Express and implied trusts Flashcards
1
Q
Express trust
A
created to either benefit individuals OR achieve a purpose.
2
Q
Implied trusts
A
arise EVEN THOUGH there has been no express intention to create a trust.
Come into existence as a matter of law.
3
Q
Implied trusts -
come into existence as a…
A
matter of law.
4
Q
Two types of implied trusts are:
A
- Resulting trusts
- Constructive trusts
5
Q
Resulting trusts:
A
implied in situations where it is presumed the settlor intended a trust
6
Q
Constructive trusts:
A
imposed where the court feels it would be unconscionable to deny another person an interest in property.
7
Q
Trusts can take effect in two ways:
A
- Inter-vivos trusts
- Testamentary trusts
8
Q
Inter-vivos trusts?
A
during the settlor’s lifetime
9
Q
Testamentary trusts?
A
on death as set out in their will.
10
Q
Inter vivos trusts (two types):
A
Declaration of trust
Transfer of title
11
Q
Inter vivos trusts -
Declaration of trust?
A
involve a valid declaration of trust
12
Q
Inter vivos trusts -
Transfer of title?
A
transfer of title of the property to the trustees.
13
Q
What happens when an inter vivos trust fails?
A
Equitable interest result back to the settlor IF they are still alive.
14
Q
Testamentary trusts (two types):
A
Declaration of trust
Transfer of title
15
Q
Testamentary trusts -
Declaration of trust?
A
involve a valid declaration of trust in the will that complies with s9 of the WA 1837.
16
Q
Testamentary trusts -
Transfer of title?
A
direction in the will to transfer property to the trustees.
17
Q
What happens when a testamentary trust fails?
A
Equitable interest reverts to the residuary beneficiary under the terms of the will.
18
Q
Fixed interest trusts:
(2 elements)
A
Beneficiaries AND their shares are fixed by the settlor.
Trustee has no discretion as to who gets what.
19
Q
Discretionary trusts:
(2 elements)
A
Settlor gives the trustee the discretion to select who, from a given class of people, will receive the trust property in what shares.
No beneficiary under a discretionary trust has any property rights UNTIL the trustee exercises his discretion.
All the beneficiary has is an expectation.
20
Q
All trusts MUST satisfy the three certainties:
A
- Certainty of intention
- Certainty of subject matter
- Certainty of objects.
21
Q
Certainty of intention:
A
MUST be clear that the person making the declaration intended to create a trust (use of the word ‘trust’ – not essential).
Failure in doing so – recipient of the property will take the property as a gift.
22
Q
Precatory words:
A
Express a hope, wish OR moral obligation AND normally indicate a gift was intended (not a trust).
23
Q
Imperative words:
(4 elements)
A
Express a command AND indicate a trust OR power is intended.
Words impose a duty on someone to act as a trustee AND hold property for someone else.
Trust can be inferred from words, written statements, OR conduct.
Loose conversations – doesn’t amount to sufficient intention.
24
Q
Certainty of subject matter:
A
MUST be clear that the property is being held on trust
AND what the individual interest of the beneficiaries are.
25
Description of property:
and examples?
Vague OR general descriptions of trust will render the trusts void
the bulk of estate, some of my best linen, AND purchases blue chip investments.
26
What is required for tangible property?
physical separation of the trust property is required.
27
What is required for intangibles?
Intangibles no separation is required.
28
Beneficiary’s interest:
(4 elements)
Beneficial interests MUST be clear, meaning that the beneficiary’s share under the trust MUST be allocated in some way when trust is established.
Method of allocation of a beneficiary’s share will become unworkable AND trust will fail EVEN THOUGH trust property is identifiable.
Trust MUST be over existing property.
Future property doesn’t constitute property.
29
Certainty of objects:
MUST be clear who the beneficiaries of the trust are.
Certainty of objects test is different for fixed AND discretionary trusts.
30
Fixed trusts:
Beneficiaries are specified in the trust instrument OR MUST be possible to draw up a complete list of every beneficiary (complete list test).
31
Discretionary trust:
Trustee given the discretion to select amongst a class of beneficiaries will benefit.
32
Individual ascertainability test applies here, which states that you need:
(3 elements)
* Conceptual certainty
* Evidential certainty
AND
* Administrative workability.
33
Conceptual certainty:
and example?
Class of beneficiary NOT susceptible to legal definition – it fails.
to my friends.
34
Evidential certainty:
Not a pre-requisite.
Where obtaining the evidence OR whereabouts of beneficiaries is impractical.
35
Administrative workability:
Where the definition of beneficiaries is wide it is administratively unworkable – it fails.
36
Beneficiary principle?
trust MUST be for the benefit of individuals.
37
Rule against perpetuities?
beneficial interest under the trust MUST vest (be unconditional) within 125 years.
38
Beneficiary principle and perpetuities: Valid trust?
further requirements MUST also be met.
39
Certain types of disposition under a trust require...
ADDITIONAL formalities before they can become effective.
40
Testamentary trust:
All dispositions by will regulated by...
s9 WA 1837.
41
Testamentary trust:
Complying with s9 WA 1837 satisfies the formalities of...
s53 LPA 1925.
42
Inter vivos trusts are governed by...
s53 LPA 1925.
43
Property other than land?
other than the 3 certainties, NO ADDITIONAL formalities required.
44
Land/interest in land?
comply with s53(1)(b) LPA 1925 which requires evidence of the trust in writing signed by the settlor.
Failure to comply makes trust unenforceable by beneficiary (NOT VOID).
45
Existing trust interest?
comply with s53(1)(c) LPA 1925 which requires disposition MUST be in writing AND by person disposing of the interest.
Failure to comply makes the transfer void (not unenforceable).
46
Disposition must be made in writing NOT...
merely supported by documentary evidence.
47
Constitution of a trust:
Trust MUST be properly constituted – property MUST vest in trustee.
48
Valid constitution of a trust is different to...
the requirement of proper formality of trust creation.
49
What must trustee have for a constitution of a trust?
trustee MUST have sufficient title to the property for the trust to be effective.
50
Trust NOT properly constituted:
equity can’t offer assistance since ‘equity will not assist a volunteer’ AND ‘equity will not perfect an imperfect gift.’
51
Three ways a property owner can benefit another with his property:
* Outright gift
* Transfer of legal title to a third person (trustee) to hold on trust for the benefit of another
OR
* Declare that the absolute owner now holds the property on trust for another.
52
One of the modes of transfer fail?
Equity does not give effect to the transfer by applying another of those modes since ‘equity will not assist a volunteer’.
AND/OR equity will not perfect an imperfect gift.
53
Types of property and transfer rules:
(2 elements)
Settlor MUST transfer the property to the trustee in the proper legal manner.
Precise mode of transfer depends on the nature of the property.
54
Land -
s52 LPA 1925 requires?
a deed of conveyance to transfer legal title to land.
55
Registered land:
transfer only becomes complete on its registration at the Land Registry (s27 LRA 2002).
56
Shares:
(2 elements)
Legal title to shares in a private company is transferred traditionally by executing a share transfer form,
Handing over the share certificate AND registering the new owner in the company’s shareholder register.
It is upon registration of the new shareholders that the transfer is complete.
57
Chattels:
Title to chattels?
transferred by either deed of gift OR by physical delivery of the item to the recipient AND intention to affect a transfer.
58
Delivery includes parting with...
control over articles.
59
Examples of chattels:
key to the jewellery box, safety deposit box OR a car.
60
Cheques:
Legal title to a cheque passes on endorsement by the transferor AND delivery of the cheque to a third party.
Not possible, if cheque is crossed ‘account payee only.’
61
Money:
Valid transfer of money merely requires delivery.
62
Copyright:
Writing is necessary for the transfer of copyright.
63
Existing equitable interests:
Transfer an existing equitable interests to another.
Assignment MUST be in writing AND signed by the assignor OR his agent. s53(1)(c) LPA 1925.
64
Equity can regard a transfer as complete EVEN THOUGH legal title hasn’t passed in the following circumstances:
* The every effort rule (Re Rose)
* Unconscionability (Pennington v Waine)
* Fortuitous vesting (Strong v Bird)
65
The every effort rule (Re Rose):
settlor did everything they could to transfer legal title AND the settlor has passed the point of no return
OR put the property beyond recall.
Normally ALL that remains for the transfer to complete = actions of a third party.
66
Unconscionability (Pennington v Waine):
would be unconscionable for the donor to change his mind.
67
Fortuitous vesting (Strong v Bird)?
there has been a failure of the legal requirements of a valid transfer
BUT transferee is appointed as executor of the transferor’s estate.
Equity will perfect IF there has been a continuing intention to give during the transferor’s lifetime.
68
Fixed interest trusts:
Beneficiaries interest are fixed by the settlor.
69
Vested interest in a trust:
Beneficiary has a present right over the trust property (unconditional).
Vested interest owned by the beneficiary.
Beneficiary dies, interest will pass to their estate.
70
Contingent interest in a trust:
Contingent interest is conditional.
Beneficiary dies before condition is met - interest will revert to the settlor.
Condition is met – interest vests in the beneficiary (vested interest).
71
Discretionary trusts:
Settlor has identified a class of people to benefit BUT the trustees decide who will benefit AND in what amount.
Before distribution by trustees, no individual member has a beneficial entitlement.
Following selection by the trustees, property vests in the beneficiary AND they become entitled to the property.
72
Beneficiaries can use the rule in Saunders v Vautier to...
end a trust AND take the trust property.
73
Rule provides that ALL beneficiaries MUST:
* Be entitled to the trust property
* Agree to ending the trust
AND
* Be adults (with legal capacity to consent).
74
Limitations on the rule:
* Threat to end the trust CAN’T be used to force trustees to invest trust funds in accordance with their instructions.
OR
* ALL beneficiaries MUST give their consent.
Beneficiaries are NOT adults, don’t yet exist OR can’t legally consent.
The rule will not apply.
75
Trusts generally need a human beneficiary BUT there are exceptions to this rule:
* Monuments
* Animals
* Mases
* Re Denley Trusts
76
Monuments?
erection AND upkeep of monuments and graves.
77
Animals?
upkeep of individual animals (pets).
78
Mases?
holding of private masses in church.
79
Re Denley Trusts?
trust identifies people who will benefit from a particular purpose, people identified have standing to enforce the trust.
80
Purpose trusts:
and what wording complies with the rule?
beneficial interest under the trust MUST vest (unconditional) within 21 years OR trustees MUST be able to spend the trust fund on the specified purpose in one go
thereby bringing the trust to an end.
Wording such as, ‘so long as the trustees can legally do so’ comply with the rule.
81
Purpose trust MUST also follow rules relating to...
declaration of trusts and constitutions of trusts.
82
Charitable trusts differ from...
non-charitable purpose trusts.
83
Charitable trusts are regulated by...
the Charity Commission.
84
Charitable trusts exempt from the Beneficiary Principle and the Rule Against...
Inalienability of Trust Capital.
85
Charitable trust MUST be:
*Recognised charitable purpose (s3(1) CA 2011).
*Public benefit
*Exclusively charitable purposes
86
Public benefit?
trust purpose MUST have identifiable benefits AND accrue to the public OR a sufficiently large section of the public.
87
Exclusively charitable purposes?
trust MUST not have a political purpose AND any fees OR profits MUST be invested in the trust
AND not paid to individuals.
88
Implied trusts:
not expressly created by the intention of the settlor BUT by operation of the law.
Implied trusts can be created without any formality (s53(2) LPA 1925).
89
Resulting trusts AND constructive trusts are...
implied trusts.
90
What does the court look at for resulting trusts:
Courts are looking at the intention to benefit another person RATHER THAN the intention to create a trust.
91
Resulting trusts arise when:
* Failure to validly create a trust (e.g., failed formalities) (Automatic Resulting Trust).
OR
* Property is voluntarily transferred to another OR purchased in the name of another (Presumed Resulting Trusts).
92
Automatic Resulting Trusts -
Trustee will hold the property on trust for the settlor (or his estate) OR donor in the following circumstances:
Uncertainty of objects.
Failure of contingency
Failure to dispose of the whole beneficial interest
Surplus of funds after a valid purpose trust has completed its purpose
Money given for a specific purpose which can no longer be carried out
93
Failure of contingency?
condition stipulated not met by beneficiary
94
Failure to dispose of the whole beneficial interest.
Example?
where beneficial entitlement is given to A for life, BUT fails to specify the remainderman therefore, reverting to the settlor
95
Surplus of funds after a valid purpose trust has completed its purpose.
Example?
after completion of the task OR the end of the perpetuity period, money will result back to the settlor
96
Money given for a specific purpose which can no longer be carried out.
Example?
if the purpose can no longer be fulfilled, money will be held on resulting trust for the donor
97
A presumption that a resulting trust was intended arises in the following circumstances:
*The voluntary conveyance of a property to another
*Purchase of money in the name of another
98
The voluntary conveyance of a property to another?
transfer of property where the recipient doesn’t provide valuable consideration in return
99
Purchase of money in the name of another?
where person provides money to buy a property in full or part BUT isn’t identified as the legal owner
100
Presumptions can be rebutted by evidence of a different intention such as...
And when should evidence be made?
transfer was meant to be a loan OR a gift.
Evidence should be BEFORE OR at the same time of the transfer.
101
Evidence AFTER the transfer to purchase OR transfer...
can’t be relied on by the maker of those statements.
102
The presumption of advancement:
The presumption of a resulting trust CAN be reversed by the presumption of advancement (gift was intended).
In this case, no resulting trust AND gift is presumed.
103
Situations where the presumption applies:
* Husband and wife (NOT wife to husband OR man to mistress).
* Father to child (minor, adult, legitimate, illegitimate NOT mother to child OR child to father).
* Person in loco parentis to child.
* Fiancé (male) to fiancé (female), provided they marry.
104
Constructive trust imposed by the court...
on the legal owner of an asset to PREVENT that person asserting beneficial ownership of the asset
in bad conscience to the prejudice of the true beneficial owner.
105
At the time of acquisition of the property the parties have...
expressed a shared common intention to share the home.
106
The intention MUST be:
*Express
*Common
*Relate to the acquisition of a share in the beneficial interest in the home
107
Express intention?
legal language isn’t necessary BUT MUST be clear enough to form the necessary intention.
108
Common intention?
MUST be shared by both parties, NOT just ONE party
109
Relate to the acquisition of a share in the beneficial interest in the home?
parties MUST be agreeing to share the home, NOT just their lives.
110
Home jointly owned – step 1 satisfied, step 2 must be met.
Both partners ARE registered as co-owners,
hold legal title jointly AND equally.
UNLESS otherwise agreed.
Presumed the beneficial interest is ALSO HELD jointly and equally.
One partner claims the shares are unequal,
MUST prove to the court that they are unequal.
Court will take into account financial AND non-financial factors.
111
Home solely owned (step 1 and 2 must be met):
One partner is registered as the legal owner,
the other partner to secure a beneficial interest MUST establish a common intention constructive trust using the two-step process.
112
Two-step process TO establish a common intention constructive trust is:
Step 1 – must be shown that:
* common intention between the parties that BOTH were to have an interest (expressly – oral agreement OR inferred – through conduct).
AND
* claiming partner acted to their determinant in reliance on the express OR inferred common intention.
113
claiming partner acted to their determinant in reliance on the express OR inferred common intention - Express intention?
financial contributions qualify as detrimental reliance, housekeeping AND childcare duties CAN qualify as detrimental reliance.
114
Claiming partner acted to their determinant in reliance on the express OR inferred common intention - Inferred intention?
ONLY significant financial contributions to purchase price OR mortgage payments qualify as detrimental reliance.
115
Two-step process TO establish a common intention constructive trust is -
Step 2 – beneficial interest must be quantified:
UNLESS otherwise agreed between parties.
Court will award what it considers fair having regard to the whole course of dealings BETWEEN the parties regarding the property
AND taking into account financial AND non-financial factors.
116
Requirements to establish proprietary estoppel:
Where trust can’t be implied.
Courts will rely on promissory estoppel to give an interest in the property
to stop the legal owner from denying the claimant’s interest.
117
The main elements are:
*Assurance
*Detriment
*Reliance
118
Assurance?
can be a representation OR encouragement either active OR passive
creates an expectation the party would have an interest in the property.
119
Detriment?
party acted to their detriment such as, spending money on the property,
giving up work, working WITHOUT OR for little pay, OR looking after someone who is ill.
120
Reliance?
reliance of the party ON the assurance made.
121
Stranger is a person who is threatened WITH personal liability for...
assistance in breach of trust EVEN THOUGH they are technically a third party to the trust.
122
Stranger can become personally liable on the basis of...
and is dishonesty required?
‘knowing receipt’ of trust property that has been misapplied OR transferred in breach of trust.
no
123
Necessary to show 3 components to ‘knowing receipt’ are:
* Disposal – disposal of assets in breach of trust of fiduciary duty.
* Receipt – receipt of assets by the defendant for his own use
AND benefit which are traceable as representing assets of the claimant
AND
* Knowledge – knowledge on part of the defendant that the assets he received are traceable to a breach of trust OR fiduciary duty.
Claim to be successful, recipient state of knowledge MUST be such as to make it unconscionable for him to retain the benefit of the receipt.
124
Stranger can become personally liable for the dishonest assistance in breach of trust EVEN THOUGH...
he has never received trust property.
125
Four requirements for dishonest assistance are:
* Existence of a trust – formal trust OR fiduciary relationship MUST exist.
* Breach of trust – trustee will be liable for a breach WHETHER it is innocent, negligent, OR dishonest.
* Assistance in the breach of trust – assistance MUST be some kind of purposive conduct designed to advance AND promote the unlawful object which breaches the trust.
* Dishonesty – third-party liability founded on the dishonest third-party (not necessarily trustee).
126
Test for dishonesty is a combined test of objective AND subjective elements:
Test for dishonesty is a combined test of objective AND subjective elements:
Objective element – defendant held to be dishonest IF his actions are seen as dishonest by the standards of an ordinary reasonable person
AND
Subjective element – defendant realised that, by those standards he was dishonest.
127
Any breach of trust OR fiduciary obligation will lead to a remedy.
The claimant will have to make the following choice:
* Personal claim – claim against a trustee OR fiduciary personally.
Not based on the recipient having the property in his possession.
OR
* Proprietary claim – claim based on the defendant having the property,
Its proceeds OR its replacement in his possession AND being required to return it.
Constructive trust will be imposed on the property.
