Equity Notes
The requirements of an express trust
- Fundamental principles: express trusts arise from the express intention of the party who created the trust -> the
judges will try to uphold a trust if they can; the settlor’s intention to create a trust should be respected ->
McPhail v Doulton: a trust should be upheld if there is sufficient practical certainty in its definition for it to be
carried out
- Intention to create a trust:
-> Capacity to create a trust: an intention will be valid only if the settlor or testator had the capacity to create a
trust -> a settlement made by a child is voidable -> a settlement made by a mentally incapacitated person is void
-> Certainty of intent:
• Essential test: to consider whether the creator of the trust wanted somebody to hold property for the
benefit of another person, so that they are under a duty to do so
• Use of the word ‘trust’: is needn’t be used to create a trust -> even if the word trust is used, it doesn’t
mean that a trust has been created
• Substance of intention: words that involve a request are described as precatory words -> if the creator
says they desire, wish, request ot are confident that the other party receiving the property will hold it for
somebody else -> this lacks the necessary element of requiring the other party to do so
• Objective assessment: rather than being concerned with what the creator of the trust actually intended,
we are concerned with what the reasonable person would conclude that the creator of the trust intended
Re Adams and the Kensington Vestry: “I give, devise, and bequeath all my real and personal estate and
effects… unto and to the absolute use of my dear wife… in full confidence that she will do what is right as to
the disposal thereof between my children, either in her lifetime or by will after her decease” -> held that this
created an absolute gift to the wife and did not impose any legal obligations on her to hold the property on trust
for the children
In some cases the fact that particular words are used in a settlement or a will that have previously been
recognized as being sufficient to create a trust is strong evidence that a trust was intended, especially where the
document is drafted by a lawyer
• Interpretation of intent: in cases of ambiguity, the court will need to make sense of the expressed intent
• Self-declaration of trust: where a person purports to hold their own property for the benefit of another
Jones v Lock: A father returned from a business trip without a gift for his son. When the family told him off, he
put a £900 cheque in the baby’s hand, and said
“ look you here, I give this to baby; it is for himself and I am going to put it away for him, and will give
him a great deal more along with it. ”
,The wife said the baby might tear it, and the father said, ‘it is his own, and he may do what he likes with it’. He
locked it in the safe and died six days later. It was argued that although there was never an outright transfer,
because he had not actually endorsed the cheque by signing it, there was no trust of the cheque for the baby. ->
it was held that he hadnt made an effective gift of the cheque, because being payable to himself, it needed to be
endorsed to the baby by adding his own signature, but neither had he intended to declare a trust of the cheque
• Commercial context: whether there is an obligation to segregate property
R v Clowes: The court considered appeals from from criminal convictions including theft in the course of which
it was necessary to consider whether the defendants were trustees of monies passed to their company for the
purpose of investment in a particular fund. -> held that the money was intended to be held on trust rather than
simply creating a relationship of debtor and creditor -> a requirement to keep money separate is normally an
indicator that a trust was intended
• Intention to make a gift: if there is an intention to make a gift, but legal title to the property is not
successfully transferred, this transaction cannot be saved byt reating it as a trust -> the intention to make
a gift contradicts any intention to declare a trust
• Testamentary trusts: the focus should be on the identification of the meaning of particular words with
reference to their natural and ordinary meaning, the overall purpose and other provisions of the will ->
the judge should ignore evidence of the testator’s intention and other extrinsic evidence -> the only
excpetion to this is where section 21 of the Administration of Justice Act 1982 applies -> it enables
extrinsic evidence to be taken into account to assist in the interpretation of the will, but only where part
of the will is meaningless or the language used is ambiguous
-> Sham trusts: cases in which the settlor appears objectively to have intended to create a trust but in which, on
closer, inspection, this intention is not genuine since the settlor has an ulterior motive to create a different set of
rights and obligations -> the sham trust is void and unenforceable -> Diplock LJ: it means acts done or
documents executed by the parties to the sham which are intended by them to give to third parties or to the court
the appearance of creating between the parties legal rights and obligations different from the actual legal rights
and obligations which the parties intended to create -> a number of principles:
1. there must be an intention to create a false or misleading appearance that a trust has been created
2. a trust may be a sham even if it is not declared with any dishonest or fraudulent motive
3. where the settlor purports to declare a trust with somebody else as trustee, the trust will be treated as a
sham only if both the settlor and the trustee intend it to be so
4. a trust that was not a sham whne created cannot be made a sham subsequently -> however, a trust that
was a sham when it was created can be converted into a genuine trust
5. a declaration of trust can also be set aside by statute
Conlagen has argued that the doctrine of sham trusts is a distinct doctrine from that involving certainty of intent,
sicne the focus is on establishing the true subjective intent of the person declaring the trust -> Douglas and
McFarlane argue that there is no distinct doctrine of sham trusts since the focus is simply on establishing the
objective intent of the settlor to determine whether the settlor didn’t intent the trust to take effect on the terms
which were set out in the trust deed
-> Absence of certainty of intent: no valid trust will have been created
- Identifiable subject matter
,-> nature of subject matter: trusts can be declared over all kind of property
-> description of subject matter: a declaration of trust can be valid only if the subject matter of the trust has been
described with sufficient clarity -> ‘the remaining part of what is left’, ‘such parts of my estate…’ ‘all my other
houses’ have failed for uncertainty
-> Identity of subject matter: the property must be identifiable -> eg if Angela declares that she hold 20 of the
100 sheeps that she owns on trust for Brian, it is not clear which 20 sheep in the flock are held on trust for
Brian, so the trust will fail
Hunter v Moss: Mr Hunter was entitled, under his contract of employment with Mr Moss, to claim 50 shares out
of 950 shares in a specific company. Although this showed an intention to create a trust, Mr Moss did not
identify which shares were the subject of this arrangement (he did not segregate 50 shares for Mr Hunter from
the 950 shares he held). Mr Moss later sold the 950 shares and kept the proceeds of sale for himself. Mr Hunter
claimed a proportion of these proceeds. The central issue was whether, in these circumstances, Mr Hunter could
assert beneficial rights over 50 shares under a trust.
• Types of share
• Chattels in a bulk
• Tangible and intangible property: a trust of part of a mass will not fail for uncertainty where there has
not been an appropriation of any specific part of the mass for the beneficiary, as long as the mass itslef is
sufficiently identified an as long as the beneficiary’s proportionate share of the mass is not uncertain
• Intention to create a trust from a particular fund: even where the subject matter of the trust is intangible,
a trust will not be created from a fund if the settlor did not intend part of that fund to be held on trust
-> Certainty of division of beneficial share: if an exrpess trust is purportedly declared, but it is unclear what
proportion of the whole each of the beneficiaries has, the trust will be void to uncertainty
-> Future certainty: a trust will not fail for uncertainty as to subject matter merely because the subject matter is,
at present, uncertain, if the terms of the trust are sufficient to identify the subject matter in the future -> floating
trust
-> Absence of certainty of subject matter: where the identity matter is unclear, there is nothing to which any
trust can attach
Certainty of object
- Distinguishing trusts from gifts: 3 scenarios:
-> the typical gift involves two parties -> the donor trasnfers all rights to property to the donee without any
obligation attached -> the donee consequently receives the property absolutely
-> the typical trust: the trustee hasn’t received the property beneficially, therefore, it cannot be considered to
have been given to them -> since the beneficiary hasn’t received the property absolutely, there has been no gift
to them either, although once the trust has been terminated and the beneficiary receives the property asbolutely,
it can be seen that there has been an effective gift of the property to the beneficiary via the mechanism of trust
, -> when property is transferred subject to a condition -> whether these transfers constitute gifts or trust will
depend on the intention of the transferor, objectively determined by the courts -> once the condition has been
satisfied, the donee of the property receives the property absolutely
Attorney General v The Cordwainers’ Co: the testator had left an inn to the Cordwainers’ Company on
condition that it paid annuities to certain relatives of the testator and made some payments for charitable
purposes. Over the years, the rents obtained from the inn increased, so that there was a substantial surplus and
the question for the court concerned who was entitled to it -> held that the original devise of the inn constituted
a gift to the Cordwainers’ Company subject to a condition rather than a trust , hence the company should
receive the inn absolutely as a gift subject to the continued performance of the condition
Comparison with Re Frame: althought the testator has used the word condition, he had actually intended to
create a trust for his chidlren
- Interests under a will or intestacy: where a testator dies, their property will pass to executors, who will receive
the property absolutely, but subject to a fudiciary duty to ensure that it is trasnferred to those entitled under the
will -> a beneficiary under a will has neither a legal, nor an equitable interest in any of the deceased’s property
until the executors have discharged all of the deceased’s debts -> until then the beneficiary cannot claim any
property from the estate for themselves and has only an expectation of the property being distributed to them,
which is characterized as a mere equity
Commissioner of Stamp Duties v Livingston: A testator had died domiciled in New South Wales and with real
and personal property both in New South Wales and in Queensland. He left one-third of his real and personal
estate to his widow absolutely. She then died intestate, also domiciled in New South Wales, but the husband’s
estate was not yet fully administered. -> it was held that she didn’t have such an inerest because administration
of the estate wasn’t complete -> on the husband’s death, full ownership of the estate had passed to the executors
=> where is the beneficial interest? -> should be considered to be in suspense pending the administration of the
estate
- Powers: trusts impose obligations that must be performed whilst powers are discretionary, so they may be
performed
-> Fixed trust: the duty to distribute trust property to the beneficiaries must be discharged -> if not, the court
will ensure that the duty is performed
-> Discretionary trust: the trustee can choose who is to benefit -> but this power must be exercised -> there is an
obligation to appoint and the trustee has a discretion regarding who is to benefit from the appointment of trust
property and by how much -> the trustee is subject to a duty to survey the class of beneficiaries -> if the trustee
fails to do so, it will be executed by the court
-> Fiduciary power: a power of appointment that is given to a trustee in their capacity as a trustee -> the trustee
is not obliged to exercise it at all -> but the trustee must consider whether or not the power should be exercised -
> if the power is not exercised, it will lapse -> if there is a fixed trust and the trustee has a fudiciary power to
distribute a proportion of the property as they might wish, if that power lapses, the property that could have
been appointed by the exercise of the power will be appointed to the terms of the fixed trust
• 3 categories: general power(to appoint property to anyone the trustee chooses) -> special power (to
appoint to a person from a selected group) -> intermediate power( to appoint property to anybody excpet
certain people or certain group of people)
