Trusts Revision Summaries 2010

7/25/2019 Trusts Revision Summaries 2010

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Creation of Express Trusts

Beneciary Principle

• For a non-charitable trust to be valid it must have a human benefciary,

lest it be impossible to administer (Morice v Bishop o Durham)• NB Debate on the nature o the benefciary’s interest

o ee belo!

o "rucial to application o #e Denley’s$#e %ipins&i’s$#e 'rant’s$Ba&er v

rcher hee rcher hee v 'arland

• NB aunders v *autier rule, and application to e+haustive discretionary

trusts (#e mith), and non-application in cases o it-over’

• Distinuish di+ed trust, discretionary trust, and mere po!er. /0ually’1F23

it-over in deault implies that initial distribution is a mere po!er3

mandatory lanuae implies a trust

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

a Certainty of !ntention

had to e+press an intent to create a trust by name or set o

arranements e0uatin to trust (#e chebsman). 4recatory !ords alone 5

intention e.. re0uest to use property or amily harmony (Marulies) nor

re0uest that 2 do !hat’s riht’ (#e dams 6inston *estry), thouh

sayin property is as much yours as mine’ does (4aul v "onstance)

• 7ntent to ma&e a it can’t 1 intent to create a trust (8ones v %oc&).

" Certainty of #u"$ect %atter

• Mere e+pectation o uture property is insu9cient (#e /llenborouh).

• 2rust property has to be distinuishable rom the eneral mass (#e %ondon

:ine$#e 'oldcorp), e+cept or intanibles (#e ;arvard ecurities$ ;unter v

Moss)

• trust or !hatever is let’ i.e. a <oatin chare is valid (=tta!ay v

Norman) despite inherent uncertainty as to !hat !ill be let. ustralian

;ih "ourt in Birminham v #enre! says its calculated to deeat the

<oatin trust are invalid> ;ard to enorce

c Certainty of #u"$ect %atter

Fi+ed trusts re0uire a complete list test (7#" v Broad!ay "ottaes)

Discretionary trusts use any iven postulant ('4) test (Mc4hail v Doulton

o NB "onusion about content o test, but %ord :ilberorce in Mc4hail

and tamp %8 in #e Baden (No.?) say court has to be able to say o

any potential claimant !hether or not he comes !ithin class o

benefciaries.

For a it standard o recipients is one person’ test i the it is o an

option to purchase property, so that there’s no need to say !ho actually

ets the property (#e Barlo!) /+amples>



o my old riends’ satisfes one person’ and '4 tests (#e Barlo!, per

B: 8) but not complete list’ (#e 'ulben&ian)- it has a core meanin,

despite uncertainties.o #elatives’ ta&en to mean statutory &in, so satisfes complete list (#e

'ulben&ian)o people !ho have helped me’ 1 too vaue or '4 (#e :riht’s

2rust)

=utsourcin decision to 24> #e 2uc&’s 2- di@erent vie!s o Dennin M#

and /veleih %8

"onceptual Ancertainty voids F2 and discretionary trusts, !hereas

evidential uncertainty only voids F2s (per sachs %8 in #e Baden (no.?)

&eneral 'ncertainty

• dministrative un!or&ability (e+ p :est or&shire M"")

• "apriciousness i.e. a po!er so broad that it allo!s 2 to distribute contrary

to intentions o (#e Manisty)

Theory- )ature of Equita"le !nterest

*ie! C> /0uitable obliations enorceable by B, imposed on the leal title-o!ner

(the trustee). B has no proprietary interest in the trust property.

• =nly vie! C e+plains #e Denley’s (as supported in #e %ipins&i’s and as

interpreted in #e 'rant’s :2)3 <oatin trust (2 o!ns absolutely durin

lietime)3 non-e+haustive discretionary trust3 po!er o distribution !$ it-

over in deault3 and charitable trusts (enorceable by ')3 act that under

a !ill a benefciary doesn’t ac0uire proprietary rihts until all debts are

paid and$or 2s transer title to Bs (%ivinstone), thouh aruably !ills

reime is ust di@erent.

• /norcement rational iven in Morice v Bishop o Durham

• upports historical oriins o trust (personal claims or B only) and

acilitative principle

• 7nterest thesis !ould re0uire property subect to an e0uitable interest to

be capable o sereation i.e. identifable. Not al!ays necessary thouh,

as in ;unter v Moss.

• Macarlane’s variant o this vie!- a riht to a riht. /0uitable interest is a

persistent riht based on enorcin the core e0uitable obliation o trust>

2hat 2 shouldn’t use trust property in his o!n interest.

• #eection o retention model o "hase Manhatten (7n :estdeutsche)

supports vie! C.

*ie! ? 7nterest thesis- that trust ives proprietary interest in trust property to B,

so that 2’s correlative duty is to e@ectuate that interest

• %ord B: in :estdeutsche and %ord Millett is 2!insectra suest that

!herever 2 holds leal title as a trustee, B must have a symmetrical

proprietary e0uitable interest (obv !ron- see above e+amples)



• ome say B’s interest attaches to the property thereore must be

proprietary- :ron> it’s the title o o!ner’ that is bein held on trust and

not the thin itsel (!adlin- aunders v *autier re0uires 2 to vest title on

B, N=2 possession).

• Nolan suests that the proprietary interest$o!nership is a neative

interest i.e. riht to e+clude others- hence claims aainst 24s, priority o B

over creditors, and act that B benefts !hen the trust property increases

in value. 2hese are indicative o o!nership.o Macarlane says this can be e+plained by reerence to e0uitable

obliation on 2 not to use trust property or personal beneft.o lso i 24 damaes property, it’s not B !ho can ma&e a claim

aainst 24, !hich implies a riht less than o!nership (2he

lia&mon)

*or+alities

Transfer of a Beneciary,s !nterest

• n interest in land can only be "#/2/D or D74=/D o in sined !ritin

or it’s *=7D (E(C)(a) %4 CG?E)

• n interest in personalty can only be D74=/D o in !ritin or it’s *=7D

(E(C)(c) %4)

• Doesn’t a@ect operation$creation o #2$"2 (E(?) %4)

• 'rey v 7#"> 7 one has an e0uitable interest beore and not ater, there is a

disposition !hich had to be in !ritin

• pecifcally enorceable oral areements ive rise to a "2 and thereore

don’t have to be in !ritin. (=uhtred$Neville v :ilson)• n oral direction to a bare trustee to ive leal and e0uitable title to a 24

doesn’t need !ritin- *andervell v 7#" (purposive reasonin o Apohn3 #e

#ose reasonin o :ilberorce)

• 2he correction o a ailed e+press trust to displace the #2 that flled the

e0uitable vacuum doesn’t need !ritin because it is a declaration (#e

*andervell (no ?)- v.dody- !ho is declarin the e+press trust3 #2 can’t ust

die a!ay3 NB purposive solution and ;ayton’s solution also don’t !or&).

!nter-ivos declarations of trust

• D/"%#27=N =F 2#A2 =*/# %ND can only be MN7F/2/D ND

4#=*/D’ in !ritin (s.E(C)(b)). %ac& o !ritin does N=2 a@ect the

validity o the trust3 ust enorceability

• "2s$#2s aren’t a@ected by this (s.E(?))

• NB ? vie!s o cases !here a trust is enorced despite lac& o !ritin>

/+press trust (e0uity !on’t allo! a statute to be the instrument o raud)

vs "2$#2 vie! (only s.E(?) e+plains this)

• #ocheoucauld3 Bannister3 Banner ;omes3 4ascoe v 2urner3 4araon

Finance3 Binions v /vans3 /ves3

Theory



!nter-ivos .eclarations of Trust

• !adlin’s *ie!> 2he cases are e+press trusts, but aren’t cauht by s.E(C)

(b) because e0uity !on’t allo! a statute to be used as an instrument o

raud. 2his vie! is ta&en by Anoed-2homas 8 in ;odson v Mar&s, " o

N: in llen v nyder e+plicitly by %indley %8 in #ocheoucauld.#ocheoucauld could only be an e+press trust because there !as a time

limit that had passed or claimin non-e+press trust (thouh in 4araon

Finance %ord Millett says this can be e+plained on basis that the statute

only applied to "2s that !ere really ust civil !rons leadin to liability to

account in e0uity’ and !asn’t intended to apply to real "2s, thouh

nothin in statute suests this). 4roblematic>o Doesn’t e+plain cases !here no trust areement is made beore

ac0uisition o the property (Banner ;omes)o "ases !here there’s never an intention to create a trust (Binions v

/vans)o "ases !here the riht ac0uired is di@erent to the one intended to

ive (in a case o proprietary estoppel e.. i 4ascoe v 2urner !ere

decided post 8ennins v #ice, !hereby money substitute or

property can be a!arded)o "ases !here there is no raud has occurred, e.. /ves v /ves, !here

4 has merely promised D that D !ill et an interest in some land.

!adlin has arued that detrimental reliance comes !ithin

meanin o raud’- can’t be riht> t the time o ma&in the

promise, the promisor may enuinely intend to pass titleH

Macarlane says better option is to say detrimental reliance is really

ust the basis or the "2 arisin here.

• Macarlane$"hambers$'ardner vie!> 2hese e+ceptions’ are really #2s$"2s

and thereore come !ithin s.E(?). 7ntention may be relevant ore !hether

a "2$#2 has arisen, but is N=2 the basis or the trust. upported by #ussell

%8 in ;odson v Mar&s, !ho supports #2 arisin on the basis o "hambers’

A/ theory3 'issin v 'issin has been interpreted as a "2 (in #osset

tac& udments)3 Millett %8’s e+planation o #ocheoucauld in 4araon

Fianance. 2his is constitutionally ustifable e+plains cases that Cst vie!

cannot. Disadvantaes>o "2 #2 thouh to be too broad as proprietary rihts, !hich creates

uncertaintyo *aue !ide application o@ends numerous clauses principle

Rationale of s/01(2(c

• 'eneral unctions o ormalities> "hannellin3 evidentiary3 !arnin3

publicity (land reistration)3 7normative ("onsumer "redit ct)3 sinallin

point at !hich areement is reached (esp. ollo!in dra!n-out

neotiations).

• Function o s.E(C)(c)I

o 4revent raudulent claims to e0uitable interest, by enablin J to

produce !ritten evidenceI



Doesn’t e+plain no need or creation in !ritin (J could claim

made trust or him beore declared it on trust or B),

thouh not trust-specifc (belo!) lso J could claim sub trust- no need or !ritin

o llo!s 2s to identiy benefciary so that 2 !ont misattribute the trust

property and et sued or breach o trust by actual benefciary NB dispute about possibility o droppin out under a sub-trust

('raine) ame problem o J claimin that made a trust or him

beore B, BA2 this isn’t a problem specifc to trusteeship- it

applies to loads o cases e.. its "ase la! ta&es ? attitudes> 'rey and *andervell- not possible

that both support this rationale. =uhtred and Neville cases harm rationale ? i droppin out

is possible

'ardner says purposive reasonin cant allo! constructionopposed to specifc !ords o the sectiono .E(C)(c) has led to purposive reasonin (*andervell no ?) and

deeats e+pectations

Constitution 3 Pro+ises to #ettle

4hen is a trust constituted5

• el declaration (Milroy v %ord)> ee certainty o intention, esp. #ichards v

Delbride. No need or ormalities e+cept or enorcement o trusts o land

(s.E(C)(b)).

• 2ranser o the trust property to trustees (Milroy v %ord). NB the transer

must be e@ective (#e Fry) and there are various ormality rules e.. entryon reister or share transer.

Enforce+ent 6here # covenants 6ith T to hold on trust for B7 "ut # later

resiles

7 B has iven consideration, damaes or 4 are available (4ullan v 6oe)

• 7 B is a party to the deed he can sue or damaes, thouh not 4 since he

is still a volunteer ("anon v ;artley)

• 7 B is a volunteer (no consideration) and not a party to the deed>

o B can’t sue at common la! as not a party to the contract, !hile

"(#o24s) CGGG !on’t help i !ould have a deence aainst 2 (seebelo!)- s.



o 2 could theoretically sue in o!n riht as a breach o the

perormance interest, ollo!in 4anato!n vie! o privity, but

prohibited in #e 4ryce by /ve 8 as an indirect assistance to a

volunteer (BD but ollo!ed in #e "oo&’s 2). 7 2 did sue, #e

"avendish Bro!ne says he !ould hold on trust or B (:#=N'- this

!ould re0uire e0uity’s assistance. lso, !hat type o trust !ould it

beI)o Because there’s a deence aainst 2s, B can’t ma&e a claim either

due to s. ("ontradictin !hat :ebb K &&ou say about ho! the

leislation !ill resolve this !hole area).o 2rust o the covenantI Found in #e Fletcher that there !as a trust o

the chose in action or B, and actual evidence re0uired. NB ;M

arument that the chose is al!ays held on trust (either e+press or

B or #2 or ). ;o!ever no chose in action ound in #e "oo&, and #e

4ryce$#e "oo& reasonin !ould appear to prohibit trust o chose in

action.

Perfecting i+perfect gifts

• 4rinciple that e0uity !on’t perect imperectly-made its.

• every e@ort’ doctrine o #e #ose, includin !here donor renees

subse0uently (Mascall)

• 4enninton v :aine> %ast steps !ould be deemed to have been ta&en

!hen every e@ort had been made to ta&e them, purportin to ollo! #e

#ose. Basis> Anconscionability or estoppelI

• Fortuitous *estin o its (tron v Bird) applied analoously to trusts (#e

#ailli’s :2- thouh NB obiter speech, never ollo!ed, can’t be based on

tron v Bird (since no continuin intention until death needed)

contradicts precedent o #e Broo&s)

Theory

Co++entary on Perfecting !+perfect &ifts

• 4enninton v :aine>

o Anconscionability is vaue (rden %8 ust says loo& at all the

circumstances)> 7snLt it unconscionable to renee on N promiseI

=r maybe N/*/# unconscionable !here the thin to be transerred

is ust a it. Neither reliance nor detriment in this case. lthouh

this case tells us at !hat stae it !ill be unconscionable (or

impossible’ re "lar&e %8) to renee on a share transer, it doesn’ttell us the same or other its re0uirin ormalities e.. transer o



land interest or transer o chattels (!hen is dominium passedI) 7n

proprietary estoppel a representation only ives rise to an e0uitable

interest i 4 has su@ered detrimental reliance ('illett v ;olt). Not the

case here, !here 4 merely didn’t et a directorship.o Not supported by #e #ose> donor hadn’t made every e@ort

o llo!s evasion o ormalities, such as share-reistration, !hosepurpose o enablin directors to consider !hether to allo! 4 to buy

the shares and let a company &no! !ho controls its shares are

undermined.o Based on misunderstandin o dictum in 2 "hoithram 4aarani that

e0uity doesn’t o9ciously strive to deeat a it.o NB "lar&e %8 didn’t tal& in terms o unconscionability, but as&ed at

!hat stae e0uitable title !ould be conerred, !hich "lar&e %8 said

occurred once a share transer orm !as flled in. ;o!ever he

doesn’t say !hy this action creates disposition o e0uitable interest

via "2 (unconscionabilityI estoppelI) lso contradicts Milroy v %ordrule that a ailed outriht transer should ive rise to a trust, and

ails to say !hy it does this.

• More enerally o #e #ose, constitutional problem o inorin statutory

re0uirements or !hatever reason. lso undermines the policies that

ormalities promote e.. evidence etc

Co++entary on Enforce+ent of &ratuitous Covenenants

• /ve 8 in #e 4ryce obviously !ron> 2 !as ta&in action at common la! so

it’s irrelevant that e0uity !on’t assist a volunteer. 8udicature act didn’t

superimpose e0uitable ma+ims$doctrines onto common la! (it merelyave all courts urisdiction in both). Furthermore the action miht not

assist the volunteer i 2 !ouldn’t hold on trust or B.

• 4urpose o ma+im !as a render marriae settlements unenorceable-

anachronistic.

• /lliott says 2s can brin action i they !ant, but are not oblied to,

ollo!in #e "oo&’s 2 :ron> court said 2s can’t brin an action, and

also (per ;ornby) this option’ o !hether to sue on the covenant is totally

opposed to the concept o trusteeship

• 'oddard> =rthodo+ interpretation is that under present state o la!,

can’t be sued. ;o!ever she says that chose in action held on trust is usedin *andervell v 7#" re the option

*or+alities Trusts 8rising on .eath

#ecret Trusts



• .G :ills ct re0uires testamentary dispositions to be !ritten, sined,

!itnessed etc

• 2s oriinally used to provide or illeit &ids$mistresses. till used

reasonably commonly (Meaer survey) !here !ant some privacy or

dispositions, probate bein public etc

• 7ncorporation by reerence is !here a !ill reers to a !ritten

inormal$unattested doc, !hich e+isted at the time the !ill !as made and

thus becomes part o the !ill (thus losin its secrecy

*ully #ecret Trusts (*#Ts

:here trust leaves property to 2, and communicates to 2 !hat he !ants

2 to do !ith it.

4ossible in intestacy (#e 'ardner)

#e0uirements (Mc"ormic& v 'roan)> 7ntention to create leal obliation,

not mere moral one3 "ommunication o terms beore testator’s death,!hich can be sealed orders, but not terms 7’ll decide later’3 acceptance

beore testator’s death

9alf #ecret Trusts (9#Ts

• :here e+istence o trust mentioned in the !ill, thouh the terms are not

• #e0uirements> 7ntention (as or F2s)3 "ommunication B/F=#/ !ill is made

(#e bateman’s :2)3 acceptance (as or F2s).

*ailures of 9#Ts:*#Ts

• 7 property let to one 2 under F2 2 hasn’t accepted, he ta&es absolutely

(:alrave v 2ebbe)

• 7 property let to ? 2s under F2 and they’re tenants in common, only the

2 !ho accepted is bound3 i oint tenants (deault) and C 2 areed ater !ill

!as made, only 2 !ho areed is bound and tenancy is severed3 7 oint

tenants and only one 2 accepted, but he did so B/F=#/ the !ill !as made,

B=2; 2s are bound (#e tead)

• 7 the trust ails or illeality$ailure o terms to be communicated in time,

#2 or estate arises. (#e Boyes)

• 7 2 predeceases , property under a F2 oes bac& to ’s estate, !hereas

;2 is e@ected by 2’s estate (#e rmitae)• Failure o ;2 1 #2 or ’s estate (since obv 2 not intended to beneft)-

#e "olin "ooper

• 7 B predeceases the testator, B’s estate still inherits (#e 'ardner no.?).-

controversial (since it normally lapses i donee predeceases donor,

unless donee has already ac0uired an interest durin his lietime, !hile

mere covenants to ma&e a it are unenorceable-'ardner3 "ritchley)

aainst precedent (#e "orbishley’s 2)

• n increase in ;2 property !ill be invalid due to communication rule, so

that the e+tra trust property is held on #2 or ’s estate (#e "olin

"ooper). =bv doesn’t apply to F2 (:alrave)



Theory

Rationales for #ecret Trusts

• Fraud #ationale> /0uity !on’t allo! a statute to be used as an instrument

o raud so that it ives ’s estate e0uitable o!nership i he had areed tohold leal title on trust or B. Ased in Mc"ormic& v 'roan. 4roblematic>

o =bv doesn’t e+plain ;2s (ince 2 cant ta&e absolutely i !ill says

there’s a trust). 2o overcome this a !ide defnition o raud includin

deeatin ’s intentions (#e Fleet!ood)o "an’t e+plain situation !here nobody’s actin raudulently e.. 2

tries to e@ect trust and residuary leatees try to stop it.o "onstitutional problem- court creatin e+ception to :ills ct

o 7 trust is e+press it can’t e+plain =tta!ay v Norman (F2 o land,

!hich re0uires !ritin to be valid under s.E(C)(a)). "2 isn’t a

solution as it !ould render :ills ct meaninless.

• Dehors theory> 2rust is inter-vivos, !ith death and the !ill merely passin

the property and thus ully constitutin the inter-vivos trust. 2hus the :ills

ct doesn’t apply. Ased by *iscount umner in Blac&!ell ratio in #e

oun. 4roblematic>o :ills ct reers to testamentary dispositions (s.C) !hich 8arman on

:ills says includes ambulatory revocable dispositions upon death-

applies here. NB, assumin B doesn’t ac0uire an interest beore the

trust !as ully constituted (and hence that #e 'ardner no ? !as

!ron).o "an’t e+plain trust o land !hich can only be created in !ritin

(=tta!ay v Norman).• ;2 as incorp by reerence. 4roblematic>

o 7B# re0uires !ritten terms, arrises rom need or e9ciency, re0uires

a hih deree o specifcity, and doesn’t need to be communicated

or accepted, unli&e ;2

• #eceipt ter 4romise "2 2heory (McFarlane version)> 4rinciple that !here

2 promises that he !ill use the property or B, and transers property

to 2, a "2 is imposed on 2 to prevent 2 ainin an advantae by brea&in

his promise, even i B su@ers no disadvantae (as in 4allant v Moran). Fair

principle e+plains reason !hy "2 arises in E(C)(b) cases upport or

eneral idea o "2 in response to promise to hold on trust is supported bya trust in =tta!ay v Norman, !hich could only be constructive (E(?)).

4roblem>o "an’t account or ;2s, since there is no !ay 2 can beneft (due to

mention o the trust’ in the !ill.

• #eceipt ater promise "2 theory ('ardner$"hambers version)> ame

principle, but aims to prevent detriment to the settlor (N=2 prevent

advantae to the trustee). 2his e+plains ;2s since ’s intentions are

bein deeated. 4roblems>o :hy should detriment to the settlor cause a trust in avour o BI

(Because that causes ’s intentions to be ulflled).

The Co++unication Rule





aidin B, purpose comes to an end !ill enerally be construed by

courts as an e+press trust or B (#e =soba).

Theory

4hat ;fact, is presu+ed in the P!RT5

• !adlin> Fact anachronistically presumed is declaration o trust in avour

o (4er %ord Nottinham in "oo& v Fountain. 2hereore presumption

overturned by any evidence inconsistent !ith a trust. %ord B: says any

evidence can overturn the trust in :estdeutsche. 4roblem>o No loner serves a useul purpose, and shouldn’t et presumption

because it’s not the udicial consensus o !hat is most common

inerence to dra!

• %ord B:$Mearry 8> n une+pressed intention to create a trust.

4roblematic>

o Not most common inerence to dra! iven that usually 2haven’t ot any intentions e.. amily property cases

o 7ndistinuishable rom e+press trust thereore allo!s evasion o

s.E(C)(c)

• ("hambers$Bir&s) %ac& o intention by to beneft 2, !hich is presumed

because e0uity is suspicious o its, !ith result that the #2 (either 47#2 or

#2) respond to A/. 2hus only evidence o intention to ma&e a it

overturns the presumption. 4roblems>o !adlin’s theoretical obections> /0uity not suspicious o its as

no reason to be and not suspicious in other conte+ts (but e0uity is

straneS)o No evidence to say presumption has chaned (this is same as

casela! point, belo!)o 2he act presumed-non-intention to beneft- is not a real !orld event

!hich can be subect to a presumption, !hich is a rule o evidence.

(Debatable i a state o mind is a real$leal event. ;o!ever is

declaration o trust a real !orld eventI No- it’s a label or real !orld

conduct$speech$!ritin etc)o Not common inerence to dra!

o "asela! obection> /+plicitly reected in ration o :estdeutsche BA2

support rom %ord Millett in 2!insectra and ir 8amaica (thouh NB

Millett in %T# sayin any evidence incompatible !$ trust displaces

the presumption).



o 4olicy obections> 2here’s a personal remedy or A/ already, and a

proprietary one !ould unairly put at ront o 0ueue o creditors.

4hat is the "asis of 8RTs (8ll "elo6 are <a6ed there is no $ustication

•

A/ theory o Bir&s$"hambers could apply here, thouh it !ould be !ithreerence to evidence o lac& o intention to beneft, and not any

presumption o this

• 4resumed$actual intention o parties to have a trust in transeror’s avour.

4roblematic>o Doesn’t e+plain cases !here doesn’t !ant a trust e.. *andervell v

7#"o Asually there are no intentions> they are imputed, as in a "2 o

amily homeo "ant use presumptions !hen there’s evidence (Fo!&es), !hile the

presumption, !hile ailed e+press trust sho!s there can’t be an

intent to create trust or .

• 4resumed declaration o trust in avour o . ame problems as the above

theory re evidence rom ailed e+press trust

• #etention o e0uitable interest ("hase Manhatten). False>

o Myth> Doesn’t !or& as e0uitable leal o!nership don’t <oat about

separatelyo #euted in :estdeutsche

Purpose Trusts

Beneciary Principle

• 2rusts must be made or person, not purpose. NB /+ceptions o #e

Denley’s3 anomalous cases e.. #e 2hompson’s$4ettinall etc3 charitable

trusts

• :hat is rationale or benefciary principleI

o /norceabilityI Morice3 stor’s 2 (NB aruably a separate

enorceability principle)o Nature o the trust (obliations need rihts(Matthe!s) or e0uitable

interest)Io No rationale, ust policy ('ardner)I

•"ourts construe purposes as ust motives$moral obliations (#e Bo!es3 #e=soba)

• 4urposes’ state used or 0uantiyin trust property #e anderson’s

2$bbot Fund

• 4o!ers may ive e@ect to purposes (;arman in #e ha!) but trusts

!$purposes not spelled out o an invalid trust (7#" v Broad!ay "ottaes).

Exceptions

• nomalous cases are arbitrary and can’t be e+tended, even by analoy

(#e /ndacott)

• #e Denley’s> purpose trust may be valid i there’s ascertainable class opeople !ho beneft su9ciently directly (not in the abstract) to enorce it



o =liver 8 applies it directly (Qdirectly in pointR) in #e %ipins&i’s, thouh

he cites #e Bo!es, causin conusion, supplements !ith a

contract-holdin theory.o *inelott 8 interpreted it as a discretionary trust- obviously !ron

interpretationo NB a trust that doesn’t re0uire a benefciary still has to have a

su9ciently certain intention, subect matter obect i.e. purpose3

must not be capricious$unla!ul$pointless (Bro!n v Burdett)3 not

perpetual (not on syllabus)

'nincorporated 8ssociations

?U people3 pool resources or common purposes3 not a business3 enter or

leave at !ill (per %a!ton %8 "A"= v Burrell> last condition unnecessary).

a 9o6 does a '8 hold property5

• 'iven to members absolutely

• 'iven to treasurer or #e Denley’s-type purpose (NB !ouldn’t allo!

members to chane !hat money is used or> Bound by purpose that

specifes).

• "ontract holdin theory (accepted in #e #echer’s :2). NB

o 4roblem o contract ormation, iven need or o@er, acceptance etc

(thouh aruably overcome by the atanita e+ception or this e+act

situation i.e. a A)o 4roblem o losin$ainin e0uitable interest upon leavin$oinin

iven s.E(C)(c). 4enner says overcome by construction o trustpo!er to add$delete benefciaries. No case la! on this point.

" 9o6 does a '8 receive gifts5

• 4" in %eahy v ' or N: said a it could be iven to a A> as oint

tenancy or all present uture members, held on trust by treasurer

(void- perpetuity)3 as trust or purpose o A (void unless !ithin #e

Denley’s, thouh debate on this)3 trust or present members, variant o

!hich is contract-holdin theory

• Ander contract-holdin theory, property ives all members an e0uitable

interest, but is ta&en as roup property’ and thereore occurs as anaccretion to the A’s unds, and subect to same rules i.e. contract inter

se.o 4roblem o ho! apparently outriht transer to treasurer becomes

an accretion to the unds Maybe contract provides that such its are held by the

treasurer on trust Maybe the areement to transer contains a trust provision

o 4roblem o !hat happens !here it purports to be or a specifc

purpose, and not to coner e0uitable interest on members, bloc&in

the contract-holdin theoryI



7n #e %ipins&i’s ust dealt !ith by construction as a #e

Denley’s style purpose trust. NB incorrect assertion o need

or in!ard loo&in’ purpose to ma&e such a construction

(denied in #e Buc&’s)

c .istri"ution of property upon dissolution of a '8

• =ld approach !as to use #2 B*o 7nvolved arbitrary assumptions about intent

o 7nvolved uneasible #2s

o Doesn’t e+plain ho! o!nership’ is lost.

• #e Denley’s theory> #2 bac& to donors (aruably e+plains result or

pension unds cases e+plains #e 'illinham Bus Disaster Fund) because

o ailure o #2.

• "ontract holdin theory> Dissolution causes contract to terminate too, so

restriction on severin share lited and remainin unds o to members

(even i ust C let- per %e!ison 8 in ;anchett-tamord v ', as aainst

:alton 8 in #e Buc&’s) e0ually in deault o rules (#e Buc&s "onstabulary

und (no.?)) or other!ise as contract prescribes (#e ic& and Funeral

ociety). Dissolution occurs !hen there’s only one remainin member

(;anchett-tamord v ')3 !hen A has lost its e@ective purpose (#e

:illiam Denby ic& Fund), includin !hen it is so inactive that dissolution

is only reasonable inerence to dra! (Maearry 8 in #e '6N ports "lub)3 in

accordance !$rules o A3 by areement o interested parties3 by court

order

• "ontract holdin theory not applied to pension unds (Davis v #ichards

:allinton) nor political parties ("A"= v Burrell #e 'rant’s). olution or

political partiesIo Ase contract holdin theory, !idenin contract’ to bindin rules’

(:ebb &&ouh)o 4ersonal ency (per Brihtman %8 in "A"=)

o Bare trust !$ mandate

o Bare trust !$ po!ers to use money or purposes (in line !$#e ha!)

=uistclose Trusts

• Barclay’s v Tuistclose> T areed to loan money to # to pay a dividend,

&ept in ban& B. # !ent ban&rupt beore payin loan and T claimed

proprietary riht to the loan money, !hile B claimed set-o@ aainst #’s

other debts to it. ;% ound that T had an e0uitable interest in the loan

money. %ord :ilberorce said there !as a primary trust or purpose o

payin the dividend, ollo!ed by a secondary #2 or ailure o the

purpose.

• 7n #e /*2# 4 loaned D money to put a deposit do!n to buy machinery

rom 24, !hich 24 areed to partially reund i D deaulted. %ater D

deaulted and 24 paid bac& part o deposit to D, !ho then !ent ban&rupt.

4 claimed e0uitable interest over the reunded part o the deposit. Dillon

%8 said there !as an e+press trust or purpose o purchasin machinery,!hich later became an #2 upon purpose’s ailure. NB money !asn’t &ept



in a separate ban& account. (ollo!s reasonin o %ord :ilberorce, BA2

:ilberorce based evidence o a trust on sereaated ban& account,

!hich !asn’t present here3 and purpose !as or deposit, and once that

!as paid the purpose !as ulflled and trust should have come to an end)

• 7n 2!insectra v ardley 2 !anted to ultimately loan money to but

arraned the deal thus> 2 loaned money to on underta&in that he!ouldn’t loan the money to e+cept or sole purpose o buyin identifed

property and not payin it over until !as ready to do so. !ould repay

2 personally. ave the money to in breach o these underta&ins, !ho

s0uandered it. 2 successully sued or breach o trust, %ord Millett sayin

that since the lender doesn’t intend to beneft the borro!er a 47#2 arises

in avour o borro!er, !$ mere po!er to pass property on in prescribed

!ay.

• 7n #e 6ayord D !as concerned about ban&ruptcy so &ept customer (4)

money sereated until order completed. D !ent ban&rupt 4 claimed a

trust o payment money. Mearry 8 said sereation o money amountedto a declaration o trust by D, so there !as an e+press trust or 4. 2his is

confned to customer cases.

Theory- =uistclose Trusts

• %ord :ilberorce analysis> problematic

o llo!s double recovery



o =bviously a loan areement not an e+press trust or purpose on

the actso :hat purpose has ailedI dministration !ouldn’t stop # rom

payin out to dividend creditors, esp i primary trust !as or

dividend creditors rather than eneral purpose, then they are

benefciaries !ho have e0uitable interests and priority inban&ruptcy. %i&ely construction, iven #e Bo!es, #e %ipins&i’s etc

• %ord Millett’s vie! o #2 U po!er is !ron

o Doesn’t e+plain cases !here it’s an e+press purpose trust e.. #e

/*2#o "hambers uses #2 as a bare trust tool to remedy A/- 7t can’t coner

po!ers

• "hambers’ vie! o a specifcally enorceable contract !$e0uitable riht o

restraint to remedy A/, so that a #2 occurs i trust money misapplieso /0uitable restraint cases he cites are old, and don’t re<ect "o-op

7nsurance limitso No principled reason !hy this type o creditor ets priority over

other creditorso No suestion that #2 e+tinuishes loan areement, so ris& o

double recovery remainso ereation o loan money is crucial to sho! that an e0uitable riht

is held by lender (incompatible !$/*2#)

• Bare trust analysis o 4enner ( Millett in %T# in VPs) says there is an

e+press trust U mandates to use trust property or certain purposes.

Mandate is a contract.o 7ncompatible !$reasonin in all the cases, and can’t e+plain the

result in /*2#, since, on an e+press trust U mandate vie!, the trust

relationship !ould have ceased once money !as all spent and no

trust property let (thouh this case is probably !ronly decided or

that reason> it doesn’t !or& !$any analysis)o till causes problem o double recovery

o aunders v *autier allo!s repayment even i this breaches terms o

loano Anairly ives one creditor priority over another.



>ia"ility of Third Parties 3 *iduciaries

Breach of *iduciary .uty

• Breach o fduciary duty renders them liable to account in e0uity, as

thouh they !ere constructive trustees (to use %ord Millett’s parlance

per %indley %8 in %ister v tubbs per court in ;alia+ B v 2homas, !here

constructive trusteeship in this sense did N=2 create a proprietary riht)o %ister v tubbs, !here %andlord !ouldn’t rant lease to B, only 2-

!as breacho /+ample is #eadin v ', !here D abused his position in the

military or smulin operations ;% said he had to account to

principal (the cro!n) !ith proftso Boardman v 4hipps imposed liability to account or causin

potential or "o7o ' or ;6 v #eid> 4" said there !as an actual "2 imposed or breach

o fduciary duty, based on ma+im that e0uity vie!s as done !hat

ouht to be done (!ron). Follo!ed in Daraydan ;oldins v allant

per "ollins 8 in ?PPE, thouh not ollo!ed by " in ;alia+ B v

2homas in CGGE. Ancertain state o precedent.

.ishonest 8ssistance

#e0uirements>o (C) Breach o trust, even innocent (#oyal Brunei irlines v 2an)3

o (?) involvement in breach beyond de minimis involvement (Brin&s v

bu aleh) havin some e@ect (Baden v ociete 'enerale)3o () D acted dishonestly, usin defnition o D’s actions bein

contrary to standards o reasonable people (Barlo! "lo!es in 4"

and bou #ahma per 2reacy 8, overcomin subective element

inserted in 2!insectra v ardley). "lear suspicion’ o some

misappropriation o money is enouh, !$no need or &no!lede o

breach o trust specifcally (ip(rica)).

Kno6ing Receipt

• #e0uirements (per Nourse %8 in B""7 v &indele)>

o (C) disposal o assets in breach o trust

o (?) #eceipt o assets by D or his o!n beneft> proessional aents

ban&s are e+cluded (ip(rica))o () 6no!lede o the breach o trust su9cient to render the

property unconscionableo (W) D loses the property

Trustee de son tort

#e0uriements (Mara v Bro!n)>



o (C) D intermeddlin$doin acts characteristic o trusteeship

o (?)actin as a trustee and not merely as an aent-has to be outside

scope o aency> :illiams-shman v 4rice :illiamso () 2rust property is in D’s possession- "=2N#=*/#7%. Ased in #e

Barney, but never aain. No need or it

Theory of 8ccessorial >ia"ility

Kno6ing Receipt

• ettled rationale in B""7 v &indele is prevention o unconscionable

conduct> llo!s common sense balancin bet!een fnality viilance,

accordin to the commercial conte+t, but so vaue as to encompass

anythin rom dishonesty to raud. lso uncertainty bad or commerce

• lternatives previously !ere specifc types o &no!lede in Baden v

ociete 'enerale.

• Bir&s and Nicholls arue or A/ to be used in conunction !ith dishonestassistance. 7n most cases A/ possible, avoidin disputes over

unconscionability$mental state, and brins A/ into this area o restitution,

as it is present in most other areas. #eected in courts because o ear o

commercial un!or&ability due to burden o chane o position (Nourse %8)

eneral obections to A/ o ustralian ;ih "ourt in Farah v ay Dee.

.ishonest 8ssistance

• eems to be about punishin dishonesty insoar as the dishonest conduct

harms others’ e+pectations, per %ord Nicholls in #oyal Brunei irlines

(re0uirement o mental state suests it’s not primarily about protectin

e+pectations). 2his e+plains !hy oriinal breach itsel need not have been

dishonest. 4roblemso #eluctance to label proessionals dishonest

o "ivil la! is an odd place to punish immoral conduct

o Dishonesty is a v hih threshold, a@ordin little protection to B’s

e+pectations

8nalogy to Econo+ic Torts

6iri’s solution> have protectin e+pectations o B as rationale or both

&no!in receipt and dishonest assistance, by analoisin to economic tort

or intererence !ith contractual relations. 2hus the claim !ould be or

&no!in participation in a breach o trust’, !ith elements o (1or

&no!in receipt3 B1or dishonest assistance)o Mental tate> a)uspicion that property is misappropriated3

b)intention to induce a breach o trusto )#eceipt o 2rust property ollo!in breach o trust (&eepin

e+clusion or proessional aents ban&s)3 b) breach o trust by

trustee



Constructive Trusts

4hen does a CT arise5

a 8ccessorial >ia"ility

• ee ection O notes

" Breach of duciary duty

• ee ection O notes

c #pecically enforcea"le contracts

• /0uity vie!s as done that !hich ouht to be done, so a "2 arises !here a

contract as specifcally enorceable (enerally available or uni0ue oods,

such as land, so that a contract o land leads to a "2 per %ysaht v

/d!ards).

d Transfers su"$ect to underta?ings or the rights of others

• :here transers land to B on the condition that B ives " an

unreistered$non-overridin riht, B holds the riht on "2 or " (Binions v

/vans).

• 2!o rationales (neither convincin)>

o 2hat this prevents statute rom bein used as an instrument o

raud (Dillon 8 in %yus v 4ro!sa Developments)o 2hat this prevents unconscionable conduct (Fo+ %8 in shburn

nstalt)

e *ailure for 6ant of a for+ality

• "2 is best e+planation or F2s$;2s- see notes on secret trusts

• ruably "2 is best e+planation or cases !here a trust o land is proved

despite lac& o !ritin under s.E(C)(b)- see notes on 7nter-*ivos

declarations o trust

f Perfecting i+perfect gifts

• #e #ose 4enninton v :aine doctrines lead to "2 bein imposed.



g *a+ily Property

• 7n 'issin 4ettitt court said "2 arose in response to the "2A% common

intentions o the parties that the party !ithout leal title should be entitled

to some e0uitable interest.

• 7n #osset %ord Bride said there had to be "2A% common intention(!hich can be evidence by conduct or !ords, =+ley v ;iscoc&) U

detrimental reliance (!hich could only be evidenced by a direct fnancial

contribution to the purchase price$mortae).

• NB attempt by Dennin to use Diploc&’s (later retracted in 'issin) speech

to use a ne! model’ "2 (i.e. a #"2) in /ves v /ves

• 7n tac& v Do!den, ;% said that a "2 arises !here there !as actual,

inerred or imputed’ common intention U detrimental reliance (!hich can

be evidenced by any evidence> not ust direct fnancial contributions).

4roportions o shares also depend on intentions, !ith rebuttable

presumption o EPX each.

h 'n$ust Enrich+ent

• Mista&en payment thouh to prevent transer o e0uitable interest

(retention model) in "hase Manhatten v British 7srael Ban&. :#=N' and

ratio criticised in :estdeutsche.o NB in :estdeutsche %ord B: says a "2 may arise i D &no!s o the

mista&e and &eeps the money. 2his is probably based on his earlier

comment that unconscionability’ is needed or a "2 to arise and

that is arises !hen the conscience is a@ected.

• Misrepresentation> :here D ac0uires 4’s property by raud$misrep thecontract is voidable ives rise to a "2 once rescinded (halson v #usso3

%onhro v Fayed3 Bristol :est B v Matthe!s)

• Andue in<uence only creates a personal remedy (llcard v &inner)

• Failure o consideration> Neste =y said a "2 !ould arise i D acted

unconscionably in ailin to provide consideration. 4ossibly confned to

specifc actors there. 2his idea !as reected in :estdeutsche.

• Anauthorised Mi+in> 7 2 uses trust property to buy property or

himsel$that isn’t authorised under the trust, he holds that property and

proceeds on trust or B, even i there’s a massive increase in value beyond

the value o trust money ta&en e.. lottery tic&et (Fos&ett v Mc6eo!n)

Theory- Constructive Trusts

'nifying Theory of CTs5

• =ne vie! is that "2 arises in response to circumstances !here D

cannot hold property absolutely, in ood conscience. 4roblematico *aue

o Doesn’t e+plain di@erent reasons !hy somethin is

unconscionableo

Doesn’t distinuish "2 rom any other type o trusto "on<ates #"2 !$7"2



• =ther vie! is that "2 is basis or A/, in sense o D ac0uirin somethin

he shouldn’t be allo!ed to retain (since A/ understood as situation

!here coners beneft on B !ithout ’s consent cant e+plain every

case !here "2 arises e.. 24 liability, breach o fduciary duty,

specifcally enorceable contract o sale). 4roblematico o broad as to cover any leal liability e.. contractual debto Doesn’t tell us !hy D is$ouht to be liable any more than

unconscionability’ theory

*a+ily Property Cases

• tac& v Do!den> ;% said it !ould use "2s rather than #2s or these cases.

7ssues to do !ith this case>o :hat does impute meanI 4oss airness in absence o actual

common intention, as per "had!ic& %8 in =+ley v ;iscoc&, !hom the

maority endorsed. NB thouh, contradicts authority o 4ettitt and

'issin, creates uncertainty as to !hen ho! intentions !ill be

imputed, and brins 7"2 close to bein a #"2o Direct fnancial contributions rule (economically naYve

discriminatory aainst !omen) is dropped (but not overturned

e+plicitly until Fo!ler v Baron) in avour o holistic approach. :hat

!ill be used as evidence no!I :ho ma&es the teaIo 4resumption o EP-EP shares- !hat overturns itI 7mbalance in

constributions U separate accounts (tac& v Do!den) but not

ormer alone. 7n bbott court ocussed on nature o relationship

(parent buyin house or couple).

Re+edial CTs

• #"2s don’t predate the court udment (retrospective)3 are at the

discretion o the court to a!ard3 and rely on a court udement or their

e+istence. 7"2s arise in response to acts, not a court udment, so court

has no discretion as to !hether or not a "2 e+ists. 2hese defnitions used

in #e 4olly 4ec& (No.?) and by Bir&s

• 4osition o /nlish la!>o ainst it> 4olly 4ec& (NB !ide and narro! ratios)3 denial o ability to

impute intentions in 'issin 4ettitt3 so ar no case has used a #"2

e+plicitly (/ves v /ves ;usey v 4almer come closest via Dennin

M#)o For> tac& v Do!den$=+ley v ;icoc& use o imputed intention, as

/therton arues3 %ord B: said it’s an open 0uestion

(:estdeutsche)3 unconscionability’ may be f-lea or discretiono "ommon!ealth uthorities>

ustralia- probably not (Muchins&i, but NB Bathurst "" v 4:"

4roviders) "anada- #"2s are available to counter enuine A/ cases (not

broad A-style defnition o A/)

A- #"2 is used to counter !hat A la!yers understand to beA/



• dvantaes o #"2s>

o Finds air solutions !here parties are leally unsophisticated

o :ould allo! end to result-based reasonin

o ruably "2s based on conscience are indistinuishable rom

conscience any!ay

• Disadvantaes>o :ould harm 24 rihts

o #etroactivity harms rule o la!

o lready a personal remedy or A/

o %ac& o certainty

• "onclusion> Maybe allo! #"2 or amily property cases and use 7"2 or all

others

Documents

Trusts Revision Summaries 2010