Creation of trusts

Question 1

What is the difference between 1. express and 2. resulting and constructive trusts?

Answer 1

1. Express = intentionally created, private or public
2. Resulting and constructive trusts = arise by operation of law (implied trusts)

Question 2

What are the 2 methods of creating express trusts?

Answer 2

1. Self-declaration of trust
2. Transfer on trust

Question 3

What happens on a self-declaration of trust?

Answer 3

• Settlor becomes T and retains legal title (now held in new capacity);
• New equitable title creatred and beneficial ownership transferred to B

Question 4

What happens on a transfer of trust (for TP)?

Answer 4

• TP becomes T and receives legal title from settlor who ceases to have interest;
• New equitable title created and beneficial ownership transferred to B (intentionally)

Question 5

What are the requirements for the creation of express trusts?

Answer 5

1. Three certainties (intention, subject matter, object)
2. Beneficiary principle (objects of trust must be legal persons bar charitable purpose and non-purpose)
3. Perpetuity rules
4. Formalities (declaration and constitution)
5. Registration (does not affect validity but important; should be done by Ts rather than settlor)

Question 6

What are the 3 categories of trust arising from operation of law?

I.e. implied (imposed) trusts

Answer 6

1. Resulting trusts
2. Constructive trusts
3. Statutory trusts (trust imposed because statute imposed that it must be; intention of owners not relevant)

Question 7

Why does an implied trust operate?

Answer 7

To correct the fact that legal ownership of property does not reflect what equity recognises to be the true beneficial ownership of that property

Question 8

When does resulting trust arise?

Answer 8

Broadly - where legal owner transfers legal ownership of property to TP, but equity recognises that they should retain/regain the beneficial interest in that property

Question 9

What are the 2 subcategories of resulting trusts?

Answer 9

1. Automatic resulting trusts
2. Presumed resulting trust

Question 10

Whenwill automatic resulting trusts arise and what is their effect?

Answer 10

• Default trusts arising when transfer on trust fails either wholly/partly
• If Ts holding legal title but trust fails = equity imposes RT meaning they hold property on trust for settlor who can use SvV rights allowing them to collapse trust and recover property

Question 11

What is the difference if trust fails from outset (e.g. problem with certainty) or at later date (e.g. purpose trust loses purpose)?

Answer 11

• Fails from outset = S can attempt to correct problem
• Fails at later date = RT ensures surplus trust property is returned to property

Question 12

Do automatic resulting trusts respond to the intention of S?

Answer 12

No - are a default trust and are equity’s way of ensuring property returns to original owner when unclear what should happen to it

Question 13

How is a presumed resulting trust different? What type of transfer gives rise to it, what presumption does it create and how is it rebutted?

I.e. what is the presumption

Answer 13

Intention of S is relevant to whether RT has arisen

• Where person makes gratuitous transfer of property to TP, equity raises presumption of RT (equity is cynical maxim; questions why property would be transferred to someone else) = equity presumes they wanted other person to hold property on trust for them
• Presumption can be rebutted by evidence that transferor did not intend property to be held on trust for them e.g. clear transferor intended gift = presumption rebutted and gift takes effect

Question 14

When will a presumed RT arise?

Answer 14

Only where there is no evidence rebutting presumption

Question 15

Why are constructive trusts imposed?

I.e. what do they seek to correct?

Answer 15

To correct unconscionability

Question 16

What are the 3 situations in which constructive trusts arise?

Answer 16

1. Institutional constructive trusts
2. Constructive trusts as remedy
3. Common intention constructive trusts

Question 17

When will institutional constructive trusts arise? When are they imposed automatically?

Orthodox

Answer 17

• Arise because conscience of legal owner affected in some way preventing them from denying beneficial interests of another person
• Imposed automatically in response to trigger event (prevent fraud, perfect imperfect gift or trust, to compel parties to enforce specifically enforceable contract, over profits made in breach of FD)

Question 18

When will there be constructive trusts as remedy? Is it automatic?

Answer 18

• Awarded by court as remedy following misapplication of property in which C can establish equitable proprietary interest or property representing traceable proceeds of breach of trust/FD
• Not automatic; a result of C’s assertion of rights in property and seeking to claim (a share of the) beneficial ownership rather than relying on personal remedy

Question 19

When will common intention constructive trust arise? In what context are they usually in and what are the two different things someone might seek to establish?

Answer 19

• Used to resolve disputes re beneficial ownership of land where no express trust declared over it
• Typically where land occupied by unmarried couples as family home where a) name registered in only one of the individuals and other seeking to establish they have beneficial interest or b) both holding as legal joint tenants but disputes as to whether shares in land are equal or not
• Common intention of parties assessed by court to determine respective equitable interests over the land