Express Private Trusts_ notes, explanations on dispositions and baden case judgment explained
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Course
Equity & Trusts (CL6331)
Institution
Cardiff University (CF)
This document contains lecture notes for equity and trusts. There are explanations for all the dispositions with examples and reasoning why that is the disposition claimed. You will also find the Baden case judgements explained by all three judges. Other cases to support the topic are also explaine...
Created intentionally by a settlor (inter vivos trusts) or a testator/testatrix
(testamentary trust) for a human beneficiary
Rules for validity:
Settlor must have capacity
Must comply with the beneficiary principle (has to be a living human
beneficiary)
Must adhere to the perpetuity rules (125 years–Perpetuities and
Accumulations Act 2009) —> trust must end by 125 years
Must comply with formalities where relevant–1)intervivos trust of land to be
signed and
evidenced by writing; 2) the will containing any testamentary trust must
adhere with the
formality requirements of s9 of the Wills Act 1937
Also, the three certainties ...
The Three certainties
Trust have to be complied with these or then its not valid
The three certainties were recognised by Lord Langdale in Knight v Knight
(1840) 3 Beav 148
The settlor must act with sufficient certainty so that the trustees and the court
know:
Express Private Trusts 1
, 1. That a trust was intended (certainty of intention); 2. Exactly which bit of property is to be
held on trust (certainty of subject-matter) 3. And who the beneficiaries are (certainty of
objects) - What amount of beneficiary is each person entitled to
If there is uncertainty about any of these three things, the trust cannot be performed
Certainty of intention
Why do we need it?
Because unlike other types of trust, express trusts are declared intentionally
Ensures that property is held subject to trust obligations only when that was
the settlor’s express intention
How do we find it?
Matter of construction of words in context – look to the substance
Did the settlor intend the trustee to be under an obligation to hold the property
for the benefit of another, and does the settlor intend for someone else to obtain
the beneficial interest in the property?
Settlor does not need to understand the concept of a trust in order to create one
See Paul v Constance [1977] 1 WLR 527: ‘....we are dealing with simple
people, unaware of the subtleties of equity, but understanding very well
indeed their own domestic situation...’ (Scarman LJ, 530)
Certainty of intention
you can create a trust by not using the word trust
but even if you have “trust” written, it doesnt mean that it is actually a trust
A trust can be created without the word ‘trust’…
“…it is well settled that a trust can be created without using the words
“trust”… the question is whether in substance a sufficient intention to create
a trust has been manifested.” Re Kayford [1975] 1 WLR 279, 282
(Megarry J)
…and the use of the word ‘trust’ does not mean that a trust has been
created
Express Private Trusts 2
, “…merely by using the word trust, even though Mr Singha had a law degree,
did not mean that Mr Singha intended to use the word trust in a legal sense.
In the context of the relationship between Mr Heer and Mr Singha, all the
word trust meant… was that the properties would not be dealt with adversely
to the interests of Mr Heer…” Singha v Heer [2016] EWHC Civ 424, [28]
(Arden LJ)
What can we look for to help us determine if there was an intention to create a trust?
Precatory words – look to the substance
Precatory words are words that involve making a request. Such wording
suggests that there is no intention to create a trust (because trusts are
obligations)
For example, ‘desires’, ‘wishes’, ‘requests’, ‘is confident’, ‘fully trusting’, ‘ in
the firm expectation of’, ‘hoping that’ etc. → suggests there is no intention
because it’s making a request
Examples of precatory words from the case law include:
‘To X, desiring that X should allow Y an annuity of £25 …’
(Re Diggles (1888) 39 Ch D 253)
‘In full confidence that she would do what was right’ for the children (Re
Adams & the Kensington Vestry (1884) 27 Ch D 394)
‘I wish them to bequeath the same equally between the families of O and P’
(Re Hamilton [1895] 2 Ch 370)
Imperative words
Imperative words express a command—a duty to do something. The use of
imperative words
indicates that a trust (or power) is intended.
Interpreting intention objectively
Where there is ambiguity – the court will make sense of it
(see Re Gulbenkian [1970] AC 508, 522)
Express Private Trusts 3
, Courts usually interpret intention objectively – would a reasonable person
conclude that the settlor intended to create a trust? → court takes objective
approach
“A settlor must, of course, possess the necessary intention to create a trust,
but his subjective intentions are irrelevant. If he enters into arrangements
which have the effect of creating a trust, it is not necessary that he should
appreciate that they do so; it is sufficient that he intends to enter into them.”
(Twinsectra v Yardley [2002] UKHL 12, [71] (Lord Millett))
See Rowe v Prance [1999] 2 FLR 787:
‘…the regular use of ‘our’ in relation to the boat, coupled with the explanation
why the boat was not registered in joint names, establishes that the boat was
held by Mr Prance on trust for himself and Mrs Rowe equally. It is pointed out
that there is no need for writing in the case of an item of personal property such
as a boat to create an express trust.’ (Nicholas Warren QC, 794)
The case of Sham Terms
On an objective assessment, there is an intention to create a trust, but the
‘settlor’ does not intend to depart with the beneficial interest in the property —>
Sham trust is when the Settlor has the intention to create a trust but their real
intention was to hide property
For sham trusts subjective intention is relevant:
Is there an intention to create a false impression of a trust? (Shalson v
Russo [2003] EWHC 1637 (Ch))
Trust may be a sham even if no fraudulent intention (Midland Bank v
Wyatt [1995] 1 FLR 697)
Sham trusts are void and unenforceable
If you’re interested in finding out more, see - Matthew Conaglen ‘Sham Trusts’
(2008) Cambridge Law Journal 176
Absence of intention
If there is no intention to create a trust, there is no trust
Person with legal title to the property keeps the property
Express Private Trusts 4
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