Certainty of Intention

kazzasingh's version from 2018-04-23 11:51

Testamentary Trusts

Question Answer
Re Adams & the Kensington Vestry (1844)Testator left property to someone "in full confidence" that she would do "what is right" with regards to its disposal.

HELD: "in full confidence" is merely a wish/desire and does not compel the recipient to deal with the property in any particular way. Hence, a trust was not created.
Lambe v Eames (1870)The case from which modern rules relating to certainty of intention are generally traced back. The case concerned a testator who was leaving his estate to his widow. The will said that the property was to be "at her disposal, in any way she may best think fit, for the benefit of herself and family". After her death, she bequeathed part of the estate to one of their illegitimate grandchildren. Her legitimate children objected to this and went to court.

CA HELD: the words that the testator had used were not compulsory. They were just words of desire and thus the property was NOT held by the widow on trust for herself and her family. It was an outright gift to her that was coupled with an expression of hope as to how she might deal with it. She was free to give that property to whoever she liked (including her illegitimate grandson).
Re Hamilton (1895)Testator who left property to someone (wishing that he would beqeuath the property to somebody else in turn)

HELD: wish was not a trust as it was not compulsory.
Re Johnson (1939)Testator left his property to someone with a request that, upon their death, he would give the property to his four sisters.

HELD: not enough to create a trust.
Comiskey v Bowring-Hanbury (1905)Testator left property to his wife (absolutely in full confidence) that at her death she will devise it to one or more of his nieces (as she sees fit). "I hereby direct that all my estate and property acquired by her under this will shall, if she does not do that, be divided equally among the surviving said nieces"

HELD: no free choice given at all. She could prefer to give it all to one niece rather than another BUT in the absence of her doing that, it is going to be split equally between them. NOT an outright gift. He did use the words (absolutely in full confidence) BUT construing the clause as a whole, he was intending to create a trust.
Re Steele's WT (1948)Testatrix used the exact words that had been used in a previous case that had created a trust. She did so deliberately thinking that she was creating a trust. She said "I give my diamond necklace to my son...AND I REQUEST my son to do all in his power to give effect to this wish.

HELD: "I request" suggests no obligation. BUT, these words were used in an earlier case called Shelley v Shelley where a trust was created. The court in this case held that given the fact that the testatrix was relying on this earlier case, it would create a trust now even though if she'd used those identical words afresh today, they would not create a trust as they are not obligatory.

Inter vivos trusts

Question Answer
Paul v Constance (1977)P & C lived with each other. Mr C gets injured at work and gets a compensation payout by his employers. He puts this money into a bank account which he opens up especially for this purpose. He opens it up JUST in his own name. BUT he ensured that Mrs P would be able to access the money as well. Whenever he withdrew money from the account, he used to declare that "the money is as much yours as it is mine". Mr C and Mrs P pay their bingo winnings into this account. Their one major withdrawal from this account is spent on their joint Christmas together. He then dies without making a will and his estranged wife then appears seeking letters of administration and wants to be appointed as the personal representative to deal with his estate. Mrs P sues her and states that she ought to be entitled to half the money in the account as it was held on trust for their joint benefit.

CA HELD: Mr C did intend for the money in the account to be held on trust for their joint benefit. Evidence for this was his words and what he said "as much mine as it is yours" and what he did with that money (it was spent on their joint lives together and checked with the bank that she could use the account despite it only being in his name). There is a trust and she was entitled to half the money. Words and actions over a long period evidenced the trust (as opposed to a written document).
Rowe v Prance (2000)Mr P and Mrs R had an affair. On numerous occasions, P indicated that he would leave his wife and move in with R (but never does). BUT what he does do is buy a yacht and tells his mistress that it is theirs. It is purchased with his money and in his name. She was involved in the negotiations to buy the boat and also gave up her rented accommodation in the expectation of living on the yacht. The yacht was referred to repeatedly as "ours" and P indicated that it was financial security for giving up her accommodation. Two years after buying the yacht, the affair ends. She seeks a declaration that there was an express declaration of trust over the boat.

HELD: granted the declaration as there was sufficient evidence that Mr P had the requisite intention.
Commissioners of C & E v Richmond Theatre (1995)Theatre said that if the customers pay over the money in order to get a ticket, in return they will hold the money on trust for the customers until the performance has taken place. The contract also specified that theatre was not accountable for any interest that the money may have earned and not accountable for use of ticket money after receipt.

HELD: no trust as the theatre company was reserving the right to spend the money as if it were part of their general funds.
Re Lewis's of Leicester (1995)Department store...all money is paid at the till rather than each concession stand. Money kept separate from rest of the store's assets.

HELD: because of the separation, there was an intention to hold the assets on trust. The store was both a trustee and a beneficiary.
Re Bond Worth Ltd [1980]C was a carpet manufacturer who bought raw materials from a supplier who purported (in the contract of sale) to retain equitable and beneficial ownership over the raw materials.

HELD: despite this apparently clear intention to create a trust, that is not what had happened. Although there was this clause, it was perfectly clear from the contract overall that Bond Worth was fully entitled to use those raw materials as though they were the absolute owner. On its true construction, this apparent intention to create a trust actually created a floating charge (only a proprietary interest - no ownership and no share in the asset. Only a right to have a fixed amount repaid. A floating charge does not attach to any particular asset). Reservation of title clause was effective in terms of creating security (at least a proprietary interest) but it was unsuccessful in reserving equitable title. Moreover, in this case, it was a floating charge and, under company legislation, a charge is void if it is not registered. The attempt to elevate themselves above standard creditors failed.
Clough Mill v Martin (1985)A mill contracted for the sale of yarm that was going to be used to manufacture a fabric. The contract purported to: (1) reserve outright legal beneficial ownership in the yarm for the seller until payment had been received in full (2) extend the ownership that the seller was purporting to reserve to the whole of any fabric manufactured with the yarm until the payment was made. HELD: there is nothing objectionable in principle in an agreement between parties under which C (the owner of goods) gives possession of these goods to B (at the same time conferring B the power of sale even though A will remain the owner until they are sold or consumed). Perfectly fine for seller to keep the legal beneficial title.
Barclays Bank Ltd v Quistclose Investments (1970)Rolls Razor borrows money to pay the dividends even though it is in a shaky financial situation. It goes insolvent before the dividends are paid out and the lender is able to get back the money on the basis that it has a trust and that it is the beneficiary. Problematic case as it (a) it turned on the House of Lords saying that there was a temporary purpose trust and the money was given, on trust, for the specific purpose of paying the creditors and when that fails, it goes back on resulting trust to the lender (b) because it may unfairly benefit a creditor as they may not have evidenced any intention to create a trust. One of these problems has been resolved through Twinsectra v Yardley.
Twinsectra v Yardley (2002)House of Lords came up with a way of giving effect to a Quistclose trust without breaching orthodox trust law. They did so in a way that is reservation of title by another name. HoL claimed that there was no purpose trust in Quistclose. You lend money for a specific purpose and you reserve for yourself the equitable title to that money. You hand the money over to the borrower and say that "I'm giving you this money for a specific purpose" and until you do that purpose, you will hold that money on trust for me (not for the purpose which could fail and result back).
Bellis v Challinor (2015)This case concerned an investment venture where money was paid by a group of investors into a solicitor's client account, and then in turn in was paid over to a special company set up to run a property investment scheme. When the scheme went pear-shaped, the CA rejected the HC's view that this money that had been lent by the investors and was held on a Quistclose trust. CA held that the investors had not done enough to evidence any intention to create a trust rather than a creditor/debtor relationship.

Sham Trusts

Question Answer
Midlank Bank plc v Wyatt (1995)C sets up a business and in order to shield his family from the financial risks associated with the venture, he purports to set up a trust under which he declares that he holds his house on trust for his daughters. He puts it in a written document and then into his safe and never refers to it again. Nobody knows about the existence of this supposed trust. HELD: trust not effective. The document may say all the right things and use the right language BUT the external evidence was that he never really intended to endow his children. It was a sham so no trust created.