1. 1
S. Selvakkunapalan LL.B., LL.M.
Attorney-at-Law, Additional Draftsman
Visiting Lecturer – Sri Lanka Law College.
https://selvakunapalan.blogspot.com/2019/
LAW OF TRUSTS
CHAPTER IV
CERTAINTIES
2. Three certainties
In the English case of Knight Vs. Knight, (1840) Lord
Langdale declared that for a trust to be validly created
three things were necessary. They are that-
(1) The words employed must be couched that, taken as
a whole, they could be deemed to be imperative;
2
3. (2) The subject matter of the trust must be certain;
(3) The objects or persons intended to be benefited
must be certain.
3
4. When creating express trust, it is important that the settlor
acts with sufficient certainty. The settlor must demonstrate
a clear intention to create a trust.
Trust property must be sufficiently segregated from other
property, so that the trust fund is certain.
People who are to benefit from the trust must be identified
with the sufficient certainty.
4
5. Subject to the provisions of sections 5 and 107, a trust is
created when the author of the trust indicates with
reasonable certainty by any words or acts –
(a) an intention on his part to create thereby a trust,
(b) the purpose of the trust,
(c) the beneficiary,
(d) the trust property, and (unless the trust is declared by
will or the author of the trust is himself to be the trustee)
transfers the trust property to the trustee – (Sec 6)
5
6. Section 6 refers acts also. An express trust under 5(1) could
not be created by acts alone because writing is necessary,
but it would be possible to do so under section 5(3), and
under section 5(2) if accompanied by transfer of the
ownership by delivery.
These rules do not apply where they would operate so as to
effectuate a fraud. (section (5(3))
6
7. In order to that a trust may be valid and enforceable at law,
the intention to create a trust must be indicated by words
or acts with reasonable certainty. The language used
must be clear enough to show an intention to create a
trust.
7
8. • A bequeaths certain property to B, " having the fullest confidence that he will
dispose of it for the benefit of" C. This creates a trust so far as regards A.
• A bequeaths certain property to B, "hoping he will continue it in the family". This
does not create a trust, as the beneficiary is not indicated with reasonable
certainty.
• A bequeaths certain property to B, requesting him to distribute it amongst such
members of C's family as B should think most deserving. This does not create a
trust, for the beneficiaries are not indicated with reasonable certainty.
• A bequeaths certain property to B, desiring him to divide the bulk of it among C's
children. This does not create a trust, for the trust property is not indicated with
sufficient certainty.
• A bequeaths a shop and stock in trade to B, on condition that he pays A's debts
and a legacy to C. This is a condition, not a trust, for A's creditors and C.
8
9. Intention to create a trust
• A trust is created when the author of the trust indicates with
reasonable certainty by any words or acts an intention on his part
to create thereby a trust. – sec 6(a).
• in construing the term of the deed, the question is not what the
parties may have intended, but what is the meaning of the word
they have used.
• The use or non-use of word ‘trust’ in a document is not an
indication of the intention.
9
10. No formal language is necessary to constitute an effective
declaration of trust, but the language used must take it
certain that the settlor intended to constitute a trust binding
in law on himself or the person to whom the property was
given.
The use of words ‘trust or trustee’ is not essential to create the
trust; even where the words by the settlor are in precatory
form, the trust will come existence.
Where the words used in the instrument do not indicate with
certainty an intention to create a trust, no trust can come
into existence.
10
11. A trust may be created by any language sufficient to show
the intention or by conduct of parties.
Dr. L.J.M Coorey has noted as follows-
“Though for the sake of brevity, we refer to ‘intention of the
settlor’ it is more correct to speak of the settlor's
‘manifestation of intention’ to create a trust.”
11
12. • In Fernando Vs. Jossie (58NLR 114) the Court cited the
case of Maharaja Manindra Chandra Nandi v. Raja Durga
Prashad Singh [AIR(1917) Privy Council 23.], Lord Parmoor
said: -
"In construing the terms of a deed, the question is not
what the parties may have intended, but what is the
meaning of the words which they used. “
12
13. • Settlor may use the words precatory or recommendatory
or express a belief when they mean to declare a trust.
• A bequeaths certain property to B, "having the fullest
confidence that he will dispose of it for the benefit of "C”.
This creates trust so far as regards A. (illustration sec 6(a)).
13
14. Paul [1977] 1WLR527 at 531. there must be a clear
declaration of trust and, that means, there must be clear
evidence from what is said or done of an intention to create
trust.
14
16. • There is a difference between merely imposing a moral
obligation on a person who is the recipient of property, and
imposing formal, fiduciary obligations on that person such that
they become a trustee over that property.
• It is possible for one person to impose a moral obligation on
another person in relation to the use of property without that
necessarily constituting conditions of trust. It is possible that as
part of making a gift to someone, the donor will seek to
impose a moral obligation on them.
16
17. • The expression generally used by the courts to distinguish
between a declaration of a trust and a moral obligation is to
define merely moral obligations as setting out “precatory
words”. Merely precatory words do not create substantive trust
obligations.
17
18. In the case of Visaladchypillai Vs. Sivapakkiammal
(40NLR114), a deed of gift was subject to the following among
other conditions. The said donor shall have the power to sell,
mortgage or otherwise alienate or encumber the said lands
and premises. In the event of the said donor dying leaving
behind the said lands and premises, then it shall be obligatory
on the said donee to pay out of the said lands and premises a
sum of five hundred rupees to S.
18
19. it was argued by the plaintiff respondent that the whole
transaction seems almost in illustration of the definition of a
trust as set out in section 6 of the Trusts Ordinance. The
property will otherwise have to be sold and the money paid
out of the proceeds in order to comply with the terms of the
deed creating the trust. A refusal to pay the sum would be in
fraud of the trust.
19
20. The defendant Appellant argued that a gift subject to a
condition is all we have here. It is a class of donation well
known to the Roman-Dutch law and in such a case, the Court
will apply the common law in order to determine the rights
and liabilities of the parties who must be deemed primarily
to have intended to create only a common law obligation.
20
21. The Court said that now, as the legal ownership has to be
vested in the person who is designated the owner,
language, however forcible and full, may be invoked to vest
that ownership without affecting the intention to create a
trust in favour of another, and this will explain the use of
the words “absolutely forever". This done, there must be
words to indicate a beneficial enjoyment of the whole or
part of that property by another.
21
22. • It would appear that the words “out of the said lands and
premises” satisfies this requirement. Koch J. said “I
should wish to emphasize firstly the words “upon
condition” in the passage quoted, for this will explain the
presence of the words “subject to the conditions” in the
deed in question; and secondly, the requirement that the
condition must be “performed and satisfied out of the
property”. We have these words in clause 3 of the deed.
The essentials of trust being present, I hold that trust has
been created.
22
23. However a more stricter and more correct test was applied
in Arumugampillai Vs. Veluppillai (46NLR241). In this case,
where a deed of gift contained the following conditions:-
(1) That the said V. S. shall look after the said properties and
take the rents and profits of the said properties and perform
the Arthasamapoojah, which is being generally performed
and which we now are performing and also the Theertam
festival in the temple standing in the land.
23
24. (2) That after the lifetime of the said V. S. the person who
was appointed by him in his place and, in default of such
appointment the eldest child of his descendant will have
the right to perform the duties of the said temple.
(3) That the said V. S. will have no right to sell and transfer
the said properties or alienate the same by documents in
his lifetime and
24
25. (4) that whenever he in his lifetime appoints a person,
whom he likes, he shall have to appoint such person subject
to the bindings recited in this paragraph.
Held, that the conditions annexed to the deed were not
sufficient to constitute a charitable trust.
25
26. • In Murugesoe Vs. Chelliah (57NLR463) H.N.G Fernando J
cited the case of Karthigasu Ambalavaner vs. Subramaniar
Kathiravelu [27 NLR15], Bertram C. J. said "when a person
who is the owner of property purports to transfer it to a
temple, the effect of his so doing is to constitute himself a
trustee of the temple. The document of dedication is in fact
a declaration of trust and the dominium remains with the
dedicator and passes on his death to his heirs subject to the
trust ".
26
27. Where a transfer of immovable property contained a recital that
the consideration was paid by the transferee "for" a specified
Hindu temple-
Held, that the transferee must be taken to have purchased the
property with funds provided by, or held by him for, the religious
charity represented by the temple. The transferee, therefore,
held the property as trustee, and, on his death, the land
devolved on his heirs subject to the same trust.
The words " for the Temple " were not merely precatory but
were sufficient to create a trust.
27
28. H.N.G Fernando A.J cited the case of Arumugam Pillai v.
Velupillai Periyatamby [46 NLR 241.] the deed in question
transferred a land "by way of donation" and on account of
" natural affection " for the donee, who was entitled by its
terms to " take the rents and profits of the land ". There
was a condition also that the donee should perform a
certain "poojah" as also a certain festival in the temple
standing on the land, but Wijeyewardene J. was unable to
find any evidence as to whether or not the performance of
the stated ceremonies would involve expenditure,
28
29. nor was the donee enjoined to utilize any part of the
income for the purpose of those ceremonies. He held that
the conditions were insufficient to create a trust, being
presumably more in the nature of a pious desire on the part
of the donors, than an expression of an intention to impose
an obligation annexed to ownership.
29
30. HARRISON AND ANOTHER V GIBSON AND OTHERS
[2006] 1 ALL ER 858
The testator made a homemade will and he said: “The
bungalow I leave in trust for my wife. On her death, the
Bungalow is to be sold and cash raised is to be equally
divided between my children.” The court held that the
wording of the bequest created an express trust, not a
gift .
30
31. RE ADAMS AND THE KENSINGTON VESTRY
(1884) 27 CH.D. 394
A testator left property to his wife by will “in full
confidence that she would do what was right by his
children”.
Held: It was held that the property passed to wife
absolutely and no trust had been created
31
32. COMISKEY V BOWRING-HANBURY [1905] AC 84
• The testator left property to his wife "in full confidence...
she will devise it to one or more of my nieces as she may
think fit".
• Held: This appeared to be merely a moral obligation on
the wife; however, the House of Lords held (by a
majority) that a trust had been created.
32
33. • This is because the entire instrument must be construed
(you must look at the whole document, and not just the
phrase in isolation) → later words indicted that it was the
intention of the settlor that a legally enforceable trust
should be created and not just a moral obligation
• So a trust was created because, having expressed that the
property would be dealt with in full confidence (and thus
looking like a moral obligation), the settlor went on to say
that he directs that the property should be held on trust
→ so this showed there was not just a moral obligation
33
34. MIDLAND BANK V WYATT [1997] 1 BCLC 242
Mr. Wyatt settled his family home on trust for the benefit
of his wife and daughter, so as to immunize it from any
business failure he might suffer. When his business did
fail, he sought to protect his house from creditors by
relying on the settlement earlier executed, of which his
wife was a trustee. It emerged that Mr. Wyatt’s wife had
had no knowledge of the effect or nature of the
declaration she signed as ‘trustee’.
34
35. • Held: there was a sham, and the declaration of trust was
void and could not be enforced.
• Where a trustee goes along with a settlor neither
knowing nor caring what he or she is signing, this
constitutes sufficient intention to create a sham.
35
37. PAUL V CONSTANCE [1977] 1 WLR 527
• Mr Constance left his wife to live with his mistress, Mrs
Paul. Constance received a court award of £950 for an
injury suffered at work, subsequently to which
Constance and Paul decided to set up a joint bank
account. After visiting the bank, they were advised that
the account should be set up in the name of Constance
alone because the couple were not married: therefore,
Constance was the common law owner of the account
37
38. • The £950 lump sum was paid into the account and formed
bulk of the money held in it. The couple also added joint
bingo winnings to the account, and used some for the
money to pay for a joint holiday. Importantly, evidence was
also adduced at trial that Constance had said to Paul “this
money is as much yours as mine”
• Constance died, and his wife sought to claim that the bank
account belonged entirely to her deceased husband and
that it therefore passed to her as his widow under the
Intestacy rules. Mrs. Paul, However, argued that the money
was held on trust by Constance, as legal owner of the bank
account, for both Constance and Paul as beneficiaries;
38
39. • therefore, she argued, the bank account should pass to her
as sole surviving beneficiary.
• Held: Constance had declared a trust over the money in
the bank account → the reasoning was that the words
“the money is as much yours as mine” manifested
sufficient intention that Constance would hold the
property on trust for them both.
39
40. LAMBE V EAMES (1870) L. R. 10 EQ. 267
• In this case, words were said that property was "to be at
her disposal in any way she may think best, for the benefit
of herself and her family“.
• Held: not to create a trust as the words are clearly
precatory (there is no clear intention to create a trust).
• To create a valid trust you “must show a clear intention” to
do so.
40
42. JONES V LOCK (1865) 1 CH.APP. 25
• A father returned from a business trip and he was scolded
for not bringing back a present for his infant son. In a rage he
wrote a cheque out in favour of him as payee and thrust the
cheque into the baby’s hand. AN issue arose as to whether a
trust was created over the cheque for the benefit of the baby
• Held: There was nothing to indicate an intention to create a
trust over the cheque → rather the father’s intention was to
make a gift or simply make a point to his wife.
42
44. Don King v. Warren [1998] 2All ER 608
Don King was the leading boxing promoter in USA and
Warren was the leading boxer and manager in Europe. The
two men formed a partnership agreement whereby they, and
the companies which they controlled, agreed to exploit
agreements with boxers in Europe for their mutual
advantages. Under the partnership agreement, each partner
was required to hold the benefit of the partnership.
44
45. • Subsequently one or more of the partners attempted to
terminate the partnership agreement and sought to
argue that certain management agreements did not fall
under the partnership property. The question arose
whether the partners held the benefit of their
management agreements on trust for the partnership.
• It was held that the intention of the parties had been to
hold the benefit derived from any contract and …
45
46. • that any benefit received from them could be the subject
matter of trust and that this partnership arrangement
evinced sufficient intention to create trust.
46
47. • Re Keyford (1975 1 WLR 279) Customers of a company paid for
goods in advance of delivery. The company had had problems
meeting orders and was advised by accountants to set up a
special bank account to hold customers’ payments to allow for
repayment to customers in the event the company went into
liquidation.
• The parties’ treatment of the property (segregating into a
separate bank account) led to court to decide that the best
understanding of the company’s intention was to declare a
trust in favour of the customers who made prepayments.
47
48. Certainty of object and beneficiary
The object or purpose of the trust must be certain or capable
of being rendered certain. Certainty of beneficiaries
implies,-
firstly, that the beneficiaries should be identifiable, and
secondly, that the interest which the beneficiaries take
should be ascertainable.
48
49. CLAYTON V RAMSDEN [1943] A.C. 320
• Property was left to the settlor's daughter. The trust
would be invalid, if she married a man not of the Jewish
faith or parentage. She subsequently married a non-
Jewish man.
• Held: Lord Atkin said the condition subsequent here was
void for uncertainty and therefore the daughter could
benefit from the trust
49
50. Clough Mill v. Martin [1984] 3All ER 982
• A manufacturer of yarn supplied a clothes manufacturer
with yarn. The clothes manufacturer used the yarn to
make clothes- that is, the yarn ceases to exist as yarn but
rather became cloth which was incorporated into clothes.
The supplier wanted security for the contractual
payments made to it by the clothes manufacturer.
50
51. • Therefore, the supplier wanted to retain title in the
yarn until it was used to create clothes, and then to
have rights in the cloths themselves. That aim was
incorporated into the contract between the parties.
Subsequently, the clothes manufacturer did go into
insolvency without having made full payment to the
supplier.
• The supplier argued that the yarn and the clothes were
held on trust for it until such time as it received
payment.
51
52. • It was held that if more people claims than there was
property to go around, the trust would have been
meaningless because no claimant could have identified
which property was held on trust for them alone.
• It is important that the which is to be held on trust is
clearly identifiable and segregated from all other
property. Therefore merely a charge created under
these circumstances.
52
53. Certainty of beneficiary involves-
(1) As to who may be beneficiary;
(2) As to identity of beneficiary;
(3) Whether the interests taken by each of beneficiaries
are indicated with certainty.
53
54. • A trust is created, when the author of the trust indicates
with reasonable certainty by any words or acts the
purpose of the trust. Sec.6 (b).
• A trust is valid, only if it can be construed as being to or
for the present members of the society. If it is included
in future members, it would be void for uncertainty and
for perpetuity, unless the future members are to be
ascertained within the perpetual period.
54
55. Anthony Gasper Vs. The Bishop of Jaffna (52NLR230)
The trust property was a land adjacent to the sea shore with a
shed built on it, to enable the beneficiaries under the trust who
were fishermen, to keep their boats on the land, and to store
their fishing tackle in the shed.
It is apparent that the trust was not limited to the present
members, and was intended to endure indefinitely. It is
submitted that the reasonable certainty required by section 6
was not present because the beneficiaries included future
members and the members of the community constitute an
uncertainable group.
55
56. • The Court held that “just as a community of persons can
hold property or acquire rights in property so also a
community of persons can be beneficiaries under a trust
deed. No provisions of the Trusts Ordinance invalidates
the trust and there is no reason why it should not
prevail.
56
57. Kandasamy Vs. Kumarasekaran (63NLR193)
The Anthony case was distinguished. An unincorporated
society, not being a juristic person, has no legal capacity
to acquire property. Accordingly, a sale of immovable
property in favour of an unincorporated society or
association cannot pass title, if it is not clear whether the
transferor meant to benefit the present members of the
society as individuals or to benefit the society as a quasi-
corporation.
57
58. • Weerasooriya J citied “I do not think the dictum amounts
to more than that the individual members comprising a
community (and not the community as a distinct entity)
can hold or acquire rights in the property.
• In Kandasamy case trust for the unincorporated society
was held to be void.
• But in Leahy Vs. A.G. (1959 (101CLR 611) it was held that
a gift to the unincorporated body was prima facie gift to
the individual members.
58
59. Sabapathy Vs. Muhamed Yoosoof (37NLR70) The
document is a will and in interpreting this will, one must
give full effect to the intention of the testator. Beyond
the prohibition of alienation which sometimes occurs in
fidei commissa, there are no words in the will to show
that the testator intended to create a fidei commissum.
On the contrary the word "trust" is used. The English law
of trusts was part of the law of Ceylon in 1872 (see
Ibrahim v. Oriental Banking Corporation [ 3 NLR.148] and
Suppramaniam v. Erampakurukal [2 23 NLR 417]
59
60. The object of the trust should not be of a nebulous
character but must be of such nature that a court can
administer it.
In Muthuswamy Naidu Vs. Rajulu Naidu (AIR 1925) case a
trust for feeding the poor on a certain specific day has
been held to be sufficiently precise and certain object of
the valid trust.
60
61. • In the case of Anthony Gaspar Vs. The Bishop of Jaffna
(52NLR230) Basanayake J held that a community of
persons can hold property or acquire rights in property.
• In the same way, a community of persons can be
beneficiaries under a trust deed. It is not disputed that
the defendants belong to the class of persons for whose
benefit the land has been provided. there is no
provision of the Trusts Ordinance which invalidate the
trust created and there is no reason why it should not
prevail.
61
62. Certainty of Trust Property
The subject-matter of the trust is the property in respect of
which the trust has been created. For creating a valid
trust, it is necessary that the subject-matter of the trust
is defined with the certainty and it should be such which
is capable of disposition.
The word ‘property’ includes any property which a person
can in law transfer or assign or dispose of inter vivos or
under a will.
62
63. The subject-matter of a trust must be property
transferable to the beneficiary. So, any property
inalienable by law can’t be the subject matter of the
trust.
The subject-matter of a trust must be property
transferable to the beneficiary. It must not be a merely
beneficial interest under a subsisting trust – Sec 8.
In other words there can’t be trust upon a trust.
63
64. There must be certainty both of the property intended to
be affected by the trust and as to the beneficial interest
to be taken by each of the several beneficiaries.
Where there is uncertainty as to the property, it is
evident that there can be no transfer of title and
purported transferor is never divested of his title.
Where certainty of intention and property are present,
but beneficiaries are uncertain, there would be a
resulting trust under section 85 of the Trusts Ordinance.
64
65. BOYCE V BOYCE (1849) 60 ER 959
• The testator devised “all my houses” – probably two but
the report is ambiguous on this point – on trust to convey
one to the eldest daughter Maria (of which she could
select which house she wanted) and the other house
would go to the other daughter, Charlotte. Maria died
before her mother without making a choice as to which
house she wanted.
65
66. • Held: The court held that the bequest to Charlotte failed,
since there could be no certainty as to which house
should be held on trust for her → both properties were
therefore held on resulting trust for the testator’s heirs,
his grandson.
66
67. HENRY V HAMMOND [1913] 2 KB 515
• The question is whether you can have a trust over part of
the money in a bank account or is it that trust money
mixed in an account with non-trust money is fatal to the
formation of a trust?
• Held: In this case, the High Court said that if the trust
money is placed in a separate account, there will be a
trust, but if it is mixed in it cannot be a trust (Channel J).
67
68. RE GOLDCORP EXCHANGE LTD
[1995] 1 AC 74
It was held that only those customers who could prove
that their order of bullion was in fact held separately
from the general store of bullion would be entitled to
enforce a trust against the exchange and consequently
be able to take their bullion orders away as secured
creditors.
68
69. RE HARVARD SECURITIES (HOLLAND V
NEWBURY) [1997] 2 BCLC 369
A dealer in financial securities held securities as nominee
for his clients. While the terms of the contracts suggested
that the dealer held the securities on bare trust for each of
his clients, the securities were not numbered and were not
separated. In consequence, none of the clients were able to
identify which securities were held on bare trust for which
client.
69
70. It was therefore held that the trusts were not invalid for
uncertainty of subject matter because the securities were
intangible property and therefore did not require
segregation.
70
71. RE LONDON WINE CO. [1986] PCC 121
A wine merchant bought and held wine for clients to their
order. The stock of wine was held together without
distinguishing which particular bottles were held for which
client. The wine merchant company went into liquidation and
the claimants argued that the wine they had ordered from
the shipper was held on trust for them under the terms of
their contracts. However, the creditors said, it belonged to
the company and was part of the company’s assets in
insolvency.
71
72. • Held: There could not be a valid trust because the
claimants could not identify which wine was held for them
out of the general store.
• It would have been necessary for the claimant’s wine to be
segregated: that is, to be separately identifiable from the
general stock of wine.
72
73. SPRANGE V BARNARD (1789) 2 BRO.C.C. 585
A testatrix provided that property would be left to her
husband to use absolutely but that “the remaining part of
what is left, that he does not want for his own wants and
use” was to be held on defined trusts.
Held: This statement was too uncertain for the trust to take
effect over any part of the property, because the property
was not sufficiently clearly identified by the expression “the
remaining part of what is left”.
73
74. HUNTER V MOSS [1994] 3 ALL ER 215
An employer agreed to give 50 of his 950 shares to the
finance director. The employer did no transfer the shares
nor were any attempts made to identify those shares
which were to be subject to the arrangement. An issue
arose as to whether or not the finance director could
assert a proprietary right over the 50 shares.
74
75. • If we were to apply the rule in Re Goldcorp to these
facts, there would have been no valid trust over the
shares, because it would be impossible to know which
50 shares out of the total holding of 950 shares were to
be held on trust.
• It was held that a trust over the shares had been formed
(so a different approach was taken from that set out in
Goldcorp and held there was a valid trust here).
75
76. Absence of Certainties
In the case of Fernando Vs. Sivasubramaniam (61NLR241)
It was mentioned that no particular formula is required by
law for the creation of a trust. The requirement of law is
that the author should make his meaning clear and evince
his intention to create a trust and the Court will give effect
to that intention. In the instant case Kanapathy the author
of the trust declared by PI has clearly indicated that the
purpose of granting the lands in question to himself and
76
77. another was for the advancement of his religion and
maintenance of religious rites and practices of the Hindu
faith.
The beneficial interest is not vested in any ascertained
individual or individuals but in an uncertain and
fluctuating body, the Brahmins. Under the law in force in
1888 he was entitled to create a trust in the way he did.
77
78. • Glanville Williams in his “The Three certainties” has
suggested three ways by which uncertainty as beneficial
interests may be cured.
(i)Where trustee is given a discretion to apportion the
property among the beneficiaries; or
(ii) the court cures the uncertainty by applying the maxim
equality is equity, dividing the property in equal shares;
78
79. (iii) If all beneficiaries are competent to contract and are
collectively absolutely entitled, they may elect to
apportion the property among themselves in a definite
manner.
79
80. • In VYRUPULLE v. PERERA (15NLR199) a testator
bequeathed to certain specified persons all the rents and
profits arising from his properties, and further directed
that the share of the rents of the legatee dying should be
distributed among the widows and really deserving
destitute people of the Burgher community according to
the discretion and judgment of the executors.
• Held (by Grenier J. and obiter by Wood Renton J.), that the
trust in favour of the Burgher community was not void on
the ground of its being vague.
80
