THREE CERTAINITIES • An express trust must be certain in three (3) distinct respects (Knight v Knight (1840)): 1) Certainty of intention: settlor must have intended to create a trust of the property as opposed to making a gift or lending it to another; 2) Certainty of subject-matter: property must be specified with reasonable certainty; 3) Certainty of objects: the beneficiaries of trust must be sufficiently identifiable. • Charitable trusts are not required to satisfy the requirement of certainty of objects. • Resulting and constructive trusts will not satisfy the requirement of certainty of intention. CERTAINTY OF INTENTION • The settlor must’ve intended to create a trust of their property as opposed to making a gift or a loan. • An intention to create a trust is an intention to impose on a property owner an obligation to apply the property for the benefit of identified beneficiaries or for recognised charitable purposes. • The settlor must’ve intended to create a legally binding relationship. • The settlor need not need to use the word “trust” or any particular words: Re Armstrong [1960]. • The intention is determined by reference to the settlor’s objective intention: Byrnes v Kendle [2011], question is whether a reasonable person would consider that in all the circumstances the settlor intended to create the trust? Must consider the settlor’s words and actions to assess whether they manifested a sufficient objective intention to create a trust: Paul v Constance [1977]. • A settlor must intend to create a trust which takes effect immediately (unless consideration had been provided to create trust at later time): Harpur v Levy [2007]. • The only circumstances in which a settlor’s subjective intention is relevant is where it is alleged that the trust is a sham, or voidable for mistake, misrepresentation, duress, undue influence or unconscionability, or where rectification of the trust instrument is sought on the ground that it does not represent the parties’ actual intentions. • The term ‘precautionary words’ mean words of prayer or words that express a hope or wish, without intending to impose enforceable obligations on the recipient of property. They tend to be invalid trusts, and more like moral obligations: Harding v Glyn (1793); Re Williams; Dean v Cole (1921). Shams • A trust is a sham where settlor deals with property otherwise in accordance with terms of the trust created, with the intention of deceiving third parties as to the settlor’s real interest in the property. • The objective appearance is a trust, but subjective intention is to create that appearance to deceive. There is no intention for trust to govern relationship between parties. CERTAINTY OF SUBJECT MATTER • The subject of the trust must be certain to be enforceable – trust cannot exist without property. • The subject-matter must constitute legally recognised property. • It can be real or personal tangible property, or intangible property. It can be legal or equitable. • The settlor must have present property rights – cannot have future property on trust. o Exception: when consideration paid in exchange for declaration of trust: Tailby v Official Receiver (1888) • The quantum or amount of property to be held must be clearly identified: Boyce v Boyce (1849) – four houses transferred on trust, trustee to allow Maria to choose a house and other three houses to go to Charlotte but Maria died before making a choice. • The amount of property cannot be vague: Palmer v Simmonds (1854) – the “bulk of my estate” cannot be clearly defined; Bardswell v Bardswell (1838) – direction to “remember” certain persons; Knight v Knight (1840) – direction to “reward very old servants and tenants according to their deserts”. o The subject-matter can be certain even if quantum will be determined by trustee, provided that the criteria applied by the trustee can be objectively assessed. Resolving Uncertainty • There are a number of ways uncertainty can be resolved in respect to subject-matter: 1) Interpretation: courts can interpret what settlors meant in trust: Re Golay’s Will Trust – courts can interpret what “reasonable” to find objective meaning in context and courts are constantly involved in making such objective assessments of what is reasonable. 2) Extrinsic evidence in interpretation: o Evidence of surrounding facts and circumstances (known as armchair principle): Jepson v Bowman [2014] – sitting in armchair of person who created trust and asking what that person would’ve meant. o Direct evidence of settlor’s intention (ie. instructions to lawyer or diary) but only when: i. There is a will: s 36 of Wills Act 1997(Vic) (allows admittance of evidence of subjective intention); ii. The equivocation principle applies: Dec v Oikonomou – settlor left his “house on trust”, but owned two house and was uncertain which house he meant, so court allowed evidence to determine which of the two he meant. 3) Share in larger subject-matter: only applicable where trusts created as part of fungible mass (items that are all the same) – ie. 200 shares held on trust but settlor holds 400 shares, it is presumed that all 400 shares are held on trust for settlor and beneficiary in equal shares: Ellison v Sandini Pty Ltd [2018]. Consequences of Uncertainty • If property remains uncertain or is not included in trust, there is no trust for property to attach to. • If property is identifiable but there are uncertain interests in the property, then trustees cannot execute intended trust which deems it invalid and must return property to the settlor. o If settlor is dead, the property must be returned to deceased estate. CERTAINTY OF OBJECTS • The beneficiaries of a trust must be identifiable. • The trust must contain beneficiaries as it’s a relationship between trustees and beneficiaries, and if there are no beneficiaries then trustees cannot owe duties to anyone. • The beneficiaries do not need to be named, but trust must have workable definitions of beneficiaries to be able to determine to whom trustees owe duties to (beneficiary principle). • There are two types of uncertainties in terms of objects (Re Gulbenkian): 1) Evidentiary uncertainty: lack of factual information about existence, identity or location of beneficiaries, and instances when it is impossible to have complete factual information about beneficiaries (ie. a person’s siblings – unknown whether person has more siblings). a) Evidentiary uncertainty will not invalidate a trust. 2) Conceptual uncertainty: vague or imprecise definitions (ie. person’s favourite colleagues). b) Has ability to invalidate a trust. Resolving Uncertainty • There are ways to resolve uncertainty depending on whether trust is a fixed or discretionary trust: 1) Fixed trusts: o List certainties test – trustees must be able to make a complete list of beneficiaries. o Evidentiary uncertainty will not invalidate fixed trust: Kinsela v Caldwell (1975). o The court has a duty to make sense of settlor’s meanings: Re Gulbenkian. o If trustees are not sure whether their list is complete, they can ask the court to approve the distribution to protect them from breach of their duties: Re Benjamin Orders [1902]. o If trustees cannot name all beneficiaries but have taken all reasonable steps to locate them, the court may approve distribution if it is satisfied on the balance of probabilities that the substantial majority of beneficiaries have been ascertained and that no more reasonable inquiries can be made: West v Weston. 2) Discretionary trusts: o Criterion certainty test: whether trustee can decide whether person is within specified class of beneficiaries or not: McPhail v Doulton; Re Baden [No 2]. • Additionally, the courts can resolve uncertainty by engaging in: 1) Interpretation: courts can interpret what settlors meant in trust: Re Golay’s Will Trust – courts can interpret what “reasonable” to find objective meaning in context and courts are constantly involved in making such objective assessments of what is reasonable. 2) Extrinsic evidence in interpretation: o Evidence of surrounding facts and circumstances (known as armchair principle): Jepson v Bowman [2014] – sitting in armchair of person who created trust and asking what that person would’ve meant. o Direct evidence of settlor’s intention (ie. instructions to lawyer or diary) but only when: iii. There is a will: s 36 of Wills Act 1997(Vic) (allows admittance of evidence of subjective intention); or iv. The equivocation principle applies: Dec v Oikonomou – settlor left his “house on trust”, but owned two house and was uncertain which house he meant, so court allowed evidence to determine which of the two he meant. Consequences of Uncertainty • If the beneficiaries cannot be identified with sufficient precision or the court decides it cannot legitimately approve a distribution that probably leaves out beneficiaries because they cannot be identified then trust is invalid because trustees cannot carry out the intended trust, and trustees must return property to settlors. o If settlors is dead, trustees must return property to deceased estate. RESULTING TRUSTS AUTOMATIC RESULTING TRUSTS • An automatic resulting trust arises upon failure of an express trust – the trustee holds the property on resulting trust for the settlor or the settlor’s estate if they are deceased, or to whomever the trust instrument provides (either expressly or impliedly). The trust returns to the settlor. o Failure can occur for numerous reasons including: c) the failure to comply with legal requirements (ie certainty of objects or interests in subject matter, the perpetuity rule, breach against public policy ect.); or d) the reason for creating the trust no longer exists. • The general principle: there is a gap between the beneficial interests in trust property and there is no mechanism for disturbing the assets. There is not enough fixed interests to cover all the property. RESULTING TRUST THEORY Theory of Resulting Use • The theory of the resulting use – settlor owed legal title and beneficial title, and when use was created, only the legal title was transferred, and settlor would retain beneficial title.