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Law Notes Trusts and Equity Notes

Resulting Trusts And Unincorporated Associations Notes

Updated Resulting Trusts And Unincorporated Associations Notes

Trusts and Equity Notes

Trusts and Equity

Approximately 1016 pages

Equity notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB trusts cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Equity and Trusts Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest re...

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Equity 8 Associations Resulting Trusts and Unincorporated RESULTING TRUSTS; PROPERTY HOLDING BY UNINCORPORATED ASSOCIATIONS Abbreviations: C Claimant D Defendant T Trustee S Settlor B Beneficiary F Fiduciary P Principal PoA Power of Appointment CT Constructive Trust RT Resulting Trust RESULTING TRUSTS The traditional analysis - 2 forms * * * The 2 distinct categories were established in Vandervell v IRC, 1967, by Megarry J 1. AUTOMATIC RT: Where A attempts to dispose of his entire beneficial interest, but fails to do so (but think he has) By operation of law, there will be RT back to A. Independent of any intentions or presumptions! 2. PRESUMED RT: Where there is voluntary/gratuitous transfer of legal estate from A to B. (or where A directs his trustee to transfer) Court will look for express intention, by construing transfer document. But if no express intention, then resulting trust will arise in favour of A - equity presumes what A's interest must have been This is easily rebutted! Distinguished by the manner by which they operate. The first is by operation of law - automatic. The second is by intention - rebuttable presumption. Analysis behind the imposition of RTs. There are 2 schools of thought on how RTs arise: response to transferor's actual or presumed intention that transferee should hold property on trust for him, or response to transferee's unjust enrichment Westdeutsche: Lord Browne-Wilkinson thought that it was a response to intention. The main objection to this is that there have been cases where RTs are imposed despite clear evidence that transferor never thought about it, or even that transferor had clear intention he did not want to acquire new equitable beneficial interest in the property (i.e. Vandervell) Also doesn't explain why unwritten intention to create trust of land can take effect as RT yet can't be an express trust cos of non-compliance with LPA 1925 s53(1)(c) Air Jamaica and Twinsectra: Lord Millett thought it was a response to unjust enrichment instead. But if taken to logical limits, this suggests that RT will arise wherever C transfers property but his intention to benefit D is vitiated by mistake/undue influence/was conditional on some future event happening which did not materialise. Not true that in all such cases, C should be given proprietary rights and priority - personal restitutionary remedy should suffice. Chambers thinks that this can be resolved by making a distinction on the basis of the time that has lapsed between receipt and the basis for failure of C's payment (if failed immediately, then D never properly owned the property hence would be ok to give C proprietary rights) 1 Equity 8 Associations Resulting Trusts and Unincorporated 1) The automatic resulting trust * * * * *---*Example: Vandervell case - see earlier notes V told bank (trustee/nominee holding his shares) to transfer shares to Royal College of Surgeons, intending RCS to take beneficially. But V created option to retake shares which vested in trustee. Didn't name beneficiary for option, hence failed to dispose of entire beneficial interest - resulted back to V. Rationale: beneficial interest must always belong to someone. Hence if transfer is incomplete, then transferor must take as beneficiary (Vandervell v IRC) Can arise where express trust fails, or where settlor fails to dispose of whole beneficial interest under an express trust. Who is the resulting trust in favour of? Will go back to the "true" transferor = previous beneficial owner. In Vandervell: RT didn't go back to nominee bank (trustee for V), but V himself who was the original beneficial owner. Divided into more subcategories: I. "Gap" resulting trusts Vandervell is an instance of this - V successfully disposed of beneficial interest, mostly, just leaving some small bit (the option to repurchase). So gap is filled by the automatic RT. II. "Complete failure" resulting trusts Where the creation of the trust itself fails (eg. For uncertainty of objects, or for beneficiary principle as in Re Astor case of NCPT) But note that there is some de minimis: must have clear subj matter and obligation on T, otherwise you won't even have a primary trust in the first place - much less RT back to T) where there's lack of certainty of subject matter, there's just no trust altogether might also fail for certainty of intention cos of precatory words. No trust in first place. III. Termination of a valid trust Where there is an originally valid trust, but gap which was not evident at outset subsequently appears. where the primary trust comes to an end or fails (eg. Purpose completed) Re Abbott, 1990: trust for maintenance of 2 elderly sisters. Initially, appeared that funds would be used up in paying for their care (originally valid), but later after their deaths, transpired that there was some left. Sterling MJ held that there will be automatic resulting trust in favour of settlors (contributors), in proportion to contribution. But difficulty of construction: sometimes, stated purpose might be seen as mere expression of motive, so that upon completion of purpose, property does NOT go back on automatic RT to settlors, but vests absolutely in Bs. Re Andrew's Trust, 1905: trust created for education of infants of deceased bishop. Purpose completed, surplus remaining. High Courts held that intention was for money to be beneficial gift, and expression of purpose of paying for education was mere motive for gift - no legally binding effect. kids as beneficiaries got to retain the surplus, absolutely. Re Osoba, 1979: testator left money to mother, widow, and daughter, specifying for last that it was for her education up to uni. Purpose completed - surplus how? court adopted same approach as in Re Andrew's - not a true purpose trust. Note that a RT will NOT arise if settlor expressly intended T to take property beneficially for T himself, but subject to a charge for some purpose. Re Foord, 1922: testator left estate to sister absolutely, but on trust to pay widow annuity. APPLICATION - dissolution of unincorporated associations (UAs) * Note the case law is not consistent - explanation using automatic RT is but one of several. * What is an unincorporated association? 2 Equity 8 Associations Resulting * * * Trusts and Unincorporated Not incorporated not a legal person itself But still has certain requirements of structure. In Conservative Central Office v Burrell, 1982, these requirements were stated: 1. 2/more members bound together for common purpose 2. Mutual rights and duties between member 3. Rules governing control of association and use of funds 4. Ability for members to join and leave association at will. While UA is still in existence, how are its assets held? Problem arises cos UAs are not legal persons - can't hold assets themselves like companies. 3 models suggested by Cross J in Neville Estates v Madden, 1962: (first 3) 1. Gift to current members absolutely as joint tenants UA is just means of identifying indivs you want to give money to. But implies members free to deal with money as they like. This would be contrary to settlor's intentions, who probably only wanted members to be able to use income, not capital. 2. ***Gift to members subject to their mutual contractual obligations Recall requirement in Burrell that parties be bound by mutual undertakings. Hence constrains them to use funds only for purposes listed in rules of UA. **So NOT vested in members as absolute beneficial joint tenants, but circumscribed by contract as represented by rules/constitution of the uA. This is the 'contract holding theory'. Implied term that where members leave/die, they forfeit their co-owned share. When members join, they gain share automatically too. Not just providing endowment capital (where members can only use interest), but allow property to be spent freely or divided up by members as contractual rules allow. Hence, does not go against rules of remoteness/inalienability. NB: if body was designed to carry on indefinitely with testator knowing it would be very hard for members to wind it up and pocket assets, then might be construed as setting up endowment capital still! 3. Gift on trust for purposes of the association Rule against perpetuity would render gift void since it can't be absolute gift to body as body has no legal personality. But after 1964 Perpetuities and Accumulations Act, the gift will be valid for the statutory perpetuity period. If it is a gift on trust to carry out purposes of the UA, then it will be void for infringing rule against inalienability (non-charitable purpose trust). Though can try arguing for a Re Denley's Trust Deeds type where fulfilment of non-charitable purpose is to benefit of sufficiently certain class of indivs, so that they have standing to enforce. Unless UA is charitable, it will usually be void. Not that helpful. So (2) is the most plausible! Supported by subsequent jurisprudence (eg. Re Recher's Will Trusts, 1972; Re Grant's WTs, 1980 - said that for (2), must be possible for current members to wind up UA and divide assets at any moment, otherwise problem of remoteness of vesting and perpetuity. Hence, gift failed on the facts - UA's rules said members couldn't take assets even if UA wound up) How can a UA be dissolved? 4 methods identified by Brightman J in Re William Denby Sick and Benevolent Fund, 1971: i. Voluntary dissolution by members ii. Event leading to automatic dissolution under UA's rules iii. Permanent loss of substratum no members left/no purpose remaining iv. Winding up by court (which has inherent jurisdiction to do so) What happens to surplus assets upon dissolution? Case law shows 3 ways - conflicting authority! (C) is the most prevalent today! a. Automatic resulting trust A bit like Re Abbott - view that surplus assets should be held on automatic RT for contributors/settlors in proportion to contributions. Re Lead Co's Workmen's Fund Society, 1904: trade union wound up. Distribution of funds was among current members in proportion to subscriptions paid. 3 Equity 8 Associations Resulting-b.-- c.- Trusts and Unincorporated CRITICISM: Strictly speaking, estates of dead members should receive shares too. Re Sick and Funeral Society of St John's, 1973: Megarry LJ recognised that shouldn't just be returning PS to surviving EEs. complicated if you have long-standing UAs. Artificial and unworkable if money raised by street collections. Re Gillingham Bus Disaster Fund, 1958: not actually UA but argued by analogy. Non-charitable fund to support survivors/relatives of deceased. Harman MJ applied automatic RT theory. But hard to trace all those who made street donations hence it was eventually decided to place money in court, saying donors could come back and claim. Silly! Didn't work! BUT might be appropriate if there was a large ascertainable gift made for particular purpose (see Re West Sussex) Bona vacantia Re West Sussex Constabulary's Benevolent Fund,1971: Goff J argued that for "outwardlooking" UA, at least, there is no intention that members should get back property upon dissolution - surplus funds should go to Crown as bona vacantia. hence for public collection/fundraising events, donors intended to part with their money. "outward looking" = meant to benefit third parties, not members. Different from inward looking UAs which were meant to provide benefits for members, hence members retain stake in money and RT would be more appropriate. focus on intention of donors. but if it's single large sum given by specific donor, then might go back on RT. Cf Re Bucks Constabulary Fund (no 2), 1979: Walton J said Goff J's solution would be adopted only if UA was already "moribund" (one/no members left) - didn't think money should go to Crown as long as there was more than one member left. Also Hanchett-Stamford v AG, 2008: Lewison J said that even if there is ONE surviving member, assets would go to him. Only goes to Crown if none left at all. So this approach is mostly out of favour! Look to (c) instead.... ***Contract Advocated by Walton J in Re Bucks: since use of UA's funds is controlled by the contracts amongst the members, upon dissolution, look back to terms of the contract to see what happens. if there is no express provision, then take that there is an implied term of equal distribution amongst existing members. Rationale: if funds are vested in members subject only to contractual obligations, makes sense that when members decide to terminate contract, they become absolute owners. Applied in most recent cases - Re St Andrew's Allotment Association, 1969, and Re Sick and Funeral Society of St John's, 1973. There was brief uncertainty after Davis v Richards and Wallington Industries Ltd, 1990 reverted to the bona vacantia approach in Re West Sussex said RT back to employees, but then since employees prevented by law from receiving more than contracted benefits under pension scheme, surplus went to Crown as bona vacantia But this is actually a case of pension trusts being argued by analogy with UAs. Makes more sense to imply RT in pension trust, cos funds are held on trust for employees. Different from UA where fund are actually co-owned by members subject to contractual obligations. But for UAs, cases stuck to contractual approach anyway! Re Horley Town FC, 2006: held that club's assets being held for full members, upon dissolution the assets would be distributed on per capita basis between those members. So the divergence may be attributed to differences in manner of assets being held prior to dissolution - whether on specific trusts (supports RTs), or by members themselves subject to contractual obligations (supports contract approach). 2) The presumed resulting trust 4

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