Updated_Trusts_and_Equity_Flashcards
What is equity?
Equity is a flexible system designed to mitigate the rigidity of common law, focusing on fairness, justice, and discretion, operating on the conscience of the legal interest holder (e.g., Westdeutsche Landesbank v Islington).
Name two maxims of equity.
- Equity will not perfect an imperfect gift (Strong v Bird).
- Equity follows the law (Re Diplock).
What is a trust?
A trust is a relationship where property is held by a trustee for the benefit of a beneficiary, splitting the legal title (trustee) from the equitable title (beneficiary).
What are the types of trusts?
- Express Trusts: Intentionally created (fixed or discretionary).
- Implied Trusts: Includes resulting and constructive trusts.
What are the three certainties required to form a valid trust?
Certainty of intention, certainty of subject-matter, and certainty of objects (Knight v Knight).
What is the difference between a fixed trust and a discretionary trust?
Fixed Trust: Beneficiaries and their shares are predetermined (IRC v Broadway Cottages).
Discretionary Trust: Trustees have discretion in distributing assets (McPhail v Doulton).
What is the significance of Re Rose in trust constitution?
It established the ‘Every Effort Principle,’ where a trust is valid if the settlor has done all they can to transfer legal title, leaving only third-party actions outstanding.
What is the rule against perpetuities?
A legal rule limiting the duration of trusts to ensure property is not tied up indefinitely, typically for a maximum of 125 years under modern UK law.
What does the case Pennington v Waine illustrate?
Equity may uphold a gift if revocation would be unconscionable, even if legal formalities are incomplete.
What is the ‘beneficiary principle’?
A trust must have ascertainable beneficiaries to be valid, ensuring enforceability (Re Endacott).
What are express trusts?
Trusts intentionally created by the settlor, either inter vivos or testamentary.
What is a discretionary trust?
A trust where trustees have the discretion to decide how to distribute assets among beneficiaries.
What is a resulting trust?
An implied trust arising when an express trust fails or when property is not entirely disposed of (e.g., Vandervell v IRC).
What is a constructive trust?
A trust imposed by equity to address unconscionable conduct, such as in Keech v Sandford.
What is the ‘is or is not’ test?
A test used in discretionary trusts to ascertain whether an individual is within the class of beneficiaries (McPhail v Doulton).
What does ‘equity looks to substance, not form’ mean?
Equity prioritises the true intention and fairness of actions over strict legal formalities.
What is the principle of ‘equality is equity’?
Equity seeks to divide assets equally when there is no evidence of contrary intention (Burroughs v Philcox).
What are precatory words?
Non-binding expressions of wish or desire that may invalidate trust intent (Re Diggles).
What does the case Re Golay illustrate?
The term ‘reasonable income’ was deemed sufficiently certain to satisfy the requirement of certainty of subject-matter.
What is the significance of Re Baden (No. 2)?
It clarified the test for conceptual certainty in discretionary trusts, using the ‘is or is not’ principle.
