Trusts Arising By Operation Of Law Flashcards
Reid v Castleton-Reid
Reid v Castleton-Reid [2019] - NZ AUTHORITY
Jog - Advancement THE NZ POSITION
Court - NZCA
Facts - Father established investment fund in sons name. Both had power to operate the fund. In a disagreement on closed the account. Father claimed the account was held by the son on trust for him, son claimed it was a gift. HC found it a gift. Overturned. Ruled evidence insufficient to show intent to gift.
Ratio - The rules around presumption are no more than a consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to be drawn in the absence of any evidence to the contrary’. The presumption of advancement is just that, a presumption as to the most likely inference of fact in the absence of evidence to the contrary. Considered Pecore but rejected both majority (only minors) and minority views (Abella J - applies to all children), instead concluding that the presumption of advancement should only apply to dependant adult children.
Ratio 2 - Three elements of inter vivos gifts are: Intent, consent of the donee, actual or constructive delivery of the gift.
Pecore v Pecore
Pecore v Pecore - [2007] - NOT NZ POSITION
Jog - Father set up joint accounts with adult daughter - joint tenancy style with right of survivorship. The advancement case.
Court - Canada Supreme Court
Facts - Father lived with adult daughter and her paraplegic husband. He contributed to their well being financially. He set up joint accounts with right of survivorship, and expressly stated to the tax department he was not gifting the money to the daughter. He died and the accounts were not mentioned in the will. They subsequently transferred to the sole ownership of the daughter. Her husband, now divorced, claimed the daughter held the accounts in trust for the estate, and should therefore be distributed.
Legal Question - If only one of the joint account holders is paying into the account and he or she dies first, it raises questions about whether he or she intended to have the funds in the joint account go to the other joint account holder alone or to have those funds distributed according to his or her will.
• Ratio -
◦ The presumption of advancement applies when either a father or a mother makes a gratuitous transfer to a minor child. It no longer applies when a parent makes a gratuitous transfer to an adult child or adult dependant child, because: (a) the principal justification for the presumption is the parental obligation to support dependent children; and (b) it is common for ageing parents to transfer their assets into the joint names of themselves and an adult child so that the child can assist them in managing their affairs. Consequently, when a parent makes a gratuitous transfer to an adult child, the presumption of resulting trust applies.
◦ The evidence required to rebut both presumptions, is evidence of the transferor’s contrary intention on the balance of probabilities.
◦ With respect to the statements to the tax department, it was found that that was not necessarily evidence of intent to maintain ownership, and he had still intended the property to pass to the daughter completely upon his death, he simply didn’t want to trigger tax while he still maintained operation of the account.\
Wolfe v Kaye
Woolf v Kaye [2018] NOT FOLLOWED Jog - Advancement - ALL CHILDREN Court - NZHC Facts - NA Ratio - Considered Pecore directly for the first time, and favoured the minority decision of Abella J - that advancement should apply to all children regardless of age or dependency. NOT followed in Reid v Reid.
Chang v Lee
Chang v Lee [2017]
Jog - Resultant Trust - Family loan without contract.
Court NZCA
Facts - Mr Chang contributed to Mrs Lee in order to buy a property. It amounted to just under half of the value. It was held in the district court it was an interest free loan between family and therefore he was only entitled to recover that amount. On Appeal it was held that Mrs Lee held his share of the property on a resulting trust, and he was therefore entitled to a percentage of the sale equivalent to his share in ownership.
Ratio - Directly affirmed Westdeutsche Landesbank Girozentrale v Islington.
◦ The rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership of funds which he or she advances towards the purchase price of a property. The legal owner holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution.
◦ Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness
◦ There can be no presumed intention of a contractual nature if one never existed in the first place. The settlor does not have to prove a positive intention to own.
Clayton v Clayton
Clayton v Clayton [2015]
Jog - Power of appointment can equal ownership. Sham trusts.
Court - NZSC
Facts - Couple split. Husband had various assets in a trust of which he was the principle family member, settlor, trustee and potential discretionary beneficiary. He was found to have a general power of appointment.
Ratio - Illusory trusts have no jurisdiction in NZ. A trust is either valid or it is not. Confirmed the Ben Nevis test for sham trusts: A sham trust is one where a document does not evidence the true common intention of the parties. Fairly high threshold based on circumstances.
Re Hays Settlement Trust
Re Hay’s Settlement Trusts [1982] UK -
Jog duty to object power of appointment
Court - UK
Facts - Not relevant.
Ratio - Less onerous than the duty of a discretionary trustee. A trustee in whom a mere power is vested must, in addition to the ordinary duty to obey the terms of the trust deed, carry out the following three duties:
◦ a) to consider practically whether or not he should exercise the power;
◦ b) to consider the range of objects of the power;
◦ c) to consider the appropriateness of individual appointments.
◦ We see this only requires some casual consideration.
Lee v Torrey
Lee v Torrey [2015]
Jog - Duty owed by trustee to the potential objects in discretionary trusts in NZ.
Court - NZHC
Facts - Not discussed.
Ratio - In cases of discretionary trusts, to show a breach of the duty of care owed to the objects, it would have to be shown that the trustee
◦ A) considered the wrong question; or
◦ B) although they purported to consider the right question, they:
‣ i) did not really apply their mind to it; or
‣ ii) perversely shut their eyes to the facts; or
‣ iii) they did not act honestly or in good faith.
Re Gulbenkians Settlement Trust
Re Gulbenkians Settlement Trust [1970]
Jog - The is or is not test
Court - HOL
Facts - Rich father left estate for is dim witted son. Contained a spendthrift clause to provide for long term payments. However the trust (with power of appointment) contained other objects including the wife, children and people who may be residing in the sons house. Was this void for uncertainty?
Ratio - Determined the test for mere power. For powers of appointment, objects were sufficiently certain if any given individual could be said to be ‘in, or not in’, the class in question.
McPhail v Doulton
McPhail v Doulton [1971]
Jog - Applied the is or is not test to discretionary trust powers.
Court - HOL
Facts - Owner of a company set up a fund for the benefit of his employees and their families.
Ratio - Ruled that the Gulbenkians is or is not test was to be used to determine certainty of object in trust powers. In terms of certainty of object, ‘all residents of greater london’ would fail, ‘relatives’ would succeed.
Re Beckbessinger
Re Beckbessinger [1993] NZ AUTHORITY
Jog Affirmed McPhail in NZ
Court - NZHC
Facts - Testamentary case. “Residue is left to XX absolutely, and they are to apply the residue, and to benefit interests which [the testator] has particularly in Christchurch”. Held the class of objects was uncertain. Considered whether it created a discretionary trust power or mere power? Held it was a trust power as the trustee had a duty to distribute.
Ratio - Affirmed McPhail V Doulton in NZ, where in the ‘is or is not’ test is now applied for certainty of objects in discretionary trusts.
IRC v Broadway Cottages
IRC v Broadway Cottages [1955]
Jog - Test for certainty in fixed trusts.
Court UK
Facts
Ratio - It must be possible to draw up a complete list of beneficiaries.
“[The trust] must be void for uncertainty, inasmuch as there can be no division in equal shares amongst a class of persons unless all the members of the class are known.”
