Equity Flashcards
(98 cards)
1
Q
What is the definition of a Trustee?
A
Legal ownership
A trustee holds the legal title to trust property.
2
Q
What is the role of a Beneficiary?
A
Equitable and beneficiary ownership
Beneficiaries have rights to benefits from the trust.
3
Q
What does the term ‘Equity’s darling’ refer to?
A
Subsequent purchaser for value always takes free, not bound
This concept protects bona fide purchasers.
4
Q
What is the difference between Active and Passive duties of trustees?
A
Bare trust is passive; active management involves exercising dispositive & investment powers
5
Q
What are the types of trusts?
A
- Express trusts
- Implied Trusts
- Resulting Trusts
- Constructive Trusts
- Institutional constructive trusts
- Remedial constructive trusts
- Common intention Constructive trusts
- Quistclose trusts
6
Q
How does Equity compare to Debt?
A
Equity has a proprietary remedy
7
Q
What is required for Self-Declaration of Trusts?
A
No formality for constitution
Only property subject to the trust requires formality.
8
Q
What is the Milroy principle?
A
Equity will not assist volunteers
Volunteers are those who do not provide consideration.
9
Q
What does the Re Rose principle state?
A
Assists volunteers only when they have put the matter beyond their control
10
Q
What is the Mascall extension to the Re Rose principle?
A
Not necessary for the transferor to send documents to the person capable of completing it, as long as the correct method is used
11
Q
What triggers the unconscionability doctrine in Pennington v Waine?
A
A promise is made and a transfer is signed and/or publicised accordingly
12
Q
What are the requirements for a valid immediate gift under Strong v Bird?
A
- Intention to make an immediate gift
- Gift made to an Executor or Representative
- Continuing intention until the donor’s death
13
Q
What is the DMC principle regarding conditional gifts?
A
Gift made in contemplation of death, donor believes death is imminent, constructive delivery of property
14
Q
What is the age requirement to request a severance of rights under the Saunder v Vautier Rule?
A
18 years old
15
Q
What are the three certainties necessary for a trust?
A
- Certainty of intention
- Certainty of subject matter
- Certainty of objects
16
Q
What is the beneficiary principle?
A
The ‘object’ of a trust must always be a legal person to be capable of being enforced
17
Q
What must be demonstrated for certainty of intention?
A
An external manifestation of intention as to gift or transfer by trust
18
Q
What happens if there is a lack of certainty in fixed trusts?
A
Uphold the valid parts of the trust at the very least
19
Q
What is required for the transfer of legal title in gifts?
A
Written transfer + written notice for debts and money; signed writing for real property
20
Q
What does s.53(1)(b) require for express trusts?
A
Some signed writing for evidential requirement (for land)
21
Q
What is the effect of a failure to evidence a Self-Declared Trust in writing?
A
It does not make it void, merely unenforceable
22
Q
What is the rule for intangible assets in creating a valid trust?
A
Do not need to be separated from the bulk of assets
23
Q
What is a sham trust?
A
Legally problematic; rights of the beneficiary depart from the real agreement
24
Q
What is the effect of lack of certainty in discretionary trusts?
A
Everything has to fail, cannot uphold just certain parts
25
What is the intention behind a physical act of delivery in relation to ownership?
Accompanying the intention with a physical act of delivery or a change of possession.
26
What is required for a charitable purpose trust to be valid?
Must meet the legal definition of charity, enforced by the A-G or Charity Commission, and meet the three certainties.
27
What are the four Endacott anomalous exceptions for private purpose trusts?
* Specific animals
* Private monuments and graves
* Private masses for other purposes
* Unincorporated association
28
What is the consequence of a failed private purpose trust?
Fatal; they cannot be severed or separated, leading to everything failing.
29
What are the three requirements for a charity to attain charitable status?
* Charitable purposes within 12 heads of charity
* Satisfy the public test
* Be wholly and exclusively charitable
30
What are the 12 heads of charity?
* Poverty
* Education
* Religion
* Health & lives
* Community & citizenship
* Arts, culture, heritage, science
* Amateur sport
* Environment
* Youth, age, ill-health, disability, financial hardship
* Animal welfare
* Emergency services
* Others within the spirit of the Act
31
What is the public benefit test for charities?
Must have an identifiable benefit and benefit the public or a section thereof.
32
True or False: Charging money for services deprives a charity of the public benefit element.
False; it does not deprive the charity of public benefit as long as it is reasonable and necessary.
33
What is the Cy-Pres Doctrine?
Applies when there is a 'general charitable intention'; useful when a gift to charity fails.
34
What is the rule against remoteness in vesting?
125 years; applies to future vesting and interests that do not take effect immediately.
35
What is the rule against alienability?
21 years; a valid non-charitable “i.e private” purpose trust must end within this time.
(Charitable purpose trusts are exceptions they do not comply with the perpetuity rules)
36
What are automatic resulting trusts?
Arise when the transfer of property wholly or partially fails but the property has been transferred to the intended trustee.
37
What is the presumption of advancement?
Assumes a gift in certain relationships, such as husband to wife or parent to child.
38
What is required to establish a common intention in family homes?
Inducement, reliance (detriment), and a common intention.
39
What is the 'wait and see' rule?
Applies when it is not clear from the outset that property will vest within the perpetuity period.
40
What are the stages in the qualification process for family homes?
* Show beneficial interest acquired under a CIT in land
* Inducement
* Reliance
* Common intention
41
What are the remedies available in proprietary estoppel?
Can be financial or non-financial.
42
What must be demonstrated for a proprietary estoppel claim to succeed?
* Assurance
* Detriment
* Reliance
* Unconscionability
43
What is required for a trustee's removal?
By the terms of the trust instrument, statutory powers, common law powers, or by court or Charity Commission.
44
What is the role of the Charity Commission regarding trustees?
Has the statutory power to appoint trustees.
45
What are administrative powers of trustees?
* Comply with the trust terms
* Safeguard the trust property
* Duty to invest
46
What is the fiduciary duty of trustees regarding conflicts?
No conflict; not to use trust property in a position of conflict.
47
What is the difference between vested in possession and vested in interest?
Vested in possession is more long-lasting, while vested in interest is fleeting.
48
What is the 'No profit' rule in fiduciary duty?
Do not profit from using trust property to make a personal gain or profit.
49
Define 'Vested interest'.
An interest can either be vested in possession (long-lasting current possession) or vested in interest (fleeting in the future).
50
What are 'maintenance powers'?
Powers allowing trustees to provide earlier provisions to beneficiaries regarding income or capital.
51
What does 'prior interest' mean?
A primary interest as a beneficiary, with subsequent beneficiaries having secondary interests.
52
What is the Power of Advancement?
To advance capital or income for the benefit of the beneficiary before becoming absolutely entitled.
53
When is advancement allowed? When is it acceptable?
When beneficiaries' interests are separate, severable, and not contingent.
54
How much can be paid under the Power of Advancement?
There is no cap limit; up to 100% of the requesting beneficiary’s own share can be paid.
55
What is the Power of Maintenance?
To advance just income for the benefit of the minor beneficiary before becoming absolutely entitled.
56
What are the core reasons for using the Power of Maintenance?
For the education, welfare, support, and benefit of the minor beneficiary.
57
At what age does a beneficiary gain entitlement to income?
At age 18, as a matter of statute.
58
What is the distinction between 'Intermediary Income' in testamentary trusts?
There is no automatic right to intermediary income unless specific *conditions* are met.
59
What is the duty of trustees regarding income and capital in fixed trusts?
Trustees must distribute income and capital as it arises, as soon as possible.
60
What are the investment powers of a trustee under S.4?
General suitability and specific suitability.
61
What is required for the delegation of powers by a trustee?
Delegation must be in writing and by a formal policy statement of instructions.
62
What is the characterizing feature of fiduciary duty?
Loyalty; trustees have an obligation of single-minded loyalty to the principle.
63
What is 'election of remedies'?
The choice a beneficiary has to choose between various appropriate proprietary and personal claims available to them on trustee breach.
64
What constitutes a breach of trustee duties?
Inappropriate distribution, wrongful distribution, poor investments, unauthorized investments, or profits.
65
What is the 'Common Law Duty of Care'?
The standard of care that requires a trustee to act as an **ordinary prudent businessperson** would in equity.
66
What are personal remedies in equitable claims?
Remedies relying on a fault standard, such as equitable compensation and account of profits.
67
What are proprietary remedies?
Recoverable irrespective of fault, requiring a proprietary right in the asset e.g tracing and an existing fiduciary relationship.
68
What is 'subrogation'?
Stepping into the shoes of another under the same terms to take equivalent ‘security’ as previously held.
69
What is a 'bona fide purchaser' defense?
A defense for a purchaser for value who acts in good faith and without notice.
70
What is the statutory defence under s.61 TA?
The defence that the trustee acted honestly and reasonably and ought fairly to be excused.
71
How can trustees protect themselves during administration?
By applying for counsel’s opinion, seeking court directions, or obtaining beneficiary consent.
72
What is the role of s.27 TA 1925?
To put unknown beneficiaries on notice through public advertisement.
73
What happens to a beneficiary's entitlement to income upon turning 18?
It triggers the end of maintenance or advancement and allows collection of accumulated income.
74
What is the starting point for apportionment of trustee liability?
Joint and several liability.
75
What is the largest remedy if the asset is rising in value?
Choose a proprietary interest e.g. equitable lien to get the benefit of the increase.
76
What is the recommended remedy if the asset is falling in value?
Choose a personal remedy.
77
What does BFP stand for in the context of bona fide purchasers?
BFP = consideration + good faith + without notice.
78
What principle does 'Equity’s darling' refer to?
The defense for the bona fide purchaser.
79
What is the preferred remedy for unmixed funds?
The proper remedy is following the asset in a simple and uncomplicated way.
80
In the case of innocent mixtures, how must leftover money be shared?
Rateably in accordance with their proportionate share in the asset.
81
What principle applies to wrongful mixtures regarding sharing leftover money?
Same principle applies regarding sharing the money left over by proportionate shares.
82
What is the preferred action when dealing with both mixed funds?
Simply sue the trustee for the original misapplied amount.
83
What does tracing refer to?
Identifying a new asset as the substitute for the old and recovering that.
84
What is the principle established in Re Hallet?
The trustee is deemed to have paid his own first.
85
What does the Re Oatway principle state?
The trustee spends his own money first when withdrawing money from a bank account.
86
According to Roscoe, what happens when personal money is paid back into the trust fund?
It is not regarded as replacing that fund.
87
What does the case Shallson v Russo allow beneficiaries to do?
Elect to keep for themselves the most profitable transactions irrespective of breach.
88
What are innocent mixtures required to do according to Re Diplock?
Always be shared proportionately with other mistreated beneficiaries.
89
What is the first in, first out rule established in Re Clayton?
The sum of money first paid in is first to be drawn out.
90
What does the ruling in Barlow Clowes | Charity Comm v Framjee state about Re Clayton?
The rule can be disapplied if there is contrary intention, impracticable result, or unfairness.
91
What are the alternatives to the Re Clayton principle?
* Parri Passu: A static, single calculation at the end
* Rolling Charge: A dynamic recalculation of contributions.
92
What type of claims are TP liability claims classified as?
Fault-based claims resulting in personal liability.
93
What are common options to remedy TP liability?
* Compensation for loss
* Traceable assets
* Proprietary claim over the assets
94
What are the elements of Dishonest Assistance (DA)?
* Trust in existence at the material time
* Assistance of the breach
* Dishonesty (objective standard)
* Factual causation
95
What is a key difference between TP liability and ordinary equity claims?
TP claims are actionable irrespective of whether a benefit was received.
96
What are the elements of Knowing Receipt (KR)?
* Misapplication of trust property
* Existing proprietary interest in the trust property
* Beneficial receipt
* Knowledge (before or after the receipt)
97
What is the test for knowledge in a KR claim?
Unconscionability - objective; no dishonesty needed.
98
What is the implication of a lack of knowledge for KR liability?
No liability for KR.
