Question

Question

1. Trusts

The course includes the study of trusts - a complex area of the law. The creation of an express trust (i.e. one intended created and not arising by law or fact) requires ‘three certainties.’ They are;

• Certainty of intention

• Certainty of subject matter (trust property)

• Certainty of the object (beneficiary or purpose)

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 the 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

In the UK case of Knight vs. Knight the three main certainties were mentioned for creation of trusts. The court conceptualize three main certainties for creation of trusts, these are as following:

1. Certainty of intention, i.e. there must be clear intention from the settler to create trust.
2. Certainty of subject matter, i.e. it is important to have clear understanding about the subject matter of the trust. There should not be any vogue term in the subject matter of the trust.
3. Certainty of object, i.e. the persons must be entitled to the benefits of the trust.    

The sufficiency of certainty to create a trust would be assessed by taking into consideration the practical situation of each case. The above three are the main certainties for creation of trust. However, each case has to be assessed separately to conclude whether there is enough certainty for creation of a trust. In case of any uncertainty then the trust shall not be allowed to be created and operate.

In this case though Basil has declared himself as a trust for 5% of the issued capital of Basil Electrical Co Pty Ltd since there was no further identification of 50 shares thus, there is uncertainty hence, there is not sufficient certainty for creation of trust.