Trusts 1 Flashcards
(214 cards)
1
Q
What are the different types of express trusts?
A
Fixed interest trusts
- trustees have no discretion
- settlor specified proportions (e.g. equal shares/my children)
- if silent on shares will take, presumed share equally
Discretionary trusts
- as to amount received and/or who is beneficiary
(e.g. “shares as see fit”)
2
Q
Requirements for valid/enforceable EXPRESS trust?
If fulfilled, what is trust deemed to be and what does this mean?
A
- Valid declaration of trust
(e.g. I give you Tower H for you to hold on trust for the benefit of my children in equal shares) - Put assets into trust
(e.g. transfer deed)
(if you EXPRESSLY TRUST in your ASSETS DECLARE them !)
= CONSTITUTED
i.e. settlor cannot change mind
(if not constituted properly, remains absolute legal owner)
3
Q
Rules regarding DECLARATION of trust?
Brief explanation of each pls
A
Three certainties of:
- Intention
clear from settlor’s words or conduct that intended to make a trust - Subject matter
trust property AND individual beneficial interests clear - Objects
clear who beneficiaries will be
(different tests for fixed / discretionary)
(ISO) (I soooo can’t be bothered with trusts)
Also:
- Beneficiary principle
- Perpetuities
- Formalities
4
Q
Explain beneficiary principle?
A
Trust must generally benefit individuals who can go to court to enforce
Satisfied automatically for express trusts
(ie fixed interest or discretionary)
5
Q
Explain perpetuity principle?
What is it also known as?
A
‘rule against remoteness of vesting’ / ‘rule against perpetuity’
Trust can’t go on for too long
(like perpetua)
Beneficiaries must have been SELECTED (if discretionary) and/or become ENTITLED to trust property (for all trusts) within 125 YEARS of trust’s creation
(125 yrs for trusts 1 April 2010 only - so usually not an issue)
(perpetua probs 125)
6
Q
Formalities for valid express declaration of trust over :
(a) land (inc via email)
(b) property other than land
(c) will
A
Land:
- signed, writing, contain all material terms
(WTS!) - can be oral as long as follow up in WTS afterwards
- does not need to be sent to beneficiary
Email (land only)
- initials/nickname/last name constitutes a signature
- electronic signature counts (especially if kind reg etc above it)
- email address does NOT count
Lifetime of trusts other than land -
oral fine
(written good practice)
Will trusts
- contained in valid will
(signed, written, 2 witnesses)
7
Q
Certainty of intention:
Is it necessary to use words ‘trust’? What will suffice?
“as much yours as is mine?”
A
No
Words or conduct
Good if says the word trust
But if not, just imposes obligation to hold property for benefit of someone else
Words must be obligatory or mandatory
About substance and effect of words used
e.g. frequently told “the money is as much yours as it is mine”
- on whole obvs trust was intended
8
Q
Precatory words - e.g. ‘wish’ and ‘hope’
Will they create a trust?
What about “i trust u will?”
A
No, must be obligatory or mandatory
e.g. neither of these sufficient:
“I am giving you X in hope you look after it for me”
“I trust you will give vase to my kids”
(in hope we do not trust)
9
Q
If there is no certainty of intention, what will there be?
A
Likely deemed to have intended and made a gift
10
Q
For trust’s subject matter to be certain, the property must be described with certainty.
Explain.
What if things will acquire eg in a trust?
A
- Must be identifiable property.
- Must constitute property
- future property which don’t own but anticipate will does not count
(e.g. “shares I will get in A’s will) - If part of collection, not valid unless all identical or identifiable/segregated/specified
(e.g. some of my silver)
wine case
- company said held wine on trust for customers after order
- went into administration
- customers who had ordered wine before then did not get it back
- because their wine had not been segregated or labelled with customer’s names so not identifiable and no valid trust
hunter v moss
- identical shares, did not matter which shares were held on trust, so valid subject matter
11
Q
To be valid express trust, must be valid declaration of trust.
To be valid declaration of trust, must be certainty of subject-matter.
To be certainty of subject-matter, beneficial interests must be certain.
Explain requirement that beneficial interests are certain.
(nb applies to discretionary and fixed interest)
A
- beneficiaries shares or interests are defined with sufficient certainty
e.g.
- silent on shares - valid - assumed that share equally
- “as see fit” - valid - trustee discretion
- ‘generous amounts’ - not valid too uncertain
e.g.
- 2 houses - one to M who can choose whichever she wants and K gets the other - M died before chose, K lost entitlement
(was only entitled to one M didn’t choose, and M never chose)
12
Q
What may happen where there is no certainty of subject-matter?
- If transferred to TP - told them were a trustee over ‘some of it’ and gifted them part?
- Transferred to another absolutely?
A
- If appointed self as trustee but no certainty of PROPERTY, they remain the outright owner
- If transferred to TP - told them were a trustee over ‘some of it’ and gifted them part, not valid trust and TP takes absolutely
- If appointed a trustee but no certainty of individual interests, will hold on a resulting trust for the settlor
13
Q
3 tests required for certainty of objects in discretionary trusts?
A
- Given postulant
- Administrative workability
- Capriciousness
GAC - grls and crls
14
Q
Explain how certainty of objects is demonstrated in fixed interest trusts?
EXAMPLES of what will NOT satisfy objects?Will friends count?
(ie name of the test and what it means)
A
Complete list test
(could do complete exhaustive list)
requires:
- conceptual certainty
i.e. clear description
- evidential certainty
i.e. sufficient evidence to IDENTIFY who falls within class
(eg we know who bob is, can’t find him - still certain)
IMPORTANT:
- employees but no records - uncertainty
- for 5 grandchildren, 1 missing - conceptually and evidentially CERTAIN (evi certain as we know she does have 5 granchildren) - distribute 1/5 to each and ask court what to do with remainder
- FRIENDS IS NOT CONCEPTUALLY CERTAIN
15
Q
What is the “given ____ “ for certainty of objects for DISCRETIONARY trusts?
Explain (name of test and what it requires)
A
‘Given postulant’ test (horrible word)
if u pick up a randomer in ptown centre, would u know with certaity if they are a beneficiary?
- Requires conceptual certainty
(clear description of the class) - DOES not require evidential certainty
(so irrelevant that may be impossible to prove someone falls within class)
(discretionary only)
16
Q
Discretionary trusts - certainty of objects - explain administrative workability
A
Administrative workability
If too wide.
Usually because too large so spend so much time and money identifying that nothing left to distribute.
Also if too large to survey so can’t identify whether distributing property is appropriate given competing needs etc.
E.g. all of West Yorkshire
No defined number of beneficiaries - Q of fact of size of class compared to trust fund.
NB: NOT AN ISSUE FOR FIXED TRUSTS!!!
17
Q
Explain capriciousness and when it is relevant.
A
capriciousness = rationalness
Certainty of objects test for DISCRETIONARY TRUSTS
If no rational reason for the trust; or
No rational basis for trustees exercise discretion upon
E.g.
Requires to distribute to randomers with no link to settlor
18
Q
What happens if there is no certainty of objects?
A
Resulting trust in favour of settlor
19
Q
What trusts will automatically satisfy beneficiary principle?
A
(ie be for benefit of individuals)
Express trusts (ie fixed or discretionary)
(just an issue with implied trusts)
20
Q
If settlor wants to be the trustee themselves, what do they need to do to create that trust?
A
Literally just make valid declaration
Don’t need to transfer since own equitable and legal title
21
Q
If a settlor appoints a third party to act as a trustee, when will that trust be constituted?
A
Valid declaration of trust
Transfer legal title to trust property to trustee
22
Q
If settlor transferring LAND to a TP to be the trustee, what formalities must be followed?
A
(remember, transferring legal title)
(omg makes sense why for trust only need WTS cos its equitable!)
- Execute deed
- must state its a deed
- signed by settlor, witnessed and signed by witness - Give executed deed to trustee and either trustee or themselves send to LR
Only takes effect when LR registers as new proprietor
23
Q
If settlor transferring SHARES to a TP to be the trustee, what formalities must be followed?
A
Either:
- Within CREST system
- computerised transfer
- public quoted companies only - Outside CREST
- execute stock transfer form; and
- give form and share certificate to trustee or company
Not transferred until title transferred
24
Q
If settlor transferring MONEY to a TP to be the trustee,
When does transfer take effect?
A
Legal title transfers when
- If handing over cash, on delivery
- If bank transfer, once lands
- If cheque, once cleared
- if settlor dies before cleared, cheque can’t be
25
If settlor transferring CHATTELS to a TP to be the trustee, when does the transfer take effect?
Physical delivery
Or deed
26
Explain 'equity will not assist a volunteer'?
(beneficiaries are the volunteers)
If settlor not followed correct formalities to transfer, there will be no trust.
nb: there are exceptions
27
What are the 2 main exceptions tot he maxim that 'equity will not assist a volunteer'?
1. Every effort test
2. Rule in Strong v Bird
28
Explain 'every effort test'
(exception to equity will not assist a volunteer)
***includes where given to someone who would give to the register-er - e.g. given to trustee to register at LR - son hasn't. still satisfied every effort.***
Settlor did everything they could to transfer legal title/passed **point of no return**
All that remained was action of a TP
If the docs are still in settlor's **possession**, not satisfied every effort test.
Equity will regard trust as valid
E.g.:
- transfer legal title to land, settlor executed deed and gave deed to trustee
NOTE:
If settlor didn't take every effort but unconscionable to back, MAY regard as complete
- involved lifetime gift
- outside scope of manual
(did essay on this at uni)
29
What is the rule in Strong v Bird
Exception to equity will not assist a volunteer.
If settlor wanted to create trust in lifetime but never got round to transferring legal title to trustee, but intended trustee becomes their executor/administrator
Since PR now has legal title, the original trust could be constituted IF:
1. Intended for immediate trust with PR as the trustee;
2. Did not transfer due to failure to comply with a relevant transfer rule; and
(will usually be satisfied - e.g. never delivered ring)
3. Intention continued until death.
(e.g.
Desmond is Chriss executor. Intended STRONG BIRD box on trust to Dad but never transfered. Intended to do so with Desmond as trustee, and intended until death, but never got round to it.)
30
What must a settlor do if declare themselves AND ANOTHER to be trustees?
Transfer legal title from their sole name to **joint names**
If made DECLARATION but not transferred, will be **UNCONSCIONABLE** for trust to fail
so trust is valid and they are duty-bound to transfer
31
what is capital v income in trusts context
capital = market value, inc any capital gain if inc in value
(remember it as capital gain = capital = no extra)
income = money derived from property on regular basis, eg dividends on shares
examples
- antique desk - no income, capital only
- bank account - balance = capital, interest payments = income
- house - market value = capital, rent = income
32
absolute vs limited beneficiary
absolute - entitled just capital and income
limited - entitled to just capital
(capital fm limited !)
33
2 types of interests can a beneficiary have in a FIXED interest trust?
(explain each one and for each, WHAT HAPPENS IF BEN DIES)
1. Vested
- unconditional entitlement
- if beneficiary dies before trust property paid to them, will belong to their estate
2. Contingent
- CONDITIONAL on future event which may not happen
e.g. born
- if die before meet condition, goes back to settlor (unless settlor specified should pass to someone else)
WITHIN those two categories, there are successive interests:
- once someone dies, you get their interest
- e.g. "hold on trust for my wife for life and remainder to son"
34
Is a standard successive interest vested or contingent?
(eg to my wife for life and remainder to my son)
Vested
- since don't have to satisfy any conditions
- just means that won't ordinary receive trust property until the other beneficiary dies
(remember entitled to capital!/s 32!)
(although the settlor can add conditions to make contingent - e.g.should he reach 25)
35
What is trust interest which is in possession vs postponed?
In possession = can enjoy it now (eg life interest)
Postponed = have to wait until another's right to enjoyment expires (eg remainderman)
36
What is interest in remainder/remainderman? (trusts)
Once someone else has died, you get the remaining trust property which has not yet been used
Entitled to capital
37
If beneficiary of successive trust interest dies before the life tenant, what happens?
Their interest in remainder passes to their estate
Unless settlor created contingent interest in remainder
e.g. remainder to son if reaches 25, and they died when 24
- interest in remainder goes back to settlor on resulting trust
38
Common name for trusts which create successive interests?
life interest trusts
(nb they are still fixed interest trusts - because settlor still stipulating who receives what and when)
39
The correct name for potential beneficiaries (ie members of the class prior to distribution of trust property) in a discretionary trust?
Objects
40
is it possible to combine elements of fixed interest and discretionary trusts within a single trust?
yes
e.g. u could say
"give my shares to Francesca to hold on trust for my wife to life, remainder to such of my children as survive my wife and shares that trustee deems fit"
- wife has a vested interest under fixed interest trust
- children have no vested or contingent interest - subject to them being selected
41
What is the rule in Saunders v Vautier?
*If for my kids who reach age of 25. none reached 25. would come back to me on resulting trust. therefore i have an interest. could not use S v V yet.*
(both mean convey trust and therefore end trust):
Bare trust (i.e. sole adult beneficiary w mental capacity + vested):
- can end trust by directing trustees to **transfer** trust property **to them** OR **other trustees**
(assuming other trustees under sep trust)
(extended rule):
group of beneficiaries can do the same, if collectively:
- absolutely entitled;
- over 18;
- agree to proposal; and
- mental **capacity**
- if the trust has contingent/remainder interests, all those bens must agree
-*imp*:
if vested, need consent of contingent and successive.
if contingent, need consent of whoever else may be entiled (e.g. settlor's residary beneficiary if died)
- if agreed a diff split or something which overrides terms of original trust in return for bringing to end, that is permitted
e.g. O only agrees to end in exchange for 50% share of fund - that is fine.
42
Are purpose trusts fixed interest or discretionary trusts? Are they express?
Express trusts (how else would u know the purpose!)
(need valid declaration and put property into the trust)
fixed interest or discretionary depending on terms.
eg
- "for residents of bath" - for individuals NOT purpose
- "to advance good citizenship amongst relatives" - purpose trust
43
How does certainty of objects apply for purpose trusts?
The objective (i.e. the purpose) is the object. Not the beneficiaries.
Must be clear what the objective is
Unless it is charitable purpose - as long as purpose is charitable, doesn't matter how vague
- Charity Commission will work out with trustees what to do with it
44
How does beneficiary principle apply in relation to purpose trusts?
As a general rule they are void
(since no beneficiary who can take to court)
But doesn't appy to charitable, Re Denley or imperfect obligation - I.E. THE ONES WE LOOK AT
45
Explain rule against perpetuities in relation to purpose trusts?
Name of this rule.
(rule against inalienability of CAPITAL)
a) trust last 21 YEARS or less; or
- draft: **as long as law allows** - presume 21 years.
b) trustees able to spend fund on that specific purpose in one go, thus ending trust
IMPORTANT:
- shouldn't use ***income*** to achieve
- if it says **maintain**, **not valid** unless **time limited** it as ongoing obligation
e.g.
- give 40k, use **INCOME** generated from that to **MAINTAIN** changing rooms
^ void, to generate income, have to lock away trust capital
^ if trustees spent the trust fund in one go (ie 40k), nothing left to generate income from, could not fulfil trust
^ and not limited to locking away for 21 years
(so effectively saying lock away capital and use the income to maintain forever)
2. 40k to spend on BUILD changing rooms
- not requiring use of income
- even tho not time limited, can **use in one go**
(nb: 125 years for individuals. unlikely any these days will offend)
46
which 2 principles DONT apply to charitable trusts?
beneficiary principle
rule against inalienability of capital
47
To be valid, charitable trusts must satisfy what 3 conditions?
1. **Charitable** purpose;
2. **Public** benefit; and
3. **Exclusively** charitable.
CPE. T shelb CPE. p for pol.
48
What counts as a 'charitable purpose' for charitable trust to be valid?
Explain each one.
At least one of following:
1. Poverty
- not destitution but **'go short'**
2. Religion
- more than philosophical discussions about if god exists (will k)
- trust must take **positive steps** to sustain and increase religious belief
e.g. distributing religious publications
3. Education
- inc research as long as useful and published
- eg scholarships, building educational facilities, paying school staff
49
When will a charitable trust have a 'public benefit'?
1. Identifiable benefits
- must relate to purpose of charity
- detriments must be outweighed by benefit
eg no school for pickpockets
2. Sufficiently large section public
- tests differ depending on charitable purpose
(separate queue card)
50
Explain how requirement for 'public benefit' apply to the three purposes of charitable trusts?
Describe each.
1. Prevention or relief of **poverty**
- GROUP fine. but not named
- 'my family' fine.
- george and ella not.
2. Advancement of **religion**
If:
- place of worship open to all; or
- members of congregation mix with rest of society
(so no if closed off cult)
3. Education and other charitable purposes
- must not be **v small number** of beneficiaries and tests:
a) personal nexus
b) class within a class
c) not exclude the poor
(sep queue card)
51
Explain tests for educational (or other charitable purpose aside from religion/poverty)
to satisfy the 'public benefit' test?
*this is a write down situ*
1. personal nexus
- not linked reli to individual or company
(e.g. kids of employees of Red Anchor)
2. class within a class test
- **c****lass and benefit must add up**
- limiting by **location** is fine
(e.g. building care home for prestoners)
(eg promoting sports to people in Preston who are methodists - **no rationale why only Methodists benefit** from sport)
3. can't exclude the poor
- can charge fees on use as long as **profits ploughed back** purpose
- not excessively high fees
eg bursaries, sharing facilities, higher fees
52
Explain the two aspects of a trust being 'exclusively charitable'?
1. no political purpose; and
2. if charge fees, profits must be ploughed back into trust
(can't give fees to private individuals)
can't have part charitable and part non charitable purpose
(eg mixture charitable and political)
53
Can charitable trust be political?
General rule is cannot have political purpose of any form.
Can't support political party or campaign for change of law in UK or abroad.
e.g. can't campaign for release of prisoners
BUT can engage in political activities which are **incidental** to their main purpose
eg Oxfam can persuade Govs to remove infrastructure which may help eradicate poverty
54
When may a non-charitable purpose trust still be valid?
(despite general rule that can't be because offends perpetuities and beneficiary principle)
1. Re Denley
- purpose secures tangible benefit for ascertainable group of individuals
2. Trusts of imperfect obligation
- eg to maintain specific animals (eg pet) graves or monuments
55
When will there be a valid Re Denley trust?
Declaration identifies people who will benefit from particular purpose
(so overcomes beneficiary principle)
Must be:
1. Clear purpose with sufficiently tangible **benefit**
2. Ascertainable beneficiaries
- given **postulant** test
3. Not offend **inalienability** of capital
- 21 years or able to spend all capital on purpose
e.g.
- 500k to spend on building gym for employees of XYZ satisfies this
- 500k for maintaining gym doesn't
(inalienability)
56
Explain 'trusts of imperfect obligation'.
Inc what happens if not enforced properly.
(Rory is imperfect but I love him 🐶)
Allow non-charitable purpose trusts to be valid.
Mainly for trusts to:
- maintain a specific animal, monument or grave
No human beneficiary obvs but we love animals and monuments so valid
Must still comply with inalienability of capital
Unenforceable by beneficiary but **settlor** or their residuary beneficiary can go to court to claim trust property if trustee not spend properly.
e.g. enforceable:
"500k to look after dog Max for as long as law allows"
- valid - specific animal and limits to 21 years
57
When will PRESUMPTION of resulting trust arise?
1. Voluntary transfer of **PERSONALTY** which they already own
(no consideration. not land)
e.g. Mike £100 to his gf Sally
*(sounds daft but easily rebutted)*
2. Voluntary transfer of **land** if **additional** evidence
e.g. they are strangers so obvs not a gift
3. Buys property for another 'purchase money cases'
- purchase but **arranges to put in name of another**
e.g. Jack pays, asks seller put in Abigail's name
- Jack holds equitable interest under resulting trust and Abigail has legal title
raises presumption that intended to keep some or all of the beneficial interest for themselves
(unless advancement applies instead cos 🤦♂️)
nb: rebuttable
r for resulting, r for rebuttable
58
What happens with legal title and equitable title under a resulting trust?
Transferee holds legal title in full
Transferor holds equitable title proportionate to the amount they contributed if purchase money
(or obvs if they owned the whole thing like gave a vase it would just be that own whole equitable itnerest)
59
Will there be a presumption of resulting trust where there is a voluntary transfer of LAND?
nb: not personalty
Only if there is some other evidence
eg transferor and transferee are strangers suggests presumption of resulting trust
Presumption doesn't arise purely from fact of voluntary transfer
60
What is a purchase money resulting trust?
How much equitable interest will transferor get?
Where purchases property from seller and arranges for property to be in name of another, presumption of resulting trust arises
Also if contributes to PP of property in name of Y
Applies personalty and realty
Get whole or part of equitable interest if paid part
61
If X contributed towards purchase price of property (which is conveyed into name of Y) and Y paid remainder, what will the presumption be?
(nb Y is the one who gets legal title)
That X intended Y to hold on resulting trust for X and Y
The size of their beneficial interests will be based on their respective
e.g.
- me and H buy holiday home
- I contribute 100k, H pays 10k of PP
- House conveyed into my name
- I own legal title but we both hold equitable title under respective shares
- I hold on resulting trust for H
- If sell in future, H gets 10% purchase price
62
Does presumption of purchase money resulting trust apply to purchases of personalty, realty or both?
Both
63
Conditions for presumption that contribution towards purchase monies = resulting trust to apply?
1. Contemporaneous
(contributed at time of purchase)
2. Contributed to actual purchase price
(eg if house purchase - not count if just paid legal fees)
(so baso i directly paid towards purchase price at time of purchase)
64
Effect of presumption of advancement?
i.e. presumption of GIFT
No resulting trust and transferor presumed to be gifting property to transferee
(so retain no equitable title)
65
When does presumption of advancement apply?
1. Father to child (minor or adult)
2. **Loco parentis** to child under 18
i.e. guardian who responsible for providing financially to child
(even if not male)
3. Husband to wife
4. Male fiancé to female fiancé, as long as eventually marry
not grandparents
66
How can presumptions of advancement and resulting trust be rebutted?
Evidence that had diff intention **before or at time** of transfer
Evidence of intention AFTER transfer can only be used against you
e.g. rebut advancement by evidence that wanted recipient to re-pay - would replace with resulting trust
e.g. rebut resulting trust by birthday card
67
Who is burden of proof on to rebut presumption of resulting trust or advancement?
The party who is seeking to rebut it
(seems obvs but imp lol)
68
What are automatic resulting trusts?
i.e. when does it arise and what is effect
Settlor transfers property to **trustees**, who do not **dispose** of all or part of equitable interest
(bcos trust is void OR does not exhaust the fund)
Equitable interest goes back to settlor via resulting trust
Would be bare trust, Saunders v Vautier, could use to get trustees to transfer legal title back
(call 'automatic resulting trusts' to distinguish from those which arise from presumptions)
69
Circumstances where automatic trust may arise?
(i.e. where equitable interest may not have been disposed of in its entirety)
**Trust void in full or part or doesn't dispose of all of the fund**
(helpful - remember equity requires someone to always hold the equitable interest)
1. conditional interest never vested
e.g. died before reached 25
2. Lacks certainty of objects
(eg my besties!)
3. Lack certainty subject matter
(eg not distinguished. sarah pick first.)
etc etc
70
Are formalities required for resulting trust?
No as it is a form of implied trust
(and statute clear that implied trust can be created w/o any formalities)
71
If relationship ENDS, how will family home be dealt with if married couple vs cohabiting?
re equitable interest:
Married
- divorce order can quantify beneficial interests, regardless of whether created express trust when purchased home
Cohabiting
- follow valid express trust
- or if not, implied trust
72
What makes a resulting trust of family home often unfair?
Only applies to monetary, **contemporaneous** contributions to purchase price.
So the following don't give rise to a resulting trust
(meaning that party loses equitable interest):
1. Payments towards mortgage
(although payment towards deposit does count)
2. Non-monetary contributions
e.g. childcare, improvements
3. Ancillary payments e.g. stamp duty, legal fees and bills
(so we usually use common intention constructive trusts)
73
If partners registered co-proprietors (legal title jointly owned), what is presumption if no express trust?
Name for this type of trust?
Assuming no express trust
If co-proprietors, hold legal title jointly and equally
"Equity follows the law"
This is the initial version of CICT.
Can rebut.
74
In a jointly owned fam home (JT), howcan a partner claim a higher share than default (ie joint and equal) via CICT?
1. **AGREEMENT** **OR** common **INTENTION** that entitled to greater share; and
2. **Detrimentally** relied on that agreement/intention .
If arguing intention, court considers 'whole course of dealing.
Will be unusual for court to find intended unequal shares.
75
What may court consider in assessing 'whole course of dealing' for common intention constructive trust / unequal shares?
***used to quantify shares once found that there is a CICT***
1. Advice/discussions at time of purchase
2. Why in joint names?
3. Arranged finances separately?
4. Nature of reli
5. Children who must provide home for?
(was one responsible for childcare?)
6. How financed property?
7. How paid outgoings?
Unequal contributions to purchase price unlikely to show unequal shares.
76
Under what type of trust can partner seek to claim beneficial interest in a solely owned family home?
What burden will they have?
Common intention constructive trust
They have burden of proving beneficial interest
77
Two stages that must be followed for common intention constructive trust?
1. Establish that a common intention constructive trust exists
(presumed if jointly owned)
2. Quantify beneficial interests
78
How can non-owning partner claim that common intention constructive trust EXISTS?
- common INTENTION that both have an interest; and
(inferred or express)
- DETRIMENTALLY RELIED on that intention
79
Two ways establishing common intention for CICT?
*imp*
1. Express common intention and detrimental reliance
- oral or written agreement that both have interest
- sufficient:
"as much yours as is mine"
- but for bank's advice, would have in joint names
- insufficient:
"finish the lease and move in" (doesn't address ownership)
2. Inferred common intention and detrimental reliance
- couple's conduct, usually:
(a) direct contribution to PP
(b) **signif** mortgage repayments
(c) paying household **expenses** which **allows** other party to pay **mortgage**
following won't count:
- **loans**
- **refurbishishments** *sorry dwye!*
- **incidental** to PP - e.g. legal fees
80
What will be valid detrimental reliance to establish common intention constructive trust?
Option 1: Express common intention + DR
- financial contributions - eg alterations
- substantial housekeeping expenses
- domestic might (less clear-cut)
Option 2: Inferred + DR
- can only infer from financial anyway (non-monetary don't suffice for inferred)
- so will automatically satisfy DR
81
How do courts quantify shares in common intention constructive trust?
If partners agree, follow that
Otherwise, WHOLE COURSE OF DEALING
(as per earlier card - e.g. how finance/any kids/expenses/advice on purchase/why joint names)
82
Two main ways a partner can establish beneficial interest in family home if there is no express trust?
1. Common intention constructive trust
2. Proprietary estoppel
(not resulting trust - wouldn't establish that would be presumed)
83
2 stages to bringing a proprietary estoppel claim?
1. Estoppel must be established (ie ADR)
2. Estoppel must be satisfied (i.e. remedies)
84
3 elements to establishing a claim in proprietary estoppel?
ADR
Assurance
Detriment
Reliance
85
When will assurance have been made for purposes of proprietary estoppel?
Legal owner made representation or created expectation that would become entitled to interest in land.
Either:
(a) active
- i.e. tells have interest
(b) passive
- conduct clearly suggests
- legal owner must have known yet never told claiming party otherwise
86
How to establish detriment in proprietary estoppel claim for family home?
Acted to detriment upon assurance
Expenditure of money not required
Must be **significant**
E.g.:
- renovations
- working w/o fair pay
- moving to new area
- looking after someone v ill
(esp if meant give up work)
Consider in light of any benefit obtained
e.g. moved to new area but got rent-free accommodation - on balance may not have suffered detriment
87
When will a party not be able to show reliance for proprietary estoppel?
Acted to detriment for reasons other than the assurance
BUT the assurance does not need to be SOLE reason for conduct
e.g. potential argument if move in with elderly relative that arose out of natural love and affection
88
What remedies can court grant for proprietary estoppel over family home?
Court discretion - one of following:
1. Transfer LEGAL ownership
2. Grant BENEFICIAL share
3. Grant lease
4. Some occupancy right - e.g. reside rent-free for life
5. Financial compensation
89
How should court decide remedy for detrimental reliance?
Including what to do if promised transfer on death but still alive.
If departure from assurance unconscionable
USUALLY hold to their assurance.
(e.g. transfer as agreed)
Legal owner burden that holding to assurance disproportionate
*e.g. got generous inheritance*
If assured transfer on **death**, court MAY order that transfer whilst still **alive**
- but will be **discount** for this
Consider whether remedy could cause **injustice** to parties or third parties?
90
If you can go for proprietary estoppel or CICT re family home, which is best?
CICT because beneficial share
**PE** - court has **discretion** on remedies
But CICT may not be possible on facts
e.g. usually requires **financial** contribution
PE **can be used between family members** as well as couples
91
Bars to claiming proprietary estoppel?
1. Inequitable or unconscionable conduct
(Clean hands)
2. Unreasonable delay
(delay defeats equity)
92
Main difference between when can use proprietary estoppel vs CICT re fam home?
Proprietary estoppel is for future interests
e.g. will leave you this in my will
CICT is for present interests (ie share a house together)
^ is it tho
93
Who can be a trustee?
Individual over 18 with mental capacity
(as long as statutory disqualifications don't apply - outside scope course)
Company, either alone or with human trustees, as long as authorised by company's constitution
(beneficiary could be!)
94
How many trustees should a trust have?
Land: at least 2 human trustees or a sole corporation and max 4
(cos overreaching)
Personalty: at least 1 and NO MAXIMUM (!!!!!!)
95
How can trustees retire?
Will they need replacing?
(nb position differs on diff circumstances)
If no express provision in trust:
1. if there will only be **one** trustee left, must be **replaced**
(sep card)
2. If **two** trustees or one trust corp left, no need replace provided:
a) retire by **deed**; and
b) other trustees **consent** by **deed**
96
Is a trustee who has retired liable for breaches of trust?
Remains liable for own breaches but not for future breaches, unless they retired to facilitate those breaches
^ same as picture frame analogy
^ except inc facilitate by retirement
97
HOW is a retiring trustee replaced(i.e. formalities)?
WHO appoints replacement?
(not who appoints usually. who appoints replacement.)
In writing
- deed not required
- good practice as auto transfer property
- except shares
Appointed by:
1. person nominated in trust instrument
2. if none ^, continuing trustee(s) - inc retiring trustee if willing to
97
GROUNDS for replacing a trustee?
Who effects replacement?
Trustee is:
- dead 💀
- outside UK **12 months** 🌎
- minor 🔞
- lacks capacity 🧠
- desires to retire 👵
- refuses to act (**disclaim**) ❌
- unfit to act 🏋️♀️
(see next card but USUALLY trustees)
98
Who has power to replace trustee if relying on those grounds?
Formalities for replacement?
1. whoever in trust
If none
2. continuing trustee/s, inc retiring if willing
3. if all died, PRs of last surviving trustee
--------------------------------
2. in writing
- ideally deed
- vests trusts property except shares in new and cont trustees
IMPORTANT:
- this is power to **REPLACE** ONLY, not to appoint or remove!
99
If appointing new trustees must be in writing, but why is it best practice to do via deed?
Deed automatically vests trust property, except company shares, in new trustee
99
When can court replace a trustee?
Only if:
- expedient and otherwise impractical
- trustees or beneficiaries **applied**; and
- best **interests** of trust
(generally dislike of trustee insufficient)
100
Conditions for beneficiaries to be able to use s19 to force trustees to retire?
trust instrument has not:
- excluded s 19; or
- nominated someone to appoint trustees
Beneficiaries are:
- full age
- capacity
- taken together, absolutely entitled
101
1. How can beneficiaries force trustees to retire/appoint another under s 19?
2. Following this, trustees must retire if ____
(ie procedure)
1. serve written direction to retire and appoint anyone specified
2. Trustees must then retire by **DEED** if:
- reasonable arrangements to **protect their rights**
- Will be 2 trustees or 1 trust corp **left**
- Another person appointed **replace** them or continuing trustees **consent** by **deed** to their retirement
102
When and how can the following **appoint** an additional trustee?
1. Continuing trustee(s)
2. Court
3. Beneficiaries
Not retire or remove/replace (same thing).
(or use any express power in trust)
1. Continuing trustee
(or anyone appointed in trust)
- if no more than 4 trustees (!) once appointed
- in writing / ideally deed
2. Court
(same as removing)
3. Beneficiary
(same as removing)
103
When and why is it important to appoint another trustee if one dies?
Only 2 trustees
They hold legal title to trust property as joint tenants, so if one dies passes via survivorship
So appoint to ensure continuity trust administration
104
When should trustees consider appointing an attorney?
If concerned may not be able to perform functions for a while, consider delegating functions (to attorney)
holiday to US get an attorney
Can also delegate investment decisions (later cards)
105
Formalities for delegating to attorney?
**Deed**
(guess might be tranferring property! not why tho!)
**Written notice** to all other trustees / those with power to appoint trustees within ***7 days*** of delegation
106
How long can a trustee delegate functions for?
12 months
107
Will delegating trustee be liable for attorney?
Yes, automatically liable
Attorney us word v liable focused lible liable !!!
108
Who has power to ____ a trustee ?
(assuming nothing in trust deed)
1. REMOVE
2. APPOINT
3. REPLACE
4. APPOINT REPLACEMENT FOR RETIRING
1. Remove = beneficiaries
(can order to retire and option to replace)
2. Replace = continuing trustees, court and beneficiaries
3. Appoint = continuing trustees, court, bens
4. Continuing trustees
109
S 31 - what is it and when does it apply?
Discretion.
Pay income MEB **minor** beneficiary if:
1. No contrary provision trust
2. Vested **or contingent** interest in income AND **no prior interest** to income
^ eg husband for life, remainder to son - cannot use s 31 whilst husband is alive
(son entitled to capital and any interest left over)
110
If using s 31, can you pay direct to beneficiary?
No
Minors can't give good receipt
Pay direct to parent or guardian
Or to provider
eg fee-paying school
(nb: trust could amend so can accept good receipt from minors)
111
How does s 31 differ for adult contingent beneficiaries?
EVEN THO CONTINGENT
Entitled to trust income as it arises
If don't pay, accumulate and pay when vests
No discretion - MUST pay
e.g. I am entitled to trust when I reach 25
- before 18, discretionary MEB
- 18 - 25 (contingent) - duty to pay income AND **NOT JUST MEB**
- 25 (vests) - call for ALL trust property (capital and income)
112
What happens if adult contingent beneficiary dies before contingent satisfied under s 31?
Their estate receives nothing further from trust
ie capital / accumulated incopme
113
what is s 32 trustee act?
power trustees to pay or apply trust capital early for beneficiary's advancement or benefit
114
what is s 32 and when apply?
AGE IRRELEVANT. once turn 32 !
1. vested OR CONTINGENT interest in capital
(remainderman or absolute)
2. trustee discretion
3. advancement or benefit
- improve material situation
- some exceptions hobbies/pleasure
- benefit to others must be incidental
4. **written consent** prior interest B
- inc life tenants
- NOT prior interest if rank equally
5. not exceed entitlement
- pre 1 Oct 2014, max half entitlement
6. The amount advanced will be reduced from amount paid when become entitled
115
Does request under s 31 / 32 request have to come from beneficiary themselves?
No
e.g. parent may request
116
Can beneficiaries compel a trustee to perform their duties?
Yes via court order
117
2 requirements which trustees must follow in exercising powers?
1. Consider time-to-time whether to exercise them; and
2. When do exercise them, do so properly
118
Duty of care - what standard are trustees subject to?
**Reasonably prudent business person**
e.g. tax-efficient manner
Can be higher for professional trustees
NB: same standard applies when investing
119
What should newly appointed trustee check and ensure on appointment?
1. That been properly appointed
2. Ascertain what trust property consists of and take reasonable measures to obtain control of it
e.g. press for any outstanding transfers
3. Draw up inventory for any chattels
4. Review relevant documents
- existing trustees must provide
5. Check if any past breaches - action for any outstanding
If don't, liable.
120
When could newly appointed trustee be liable?
If failure to carry out the activities (on sep card - eg checking history) causes any loss
re-cap:
checking history/outstanding claims/not reviewing instrument
121
Can trustees benefit one beneficiary over another?
No - breach of trust - duty act impartially between beneficiaries
BUT
Does not mean need to give equal treatment or consult both
122
Do co-trustees need to take decisions unanimously?
Yes, unless trust document provides otherwise
123
Explain when trustee will breach duty to act personally and implications of this?
Must be **personally active** in running of trust, aside from powers to delegate.
(Personally = can't be Passive)
Liable for beneficiary's loss if:
1. Leave matters to co-trustee w/o enquiry
2. Allow trust funds to remain in SOLE control of co-trustee
3. Fails to observe/correct conduct of co-trustee
4. Failed to act knowing co-trustee did/planning to breach
124
Can trustees allow experts to take decisions for them?
***TAKE ADVICE OR DELEGATE***
No, can just take advice from them.
Unless COLLECTIVELY delegate investment decisions to an AGENT
125
What factors must trustees exercise their powers in accordance with?
(there is a list!)
1. Good faith
2. Considering material circumstances
(relevant matters and facts)
3. Legitimate expectations of beneficiaries re how power exercised
4. Rationally
5. For purpose created
e.g. disc trustees couldn't distribute just to those with red hair cos irrational and irrelevant matter
126
Do trustees need to give reasons for their decisions?
Generally no
(but if do give them, court/bens can enquire into soundness)
but if beneficiary has **legitimate expectation** that discretion exercised in THEIR FAVOUR, trustees may be ibliged to give **reasons** and **advance warning** if doing otherwise
127
What documents are beneficiaries entitled to see?
1. Trust document or will which created it
(how else would u know entitlement)
2. Trust accounts
(fair!)
3. Trust investments
(fair!)
128
What docs in particular are they beneficiaries not entitled to request?
Can they ever get access to such docs?
1. Those which show trustee **deliberations** behind decisions
2. **Letters of wishes** from settlor
(since facilitates exercise of discretion)
^ both come back to that trustees don't need to give reasons
BUT
- can apply to court
- court only disclose if **interests admin of trust**
eg potential breach
- may refuse if cause family fallout or confidential info re individual beneficiary
129
generic circumstantial things trustees should consider when investing?
(a) What type of interests beneficiaries have?
- life interest gets interest
- remainderman gets capital
(remember as life interest gets interest)
- balance them ^
(b) **circumstances** of the individual beneficiaries
(c) How **long** will the trust last for? Are they investing for the short-term or the long-term?
- eg riskier investments when there is still while left to run on trust
(d) **size** of the trust fund?
- can be riskier
(e) **tax** position of the trust and beneficiaries?
130
What type of return likely to get on shares investment?
Considerations when investing shares?
(trusts)
- capital on value of shares
- interest on dividends
Consider:
- generally longer you invest, greater capital return
- spread across diff types of companies in diff areas
- less info and opportunities to buy shares in priv LCs
131
Type of return can get on bonds investments and things to consider when investing?
(trusts)
Income = the coupon (i.e. interest that runs on the loan)
Capital = generally income-producing, can sometimes get cap growth on sale
Considerations:
- provided in exchange for money lent to govs/companies
- loan will be repaid at some point, receive interest each year
- gov't bonds safe and secure
132
What return can you get on realty and considerations when investing?
Income = rent
Capital = inc in property value
Considerations:
- generally inc in value
- expensive
133
Return on cash-in-bank and investment considerations?
Interest = interest from the bank
Capital = none
Considerations:
- safe
- regular but small amounts of income
- if investing for long-term, should be small proportion portfolio
134
Examples of main things which are not classed as investments for trust?
so don't invest in:
- 'run around' car which depreciate in value
(not classic or luxury ones)
🚗
- bets on horses 🐎
(expects that lose)
- **unsecured** loans
(unless trust doc expressly permits)
(e.g. abi)
135
Can a settlor exclude liability for trustees for losses arising out of investments?
Yes
136
What property can trustees invest in?
Generally anything would purchase themselves, except property overseas
137
What duties do trustees have when exercising investment powers?
(bonus for saying which are statutory and which not)
1. Standard investment criteria
(suitability and diversification)
2. Review investments from time-to-time
3. Must select and review with **professional advice**
4. Choose with reasonable care and skill
5. Act fairly between beneficiaries and try generate best return for trust
(last one is non-statutory, rest are statutory)
138
What is standard investment criteria?
Explain both aspects of it.
A) Suitability
Step 1:
is it a suitable investment?
Step 2:
is it a good choice?
- e.g. consider trust size, beneficiary interests, risk, tax etc
B) Diversification
- diff types of investments to avoid risk of losing all on one investment
139
Explain requirement of trustees to review investments from time-to-time?
Review based on standard investment criteria
Time-to-time is Q of facts / depends circumstances of each trust
eg economic downturn, review ASAP
140
Do trustees need to obtain professional advice when investing/selling/purchasing?
Yes unless inappropriate or unnecessary
(eg trustee is qualified financial adviser)
Act reasonably in selecting/reas believe that person is qualified
Decision on what will invest etc remains that of trustees
141
Non-statutory duties of trustees when exercising investment powers?
1. Act **impartially** between beneficiaries
e.g. life tenant (income), remainder (capital)
2. Secure **best return** for beneficiaries
- financial considerations take precedent
- ethical and moral usually irrelevant
(sometimes are - separate queue card)
142
When can trustees take ethical considerations into account when investing?
1. Charitable trust
- can refuse to invest things at odds with charitable purpose
2. Ethical investment likely to get same financial return as ethically dubious investment, CAN invest in ethical
3. Settlor can state shouldn't invest in specified unethical sectors
143
Can trustees delegate their functions to a beneficiary?
No
144
How much can a third party be paid where trustee delegated their powers to them?
Reasonable renumeration
145
Trustees must ___ delegate investment functions to either _____ or ____
Collectively
A third party (agent)
One of the trustees, who is suitably qualified
(NB: collective delegation is diff to individual delegation. collective delegation is where trustees are delegating investment functions. individual delegation is where trustee is going to be away for a while so someone else takes over and is to an attorney. collective del not liable but attorney u are.)
146
What must trustees do if delegating investment functions to agent?
1. Appoint in writing✍️
2. Prepare agent with written policy statement agent 📜
- re how to exercise functions
3. Term in written agreement that must comply with policy statement ⚠️
4. Select someone suitably qualified 🎓
5. Review actions time-to-time ⏰
(with reasonable care and skill)
147
What must agents (who trustee delegated investment powers to) comply with ?
Same statutory and non-statutory investment duties that would otherwise apply to trustees
e.g. act impartially, standard investment criteria, best financial return, obtain advice
148
Is trustee liable for act or default of investment agent?
No
Unless trustee breached any of its personal duties in relation to delegating
(e.g. policy statement, review time-to-time etc - see sep card)
nb would be liable for actions of attorney
149
Differences between individual delegation and collective delegation by trustees?
Collective is where all trustees delegating to an AGENT
e.g. investment
^ they make decisions for them
Individual is where one trustee delegating to an ATTORNEY
e.g. bcos going away for a while
Agent is not time-limited, attorney is 12 months
Agent - not liable for actions/defaults if taken reas care skill etc. / Attorney - liable for acts and defaults
150
Who can be a fiduciary?
someone act on behalf of another in situ where reli trust/confidence arises
includes:
- solicitors
- business partners owe to each other
- trustees to bens
- directors to company
- agents to principal
(extend beyond trusts)
151
What is the core fiduciary duty?
What does it raise?
Loyalty
(k fiduciary iking lamar)
Means act for benefit of others and not self, raising:
1. No conflict rule
- own interest conflict with principal
2. No profit rule
- unauthorised personal profit from position or use principal's property to make benefit
152
If trustee breached no profit rule, what must they do?
Account to trust for the profit
i.e. pay it to trust
153
What are irrelevant considerations for court in assessing whether trustee breached fiduciary duty (i.e. no-profit/no-conflict)?
Honesty of trustee
Effort trustee put in to secure personal profit
Fact trust didn't want it anyway / **hasn't lost anything**
(so strict liability - if put self in that position, liable).
154
When can trustees make a personal profit?
1. Trust instrument expressly allows;
2. All beneficiaries are aged 18 + and informed consent; OR
3. Court order or statutory provision authorises
155
What are the main breaches of fiduciary duty relevant to trustees?
1. Purchase trust property
2. Competition with trust
3. Remuneration
4. Incidental profits
(director salary and commission)
5. Exploit info or opportunity
156
Explain self-dealing rule?
- when does it arise?
- options to beneficiaries?
purchases property from trust for self
In position of conflict
(trustee want highest price, self wants lowest price)
Beneficiaries can set aside at later date
(have reasonable time)
**Not automatically void** as may be good deal for trust
**Strictly liable** - court doesn't consider value paid / honesty
157
Can trustee avoid self-dealing rule applying by retiring prior to purchasing the property?
No, as long as retired with objective of purchasing trust property, will be caught by rule
bens can set aside
158
Explain when trustee will be liable for competing or intending to compete with trust?
What will they have to do if liable?
What could beneficiaries do?
Sets up own company which competes with trust
Liable to account for any profits made by competing business
Beneficiaries can get injunction if find out planning to set up competing business
159
When can trustees get financial renumeration?
No, unless any of below apply:
1. Express provision in trust deed
(charging clause)
2. Fully informed consent by all beneficiaries, all over 18
(if didn't have all facts, can set aside agreement)
3. Court order
- if interests of beneficiaries (eg skill)
- and fees not excessive
4. TA 2000:
- trust corp or professional trustee (if not sole and other trustees written consent) entitled reasonable remuneration
(see separate queue card for further detail)
ALWAYS ENTITLED TO EXPENSES
160
When will STATUTE allow trustee to take ___ remuneration?
Reasonable
(Q on facts - eg more £ if skill/size fund)
Allows if:
- no express provision in trust
**Trust corporation or professional trustee**
^ If **professional** trustee, must have co-trustees who given written **consent**
Professional if in course of business which includes management or administration of trust
161
What must trustees do if receive commission?
Account to trust
Because trustees cannot make incidental profits (i.e. 'on the side)
162
If a trust includes substantial shareholding in a company, what should trustees consider doing?
Joining board of directors
(so can oversee and have management input)
163
If acquired directorship due to being a trustee, can director keep director salary?
Unless express provision in trust
No and must account to trust IF got directorship DUE TO trust
Mainly means under ordinary resolution would not have been voted in if not for trust
E.g.
Trust has 35% shares
- 90% shareholders vote in favour - can keep salary
(even if trust did not vote, would have become director)
- 65% vote in favour - can assume only get due to trusteeship
164
Trustee defence so don't have to account for personal profits?
**Authorised** by:
- beneficiaries, all over 18;
- court; or
- trust deed
165
Explain trustee liability for using info or opportunity received in capacity as trustee?
Can't use to receive personal profit
**(unless consent from court or all bens over 18)**
Because got access to info/opp via trust
Also because of no-conflict rule
Unwillingness of trust and honesty irrelevant
e.g. Boardman v Phillips
- received info in capacity as trustee about a company
- told co-trustees to buy shares in company
- they refused so he asked some trustees if he could personally buy and they said yes
(trustees can't consent)
- had to account to trust for profit
166
What remedies are available if a trustee breaches their fiduciary duty without authorisation to keep personal profit?
Who can bring ?
Beneficiaries entitled bring **either or both**:
1. Personal claim for account of profits
- regardless of if trust suffered loss
2. Proprietary claim
- recover property owned by trustee which represents the profit received
e.g. spent money on dog - receive dog
e.g. gained access to opportunity to buy shares - receive shares
***e.g. take the ice cream van AND any other profit u got that take that too ! e.g. the commission for buying the van***
167
Explain personal claims?
(trusts)
If trustee's wrongdoing causes monetary loss to trust, beneficiaries can seek compensation
Must satisfy from own property or funds
Only as good as financial solvency of trustee
NB: can only bring personal (and not proprietary claim) if wrongdoing did not cause any property to leave trust
e.g. didn't check on existing investments, became worthless
168
When is personal claim against trustee NOT a good idea?
(and what may be instead)
1. Trustee used trust property to buy something attractive
e.g. shares gone up in value
- could use proprietary to recover shares
2. Trustee is insolvent
- will be ranked as unsecured creditor
- but proprietary claim can show it is trust property so not distributed during bankruptcy
3. Happened while ago
- no statutory limitation period for proprietary claims, but (usually) is for personal
169
If more than one trustee has breached trust, how will liability be shared?
Jointly and severally
i.e. can bring against one of the wrongdoing trustees or all
e.g. could bring personal claim against wealthiest or professional trustee w insurance
(NB: trustees aren't automatically liable for other trustees actions)
170
Causation required to establish PERSONAL claim?
(trustees)
But for test
ie no loss if not for breach of trust
eg if another caused loss but u failed to act personally, assumed that u enabled loss to happen
(sep queue card but harder to prove with investments due to low bar of expectations lol)
171
Causation required for personal claim for INVESTMENT decisions?
(against trustees)
- have to prove
- decision was one which **NO REASONABLE TRUSTEE** could have made
(so there is only causation if caused loss which would not have happened if decisions were worse than those reasonable trustee made)
e.g. nestle case - failed acquit with investment powers, not taken legal advice, not regularly reviewed - but series of complicated interests and different beneficiary interests to balance
172
What can beneficiaries recover under personal claim?
Compensation equal to loss caused to trust
Interest
173
Trustee defences to personal claim?
(just a list of them)
1. Exemption clauses
2. Knowledge and consent of beneficiaries
3. section 61 of Trustee Act 1925
4. Limitation periods and laches
174
Explain when exemption clause in trust instrument exclude trustee's liability for personal claim?
Can't exclude for fraudulent breaches
If included by professional trustee:
- any ambiguity construed against them
- must have made settlor aware of
175
When can trustee rely on beneficiary's knowledge and consent as defence to personal claim?
What if only one consents?
Fraudualtn?
What if consent afterwards?
If consented to the breach before **or afterwards**, can't subsequently bring claim
Fully informed. Adults. Capacity
If one consented, only that beneficiary is barred.
Can consent for breach
176
Explain section 61 of the Trustee Act
Court can relieve trustees from liability in personal claim
In whole or in part
If acted honestly and reasonably
And ought to be fairly excused
Reluctant to use for passive trustees
e.g. lay trustee and honestly made mistake on complex law - likely excused
e.g. did something which expressly prohibited by trust but weren't dishonest about it (e.g. 'it transpired' were prohibited), not professionals and took advice before selling
177
Limitation period for bringing personal claim for breach of trust (inc when runs from)?
Is this ever varied?
USUALLY
6 years from date of breach
But for a minor, time only starts to run when turn 18
Remainder beneficiaries: time starts to run when become entitled (eg life tenant dies)
**Does not apply if fraudulent breach** and some others (sep card)
178
If there is no statutory limitation period for personal claims, what doctrine applies?
Explain the doctrine.
i.e. fraudulant cos doesn't apply
Doctrine of laches
Means beneficiary cannot bring personal claim if:
1. **Knew** of the breach;
2. Delayed taking action;
3. Delay means:
- deemed consent/waiver; OR
- causes detriment / prejudice to trustee
^ delay alone does not detriment
e.g. witnesses died. docs destroyed.
179
If only one trustee is sued via personal claim, can they share the burden of paying compensation with other trustees?
Potentially if:
1. Equitable indemnity
- could claim full amount
2. Court can order co-trustee to make contribution, considering their blameworthiness
- claim contribution of up to 100%
see other cards.
180
When will equitable indemnity apply to allow trustee to recover personal claim compensation from co-trustee?
Can recover FULL amount if:
1. Acted **FRAUDULENTLY**, when other trustees acted in good faith; or
2. **SOLICITOR** had such **CONTROLLING** influence that others blindly followed advice; or
3. **BENEFITTED** personally from breach; or
4. Is also a BENEFICIARY who benefitted personally from the breach
- indemnity limited to their equitable interest
181
What contribution can court order co-trustee to make towards personal claim (made against other trustee)?
civil contribution act
Up to 100% of compensation ordered
(will consider what is just and equitable)
182
Who does trust property ULTIMATELY belong to?
Beneficiaries
183
Explain when trustee can use proprietary claim?
If trustee uses trust money to buy something in own name, can use to recover that asset and bring back within trust's control
183
When will there be no value in bringing a proprietary claim?
trustee **dissipated** trust property
i.e. spent it in such a way that there is nothing left to trace into
e.g. paid bills or used money to go on holiday
^ bcos nothing to claim against.,
183
Tracing rules where trustee has sold trust property and used to buy something else in own name?
(proprietary)
2 options.
1. Take substitute property
(use if high value)
2. If reduced in value:
- Sue trustee for compensation (personal claim); and
- assert equitable lien (charge) against property
lien allows to sell and recover remaining amount due if D doesn't have sufficient funds to satisfy personal claim
183
If trustee purchases asset with trust money and own money, what options are available to beneficiaries?
When should you use each?
(i.e. mixed asset - but not mixed bank account)
1. Claim proportionate interest in property based on the percentage of trust money contributed
- if inc value
2. Personal claim and equitable lien
- if reduced in value
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If wrongdoing trustee has paid trust property into bank account, which contained their money, and made withdrawals from that bank account - what are the broad 2 options and names?
(mixed bank account)
Re Hallett (primary tracing rule)
- assumes trustee's money spent first
Re Oatway
- beneficiary gets first charge over bank account and property purchased
- so can satisfy against most attractive items purchased
^
- Use Re Oatway if Re Hallett works to benefit wrongdoing trustee
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Explain Re Hallett?
- primary tracing rule proprietary mixed funds bank account
- assumes trustee spent own money first
- can trace into balance of bank account
e.g.
- Takes 25k trustee money
- Pays into b/acc, already had 10k in
- spends 8k cruise, 10k shares
- 7k balance
- can have equitable lien over 8k value of shares, and whole balance
(v Hallett energy me first)
185
If property which wrongdoing trustee purchased has gone up in value, does proprietary claim extend to increase in value?
Yes
Applies for both Re Hallett and Re Oatway
185
When is it good idea to use Re Hallett?
Healthy bank account
Use Re Oatway if Hallett works to benefit wrongdoing trustee
185
Explain Re Oatway
(proprietary mixed asset/bank account tracing rule)
Gives beneficiary first charge on mixed fund in bank account or any property purchased from it
Means beneficiary gets first choice so can choose how to best satisfy their claim
Trustee must wait until beneficiary claim satisfied before gets any of the mixed property
E.g.:
- Stole 50k trust money
- Account already had 150k in
- 150k to buy flat and remainder on debts
(Re Hallett would dissipate)
- Oatway: can assert equitable lien valued at 50k flat
- Beneficiary gets money first from sale proceeds and trustee gets balance
(so I think if Re Hallett gives a bad result can use Re Oatway to go crazy and use against whatever works best for them)
186
What is rule where someone tops up wrongdoing trustees bank acc? Name of case?
Roscoe v Winder
If trustee spends the mixed fund and they or someone else add more money to the account, beneficiary cannot trace into that
Unless it was specifically intended to replenish funds
(can't go beyond 'lowest intermediate balance' - ie the amount before extra money paid in)
187
What is the rule if trustee takes money from one trust and mixes with trust for another, and uses the entire mixed fund to BUY AN ASSET?
(would happen where trustee for multiple trusts)
Share pari passu
i.e. entitled to proportionate share in the mixed asset
Beneficiaries benefit or suffer from the increase OR decrease in value of the purchased property
(can't benefit one set of beneficiaries over another)
e.g.
- 10k from trust A and 20k from trust B to buy 30k shares
- if increased in value, proprietary claim is valued higher
- if gone down, valued lower
(nb this is where purchased one asset - diff rule if made various withdrawals)
188
If trustee mixed the money of TWO DIFFERENT trusts and makes VARIOUS withdrawals, what are the two tracing rules?
1. Clayton's case
- first money in is first out
2. Barlow Clowes
- depart from Clayton's case in cases of injustice
189
Explain Clayton's Case
trustee mixed money from 2 trusts and various withdrawals
the trust money that was paid in first is the first money out
(FIFO)
(FIFO is in and she is out)
190
When would Barlow Clowes v Vaughan apply and what is the rule?
trustee mixed money from 2 trusts and various withdrawals
Clayton's Case results in injustice
(or contrary intention or impossible to apply)
- easy to depart from
e.g.:
- if Clayton's case meant one party's shares dissipated, may apply pari passu
(sounds like just need to know Clayton's Case doesn't apply if injustice
191
What should you do if trustee takes money from 2 innocent trusts and MIXES WITH OWN MONEY?
1. FIRST apply rules in Re Hallett / Re Oatway
- aim of pushing as much of trustee's own money into dissipation
2. AFTER DONE THAT ^^
- apply rules in Clayton's Case / Barlow Clowes to allocate any REMAINING assets between trusts
E.g.
Transfers 20k from trust A and 30k from trust B
- Already had balance 10k
1. First withdrawal was paying off debt
- Re Hallett applies nicely ^
(so no need Re Oatway)
2. Then with remainder:
Clayton's case would mean one beneficiary's money dissipated so doesn't apply
Once all trust money been allocated against withdrawals, can't take anymore - remainder represents lowest intermediate balance
192
Is it just beneficiaries who can bring proprietary claims?
No
principal (beneficiary equivalent) of other fiduciary relationships can bring against fiduciary (trustee equivalent)
use same tracing rules
e.g. if director steals from company, company can use to asset proprietary claims over the property
193
What are the main claims which beneficiaries can make against third parties?
inc whether they are personal or proprietary
1. Equitable personal **INTERMEDDLING**
(third parties who act as trustees)
2. Equitable personal **KNOWING RECEIPT**
(for third party recipients)
3. Equitable PROPRIETARY actions against third party RECIPIENTS
4. Equitable personal actions against THIRD PARTY ASSISTERS - **'dishonest assistance'**
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What is intermeddling?
What will the penalty be?
Third party who is not expressly appointed as trustee but acts as if was
**Personally liable for loss** suffered to trust caused by their actions
Includes if an agent for trustee continues to act as agent after the trustee died
195
Conditions for knowing receipt claim (beneficiary against third party)?
Third party:
1. Received property due to breach of trust
2. Received for own benefit
3. Had **knowledge** WHILST owned the property that made **UNCONSCIONABLE** to keep/deal with
so:
- if only found out after disposed, not liable
196
When will third party have 'unconscionable' state of knowledge for knowing receipt claim?
ONE of following applies:
1. Know it is trust property
(obvs)
*i know there was nuts in it*
2. Wilfully **shut eyes** to the obvious 👀
e.g. A told B transferred money into your account, look on account and see it came from trust (not A)
(up until checked account, no knowing receipt claim)
*i wilfully shut my eyes to fact that packaging said may contain nuts*
3. Deliberately don't ask any questions despite suspicions ❓
*i know brownies usually contain but didnt ask*
(nb there is no legal authority on the position where the D had no awareness but reasonable person would have - so can ignore that point)
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Can proprietary claim be brought by beneficiaries against bona fide purchaser for value without notice?
No
Equity's darling
Sucks
(i.e. bought it, no idea belonged to trust, buy free from equitable interest, no prop claim)
198
What tracing options available against wrongdoing third party recipient of trust property for proprietary claim?
(clue - depends on various circumstances)
(they are **same rules use for trustees** in same situation)
1. If still hold trust property in original form, recover it
2. If used wholly trust property to obtain another asset, can claim that asset
(clean substitution)
3. If mixed trust money and own money to purchase one asset:
A) claim proportionate share; or
B) equitable lien
(depends if inc value)
4. If mixed trust and own money, and made VARIOUS withdrawals:
- Re Oatway or Re Hallett
199
Who will be wrongdoing vs innocent third party?
Wrongdoing usually where:
- KR/intermedlling/dishonest assistance
Innocent volunteer:
- no knowledge or notice of breach BUT provided no **consideration**
200
What tracing rules apply for innocent third party?
SAME AS FOR OTHER INNOCENTS
DIFFERENCE IS IMPROVEMENTS (see sep card)
-------
1. Recover trust property in full if in same form
2. If spent on single asset in their name, take that (clean substitution)
3. If mixed with own funds to purchase single asset
- proportionate share
- take any increase or decrease in value
4. Mixed and various withdrawals
- FIFO unless injustice
201
Defence to an innocent third party recipient of trust money in proprietary claim?
Defence
***MIXED bank account only***
If used to make **IMPROVEMENTS** to property already own, can't trace into the improvement
(bcos
- even if inc value, would be inequitable as beneficiary could sell their land and on the street!!)
202
What is Re Diplock defence?
When does it not apply?
innocent third party recipient of trust money is protected if they have used the trust money to make improvements to property they already own
Doesn't apply:
- (imp) mixed then used to purchase an asset
so if used the mixed funds to PURCHASE property
(only works against existing property)
- wrongdoers
203
Explain dishonest assistance claim?
(aka personal accessory liability)
Is it personal or proprietary?
Up to what value?
Beneficiary PERSONAL claim
Against TP who assists trustee breaching trust or fiduciary duty
Value of loss assistance caused plus interest
204
How can you establish dishonest assistance claim?
Why is it often a good one?
1. Breach of trust or fiduciary duty
- even if trustee didn't do intentionally or dishonestly
2. TP assisted breach;
3. TP dishonest; and
4. TP took a positive action
- e.g. draw up accounts or draft documents
5. TP knew they were assisting with something **illegal**
- even if didn't know assisting breach of trust/fid duty
(often against professionals - good cos insurance = deep pockets)
205
Standard for honesty in dishonest assistance claim?
How ordinary honest person in D's position (inc D's knowledge and attributes) would have acted
Objective standards of reasonable person
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