Types of Trusts and Property Flashcards
[ESSAY] Equity: Did the Judicature Act 1873 result in substantive fusion between law and equity?
YES:
• High Trees (Denning J)
• United Scientific Holdings v Burnley BC: ‘Conducive to erroneous conclusions’ wrt UK’s law development if rules of equity and common law are seen as separate
NO:
• Meagher, Gummow and Lehane: Substantive fusion is a fallacy
- Bank of Boston Connecticut v EU Grain and Shipping (Brandon LJ): Acts ‘did not alter and were not intended to alter the rights of parties’
- MCC Proceeds v Lehman Bros Int’l (Mummery LJ): Acts intended to effect ‘procedural improvements in the administration of law and equity in all courts’, not to change rights/rules
[ESSAY] If Equity were to clash with law, which would prevail?
Salt v Cooper (Sir George Jessel MR):
•Clashes are rare
• Equity will prevail
Re Hallett’s Estate (Sir George Jessel MR):
• Equity will prevail over common law
• Common law presumed to have been established from time immemorial
• Equity ‘established from time to time – altered, improved, and refined from time to time’
What types of trusts are we focussed on?
- Express Trust
- Resulting Trust
- Constructive Trust
Subgroups:
• Quistclose Trust
• Secret/Half-secret Trust
Express: Definition
- Created by settlor intentionally, irrelevant if he later changes mind
- Creation can be testamentary or inter vivos; for land, s53(1)(b) LPA 1925
- Beneficial interests can be fixed or discretionary
- Is overarching category of ‘person trusts’
RT: Definition
- Cannot be created by settlor with intent to benefit self [Air Jamaica]
- May be automatic or presumed RT
- Beneficial interests determined by settlor
- Usually for commercial purposes? [Stack v Dowden]
CT: Definition
- Settlor’s intention does not matter; CT is created by operation of law by courts
- Usually created where there is unconscionability, or common intention trusts
- Beneficial interests determined by the law
- Typically for personal affairs? [Stack v Dowden]
RT: Automatic RT
Trust was made for a specified beneficiary, but beneficiary has died/was not adequately specified
= Property ‘results’ back to settlor
RT: Presumed RT
Intention to make a RT is presumed, unless beneficiary is settlor’s spouse/child (where a gift will be presumed)
If beneficiary is separated wife/child, settlor expected to pay (‘man’s duty to maintain family’)
[ESSAY] What is the difference between trusts, contracts, and agencies?
Contract:
•Based on black letter law (except equitable remedies)
• 3rd party laws are restrictive
Agency:
• Based on fiduciary interest
• Not really about property-holding, more about acting on another’s behalf (e.g. Bank, agent, carries out financial instructions from client, principal)
Trust:
• Can be based on fiduciary interest
• Beneficiary can get proprietary interest in trusts [Re Kayford]
•About property-holding
Re Kayford
[TRUST = BENEFICIARY HAS PROPRIETARY INTEREST IN PROPERTY IF INTENTION TO CREATE TRUST IS FOUND]
Facts:
•Company set up bank account to pre-pay for ordered customers’ goods
• Before going into liquidation, attempted to take money from the bank account
Held:
• Money held on trust for customers: Customers had proprietary interest in the money
How is a trust created?
- S declares self to be T of property
(Needs valid declaration of trust) - S transfers property to T to hold on trust
(Needs valid declaration of trust + valid constitution of trust) - S appoints Ts for property in will
What happens when company goes insolvent while holding money/goods for customers?
1. Quistclose principle to test for trusts for loans [Barclays v Quistclose] [Twinsectra v Yardley] [Re EVTR] and for payment in exchange for goods [Cooper v PRG Powerhouse]
- CoSM for trusts of property
[e.g., OT Computers v First National Tricity Finance]
[Re London Wine]
Barclays Bank v Quistclose [1970]
[UNUSED LOAN MONEY FOR CERTAIN PURPOSE = HELD ON TRUST FOR CREDITOR]
Facts:
• Q lent R money to pay dividends to shareholders
•R went into liquidation without paying dividends
Held:
• Unused money returned to Q: Q never intended loan money to be at ‘free disposal’ of R, implicit that unused money to return to Q through a trust
Twinsectra v Yardley [2002]
[UNUSED LOAN MONEY FOR CERTAIN PURPOSE = HELD ON TRUST FOR CREDITOR BANK]
Facts:
• Money to acquire property
Re EVTR [1987]
[UNUSED LOAN MONEY FOR CERTAIN PURPOSE = HELD ON TRUST FOR CREDITOR BANK]
Facts:
•Money to buy new equipment
Cooper v PRG Powerhouse [2008]
[UNUSED DEBT MONEY FOR CERTAIN PURPOSE = HELD ON TRUST FOR CREDITOR BANK]
Facts:
• C repaid P for amount outstanding on credit agreement to get company car as part of severance package
What happens when trust creates contingent interests (Bs not yet in existence or ascertained)?
(E.g. For Y’s children but Y does not have children yet; For all grandchildren equally but more may be born)
REMOTENESS OF VESTING
- Look mainly at fixed trusts, because under discretionary trust Bs born after expiry of perpetuity period may be excluded
[s 8 Perpetuities and Accumulation Act] - Trust void unless B’s interest vests within perpetuity period
•Pre 6 Apr 2010: 80 yrs if perpetuity period specified; or lifetime of person connected with trust + 21 yrs
• Post 6 Apr 2010: ‘wait and see’
[s 7 Perpetuities and Accumulation Act]
How likely are courts to validate trusts?
Penner: In general, quite likely
[IRC v McMullen: So long as reasonable construction can be placed on words to make trust valid]
BUT individual judges vary in willingness to do so
• Endicott: Legal language can be vague and allows for many interpretations
What is Ts’ personal liability?
Liability relating to inappropriate use of trust property and the resultant expectation for Ts to make up for it with any of their own resources
If Ts are insolvent when breach is discovered, Bs are unsecured creditors and may not be compensated
What is Ts’ proprietary liability?
Liability relating to inappropriate use of trust property in which Bs have beneficial interest and the resultant expectation for Ts to be held to terms of the trust
