Trusts: purpose and implied trusts Flashcards
Generally, are purpose trusts valid and why/not?
Generally purpose trusts are void because:
-they offfend the beneficiary principle
-lack of certainty
-offend rule against perpetuities
-capriciousness (no useful purpose)
What are 3 types of purpose trust that will be valid?
- charitable purpose trusts
- Quistclose trusts
- Non charitable purpose trusts (trusts of imperfect obligation and Re Denley trusts)
3 requirements for a purpose trust to be charitable under s3(1) charities act
- charitable purpose
- exclusively charitable
- public benefit
s3(1) charities act names…?
13 heads of charitable purpose
Heads of charitable purpose under s3(1) charities act 2011
- prevention or relief of poverty
2 The advancement of education
3 Advancement of religion
4 Advancement of health or the saving of lives
Advancement of citizenship or community development
Advancement of the arts, culture, heritage or science
advancement of amateur sport
Advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
Advancement of environmental protection/improvement
Relief of those in need by reason of youth, age, ill- health, disability, financial hardship or other disadvantage
Advancement of animal welfare
Promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services
any other [charitable] purposes.
Elements of ‘Exclusively charitable’
- NO Political purpose
- Profits must be ploughed back into charity (can pay salaries ect NOT commercial venture)
What political purpose do/dont make a trust exclusively charitable?
NO:
Supporting a political party
Campaigning for a change in law/change in gov policy decisions
YES:
engage in political activities that are incidental to/means of achieving main charitable purpose as long as not main means of achieving purpose
What are the 2 aspects of public benefit (as one of the 3 conditions for a trust to be charitable)
- Benefit aspect (benefit must outweigh harm)
- Public aspect (must benefit sufficient section of public)
For what trusts will the public benefit test be satisfied so long as the purpose will accrue to a class of individuals
trust to prevent poverty
Sufficient public benefit: What is the Class within a class test?
the class off ppl who can benefit from a charitable purpose can be limited so long as limits are legitimate, proportionate, rational or justifiable given the nature of the charitable trust (ie. Geographical restrictions
Rules relating to personal nexus for the public aspect of public benefit aspect of charitable purpose trusts?
Must not be restricted to personal nexus.
1-numbers must not be numerically negligible
2-must not rely on personal connection like employment
UNLESS the charity is to relieve poverty.
If a charitable trust charges fees, can it still be charitable under the public aspect?
yes BUT cant jeopardise their ability to meet the public benefit by excluding those who cant pay, but may be other ways to benefit less wealthy.
What are the 2 types of non charitable purpose trusts
- Trusts of imperfect obligation
- Re Denley Trusts: Purposes which benefit an identifiable group of people
What are trusts of imperfect obligation and what is the requirement for them to be valid?
Where theres no one to enforce the trust but are the ONLY ‘concessions to human weakness’
Valid if end within 21y
Examples of the 2 recognised trusts of imperfect obligation
- care or maintenance of specific animals
- maintenance of graves and funeral monuments
What is a re: Denley trust?
Purposes which benefit an identifiable group of people
Requirements for re denley trust to be valid?
a. Purpose must be sufficiently clear and give rise to a sufficiently tangible benefit
b. People benefiting must be ascertainable (thought have to satisfy any given postulant test)
c. must offend rule against inalienability of capital
How can purpose trusts satisfy the rule against perpetuities?
a. Be limited to 21y
b. OR trustees can spend all the trust capital on the purpose and thereby end the trust at any time
What is a Quistclose trust used for ?
trust can be used to safeguard against corporate insolvency.
What is a Quistclose trust
- When money is sent for a specific purpose 2 tier trust created
- Borrower holds the funds on trust for the lender until the specified purpose is fulfilled.
- If the purpose is achieved, the borrower becomes the absolute owner of the funds.
- If that purpose fails, reverts to settlor/lender
What are implied trusts
are created/implied through operation of law
What are the 3 types of implied trust
Resulting trusts
Common intention constructive trusts
Proprietary estoppel
What are resulting trusts
Implied where a person transfers something to another where it is or becomes unclear who owns beneficial interest.
2 ways a resulting trust can arise
Automatic resulting trust (incomplete disposal of trusts equitable interest)
Presumption of resulting trust
How doe an automatic resulting trust arise?
- Settlor transfers property to trustees on trust
- BUT doesn’t dispose of all/part of equitable interest (eg. trust void/trust fund not all used/gap in beneficial ownership )
- =trustees hold property on resulting trust for settlor/their estate in absence of any contrary intention
How does a presumption of resulting trust arise?
- Voluntary transfer of personalty for no consideration
- Contribution to purchase of personalty/realty at the time in. name of another
What is personalty?
any property other than land
Limitations on the presumption of resulting trust for the voluntary transfer of personalty?
Easily rebutted with any evidence of actual intention (eg. Bday)
Much less likely to apply if property is realty (land)-no presumption of a resulting trust after vol transfer of land, court would need additional evidence
Presumption of resulting trust via contribution to purchase: what must/mustn’t the contribution consist of?
Money to purchase price/deposit NOT:
◊ Mortgage
◊ Tax
◊ Legal fees
◊ Stamp duty
What other presumption may apply other than the presumption of a resulting trust?
Presumption of advancement (gift), where equity sees transferor as under moral obligation to provide for transferee)
Applies to gifts from:
1. Married father to child (or adult child)
2. By person in Loco parentis (financial responsibility) to child inc. single parent with financial responsibility
3. Husband to wife
4. Male Fiancé to Female Fiancé (as long as marriage happens)
How can the presumption of resulting trust/advancement be rebutted?
By slightest evidence existing at time/before/right after
eg.
Transfer on Bday
Statements made
More likely to be resulting trust where parties strangers rather than fam members
Reason for prop being put in transferees name
Presumption between father and child only if no other evidence
How is the legal/equitable title held where home is in joint names?
Legal title=held jointly and equally
Equitable title=If no express trust addressing beneficial interest=Implied trust to hold house on trust for themselves in equal shares
Where home is in joint names, how can someone persuade the court they’re entitled to a larger beneficial interest?
Must prove:
1. Agreement/common intention to that effect
2. They relied on this agreement to their detriment
Court will consider:
} Advise/discussions at time
} Reasons home in joint name
} Nature of relationship
} Children they needed to provide home for?
} How purchase financed initially/subsequently
} Pooled finances?
} How paid outgoings/household expenses
If the family home is in the name of 1 party, how is a common intention constructive trust established (to set beneficial interest)
- There was a common intention between the parties that both were to have an interest
- AND C acted to their detriment relying on it
What types of common intention can there be?
a.EXPRESS
Agreement/understanding when property purchased that both would have interest
(or would have been on title but for age ect)
b.INFERRED
Direct contribution to purchase
OR significant contribution to mortgage payments
OR Indirect payments of household expenses enabling mortgage to be paid (that’s an arbitrary allocation of responsibility)
CICT: How can detrimental reliance be shown?
If common intention express: C acted to their detriment or significantly altered their position in reliance on agreement
-Paying some of mortgage
-Paying improvements/alterations
-Substantial payments of housekeeping expenses
-Domestic (ie. Childcare) may count if substantial
If common intention inferred: Conduct will show detriment but ONLY financial contributions count
How are the beneficial interests under a common intention constructive trust quantified?
Parties may agree a
If not, Court will award what is fair considering the whole course of dealing (inc. indirect & non financial contributions)
For a common intention constructive trust, can agreement as to the size of the beneficial interest change over time?
Yes
What is proprietary estoppel?
Where it would be unconscionable for the legal owner to insist on their strict legal ownership.(aka. Prevents someone going back on their word when it would be unfair to do so)
Elements of proprietary estoppel
- Assurance from legal owner that C will acquire an interest
a. Active-tells C they have interest
b. Passive-conduct suggests C thinks they have interest +owner remains silent - Detrimental reliance (C acted to their detriment in reliance on the assurance)
Doesn’t have to be financial as long as substantial and is weighed against any benefit obtained
Examples of detrimental reliance for proprietary estoppel
□ Improving legal owners land
□ Working without adequate remuneration
Giving up job and moving to new area
Looking after ill family member
For proprietary estoppel, what must there be between the detriment and assurance?
Causal link
For proprietary estoppel, does the assurance have to be the sole reason for the detrimental conduct?
No but can sometimes cause action to fail eg. Conduct arose form natural love and affection
Remedies for proprietary estoppel
Transfer legal ownership in land
Grant lease
Grant right of occupancy (ie. Life in house rent free)
Financial compensation
Beneficial share in home
What is the courts 5 step approach for establishing remedies in estoppel?
- Iss withdrawal of assurance unconscionable given Cs detrimental reliance
- If so, will hold legal owner to assurance
- Burden on legal owner to prove that enforcing assurance would be out of proportion to detriment (if est. may limit remedy granted)
- If assurance involved transfer of prop on death, may be possible for court do to this whilst they’re alive
- Court should consider whether any remedy would do justice between the parties or cause injustice to third parties
Bars to claiming a remedy for proprietary estoppel
a. Cs conduct is inequitable or unconscionable
b. Unreasonable delay in brining claim
