Q1.

  1. A transfers property 1 to B and orally instructs B to hold the property on trust for C.
  2. A makes a will leaving property 2 to C in full confidence that C will hold it on trust to be used to provide accommodations for four persons as seen in her absolute discussion things are most deserving.
  3. The will also provide that B should be able to choose one from the bulk of any other properties to occupy for the rest of his life.

Answer

According to the question above A transfers property 1 to B and orally instructs B to hold the property on trust for C, the trustee is seeking to rely on the formality requirement of the conveyance to possess the property. The court will intervene and uphold the trust.

In Rochefoulcauld v Boustead Lindley LJ stated, “It is a fraud on the part of a person to whom the land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parole evidence that it was so conveyed upon trust for the claimant and that the guarantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself.”

The principle invoked in Rouhefoulcauld is that “Equity will not permit a statute to be used as an instrument of fraud”. Thus the court has the power to intervene to prevent the trustee possessing the property because of the settler’s non-compliance with S53 (1) (b). S53 (1)(b) of the Law of Property Act 1925 states that “ a declaration of trust respecting any land or any interest therein must be manifested and proved by someone writing signed by some person who is able to declare such trust or by his will”

Hence, as the statute cannot be proven as illegal by court, they will make sure the property doesn’t go to B so the property will go back to A.

Constructive Trust

A constructive trust does not arise because of the expressed intent of a settler, one who establishes a trust. The court creates it whenever a person who, in fairness, should not be permitted to retain it holds title to property.

The law accepts an oral trust and is inappropriate to disregard oral trust. In the absence of written evidence express trust is unenforceable created but property is obtained or retained by other  conduct. The court employs the constructive trust as a remedial device to compel the defendant to convey title to the property to the plaintiff. It treats the defendant as if he or she had been an express trustee from the date of the unlawful holding of the property in question.

It is noted that in may cases where constructive was applied is where a transfer of property from the settler to the trustee, the trustee holds it for his own benefit. Some of these cases include Bannister v. Bannister (1948), Binions v. Evans(1972) and Re:  Densham (1975). 

Certainty of Intention

There is a will with written evidence, which makes it clear that there is an intention on the part of the alleged settler to create a trust such as “in full confidence”. This leaves the court with a problem to solve, whether the court had the intention to trust or the intention to make a gift. “In full confidence” is a precatory word, which cannot convey a sense of positive obligation.

In Tito v Waddell (1977) it was established that merely using the word “trust” in a document that is alleged to have created a trust will not of itself automatically show intention to create a trust. Nor does the absence of the word trust automatically mean that there is no intention to create one. The court will always examine the usage.

 The main problem in establishing the certainty of intention is whether the settler intended to impose obligation on the alleged trustee. And no trust can arise until the court finds any intention to such an obligation. While dealing with this, particular difficulties arise when precatory words are used.  “In full confidence” is a precatory word, and as the modern approach of the courts says that using precatory words is that they are not a conclusive proof of the intention to create a trust. And they also said that it does not mean that there would be no intention to create a trust just because of the use of precatory words.

In the case Adams v Kennington Vestry, the court decided that the testator intended to give the property entirely to his wife and trusted her to deal with it appropriately. Thus, it makes it clear that the property is a gift to his wife, and the testator expects the wife to act as family held by taking. In such case precautionary words are expressing a desire.

By contrast, in Comisky v. Bowring Hanbury precatory words did show an intention to create a trust, when looked in the context of the will as a whole. In this case the court decided that the testator had intended his nieces to acquire some rights in his whole property from the moment of his death or of making the will, rather than requiring them to rely on his widow, even though the bequest was couched in terms of that the testator had full confidence in his wife.

The most striking modern example of lack of certainty of intention was in the case of Tito v. Waddell No. 2 (1977). The facts were that the British government had provided that royalties had to be paid on phosphate mined on Ocean Island and that such royalties were to be held in trust for the previous owners of the land. It was held by Megarry VC that the use of word trust was not conclusive when the court was trying to decide whether a trust had been created and in particular when the Crown used the word. The word could be used to indicate a trust in the higher sense V a governmental obligation, which was not enforceable in the courts.

In this case we see that there is an intention to create a trust because of the certainty of the subject and the intention is quite clear. Some of the words used in the case is sufficient enough to create a trust, but “in full confidence” alone doesn’t create a trust.

Certainty of object

 Leaving C in his own absolute discretion, to think and find those people who are most deserving is another difficulty. It is very difficult to say whether or not any given person falls within the class of beneficiary. “This brings about discretionary trust”. Discretionary trust is where the trustee is given discretion as to how he or she distributes the trust property.

Lord Wilberforce stated that, in the case of a discretionary trust the test for certainty of objects would be fulfilled if it could be: “said with certainty whether any given individual is or not a member of the class and does not fail simply because it is impossible to ascertain every member of the class”.

This test was discussed further in the case of Re Baden’s Deed Trusts. Here Sachs and Wilberforce LJ made a distinction between a “conceptual uncertainty” which will defeat for uncertainty of objects, on the one hand, and “an evidential difficulty”, which the court will be able to overcome, on the other.

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Certainty of Subject Matter

It involves what it was that the settler intended to give the beneficiary. In this particular case, the uncertainty of subject matter arises when we need to find what bulk actually means. The identification of the subject matter is not needed when the trust is created but at the time the trust comes into being or effect.

Re Golay’s Will Trusts (1965) a gift of a “reasonable income” succeeded because, because taking into account all circumstances, it was clear that it was to be reference to the previous standard of living of ...

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