Large Group 3

Question 1

What are the two essential requirements for creating a valid express trust?

Answer 1

• Declaration of trust: The settlor must declare the terms of the trust.
• Vesting of property: The trust property must be transferred to the trustee.

Question 2

What is the significance of the case McPhail v Doulton in relation to express trusts?

Answer 2

The litigation in McPhail v Doulton lasted 10 years, demonstrating the importance of ensuring that a trust declaration is clear and complies with formalities. If the declaration is ambiguous, it can lead to lengthy legal disputes.

Question 3

What are the three methods of creating a trust?

Answer 3

Self-declaration as trustee: The settlor declares themselves as trustee over their property.

Transfer of property to a trustee during the settlor’s lifetime: The settlor transfers the property to another trustee.

Creation of a trust by will: The settlor transfers property in their will to a trustee for the benefit of a beneficiary.

Question 4

What formalities are required to declare a trust over land?

Answer 4

Under Section 53(1)(b) of the Law of Property Act 1925, a trust over land must be in writing and signed by the person capable of declaring the trust. Without written evidence, a trust over land is unenforceable.

Question 5

Can a trust over personal property be created orally?

Answer 5

Yes, trusts over personal property (such as money, shares, or chattels) can be created orally or by conduct, although it is better to have them in writing for evidential purposes.

Question 6

What is the ‘every effort test’ from Re Rose in relation to trusts?

Answer 6

The ‘every effort test’ states that if the settlor has done everything in their power to transfer the trust property, equity will treat the trust as valid, even if some formalities remain incomplete.

Question 7

What is the rule from Strong v Bird?

Answer 7

If the trustee is also the executor of the settlor’s estate and the settlor intended to make an immediate gift, the gift becomes valid upon the settlor’s death.

Question 8

What is the rule from Pennington v Waine?

Answer 8

If it would be unconscionable for the settlor to withdraw the gift or trust, equity may enforce the trust even if the transfer formalities are incomplete.

Question 9

What are the three certainties required for a valid trust?

Answer 9

Certainty of intention: The settlor must intend to create a trust.

Certainty of subject matter: The trust property must be clearly identified.

Certainty of objects: The beneficiaries or class of beneficiaries must be clearly identified.

Question 10

What is the significance of the case Knight v Knight?

Answer 10

Knight v Knight established the requirement of the three certainties—intention, subject matter, and objects—for a valid trust.

Question 11

What are precatory words, and why don’t they create a trust?

Answer 11

Precatory words are expressions of hope, wish, or desire (e.g., “in full confidence”). They do not create a trust because they do not impose a clear duty on the trustee. The case of Adams v Kensington Vestry confirmed this.

Question 12

What is the significance of Paul v Constance in relation to trusts?

Answer 12

In Paul v Constance, the court held that even without using the word “trust,” a trust can be created through the settlor’s words or conduct if it is clear they intended to create a trust.

Question 13

What happens if the trust property is uncertain?

Answer 13

If the trust property is not clearly defined, the trust will fail, and the property remains with the settlor. For example, in Palmer v Simmonds, the trust was void because the term “bulk of my estate” was too vague.

Question 14

What is the difference between tangible and intangible assets in trust law?

Answer 14

Tangible assets (like wine in Re London Wine Co.) must be physically separated to create a trust, while intangible assets (like shares in Hunter v Moss) do not require physical separation to create a valid trust.

Question 15

What is a fixed trust?

Answer 15

In a fixed trust, the settlor specifies the exact shares or interests that each beneficiary will receive. The trustee has no discretion in distributing the trust property.

Question 16

What is a discretionary trust?

Answer 16

In a discretionary trust, the settlor gives the trustees discretion to decide which beneficiaries will benefit from the trust and how much they will receive. The trustees must act within the scope of their discretion.

Question 17

What is the complete list test, and when is it used?

Answer 17

The complete list test is used in fixed trusts and requires the trustees to be able to create a complete list of all beneficiaries. If this cannot be done, the trust is void. The case of IRC v Broadway Cottages established this rule.

Question 18

What is the ‘any given postulant test,’ and when is it used?

Answer 18

The any given postulant test is used in discretionary trusts. It requires that it be possible to determine with certainty whether any given individual is a member of the class of beneficiaries. This test was established in McPhail v Doulton.

Question 19

What is administrative unworkability in trust law?

Answer 19

A trust is administratively unworkable if the class of beneficiaries is so large that it would be impossible for the trustees to carry out their duties. An example is the case of R v District Auditor ex parte West Yorkshire, where a trust for 2.5 million people was held to be unworkable.

Question 20

What is capriciousness in trust law?

Answer 20

A trust is capricious if there is no rational reason for benefitting a particular class of beneficiaries, and the trustees have no reasonable basis for distributing the trust property. An example would be creating a trust for a random group of people with no connection to the settlor.

Question 21

What is the rule against perpetuities?

Answer 21

The rule against perpetuities prevents trusts from lasting indefinitely. The trust must vest within a specified period, which, for trusts created after April 2010, is 125 years. If the trust doesn’t vest within this time, it is void.

Question 22

What is the rule against remoteness of vesting?

Answer 22

This rule ensures that contingent interests in a trust must vest within the perpetuity period (125 years). If the contingent interests do not vest within this time, the trust is void.

Question 23

What happens if a trust is not constituted properly?

Answer 23

If the trust is not properly constituted, meaning the property has not been validly transferred to the trustee, the trust will be void. Beneficiaries of an incompletely constituted trust cannot enforce the trust because they are considered volunteers.

Question 24

What is the difference between fully constituted and incompletely constituted trusts?

Answer 24

A fully constituted trust is when the property is properly transferred to the trustees and the trust can be enforced by the beneficiaries. An incompletely constituted trust occurs when the transfer formalities are not fulfilled, and in such cases, equity will not assist the beneficiaries unless an exception applies (e.g., Re Rose, Strong v Bird, or Pennington v Waine).

Question 25

What is the importance of a written declaration in a trust involving land?

Answer 25

For a trust involving land, a written declaration is required by Section 53(1)(b) of the Law of Property Act 1925.

If the declaration is not in writing, the trust will be unenforceable, as demonstrated by Sam’s example in the transcript, where his oral declaration over his house was unenforceable due to lack of written evidence.

Question 26

How can a settlor create a trust through a will?

Answer 26

A settlor can create a trust through a valid will by transferring property to a trustee who will hold the property for the benefit of the beneficiaries.

This must comply with Section 9 of the Wills Act 1837, which requires the will to be in writing and signed by the testator in the presence of two witnesses.

Question 27

What happens if the beneficiary’s interests in a trust are uncertain?

Answer 27

If the interests of the beneficiaries are uncertain, the trust will fail, and the property will result back to the settlor under a resulting trust.

For example, if the settlor does not define how much each beneficiary is entitled to, the trust might fail unless it is assumed that the beneficiaries receive equal shares.

Question 28

What does the term “resulting trust” mean?

Answer 28

A resulting trust arises when the beneficial interests in a trust are not properly defined or when a trust fails, and the property returns to the settlor or the settlor’s estate. Resulting trusts occur when the court presumes that the settlor did not intend to gift the property without clear instructions.

Question 29

What are the rules for determining certainty of objects in discretionary trusts?

Answer 29

The any given postulant test is applied in discretionary trusts. This test requires that it is possible to say with certainty whether any individual is or is not a beneficiary. The class of objects must be conceptually certain, as seen in the case of McPhail v Doulton.

Question 30

What is the role of trustees in discretionary trusts?

Answer 30

In discretionary trusts, trustees have the discretion to decide which beneficiaries receive trust property and in what proportion.

However, their discretion must be exercised within the framework set out by the settlor, and they must follow the criteria provided in the declaration of trust.

Question 31

What is the rule in Re Golay regarding certainty of subject matter?

Answer 31

In Re Golay, the court held that a trust was valid even though the settlor did not specify the exact amount of income the beneficiary should receive, as the term “reasonable income” provided an objective standard for the trustees to apply. This case shows that certainty of subject matter can sometimes be interpreted by the courts based on objective measures.

Question 32

How can a discretionary trust be made more certain in terms of its subject matter?

Answer 32

A discretionary trust can be made more certain by providing an objective formula for distributing the trust property, such as specifying a particular school for education expenses or using a letter of wishes to guide the trustees in their decisions.

Question 33

What are the consequences of a trust being administratively unworkable?

Answer 33

If a trust is administratively unworkable, meaning the class of beneficiaries is too large for the trustees to manage effectively, the trust will be void.

The case of R v District Auditor ex parte West Yorkshire Metropolitan County Council is an example where a trust for 2.5 million people was deemed administratively unworkable.

Question 34

What does the term “capricious trust” mean?

Answer 34

A capricious trust is one where the class of beneficiaries is chosen without any rational reason or connection to the settlor, making it void. Trustees would have no reasonable basis for deciding who should benefit from the trust in such cases.

Question 35

What is the perpetuity period, and why is it important in trust law?

Answer 35

The perpetuity period limits how long a trust can last. For trusts created after April 2010, the period is 125 years. If the interests in the trust do not vest within this time, the trust is void due to the rule against perpetuities. This rule prevents trusts from lasting indefinitely and ensures property is not tied up for too long.