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Equity and Trusts summary of key principles, types of trust, actions against third parties, duties, defences

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  • Equity and Trusts
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  • University Of Law (ULaw)

Equity and Trusts summary of key principles, types of trust, actions against third parties, duties, defences

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Document information

  • March 7, 2023
  • 57
  • 2022/2023
  • Summary

Subjects

  • gift
  • trust
  • valid gift
  • beneficiary principle
  • purpose trust
  • chattels
  • shares
  • equitable interest
  • every effort test
  • inperfect gifts
  • strong v bird
  • cha
  • establishing self as trustee
  • rules against perpetuities

Written for

  • University of Law (ULaw)
  • Unknown
  • Equity and Trusts
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Table of Contents
The structure of setting up a gift/ trust/ establishing yourself as trustee............................3
Ways settlor giving............................................................................................................4
Requirements for a valid gift..............................................................................................4
Three certainties Knight v Knight (1840) 3 Beav 148...........................................................4
Certainty of intention...................................................................................................................4
Certainty of subject matter...........................................................................................................4
Certainty of objects......................................................................................................................5
Fixed trust = complete list test.......................................................................................................................5
Discretionary = given postulant test (less strict rule).....................................................................................5
Power of appointment = given postulant test................................................................................................6

Also must satisfy: Beneficiary principle...............................................................................7
Purpose trust (TRUST)..................................................................................................................7
Rules against perpetuity....................................................................................................7
Property must be transferred in the correct manner...........................................................8
Requirements for a valid gift of land............................................................................................8
Transfer of chattels.......................................................................................................................8
Requirements for a valid gift of shares in a COMPANY.................................................................8
Requirement of gift of equitable interest.....................................................................................9
Gift to non-charitable unincorporated association (private purpose trusts club/association)
(GIFT)............................................................................................................................................9
Equity will not perfect an imperfect gift............................................................................11
Exceptions........................................................................................................................11
Every effort test (Milroy v Lord, Re Rose (for shares))................................................................11
Imperfect gifts and unconscionability.........................................................................................11
Strong v Bird...............................................................................................................................11
Charitable trusts...............................................................................................................13
the charitable exception.............................................................................................................13
Requirement for charitable trust................................................................................................14
The benefit aspect........................................................................................................................................14
The public aspect..........................................................................................................................................14
...................................................................................................................................................15
Other exceptions to beneficiary principle…................................................................................16
Insolvency and quistclose trusts.......................................................................................16
Trusts and equitable interests in property........................................................................20
Express trust...............................................................................................................................20

, Resulting trust............................................................................................................................20
Constructive trusts of the family home........................................................................................................21
Common intention constructive trusts.........................................................................................................21
constructive trusts in a commercial setting..................................................................................................22
Detriment...................................................................................................................................22
satisfying the equity (quantifying interest).................................................................................22
Proprietary estoppel...................................................................................................................23
Active assurance...........................................................................................................................................24
Passive assurance.........................................................................................................................................24
Remedy......................................................................................................................................24
Resulting trusts and presumption of advancement for gift giving.....................................25
Voluntary transfer.........................................................................................................................................25
Purchase money cases..................................................................................................................................26
The presumption of advancement...............................................................................................................26
Rebutting the presumption of resulting trust and advancement................................................................27

Personal claim against trustees........................................................................................28
Are they a fiduciary?...................................................................................................................28
Duties to the trust fund..............................................................................................................28
Common law duties......................................................................................................................................28
TA 2000 s1 – duty of care.............................................................................................................................29
TA 2000 s3 – general power of investment..................................................................................................29
TA 2000 s4 – standard investment criteria...................................................................................................29
TA 2000 s5 – Advice......................................................................................................................................30
S8 Power to acquire freehold and leasehold land........................................................................................30
Has there been a breach?...........................................................................................................30
Unauthorised investment.............................................................................................................................31
Breach of duties regarding delegation........................................................................................31
S11 TA 2000 Power to employ agents..........................................................................................................31
s25 Delegation of trustee’s functions by power of attorney........................................................................31
Collective delegation....................................................................................................................................32
Breach of duty to be active in the affairs of the trust..................................................................32
Appointment, retirement and removal of trustees.....................................................................32
S36 TA 2000..................................................................................................................................................33
S39 TA 2000 – retirement of trustee without a new appointment..............................................................33
S40 TA 2000- vesting of trust property in new or continuing trustees........................................................33
S41 TA 2000- power of courts to appoint new trustees...............................................................................33
TOLATA 1996 :S19 – appointment and retirement of trustee at instance of beneficiaries.........................33
Has the breach caused loss?.......................................................................................................33
Defences.....................................................................................................................................34
Consent of beneficiaries...............................................................................................................................34
Exclusion clause in the trust instrument......................................................................................................34
Limitation Act 1980.......................................................................................................................................35
Contribution/ indemnity available?............................................................................................35
Civil liability (Contribution) Act 1978 2 Assessment of contribution...........................................................35
Trustee Act 1925 S62 power to make beneficiary indemnify for breach of trust.........................36
POSSIBLE ACTIONS AGAINST A THIRD-PARTY TEMPLATE..................................................37

, Did third party (defendant) receive property subject to a trust/fiduciary relationship?.............37
Personal equitable actions (no good if defendant bankrupt):.....................................................37
Accessory liability (dishonest assistance)....................................................................................37
The standard of honesty...............................................................................................................................37
Recipient liability........................................................................................................................37
stages of knowledge:....................................................................................................................................38
Intermeddling.............................................................................................................................38
Personal common law action (no good if defendant bankrupt)..................................................38
Restitution (only if D has money) 4 conditions laid down in Lipkin Gorman v Karpnale.............................39
Defences.....................................................................................................................................39
Change of position........................................................................................................................................39
where D is a bona fide purchaser for value without notice.........................................................................39
Equitable Proprietary claim........................................................................................................39
Which tracing rules?.....................................................................................................................................40
Personal equitable action (no good if defendant bankrupt):......................................................40
Accessory liability..........................................................................................................................................40
Equitable proprietary claim against a trustee.............................................................................41
Trust property is dissipated..........................................................................................................................42
Trustee still holds original trust property.....................................................................................................42
Clean substitution.........................................................................................................................................42
Mixed asset...................................................................................................................................................42
Mixed bank account: allocating withdrawals...............................................................................................43
Mixing of two trust funds.............................................................................................................................44
Personal equitable action (no good if defendant bankrupt):......................................................45
Claim against a director...................................................................................................46
Companies Act 2006...................................................................................................................46
Power of advancement and maintenance........................................................................49
Information beneficiary can demand from trustees...................................................................49
What documents can the beneficiaries demand?.......................................................................50
Circumstances in which trustees might be obliged to give reasons for their decisions...............51
32 TA 1925— Power of advancement.........................................................................................51
s 32 authorises trustees to pay:....................................................................................................................51
Restrictions to s32........................................................................................................................................52
Power of maintenance...............................................................................................................53
Ending a trust - Saunders v vautier...................................................................................54

Equity problem questions


The structure of setting up a gift/ trust/ establishing yourself as trustee

What is the Are they making a gift or trust? – self as trustee?

, person trying
to do?
What is the Shares?
property? Equity?
Land?
What are the
rules/
requirements?
Ways settlor giving
A settlor may create an express trust in his lifetime in one of two ways: Milroy v Lord
1- Settlor declares self as the trustee
a. Simplest way to create a trust is for the owner of an asset to declare that he holds
the asset for the benefit of someone else
b. Ie. ‘From now on, I am going to hold the money in my account at National
Westminster Bank, Park Street, Chester on trust for Robert’. Such a ‘declaration of
trust’ will make the original owner a trustee for Robert
c. There is no need to transfer legal title to constitute the trust
2- Settlor transfers property to trustees on trust
a. Settlor doesn’t retain legal title to the asset but transfers it to trustees to hold on
trust for a designated beneficiary (legal title of chattels passes on delivery)
b. The trustees may number one or more; settlors commonly choose two trustees, so
that one can keep an eye on the other and so that there is someone to carry on if
one trustee should die.




Requirements for a valid gift
(a) The donor must have the necessary mental capacity to make a gift
Donor must understand the nature of the transaction and its consequences
Smaller gift = lower degree of understanding needed
High degree of understanding needed (dementia case)  Re Beaney [1978] 1 WLR 770



Three certainties Knight v Knight (1840) 3 Beav 148
Certainty of intention
Need intention at the time of transfer

construed as merely precatory words, lacking sufficient intention to create a trust (ie ‘I would like’)
Adams and the Kensington Vestry .

Paul v Constance [1977] 1 WLR 527

Certainty of subject matter
the buyers of wine stored in a warehouse but not segregated from the general stock of wine could
not establish a trust as the subject matter was uncertain Re London Wine Company (Shippers) Ltd
Re London Wine Company (Shippers) Ltd [1986] PCC 121,

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