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Express Trusts: A Study Guide for PGDL Students, Exams of Advanced Education

Walden UniversityAdvanced Education

This study guide provides a comprehensive overview of express trusts, covering key concepts, legal principles, and relevant case law. It explores the three certainties required for creating an express trust, including intention, subject matter, and objects. The guide also delves into the importance of precatory and imperative words, the role of implied terms, and the impact of segregation of assets. It examines cases related to certainty of intention, subject matter, and objects, providing insights into the application of legal principles in real-world scenarios. The guide concludes with a discussion on the constitution of trusts, including testamentary trusts and inter-vivos trusts.

Typology: Exams

2024/2025

Available from 12/30/2024

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TRUSTS PGDL STUDY GUIDE 2025
What is an express trust? - A trust created intentionally by the settlor.
What are the three certainties required to create an express trust? - Intention, subject
matter, and objects.
What is the importance of precatory and imperative words in creating an express trust?
- Precatory words express a hope or desire, while imperative words create a binding
obligation.
How is the meaning of words in a written document determined when creating an
express trust? - By natural and ordinary meaning, relevant contextual features, facts
known to or assumed by authors, common sense, and implied terms in formal
documents.
Is the characterization of something as a trust in a formal document conclusive? - No, it
is not (Modelboard v Outer Box Ltd; Don King v Warren)
Lord Millet quote from Twinsectra v Yardley about intention - "a settlor must, of course,
possess the necessary intention to create a trust, but his subjective intentions are
irrelevant. If he enters into an agreement which have the effect o creating a trust, it is
not necessary that he should appreciate that they do so: it is sufficient that he intends to
enter into them".
Can implied terms be taken into account in documents when looking at intention for
express trusts? - YEs (Lehman Brothers)
Is use of word trust determinative of whether there is a trust? - No, nature of relationship
is determined by substantive rights NOT label (Re Kayford)
Cases on segregation of assets showing intention to create trust - Re Kayford; Mac-
Jordan Construction v Brookmont Erostin; Lyell v Kennedy (Earl of Shelbourne said
seperate account "indicative of some sort of trust)
In which case was freedom to use sums credited to customer account fatal to certainty
of intention for express trust? - Customs and Excise Commissioners v Richmond
Theatre Management
Which case shows that people do not even need to know what a trust is to intend to
create one? - Paul v Constance (words "this money is as much yours as mine" enough)
Cases where treating sole bank account as joint was indicative of intention to create
trust? - Paul v Constance; Henry v Hammond (person "bound to keep money separate"
is "a trustee of the money" per Channell J)
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TRUSTS PGDL STUDY GUIDE 2025

What is an express trust? - A trust created intentionally by the settlor. What are the three certainties required to create an express trust? - Intention, subject matter, and objects. What is the importance of precatory and imperative words in creating an express trust?

  • Precatory words express a hope or desire, while imperative words create a binding obligation. How is the meaning of words in a written document determined when creating an express trust? - By natural and ordinary meaning, relevant contextual features, facts known to or assumed by authors, common sense, and implied terms in formal documents. Is the characterization of something as a trust in a formal document conclusive? - No, it is not (Modelboard v Outer Box Ltd; Don King v Warren) Lord Millet quote from Twinsectra v Yardley about intention - "a settlor must, of course, possess the necessary intention to create a trust, but his subjective intentions are irrelevant. If he enters into an agreement which have the effect o creating a trust, it is not necessary that he should appreciate that they do so: it is sufficient that he intends to enter into them". Can implied terms be taken into account in documents when looking at intention for express trusts? - YEs (Lehman Brothers) Is use of word trust determinative of whether there is a trust? - No, nature of relationship is determined by substantive rights NOT label (Re Kayford) Cases on segregation of assets showing intention to create trust - Re Kayford; Mac- Jordan Construction v Brookmont Erostin; Lyell v Kennedy (Earl of Shelbourne said seperate account "indicative of some sort of trust) In which case was freedom to use sums credited to customer account fatal to certainty of intention for express trust? - Customs and Excise Commissioners v Richmond Theatre Management Which case shows that people do not even need to know what a trust is to intend to create one? - Paul v Constance (words "this money is as much yours as mine" enough) Cases where treating sole bank account as joint was indicative of intention to create trust? - Paul v Constance; Henry v Hammond (person "bound to keep money separate" is "a trustee of the money" per Channell J)

What is a Quistclose trust? - Trust combining a debt and a trust for a specific purpose (commonly in debtor-creditor relationship, eg Foley v Hill) Lord Mustill quote on certainty of subject matter from Re Goldcorp Exchange Ltd 1995 - "It is impossible to have a title to a property when nobody knows to which property the title relates" (confirmed in Westdeutsche Landesbank) Two requirements making up certainty of subject matter - Identifiable property and Beneficial Entitlement (latter only for fixed trust?) What is a trust? - A duty and a property right Words that are uncertain where person attempts to identify trust property by description? - "bulk" (Palmer v Simmonds) or "net assets" (Wilkinson v North) Can you create a trust over items from a larger quantity using fractional interest without specifying (eg 20% of five diamonds?) - Yes Can you create a trust over a specific number of items from a larger quantity without specifying? - ONLY if they are intangible fungible items like shares (Re London Wine Company; Re Goldcorp; Hunter and Moss; Re Lehman Brothers) What is beneficial entitlement requirement? - Must be possible to ascertain nature and extent of beneficiary interest in trust property Consider a trust under which trustees are to hold two cars on trust for A and B, with C determining which car should be held for A and B. Initially no problem as mechanism for beneficial entitlement. What happens if C dies without making a selection? - Trust will fail and cars held on resulting trust for settlors estate (Boyce v Boyce 1849) Will a trust over X amount which requires trustee to pay "reasonable income" to beneficiary satisfy beneficial entitlement requirement? - Suprisingly, yes (Re Golay's Trust 1965 held reasonable income to be an "objective yardstick") What happens if trust fails for uncertainty of subject matter? - Goes on automatic resulting trust to settlor/estate Test for certainty of objects for a fixed trust where distribution between class - Complete list test (IRC v Broadway Cottages Trust 1955) Does a fixed trust need evidential and conceptual clarity for its objects? - Yes What is the rule in Saunders v Vautier? - A sole adult beneficiary of sound mind with a vested interest in trust property is entitled to direct the trustee to transfer legal title to them (since extended to include multiple beneficiaries, whether vested or contingent,

Where do we need to consider rule against inalienability? - non-charitable purpose trusts How to constitute testamentary trusts? - Constitution happens via will How to transfer land for an inter-vivos trust? - transfer made by deed per s52(1) LPA 1925 and registered per s27 LRA 2002 (title passes on registration) How to transfer shares for an inter-vivos trust? - Sign stock transfer form and send to company (title passes when transferee registered in internal register of members) How to transfer choses in action for an inter-vivos trust? - Either Deed of gift OR delivery of chattel with evidence of intention to transfer it (Re Cole 1964) How to transfer cheques for an inter-vivos trust? - Endorsed by transferor by signing name on back (per Bills of Exchange Act 1882) Basic rule around imperfect constitution - "equity will not perfect an imperfect gift" (Milroy v Lord 1862, applied in Jones v Lock for instance where cheque not endorsed) What does Virgo textbook say about imperfect constitution - 'Although the principles that Equity will not assist a volunteer and will not perfect an imperfect gift are fundamental, Equity recognises a further qualifying principle, namely that 'Equity will not strive officiously to defeat a gift'. What is principle in Re Rose about imperfect constitution? - transfer effective in equity once transferor done "everything in his power" (here applied to shares, extended in Mascall v Mascall) For Re Rose purposes, what does not count as putting matter beyond control of transferor? - Where documents sent to an agent (Re Fry 1948; Zeital v Kaye 2010) What case says equity might perfect imperfect gift where would be unconscionable not to? - Pennington v Waine Where does fortuitous vesting rule come from? - Strong v Bird What are conditions for fortuitous vesting? - Must be intention to make immediate gift (Re Freeland), must continue until donors death (Re Gonin) and intended donee becomes an executor of donor's estate (Re Stewart) Donations Mortis Causa requirements - gift made in contemplation of death, conditional on death, delivery of property

For a DMC what must be delivered? - donor must part with dominion (something representing title, not just ownership-- Per Sen v Headley 1991, key to box with deeds in okay, but not key to house) Proprietary Estoppel requirements - assurance, detrimental reliance, unconsionable to resile from assurance (Gillet v Holt) What provision contains formalities relating to trust of land? - s53(1)(b) LPA 1925 What does s53(1)(b) LPA 1925 require for a trust over land? - declaration manifested and proved, in some writing, signed by some person who is able to declare such trust OR in a will What are two types of resulting trust? - Automatic and presumed Which types of failure to create express trust will NOT result in automatic resulting trust? - self-declaration or testamentary trust which fails for uncertainty of objects, property in will and no certainty of intention then result is simple gift, fails for constitution (nothing to have trust over as legal title never moved) Where do presumed resulting trusts arise? - where person makes gratuitous transfer as "equity is cynical" so a trust is presumed common scenario leading to presumed resulting trusts? - A and B contribute to land but A becomes only legal owners-- legal title held by one person (or up to four) but equity presumes that held on trust and equitable interest reflects trust ownership (NOT in family home) what are three types of constructive trusts - institutional, as remedy and Common intention constructive trusts Hale quote from Stack v Dowden about context - "in law context is everything and the domestic context is very different from the commercial world" Can a CICT be express or implied? - Both What is effect of an express trust of family home where no marriage/civil partnership? - Is there is trust satisfying s53(1)(b) LPA 1925 this settles beneficial ownership (Pettitt v Pettitt 1970, TR1 form is such a form) What is starting point for CCITs if no marriage/CP or express trust? - "Equity mirrors the law", which can then be rebutted In CCIT cases where presumption that equity mirrors the law is rebutted, what is final step? - Quantification of interests

how are non-charitable purpose trusts enforced - Pettingall order Are non-charitable purpose trusts technically enforceable? - No Where is first place to look for trustee duties - trust instrument Where is statutory duty of care - s1 TA 2000 what is statutory duty of care - to exercise "such care and skill as is reasonable in circumstances" statutory duty of care professional trustees - s1(1)(b) says it is higher for professional trustees as s1(1)(a) allows specialist skill/experience to be taken into account What governs the application of the statutory duty of care - Schedule 1 TA 2000 where are standard investment criteria found - s4 TA 2000 What are standard investment criteria that need to be considered when exercising power of investment, howsoever conferred - Suitability under s4(3)(a) and (general and specific) and diversification under s4(3)(b) (think of modern portfolio theory) What case discusses the suitability etc of investments in relation to s4 TA 2000 standard investment criteria - Cowan v Scargill What statutory provision governs the duty to take advice - s5 TA 2000 What section defines proper advice - s5(4) TA 2000 as a "person who is reasonably believed by the trustee to be qualified to give it" What is exception to take proper advice - s5(3) if trustee reasonably believes not needed what statutory provision covers delegation - s15 TA 2000 (in selecting and reviewing agents need comply with s1 duty of care) What statutory provision covers reviewing agents - s What is common law duty of care for trustee - Exercise standard of diligence of ordinary prudent businessperson What are main two Fiduciary duties - No profit rule and no conflict rule what are sub-sets of no profit rule - direct, indirect, exploiting opportunities and bribes and secret commissions

Can you indirectly profit from fiduciary role - No (Re Macadam 1946), subject to provision in instrument (Re Llewellin's Will Trusts) How strict is the rule against exploiting opportunities? - Very (Keech v Sandford 1726; trustee "one person in whole of mankind" not entitled to renewed lease) What are sub-sets of the no conflict rule - Self-dealing and fair-dealing What case gave rise to terms self-dealing and fair-dealing - Tito v Waddell No.2 1977 what is consequence if self-dealing - transaction voidable How might self-dealing be okay? - If can demonstrate that transaction conducted fairly What is exemption/exclusion clause defence too? - Any sort of breach other than a fraudulent one (Armitage v Nurse 1998) If there is no exemption clause what might trustees seek to rely on to avoid liability for a breach? - s61 TA 1925 which lets court excuse trustee if think "acted honestly reasonably and ought fairly to be excused for the breach of trust" (NOT used lightly) What is limitation for breach of trust? - 6 years from breach, although if interest not yet vested in possession clock only starts to run from moment it does and it DOES NOT apply to fraudulent breaches What provisions deals with limitation for breach of trust? - s21(1)(a) Limitation Act 1980 What provision says fully informed consent of adult beneficiaries can excuse liability for breach? - s36(2) Limitation Act 1980 What cases govern tracing in wrongful mixtures? - Hallett, Oatway and Shalson (cherry picking) In wrongful mixtures when is cherry picking not available? - When competing with other secured creditors, in which case the basic rule applies (can attribute dissipations to trustee but cannot cherry-pick) Where innocent mixture and multiple assets not in current account how are withdrawals attributed? - Rateably to contributors (Diplock) Where innocent mixture in bank account what is preferred method, second choice and least preferred - Rolling Charge, pari passu ex post facto and first in first out from Clayton's Case What provision contains the general power of investment? (can be excluded) - s3 TA 2000