Introduction and Key Concepts

Question 1

What is a trust?

Answer 1

It is an equitable duty relating to property. Must have a property and obligation component

Question 2

What benefits are there to the use of trusts?

Answer 2

Separation of ownership vs management, trustee expertise, ringfencing on insolvency, tax benefits

Question 3

What is an express trust?

Answer 3

One which is deliberately created

Question 4

Which trusts arise by operation of law?

Answer 4

Resulting and constructive trusts (aka. implied trusts)

Question 5

What is a testamentary trust?

Answer 5

Made by a will

Question 6

What is an inter vivos trust?

Answer 6

Created during an individual’s lifetime

Question 7

What is the difference between a fixed and discretionary trust?

Answer 7

Fixed - trustees know what they need to give to each beneficiary

Discretionary - trustees know who the beneficiaries are, but not what they get.

Question 8

What can be held on trust?

Answer 8

Almost anything - but not nothing (e.g. if trust property is destroyed, it no longer exists)

Question 9

Why does a trust give a stronger right than a contract?

Answer 9

Creates an equitable proprietary interest in the trust property, as opposed to a personal right to payment

Question 10

What is a Quistclose trust?

Answer 10

A device combining a debt or a trust; where property is transferred to a person whose use of the property is restricted to a specified purpose - where it is not the free disposal of the transferee. This must be the mutual intention that the money could only be applied for this purpose.

Question 11

What is the difference between a trust and a charge?

Answer 11

A chargor can use charged property for their own benefit.

Question 12

What is the difference between a trust and a bailment?

Answer 12

Only tangible personal property can form the subject matter of a bailment vs any asset or right can be held on trust

Question 13

Why can bailed goods be recovered from a purchaser of a legal interest without notice, but shares sold by a trustee not be?

Answer 13

Bailor - has a legal proprietary interest in the bailed goods

Question 14

What are the two different methods for creating an express trust?

Answer 14

Self-declaration of trust - legal title is held, but in a new capacity

Transfer on trust - third party becomes trustee

Question 15

What requirements are there for the creation of express trusts?

Answer 15

Three certainties: intention, subject matter, objects

Perpetuity rules

Beneficiary principle (except charity / NCPT)

Formalities: declaration of the trust, constitution of the trust

Registration - online trusts registration service (private express trusts)

Question 16

When do resulting trusts occur?

Answer 16

When a legal owner has transferred ownership of their property to a 3rd party, but for some reason, equity recognises that they should retain or regain the beneficial interest in that property.

Question 17

When do automatic resulting trusts arise?

Answer 17

Default trusts which arise when a transfer on trust either wholly or partly fails. Trustee holds property on trust for the settlor.

When a person makes a gratuitous transfer of property to a third party.

Question 18

When do constructive trusts arise?

Answer 18

Broadly, they arise to correct unconscionability.

Sometimes they arise as a remedy

Or CICTs - used to resolve disputes as to the beneficial ownership of land.

Question 19

What is the certainty of intention?

Answer 19

An express trust must have been brought into existence by an intention to create it.

Question 20

How do courts approach certainty of intention?

Answer 20

Courts adopt an objective approach - if someone manifests an intention to impose / assume a duty which is characteristic of a trust, they intend to create a trust - no requirement to actually understand what a trust is

Word ‘trust’ itself is not determinative

Key feature - segregation / earmarking of assets

Words / actions always considered in context

Question 21

What does the certainty of subject matter require?

Answer 21

Must be able to identify the trust property

Must be possible to ascertain the beneficiary’s interest in the trust property.

Question 22

Give examples where attempts to identify trust property by description has failed

Answer 22

‘the bulk’

‘net assets’

Question 23

Over which type of assets is it possible to declare a trust over a specified number of assets without identifying the specific assets?

Answer 23

Fungible, intangible (e.g. ordinary shares)

None of the other types of asset will qualify.

Question 24

Why must a trust have a clear power to determine beneficial entitlement?

Answer 24

Otherwise it may fail for certainty of subject matter, as it is not clear who decides where trust property goes.

Question 25

Which vague phrase does case law confirm will not fail for certainty?

Answer 25

"Reasonable income"

Question 26

What is certainty of objects?

Answer 26

The people who will benefit from the trust

Question 27

What must be known for a fixed trust to have certainty of objects? What test must be applied?

Answer 27

Complete list test - Who and how much each person is receiving

Question 28

Why does a discretionary trust / power of appointment not matter if they cannot identify all objects?

Answer 28

Trustees are not required to divide property between all objects - power of appointment does not need to be exercised.

Question 29

What test should be applied to consider whether a power of appointment is valid?

Answer 29

The is / is not test - trustee must be able to say with certainty whether any given individual is or is not a member of the class.

Question 30

What test should be applied to consider whether a discretionary trust is or is not valid?

Answer 30

Is or is not test - conceptual certainty

Question 31

Which labels / classes pass the is / is not test?

Answer 31

Employees - yes Children - yes Relatives - yes Friends - no

Question 32

How does evidential certainty operate for the is / is not test?

Answer 32

If a claimant can prove they are in a class, they are in it - if not, they are not.

Question 33

When may a discretionary trust fail for administrative unworkability?

Answer 33

If the objects are so wide as to form nothing like a class - however, this would not invalidate a fiduciary power of appointment because the donee of a fiduciary power has no obligation to exercise the power.

Question 34

What is the consequence of uncertainty for an inter vivos trust?

Answer 34

If title has been transferred gratuitously - must consider if there was intention. If no intention, presumption of resulting trust applies. If there is intention, and transfer of legal title, but no certainty of subject matter / objects - automatic resulting trust for the settlor.

Question 35

What is the consequence of uncertainty for a testamentary trust?

Answer 35

If trust fails - will form part of the residue of the estate