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Wrapped: Property and Conveyancing > 2. Trusts > Flashcards

2. Trusts Flashcards

1
Q

What is the general idea of a trust?

A

The basic idea of a trust is that one person, the trustee, holds property for the benefit of another, the beneficiary. The trustee is the legal owner of the property but they have additional obligations and cannot treat the property as if it was their own.

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2
Q

Give some examples of when a trust might be used?

A
  • trust for child
  • charitable purposes
  • persons in succession
  • hold land jointly
  • property held by clubs or societies
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3
Q

In which 3 ways can trusts be created?

A

Expressly, by implication or operation of law.

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4
Q

What are the two types of implied trust?

A

The resulting trust
The constructive trust

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5
Q

How has the beneficiary’s interest under a trust been traditionally described? In rem or in personam? What is the present position?

A

In personam (against one person), not in rem (enforceable against the whole world). However, the present position is basically that the beneficiary can enforce against everyone except a bona fide purchaser for value without notice. So, while it may be true that the beneficiary does not have a right enforceable against the whole world, it is certainly something greater than other rights in personam.

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6
Q

What does s53(1)(a) LPA 1925 outline?

A

That a trust of land must be created in writing and signed by a person who is able to declare such trust or by his will.

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7
Q

What happens if an express declaration of trust fails to comply with the provisions of s53(1) LPA 1925?

A

The trust is unenforceable, but not void.

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8
Q

What if there are some terms that are left out of the declaration of trust?

A

The writing must contain all the terms of the trust.

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9
Q

Does the express declaration of a trust need to be in writing?

A

No, as per s53(1)(b) LPA 1925, the declaration of trust need not itself be in writing as long as there is written evidence of proof of intention.

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10
Q

What is a successive interest in land?

A

Where two or more people are entitled to possession of land in succession to each other, rather than concurrently. E.g. life interest

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11
Q

What is a concurrent interest in land?

A

Ownership of land by two or more persons at the same time. E.g. co-ownership

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12
Q

What was the doctrine of conversion?

A

Beneficiaries were deemed to have an interest in money and not land. (In trusts of sale).

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13
Q

What is an express trust?

A

One created by the intentional act of the creator, who is known as the settlor or, in the case of a will, the testator.
Must have intention to create a trust
May nominate a third party to act as trustee, or themselves

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14
Q

What is a statutory trust?

A

Trusts created by law as an automatic consequence of certain circumstances. E.g. trust for a minor, or co-ownership.

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15
Q

What are the two types of implied trust?

A

Constructive trust
Resulting trust

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16
Q

What are constructive trusts?

A

A trust that arises by operation of law where it would be unconscionable for a person (A) who holds an asset to deny the beneficial interest of another person in the asset.

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17
Q

What is the difference between private and public trusts?

A

Private: being for the benefit of individuals
Public: being charitable in nature and for the benefit of the public

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18
Q

What is a purpose trust?

A

This is a trust which is created for the fulfilment of a purpose; it is not for the benefit of a person.

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19
Q

Why do courts generally take the view that purpose trusts are invalid? What is the exception?

A

Because there is no legally recognised beneficiary, therefore nobody to enforce the trust. An exception is charitable trusts, because they are enforceable because they represent the public interest.

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20
Q

Will the equitable interests of the contributor in resulting and constructive trusts appear on the register if the land is registered (or on the deed if unregistered)?

A

No, they will not.

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21
Q

What is a resulting trust?

A

A resulting trust arises where payments towards the purchase price were made at the time of the acquisition of the property

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22
Q

What does equity presume in resulting trusts?

A

Equity presumes that the intention is that the legal estate will be held on a trust of land with the contributing parties taking beneficial interests in proportion to their contribution to the purchase price.

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23
Q

Is the presumption in resulting trusts rebuttable?

A

Yes, as the contribution might be a gift.

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24
Q

What is the value of the beneficial interest under a resulting trust based upon?

A

The proportion of the contribution. A 20 per cent contribution on purchase will entitle a beneficiary to 20 per cent of the value on sale.

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25
Q

Explain the two types of common intention which arise in constructive trusts?

A

Constructive trusts arise in relation to land where there is either:
- an express common intention, that is, there is evidence that the parties had actually expressed an intention to share the ownership of the property; or
- an inferred common intention, that is, where the court will infer a common intention based on the conduct of the parties.

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26
Q

What must be shown in order for a party to claim the interest in a constructive trust?

A

It must be shown that the party claiming the interest acted in reliance on the promise to their detriment.

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27
Q

Is a contribution to household expenses sufficient for a constructive trust?

A

No, it is not.

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28
Q

Provide case examples of implied common intention in constructive trusts?

A

In Lloyds Bank plc v Rosset [1991], it was considered doubtful that anything less than direct contributions to the purchase price, whether initially or by payment of mortgage instalments, would be sufficient. In this particular case, the contribution was towards the renovation and decoration of a house; this was considered an insufficient contribution for a common intention to be inferred.

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29
Q

Can a constructive trust still rise in absence of an express common intention? If so, how?

A

In the absence of an express common intention, if a claimant has made a direct financial contribution to the purchase price (e.g. by payment of some mortgage instalments), the requirement of detriment will automatically be satisfied. The claimant’s contribution both infers a common intention and acts as the required detriment.

30
Q

What addition can mean that a resulting trust turns into a constructive trust?

A

A resulting trust can evolve into a constructive trust over time with the addition of the common intention element.

31
Q

What is the fairness principle in terms of constructive trusts?

A

This fairness principle applies only where there is no express declaration of trust indicating the contrary – so, if the parties had expressly declared their proportions, the fairness principle would not be used.

32
Q

Is the equitable share valued at the date of contribution or the date the property is sold?

A

Any equitable share must be valued at the date the property is sold.

33
Q

What are some factors that the court may consider when determining the intentions of the parties contributing to the property, apart from monetary value?

A
  • the nature of the parties’ relationship;
  • advice or discussions at the time of the transfer;
  • the purpose for which the home was purchased;
  • children of the parties;
  • how the couple arranged their finances;
  • payment of outgoings and how this was divided;
  • the individual characters and personalities of the parties.
34
Q

What is the presumption to do with the family home in the absence of a express declaration of a tenancy in common?

A

It is presumed that where the family home is held by both partners, the beneficial interest will be held on a joint tenancy. This presumption can be rebutted where it can be proved that a tenancy in common was intended.

35
Q

What is the presumption to do with commercial property in the absence of a express declaration of tenancy in common?

A

The presumption here is that unequal contributions to the purchase of the property give rise to a tenancy in common. This presumption can be rebutted but the burden of proof is on the person alleging a beneficial joint tenancy.

36
Q

What is the presumption to do with property owned by siblings or relatives when there is no express declaration of tenancy in common?

A

They could be within the scope to apply on Stack v Dowden, meaning that the presumption of equal shares should apply. See Laskar v Laskar [2008], this doesn’t apply to commercial arrangements in relative-owned properties.

37
Q

What is the basic rule from Stack v Dowden?

A

Joint legal ownership means joint equitable ownership.

38
Q

Which case clarified stack v Dowden in situations where the parties had lived apart for some time and where their respective shares could vary over that period?

A

Jones v Kernott [2011]. An unmarried couple owned a house in joint names but there had been no express declaration of trust saying how it was to be shared. The parties had been separated for a number of years before the court was asked to decide their respective shares. The Supreme Court decided that a “fair” split was 90 per cent to Ms Jones and 10 per cent to Mr Kernott. The court said that, where there was no express declaration, the court could, where necessary, infer or impute an intention to the parties and that this intention could change over time. On the facts, the court found that their common intention had changed, and that the court was entitled to infer or impute an intention as to the division of the property that could be considered fair.

39
Q

Does Stack v Dowden apply to express and implied trusts?

A

No, only implied. Where parties have expressly detailed their respective beneficial interests in a property, Stack v Dowden will not apply.

40
Q

Can an equitable interest from a resulting or constructive trust be overreached?

A

Yes, it can.

41
Q

What is overreaching?

A

Overreaching is the process whereby a buyer takes land free of the interests of beneficiaries. A legal owner has the power to sell and, provided the purchase money is paid to at least two trustees, the beneficiaries’ interests are swept off the land (they no longer have an interest in the land) and put into the proceeds of sale (s2 LPA 1925).

42
Q

Explain overreaching with reference to Williams & Glyn’s Bank Ltd v Boland [1980]?

A

In Williams & Glyn’s Bank Ltd v Boland [1980] Mrs Boland made a substantial contribution towards the purchase of the house, but the house was bought and registered in her husband’s sole name. Thus, there was a trust where Mr Boland was the sole trustee and Mr and Mrs Boland were beneficiaries. When Mr Boland mortgaged the property, Mrs Boland’s beneficial interest could not be overreached because there was only one trustee. Mrs Boland was also in occupation and so had an overriding interest. The bank was bound by her interest.

43
Q

What did City of London Building Society v Flegg [1988] result in because of overreaching?

A

In City of London Building Society v Flegg [1988] the property was bought by and registered in the names of a married couple, Mr and Mrs Maxwell-Brown, but a substantial contribution was made by Mr and Mrs Flegg, who occupied the property with the Maxwell-Browns. A trust arose in these circumstances. Mr and Mrs Maxwell-Brown were co-trustees holding the legal estate and all four were beneficiaries. When the Maxwell-Browns sold the property, the beneficial interests of the Fleggs were overreached because money was paid to two trustees. The building society was not bound by the Fleggs’ interest.

44
Q

Where is the law on the rules of being a trustee or a beneficiary?

A

TLATA 1996.

45
Q

Does a trustee or a beneficiary need to know that they are one?

A

No, they don’t.

46
Q

What does s6 TLATA 1996 provide?

A

Trustees of land have the same powers in relation to property as an absolute owner.

47
Q

Can trustees insist on transferring the land to the beneficiaries?

A

Yes, if they are all of full age and in possession and can bring the trust to an end.

48
Q

What does s8 TLATA 1996 outline?

A

Trustee powers may be
1. expressly excluded or
2. require consent of a third party prior to being exercised,

although the power to postpone sale cannot be excluded.

49
Q

Will trustees be liable if they unreasonably delegate to an unsuitable beneficiary?

A

Yes, and the trustees also have a statutory duty to keep the delegation under review.

50
Q

What does s12 TLATA 1996 state?

A

Where the purpose of the trust includes making the property available for occupation for the beneficiaries, they will have such a right to occupation if they are:
- of full age and
- beneficially entitled to an interest in possession.

51
Q

When might land be unavailable or unsuitable, according to ‘The right to occupy is not available if the land is unavailable or unsuitable for occupation s12(2) TLATA 1996’?

A

When it is let out to a tenant (unavailable) or unsuitable because it is a factory or warehouse.

52
Q

Can trustees restrict the entitlement of a beneficiary even if they have a right to occupy?

A

Yes, if:
- it is reasonable to do so and
- if the trust includes making the property available for the occupation of beneficiaries, where there are two or more beneficiaries.

The right is limited in that they can’t restrict all the beneficiaries from occupation.

53
Q

Can the trustees impose conditions on occupation?

A

Yes, they can impose reasonable conditions on occupation, like restricting use of land. They can also get beneficiaries to pay expenses of the land.

54
Q

Summarise the important sections in TLATA 1996?

A

s6: trustees have same POWERS as absolute owner.
s6(2): trustees can INSIST on transferring land to beneficiaries, if they are full age, in possession and can bring trust to an end.

s8: trustee’s powers can be RESTRICTED expressly or require consent of a third party. POSTPONE SALE cannot be restricted, but the power to sell may be made subject to consent.

S9: trustees can DELEGATE their power by power of attorney to the beneficiaries who are of full age, but they also must keep the delegation under REVIEW.

s10(1): if more than two consents are needed, any two will suffice in favour of a buyer.

s11(1) TLATA 1996 - it means that the trustees are under an obligation to CONSULT with the beneficiaries

s12: where the property is to be passed to the beneficiaries for occupation, they have a RIGHT TO OCCUPATION if they are full age and beneficially entitled in possession.
s12(2): the right to occupy is not available if the land is UNAVAILABLE OR UNSUITABLE for occupation

s14: any person with an interest in the trust can apply for an ORDER TO SELL.

s15: WHAT’S CONSIDERED when looking at an application of an order about trustees.

55
Q

Why are ss14 and 15 TLATA 1996 important?

A

They provide for a person with an interest in the trust to make an application for a court order ‘relating to the exercise by the trustees of any of their functions’, i.e. to, amongst other things, sell the property or declare a % of beneficiary interest. s14 is the ability for someone to make an application for an order. s15 is what the court will consider before granting a court order to sell or declaring as to the beneficiary interest of any interested party.

56
Q

Under s14 TLATA 1996, who would count as someone who has an interest in the land?

A

A trustee, beneficiary, creditor, children of beneficiary, etc.

57
Q

What are some examples of the guidelines the court should consider in s15 TLATA 1996?

A
  • the intention of the person or persons who created the trust;
  • the purposes for which the property subject to the trust is held;
  • the welfare of any child who occupies or might reasonably be expected to occupy any land subject to the trust as their home; and
  • the interests of any secured creditor of any beneficiary.

This is not an exhaustive list.

58
Q

Are the courts bound to the criteria in s15 TLATA 1996?

A

No, they are not. They can depart from them.

59
Q

Which takes precedence, the interests of a creditor or a family home right?

A

The interests of a creditor, usually.

60
Q

Will there be a sale at the request of the third party when there is bankruptcy?

A

Sale will almost certainly be ordered at the request of the trustee in bankruptcy.

61
Q

When a beneficial owner is declared bankrupt, where does their beneficial interest sit?

A

The beneficial interest vests in the trustee in bankruptcy.

62
Q

Does the trustee in bankruptcy count as a ‘person interested’ in the trust for the purpose of a s14 application in TLATA 1996?

A

Yes, they do.

63
Q

What are the ways in which a beneficiary and prevent sale where the trustees wish to sell?

A
  • Injunction for a second trustee
  • The rule in Saunders v Vautier (discharge trustees and find new ones)
  • Consultation with beneficiaries (as trustees should give effect to their wishes, but actually work in best interests of the trust)
64
Q

Why is an injunction to prevent the disposition of land until a second trustee is appointed only a delaying device?

A

Because once the existing trustee has appointed someone as the second trustee, overreaching will occur and there will be a valid disposition.

65
Q

What is the rule in Saunders v Vautier? Why might it fail?

A

The beneficiaries may act in union to bring the trust to an end, so if they want to prevent sale, they can discharge the trustees and appoint new ones. Most of the time, a beneficiary is a trustee, so unanimous agreement will be difficult to obtain.

66
Q

Where is Saunders v Vautier codified in TLATA 1996?

A

S18 TLATA 1996.

67
Q

Why will consultation not likely work?

A

Because the trustees are under no duty to follow the wishes of the beneficiaries provided that the trustees work in the best interests of the trust.

68
Q

Where is consultation with the beneficiaries codified?

A

s11(1) TLATA 1996 - it means that the trustees are under an obligation to consult with the beneficiaries (full age and possession) and if their wishes are in the best interests of the trust, they must give effect to those wishes. However, the trustees can ignore the beneficiaries if the trustees are acting in the best interest of the trust.

69
Q

What can the settlor do about s11(1) TLATA 1996 (consultation)?

A

They can expressly exclude consultation.

70
Q

What two criteria must be present in order for overreaching to take place?

A

1) The beneficial interest must be capable of being overreached (includes the beneficial interest arising behind the trust of land)
2) There must be compliance with respect to payment of any capital money.

Wrapped: Property and Conveyancing (16 decks)

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