I scored 87% in Equity and Trusts and received a Distinction (74%) overall in the GDL at the University of Law using these notes.
These notes are written in the form of step-by-step exam plans. Compared to standard notes, this will save you lots of time. Most people will make notes during worksh...
STEP 1: Will a valid trust be found to exist over the claimant’s money? Go
through the usual requirements.
By putting customers’ money into a separate bank account, X may have created a trust
over customers’ money. If customers have made a prepayment, a trust can be used to
protect their money (Re Kayford; Re Goldcorp Exchange Ltd).
X was attempting to prevent the customers becoming ordinary creditors in an instance
of insolvency. As beneficiaries under a trust, they would have a proprietary interest in
this money, and would be able to reclaim it ahead of the company’s ordinary creditors.
[ONLY IF RELEVANT] What motivates companies to set up trusts?
Also, as a director, [INSERT DIRECTOR SETTING UP TRUST] may have to contribute
from his personal wealth if he has not taken all possible steps to minimise risk to
creditors (s.214 Insolvency Act 1986).
Is there a valid trust?
The following must be satisfied for a valid trust to exist over customers’ money:
- The three certainties (Knight v Knight);
- The beneficiary principle; and
- The correct formalities for declaration.
Certainty of intention
There must be certainty of intention to create a trust for customers, which can be
inferred from (as per Re Kayford):
- Payment of customers’ money into a separate bank account;
- Evidence that the company’s accountants had advised the above, in order to
protect customer’s money; or
- The company need not expressly state that the bank account was to be held on
trust for customers, if evidence of such intention existed otherwise.
- The separate bank account holding money on trust for customers need not be
labelled ‘customer’ or ‘trust’ if it is clear by conduct (i.e. by setting up the separate
, bank account) that is what the company intended to do (Paul v Constance,
applied in Re Kayford).
- A deed of trust provides evidence of certainty of intention (Re Farepak Food and
Gifts Ltd).
Certainty of subject matter
[INSERT THE CUSTOMERS’ MONEY] placed in a separate bank account constitutes
certain subject matter (Re Lewis’s of Leicester Ltd).
- OR: There will be uncertainty of subject matter if money is not segregated from
other funds by being placed in a separate bank account (Mac-Jordan
Construction Ltd v Brookmount Erostin Ltd)
[ONLY IF CHATTELS / SHARES, NOT MONEY] One cannot create a trust over an
undifferentiated mass of property. The company must keep customers’ property
separated for certainty of subject matter, e.g. in a different account (Re London Wine
Company (Shippers) Ltd).
- For example, where specific gold ingots had not been assigned to customers, as
the stock of bullion was constantly traded, there was no intention to create a trust
over the bullion for the customers and it was unclear which ingots belonged to
the customers. The trust failed due to lack of certainty of subject matter and
intention (Re Goldcorp Exchange Ltd).
- Distinguished from Re London Wine, a company can create a valid trust over a
percentage of property if the subject matter comprises intangible assets such as
identical company shares (i.e. not chattels) (Hunter v Moss).
Certainty of objects
As this is an attempted fixed trust, the complete list test applies. It must be possible to
draw up a comprehensive list of each and every beneficiary (IRC v Broadway Cottages
Trust). Conceptual and evidential certainty are required.
Conceptual certainty
Can the group be defined? Normally customers who have already paid. NOTE: these
The settlor must define the objects using clear concepts so that the trustees know what
type of person they are looking for.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller lawnotes08. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.97. You're not tied to anything after your purchase.
