Trusts - Sheet1 Flashcards
Trusts Classification (Surface)
A) According to nature of duties of trustees
B) According to Object
C) According to mode of creation
Trusts according to nature of duties of trustees
Simple, Special
Trusts according to objects
Private
Public or Charitable
Trusts according to mode of creation
Every Important Cat Really Purrs Softly.
Express (Executed & Executory)
Implied
Constructive
Resulting
Precatory
Secret
Express Trusts
One that is created not by facts and circumstances but my express words. A trust created by an express declaration of the person in whom the property is vested is an express trust.
Example of express trust
A declares himself a trustee of X property for B.
Implied Trusts
Created by act or construction of law.
2. Declared either by word or in writing.
3. Important rule is that the law never implies, the court never presumes a trust but in case of absolute necessity
Example of Implied Trust
Where A purchases land and conveys it to X, there is prima facie an implied trust and X holds it as trustee for A
Constructive Trusts
- Arise by operation of law
- When it would be an abuse of confidence for the owner of the property to hold the same for his own benefit, a trust is imposed upon him.
Difference between Implied and Constructive Trust
In implied trust, it is declared by a party not directly but by implication, such as when a testator devises an estate to A and his heirs, not doubting that A will pay an annuity to B of 20 Pounds. In which case A is the Trustee for B to the extent of the annuity.
In trusts made by operation of law, they are not declared by a party at all even indirectly, but result from a rule of equity.
Example of trusts by operation of law
Resulting Trust: Estate is devised to A and his heirs upon a trust to sell and pay the testator’s debts. In which case the surplus of the beneficial interest will be a resulting trust in favor of the testator’s heirs.
Constructive Trust: When the court elicits a trust by a construction. Tenant for life of leaseholds renews the lease on his own account, in which case the law gives the benefit of the renewed lease to those who were interested in the old lease.
Constructive trust and profit
There is an obligation on a trustee who has made a profit however innocently through his office, to hold such profit for the benefit of the beneficiaries.
Who can enforce a charitable trust?
Attorney General
Simple v. Special trust
Simple Trust
1. A rests his property in B for C.
2. No duties to perform for B
Special Trust
1. Imposes duties on trustees for execution.
2. Trustee is not a mere depository but has to take pains and perform duties
Ministerial vs. Discretionary Trust
Where the duties are mechanical and of routine intelligence it’s ministerial
Where special intelligence involved its discretionary
Precatory Trust
Obtained from the Latin word precarious meaning entreaty.
Secret Trust
A “secret” trust is not a testamentary trust. It looks like a testamentary gift, but it is created in reliance on the named beneficiary’s promise to hold and administer the property for another. The intended beneficiary is permitted to present extrinsic evidence to prove the promise. If the promise is proven by clear and convincing evidence, then a constructive trust is imposed on the property for the intended beneficiary, so as to prevent the unjust enrichment of the “secret” trustee.
Types of secret trust
Fully Secret - neither the existence of the trust nor its terms are disclosed by the will
Half Secret - The existence of the trust is disclosed by the will but the terms are not
Duty vs Power
Duty - obligation
Power - discretion
Deoki Nandan v. Muralidhar
Public v. Private Trust
A trust was created to set up a temple. The Court here had to decide whether the trust laid down in the will of the settlor was private (legal heirs and family) or public (general people of the village) in nature. The SC stated that when one determines whether it is a public or private trust, the guiding factor must be the intention of the author of the trust, and the intention must be gathered by reading the documents relating to the creation of the trust. From the will, it could be gathered that the settlor intended to create trust not exclusively for the benefit of his family members. In that village, there was no other temple for the Hindu religion- hence, the author wanted to create trust not only for family members but also for persons of the village, and hence, it is a public trust.
Allahabad Bank vs. CIT
What is a valid trust?
A banking company created a trust to provide pensions for its retiring staff. The company transferred funds to three trustees and could contribute more later. However, the company was not obligated to pay any pensions. Payments and amounts were at the company’s discretion, and it could withdraw, modify, or change the pension rules at any time.
Held, that, as the deed did not impose any obligation on the bank or the trustees to grant any pension to any employee, and the pension, even if granted, could be withdrawn and even the rules could be completely altered at will by the company, no valid trust was created even though moneys had been transferred to the trustees, and the sum in question could not be said to have been spent for the purposes of the business and allowed as a deduction under s. 10 (2) (xv) of the Income Tax Act.
The SC stated that for a valid trust there needs to be certainty of beneficiaries and presence of obligations.
Howe v. Earl of Dartmouth
To convert perishable property
The rule that originates from this case is reflected statutorily in India in §16 of the Trusts Act. The case established that assets of a trust created by will should be converted, despite the absence of an express direction to do so, as long as the trust property is comprised of residuary personal estate, the property is of a wasting or reversionary character, and there is expressed an intention that the legatees should enjoy the same thing in succession.
Vasudevan vs. Bhavadasan
Duties of Trustees and Liabilities of Co-Trustees
1. Loss of profits due to lack of due diligence can cause breach of trust
2. If some trustees were negligent and therefore loss had occurred, then all of them would not be liable for the loss. Only the negligent ones would be liable.
Townley v. Sherborne
Liability of Co-Trustees
Trustees are individually liable unless there is evidence of dolus malus that permitted a breach by another trustee. In this case, the trustee who had signed receipts alongside other trustees was held liable though he received none of the embezzled money because he had done evil dealing by leaving the received money in the hands of his co-trustees.
Ramabai Govind Gadhve v. Raghunath Vasudev Joshi (Ramabai Case)
If trust funds are mixed when buying personal property for the trustee, the trustee must prove personal funds were used.
(Rama-Bye) to his trust funds
Ms. Shanti Vijay and Co. v. Princess Fatima Fouzia (Nizam Jewelry Trust Case)
Co-Trustees and their lack of capacity to act individually
4 trustees had agreed to sell 37 items of jewelry but one was absent due to a preoccupation.
In a private trust, where there are more trustees than one, all must join in the execution of the trust. In order to bind the trust, the act must be the act of all.
Satya Kinkar v. Kiron Chandra
Insolvency of a trustee does not automatically discharge him
Section 70 indicates two circumstances when the office of a trustee is vacated. One is the death of the trustee and the other is his discharge from his office as a trustee. Also not there in Section 71.
