Summary Trusts Law Oxford PQ Summaries or Guide All Trusts Topics(apart from Unincorporated Assoc)
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Course
Trusts Law
Institution
Oxford University (OX)
This guide will be sufficient to get a high 2.1/1st in finals if you do only problem
questions. It does not cover unincorporated associations.
There are some minor summaries of academics at the end for each topic, but the document is mostly rules/case summaries in a guide form to be used step-by...
This guide will be sufficient to get a high 2.1/1 st in finals if you do only problem
questions. It does not cover unincorporated associations.
There are some minor summaries of academics at the end for each topic, but the
document is mostly rules/case summaries in a guide form to be used step-by-step.
The main headings from the contents page are in neon pink.
THE THREE CERTAINTIES
1. FT or DT?
2. 3 certainties.
Past paper issues; consider capriciousness, intention, what is the relevant object test, if charitable
fails consider these issues,
If the trust is void due to lack of certainty for object or subject matter, the trustee will hold the
property on resulting trust for the settlor made clear by Vandervell v IRC [1967]. Lord Upjohn
held that if A intends to give away all his beneficial interest in a property and thinks he has done so but
has failed to do so, by operation of law there will be a resulting trust of the beneficial interest of which
he failed to dispose.
Beneficiary principle
A private trust must have a clear beneficiary. In Morice v Bishop of Durham (1804) Sir William Grant
held that every trust other than a charitable one must have a definite object, which is
somebody whose favour the court can decree performance for.
Bringing trust to an end
● In Saunders v Vautier (1841) Vautier was able to demand a transfer of stocks and dividends
which were set up on trust for him and the trustee was directed to transfer them when he turnt
25. Lord Cottenham held that where a beneficiary, who is of full age and of sound mind,
has an absolute interest in the trust property, he may call on the trustee to transfer legal title
over the property to him to bring the trust to an end. If they are not a sole beneficiary, the
absolute consent of all beneficiaries under a trust will enable them to terminate their beneficial
interest under the trust.
● In Re Smith [1928], Romer J held that under a discretionary trust where there are
multiple objects, the trustee is required to treat all the beneficiaries together as
though they formed 1 person for whose benefit the trustee was directed to apply the
whole fund for. Beneficiaries, acting together as one, can require the trustee to
transfer the trust property to them as co-owners.
, ● In Pilcher v Rawlins (1871), the intended beneficiaries of a trust set up for them by their father
regarding his real estate were unable to recover the property after the remaining trustee
agreed with a mortgagor to mortgage the property to parties who had no notice of the trust.
Mellish LJ held that bona fide purchasers for value without notice are not bound by an
equitable title. The mortgagor acted diligently and reasonably, and believed they had good
title so they had no knowledge of the trust, so where equities were equal, the law must
prevail. The bona fide purchaser is equity’s darling. Lord Greene MR in Re Diplock [1948]
makes clear that the claim of the owner is extinguished so subsequent owners take the
property free of any beneficial interest.
● In City of London BS v. Flegg [1988], the daughter and son-in-law were registered proprietors
of a home that the parents had contributed purchase money towards, so they held the legal
title on resulting trust but their interests were overreached when the borrowers remortgaged,
as laid out by s.2(1)(ii) of the Law of Property Act 1925 (LPA). Overreaching is where the
rights of the beneficiary under a trust of land are removed from the land and attached to the
money, so the land is free from any beneficial interest. Following s.27(2) of the LPA and
Flegg, overreaching occurs where there is an advancement of capital sums made to 2
trustees.
Powers of appointment ;
A power of appointment is where a donor gives power to the donee to appoint the property in favour of
whomever the donee wishes, including the trustee. The key distinction between a power and a trust is
that under a trust, a trustee must exercise their duties as a trustee whilst powers do not have to be
exercised. Where the power is a fiduciary one, such as that under a trust, the holders must consider
whether to exercise the power, making a survey of a range of objects, but may choose not to
distribute the property as made clear by Meggary V-C in Re Hay’s ST [1982]. Usually found under a
discretionary trust but may be free-standing.
● Since the holder of a power must consider exercising it, it must be possible to make a survey
of the potential objects to reach the decision of whether to exercise it or not. In Re
Gulbenkian’s settlements [1970], Lord Upjohn held that the test for certainty of objects in
powers was not requiring a complete list but the power is valid if it can be said that any
individual was or was not a member of that class.
● Conceptual certainty
● Evidential certainty; re Baden
● Admin unworkability (never)
● Capriciousness (?)
●
● Fiduciary powers have been recognised by courts where trustees are able to exercise the
power in favour of the whole world (such as in Re Manisty's ST [1974), so it is clear that a
fiduciary power cannot be held void for being administratively unworkable because of the
breadth of class. Templeman J held that the settlor can empower the trustee to add to a
class of beneficiaries of a settlement and the power was not void for uncertainty
simply because it was wide in ambit. It would be valid if it could be said with certainty
where a given person will be a member of the class.
● In theory, a fiduciary power may be declared void by capriciousness (relying on Templeman
J’s dicta in Re Manisty’s ST [1974]) but it is difficult to imagine a situation where a settlor has
created a trust capricious that precludes a trustee from sensibly considering the exercise of
that power. It is also not clear that this is a free-standing legal principle which can make a
power of appointment void.
● A general power of appointment allows the trustee to appoint any person they wish.
● A special power of appointment is where the holder of the power may only exercise it in
favour of a specified people or a defined class.
● In Re Hay’s ST [1982], Meggary V-C held that an intermediate power of appointment (a
trustee’s power to appoint anyone except specified persons) or a general power of
appointment to appoint anyone is not invalid by the width of power. However, trustees have
no power to delegate under a power of appointment and is thus invalid.
,Discretionary or fixed trust? -
IS IT SUBJECT TO CONDITION PRECEDENT OR IS IT A POWER OF APPOINTMENT
A fixed express trust holds that a trustee must confer a benefit on the identified beneficiaries, and
identifies what proportion of the benefit they are to receive. They have no discretion to decide what
the beneficiaries are entitled to.
There may be a conditional fixed trust where the money is already divided into what will be given out
but is subject to the condition of whether it will be given out.
A conditional subsequent deals with circumstances that happen later, which require a trustee
to withhold the property from the beneficiary as in Re Coxen [1948], where the testator held that the
property is to be held on trust for the benefit of his wife and she would lose this benefit where she
ceased to permanently reside therein. There must be complete certainty of the condition.
A condition precedent requires something to be satisfied before the property is held on trust
for the beneficiary. This can take the form of a skill or a characteristic that must be satisfied.
- I.e they have a skill or characteristic - best driver, good musician.
[where the trust has been constituted - not applicable in covenants to settle]A floating trust is
where the subject matter may appear to be uncertain at present, but is clearly identified in the future.
There is no immediate trust of the property since it is uncertain what is being held on trust. As Virgo
argues, floating trusts have been recognised in English law but only in the specific context of secret
trusts clear from Ottaway v Norman [1972] where a trust for whatever money was left over after the
housekeeper had used it was not certain enough. Brightman J held that if the money had been kept
separated from the housekeeper’s funds or if the housekeeper was required to leave all of her
remaining money to the beneficiaries, the trust would have been valid indicating an acceptance of
floating trusts.
This is a discretionary trust, since the trustees are able to distribute the trust property amongst the
beneficiaries in the amounts as they decide between themselves, with the power to appoint people as
beneficiaries within the specified class. The trustee is under an obligation to make an appointment
(unlike a mere power of appointment, where there is no duty to exercise that power (Re Hay’s ST
[1982])), but with a discretion as to who will benefit.
, a power of appointment, since the trustees are able to appoint the property to a beneficiary,
but are under no duty to distribute the property - this is when the question deals with distributing
amongst the people as they see fit, but under no obligation.
Discretionary trust: ‘I leave £100,000 to my wife to be held on trust at her absolute and
unfettered discretion for the employees of Brillington Engineering Co Ltd.’
Fiduciary power: ‘To my trustees I leave £50,000 to share amongst those of my relatives who
are most in need. In the event that all the money is not used up, any remainder will pass to my
gardener, Ted.’
As there is no duty to distribute in a fiduciary power, there may be a beneficiary in default as Ted.
There is a duty to distribute in discretionary trusts, so there is no instructions of what to do with the
remaining money.
● As made clear in Gartside v IRC [1968], a beneficiary under a discretionary trust has a right to
be considered as a potential recipient of the benefit by the trustees. The trustees must apply
some criterion in deciding to exercise their discretion in favour of a beneficiary but it is not a
proprietary right. They do not have the automatic right to receive the property, but the trustee
is under a duty to distribute the property.
3 certainties
Lord Langdale MR in Knight v Knight (1840) made clear that valid express trust must satisfy the 3
certainties of intention (indicated by imperative words), subject matter and objects.
Intention
The use of imperative words requiring the trustee to hold the property ‘on trust’ will usually suffice to
demonstrate an intention but this depends on the circumstances. In Lambe v Eames (1871), Mellish
LJ held that the property was not given to her subject to a trust, since the precatory words used
indicated she was given a gift. He held that imperative words indicated the existence of a trust.
● In Milroy v Lord (1862) Turner LJ held that there was no equity to perfect an imperfect gift.
A voluntary settlement would meet all the formalities if the property was transferred (either
transferring the legal title to the recipient on trust for the beneficiary, or transferring the title to
the recipient) or there was self-declaration of a trust. This was not done and an ineffective
outright transfer cannot be regarded as an effective declaration of trust.
● In Jones v Lock (1865), Lord Cranworth LC held that there was a clear intention to
make a gift which failed since transferring the right to sue at law requires an
indorsement. There was an imperfect gift, and so the court will not perfect an
imperfect gift nor develop a trust out of it. He held that it would be very dangerous if
loose conversations of this sort, in important transactions of this kind, should have the
effect of declarations of trust.
● In Richards v Delbridge (1874), a trust was not found in the case where an uncle
wanted to make a gift of a lease of land used as business premises to his nephew.
The uncle wrote on the back of the deed which the lease had been granted on that he
gave the lease to his nephew. Jessel MR held that there was no transfer of lease
since a fresh deed was needed and the formalities were not met for transferring a
leasehold. The evidence contradicted the claim that the lease was to be held on trust
for the nephew since this was an expression to giveth property to another in a gift
rather than retaining it in the donor’s hand. Equity cannot perfect imperfect gifts by
imposing trusts where there is no intention to create a trust•.
● •In T Choithram International SA v Pagarani [2001] the Privy Council held that it
would be unconscionable for a settlor who had declared a trust when he was one of a
number of trustees to subsequently resile from his declaration of trust as it would be if
he had declared himself to be sole trustee. Whilst equity would not aid a volunteer, it
would not strive officiously to defeat a gift. An incomplete transfer to the trustee is
perfected if the donor (who has legal title) is one of the trustees.
● In Lambe v Eames (1871), property was given to a widow to be at her disposal ‘in any way
she may think best’ and she gave part of the estate to an illegitimate son. Mellish LJ held that
the property was not given to her subject to a trust, since the precatory words used indicated
she was given a gift. He held that imperative words indicated the existence of a trust.
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