Trust Flashcards
(188 cards)
1
Q
What are the most common reasons for clients creating a trust?
A
- To set aside property for a specific purpose (such as for the maintenance of children)
- To protect capital from being dissipated
- To protect and provide for young and/or incapacitated persons
- Asset protection – to protect capital from creditors and possibly divorcing partners
- To avoid the need to obtain probate on a deceased person’s assets
- To reduce tax
These reasons reflect the strategic uses of trusts in estate planning and asset management.
2
Q
Who are the three parties involved in a trust arrangement?
A
- The settlor/testator
- The trustees
- The beneficiaries
Each party plays a distinct role in the trust, ensuring its proper administration and fulfillment of its purpose.
3
Q
What is the role of the settlor/testator in a trust?
A
The person who creates the trust, which can be more than one person.
When property is transferred via a will, the settlor is the testator of that will.
4
Q
What is the role of the trustees in a trust?
A
The legal owners of the trust property who hold and administer it for the benefit of the beneficiaries.
Trustees are typically named in the trust document and may include the settlor.
5
Q
What is the role of the beneficiaries in a trust?
A
The people for whose benefit the trust has been established.
Beneficiaries own the equitable title to the trust property.
6
Q
What types of property can be transferred on trust?
A
- Real property (land)
- Money
- Chattels
- Shares
- Copyright
The property of a trust is referred to as the ‘subject matter’ of the trust.
7
Q
What are the main types of express trusts?
A
- Bare trusts
- Fixed trusts
- Discretionary trusts
- Interest in possession/life interest trusts
Express trusts are created through the express intention of the settlor.
8
Q
What are the main types of implied trusts?
A
- Statutory trusts
- Resulting trusts
- Constructive trusts
Implied trusts arise by operation of the law rather than the express intention of the settlor.
9
Q
What is an inter vivos trust?
A
A type of trust created during a settlor’s lifetime, also known as a ‘lifetime trust’.
The trust property is transferred by the trust deed/instrument.
10
Q
What is a testamentary trust?
A
A type of trust contained within the will of a testator that takes effect upon their death.
Testamentary trusts are established to manage the assets of the deceased according to their wishes.
11
Q
What are the three certainties required for an express trust to be valid?
A
- Certainty of intention to create a trust
- Certainty of subject matter of the trust
- Certainty of object of the trust (beneficiary)
These are collectively known as ‘the three certainties’.
12
Q
What does certainty of intention mean in the context of a trust?
A
The words used by the settlor must be imperative and clearly indicate the intention to create a trust.
There is no requirement to use the word ‘trust’, but the intention must be unmistakable.
13
Q
True or False: A settlor can create a trust without using formal language.
A
True
The settlor’s intention must be clear, but formal wording is not necessary.
14
Q
Fill in the blank: A trust can also be described with reference to how and when it was created: __________ trust.
A
Inter vivos
This refers to trusts created during the lifetime of the settlor.
15
Q
What is the significance of the phrase ‘to hold upon trust for the benefit of my children’?
A
It indicates sufficient certainty of intention to create a trust.
16
Q
What is meant by ‘certainty of subject matter’ in the context of trusts?
A
The property to become trust property must be identifiable, and beneficiaries’ interests must be ascertainable.
17
Q
True or False: A trust will fail for uncertainty of subject matter if it’s a discretionary trust.
A
False.
18
Q
In what case must trust property be distinguishable from other similar property?
A
Boyce v Boyce (1849).
19
Q
What happens if a trust is created for ‘some of my shares’?
A
It would fail for uncertainty of subject matter.
20
Q
What is a ‘life interest’ in the context of interest in possession trusts?
A
An interest where a beneficiary enjoys the trust property for their own life.
21
Q
Fill in the blank: The test to ascertain beneficiaries in a fixed trust is called the _______.
A
complete list test.
22
Q
What is a ‘discretionary trust’?
A
A trust where trustees determine the respective shares of the beneficiaries.
23
Q
What is required for the creation of express private trusts?
A
Usually created in writing by deed, but can also be created orally.
24
Q
What does the Law of Property Act 1925 s 53(1)(b) stipulate regarding oral trusts of land?
A
Valid from the oral declaration but enforceable only with written evidence.
25
What is the maximum duration for a non-charitable trust created after 6 April 2010?
125 years.
26
What is meant by 'constituting a trust'?
A trust is constituted when legal title to the trust property is transferred to the trustees.
27
What is a 'remainderman' in the context of trusts?
A beneficiary who becomes absolutely entitled to the trust property after the interest in possession ends.
28
What case illustrates the need for compliance with LPA 1925 s 53(1)(c) when transferring equitable interests?
Grey v Inland Revenue Commissioners [1960].
29
What is the 'any given postulant test'?
A test for identifying beneficiaries in a discretionary trust.
30
What happens if the trust fails on one or more of the certainties?
The trust may be void or result in a gift to the trustee or a resulting trust back to the settlor.
31
What is the distinction between a 'fixed interest trust' and a 'discretionary trust'?
In a fixed interest trust, beneficiaries and shares are predetermined; in a discretionary trust, trustees have discretion over shares.
32
Fill in the blank: A trust for 'my nieces and nephews' is more likely to succeed than a trust for 'my friends' due to _______.
the ability to identify the beneficiaries.
33
What is a 'reversionary interest'?
The interest held by a remainderman during the existence of an interest in possession.
34
True or False: A trust for 'the residue of the estate' is uncertain.
False.
35
What does 'reasonable income' refer to in trust property?
Income that can be objectively determined considering various factors.
36
What is the 'law against perpetuities'?
A rule stating that a non-charitable trust cannot run indefinitely.
37
What is required for a settlor to declare a trust?
The settlor may declare that they hold the property on trust for the beneficiaries without needing a transfer
## Footnote
This is established in T Choithram International SA and others v Pagarani and others [2001] 1 WLR 1.
38
What does Milroy v Lord (1862) state about imperfect gifts?
Equity will not perfect an imperfect gift or assist a volunteer
## Footnote
If trust property has not been properly vested in the trustees, the trust is void and unenforceable.
39
List the three main methods of transferring property outside of contract law.
* Absolute gift to a volunteer without consideration
* Creation of an express trust through transfer of legal title to a trustee
* Self-declaration of trust by the settlor retaining legal title
## Footnote
Complete constitution is necessary for the first two methods.
40
What happens if a settlor fails to complete necessary steps for a transfer?
Equity will not intervene to save the gift by construing it as a trust
## Footnote
This follows the equitable maxims regarding failed property transfers.
41
What must occur for a trust property to be properly transferred?
The property must be transferred using the requisite formalities
## Footnote
This includes specific methods for different types of trust property.
42
What are the formal requirements for transferring an estate in land?
The transfer must be by deed and registered
## Footnote
Refer to LPA 1925 s 52(1) and the Law of Property (Miscellaneous Provisions) Act 1989 s 1.
43
How must shares be transferred according to the Stock Transfer Act 1963?
The transferor must sign a stock transfer form in favor of the transferee and send it to the company’s registrar
## Footnote
Title passes only on registration of the transferee as the new shareholder.
44
What is required for the transfer of chattels?
Chattels must be transferred by deed of gift or actual delivery
## Footnote
There must also be an intention by the transferor to transfer the property.
45
How can bills of exchange be transferred?
By the transferor endorsing (signing) the cheque in line with the Bills of Exchange Act 1882
## Footnote
A cheque addressed to one party may be transferred to another.
46
What is the method for transferring money?
Money must be transferred by actual delivery
## Footnote
Writing a cheque does not constitute a transfer as it can be revoked.
47
What are choses in action?
Choses in action are rights to sue for something, such as debts
## Footnote
The transfer must comply with LPA 1925 s 136.
48
What is required for the transfer of equitable interests?
The disposition must be in writing and signed at the time of the disposition
## Footnote
This is in accordance with LPA 1925 s 53(1)(c).
49
What are the exceptions to the rule that equity will not assist a volunteer?
* The transferor has done everything in their power to effect the transfer
* There has been fortuitous vesting
* Proprietary estoppel applies
* There is a gift in contemplation of death
## Footnote
These exceptions allow equity to intervene to uphold a trust or gift.
50
What was the outcome of the case Re Rose regarding share transfers?
The transfer was effective in equity once the transferor had done everything in their power to effect the transfer
## Footnote
The delay in registration was caused by the directors, not the transferor.
51
What did the Court of Appeal conclude in Mascall v Mascall regarding the transfer of land?
The transferor had done everything in his power to complete the transfer, making it complete in equity
## Footnote
The means of obtaining title had been given to the transferee.
52
What must the transferor do for a transfer to be irrevocable according to Re Rose and Mascall v Mascall?
The transferor must have either sent all required documents for registration or delivered them to the transferee.
53
In Pennington v Waine, what did the courts find regarding the transferor's actions?
It was not always necessary for the transferor to have done everything in their power to irrevocably transfer ownership.
54
What does Arden LJ state about a donor changing their mind in Pennington v Waine?
A donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, to do so.
55
List the key facts of Pennington v Waine.
* Transfer forms and share certificates had been transferred to the agent of the transferor
* The transferee was assured all documentation had been given to the agent
* The transferee acted in reliance on this gift by accepting a fiduciary office
56
What caution is advised regarding the Pennington judgment?
The judgment of Zeital v Kaye appears to have restricted this line of reasoning to the particular facts in Pennington.
57
What does 'fortuitous vesting' imply in property transfer?
It holds that the failure to complete the transfer may be resolved if the transferee later acquires the legal title.
58
What does the rule in Strong v Bird provide?
The transfer can be completed if the legal title is fortuitously vested in the intended recipient.
59
What are the requirements for fortuitous vesting?
* The donor intended to make an immediate gift
* The intention to transfer the property continued until the death of the donor
* The legal title is vested in the donee as the legal representative of the donor
60
What can fortuitous vesting also perfect aside from gifts?
It can also be used to perfect a trust which has not been completely constituted.
61
What are the elements of proprietary estoppel as per Thorner v Major?
* Assurance or representation by the donor to the donee
* The donee has relied on that assurance
* The donee has suffered detriment due to reliance
* It would be unconscionable for the legal owner to assert strict legal rights
62
What is donatio mortis causa?
It refers to gifts made in contemplation of imminent death, often called deathbed gifts.
63
What are the strict requirements for recognizing the validity of donatio mortis causa?
* The gift must be made in contemplation of imminent death
* The gift is conditional upon the death of the donor
* There is actual or constructive delivery of the property
64
How can delivery for chattels perfect the transfer of title?
Delivery along with the necessary intention to transfer ownership will perfect the transfer on the settlor's death.
65
What did the court find in Sen v Headley regarding constructive delivery?
It was sufficient to hand keys to a box containing the deeds to the intended donee.
66
True or False: The death of the donor must be from the contemplated cause for donatio mortis causa.
False.
67
What is an interest in possession/life interest trust?
A trust where the beneficiary gains an interest in the trust property for a designated period, generally their lifetime.
68
What rights do life tenants typically have?
Life tenants usually acquire the right to the income or interest generated by the trust property or the right to reside in trust property during their lifetime.
69
What happens to the trust property after the life tenant's interest ends?
The trust property passes to the residual beneficiary as outlined in the trust instrument.
70
Define fixed interests in the context of trusts.
Beneficiaries hold a fixed entitlement to the capital and/or income of the trust, usually set out in the trust deed or associated registers.
71
What are discretionary interests?
Objects of the trust have no immediate right to the use of the trust property or to the net income, and their ability to benefit is subject to the trustees' discretion.
72
What is the difference between vested and contingent interests?
A vested interest has no further conditions, while a contingent interest is subject to certain conditions.
73
What is the rule in Saunders v Vautier?
Beneficiaries can request a variation of the trust or a winding up of the trust if all beneficiaries are sui juris and absolutely entitled to the trust property.
74
What are the conditions for beneficiaries to use the rule in Saunders v Vautier?
All beneficiaries must be sui juris and absolutely entitled to the entirety of the trust property.
75
What can beneficiaries do under the rule in Saunders v Vautier?
They may bring the trust to an end and transfer remaining property to the beneficiaries or consent to any variation of the trust.
76
What are the two key limitations for a beneficiary of a fixed trust to collapse their share?
* The trust property must be capable of division
* The collapse must not devalue other beneficiaries' interests.
77
Is it possible to collapse or vary a discretionary trust using Saunders v Vautier?
Yes, but it can be difficult due to potential beneficiaries who are not yet born, underage, or lack capacity.
78
What are charitable trusts?
Trusts created for the purpose of supporting a charitable aim or organization
## Footnote
Charitable trusts benefit the public interest rather than individuals or groups.
79
What is the beneficiary principle in relation to charitable trusts?
Charitable trusts are not bound by the beneficiary principle, allowing them to operate without a human or legal beneficiary
## Footnote
The Attorney General and the Charity Commission ensure compliance.
80
What is the significance of the Charities Act 2011 s 1(1)?
Defines a charity as an institution established for charitable purposes only and under High Court control
## Footnote
Charities must benefit the public.
81
List examples of charitable purposes under Charities Act 2011 s 3(1).
* Prevention or relief of poverty
* Advancement of education
* Advancement of religion
* Advancement of health or saving of lives
* Advancement of animal welfare
82
What are the two parts of the public-benefit test?
* Is the charity for the benefit of all of the public or a section?
* Are the charitable purposes beneficial or detrimental?
83
What test is applied to assess whether a charity's beneficiaries constitute a public class?
The personal-nexus test
## Footnote
Evaluates if there is a personal connection between the donor and beneficiaries.
84
What is the cy-près doctrine?
Ensures property from a failed charitable bequest is dedicated to a similar charitable purpose
## Footnote
It aligns with the original intentions of the donor.
85
What happens if a charitable bequest fails before it takes effect?
Property is applied cy-près only if the donor had a general charitable intention
## Footnote
Otherwise, it returns to the donor.
86
What are non-charitable purpose trusts?
Trusts that do not have a legal or human beneficiary and are limited to specific valid purposes
## Footnote
They can be valid but are unenforceable.
87
List examples of valid but unenforceable non-charitable purpose trusts.
* Erection or maintenance of tombs
* Care of specific animals
* Saying of private masses
* Fox hunting
88
What is a resulting trust?
A form of implied trust that arises when the settlor fails to transfer equitable interest to the beneficiary
## Footnote
It can also occur when trustees fail to distribute trust property.
89
What are the two types of resulting trusts?
* Automatic resulting trusts
* Presumed resulting trusts
90
What is an automatic resulting trust?
Occurs when no one holds the equitable title due to the settlor not transferring the full interest effectively
## Footnote
It rectifies the gap in ownership.
91
What triggers a presumed resulting trust?
A voluntary conveyance of property into the name of another without consideration
## Footnote
The beneficial interest remains with the transferor.
92
What is the presumption of advancement?
An equitable principle suggesting that transfers between certain relationships (e.g., parent to child) are gifts
## Footnote
It can be rebutted by evidence of intent.
93
What are trusts of the family home?
Implied trusts determining beneficial interests in family homes when legal ownership is not documented
## Footnote
They can be resulting or constructive trusts.
94
What is required to establish a trust of the family home?
* Acquisition: evidence of beneficial interest
* Quantification: determining the extent of the beneficial interest
95
What does the court consider when quantifying beneficial interest in a family home?
The whole course of dealing between the parties in relation to the property
## Footnote
This includes both financial and non-financial contributions.
96
What is the first requirement for establishing a beneficial interest in property?
The non-legal owner must provide evidence that they have acquired a beneficial interest in the property.
97
What does quantification of beneficial interest involve?
The court must determine the extent of the beneficial interest.
98
What does 'the whole course of dealing between them in relation to the property' include?
Arrangements made to meet outgoings like mortgage contributions, council tax, utilities, repairs, insurance, and housekeeping.
99
What are the three types of contributions considered in determining beneficial ownership?
* Direct financial contributions
* Indirect financial contributions
* Non-financial contributions
100
What are examples of direct financial contributions?
* Paying the deposit
* Paying the mortgage
101
How are indirect financial contributions recognized by the courts?
They are generally recognized but may not be valued as highly as direct financial contributions.
102
What might be considered indirect financial contributions?
* Paying for utilities
* Paying for costs of an extension or renovation
103
What are non-financial contributions?
Contributions such as looking after the house or raising children.
104
Which case established a more holistic approach in assessing contributions?
Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776.
105
What must parties do if they are joint legal owners and there is a dispute about beneficial shares?
They will apply to the court for quantification of the beneficial interests.
106
What is a purchase-money resulting trust (PMRT)?
A trust arising when the non-legal owner contributed to the purchase through part of the deposit or mortgage payments.
107
What did Jones v Kernott [2012] find regarding PMRT analysis?
It found that PMRT analysis was less effective in reviewing trusts of the family home, favoring a common intention constructive trust instead.
108
What can rebut the presumption that the sole legal owner is the sole beneficial owner?
Establishing that the parties created a common intention constructive trust.
109
What are the three required elements to establish a common intention constructive trust?
* Express agreement
* Common to the parties
* To share the home
110
What is required for an express common intention constructive trust?
Both parties must expressly state their intention to share the family home.
111
What phrases have been considered insufficient to demonstrate shared ownership?
* “Let’s share a family home”
* “This will benefit us both”
112
What phrases have demonstrated an intention to share ownership?
* “Everything’s 50:50”
* “Half yours”
113
What does detrimental reliance involve?
The non-legal owner must demonstrate they relied on the common intention to their detriment by changing their position.
114
What must the detrimental reliance involve?
A material sacrifice or investment linked to the reliance.
115
What can the court do if an express agreement cannot be established?
Infer a common intention based on the whole course of conduct between the parties.
116
What does Lord Bridge state about inferring common intention?
It should be based on direct contributions to the purchase price.
117
What is the presumption regarding beneficial interest when the family home is held with joint legal title?
The presumption is that the beneficial interest is held equally between the parties.
118
What are the two ways the presumption of equal beneficial interest can be rebutted?
* Showing an alternative common intention at the time of purchase
* Demonstrating unequal direct financial contributions
119
What must a party do after establishing a beneficial interest in property?
Apply to the courts for the quantification stage.
120
What approach will the court take if the distribution of shares in a constructive trust has not been agreed?
The court will take a holistic approach and look at the whole course of conduct of the parties.
121
What are the four requirements for proprietary estoppel?
* a representation or assurance
* reliance on the assurance
* detriment due to reliance
* unconscionability.
122
What does the representation or assurance in proprietary estoppel provide to the claimant?
An expectation that they will acquire rights over the defendant’s property.
123
True or False: The assurance in proprietary estoppel must always be explicit.
False.
124
What must the claimant demonstrate regarding reliance on the assurance?
The claimant must have acted in reliance on the representation.
125
What constitutes detriment due to reliance in proprietary estoppel?
The claimant must have suffered substantial detriment as a consequence of relying upon the representation.
126
In Gillett v Holt, what was considered detrimental reliance?
Giving up opportunities for advancement on the assurance of inheritance.
127
What is the fundamental requirement for establishing unconscionability in proprietary estoppel?
The promiser’s actions must have been unconscionable.
128
What happens once proprietary estoppel is established?
The claimant can seek a remedy from the court.
129
What factors does the court consider when awarding remedies in proprietary estoppel cases?
* Circumstances of the case
* Nature of the assurances
* Detriment
* Proportionate to the claimant’s expectations.
130
What is the liability of third parties to a trust?
They may be held personally liable for a breach of trust under certain circumstances.
131
What must be established for accessory liability in the context of dishonest assistance?
* A fiduciary relationship between the trustee and beneficiary
* A breach on the part of the trustee
* The third party must have assisted in procuring the breach in some substantial way.
132
What is the standard of honesty for third parties in cases of accessory liability?
The standard of an ordinary honest person in the position of the third party.
133
What is 'knowing receipt' in the context of trust law?
Where a third party knowingly receives trust property, for their benefit, in breach of trust.
134
What are the requirements for establishing recipient liability?
* A breach of trust
* Beneficial receipt of the trust property
* Knowledge of the breach of trust on the part of the third party
* Unconscionability.
135
True or False: A beneficiary can apply for double restitution.
False.
136
In the case of El Ajou v Dollar Land Holdings plc, what outlines the requirements for recipient liability?
A breach of trust, beneficial receipt of the trust property, knowledge of the breach of trust by the third party, unconscionability.
137
What are fiduciary obligations?
Fiduciaries must not:
* place themselves in a position of actual or potential conflict between their duty to their beneficiary and their own interest
* personally profit from their position as fiduciary
## Footnote
Trustees are often considered fiduciaries par excellence.
138
What does the no-conflict rule entail?
The no-conflict rule includes:
* Self-dealing: trustees should not purchase trust property for themselves
* Fair-dealing: valid purchase of a beneficiary's interest if the trustee demonstrates:
* no advantage taken of their position
* full disclosure to the beneficiary
* transaction was fair and honest.
139
What is the no-profit rule?
A fiduciary must not make any unauthorized profit from their position, including remuneration for trustees.
## Footnote
Trustees can be compensated for expenses incurred on trust business.
140
What must a trustee do if they gain personal profit from their trusteeship?
They must relinquish that profit to their beneficiaries.
141
True or False: A trustee can compete with the interests of the trust.
False.
142
What are the exceptions to the no-profit rule?
The four exceptions are:
* Court authorizes payment under inherent jurisdiction
* Beneficiaries authorize payment, if sui juris
* Solicitor-trustee involved in litigation may be remunerated
* Trust deed contains a charging clause.
143
What is required for a trustee to purchase trust property?
There must be an express power in the trust instrument or court approval.
144
Who can act as a trustee?
Anyone who can own property, provided they are not of unsound mind.
145
Can a minor be a trustee?
A minor can be a trustee of a trust of personalty but cannot hold the legal estate in land.
146
What is the minimum number of trustees required if land is settled in trust?
Ordinarily at least two trustees are appointed.
147
What must trustees do once they accept their appointment?
They must participate fully in managing the trust and act jointly.
148
How can a trustee retire from their position?
By deed, with consent from co-trustees, ensuring there will still be a trust corporation or at least two trustees.
149
What is the duty of care for trustees?
Trustees must exercise reasonable care and skill, considering any special knowledge or experience.
150
What information are beneficiaries entitled to?
Beneficiaries are entitled to information about the trust and can inspect trust documents.
151
What does the Trustee Act 2000 s 3 allow trustees to do?
It gives trustees the power to treat trust assets as their own when determining how to invest trust property.
152
What should trustees consider when investing trust property?
They must consider the standard investment criteria and balance the interests of all beneficiaries.
153
What is the duty to distribute trust property?
Trustees must distribute trust property in accordance with the trust instrument.
154
What is the duty to act impartially?
Trustees must act impartially between the beneficiaries in dealing with trust property.
155
What powers do trustees have according to the trust instrument?
The trust deed or will specifies the powers allocated to the trustees.
156
What discretionary powers do trustees have regarding minor beneficiaries?
They have the power to use trust income for maintenance and to advance capital.
157
What does 'maintenance' cover for minor beneficiaries?
Education, maintenance, and benefit of the beneficiary.
158
What is the maximum amount trustees can advance to a beneficiary?
Up to the whole of the beneficiary’s presumptive share.
159
True or False: Trustees can delegate their powers.
True, except for certain powers.
160
What must a life tenant grant to allow an advancement from the trust?
Consent
## Footnote
The removal of capital may impact the income from the trust.
161
What are the powers that trustees cannot delegate under TA 2000?
* Any function relating to asset distribution
* Any power regarding fees or payments from trust funds
* Any power to appoint a trustee
* Any power conferred by enactment or trust instrument that allows delegation
## Footnote
These limitations ensure the integrity and management of the trust.
162
According to TA 2000 s 15, how should delegation by trustees be documented?
In writing
## Footnote
This requirement ensures clarity and accountability in the delegation process.
163
Who may not be appointed as agents by trustees under TA 2000 s 12(3)?
Beneficiaries
## Footnote
This prevents conflicts of interest in trust management.
164
Under TA 2000 s 14(3)(c), what circumstances must agents avoid when acting on behalf of trustees?
Circumstances that could give rise to a conflict of interest
## Footnote
This provision protects the trust's integrity and beneficiaries' interests.
165
What must trustees comply with when delegating their authority according to Sch 1 para 3(1)?
Requirements of the statutory duty of care
## Footnote
Compliance ensures that trustees are acting responsibly and in the best interest of the beneficiaries.
166
What is the liability of trustees for the acts or omissions of their agents if they have abided by their duty of care?
They will not be held liable
## Footnote
This provision encourages trustees to delegate responsibly without fear of undue liability.
167
In which cases have the courts interpreted the power of advancement widely?
Pilkington v Inland Revenue Commissioners [1964] AC 612; Re Clore’s Settlement Trusts [1966] 1 WLR 955
## Footnote
These cases provide legal precedents regarding the interpretation of advancement powers.
168
What is a breach of trust?
A breach of trust occurs when trustees fail to carry out their duties according to the trust instrument or law, or exercise their powers improperly.
169
What are the personal liabilities of trustees?
Trustees are personally liable for any loss suffered by the trust and for breaches of contract and tort involving trust property.
170
Which rights do beneficiaries have when a breach of trust occurs?
Beneficiaries can recover identifiable trust property or claim damages from the trustee.
171
What is 'equity’s darling'?
A bona fide purchaser for value who has no notice of the breach of trust.
172
What must beneficiaries prove to claim damages from a trustee for breach of trust?
Beneficiaries must prove that the breach resulted in a loss to the trust.
173
What is the measure of liability for trustees?
Trustees must compensate the trust fully for any loss caused and restore it to the position it would have been in without the breach.
174
Are trustees liable for breaches committed by other trustees?
Trustees are only liable for their own breaches unless they are negligent in monitoring fellow trustees.
175
What are the defenses available to trustees against breach of trust claims?
Defenses include:
* exemption clause in the trust deed
* limitation
* laches (delay)
* consent of the beneficiaries
* statutory relief under the Trustee Act 1925.
176
What does an exemption clause in the trust deed do?
It may protect a trustee from liability for breach of trust if they performed their duties honestly and in good faith.
177
What is the general limitation period for breach of trust claims?
The general limitation period is 6 years from the date of the breach.
178
What is laches in the context of trust law?
Laches is an equitable doctrine that allows courts to dismiss a claim due to unreasonable delay by the claimant that prejudices the trustee.
179
What requirements must be met for beneficiary consent to be a valid defense?
The beneficiary must provide informed consent freely and not be under undue influence, and be sui juris.
180
What does the Trustee Act 1925 s 61 provide?
It allows the court to relieve a trustee from personal liability if they acted honestly and reasonably.
181
What is tracing in trust law?
Tracing is the process of identifying trust property as it moves through different hands.
182
What are the equitable proprietary remedies available to beneficiaries?
Equitable remedies include:
* Equitable ownership
* Equitable charge or lien
* Subrogation to the interests of a third party creditor.
183
What are the prerequisites for a tracing claim?
The prerequisites are:
* A fiduciary relationship
* An equitable proprietary interest in the property being traced.
184
Into whose hands can property be traced?
Property can be traced into the hands of:
* the breaching trustee
* a third party with knowledge of the breach
* an innocent volunteer without knowledge.
185
What happens if trust property is traced into the hands of a bona fide purchaser for value?
The proprietary claim will not succeed as the bona fide purchaser is unaware of the breach of trust.
186
What can beneficiaries claim when trust property is mixed with the trustee's own funds?
Beneficiaries can claim a proportionate share or a charge over the new asset based on the trust money used.
187
What are the potential defenses to a tracing claim?
Defenses include:
* Equity’s darling
* Dissipation
* Inequitability.
188
What is the significance of Re Diplock in tracing claims?
It demonstrates that inequity may prevent a claim if enforcing it would unfairly disadvantage an innocent party.
