1
Table of Contents
Topic 1 Introduction 3
1.1 Definition of Trust 3
1.2 Special features of trusts 3
1.3 Classification of Trusts 3
1.4 Express Trusts 3
1.5 The attraction of a trust 5
Topic 2 Certainty of Intention 6
2.1 Intention to create 6
2.2 ‘Manifest’ an intention to create an intervivos trust 6
Topic 3 Certainty of Object 11
3.1 Classification Of Trust 11
3.2 Certainty of objects 14
3.3 Uncertainty 15
3.4 Administrative Unworkability 16
3.5 Capriciousness 17
3.6 Exam Steps 17
Topic 4 Quistclose Trust 18
4.1 Quistclose Trust (QT) 18
4.2 Express trust analysis 19
4.3 Resulting trust analysis 19
4.4 Preferrable position of QT 20
Topic 5 Certainty of Subject Matter 21
5.1 Present or future property 21
5.2 Uncertainty 21
Topic 6 Constitution 23
6.2 Consideration 24
6.3 Assignment 24
6.4 Summary 27
Topic 7 Formalities 28
7.1 Formalities for Will 28
7.2 Statutory Formalities 28
7.3 Exception 31
Topic 8 Charitable Trust 32
2
8.1 General rule of Trust for a purpose 32
8.2 Validity of Charitable Trust 32
8.3 Severing Charitable and non-charitable purposes 35
8.4 Doctrine of Cy-Pres 35
Topic 9 Trustee’s Power 36
9.1 Duty to adhere to the trust deed 36
9.2 Duty to get in trust property 36
9.3 Duty to keep trust property separate 37
9.4 Duties derived from equitable principles 37
9.5 Duty to act personally 38
9.6 Common law duty to act in best interests of beneficiaries 40
9.7 Duty to act impartially 41
9.8 Duty of reasonable prudence (for ongoing management of the trust) 41
9.9 Statutory duties re investment 42
9.10 Duty to keep accounts and inform 46
9.11 Duties re exercising discretion 48
Topic 10 Defences for Breach of Trustees’ Duties 51
10.1 Exclusion clause 51
10.2 Statutory defences 52
10.3 Equitable defences - consent 53
Topic 11 Rights of Trustees 54
11.1 Trustees’ right of indemnity from trust assets 54
11.2 Right of indemnity against beneficiaries personally 56
11.3 Right to approach the court 56
Topic 12 Beneficiaries' rights and defences 57
12.1 Termination of the trust by beneficiaries 57
12.2 Right to seek variation of trust 58
12.3 Right to seek removal of trustee 59
Topic 13 Remedies for Breach of Trust 61
13.1 Standings 61
13.2 Personal Remedies 61
13.3 Proprietary remedies 62
13.4 Tracing (Foskett v McKeown) 64
3
Topic 1 Introduction
1.1 Definition of Trust
❖ A trust exists when the owner of a legal or equitable interest in property is bound by an obligation, recognised by and enforced in equity, to hold that interest for the benefit of others, or for some object or purpose permitted by law. (Jacobs [101])
❖ The term ‘trust’ refers to the legal relationship created- intervivos or on death- by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or a specified purpose. (Hague Convention (Art 2)
❖ The difference between these two descriptions is that in the first, all forms of trust are potentially described, but in the second, only express trusts are described. [Jacobs is broader]
1.2 Special features of trusts
❖ Only enforceable in equity; not recognised by CL
❖ Trust has no legal personality (The trust cannot be sued (contrast to a company. Can only sue the trustee personally)
❖ Trustee’s obligation is also fiduciary (personal obligation)
❖ Trust is a way of managing wealth as the trustee is under an obligation to grow wealth for the beneficiary
❖ Because trust must involve property, easy to give rise for proprietary remedies
❖ Trust must be over specific property (need to identify some form of asset), but any kind of property can be trust property (similar to assignment)
❖ The “split” in title – the metaphorical split between ‘legal’ title ’&‘beneficial’/
‘equitable’ title. When a trust is created, beneficial or equitable title is created.
❖ The trustee’s obligation is to administer the trust/manage the assets, but not for its own benefit; instead, the benefit is for the beneficiaries/cestuis que trust or for a valid purpose [NOTE purpose trust is only allowed for charity].
1.3 Classification of Trusts
1.4 Express Trusts
1.4.1 WHO❖ Trustee: (person holding the property) can be one or more person(co-trustee) (including non-natural person). Some statutory limits on numbers. A trustee can also be a beneficiary, so long as not sole beneficiary.
❖ Beneficiary: (In old cases, called cestui que trust) can be one or more person (including non-natural person) OR can be an object/purpose
Express Trusts Dependent on positive intention to
create a trust Relevant intention is to benefit another
Resulting Trust Arise by operation
of law Arise where person did not intend (negative intention) to benefit
party now holding property
Constructive Trusts Imposed where it
would be unconscionable for
party holding property to assert
ownership Wide variety of
applications
4
❖ Settlor: (The original owner) Can be a trustee or one of trustees. In trusts created by declaration, settlor will also be trustee. Can also be one of beneficiaries
❖ Attorney-General: Person who standing to enforce a charitable trust 1.4.2 Subdivisions of express trusts
1.4.3 How to create
1. Testamentary trusts- created by the testator’s valid Last Will and Testament- come into effect when the testator dies.
2. Intervivos trusts, created during the settlor’s lifetime, can be created by one of two methods
• Trusts by transfer
• Trusts by self-declaration Creation of express trusts
To create a valid express trust, you need 3 certainties and 2 extra elements:
● Certainty of intention to create a TRUST
● Certainty of subject-matter
● Certainty of object (that is, a valid charitable purpose or a trust for identifiable beneficiaries)
● Compliance with any relevant statutory formality [Requirement in writing]
● Complete constitution of the trust (for intervivos trust created by transfer)
● Additionally, a trust will fail if it is void for legality issue/public policy
● Rule of perpetuality: Trust would end if property not reach the beneficiary hand at the end of 18 years
Mallott v Wilson
Settlor made voluntary transfer of land to a third party, to hold for his wife & children. The third party refused to act as trustee, and S purported to cancel trust. Later S purported to declare second trust over land
Intervivos- created during settlor’s life
Testamentary- created by will of testator- come into effect on death
Time of creation
Private express trusts-benefit named or identifiable individuals, groups Public express trust- benefit public, or section of public – charitable trusts
Who benefits?
Fixed interest trusts – beneficiary’s interests specified (e.g., one half) Discretionary trusts – in favour of a class of objects trust selects from (e.g., to such of A, B, and C as the trustee selects
Nature of
beneficiaries’ interests
5
Held: The first trust was validity created, and once it was created, the settlor lost all his rights, and has no power to revoke the trust. The settlor is the trustee in this case as he held the legal title.
Principle: Once a settlor creates a trust, they are not entitled to change their mind, and ‘undo’
the trust, unless a right of revocation has been included in the trust instrument at inception.
NB There is no need for certainty of trustee.
1.4.4 Trust structures Simple/Complicated Income/Capital
● E.g., Capital and Income Beneficiaries
● “I leave my property on trust for my husband for life, and then for my children”
● Husband is entitled to income only
● Children entitled to capital only, at termination of life tenancy
● Husband and children are all fixed interest beneficiaries; but the nature of their beneficial interest differs.
● Point of differentiation doesn’t have to be a life: e.g., “on trust as to income for my wife for 5 yrs, and then for my siblings”
● But I could also insert a discretionary trust: e.g. “I leave my property on trust for my husband for life, and then for whichever of my children my trustee selects”
Levels/Interests
Trusts can be over virtually any form of property, including equitable property. Therefore, a trust can be over a beneficial interest. If trust is declared over a beneficiary’s interest, a sub- trust is created. (Trust created for a trust)
1.5 The attraction of a trust
An immensely flexible structure Settlor can:● Separate income from capital for whatever period of time chosen (subject to perpetuity)
● Can create great levels of flexibility as to recipients; e.g., discretionary trust for income followed by fixed trust for capital; or discretionary trust for income followed by discretionary trust for capital, or any variation on that theme
● Can be used to create interests that did not previously exist- e.g., beneficial interest in a trust or sub-trust
● Can give trustee (or someone else) discretionary powers to change most of the provisions of trust
● Can use trust as a form of security e.g., Quistclose trust (so trusts have commercial applications) [For borrowing money in secure by the trust]
● Because a trust u created, the lender can trace the money from the borrower
● Can use a trust to achieve public purposes, so long as they are charitable purposes
