Trusts Revision Summaries Notes

Creation of Express Trusts

Beneficiary Principle

• For a non-charitable trust to be valid it must have a human beneficiary, lest it be impossible to administer (Morice v Bishop of Durham)

• NB Debate on the nature of the beneficiary’s interest

  • See below

  • Crucial to application of Re Denley’s/Re Lipinski’s/Re Grant’s/Baker v Archer Shee & Archer Shee v Garland

• NB Saunders v Vautier rule, and application to exhaustive discretionary trusts (Re Smith), and non-application in cases of ‘gift-over’

• Distinguish dixed trust, discretionary trust, and mere power. ‘Equally’=FT; A gift-over in default implies that initial distribution is a mere power; mandatory language implies a trust

Three Certainties (Required to create an express trust- Knight v Knight)

a) Certainty of Intention

• S had to express an intent to create a trust by name or set of arrangements equating to trust (Re Schebsman). Precatory words alone intention e.g. request to use property for family harmony (Margulies) nor request that T ‘do what’s right’ (Re Adams & Kingston Vestry), though saying property ‘is as much yours as mine’ does (Paul v Constance)

• Intent to make a gift can’t = intent to create a trust (Jones v Lock).

b) Certainty of Subject Matter

• Mere expectation of future property is insufficient (Re Ellenborough).

• Trust property has to be distinguishable from the general mass (Re London Wine/Re Goldcorp), except for intangibles (Re Harvard Securities/ Hunter v Moss)

• A trust for ‘whatever is left’ i.e. a floating charge is valid (Ottaway v Norman) despite inherent uncertainty as to what will be left. Australian High Court in Birmingham v Renfrew says gifts calculated to defeat the floating trust are invalid: Hard to enforce

c) Certainty of Subject Matter

• Fixed trusts require a complete list test (IRC v Broadway Cottages)

• Discretionary trusts use any given postulant (AGP) test (McPhail v Doulton

  • NB Confusion about content of test, but Lord Wilberforce in McPhail and Stamp LJ in Re Baden (No.2) say court has to be able to say of any potential claimant whether or not he comes within class of beneficiaries.

• For a gift standard of recipients is ‘one person’ test if the gift is of an option to purchase property, so that there’s no need to say who actually gets the property (Re Barlow)

• Examples:

  • ‘my old friends’ satisfies ‘one person’ and AGP tests (Re Barlow, per BW J) but not ‘complete list’ (Re Gulbenkian)- it has a core meaning, despite uncertainties.

  • ‘Relatives’ taken to mean statutory kin, so satisfies complete list (Re Gulbenkian)

  • ‘people who have helped me’ = too vague for AGP (Re Wright’s Trust)

• Outsourcing decision to TP: Re Tuck’s ST- different views of Denning MR and Eveleigh LJ

• Conceptual Uncertainty voids FT and discretionary trusts, whereas evidential uncertainty only voids FTs (per sachs LJ in Re Baden (no.2)

General Uncertainty:

• Administrative unworkability (ex p West Yorkshire MCC)

• Capriciousness i.e. a power so broad that it allows T to distribute contrary to intentions of S (Re Manisty)

Theory- Nature of Equitable Interest

View 1: Equitable obligations enforceable by B, imposed on the legal title-owner (the trustee). B has no proprietary interest in the trust property.

• Only view 1 explains Re Denley’s (as supported in Re Lipinski’s and as interpreted in Re Grant’s WT); floating trust (T owns absolutely during lifetime); non-exhaustive discretionary trust; power of distribution w/ gift-over in default; and charitable trusts (enforceable by AG); fact that under a will a beneficiary doesn’t acquire proprietary rights until all debts are paid and/or Ts transfer title to Bs (Livingstone), though arguably wills regime is just different.

• Enforcement rational given in Morice v Bishop of Durham

• Supports historical origins of trust (personal claims for B only) and facilitative principle

• Interest thesis would require property subject to an equitable interest to be capable of segregation i.e. identifiable. Not always necessary though, as in Hunter v Moss.

• Macfarlane’s variant of this view- a right to a right. Equitable interest is a persistent right based on enforcing the core equitable obligation of trust: That T shouldn’t use trust property in his own interest.

• Rejection of retention model of Chase Manhatten (In Westdeutsche) supports view 1.

View 2 Interest thesis- that trust gives proprietary interest in trust property to B, so that T’s correlative duty is to effectuate that interest

• Lord BW in Westdeutsche and Lord Millett is Twinsectra suggest that wherever T holds legal title as a trustee, B must have a symmetrical proprietary equitable interest (obv wrong- see above examples)

• Some say B’s interest attaches to the property therefore must be proprietary- Wrong: it’s the title of ‘owner’ that is being held on trust and not the thing itself (Swadling- Saunders v Vautier requires T to vest title on B, NOT possession).

• Nolan suggests that the proprietary interest/ownership is a negative interest i.e. right to exclude others- hence claims against TPs, priority of B over creditors, and fact that B benefits when the trust property increases in value. These are indicative of ownership.

  • Macfarlane says this can be explained by reference to equitable obligation on T not to use trust property for personal benefit.

  • Also if TP damages property, it’s not B who can make a claim against TP, which implies a right less than ownership (The Aliakmon)

Formalities

Transfer of a Beneficiary’s Interest

• An interest in land can only be CREATED or DISPOSED of in signed writing or it’s VOID (53(1)(a) LPA 1925)

• An interest in personalty can only be DISPOSED of in writing or it’s VOID (53(1)(c) LPA)

• Doesn’t affect operation/creation of RT/CT (53(2) LPA)

• Grey v IRC: If one has an equitable interest before and not after, there is a disposition which had to be in writing

• Specifically enforceable oral agreements give rise to a CT and therefore don’t have to be in writing. (Oughtred/Neville v Wilson)

• An...

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