Equity and Trust Revision Summary

Equitable Principles 1

The Three Certainties 3

Certainty of Intention 3

Certainty of Subject 4

Certainty of Object 6

The Beneficiary Principle & Private Purpose Trusts 9

Trusts of Imperfect Obligation 9

The Re Denley Purpose Trust 11

Other Exceptions to Beneficiary Principle 12

Charities 15

Charitable Purposes 16

Public Benefit 20

The Doctrine of Cy-Prés 22

Formalities of a Trust 24

Constitution of a Trust 27

Exceptions to Formality Requirements 28

Secret Trusts 32

Equitable Principles

• Types of Trust

  • Fixed trust - trustee must give property out to the named objects + has no discretion as to how it's to be distributed

  • Discretionary trust - trustee must give property out to the named objects + has discretion as to how it's to distributed

  • Discretionary power of appointment - trustee has discretion as to whether & to what extent to give the property out to named objects and, to the extent that he decides to do so, in what proportions

  • Fixed power of appointment (least common) - trustee has discretion as to whether to give out the property to the named objects but, if he decides to give out, must do so in pre-determined proportions.

• Trusts vs Powers

  • Trusts impose obligations on trustees. A mere power has discretion.

  • The court will enforce a trust not a power.

  • The objects of a fixed trust must be certain, they may be more loosly described for a power

• Examples of Powers

  • Re Gulbenkian [1970] – to use the estate for the maintenance or personal support of a listed group

  • Re Hay’ Settelment Trust [1982] - here there is a gift over in default, that typically indicate a power rather than a trust.

• Classification of Trusts

  • An express trust is usually deliberately set up by the settlor, though it may be deduced from their informal language or conduct.

    • A private express trust is for the benefit of individual persons.

    • A charitable express trust is for public purposes, not for private individuals as such.

  • Other trusts may be implied by law, in some cases despite the intentions of the parties.

    • Resulting trusts occur when the property ‘results’ or ‘returns’ to the settlor, because settlor did not dispose of the trust property fully

    • Constructive trusts are trusts imposed by operation of law in a number of different circumstances, mostly to prevent an unconscionable outcome.

    • Trusts may also be implied by statute. For instance, on an intestacy, or where there is co-ownership of land, LPA 1925 imposes a trust of land.

  • ‘Bare’ trusts exist where a beneficiary, who is a person of full capacity viz. over 18 years of age and of sound mind (sui juris), is absolutely entitled to the trust property

    • Beneficiaries may call for the trust property to be transferred to them or their nominee (so bringing the trust to an end) under the rule in Saunders v Vautier (1841)

• Equitable Maxims:

  • NB These are contradictory and so not used unless in a genuinely novel scenario or there are conflicting precedents or previous precedents are considered wrong.

• Examples:

  • Equity will not suffer wrong to be without a remedy

  • Equity follows the law

  • When the equities are equal, the first in time prevails.

  • He who seeks equity must do equity.

  • Equity will not assist a volunteer (except where it will)

  • Equity will not perfect an imperfect gift.

  • He who comes to equity must come with clean hands.

  • Equity is equality

  • Equity looks to substance, rather than the form.

  • Equity looks on that as done which ought to be done

The Three Certainties

• In order to create a trust:

  • A) The settlor must have legal capacity to create the trust.

  • B) Any statutory formalities, that may apply depending on the nature of property, must be met and

  • C) The trust must be properly constituted.

  • D) Three certainties must be satisfied.

• Formally declared in Wright v Atkyns (1823) and Confirmed in Knight v Knight (1840)

  • 1) Certainty of Intention

  • 2) Certainty of Subject Matter

  • 3) Certainty of Object

Certainty of Intention

• For the trust to be valid, the settlor must have intended to impose a legal (as opposed to a mere moral) obligation to act and deal with the property in accordance to the trust instrument.

• Intention to create a trust can be shown easily with words or conduct

  • But you don’t have to understand that you are creating a trust in order to create a trust - What we are looking at is the consequences

• The words ‘on trust’ is not required (Re Kayford [1975])

  • Neither does the usage of the word trust guarantee the creation of a trust (e.g. I trust you…).

• Distinction drawn between

  • (i) imperative words, which show an intention to create a legally binding obligation. This will generally create a trust.

  • (ii)precatory words, which merely express a mere hope or a wish. E.g. ‘in full confidence’ ‘trusting’ ‘hoping’. This may but do not have to create a trust

• Precatory Words:

  • Historically they always created a trust (before Executors Act 1830), court was more inclined to create trusts as otherwise the executors got the estate.

  • Lamb v Eames (1871) “to be at her disposal in any way she may think best, for the benefit of herself and her family”

    • Court: ‘it is a cruel kindness indeed to impose a trust when none was intended.’ Held this was a gift.

  • For short period court stopped awarding trusts, but later a more balanced approach came in

  • Re Adams and Kensington Vestry (1884) “in full confidence that she will do what is right”

    • Took into account the fact that this was for the wife, therefore a gift.

  • Comiskey v Bowring-Hanbury [1905] “in full confidence that she will devise it to such one or more of my nieces as she may think fit…in default of any disposition by her thereof by her will or testament I hereby direct that”

    • Mandatory nature of the instruction, trust imposed.

  • Re Steele’s Will Trust [1948]

    • Will had been professionally prepared. Same words used as in the case of Shelley v Shelley (1868): “I request that…”

    • As identical clause is used then the same outcome must be applied

  • Re...

Buy the full version of these notes or essay plans and more in our GDL Equity and Trusts Notes.