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Summary Equity and Trusts: different types of trusts, key principles, duties and claims against trustees

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Module
Equity and Trusts

Institution
University Of Law (ULaw)

Summary of all the key elements of equity and trusts, including all the different types of trust, principles, and duties owed

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Uploaded on March 7, 2023
Number of pages 46
Written in 2022/2023
Type Summary

gift
trust
three certainties
subject matter
objects
chattels
shares
equitable interest
imperfect gift
exceptions
imperfect gifts
quis
establishing self as trustee
requirements for valid gift
intention

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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................................................................................................5

Also must satisfy: Beneficiary principle...............................................................................6
Purpose trust................................................................................................................................6
Rules against perpetuity....................................................................................................7
Property must be transferred in the correct manner...........................................................7
Requirements for a valid gift of land............................................................................................7
Transfer of chattels.......................................................................................................................7
Requirements for a valid gift of shares in a company...................................................................7
Requirement of gift of equitable interest.....................................................................................8
Gift to non-charitable non-incorporated association....................................................................8
Equity will not perfect an imperfect gift.............................................................................9
Exceptions..........................................................................................................................9
Every effort test (Milroy v Lord, Re Rose (for shares))..................................................................9
Imperfect gifts and unconscionability.........................................................................................10
Strong v Bird...............................................................................................................................10
Insolvency and companies................................................................................................11
Quistclose trust..........................................................................................................................13
Trusts and equitable interests..........................................................................................14
Express trust...............................................................................................................................14
Resulting trust............................................................................................................................15
Voluntary transfer.........................................................................................................................................15
Purchase money cases..................................................................................................................................15
The presumption of advancement..............................................................................................16
Rebutting the presumption of resulting trust and advancement................................................................16
Constructive trust.......................................................................................................................17
Constructive trusts of the family home........................................................................................................17
Common intention constructive trusts.........................................................................................................18

, constructive trusts in a commercial setting..................................................................................................18
Detriment...................................................................................................................................19
satisfying the equity...................................................................................................................19
Proprietary estoppel...................................................................................................................20
Active assurance...........................................................................................................................................20
Passive assurance.........................................................................................................................................21
Remedy......................................................................................................................................21
Personal claim against trustees........................................................................................22
Are they a fiduciary?...................................................................................................................22
Duties to the trust fund..............................................................................................................22
TA 2000 s1 – duty of care.............................................................................................................................22
TA 2000 s3 – general power of investment..................................................................................................22
TA 2000 s4 – standard investment criteria...................................................................................................23
TA 2000 s5 – Advice......................................................................................................................................23
S8 Power to acquire freehold and leasehold land........................................................................................24
Common law duties......................................................................................................................................24
Has there been a breach?...........................................................................................................24
Unauthorised investment.............................................................................................................................24
Breach of duties regarding delegation........................................................................................24
S11 TA 2000 Power to employ agents..........................................................................................................24
Liability and delegation s32 TA 2000............................................................................................................25
s25 Delegation of trustee’s functions by power of attorney........................................................................25
Collective delegation....................................................................................................................................26
Breach of duty to be active in the affairs of the trust..................................................................26
Appointment, retirement and removal of trustees.....................................................................27
S36 TA 2000..................................................................................................................................................27
S39 TA 2000 – retirement of trustee without a new appointment..............................................................27
S40 TA 2000- vesting of trust property in new or continuing trustees........................................................27
S41 TA 2000- power of courts to appoint new trustees...............................................................................27
TOLATA 1996 :S19 – appointment and retirement of trustee at instance of beneficiaries.........................27
Has the breach caused loss?.......................................................................................................28
Defences.....................................................................................................................................28
Consent of beneficiaries...............................................................................................................................28
Exclusion clause in the trust instrument......................................................................................................28
Limitation Act 1980.......................................................................................................................................29
Contribution/ indemnity available?............................................................................................29
Civil liability (Contribution) Act 1978 2 Assessment of contribution...........................................................29
Trustee Act 1925 S62 power to make beneficiary indemnify for breach of trust.........................30
Power of advancement and maintenance........................................................................30
Information beneficiary can demand from trustees...................................................................30
What documents can the beneficiaries demand?.......................................................................31
Circumstances in which trustees might be obliged to give reasons for their decisions...............32
32 TA 1925— Power of advancement.........................................................................................32
s 32 authorises trustees to pay:....................................................................................................................32
Restrictions to s32........................................................................................................................................33

, S29 Remuneration of certain trustees........................................................................................33
Power of maintenance...............................................................................................................33
Charitable trusts...............................................................................................................35
the charitable exception.............................................................................................................35
Requirement for charitable trust................................................................................................36
The benefit aspect........................................................................................................................................36
The public aspect..........................................................................................................................................36
Other exceptions to beneficiary principle…................................................................................37
POSSIBLE ACTIONS AGAINST A THIRD-PARTY TEMPLATE..................................................38
Did third party (defendant) receive property subject to a trust/fiduciary relationship?.............38
Personal equitable actions (no good if defendant bankrupt):.....................................................38
Accessory liability (dishonest assistance)....................................................................................38
The standard of honesty...............................................................................................................................38
Recipient liability........................................................................................................................38
stages of knowledge:....................................................................................................................................38
Intermeddling.............................................................................................................................39
Personal common law action (no good if defendant bankrupt)..................................................39
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
Equitable proprietary claim against a trustee.............................................................................40
Trust property is dissipated..........................................................................................................................41
Trustee still holds original trust property.....................................................................................................41
Clean substitution.........................................................................................................................................41
Mixed asset...................................................................................................................................................42
Mixed bank account: allocating withdrawals...............................................................................................42
Mixing of two trust funds.............................................................................................................................43
Personal equitable action (no good if defendant bankrupt):......................................................45
Ending a trust - Saunders v vautier...................................................................................46

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
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,

The Court of Appeal distinguished Re London Wine Co (Shippers) Ltd because that decision related
to tangible assets (chattels) whereas Hunter v Moss concerned intangible assets, namely company
shares. It would appear that you can create a valid trust of an unascertained part of a bulk of
intangible assets. This decision has been criticised. – ie it doesn’t matter which 500 shares are given
away as long as 500 are given away Hunter v Moss [1994] 1 WLR 452

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Summary Equity and Trusts: different types of trusts, key principles, duties and claims against trustees

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