express trusts Flashcards
trustee has what title
legal title
beneficiary has what title
equitable title
what are the 3 ways in which a settlor can constitute a trust
1) A makes outright gift of property to B
2) A declares him/herslef trustee of the property, to hold on trust for B, or
3) A transfers the property to C as a trustee, to hold on trust for B
what does Milroy v Lord say about when equity will not construe a valid trust
equity will not construe a valid trust from a failed gift
what formality is required for an express trust (2)
-signed writing is required to create express trusts over land, or transfer pre-existing equitable interests in any type of property. Otherwise no formalities are required
(Law of Property Act 1925, s53)
-a formally executed deed of trust in common- but not a requirement. Oral declaration will do
what 2 cases show the problem of oral declarations of trusts
- Paul v Constance
- Gold v Hill
where settlor and trustee are the same, what must there be
where the settlor and trustee are the same, there must be a declaration of trust
3 cases which show declaration of trust (where settlor and trustee are the same)
- Jones v Lock
- Paul v Constance
- Richards v Delbridge
where settlor and trustee are different, what must there be in place
there must be a transfer of property to the trustee (application of the law of gifts)
case for where settlor and trustee are different
T Choithram
case which shows that a transfer is required (where settlor and trustee are different)
Milroy v Lord
case where the purported trust property made its way to the trustee by operation of a will
Re Ralli’s WT
will trust case
Strong v Bird
3 certainties first seen in which case
Knight v Knight
which case shows that the courts will seek to resolve ambiguity in favour of validity
Re Hay’s ST
what are the 3 certainties
- certainty of intention
- certainty of subject matter
- certainty of objects
certainty of intention
what does it concern
the settlor’s intention, expressed through the acts and words of the settlor as interpreted objectively
certainty of intention
3 cases
- Investors Compensation Scheme Ltd v West Bromwich Building Society
- Re Sigma Finance Corpn
- Staden v Jones
certainty of intention
what must there be intention for
an intention to create a trust not a gift ie. hold the property for the benefit of others. However, it is not necessary to use the word ‘trust’ or ‘confidence’
-we are looking for the substance of the words in order to determine what the settlor intends
certainty of intention
2 cases showing that there must be an intention to create a trust not a gift
- Re Kayford Ltd
- Re Farepak Food and Gifts Ltd
certainty of intention
meaning on the word ‘trust’
neither does the the use of the word ‘trust’ necessarily mean a trust if that is not what it meant
certainty of intention
case on the word ‘trust’
Tito v Waddell (No 2)
certainty of intention
what words must be used to express intention
imperative words or precatory words, expressing ‘hopes, desires, requests, wishes’ but as a whole court said words must be imperative
certainty of intention
4 cases for imperative words
- Lambe v Eames (‘in any way she may think best’)
- Re Adams and Kensington Vestry (in full confidence that she will do what is write’)
- Re Diggles (‘it is my desire’)
- Re Johnson (‘I request’)
certainty of intention
2 cases where valid trusts were created using (imperative words)
- Comiskey v Bowring Hanbury (complex and included some precatory words, but as a whole was imperative
- Re Steel’s WT (precatory words, but copied from an 1868 precedent pre-dating Lambe v Eaves)
certainty of intention
when will there be no certainty of intention
there is no certainty of intention to create a trust if it is a sham or fraud
certainty of intention
2 cases where there was no certainty of intention because it was either a sham or fraud
- Hitch v Stone
- Midland Bank v Wyatt
certainty of intention
when will there be no intention to create a trust (settlor)
if the trust is so massively discretionary that the settlor effectively retains control, that is not an intention to create a trust (or not a trust)
certainty of intention
1 case and 1 article where there is no intention to create a trust by the settlor, if the trust is so discretionary
- JSC case
- Lionel Smith ‘Massively discretionary trusts’
certainty of subject matter
the definition
property needs to be specified in objectively certain terms. T needs to know what to manage
certainty of subject matter
case
Brudenell-Bruce v Moore
certainty of subject matter
3 cases which failed to identify the beneficiaries’ individual shares in the subject matter
- Burrough v Philcox (solved by dividing equally)
- Boyce v Boyce (whole gift failed because condition failed)
- Re Knapton (court intervened to save gift- a more modern approach?)
certainty of subject matter
what are the 2 issues when it comes to shares
- failing to identify the beneficiaries’ individual shares in the subject matter
- allocating shares of property in bulk. Which elements in the bulk belong to whom?
certainty of subject matter
4 cases about the problem of allocating shares of property in bulk
- Re London Wine Shippers (choses in possession)
- Hunter v Moss (choses in action)
- Re Harvard Securities (approving Hunter v Moss)
- White v Shortall
certainty of subject matter
which act does not apply to trusts
Sale of Goods Act 1979, s 20A (as inserted by the Sale of Goods (Amendment Act) 1995)
certainty of subject matter
which 2 academics wrote about certainty of subject matter
- Hayton ‘uncertainty of subject matter of trusts’
- Martin ‘certainty of subject matter: a defence of Hunter v Moss’
certainty of objects (beneficiaries)
what does object mean
‘object’ means the object of the bounty, ie the beneficiary - plainly the trustee needs to know who she is holding the property for.
- But often the objects are defined as a class rather than a list of individuals
- moreover, the trustee may have different degrees of discretion as to who gets what
certainty of objects (beneficiaries)
what are the 4 matters- as defined by Emery
1) conceptual (or linguistic) certainty
2) evidential certainty
3) ascertainability
4) administrative workability
certainty of objects (beneficiaries)
1) conceptual (or linguistic) certainty- meaning
the precision of language used by the settlor to define the classes of person whom he intends to benefit
certainty of objects (beneficiaries)
2) evidential certainty meaning
evidence available enabling specific persons to be identified as members of those classes- and so as beneficiaries or potential beneficiaries
certainty of objects (beneficiaries)
3) ascertainability - meaning
the extent to which ‘the whereabouts or continued existence’ of persons identified as beneficiaries or potential beneficiaries
certainty of objects (beneficiaries)
4) administrative workability- meaning
the extent to which it is practicable for trustees to discharge the duties laid upon them by the settlor towards beneficiaries or potential beneficiaries
fixed trust
what does the trustee not have
no discretion in carrying out the trust’s instructions. Complete conceptual and evidential certainty is therefore required since every beneficiary and non-beneficiary needs to be positively identified
fixed trusts
a list of what is required
a complete list of beneficiaries is required
fixed trusts
2 cases about complete list of beneficiaries being required
- IRC v Broadway Cottages
- OT Computers Ltd v First National Tricity Finance Ltd
fixed trusts
what words are certain and what words are not
terms such as ‘siblings’ or ‘employees’ are conceptually/ linguistically certain, but ‘friends’ and ‘relatives are problematic
fixed trusts
case about certainty of the words
Re Gulbenkian
fixed trusts
what would suffice if present
if there is just a substantial probability of evidential certainty
fixed trusts
case about substantial probability of evidential certainty
Re Saxone Shoe Co Ltd’s Trust Deed
fixed trusts
if one or more beneficiaries are missing, what 2 things may a trustee do
- Trustees may follow the process in the Trustee Act 1925, s27 (advertise and wait)
- and obtain a ‘Benjamin order’ permitting distribution to the other beneficiaries in what would otherwise be a breach of trust
fixed trusts
case for obtaining a Benjamin order
Re Benjamin
fixed trusts
what should be taken out to avoid difficulties where beneficiaries are missing
missing beneficiary insurance
discretionary trusts
what is this
the trustee must appoint the entirety of the appropriate property to the objects, she has the discretion, within the directions, to choose how much and to whom.
-The exercise of this trust power is mandatory- which is how one identifies a discretionary trust from the trust’s terms
discretionary trusts
originally what was required
a complete list
discretionary trusts
2 cases which show that originally a complete list was required
- IRC v Broadway Cottages
- Burrough v Philcox
discretionary trusts
a complete list may be workable with .. and may not be workable for …
it may be workable with a small class of beneficiaries, but with a large class enumerating every member might be possible to at least unworkable
discretionary trusts
the House of Lords adopted the test from what to what
the House of Lords adopted the test from fiduciary powers to discretionary trusts. It is only required that one can ascertain that an individual postulant is a member of the class or not; the ‘individual ascertainability’ or ‘in or out test’
discretionary trusts
case for individual ascertainability or in our out test
McPhail v Doulton, Re Baden’s Deed Trusts (No1)
discretionary trusts
in Re Baden’s Deed Trusts (No2), what was there a dispute about
there was a dispute as to how this test should be applied. In the second round of litigation, (Re Baden’s Deed Trusts (No2)) all three lords justices differed as to its interpretation
discretionary trusts
what do you need in order to apply this test as seen in Re Baden
one still needs records in order to apply this test; the trust inherently fails if the records do not allow one to ask if that given postulant is in the class or not
discretionary trusts
case for needing records to apply the test
Re Sayer
discretionary trusts
how may it be possible to cure any uncertainty
by specifying an umpire
discretionary trusts
specifying an umpire cases
- Re Wynn (wide clause could not be cured by allowing trustee to decide)
- Re Coxen (conditional gift depending on ‘if in the opinion of my trustees she shall have ceased permanently to reside’ in a house not void for uncertainty)
- Re Tuck’s ST (so long as he be of the Jewish faith and living with ‘an approved wife’, not void as could be determined by the appropriate rabbi)
fiduciary powers
how do they differ from discretionary trusts
the power does not have to be exercised, though the trustee must consider doing so. Thus they are very close to discretionary trusts.
fiduciary powers
how to spot them apart from discretionary trusts
the way to spot them is to look for an alternative destination for the property ie. if there is the possibility go a ‘gift over’
fiduciary powers
2 cases which show how to spot them from a discretionary trust
Re Gulbenkian’s Settlements
Re Gestetner’s Settlement
a series of gifts subject to a condition precedent
how does this category have the most lenient test
it is only required that one can say with certainty that some person would clearly be a member of the class
a series of gifts subject to a condition precedent
2 cases
Re Allen
Re Barlow
duty to survey the field
what must the trustee do
the trustee must inform the beneficiaries of their rights
duty to survey the field
case to show that the trustee must inform the beneficiaries of their rights
Hawkesley v May
duty to survey the field
when is there a duty to survey the field
when applying discretion; the trustee must make a rational decision.
- this varies with the type of trust.
- this is not relevant to fixed trusts except in the most trivial sense
duty to survey the field
in Re Baden (No1) what suggestion was given as to how the test may be framed
‘[The trustee] would examine the field, by class and category;
-might indeed make diligent and
careful inquiries, depending on how much money he had to give away and the means at his
disposal, as to the composition and needs of particular categories and of individuals within
them;
-decide upon certain priorities or proportions, and then select individuals according to
their needs or qualifications.
duty to survey the field
in Re Baden (No2) what suggestion was given as to how the test may be framed (2)
Stamp LJ: A ‘comprehensive range of inquiry is called for.’
Sachs LJ: ‘Assessing in a businesslike way “the size of the problem”’ is what the trustees are
called on to do.
duty to survey the field
in Re Hay’s ST what suggestion was given as to how the test may be framed
[W]hat is needed is an appreciation of the width of the field, and thus whether a selection is
to be made merely from a dozen or, instead, from thousands or millions.’
duty to survey the field
for fiduciary powers, the duty appears …
lesser
duty to survey the field
for fiduciary powers, the duty appears lesser Case
Re Gestener’s Settlement
duty to survey the field- fiduciary powers
in Re Gestener’s Settlement what suggestion was given as to how the test may be framed
T]here is no obligation on the trustees to do more than consider – from time to time, I suppose – the merits of such persons of the specified class as are known to them and, if they think fit, to give them something.
duty to survey the field
what do all the tests clearly show
the tests clearly colour the duty to inform beneficiaries
duty to survey the field
what must trustees consider with regards to trust property or fiduciary power
Trustees must consider whether to make appointments of trust property or exercise a
fiduciary power within a reasonable time. They must appoint the property of a
discretionary trust at some point
duty to survey the field
3 cases which show that trustees must consider whether to make appointments of trust property or exercise a
fiduciary power within a reasonable time
- Re Baden’s Trusts (No1)
- Re Locker’s Settlement
- Breadner v Granville-Grossman
Administrative Unworkability
what is this and what does it apply to
whether, given that and the
trust’s terms, the trust is even workable.
In practice this only applies to discretionary
trusts, since for fixed trusts one needs a complete list anyway and for fiduciary powers
one may rationally decline to exercise the power
Administrative Unworkability
case to show what it is
Re Hay’s ST
Administrative Unworkability
when is Administrative Unworkability usually a problem
it is generally only a problem with extremely large classes of objects
Administrative Unworkability
2 cases to show that Administrative Unworkability is a problem with large classes of objects
Re Gulbenkian’s Settlements: would the cost of administering the trust outweigh the benefits it would provide?
Re Baden’s Deed Trusts (No 1): if the
‘definition of beneficiaries is so hopelessly wide as not to form “anything like a class”’ such as ‘all the residents of Greater London.’
Administrative Unworkability
which case shows discretionary trust failing for want of administrative unworkability
R v District Auditor, ex p West Yorkshire Metropolitan County Council: (to ‘any or all or some of the inhabitants of West Yorkshire’)
Capriciousness
how is this a further concern for discretionary trusts and all kinds of powers
there is an uncertain (and rarely seen) doctrine of capriciousness that will invalidate a trust where it
is petty and useless. The line between this and administrative unworkability is blurry, but
is one example of something workable but capricious
Capriciousness
case
Brown v Burdett: (testator devised house to trustees to block up most of the rooms for 20 years before final transfer).
Capriciousness
which case is an example that would be administratively unworkable but not capricious
Re Hay’s ST: a trust to benefit ‘all the residents of Greater London’ would not be capricious if the settlor were, say, ‘a former chairman of the
Greater London Council’.
Perpetuities
explain the term
There is a long-standing policy of the law the wealth cannot be tied up indefinitely; it should be used. Consequently there are rules governing how long money is tied up in investments before it must be applied. Failure to comply results in a trust being void.
Effect of Failure of the Three Certainties
when will the trust fail
If there is insufficient certainty of any one of the three certainties, the trust will fail.
Effect of Failure of the Three Certainties
how will the trust end up failing if there is insufficient certainty of any of the 3 certainties
That depends on whether the property has been transferred, whether the trust is self-declared by the settlor-trustee or whether settlor and trustee are separate, and which certainty or certainties failed.
Effect of Failure of the Three Certainties
what can the trustee not do
a trustee cannot keep trust property for
herself; the settlor has tried to create an arrangement where the trustee does not take
beneficial interest in the property … unless there is no intention to create a trust!
Preliminary Point: Resulting Trusts
case
Dyer v Dyer: equitable ownership ‘results to
the man who advances the purchase money’.
equity presumes, in the absence of something to rebut that presumption, that the person who provides the money intends to retain beneficial ownership of it.
Certainty of Intention
what happens if a settlor fails to self-declare a trust
If a settlor fails to self-declare a trust, she remains the owner of the property
Certainty of Intention
case to show if settlor fails to self-declare a trust, she remains owner of the property
Jones v Lock
Certainty of Intention
what happens if there has been transfer of property to the would be trustee
If there has been a transfer of property to the would-be trustee, there is no trust but an absolute transfer; a gift.
Certainty of Subject Matter
what happens If the property cannot be ascertained
If the property cannot be ascertained, similarly there is no trust and ownership remains with the settlor for self-declared trusts.
Certainty of Subject Matter
what happens if the property has been transferred, what does it show
If property has been transferred, that goes some way to indicate it was well-defined
Certainty of Subject Matter
what happens if well-defined property has been transferred but the trust does not define the part of it to be held on trust
But if well-defined property has been transferred but the trust declared over it does not define the part of it to be held on trust sufficiently clearly, ownership remains with the transferee
Certainty of Subject Matter
what is the more difficult case and what happens
The more difficult case is where the beneficiaries’ shares cannot be identified. Then
transferred property is held on resulting trust for the settlor (or deceased testator’s estate).
Certainty of Objects
what happens if a fixed or discretionary trust fails because the certainty of objects test fails
If a fixed or discretionary trust fails because the relevant certainty of objects test fails, the transferred property is again held on resulting trust.
Certainty of Objects
what happens if a fiduciary power fails for want of certainty of objects
If a fiduciary power fails for want of certainty of objects, the transferred property is held for the recipient of the gift over absolutely.
Certainty of Objects
what happens if there are different groups amalgamated into the class of discretionary trust objects and there is a want of certainty relating to only one group
If there are different groups amalgamated into the class of discretionary trust objects and there is a want of certainty relating to only one group, it is possible to sever that group from the class and save the trust?
Certainty of Objects
case for different groups amalgamated into the class of discretionary trust objects
Re Wright’s WT
The Beneficiary Principle
what is this principle and why does it exist
There is also a principle that trusts are for people, nor purposes: the ‘beneficiary principle’. This is because a trust needs an enforcer, i.e. someone to sue the trustee if he fails to comply with his duties.
