6.3 Special Types of Trusts Flashcards
What are charitable purpose trusts?
These trusts do
not require strict certainty of objects (no beneficiary principle), are not subject to the rules against perpetuity, and are exempt from taxes. Public policy is in favour of charitable trusts lasting indefinitely.
a) Must have charitable purposes
b) Must have sufficient public benefit - public benefit has to be shown, it is not presumed. Must be shown the purpose will benefit at least a section of the public.
c) Must be exclusively charitable
What is meant by a charity and charitable purposes?
A charity is an institution which is established exclusively for charitable
purposes for the public benefit.
Charitable purposes include prevention or relief of poverty,
and advancement of education, religion, or health.
What is the doctrine of ‘cy-pres’?
It is possible for the wishes of a donor to charity to be carried out even if the original purpose of the gift has failed.
This doctrine applies both to lifetime gifts and gifts by will. This is achieved
by instead applying the property to a new purpose, which should be as close as possible to
the original purpose. If a charity cannot be found which is close to the original specified
purpose, the property may be applied for charitable purposes generally.
What is meant by a ‘resulting trust’ and how are these formed?
A resulting trust is a form of implied trust under which the beneficial interest reverts to the settlor.
Resulting trusts can be automatic or presumed. It arises where:
a) there is a failure on the part of the settlor to transfer the equitable interest effectively to the beneficiary.
b) It can also arise where
the trustees have failed to distribute trust property (in whole or in part) under a discretionary trust and the trust comes to an end.
What is an automatic resulting trust?
Automatic resulting trusts occur where there is no declaration of trust, where an express trust
fails, where there is surplus property, or upon the dissolution of an unincorporated
association. This rectifies a gap in the equitable title to property.
What is a presumed resulting trust?
Where a lifetime transfer fails and there is no reason to assume an outright gift was intended, a presumed resulting trust has occurred.
However, there is a presumption of
advancement where the relationship is often between family such as between spouses or
parent to child.
Can trusts in the family home be expressed or implied?
Sometimes beneficial
interests in land are set out in an express trust and in writing for land (express).
However, often parties
fail to prepare any written documentation identifying the beneficial interests (implied).
When does an implied trust in the family home occur?
Implied trusts can arise when there is a dispute over the ownership of a shared family home. This
may be because of the breakdown of a relationship, the death of a party or where a third
party makes a claim against the property. The implied trust can be a resulting or a
constructive trust.
What is meant by rebutting the presumption of sole beneficial ownership?
To establish an implied trust of the family
home where the claimant is not a named legal owner means rebutting the presumption of sole beneficial ownership.
1) The claimant must show that they have a beneficial interest in the property.
2) The court will then determine the size of that interest. This requires assessment of the contribution made by the parties – be they financial (direct or indirect) and/or nonfinancial. It must be said that courts have rarely valued non-financial contributions, such as
assuming domestic responsibilities and giving up paid work, but are increasingly doing so in
recent times.
How can a purchase money resulting trust (PMRT) rebut the presumption of sole beneficial ownership?
One way of rebutting the presumption of sole beneficial interest is to identify a purchase
money resulting trust, also known as a purchase money resulting trust (PMRT).
** Likely only to be relevant in commercial situations
A PMRT may arise where the other party paid part of the deposit. However, these kinds of trusts are only likely to be relevant for commercial situations, as decided in the courts.
How can a common intention constructive trust (CICT) rebut the presumption of sole beneficial ownership? Explain how an express or implied intention can be created in this scenario.
- [Common Intention] There needs to be a common intention between the parties (express or implied) and;
- [Detrimental Reliance] Some form of detrimental reliance on that intention.
For an express intention,
this must have been communicated between the parties (before or at the time of the
purchase), shared by the parties and about sharing ownership of the home (not just living
together).
Occasionally, the courts can sometimes infer a common intention, where there is a direct
contribution to the acquisition of the property, such as to the purchase price or by payment of
mortgage instalments. Be aware that merely paying household expenses will never be sufficient.
What is meant by detrimental reliance in the common intention between the parties in a common intention constructive trust (CICT)?
The party seeking to rebut the presumption must show that they subsequently “acted
to their detriment or significantly altered their position” as a result.
The detriment must be a
material contribution or sacrifice, such as paying substantial expenses, including bills. But sometimes the courts have not found there to be sufficient detriment, for example decorating
the property or performing domestic duties in the home.
There will not be reliance if it can be established that the party claiming reliance would have acted in the same way even without the agreement
What are some exceptions to parties having a common intention?
- Making unequal financial contributions to the purchase price in and of itself is not sufficient.
- The other exception is where the parties’ common intention over shared ownership changed over time.
In terms of quantifying the beneficial interest, the courts follow what the parties agreed. If not
agreed, a holistic approach and/or an objective deduction will be applied.
How can proprietary estoppel be proven to establish an interest in a property (proprietary interest)?
- [Representation / Assurance] There must be a representation or assurance made to the claimant, or an expectation by the claimant, that they have, or will have, rights in the defendant’s land.
-
[Reliance] Second, the claimant
must have acted in reliance on that assurance – it is not good enough if they would have acted in the same way, regardless of the assurance. - [Detriment] Next, the claimant must have suffered detriment because of their reliance on that assurance. This is likely to be financial.
- [Unconscionable] Finally, the owner’s behaviour must have been unconscionable.
If the four elements are present and an estoppel has been established, this creates an “equity” – in other words, the right to seek a remedy from the court, at its discretion.
How can the equity be protected in land once proprietary estoppel has been proven?
The equity can be protected in registered land by entering a notice on the Charges Register.
It may also be an overriding interest if the claimant is in actual occupation.
For unregistered land, the doctrine of notice applies.
