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Equity and Trusts Flashcards

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1
Q

What is a fixed trust?

A

This defines the share of the trust property which the beneficiary will receive

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2
Q

What is a bare trust?

A

When the beneficiary is an adult, with full mental capacity and the sole beneficiary - can end the trust at anytime

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3
Q

What is a trust with a remainder?

A

This is when there is a life tenant and a remainder man. Life tenant receives income and remainderman entitled to trust capital

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4
Q

What is the test for a fixed trust?

A

The complete list test

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5
Q

What is the rule in Saunders v Vautier?

A

The beneficiary can end the bare trust at any time, by demanding that the trustees transfer legal title to him

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6
Q

What are the conditions in Saunders v Vautier?

A
  1. In existence and ascertained
  2. 18 or older of sound minds
  3. In agreement
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7
Q

What is a discretionary trust?

A

This gives the trustees power to the amount they may give any beneficiary

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8
Q

What are the names of people named in a discretionary trust?

A

Objects rather than beneficiaries

This is because they hold no equitable interest

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9
Q

What is the test for a discretionary trust?

A

McPhail v Doulton

Given postulant

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10
Q

What is a vested interest?

A

The interest is unconditional

They will receive the trust no matter what - on death will fall in to their estate

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11
Q

What is a contingent interest?

A

This interest is conditional. It is reliant on some future event being satisfied

Once this future event occurs then it is a vested interest

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12
Q

What is in possession?

A

In possession means NOW. Can enjoy the interest immediately

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13
Q

What is in remainder?

A

Can enjoy the interest later, have to wait until some other beneficiaries right to enjoyment expires

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14
Q

What is an absolute interest?

A

You get the capital -

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15
Q

What is a limited interest?

A

You get the income only

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16
Q

What comes under s.9 of the Wills Act 1837?

A

Will must be

  1. In writing
  2. Signed by testator
  3. In the presence of two witnesses who also sign the will in his presence
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17
Q

What do the administrators need to do upon death?

A
  • They become PRs
  • They automatically become legal and beneficial owners of the property forming the estate of the deceased
  • Can pass on the legal and beneficial titles to the beneficiaries
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18
Q

What is a grant of probate?

A

This is confirmation of the PRs the authority in the will

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19
Q

What is a grant of letters of administration?

A

This is confirmation of the adminstrators the authority in the will

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20
Q

What is a codicil?

A

This is a later alteration of the will, must be signed and witnessed

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21
Q

What is a devise gift?

A

This is a gift of freehold land

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22
Q

What is a legacy or bequest?

A

This is a gift of personal property or personalty

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23
Q

What is a specific gift/legacy/device?

A

This is a group of assets that is distinguished from all other assets of the same kind (eg my BT shares, my Audi)

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24
Q

What is a pecuniary legacy?

A

Money

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25
Q

What is a residuary gift?

A

Anything that remains

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26
Q

What is a gift on trust?

A

Can give the property to trustees on behalf of the beneficiary

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27
Q

What is ademption?

A

This is a failure of a gift if the testator no longer possesses the property when he dies (eg he sold it or gave it away)

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28
Q

What is a lapse?

A
  • This fails if the beneficiary dies before the testator

- This gift will fall in to the residuary estate

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29
Q

What is the witness beneficiary rule?

A

s.15 Wills Act 1837. If the will is witnessed by a beneficiary or a beneficiary’s husband, wife or civil partner then the gift to the witness fails

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30
Q

When may a will be revoked?

A
  1. The marriage or civil partnership of the testator
  2. The destruction of the will with an intention to revoke
  3. The making of a new will, which deals with the same property as the first will
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31
Q

How may individual gifts be revoked?

A

Codicil

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32
Q

What are intestacy rules?

A

All the deceased estate passes to statutory next of kin

  • If the deceased made no will
  • If his will contains no residuary gift
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33
Q

How may you know if the trust has been properly constituted?

A

Has received cash

By deed etc

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34
Q

How is land properly constituted?

A

The transferor must execute a deed (s52(1) LPA 1925)

Deed 
- Signed
- Witnessed
Intention 
Delivered

Must be registered at the Land Registry

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35
Q

What is the difference between shares inside or outside the CREST system?

A 
Outside = private companies
Inside = public companies
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36
Q

How do you properly constitute shares that are outside the CREST system?

A

The shareholder will have a share certificate

  1. Transferor signs the stock transfer form
  2. Transferor hands completed stock transfer form and share certificate to transferee
  3. Transferee sends both documents to the company to be registered. The legal title is not transferred until registered
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37
Q

How do you properly constitute shares within the CREST system?

A
  • These shares are part of an electronic system therefore registration is IMMEDIATE.
  • There is no need for a stock transfer form
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38
Q

How do you properly constitute money?

A

Transfer is effective by delivery of notes and coins to transferee

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39
Q

How do you properly constitute chattels?

A

Chattels are passed by

  • Physical delivery of the asset
  • By deed
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40
Q

What happened in Jaffa v Taylor Gallery?

A

Transfer of picture was valid by deed as held to physically deliver to another country was absurd

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41
Q

What is the general rule if not properly constituted?

A

Equity will not perfect an imperfect gift

Equity will not assist a volunteer

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42
Q

What are the two exceptions?

A

Every effort test [Re Rose 1952]

Strong v Bird

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43
Q

What is the every effort test?

A

If the transferor has done everything in his power to legally affect the transfer and all that is left is action by a third party

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44
Q

What was established in Pennington v Waine?

A

Equity will regard the gift as complete if the stage had been reached where it would be unconscionable to withdraw

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45
Q

What was established in Mascall v Mascall?

A

With property, if no deed was used then the every effort test WILL NOT ASSIST

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46
Q

What are the conditions needed in Strong v Bird?

A
  1. The donor intends to make an immediate gift to the donee, but the gift is invalid because they have failed to comply with appropriate formalities
  2. The intention must be required to make an IMMEDIATE gift, not one conditional in the future
  3. The intention to give must continue unchanged until the donor’s death
  4. The donor dies and the DONEE IS APPOINTED EXECUTOR
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47
Q

What are the requirements needed for a valid gift?

A
  1. The donor must have the necessary mental capacity to make a gift
  2. The three certainties must be satisfied
  3. Must be properly constituted
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48
Q

What was established in Re Beaney?

A

The degree of understanding must be greater, if the size of the gift is greater

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49
Q

What are the three certainties?

A
  1. Certainty of intention
  2. Certainty of subject matter
  3. Certainty of objects
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50
Q

What are the four requirements needed to create a valid trust?

A
  1. Three certainties
  2. Beneficiary principle
  3. Rules against perpetuity
  4. Formalities for express declaration of trust
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51
Q

What is meant by certainty of intention?

A

There must be an intention to impose a legally binding obligation on the trustee

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52
Q

What was established in Paul v Constance?

A

It is not necessary to use the word trust. Words and conduct are sufficient to show intention

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53
Q

What are precatory words?

A

In full confidence that, hoping that, believing that

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54
Q

What was established in Re Adam and the Kensington Vestry?

A

Precatory words are NOT SUFFICIENT

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55
Q

What is meant by certainty of subject matter?

A

There must be a clear description of trust property and respective interests of beneficiaries

The beneficial interests must be certain. It must be clear what type of interest each beneficiary has and what shares they will respectively enjoy

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56
Q

What happened in Re London Wine Company?

A

In this case, specific wine bottles stored in a warehouse had to be specified to have certainty of subject matter. The wine bottles were different in quality/price

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57
Q

What happened in Hunter v Moss?

A

The shares in a company did not need to be specified to create a trust as they are all the exact same

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58
Q

What happened in Re Lewis’s of Leicester?

A

The subject matter was certain as money was paid in to a separate bank account

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59
Q

What happened in Re Golay?

A

The subject matter of a trust is certain if the settlor gives a workable formula for calculating the amount

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60
Q

What is meant by certainty of objects?

A

The certainty of objects rule requires that the settlor defines the beneficiaries with sufficient clarity when declaring a trust

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61
Q

What is the beneficiary principle?

A

Must be human beneficiaries, capable of enforcing in court

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62
Q

What are exceptions to the beneficiary principle?

A

Charitable trust

Pet

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63
Q

What is the rule of perpetuity?

A

This is to prevent tying up your property for a very long time

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64
Q

What is the rule against the remoteness of vesting?

A

A contingent interest is void unless it vests within the perpetuity period

This is 125 years

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65
Q

What is the rule against inalienability?

A

Must be able to spend all of the trust or does not go further than 21 years

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66
Q

What is the difference between a power of appointment vs a discretionary trust?

A

Discretionary trust - HAS TO DEAL WITH THE PROPERTY

Power of appointment = DOES NOT NEED TO EXERCISE THE POWER

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67
Q

What does the power of appointment do?

A

Fiduciary duty

  1. They must check whether or not they should exercise the power periodically
  2. They must consider the range of objects of the power
  3. They must consider the appropriateness of individual appointments
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68
Q

When would you use the complete list test?

A

Fixed trusts

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69
Q

What is the complete list test?

A

IRC V Broadway Cottages

It must be possible to draw up a complete list of each and every beneficiary - otherwise the trust will fail

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70
Q

What are the requirements for the complete list test?

A

Conceptual certainty

Evidential certainty

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71
Q

What is conceptual certainty?

A

The settlor must define objects using clear concepts so that the trustees will know who they are looking for

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72
Q

What is evidential certainty?

A

Must be able to identify each and every member of the class

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73
Q

What is the given postulant test for discretionary trusts?

A 
McPhail v Doulton
Must be possible to say with certainty that any given postulant is or is not within the class of objects stated in the trust instrument
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74
Q

What was established in Re Baden?

A

For given postulant need conceptual certainty, but not evidential certainty

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75
Q

What is the difference between the given postulant test for discretionary trusts and power of appointment?

A

The only difference is one of degree
Trustees of a discretionary trust make a wider and more systematic survey of the range of objects that if they were given power

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76
Q

What is administrative unworkability?

A

When the definition of the beneficiaries is so wide that the trust is administratively unworkable

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77
Q

What is an example of administrative unworkability?

A

Discretionary trust of 2.5m people of Yorkshire

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78
Q

What is different for powers of appointment and administrative unworkability?

A

Powers of appointment to everyone in the world are permitted

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79
Q

What is capriciousness?

A

Irrational

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80
Q

How do you identify a purpose trust?

A

No certainty of objects, offends beneficiary principle

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81
Q

What is a charitable trust?

A

Even if no identifiable beneficiaries they are allowed if for a charitable purpose

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82
Q

What must a charitable trust have?

A
  1. Charitable purpose
  2. Sufficient public benefit
  3. Exclusively charitable
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83
Q

What is charitable purpose?

A

Comes under s3(1) Charities Act 2011

Poverty, education, sport, religion etc

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84
Q

What is meant by public benefit?

A

It must be beneficial to the public and any detriment or harm must not outweigh the benefit

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85
Q

What is said in s4(2) CA 2011?

A

There is no presumption of benefit, it must be proved

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86
Q

When may it not be public benefit?

A

If restricted to a section of the public

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87
Q

What must you look at if restricted to a section of the public?

A

Any restrictions must be proportionate

Age, geographical etc

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88
Q

What happened in IRC v Baddeley?

A

A trust for methodists in West Ham was invalid as class within a class

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89
Q

What was established in Oppenheim v Tobacco?

A

Education for the children of employees and former employees of BAT.
Contractual relationship, therefore personal nexus

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90
Q

What is the difference between poverty and anything else?

A

Much more lenient when it comes to poverty

Trust to relieve poverty among relations was allowed

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91
Q

What happened in Independent Schools Council v Charitable Commission case?

A

In order to be charitable, you must make more than a de minimus or toke provision to the less-well off. A private school must put all charitable money back in to the school and give opportuities to less fortune

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92
Q

What happened in Gilmour v Coats?

A

Religious order who had no contact with community - not a public trust

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93
Q

What happened in Neville Estates v Madden?

A

Trust for a synagogue allowed as they would benefit society with their religious outlook so valid

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94
Q

What is meant by exclusively charitable?

A

Must be solely for charity

Not for political purposes etc

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95
Q

What is a Denley Trust?

A

Where a sufficiently identifiable group of individuals would be capable of enforcing in court - then valid

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96
Q

What happened in Re Denley and what is needed in a Denley trust?

A

Sports and recreation ground left for benefit of employees of a particular company

  1. Tangible benefit
  2. Ascertainable beneficiaries
  3. Compliance with rule of inalienability
  4. Certainty of purpose and objects
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97
Q

What are the two other exceptions?

A

For animals

For maintenance of graves

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98
Q

How does a purpose trust not offend the rule of inalienability?

A
  1. Be limited in duration to 21 years or ‘as long as the law allows’
  2. Allow the trustees to spend all the trust capital on the purpose and thereby end the trust at anytime
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99
Q

What are the two ways in which an implied trust can be created?

A

Voluntary transfer of asset

Purchase money cases

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100
Q

What happens in a voluntary transfer of an asset?

A

When someone transfers property for no consideration, there is an assumption that a resulting trust is established

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101
Q

What happens in a purchase money case?

A

When someone provides money for a property to be put in a sole name of someone else, presumed resulting trust

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102
Q

What is an exception to presumption of a resulting trust for a transfer of an asset?

A

If PROPERTY then it is likely to be intended as a gift

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103
Q

What happened in Parrot v Parkin?

A

Yacht purchased 55% 45%

This resulting trust was presumed for the contribution that they gave

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104
Q

What happened in Curley v Parkes?

A

This considered what payments would give rise to a resulting trust

  1. Payment must be part of the purchase price
  2. Payment must be made at the time of the initial purchase
  3. Payment of mortgage instalments or any other outgoings at the date of the purchase WILL NOT GIVE RISE to a resulting trust
  4. Legal fees and stamp duty do not count
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105
Q

What happened in Sekhon v Alissa

A

The presumption of a resulting trust if a mother purchases property in the name of her child

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106
Q

What happened in Stack v Dowden?

A

Constructive trusts are better

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107
Q

What happened in Laskar v Laskar?

A

Resulting trusts will still have a part to play where an investment rather than a home

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108
Q

What happened in Marr v Collie?

A

Where property bought as an investment - intention to show how beneficial ownership shared

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109
Q

When would a presumption of advancement arise?

A

When a FATHER makes a voluntary transfer in the name of his child [Bennet v Bennet]

When a father ‘in loco parentis’ makes a voluntary transfer or purchases property in the name of a child

When a husband makes a voluntary transfer or purchases the property in the name of his wife (Pettitt v Pettitt)

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110
Q

What does loco parentis mean?

A

Taking on the responsibility of being a parent

This CAN be mother (Re Cameron (Deceased))

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111
Q

What is key about the presumption of advancement?

A

EASILY REBUTTED

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112
Q

How can either be rebutted?

A 
Advancement (family relationships)
Evidence that an outright gift was intended 
Section 60(3) LPA 1925
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113
Q

What happened in McGrath v Wallis?

A

The reason for the purchase of the house was conveyed in the son’s sole name was a technicality
- Therefore presumption of advancement rebutted

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114
Q

What happened in Marshall v Crutwell?

A

A husband transferred his bank account into the joint names of himself and his wife. The presumption of advancement was rebutted as was covenience

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115
Q

What happened in Warren v Gurney?

A

Purchased for daughter as wedding gift but kept the deeds - presumption of advancement rebutted

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116
Q

How do you prove that evidence is admissable?

A

Any evidence should be from actions in the past, not future actions
[Shephard v Cartwright]

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117
Q

What could a trust be if land or personalty?

A
  • Express

- Implied (resulting or constructive)

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118
Q

Why are constructive trusts preferred to resulting trusts?

A

Constructive = more flexibility regarding the proportion of equitable interest

119
Q

What was established in Lloyds Bank v Rosset regarding constructive trusts?

A

For a claimant to obtain equitable interest there must

  1. Be COMMON INTENTION between the parties that both parties are to have an interest
  2. The claimant has acted to their detriment
120
Q

What are the two types of common intention?

A

Express

Inferred

121
Q

What is express common intention?

A

There must be an agreement, arrangement or understanding reached by them that the property is to be shared beneficially

122
Q

What could express common intention consist of?

A

Communication

  • Can be oral
  • Were there witnesses?
123
Q

What happened in Grant v Edwards?

A

The legal owner told the claimant that her name would have been on the legal title but for the fact that it may prejudice divorce proceedings
- This was express common intention

124
Q

What happened in Curran v Collins?

A

A plausible but incorrect excuse as to why a claimant’s name is not on the title does not necessarily constitute an express common intention that the claimant has equitable interest
This was NO EXPRESS COMMON INTENTION

125
Q

What is inferred common intention?

A

The court will infer common intention from direct contributions to the purchase price

126
Q

What did Lord Bridge say about inferred common intention?

A

Courts will not infer common intention from payment of household bills or non-financial acts

127
Q

What was established in Foe v Foe?

A

An express agreement that one party should pay the mortgage and the other should meet substantial household expenses, MAY have inferred common intention

128
Q

What is detriment?

A

Claimant must show that she had significantly altered her position in reliance to the agreement

129
Q

How does the court quantify equitable interest?

A

Looking at the WHOLE COURSE OF DEALINGS

130
Q

What may the court consider when thinking about the whole course of dealings?

A
  • Advice and discussions at the time of the purchase
  • The purpose for which the house was acquired and the nature of the relationship
  • Whether the resources were pooled
  • Contributions to mortgage payments
  • Payments of outgoings such as council tax and utilities
131
Q

What is proprietary estoppel?

A

This is when an owner of a property gives an assurance that the claimant will have an interest in the property and the claimant acts to that detriment so that it would be UNCONSCIONABLE to deny ownership

132
Q

What is active assurance?

A

Where makes obvious claims that will receive the property

133
Q

What is passive assurance/

A

Where legal owner stands back and lets the claimant act to his detriment

134
Q

What happened in Gillet v Holt?

A

G worked for H for nearly 40 years on little pay. Went well beyond employees duties and refused offers of alternative employment

135
Q

What happened in Thorner v Major?

A

Suggested that sufficient if claimant reasonably understands the defendant’s words to be assurance on which he could rely

136
Q

What is detriment?

A

Financial and personal detriment

When actions go beyond what was called for by natural love and affection

137
Q

What is the difference between constructive trusts and proprietary estoppel?

A

There is a much greater willingness to accept non-financial acts as detriment in proprietary

The courts also have much wider discretion on remedies

138
Q

What are the 7 circumstances under which a trustee can be replaced?

A
  • Dies
  • Remains outside of the UK for 12 months
  • Desires to be discharged
  • Refuses to act
  • Is unfit to act
  • Is incapable of acting
  • Is an infant
139
Q

What happens if a trustee is to leave but there is only one trustee left?

A

Must be REPLACED

140
Q

What comes under s36(6) Trustees Act?

A

Power for the appointment of a new trustee

141
Q

What comes under s39 TA?

A

The retirement of a trustee without replacement (as long as there are two remaining trustees)

142
Q

What comes under s40 TA?

A

The use of deed to make an appointment is to benefit from automatic vesting

143
Q

What comes under s41 TA?

A

Gives the power of the court to remove or appoint trustees

144
Q

What comes under s19 of TLATA?

A

Allows beneficiaries to serve a written discretion on a trustee or trustees to retire

145
Q

What must the beneficiaries be to use s19?

A
  1. All agree

2. Be over 18

146
Q

What is the standard required from trustees?

A
  • The layman must use such care as would a prudent man of business (Speight v Gaunt
147
Q

What are the duties on taking up office?

A
  • Must ensure they are properly appointed
  • Must become familiar with the terms of the trust
  • Must inquire to past business of trust to discover any previous breaches and remedy them
148
Q

What are the duties to keep trust property in joint names?

A

This is to prevent one trustee misappropriating trust property

149
Q

What is the duty to invest?

A

Must invest trust funds to produce either income or capital growth

150
Q

What is the duty to provide information?

A

Trustees must keep trust accounts showing how the trust fund is invested and showing the money coming in and

Beneficiaries must be allowed to inspect them

151
Q

What is the duty regarding powers and discretions?

A

No duty to act in a particular way but must consider how to exercise power

Trustees do not have to explain WHY decisions have been made

152
Q

What is the duty to act in the best interests of the beneficiaries?

A

Must consider both life tenants and remaindermen

153
Q

What is the duty of care?

A

The trustees must undertaken their role to the appropriate standard. If negligent then breach of trust

154
Q

What is a duty to act personally?

A

Must play an active role in the administration of the trust

  • They are allowed to delegate to co-trustees on a formal basis
  • In the absence passive trustees may be liable for the defaults of the active trustees
155
Q

What was established by TA 2000 about powers to invest?

A

Trustees have an

  • Unfettered power to invest
  • Powers to employ experts to manage trust investments
156
Q

What are trustees allowed to invest in?

A

ANYTHING

Has to be expected to produce income or capital growth (therefore not a depreciating asset eg a car)

157
Q

What about investing in land?

A

Can purchase land as an investment BUT ONLY IN THE UK

158
Q

What are the 4 duties for trustees?

A
  • Suitability (s4)
  • Diversification (s4)
  • Advice (s5)
  • Review (s5)
159
Q

What comes under suitability?

A

Decide whether something is appropriate to invest in

160
Q

What comes under diversification?

A

Must achieve a diversity of investments

Dependent on the size of the trust

161
Q

What comes under advice?

A

Must obtain and consider proper advice

  • Do not need to if they do not need to (eg if stockbroker themselves)
  • Beneficiaries can force them to get advice
162
Q

What comes under review?

A

Must review trust instruments from time to time and consider whether they should be varied

This review should be carried out to s1 standard of care

163
Q

What is the statutory duty of care?

A

Duty of care and skill as is reasonable with regard to knowledge and expertise

164
Q

What is the subjective part of the duty of care test?

A
  1. Circumstances (eg amount of money/size of trust)

2. Special knowledge or skill the trustee has

165
Q

What happened in Nestle v National Westminster Bank?

A

Held that trustee’s failure to keep pace with inflation and the average performance of company shares over a particular period was not a breach of its duty of care

166
Q

What happened in Wight v Olswang?

A

Trustee only liable for investment decision which no reasonable trustee would make

167
Q

What is collective delegation?

A

This is the act of appointing an agent eg a stockbroker, to carry out investments

168
Q

What must the trustees do when appointing an agent?

A

Exercise such care when appointing (s1)

169
Q

Will trustees be liable for agent’s defaults?

A

Only if they had breached one of the trustees’ duties (eg not checking or not duty of care)

170
Q

How should you appoint an agent?

A
  • In writing

- Accompanied by a policy statement to provide guidance on how the trust fund should be invested

171
Q

Can trustees pay the agent out of the trust fund?

A

YES (s32)

172
Q

Can a beneficiary enforce trustees appoint agents?

A

NO, beneficiaries cannot dictate how trustees exercise their discretion

173
Q

What are non-delegable functions?

A

These are functions that cannot be passed to agents

174
Q

What are examples of non-delegable functions?

A
  • Way the assets are distributed
  • What should be income and what should be capital
  • Cannot appoint new trustee
175
Q

What is individual delegation?

A
  • Going abroad
  • Going to hospital

May appoint an attorney to give written notice to co-trustees to carry out his powers for 12 months or less

This will expire after that time

176
Q

What is different with individual delegation to collective delegation?

A

For individual, they can distribute capital to beneficiaries

The original trustee will be vicariously liable for the actions of an attorney just as if they were their own acts

177
Q

What is the main object of trustees?

A

TO MAKE MONEY

178
Q

What happened in Cowan v Scargill?

A

Must put aside moral, political and social interests

179
Q

What are the four circumstances where a trustee may take ethical considerations in to account?

A
  1. When 2 investments yield equal return, they can choose the more ethical option
  2. Beneficiaries are all adults with strong view about one thing
  3. When it may not be appropriate for charitable trustees to invest in a company whose objects are opposed to the purposes of the trust
  4. The settlor can provide a trust instrument or will that trustees are not to invest in certain sectors
180
Q

What is a power of advancement?

A

Can pay the beneficiaries capital, to beneficiaries with an interest in capital, if the payment is for the beneficiaries advancement of benefit

181
Q

What are the three restrictions on the power of advancement?

A
  1. The maximum that can be advanced for trusts pre-2014 is HALF. If after 2014 then can be all
  2. The beneficiary must bring any advancement in account on becoming absolutely entitled
  3. Anyone with a prior interest must be an adult and consent in writing to this advancement.
182
Q

Can beneficiaries force a power of advancement?

A

NO

183
Q

What happened in Re Pauling’s Settlement?

A

The beneficiaries’ parents requested for an advancement for their young adult beneficiaries, which were used improperly by parents

184
Q

What about advancement to minor children?

A

They cannot give good receipt therefore unwise but not banned. Should give to school straight etc

185
Q

What will beneficiaries receive after advancement?

A

They will receive trust capital, minus advancement

186
Q

What if they die before the contingency?

A

They do not have to pay back the advancement

187
Q

What is the power of maintenance?

A

This is the method of giving beneficiaries income from the trust

188
Q

What is the way in which power of maintenance works for VESTED interests?

A

Under 18 - must accumulate all income, have a discretion to give beneficiaries for maintenance, education or benefit

Over 18 - obliged to give all income

189
Q

What is the way in which power of maintenance works for CONTINGENT interests?

A

While under 18, trustees have discretion to apply income for beneficiary’s maintenance

After 18, entitled to receive all trust income and trust capital when contingency reached

190
Q

How can beneficiaries force trustees to perform their duties?

A

Court action

If possible, Saunders v Vautier to end the trust

191
Q

When may the courts interfere with exercise of a discretion or power?

A
  1. Trustees are not exercising their autonomy
  2. To prevent the exercuse of discretion of a favour of a non-object
  3. Capriciousness
192
Q

What documents can beneficiaries demand to see?

A
  • Trust accounts (Schmidt v Rosewood)
  • Certificates, deeds and building society books
  • Minute books
193
Q

What documents can beneficiaries NOT see?

A
  • Correspondence between trustees selecting objects [Re Londonderry’s Settlement]

A letter of wishes from the creator of the trust

Minutes showing why trustees made a decision

194
Q

What are exceptions to these rules?

A
  1. When there is a legitimate expectation that discretion will be exercised in their favour, if this changes they are entitled to be warned
  2. Pension funds
195
Q

What is the rule in Saunders v Vautier if sole beneficiary?

A

Can apply to end the trust if

  • 18 or more and of sound mind
  • Is the sole beneficiary entitled under trust
  • Has a vested interest
196
Q

What is the rule in Saunders v Vautier if multiple beneficiary?

A
  • Are in existence and ascertainable
  • Are 18 and over and of sound mind
  • Are in agreement
197
Q

What if there is a trust with some unascertainable subjects?

A

Can apply to court for consent of these beneficiaries under the Variation of Trusts Act 1958

198
Q

When would the court consent for unascertainable beneficiaries?

A

If it is for their benefit

199
Q

What is a status based fiduciary?

A
  • Trustees
  • PRs
  • Agents
  • Directors
  • Solicitors
200
Q

What is a fact based fiduciary?

A

The court will decide if a relationship exists

201
Q

What is an example of a fact based fiduciary relationship?

A

LAC Minerals v International Corona Resources

Negotiations together to purchase land, ended up purchasing for sole venture

202
Q

What is the self-dealing rule?

A

If the trustee purchases trust property for himself and his co-trustees

203
Q

What is important about the self-dealing rule?

A

It is strict

Courts do not consider honesty

204
Q

How can a beneficiary void the sale?

A
  • Express that they wish to void the sale
  • Within a certain time frame
  • Refund the price and expenses paid
205
Q

How can a trustee authorise the sale?

A

Trustees could seek seek a court order authorising the sale

Consent of beneficiaries

206
Q

How must consent of the beneficiaries be given?

A
  1. Sui juris
  2. Knew all the relevant facts and that the transaction was fair in order to rebut the presumption of under influence
  3. Ideally, beneficiaries should obtain independent advice
207
Q

What is the fair dealing rule?

A

The trustee purchases the equitable interest of a beneficiary

208
Q

What is the presumption under the fair dealing rule?

A

There is a presumption of undue influence as the beneficiary may be in the habit of relying on the trustee’s professional skill or superior knowledge

209
Q

How can the fair dealing rule be authorised?

A

Trustees need to ensure that

  1. They enclose all material facts to the beneficiaries before the purchase
  2. The transaction is fair and honest
  3. They can show that they took no advantage and that the beneficiary exercised an independent judgement and was not the subject of undue influence
210
Q

What is the difference between the fair dealing rule and the self-dealing rule?

A

The fair dealing rule is much more relaxed than the self dealing rule

Fair-dealing = upheld if fair 
Self-dealing = fairness irrelevant
211
Q

Why is there this difference?

A

Beneficiaries negotiate in the sale of beneficial interests, therefore they will be more aware of key facts

212
Q

What is the breach of competition with the trust?

A

When a trust includes a business and a trustee sets up his own business in competition, trustees are entitled to account for any profits

213
Q

What is a further remedy to competition with the trust?

A

Injunction

214
Q

What is the breach of unauthorised remuneration of trustees?

A

Trustees cannot demand payment for their services

215
Q

What money can a trustee recover?

A

Travel expenses from the trust fund, such as the cost of travelling to trustee meetings

216
Q

How can remuneration be authorised? (4)

A
  1. Charging clause in the trust instrument
  2. Beneficiaries’ consent
  3. Court order
  4. s29 TA 2000 this gives trustees power to charge reasonable fees
217
Q

What is a charging clause?

A

Trustees can charge fees if there is a clause in the will/trust document

218
Q

What happens with beneficiaries consent?

A

If all beneficiaries are sui juris they can agree to pay trustees remuneration

219
Q

What is a court order?

A

The court can authorise remuneration

This could be if it is in the interests that they need the skill of the trustees and it would be alot cheaper than other professionals

220
Q

What happened in Re Duke of Norfolk’s Settlement Trusts?

A

courts may be more generous to trustees and need to protect beneficiaries from trustees’ claims against effective administration

221
Q

What is s29 TA 2000?

A

This gives trustees power to charge reasonable fees

s29(2): must act in a professional capacity and if all other trustees agree in writing

222
Q

What comes under s29(3)?

the amount of remuneration paid

A
  1. Nature of services (are they very specialist)
  2. The trust (is it a small trust)
  3. Attributes of the trustee who is seeking to charge (is the trustee the most appropriate person)
223
Q

Can a sole trustee charge remuneration?

A

NO as need authorisation by other trustees

A trust corporation can

224
Q

What is incidental profits?

A

Trustees are uniquely placed to gain valuable information or opportunities

225
Q

What is remuneration from a third party?

A

Trustees could gain director roles with shares of trust etc

226
Q

What happened in Re Gee?

A

Trustee WILL NOT have to account to trustee if would have been voted as director independently

227
Q

What happened in Re Macadam?

A

Trustee WILL have to account to trust where became director by virtue of being a trustee and using trust property

228
Q

What happened in Re Dover?

A

It is not an issue when a trustee was a director BEFORE he became the trustee

229
Q

What about when the trustee receives commission as part of their role?

A

Must account for any commission

230
Q

What about renewal of leases?

A

this may occur when there is a renewal of a lease owned by a trust and the trustee could personally take the new lease

BREACH [Keech v Sandford]

231
Q

What is the use of information and opportunities?

A

A trustee is accountable for profits made out of information of opportunities that he has received by virtue of being a trustee

232
Q

What happened in Boardman v Phipps?

A

Boardman took control of company by purchasing further shares. Skilful management helped the company
Still liable

233
Q

What was shown in Boardman v Phipps?

A 
Strict liability
It did not matter that 
1. They were honest
2. The fact that the trust benefitted
3. The possibility of conflict was remote
234
Q

What are the remedies?

A

Must account for any unauthorised profits made

No need for claimant to have suffered loss

Or a proprietary claim

235
Q

What must a beneficiary prove to bring an action against a trustee?

A
  1. The trustee breached on his duties

2. That breach caused loss to the trust

236
Q

What happens if there are multiple breaches creating profits and losses?

A

Beneficiaries may keep both - the loss is not allowed to be offset by the profit

237
Q

What is the exception to this rule?

A

When both the profit and loss are from the same speculative property investments, it is allowed [Bartlett v Barclays Bank Trust]

238
Q

Which trustees are liable for a breach?

A

ALL

They are all jointly and severally liable

239
Q

What are defences that can be used by trustees?

A

Express exclusion clause
s61 Trustee Act 1925
Consent of beneficiaries
Limitation Act 1960

240
Q

What is an express exclusion clause?

A

There may be in the trust instrument, something that will relieve trustees for negligent breaches

241
Q

What cannot be in the trust instrument?

A

Exclusion of liability for fraudulent breaches

242
Q

What is s61 TA 1925?

A

Trustees can be excused if they have acted HONESTLY AND REASONABLY and ought fairly to be excused

243
Q

What do trustees need to do to get help from s61?

A

Trustees must evidence in court why they OUGHT to be.

The court is usually reluctant to grant relief to professional trustees

244
Q

What is needed for the consent of beneficiaries?

A

Beneficiaries must give informed consent
Must be
- Sui juris
- Full knowledge of the facts

245
Q

What is the Limitation Act 1960?

A

actions for breaches of trust cannot be brought after 6 years from the date which the cause of action occurred

the time does not start ntil the beneficiary’s interest falls into possession

246
Q

When does the limitation period not apply?

A
  • Fraud

- No limitation for proprietary

247
Q

What is the equitable doctrine of laches?

A

Where the claimant has delayed in asserting their right and because of this delay, is no longer entitled to bring an equitable claim

248
Q

Do trustees have a right to indemnity?

A

YES

If only one trustee was pursued for the money

249
Q

When can a trustee claim the full amount?

A
  1. fraudulent

2. where blindly follows the advice of a co-trustee who is a solicitor

250
Q

What type of action can be taken?

A
  • Personal

- Proprietary

251
Q

What is a personal action?

A

Beneficiaries can claim compensation for any loss plus interest

252
Q

What is a proprietary claim?

A

This is to recover trust property

If bankrupt and holds trust property or replacement can use equitable tracing rules

253
Q

What is clean substitution?

A

This is where there is no problem tracing trust property in to the replacement asset

254
Q

What will the beneficiary receive in a clean substitution?

A

Either the replacement property

A charge over the proerty to secure the amount (if increased/decreased in value)

255
Q

What if the whole of a mixed fund is used to buy an asset?

A
  1. Can claim a proportionate share (Foskett v McKeown)

2. Can claim a charge/lien over the sum stolen (if decreased in value)

256
Q

What happens if withdrawals go in to a bank account which contains the trustees own money?

A

You must establish who’s money has been spent on what

257
Q

What is the rule in Re Hallett?

A

Fiduciary is deemed to have spent their OWN money first

258
Q

Why would you use Re Oatway and why?

A

If Re Hallett does not favour trust

Claimant can claim charge over each and every part of the bank account and any property bought with it

259
Q

What happens if the asset has gone up in value?

Re Oatway

A

It is unclear

260
Q

What happened in Roscoe v Winder?

A

If all of the money is dissipated from the bank account and the trustee puts their own money back in, this is not considered trustee money

261
Q

What happens if there are two or more trust funds in one bank account?

A

Clayton’s case: first in first out

HOWEVER

If unjust then Barlow Clowes v Vaughan
- The property owned is proportionate to the contribution

262
Q

What happens if the trustee mixes his own money with two or more trust money?

A
  1. Apply the rules in Re Hallet and Re Oatway
  2. Then apply Clayton
  3. If not use Barlow
263
Q

What is common law tracing rules?

A

Once mixed, cannot receive

264
Q

Why can beneficiaries use equitable tracing rules?

A

They have an equitable interest in the property

265
Q

Why would you bring an action against a third party?

A

When you cannot find a trustee or they are bankrupt

266
Q

What if the third party did not receive trust property?

A

Bring a claim for accessory liability

267
Q

What is accessory liability?

A

Usually when someone has helped the trustee to misappropriate the property, without actually receiving anything themself

268
Q

What is key about the assistance?

A

It must be active

269
Q

What state of mind must the defendant have?

A

Must be DISHONEST

270
Q

What is dishonesty?

A

Royal Brunei Airlines v Tan objective test, but also subjective as will take in to account knowledge and experience

271
Q

What was established in Barlow Clowes v Eurotrust?

A

It is not necessary for the defendant to be aware that he is being dishonest

272
Q

What was established in Ivey v Genting Casinos?

A

The issue of dishonesty is objective

273
Q

What was established in Group Seven?

A

This backed up the dishonesty

274
Q

What will the defendant be liable for if found to be dishonest?

A

Personally liable to pay for compensation of the entire sum which he assisted in obtaining, plus interest

275
Q

What is recipient liability?

A

This is when a stranger receives property

276
Q

What is needed for it to be considered recipient liability?

A
  1. The trustee (or fiduciary) transfers property to a stranger in breach of trust
  2. The stranger received the property for the stranger’s benefit
  3. The stranger received the property with the requisite degree of knowledge that the transfer of the property was in breach of trust or fiduciary duty
277
Q

What is a bona fide purchaser?

A

Equity’s darling
Has provided full consideration without notice of the property’s provenance
NO ACTION CAN BE BROUGHT AGAINST THEM

278
Q

What is a wrongdoer?

A

Third party had such knowledge that their conscience is affected

279
Q

What is the state of mind needed to prove a stranger liable for recipient liability?

A
  • This is not as strict as dishonesty

- If the defendant’s knowledge made it unconscionable for him to retain the property

280
Q

What are remedies for wrongdoer?

A

EQuitable rracing rules

281
Q

What is an innocent volunteer?

A

Third party had no knowledge of notice of breach of trust or fiduciary duty and provided no consideration for the transfer

282
Q

what are the remedies for an innocent volunteer?

A

Much kinder tracing rules

283
Q

What is an intermeddler?

A

Will be liable for any misapplication of trust property

Called a trustee de son tor

284
Q

What are the tracing rules for wrongdoers?

A

EXACT SAME FOR TRUSTEES

285
Q

What is different about the tracing rules for innocent volunteers?

A

There will be two innocent parties so the remedies must be shared

286
Q

What happens in a mixed asset purchase?

A

The solution is to share the asset rateably in proportion to the contributions made

The trust and the innocent volunteer will share the property

287
Q

What happens in allocation of withdrawals made from bank accounts?

A

First in first out

but if not barlow

288
Q

What is a customer pre-payment trust?

A

This is a trust for payments made just prior to insolvency

This will rank higher than unsecured creditors

289
Q

What is unlawful preference?

A

Must not prefer some creditors over others in an insolvency situation

290
Q

What happened in Re Farepak?

A

Unlawful preference so entire trust failed

291
Q

What happened in Re Kayford?

A

Customers were never creditors so trust was valid

292
Q

What is a Quistclose trust?

A

When a loan has been made to a company just prior to insolvency and the lender has not been able to take security for that loan

They will try and restaboish that there was atrist created

293
Q

What happened in Barclays Bank v Quistclose?

A

Money was lent as a sole purpose to keep company afloat

Law 2 (4 decks)

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