EXPRESS PRIVATE TRUSTS
CONTENTS
1.0 Introduction
2.0 Objectives
- Main Content
- Express Private Trusts
- Requirements for Creation of Express Private Trusts
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignment (TMA)
7.0 References/Further Readings
INTRODUCTION
Apart from the treatment of the requirements for a valid trust generally, it is important to understand issues relating to private express trust and the essentials of this type of trust. Although no formal requirement is compulsory for the creation of trusts as a result of the equitable nature of trusts. These issues will be treated in details and will enable you to appreciate them in order to avoid creating ineffective private trusts.
OBJECTIVES
In this Unit, you will learn about private express trusts which are usually created for the benefit of human objects, although some may be instituted for non-human objects. Importantly, this unit will familiarize you with the essentials of creating express private trusts. In this regard, you will be taken through the ‘three certainties’ which are the principal requirements of express private trusts. You will also learn about the “given postulant test” that came out of the certainty of objects and the three limitations on the application of this test. At the end of this Unit, you should be able to:
- Describe what express private trust is
- Understand the requirements of the express private
- Know features of the three certainties
- Know the application of the given postulant test and its limitations
- Learn the appropriate laws guiding the creation of express private trust
MAIN CONTENT
Express Private Trusts
An express private trust, as the name implies is one created by the unilateral act of the donor, settlor or testator and not an implied or a resulting trust. Private trust is one which usually has as its objective, the benefit of human objects based on filial or other considerations. The essence of human object in a private trust was pointed out by Sir William Grant, M.R. in Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 at 404 when he stated that there must be someone in whose favour the court can decree performance.
However in some cases, a private trust may have as its objective, the benefit of non-human objects. These human objects in a private trust are the ones who usually take up cases of enforcement of the trusts and other matters in connection therewith. The latter class of trusts is called “trusts of imperfect obligations” or “non-charitable trusts”, which makes provisions for the building and maintenance of tombs and monuments, care of animals, etc.
As treated above, a private trust may be coupled with power, such as power of identification or selection, which may however not be exercisable immediately. See McPhail v. Doulton (supra). In situations, it is required that the individuals which are the objects of the trust and their beneficiary interests in the trust property must be identified/ascertained within the perpetuity period. The period is the life time of a person in existence plus twenty one years. Failure to identify the human objects and their interests within the perpetuity period renders the trust void.
SELF ASSESSMENT EXERCISE (SAE) 1
The objects and their beneficiary interests in a private trust that is coupled with a power of selection not exercisable immediately must be identified/ascertained within the perpetuity period to be valid. Discuss this assertion and exceptions, if any.
Requirements for Creation of Express Private Trusts
In order to create a valid express private trust, certain requirements must be satisfied, especially with respect to the creation of express trust, although, in a general sense, equity is not usually strict in the compliance with a special formality for the creation of a valid trust. For a valid express trust to be crated however, requirements as to the “three certainties” must be met. This requirements was first conceived by Lord Langdale, MR., in Knight v. Knight (1840) 3 Beav 148 at 173 these are, certainty of intention to create a trust, certainty of the subject matter of the trust, and certainty of objects (i.e. the beneficiaries). Where there is uncertainty in respect of any of the three, the trust will fail
The three certainties will now be treated seriatim as follows:
i.) Certainty of intention: For an express trust to be validly created there must be the certainty of intention to create that trust. Although no special word or language is required to indicate this intention since equity looks on the intent rather than the form. As such, it is possible for a trust to be created without technical or special words such as ‘trust’ or ‘confidence’ being used in as much as such intention on the part of the settlor or testator is clear in this regard. Where, however, the words or language used is not clear or precatory words (words making a request or expressing “hope”, “belief” and desire, etc rather than a clear command or direction to the trustee) are used by the settlor, there is always problem of interpretation and difficulty in ascertaining the intention of the settlor to create a trust. For example, ‘I belief or have confidence that the property will be used in a particular manner’.
The attitude of the courts formerly was that, where such precatory words were used, some sort of leniency was adopted and a kind construction given to hold that a trust exists, which gave rise to special class of trusts called “precatory trusts”. This approach was adopted by the court of chancery to prevent situations where the executor will be entitled to the beneficiary interest in the residue of the estate of a testator left undisposed by will. After the coming into effect of the Executors Act, 1830 the executor can no longer hold beneficiary interest in the residue left undisposed unless the testator had expressed such an intention. Thereafter, imposing a trust in absence of such intention has been criticized as being capable of imposing a trust where none was intended. See Lambe v. Eames (1871) 6 Ch. App. 597 at 599 per James, L.J.
Starting with the case of Hill v. Hill (1897) 1 Q.B. 483 however, you must note that the mere use of precatory words will not automatically result in the imposition of trust unless such intention can be inferred from relevant document and surrounding circumstances. If an obligation on the trustee can be inferred, then it will be held that trust exists. The words “I leave in charge”, which was contained in a will came up for adjudication in Ali v. Ali (1942) 8 W.A.C.A. 1 whether they were capable of creating a trust. While the trial judge and the West African Court of Appeal, held that a trust was created, the Privy Council decided otherwise, on the ground that the words used are not the ones widely used and that construing the will of the testator as a whole, no trust was created.
Also, in Mussoorie Bank Ltd v. Raynor (1882) 7 App. Cas 321 where a testator gave his property to his wife in a will and “feeling confident that she will act justly to our children in dividing the same when no longer required by her.” The court held that no trust was created for the children.
From a consideration of the later cases, you will appreciate that it is better not to use precatory words in creating a trust rather, it is better to use certain obligatory or commanding words. The resulting change in the judicial approach to the use of precatory words was borne out of the desire of courts not to saddle a donee/trustee of the property with the onerous duties of a trustee unless the donor manifest such intention to create a trust. Where a trust is held not to be been created owing to the use of uncertain words, the donee/trustee takes absolutely.
ii.) Certainty of the subject matter: This means that the subject matter of the intended trust, that is, that which is to be given to the beneficiary, must in the first instance exist and be certain, identifiable or capable of being made certain when the trust is created, otherwise the trust fails. See Palmer v Simmonds (1854) 2 Drew 221.
The property in question may take the form of real or personal properties, tangible or intangible. Where the testator anticipates a bequest of property, such cannot form the subject matter of a trust, having not crystallized at the time of the trust. Also where the property forming the subject matter of the trust is destroyed or no longer in existence, the trust fails.
Where the words used by the testator/settlor are such that the subject matter of the trust cannot with reasonable precision be made certain, the trust fails. For example, where the words “such parts of my estate she shall not have sold”, "the majority of my estate", or the “bulk of my said residuary estate” See Palmer v. Simmonds (supra). See further, Sprange v. Barnard (1789) 2 Bro. C.C. 585 where a testatrix gave property to the donee (the testatrix’s husband) “for his use and at his death, the remaining part of what is left, that does not want for his use” to be divided between the testatrix’s brothers and sisters. It was held that the donee takes absolutely.
In Boyce v. Boyce (1849) 16 Sim 476 the settlor gave two houses on trust to trustees with direction to convey one of the houses to Maria “whichever she may think proper to choose or select” and the other to be conveyed to Charlotte. It happened that Maria predeceased the testator in which case she did not have the opportunity of making her choice before Charlotte, it was held that the trust fails as the property that will go to Charlotte cannot be ascertained.
In any event where a trust fails for lack of uncertainty of the subject matter, the trustee or donee takes absolutely. See Hancock v. Watson [1902] A.C. 14.
iii.) Certainty of objects: This means that the intended beneficiaries of the trust must be clearly identified or possible of being made ascertainable. See Re Hain’s Settlement [1961] 1 W.L.R. 440; 1 All E.R. 848 and Re Vandervell’s Trusts (No. 2) [1974] Ch. 269 at 319 per Lord Denning. If the beneficiaries cannot be identified, the trust fails, except the trust is a charitable one, and the property or subject of the trust must result to the estate of the testator/donor. See Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 at p. 404 per Sir William Grant. In other words, the trustee must be able with reasonable certainty to identify those beneficiaries who falls within the trust, such that he should be able to compile a list of all the beneficiaries when the time for distribution is ripe. The ‘list test’ is what is required in the case of a fixed trust. See the House of Lords decision in Re Gulbenkian’s Settlement [1970] A.C. 508. If however the trust is a charitable one, what is needed to be ascertained is the purpose of the charity, such that the certainty of beneficiaries is not of essence.
However, where the trust is a discretionary one, whereby the trustee was given power to decide who the beneficiaries will be, the power of appointment will be held valid but the testator/settlor must have expressly stated an identified or identifiable class or group from which the beneficiaries will be chosen. See McPhail v. Doulton [1971] A.C. 424. In stating the class or possible beneficiaries, it suffices if the testator/settler says “my grandchildren”. In this case, the beneficiaries may include those unborn at the time of the trust. In the case of discretionary trust, where either trust power or mere power of appointment was reserved, it is not necessary for the trustee to be able to identify all the objects (beneficiaries) as the requirement to be satisfied is the ‘given postulant test’ laid down in Re Gestetner Settlement per Harman J. [1953] Ch.672 at 681. The pivotal question here is whether the donee of the power is able to ascertain without difficulty whether a particular individual (given postulant) is or is not a member of a specified class of objects. The test will be satisfied once the donee of the power is able to draw with certainty the border line for the objects falling within that class and those outside it. In that case, there is no uncertainty.
The ‘given postulant test’ in Re Gestner Settlement was restated by the House of Lords in Re Gulbenkian’s Settlement [1970] A.C. 508 overruling the diluted approach to the test as applied by the courts and adopted by the Court of Appeal in its decision of the same Re Gulbenkian’s Settlement, where the test will be deemed satisfied if at least one person clearly falls within the specified objects class; notwithstanding that others cannot be ascertained. You must note that there is no distinction in the application of the test between trust powers and mere powers.
In the application of the given postulant test as postulated in Re Gulbenkian’s Settlement (supra) at pp. 524-525 per Lord Upjohn, three limitations to its application have been set in McPhail v. Doulton [1971] A.C. 424 at 457 per Lord Wilberforce as follows:
i.) The first which is on linguistic or semantic uncertainty, also referred to as conceptual uncertainty; relates to when the language used is unclear and cannot be resolved, such that the trustee cannot ascertain the class of persons to be so entitled to the trust, the gift will be declared void.
ii.) The second relates to evidential uncertainty, which deals with situations where there is difficulty in ascertaining the existence or whereabouts of members of the class. As a result of the fact that this type of uncertainty can be cured by the trustees applying to court for an order for necessary directions; this may not lead to invalidity.
iii.) The third uncertainty is administrative unworkability; in this case, the meaning of the words used is clear but the definition of the beneficiaries is so hopelessly wide as not to form “anything like a class”. The trust will therefore be regarded as administrative unworkable. An uncertainty of this nature has the effect of invalidating a trust power (See R v. District Auditor ex parte West Yorkshire Metropolitan C.C. [1986] 26 R.V.R. 24) but a mere power cannot be uncertain merely because it is wide in ambit. See Re Manisty’s Settlement [1973] 3 W.L.R. 341.
SELF ASSESSMENT EXERCISE (SAE) 2
Mention and discuss any two of the requirements for the validity of express private trust.
CONCLUSION
Compliance with the requirements for the creation of express private trust is sine qua non if such trust is not to be declared invalid. From the examination of these requirements above, you will realize clearly that creating or settling a trust is something that should be given to professionals for proper handling of the intricacies, including ensuring that the legal requirements are complied with and that any provision or act that can offend against the rule against perpetuity is not offended or to avoid pitfalls which can render the trust from been declared void.
SUMMARY
In this Unit, you have been introduced to express private trust, its meaning and the requirements for the valid creation of this trust. In particular, you were taken through the three certainties, as the cardinal essentials of express private trust and how to satisfy there requirements. You also learnt about the given postulant test with respect to certainty of objects given in Re Gulbenkian’s Settlement (supra) and the limitations to the application of this test as laid down in McPhail v. Doulton (supra). In the next Unit, you will be learning about charitable trusts.
TUTOR-MARKED ASSIGNMENT (TMA)
- In creating a private trust “…there must be someone in whose favour the court can decree performance.” Per Sir William Grant in Morice v. Bishop of Durham (1804) 9 Ves. Jr. 399 at pp. 404.
- Discuss the three limitations on the application of the “given postulant test” laid down in McPhail v. Doulton [1971]C. 424 at 457 per Lord.
REFERENCES/FURTHER READINGS
Banire, Muiz. (2002). The Nigerian Law of Trusts. Lagos: Excel Publications. Fabunmi, J.O. (2006). Equity and Trusts in Nigeria. Ile-Ife: Obafemi Awolowo
University Press Ltd.
Jegede, M.I. (1999). Law of Trusts, Bankruptcy and Administration of Estate.
Lagos: MIJ Professional Publishers Limited.