Exploring Equity and Trusts

Guided Tour
Preface
Acknowledgements
Table of cases
Table of statutes
PART 1
1 Introduction to equity
Learning objectives
Setting the scene: Equity and role of unconscionability
1. Introduction
2. The common law
i. The inadequacy of the writ system
ii. The inadequacy of an appropriate remedy
3. The origins and development of equity
i. The nature of equity in the early days
ii. The Lord Chancellor
iii. Disputes in the early Court of Chancery
4. Equity and the role of conscience
5. Unconscionability, fairness and the role of context
6. The Judicature Acts 1873 and the relationship between law and equity
7. Fusion fallacy
8. Equitable maxims
i. Equity will not suffer a wrong without a remedy
ii. Equity follows the law
iii. Equity acts in personam
iv. He who comes to equity must come with clean hands
v. Equity looks to substance as opposed to form
vi. Equity regards that as done which ought to be done
vii. He who seeks equity must do equity
viii. Equity imputes an intention to fulfil an obligation
ix. Delay defeats equity
x. Where equities are equal the first in time prevails
xi. Where the equities are equal the law prevails
xii. Where there is a conflict between law and equity equity prevails
9. Nature of proprietary rights in law and in equity
i. Legal proprietary rights: rights in rem
ii. Equitable property rights: rights in personam or rights in rem?
iii. Equitable rights and the doctrine of notice
10. Equity and social reform
i. The property rights of married women
ii. Freedom of testation
11. Conclusions
Further reading
Moot points
2. The trust concept
Learning objectives
Setting the scene: Hambro and Others v The Duke of Marlborough and Others [1994] 3 WLR 341
1. Introduction
2. Definition
3. The key features of the trust
i. The settler
ii. The trustee(s)
iii. The beneficiary
iv. The trust property
v. The trust instrument
vi. The legal and equitable interest
vii. A judicial assessment of the nature of a trust
4. Trust as a product of fragmentation of ownership
5. Historical foundations of the trust
6. Trusts and law reform
7. Classification of trusts
i. Express trusts
ii. Fixed and discretionary trusts
iii. Bare and active trusts
iv. Protective trusts
v. Secret trusts
vi. Implied trusts
8. The contemporary significance of trusts
9. Some key players and concepts in the trust relationship
10. Conclusion
Further reading
Moot points
3. The trust distinguished from other legal concepts
Learning objectives
Setting the scene: Re Mills [1930] 1 Ch. 654
1. Introduction
2. Contract
i. The element of a bargain
ii. A personal relationship
iii. A promise to create a trust or settle property for the benefit
of another
3. Agency
4. Bailment
5. Interests under wills and administrations
i. Personal representatives
ii. The interest of a legatee or devisee
6. Debts
7. Powers: general observations
i. Powers in general
ii. Powers of appointment
iii. Reasons for creating powers of appointment
8. Different types of powers of appointment
i. General, special and hybrid powers
ii. Bare powers and fiduciary powers
iii. Trust powers and mere powers
9. Exercising a power of appointment
10. Excessive or fraudulent exercise of a power
11. Consequences of note exercising a power of appointment
i. Resulting trust for the donor or his estate
ii. Gift over in default of appointment
iii. Gift in favour of all of the objects or the class
12. Conclusion
Further reading
Case study
Moot points
4. The three certainties
Learning objectives
Setting the scene: Mcphail v Doulton [1971] AC 424
1. Introduction
2. The effect of uncertainty
3. The rationale for certainty
4. Certainty of intention
i. Equity's concern is with substance not form
ii. Precatory words
iii. The effect of reliance on precedent
iv. Curing uncertainty with extrinsic evidence
v. Sham intentions
5. Certainty of subject matter
i. What is the subject matter of the trust?
ii. What is the precise beneficial interest of the beneficiary?
iii. Unascertained property
6. Certainty of objects: general observations
7. The constituent elements of certainty of objects
i. Conceptual certainty
ii. Evidential certainty
8. The test of certainty of objects for a fixed trust
i. Conceptual certainty
ii. Evidential certainty
iii. Ascertainability
iv. Administrative workability
9. The test of certainty of objects for a discretionary trust
i. The position pre-Mcphail v Doulton
ii. The position post-Mcphail v Doulton
10. [A-head missing?]
i. Conceptual certainty
ii. Evidential uncertainty
iii. Ascertainability
iv. Administrative workability
v. Gifts subject to condition precedent
vi. Curing conceptual uncertainty
11. Conclusion
Further reading
Case studies
Moot points
5. Formalities
Learning objectives
Setting the scene: The Vandervell Saga 1958 1965
1. Introduction
2. Testamentary trusts
3. Inter-vivos wills
4. Declarations of trust
i. Trusts of pure personality
ii. Trusts of land and interests therein
iii. The effect of non-compliance with s.53(1)(b)
iv. What trust is being enforced if s.53 is not complied with?
v. Declaration of sub-trust
5. Dispositions of equitable interests
i. The ambit of section 53(1)(c) Law of Property Act 1925
ii. The context of the s.53(a)(c) case law
iii. Assignment of an equitable interest
iv. Direction by equitable owner to trustee to hold for another
v. Direction by equitable owner to trustee to transfer the legal title to a
third party
vi. Declaration of new trusts with the consent of equitable owner
vii. Specifically enforceable contract for the assignment of an equitable
interest
viii. Disclaimer
6. Conclusion
Further reading
Case studies
Moot points
6. Constitution of trusts
Learning objectives
Setting the scene: Pennington v Waine [2002] 1 WLR 2075
1. Introduction
i. Completely constituted and incompletely constituted trusts
2. The Milroy v Lord principles of conferring a benefit on a donee
3. Declaration of trust
4. Transfer to trustees
i. There must be an actual transfer of the property to the trustee
ii. It matters not that the intended trust property arrives in the hands of the trustee in some other capacity
iii. What is the legal position where it is an act of a third party which is required to perfect the transfer?
5. Equity will not strive officiously to defeat a gift
i. Settlor declares a trust being one of a number of trustees
ii. Where it would be unconscionable to recall the gift
6. Enforcing a incompletely constituted trust
i. Has the beneficiary given consideration at common law?
ii. Marriage consideration
iii. Contract (Rights of Third Parties) Act 1999
iv. Consideration by use of a deed
v. Settlor covenants with the trustee to settle property on trust
vi. Completely constituted trust of a covenant (promise) in favour
of a beneficiary
vii. Specific performance of a covenant using the principle of
Beswick v Beswick
7. Exceptions to the rule that equity will not assist a volunteer
i. The rule in Strong v Bird
ii. Donatio mortis causa
8. Proprietary estoppel
9. Conclusion
Further reading
Case study
Moot points
7. Secret trusts and mutual wills
Learning objectives
Setting the scene: Re Boyes (1884) 26 Ch D 531
1. Introduction
2. Succession
i. Intestate succession
ii. Testate succession
iii. Vesting the deceased property in the personal representatives
3. Definition of a secret trust
4. The theoretical justification of secret trusts
i. Fron for the enforcement of secret trusts
ii. Secret trusts dehor the will
5. Requirements of a fully secret trust
i. Intention to create a trust
ii. Communication of the secret trust
iii. Acceptance of the secret trust
6. Requirements for a half-secret trust
7. Predecease of the secret beneficiary
8. Predecease of the secret trustee
9. Can a secret trustee derive a benefit from the secret trust?
10. How are secret trusts classified?
11. Mutual wills
i. There must an agreement not to revoke
ii. It is not a pre-requisite that the surviving testator should take a benefit from the first testator's will
iii. The imposition of a constructive trust in favour of a beneficiary
iv. The extent of a beneficial interest
12. Conclusion
Further reading
Case study
Moot points
8. The beneficiary principle
Learning objectives
Setting the scene: Re Astor's Settlement Trusts [1952] Ch 534
1. Introduction
2. Non-charitable purpose trusts and charitable trusts
3. Is the trust a purpose trust?
4. The beneficiary principle stated
5. Rationale behind the principle
i. Uncertainty
ii. Purpose trusts conflict with the perpetuity rules
iii. Excessive delegation of testamentary power
6. The Re Denley Principle: A situation outside the beneficiary principle
i. The principle stated
ii. Conceptual problems with the principle
iii. The principle endorsed
7. The anomalous cases
i. Trusts for the erection and maintenance of graves and monuments
ii. Trusts for saying masses
iii. Trusts for care and maintenance of specific animals
iv. Miscellaneous cases
8. The construction of gifts to unincorporated associations
i. Definition and problems of ownership of property
ii. Gift to present members as co-owners
iii. Trust for present members
iv. Trust for present and future members applying Re Denley
v. Contract holding theory
9. Reform
10. Conclusion
Further reading
Case study
Moot points
9. Illegality and public policy
Learning objectives
Setting the scene: Blathwayt v Baron Cawley [1976] AC 397
1. Introduction
2. Freedom of disposition and public policy
3. Trusts contrary to public policy
i. Conditions precedent, conditions subsequent and determinable
interests
ii. Trust interfering with parental duties
iii. Trusts in restraint of marriage
iv. Capricious trusts
4. Illegality
5. Trusts which contravene the perpetuity rules
6. Trusts to safeguard property from creditors
i. Transactions defrauding creditors
ii. Bankruptcy provisions
7. Trusts defeating the rights of the family and dependants
8. Trusts defeating the rights of a spouse
9. The Law Commission's consultation paper
10. Conclusion
Further reading
Case study
Moot points
10. Resulting trusts, part I: Nature of resulting trusts
Learning objectives
Setting the scene: When does a resulting trust arise?
1. Introduction
2. Theories explaining the imposition of a resulting trust
3. The 'beneficial vacuum theory'
4. Resulting trusts and a restitutionary justification
5. Resulting trusts and the role of intentions
6. Automatic and presumed resulting trusts
7. Westdeutsche: the prevailing view
8. Conclusion
Further reading
Moot points
11. Resulting trusts, part II: Imposing resulting trusts
Learning objectives
Setting the scene: Problems requiring a resulting trust solution
1. Introduction
2. Failure of the trust
i. Failure to declare the beneficial interest
ii. Subsequent failure of a trust
iii. Failure due to non-compliance with a substantive or formal requirement
3. Resulting trusts and quistclose trusts
4. Unexhausted funds
i. The maintenance of individuals
ii. Disaster funds
iii. The surplus funds of unincorporated associations
iv. Pension fund surpluses
5. Voluntary conveyance in the name of another
i. A voluntary conveyance of land in the name of another
ii. A voluntary conveyance in the context of personal property
6. Purchase in the name of another
7. Rebutting the presumption of a resulting trust
i. Evidence of a gift
ii. The presumption of advancement
8. Rebutting the presumptions and evidential matters
i. Evidence of illegality
ii. Illegality giving rise to the presumption but not to its rebuttal
iii. Illegality not carried out
iv. Reform
v. Resulting trusts in the family home
9. [A-head missing?]
i. Purchase money resulting trusts
ii. What contributions count?
iii. Mortgage contributions
iv. Indirect contributions
v. Quantification
vi. Differences between resulting and constructive trusts in the family context
vii. Reform
10. Conclusion
Further reading
Case studies
Moot points
12. Constructive trusts, part I: The nature of constructive trusts
Learning objectives
Setting the scene: Why do we impose constructive trusts?
1. Introduction
2. When will a constructive trust be imposed?
3. Institutional and remedial constructive trusts?
4. Institutional constructive trust
5. A remedial constructive trust
6. Does English law recognise a remedial constructive trust?
7. Consequences of the imposition of a constructive trust
i. Proprietary and personal claims
ii. Only a personal claim
iii. The effect on third parties
iv. The duties of the constructive trustee
8. Conclusion
Further reading
Moot points
13. Constructive trusts, part II: Imposing constructive trusts
Learning objectives
Setting the scene: Problems requiring a constructive trust solution
1. Introduction
2. Acquisition of property as a result of unlawful conduct
i. Acquisition of property by killing
ii. The Forfeiture Act 1982
iii. Law Commission reform
iv. Theft
v. Bribes
vi. Fraud
3. Unauthorised profits gained by a fiduciary
i. The principle stated
ii. Examples of unauthorised profits
iii. Proprietary or personal remedies?
4. Constructive trusts and the family home
i. The common intention constructive trust
ii. Requisites for the imposition of a common intention constructive trust
iii. Express common intention
iv. Implied common intention
v. Detriment or change of position
vi. Quantifying the beneficial interest under a common intention constructive trust
vii. Constructive trusts, proprietary estoppel and resulting trusts
viii. Criticism of the present law and law reform in the context of co-habitation
5. Miscellaneous situations giving rise to a constructive trust
i. Specifically enforceable contract for the sale of property
ii. Undertaking by purchaser to recognise the right of another
iii. Failure to comply with formality requirements for interests in land
iv. Secret trusts and mutual wills
6. Conclusion
Further reading
Case studies
Moot points
14. Constructive trusts, part III: Imposing constructive trusts intermeddling with trust property
Learning objectives
Setting the scene: Royal Brunei v Tan [1995] 2 AC 378
1. Introduction
2. Nature of liability for knowing assistance
3. Requisites for liability for knowing assistance
i. A breach of trust or fiduciary duty by someone other than the defendant
ii. Assistance by the defendant
iii. Dishonesty on the part of the stranger
iv. The test of dishonesty in Royal Brunei v Tan
v. The test of dishonesty in Twinsectra v Yardley
vi. The test of dishonesty after Twinsectra v Yardley
4. Receipt of trust property in breach of trust
5. Significance of knowing receipt liability and requisites for liability
i. Disposal of assets in breach of trust or fiduciary duty
ii. Receipt of assets transferred in breach of trust or fiduciary duty
iii. Knowledge
iv. Strict liability?
6. Conclusion
Further reading
Case study
15. Introment, removal and retirement
Learning objectives
Setting the scene: Klug v Klug [1918] 2 Ch 67
1. Introduction
2. Capacity and numbers
3. Appointment of initial trustees
4. Appointment of new trustees
i. Express power to appoint a new trustee
ii. The statutory power in s.36 Trustee Act 1925
iii. The statutory power in s.41 Trustee Act 1925
iv. Appointment under the Trusts of Land and Appointment of Trustees Act 1996
5. The retirement of trustees
6. Removal of a trustee
7. Special types of trustees
i. Public trustee
ii. Judicial trustee
iii. Trust corporations
8. Vesting of the trust property in trustees
9. Conducting the office of trusteeship
10. Control of trustees discretions
i. Dispositive discretions
ii. Administrative discretions
11. Do trustees need to give reasons?
i. The right to inspect trust documents
ii. Disclosure of the reasons for acting in a particular way
12. Conclusion
Further reading
Case study
16. Investment of trust funds
Learning objectives
Setting the scene: Nestle v National Westminster Bank plc [1993] 1 WLR 1260
1. Introduction
2. The duty of investment and the power of investment
3. The objectives of trust investment
4. Historical note and contemporary trends in trustee investment
5. Common law and statutory duties when investing
i. The general duty of care in the Trustee Act 2000
ii. Balance the financial interests of all the beneficiaries
iii. The duty not to have regard to non-financial considerations
iv. Review of the trust investments
6. Express powers of investment
i. The nature of an express power of investment
ii. Interpreting express investment clauses
iii. The meaning of investment
7. Statutory power of investment
i. Background to the investment power in the Trustee Act 2000
ii. The general power of investment
iii. Standard investment criteria
iv. The need for advice
v. Delegation of investment powers and asset management
8. Purchase of land as an investment
9. Mortgages of land as an investment
10. Enlargement of investment powers: the return of the Re Kolb Principle
11. The duty to act fairly between the beneficiaries
i. The rule in Howe v Earl of Dartmouth: the duty to convert
ii. The rule in Re Earl of Chesterfield's Trust: the duty to apportion
iii. The contemporary application of the rules of conversion and apportionment and law reform
12. Conclusion
Further reading
Case studies
Moot points
17. Fiduciary nature of trusteeship
Learning objectives
Setting the scene: Keech v sandford (1726) Sel.Cas. Ch 61
1. Introduction
2. Defining fiduciary relationships
i. Problems of definition
ii. When will a fiduciary relationship arise?
iii. Fiduciary relationships in a commercial sense
iv. The nature and standard of fiduciary liability
v. The rationale for the strict approach
vi. Is the strict liability approach in fiduciary law justified in the modern law?
3. The purchase of trust property
i. The self-dealing rule
ii. The fair-dealing rule
4. Trustee remuneration
5. Sources of trustee remuneration
i. The trust investment
ii. The court's inherent jurisdiction
iii. Statute
iv. Solicitor-trustees
6. Incidental profits
i. Renewal of a lease
ii. Directors' fees
iii. Competing and doing business with the trust business
7. Remedies for breach of fiduciary duty
i. Account for profits
ii. A constructive trust imposed on the profits
iii. Equitable compensation
8. Conclusion
Further reading
Case study
Moot points
18. Powers of trustees
Learning objectives
Setting the scene: Re Pauling's Settlement Trusts [1966] 1 WLR 955
1. Introduction
2. The power to delegate
i. Principles of delegation pre-1925
ii. Principles of delegation under the Trustee Act 1925
iii. Principles of delegation under the Trustee Act 2000
iv. Individual delegation under s.25 of the Trustee Act 1925
3. The power of maintenance
i. Express powers of maintenance
ii. The statutory power of maintenance in s.31 Trustee Act 1925
iii. Exercising the statutory power of maintenance
iv. Accumulations of income and attaining majority
4. The power of advancement
i. The nature of s.32 Trustee Act 1925
ii. The meaning of advancement
iii. The provisos in s.32 Trustee Act 1925
5. Miscellaneous powers of trustees
i. The power of sale
ii. The power to insure
iii. The power to give receipts
iv. Compound liabilities and compromise
6. Conclusion
Further reading
Case studies
Moot points
19. Variation of trusts
Learning objectives
Setting the scene: Re Weston's Settlements [1961] 1 Ch 233
1. Introduction
2. The rule in Saunders v Vautier
i. The nature of the rule
ii. Justifications for the rule
iii. Application to different types of trust
iv. Limits to the rule inSaunders v Vautier
2. The court's inherent jurisdiction to order variation
i. Conversion
ii. Emergency
iii. Maintenance
iv. Compromise
3. Statutory provisions
i. Section 53 of the Trustee Act 1925
ii. Section 57 of the Trustee Act 1925
iii. Section 64 of the Settled Land Act 1925
iv. Section 24 of the Matrimonial Causes Act 1973
4. The Variation of Trusts Act 1958
i. The background to the Act
ii. The wide discretion in s.1 of the Variation of Trust Act 1958
iii. The persons on whose behalf an arrangement can be made
iv. The requirement of benefit
v. The wishes of the settler
vi. Variation or resettlement
vii. The effect of a variation
5. Conclusion
Further reading
Moot points
20. Breach of trust and personal remedies
Learning objectives
Setting the scene: Target Holdings v Redferns [1996] AC 421
1. Introduction
2. The personal liability of the trustee
3. Liability for co-trustees
4. Joint liability, contribution and indemnity
5. Established principles when assessing liability
i. Making an unauthorised investment
ii. Improperly retaining an investment
iii. Improperly selling an authorised investment
iv. A trustee who simply fails to invest the trust fund
v. Assessment of compensation and investment
vi. Setting off profits and losses in two or more breaches
6. Defences in a personal claim
i. Trustee exemption clauses
ii. Consent from the beneficiaries
iii. Section 61 Trustee Act 1925
7. Limitation of actions
i. The general limitation period
ii. Exceptions to the limitation period
iii. The equitable doctrine of laches
8. Conclusion
Further reading
Case study
Moot points
21. Tracing and a proprietary claim Learning objectives
Setting the scene: Re Diplock's Estate [1948] Ch 465
1. Introduction
2. Proprietary claims and tracing
3. Tracing and proprietary claims at common law
i. Unmixed property
ii. Unmixed property and profits
iii. Mixed property
4. Tracing and proprietary claims in equity
i. The right to trace in equity
ii. Tracing original property and clean substitutions
iii. Tracing trust property which has been mixed with the trustee's property
iv. Tracing trust money which has been mixed with the trustee's money in a bank account
v. Tracing trust property which has been mixed with other trust property or that of an innocent volunteer
vi. Loss of the right to trace
5. Conclusion
Further reading
Case studies
Moot points
22. Charities and charitable trusts
Learning objectives
Setting the scene: IRC v McMullen [1981] AC 1 House of Lords
1. Introduction
2. A historical note
i. Developments in charitable giving
ii. Developments in the law relating to charity
3. The structure of charity
4. The Charities Act 2006
5. Differences between charitable trusts and private trustsiii. The perpetuity rules
iv. Thecy-pres doctrine
6. Regulation and supervision of charities
i. The Charity Commission
ii. Registration
iii. Auditing and accounting
iv. Remuneration of charity trustees
v. The Charity Tribunal
7. Requirements for a Charitable Trust
8. The definition of Charity
i. Defining a charitable purpose pre-Charities Act 2006
ii. The definition of charitable purposes post-Charities Act 2006
9. Charitable purposes under the Charities Act 2006
i. The relief of poverty
ii. The advancement of education
iii. The advancement of religion
iv. The advancement of health or saving lives
v. The advancement of citizenship or community development
vi. The advancement of arts, culture, heritage or science
vii. The advancement of amateur sport
viii. The advancement of human rights, conflict resolution or reconciliation, or the promotion of religious harmony or equality and diversity
ix. The advancement of environmental protection or improvement
x. The relief of those in need, by reason of youth, age, ill health, disability, financial hardship or other disadvantage
xi. The advancement of animal welfare
xii. The promotion of the efficiency of the armed forces of the crown
xiii. Any other purposes
10. Recreational charities
11. Public benefit
i. The public benefit principles: principle 1 identifiable benefit
ii. The public benefit principles: principle 2 benefit must be to the
public, or a section of the public
iii. The nature of the public benefit test
iv. Class within a class
v. Personal nexus
12. Exclusively charitable
i. Is the non-charitable purpose merely incidental?
ii. The 'and/or' cases
iii. Severance
iv. Charitable Trusts (Validation) Act 1954
13. Trusts with political purposes
i. The general rule against political purposes
ii. When will a trust be deemed to have political objects?
iii. Applications of the rule in the decided cases
iv. Is political activity and campaigning totally disallowed?
14. Conclusion
Further reading
Case studies
Moot points
23. The cy-pres doctrine
Learning objectives
Setting the scene: Re Rymer [1895] 1 Ch 19 and Re Slevin [1891] 2 Ch 236
1. Introduction
2. The court's inherent jurisdiction to apply cy-pres
3. A general charitable intent
4. Initial failure
i. Gifts to a specific institution
ii. Amalgamation with another charity
iii. Non-existent charity
iv. Gifts to unincorporated and incorporated charitable associations
v. Discriminatory conditions
5. Subsequent failure
6. The Charities Act 1993
7. The Charities Act 2006
i. Regard to social and economic circumstances
ii. Charity Commission guidance on 'social and economic circumstances'
iii. Cy-pres when there are primary and secondary trusts
8. Charity donations and unidentifiable donors
9. Cy-pres schemes
10. Conclusion
Further reading
Case study
Moot points
Index