire' that the receiver of |
| a Settlor, Trustees and Beneficiaries. The Settlor | | | | property will handle it a certain way. For example, |
| is the person who transfers property to the | | | | in Re Adams and Kensington Vestry 1884, a |
| Trust. The Trustees are people who legally own | | | | husband gave all of his property to his wife, "in full |
| the Trust Property and administer it for the | | | | confidence that she will do what is right as to the |
| Beneficiaries. The Trustees' powers are | | | | disposal thereof between my children...". The Court |
| determined by law and may be defined by a trust | | | | held that the wife may have been under a moral |
| agreement. The Beneficiaries are the people for | | | | obligation to treat the Property a certain way but |
| whose benefit the trust property is held, and may | | | | this was not sufficient to create a binding trust. |
| receive income or capital from the Trust. | | | | Precatory words can still sometimes create a |
| "No particular form of expression is necessary for | | | | trust. In Comiskey v Bowring-Hanbury 1905, the |
| the creation of a trust, if on the whole it can be | | | | words 'in full confidence' were again used, but the |
| gathered that a trust was intended". This | | | | will also included further clauses, which were |
| statement gives the impression that no formalities | | | | interpreted to create a trust. The Court will look |
| are needed, and could be misleading. Although | | | | at the whole of the document to ascertain the |
| equity generally does look to intent rather than | | | | testator's intention, rather than dismissing the |
| form, mere intention in the mind of the property | | | | trust because of individual clauses. |
| owner is not enough. For a valid trust to exist, | | | | There are further formalities required for certain |
| the Settlor must have the capacity to create a | | | | types of trust property, and for a trust to be |
| trust. He must validly transfer the trust property | | | | valid, title to the trust property must vest in the |
| to a third party trustee or declare himself trustee. | | | | Trustees, or, the trust must be "constituted". This |
| Further, he must intend to create a trust, and | | | | might be done for example, by delivery for |
| must define the trust property and beneficiaries | | | | chattels or by deed for land. If the trust is not |
| clearly. This is known as the 'three certainties'; | | | | properly constituted, the supposed beneficiaries |
| certainty of subject matter, certainty of objects | | | | have no right to compel the Settlor to properly |
| and certainty of intention. | | | | transfer the Property, as 'equity will not assist a |
| Certainty of intention refers to a specific intention | | | | volunteer'. The exception to this is where the |
| by a person to create a trust arrangement | | | | beneficiary has provided consideration (including |
| whereby Trustees (which may include himself) | | | | marriage) for the Settlor's promise, in which case, |
| hold property, not for their own benefit but for | | | | there would be a valid contract and the |
| the benefit of another person. | | | | Beneficiary could sue for breach. |
| It is clear when trusts are created in writing and | | | | Where a testamentary trust of land or personalty |
| on the advice of legal professionals that intention | | | | is purported, the will in which it is contained must |
| is present [Re Steele's Will Trusts 1948]. | | | | be in writing and executed in accordance with |
| However, no particular form of words is needed | | | | Section 9 of the Wills Act 1837, which means the |
| for the creation of a trust and here the equitable | | | | Will must be signed by the Testator in the joint |
| maxim, "Equity looks to intent rather than form", | | | | presence of two witnesses, and then signed by |
| applies. It is therefore sometimes necessary for | | | | the two witnesses in the presence of the |
| the Courts to examine the words used by the | | | | Testator. |
| owner of the Property, and what obligations if | | | | Where a Settlor wishes to create an inter vivos |
| any the Owner intended to impose upon those | | | | trust of personalty, the formalities are minimal. |
| receiving the Property. | | | | Besides the usual requirements for a trust |
| It is not necessary that the Owner expressly calls | | | | (capacity, the three certainties e.t.c), the Settlor |
| the arrangement a trust, or declares himself a | | | | must observe any formalities required to properly |
| trustee. He must however by his conduct | | | | transfer the Property to the trustees - for |
| demonstrate this intention, and use words which | | | | example, the execution and delivery of a stock |
| are to the same effect [Richards v Delbridge | | | | transfer form for shares. |
| 1874]. For example, in Paul v Constance 1977, Mr | | | | To create an inter vivos trust of land or of an |
| Constance did not expressly declare a trust for | | | | equitable interest in land, in addition to the |
| himself and his wife, but he did assure his wife | | | | formalities of transferring the land, the declaration |
| that the money was "as much yours as mine". | | | | of trust must be in writing and must be signed by |
| Additionally, their joint bingo winnings were paid | | | | the person able to create the trust - i.e., the |
| into the account and withdrawals were regarded | | | | Settlor or his attorney [S.53(1)(b) Law Property |
| as their joint money. The Court therefore found | | | | Act 1925]. Where this formality is not complied, |
| from Mr Constance's words and conduct that he | | | | the Trustee would hold the land on trust for the |
| intended a trust. | | | | Settlor rather than the Beneficiary. The exception |
| Certainty of intention is also known as certainty | | | | is where the rule in Strong v Bird 1874 applies - |
| of words, although it has been suggested a trust | | | | the Settlor intended to make an immediate |
| may be inferred just from conduct. Looking at Re | | | | unconditional transfer to the Trustees, the |
| Kayford 1975 1All ER 604, Megarry J says of | | | | intention to do this was unchanged until the |
| certainty of words, "the question is whether in | | | | Settlor's death, and at least one of the Trustees |
| substance a sufficient intention to create a trust | | | | is the Settlor's administrator or executor. In this |
| has been manifested". In this case, Kayford Ltd | | | | case, as the property is automatically vested in |
| deposited customer's money into a separate bank | | | | the Settlor's personal representatives and the |
| account and this was held to be a "useful" | | | | trust is constituted. |
| indication of an intention to create a trust, | | | | It is sometimes stated that no particular form of |
| although not conclusive. There was held to be a | | | | expression is necessary to create a trust if |
| trust on the basis of conversations between the | | | | intention was present. Clearly this is not the case. |
| Company's managing director, accountant and | | | | There are formalities for creating inter vivos land |
| manager so words were necessary for the | | | | trusts and testamentary trusts and if these are |
| conclusion. | | | | not followed, the trust will fail unless consideration |
| In contrast, where the word 'trust' is expressly | | | | has been provided or the rule in Strong v Bird |
| used, this is not conclusive evidence of the | | | | 1874 applies, even if the Trustee had the best |
| existence of a Trust - the arrangement may in | | | | intentions. Further, the form of words used in |
| fact constitute something very different [Stamp | | | | those formalities must be clear and unambiguous, |
| Duties Comr (Queensland) v Jolliffe (1920)]. For | | | | or they may not amount to a trust. He goes on |
| example, the deed may contain wording such as | | | | to say that 'a trust may be created without using |
| "On trust, with power to appoint my nephews in | | | | the word "trust"' and this is true in that other |
| such shares as my Trustee, Wilfred, shall in his | | | | words and conduct to that effect are sufficient. |
| absolute discretion decide, and in default of | | | | However, the Court does not just regard the |
| appointment, to my friend George". Although | | | | 'substance' of the words. If the wording used |
| professing to be a trust, Wilfred is not under an | | | | does not meet the 'three certainties' or, for |
| obligation to appoint the nephews and provision is | | | | example, the person making the declaration does |
| made for the property to pass to George if he | | | | not have the capacity to make a trust, the trust |
| does not. This is therefore a power of | | | | will fail. This is clearly not the desired 'effect' and |
| appointment, not a trust [eg. Re Leek (deceased) | | | | not the owner's intention. |
| Darwen v Leek and Others [1968] 1 All ER 793]. | | | | |