Question

Scenario

Basil declared himself trustee of 5% of the issued share capital of Basil Electrical Co Pty Ltd. There were 1000 shares in the company. There was no further identification of the 50 shares held on trust.

Assessment tasks

Is there sufficient certainty for creation of a trust? In addressing this question identify the research question, explain the relevant law succinctly relating to the research question and then discuss your research methodology, and finally provide an answer to the question.

Answer 1

To be validly and legally constituted, a trust must satisfy three criteria, known as “the three certainties”:

1. Certainty of Intention

It must be clear that the settlor intended to create a trust and to transfer his ownership of the trust property to the trustee to hold on behalf of the beneficiaries.

2. Certainty of Subject Matter

A trust is not valid unless it is clear what property forms part of the trust. The trustee must be able to identify with certainty the property he is to hold on behalf of the beneficiaries.

3. Certainty of Objects

The objects (beneficiaries) of the trust must be clearly identified or readily ascertainable by the trustee.

If any of the three certainties are absent, a valid trust is not created and the assets remain the property of the purported settlor.

In the given case, there is no certainity of the creation of trust as it does not fullfill the above all crirerias.

There is no identification of the 50 shares held on trust. Also it is not clear as to what properties for part of the trust and the beneficiaries of the trust is alkso not clear

Note-

Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible.

Please provide positive feedback.