Lecture notes
Equity & Trusts Lecture Notes
- Module
- Equity And Trusts
- Institution
- De Montfort University (DMU)
Concise and to the point Equity & Trusts Lecture notes for the entire course.
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What is Equity & TrustsEquity Trust
The body of rules which originally developed The trust is purely a creation of equity.
and administered by the court of Chancery, and
which are now administered by all courts
through their equitable jurisdiction.
Equity developed in response to the injustices ‘De nition’ of a trust:
caused by the common law. - Equitable obligation
- Binds a person (Trustee)
- To deal with property (Trust property)
- For the bene t of persons (Bene ciaries)
- Who may enforce the obligation.
Where there is a con ict between law and A trust separates the legal title and equitable
equity, equity prevails. title to property.
The Court of Chancery made decisions on a Legal title is vested into the Trustee. As far as
discretionary basis applying the general the law is concerned, the trustee is the legal
principles of equity. owner of that property.
The general principles of equity have now Equitable title is owned by the Bene ciary.
evolved into the maxims of equity. These Ultimately get to enjoy and get the bene t from
maxims are only guidelines. the property.
Equity created new remedies: Sometimes, the trustees and bene ciaries can
1. Speci c performance (make someone do be the same people, particularly in relation to
something). land e.g. co ownership.
2. Injunctions (including freezing injunctions) -
stops someone from doing something.
3. Recti cation (the action of putting
something right).
4. Search orders.
All equitable remedies are discretionary and are A bene ciary under a trust has a proprietary
only appropriate where the common law right.
remedies are inadequate.
Classi cation of Trusts
Private Public
A private trust is for either named individuals or A public trust is a trust to promote a charitable
a class of individuals. purpose e.g. animal welfare.
Public trusts are enforced by Attorney
General as there is no speci c bene ciary.
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, Classes of Private Trust
Express Trusts Implied Trusts
Intentionally created by the settlor. Are not created expressly by the settlor but
instead arise by implication or operation of law.
Fixed Trust - the bene ciaries and their Constructive Trusts - arise by operation of law
interests are stipulated (speci ed) and are imposed where justice and conscience
E.g.: requires it e.g. the law will presume a legal
- £20,000 to be divided equally between my owner hold the property of another where it
children. would be unjust to hold it for his own bene t
- £1m to be divided by my trustees equally and if a trustee purchases trust property from
amongst my four children. the trust (in breach of his duciary duty) a
constructive trust will apply requiring that the
property is held on behalf of the bene ciaries.
Discretionary Trust - here the settlor gives the Resulting Trusts - these arise in 2 main
trustees a discretion which bene ciaries to circumstances. Firstly where an express trust
chose from out of a particular class fails (e.g. doesn’t satisfy the requirements for
E.g.: creating a valid trust) the property will result
- £20,000 to be divided between such of my back to the settlor (automatic). Secondly, where
children as my trustees think t. A buys property but registered it in B’s name, B
- £1m to be divided amongst my four children is presumed to hold the property on resulting
as my trustees in their absolute discretion trust for A.
think t.
Secret Trusts - created by Will these appear to Statutory Trusts - these are created by law as a
leave an outright legacy to X but in fact an result of certain circumstances e.g. land and co
earlier agreement had been entered into ownership. Co ownership of land always occurs
whereby X agreed to hold the legacy on behalf behind a test TOLATA 1996.
of someone else. These types of trusts can be
secret or half secret.
Testamentary Trust Intervivos Trust
A trust which comes into e ect after their death. Comes into e ect during your lifetime.
Testator/Testatrix - someone who creates a Settlor - is the person who creates a trust if
trust by way of a will. they created it to come into the e ect during
Testator - male, testatrix - female. their lifetime.
For testamentary trust the trust instrument will For the intervivos trust instrument will be a deed
be a Will. that is drawn up and signed during your lifetime.
Trustee - the person who is looking after the property but for someone else’s bene t.
Bene ciary - the person who is ultimately going to get the enjoyment out of property.
Personal representative - an individual whom another has trusted to manage her property and
money.
Life interest - the bene ciary has the use of property during their lifetime but on their death it
passes to a third party.
Remainder interest - where the bene ciary’s possession and enjoyment of the trust assets is
postponed by a prior interest in the same assets.
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, Testamentary Trust Intervivos Trust
Vested interest - a bene ciary of a trust has a vested interest if he does not have to meet any
conditions for his interest to take e ect.
Contingent interest - an interest that does not take e ect until a condition (contingency) has been
met. When the condition is met, the interest becomes a vested interest.
In personam - a latin term meaning “against a person”. An in personam proceeding decides the
personal rights and interests of the parties named in the action.
Donee - person to whom a gift is made.
Legatee - trustee in a fully secret trust.
The Creation of Trusts
In order to create a valid private trust the following criteria must be satis ed:
1. Any formalities required by statute must be satis ed.
2. The trust must be fully constituted.
3. The trust must comply with the tree certainties:
- Certainty of words/intention
- Certainty of subject matter
- Certainty of object
4. The trust must not be contrary to public policy or the perpetuity rules.
1. Formalities
1. Trusts made inter vivos
- Inter vivos trusts of pure personalty (e.g. money and shares) can be created without the need
for any formalities.
- S.2 Law of Property (Miscellaneous Provisions) Act 1989 states that contracts to create a trust
of land, must be in writing. If not, it is void.
2. Trusts created by will
- S.9 Wills Act 1837 states that no will shall be valid unless it satis es the requirements of s.9,
which include Will being made in writing and witnessed by two witnesses.
3. Transferring an existing interest under a trust
S.53(1)(c) Law of Property Act 1925 requires that “A disposition of an equitable interest or trust
subsiding at the time of disposition must be in writing signed by the person disposing of the same
or by his agent … or by his will”.
Grey v IRL - where there is no writing there is no disposition.
Vandervell v IRC - provides an exception to the rule whereby if the legal and equitable title are
being transferred together there is no need for a separate disposition of the equitable interest.
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