Equity Law Exam Prep, Exams for Civil Law. City University London
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Equity Law Exam Prep, Exams for Civil Law. City University London

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Equity

1. Does a trust require human beneficiaries? Trusts which do not have charitable objects, as under the UK Charities Act 2006 sections 2 and 3, and also do not make the trust property available for the benefit of defined people (i.e. beneficiaries), are void.

Morice v Bishop of Durham [1804] EWHC Ch J80 the Court of Appeal held that non- charitable purposes were void for want of objects.

Exceptions to this- tombs/graves/monuments and animals.

Courts want the trust to be specific about the nature of the construction, the purpose and any benefit arising from it. This is clear in the decision in Re Endacott [1959] EWCA Civ 5, where a bequest to leave £60,000 to the ‘North Tawton Parish Council for the purpose of providing some useful memorial to myself’ was held not to be valid as it was too vague.

Theoretically you cannot have a trust for a pet because legally a pet is regarded as property. However, in Pettingall v Pettingall [1842] 11 LJ Ch 176, there was a valid trust for a horse. The disposition in this case was £50 per year for the maintenance of the testator’s favourite horse, which the executor of his estate had promised to honour. The court held that there was a trust because the residuary legatee could enforce the trust.

Law of Perpetuity: When property is left on trust for beneficiaries, the property must vest in individuals within a recognised period of time. If this does not occur within the relevant time period, the interest in the property may be void. This rule is in place to stop property being indefinitely unavailable. It also applies to equitable interests under a trust with a condition precedent attached. If the condition is not satisfied within the required time period, the interest will lapse. The period is 21 years. The common law allows for an extension of this period through a ‘life in being’ being expressly specified. This is where the period is extended to the duration of an identified person’s life; it is common in non-charitable purpose trusts. Under this time period, the trust property must vest within 21 years of the creation of the trust. However, this has now been changed by s 5 of the Perpetuities and Accumulations Act 2009. This section has changed the perpetuity period to 125 years. Therefore, the trust property must vest within 125 years of the creation of the trust.

Re Denley’s Trust Deed [1969] 1 CH 373: Land conveyed to Ts for 21yrs after death of X. Land should be: maintained and used as and for the purpose of a recreation or sports ground primarily for the benefit of the employees of the company...

ISSUE: Was purpose of trust framed as trust for people?

HELD: Trusts valid: employees ascertainable & sufficiently tangible benefit. If individuals derive sufficiently tangible benefit entitled to go to court to enforce trust & not offend beneficiary principle

Goff J: .. in my judgment the beneficiary principle of Re Astor, which was approved in Re Endacott... is confined to purpose or object trusts which are abstract or impersonal. The objection is not that the trust is for a purpose or object per se, but that there is no

beneficiary... Where, then, the trust, though expressed as a purpose, is directly or indirectly for the benefit of an individual or individuals, it seems to me that it is in general outside the mischief of the beneficiary principle...

Re Astor’s Settlement Trusts: Waldorf Astor, lover and private secretary to David Lloyd George and the husband of Lady Astor, the first woman to take her seat in the House of Commons, died. He had wished to create a trust for the ‘maintenance… of good understanding… between nations’ and ‘the preservation of the independence and integrity of newspapers’ with money from the shares he owned in his newspaper The Observer. The will was challenged on the basis that a trust for an abstract purpose, rather than for real people, could not be valid. Roxberg J said: ‘if the purposes are valid trusts, the settlors have retained no beneficial interest and could not initiate [proceedings].’ One cannot generally have a trust without a beneficiary or, at least a person who can move the court to enforce the trust: ‘This seems to me to be good equity and good sense.

2. Secret Trusts

Wills Act: Wills Act 1837 introduced a common form for both real and personal property, providing in s.9 as follows:

(a) it is in writing, and signed by the testator, or by some other person in his presence and by his direction; and (b) it appears that the testator intended by his signature to give effect to the will; and (c) the signature is made or acknowledged by the testator in the presence of two or more witnesses present at the same time; and (d) each witness either - (i) attests and signs the will; or (ii) acknowledges his signature, in the presence of the testator (but not necessarily in the presence of any other witness), but no form of attestation shall be necessary.

Fully secret trust: Document which is signed and witnessed, makes no mention whatsoever of a T. However, the testator will have declared that a legatee who under the will takes absolutely is in fact a Trustee and is to hold on T for a third party.

Half Secret trust: the 'will' now contains a declaration of T, though one which is void for want of objects. A typical form of words would be, '£10,000 to John on T for the persons or purposes I have communicated to him'.

People create secret trusts to avoid publicity and to produce an ability to change their minds without the need for a codicil (supplement modifying a will or revoking some provision of it). The latter should be self-explanatory. The motive for the avoidance of publicity comes from the fact that wills are public documents; anyone can inspect a will on payment of a nominal fee. If the testator wants, for example, to make provision for an illegitimate child, then that might well be something he does not want placed in the public domain.

Requirements for all secret trusts: a) An intention by the testator to create a trust

b) The communication of the trust to the intended trustee OUTSIDE OF THE WILL c) Acceptance of the trust by the intended trustee (which can take the form of silent acquiescence –implied through conduct)

Ottoway v Norman: In a fully secret trust, the will of a testator will not mention whatsoever of a trust. However, the testator will have declared that a legatee who under the will takes absolutely, is in fact a trustee and is to hold on trust for a third person. Neither the existence nor the terms of the trust are disclosed in the will. However, the existence and terms of the trust must be communicated to the trustee prior to the testator's death. The intended trustee must accept the office of trusteeship and acquiesce to the terms of the trust. Testator made a will leaving bungalow and contents to housekeeper – p.f. absolutely. T’s son visited and T said in front of the housekeeper that he had made a will but that she should leave everything to the son after her death. She remained silent. She left to a friend. There WAS a ST – she implied by her silence that she agreed – she should and could have spoken up if she disagreed [also Moss v Cooper 1861] Fully secret trusts of land are valid despite the absence of writing- acceptance can be made in silent acquiescence.

Irvine v Sullivan: Sometimes, a Half Secret Trust which appears to fail because of precatory wording in the will may be found to be a Fully Secret Trust because previously communicated instructions made him legally obligated to fulfil the testator's wishes.

Wellgrave v Tebbs: The testator left £12,000 in his will jointly to T and M. After the 2 0 1 Ftestator s death, a draft letter was found specifying how the testator wanted them to hold the

money. The court held that, because there had been no communication of this to T and M before the testator's death, there was no binding trust: T and M could keep the money. If,

2 0 1 Fhowever, the trust had been communicated in the testator s lifetime the secret trust would

have been effective. Communication must happen before death.

As Wood V.C. explained, "Here there has been no promise or undertaking On the part of the 2 0 1 Flegatee. The latter knew nothing of the testator s intention until after his death. Upon the

face of the will, the parties take indisputably for their own benefit".

Re Boyes: The testator told the intended trustee (his solicitor) that he was going to leave him property to be applied under a secret trust. The testator said that the terms of the trust would be communicated to the trustee within the testator's lifetime. This did not occur. Following the testator's death the two documents addressed to the solicitor were discovered. Despite these documents, the High Court held that this post-mortem communication was insufficient. It was therefore held on resulting trust for the deceased's estate. Terms must be communicated.

Blackwell v Blackwell: The testator had left money in his will to five legatees to be applied for the benefit of people whose names he had previously communicated to them. Before the will was executed, the testator had informed the trustees orally that the money was to be used for the benefit of his mistress and his illegitimate son.

In summation, a half-secret trust is an express trust that is declared by the testator in his or her will. The trust should be valid only where the terms of the trust have been communicated to the trustee, either before or after the will was executed.

Re Rees’ Will Trusts: Testator declared a half-secret trust. When the will was executed, he told the trustees that any surplus after making certain payments could be retained by them beneficially. It was held that the surplus could not belong to the trustees, but rather was held on resulting trust for those entitled the testator’s residuary estate. This was because the testator’s oral communication to the trustees about the surplus conflicted with the terms of the will, which stated that the trustees were to receive the property as trustees rather than beneficially. Even if the trustees in Re Rees were intended to benefit under the half-secret trust itself rather than to obtain any surplus, they would not have been able to do so.

Re Oldham: Evidence required for an express agreement not to revoke the wills must be certain and unequivocal.

Re Hagger: T1 and T2 left mutual wills leaving everything to each other & on death of the survivor, to X. T1 died & then X died before T2. Normally X would not take anything but court decided X's interest did not fail & his estate took under the constructive trust. The trust must have arisen prior to T2's death.

Comiskey: Absolutely in full confidence that she will make such use of it as I would have made myself and that at her death she will decise it to such one or more of my nieces as she may think fit’ Puts pressure on the intention of words and actions. ‘As she may think fit’ normally creates a discretionary trust. She has complete discretion.

Re Snowden: Onus of proving a secret trust is on the person claiming that it exists, on the balance of probabilities - the 'ordinary civil standard of proof'.

A good example of the current ambit of the court's willingness to enforce Fully Secret Trusts. An indecisive testatrix, after making a number of particular gifts in her will left the residuary estate to her brother, claiming that he 'knowing her wishes'. He died 6 days after she did and the question was whether, on insufficient evidence, a trust of the residue was undertaken by him. Megarry found that the testatrix had only imposed a moral, not legal obligation upon her brother: there was no secret trust.

He pointed out that only some cases of secret trust involved the possibility of fraud, and as there was none here (the secret trustee couldn't benefit as he had died) the question was whether the property should be taken out of his estate. While the burden of proof lies on the person asserting the secret trust's existence, where there is no fraud the normal civil standard of proof applies.

3. Charitable Trusts & Cypress Doctrine

Trusts for purpose are prime facie void (Morice v Bishop of Durham) unless they fall within a recognized exception- like charitable trusts. These must satisfy 3 requirements: 1) the purpose must be charitable in nature, 2) the trust must be for public benefit and 3) it must be wholly and exclusively charitable.

Poverty- Re Clarke [1923 2 Ch. 407] – poverty is a relative term Re Coulthurst Will Trust [1951] Ch. 661 – poor do not mean necessarily destitute – reduced circumstances suffices. Re Gwyon etc: Gave school boys a pair of underwear each year. Wanted to set up a trust to leave money to apply for school boys. Terms of the trust are capricious or perverted depending on whom you ask. 1) Not black boys. 2) Wanted a label stitched into them saying ‘Gwyon’s present’. HOL. Wanted them to send back unwashed. If he could still read the label they would get a new pair. The ratio was that the boys were not poor. Tried to do it under poverty. There was no element of need here.

Advancement of Education: Re Shaw- Advancement of Education, but no element of teaching or education, and tried to make a new 40 letter language. This was criticised as being too narrow.

Re Hopkins- A woman who believed that Shakespeare couldn't have written the plays as he was just a poor man and in fact Bacon must have. She left money for people to try and trace them. HELD: education trust. "I think...that the word 'education'...must be used in a wide sense, certainly extending beyond teaching, and that the requirement is that, in order to be charitable, research must either be of educational value to the researcher or must be so directed as to lead to something which will pass into the store of educational material, so as to improve the sum of communicable knowledge..." Wilberforce J → Flexible definition.

Re Compton: The personal nexus test. There was a trust to pay fees for pre-named families. HELD: this was not a section of the public because they were named. Adopted in Oppenheim v Tobacco Securities Trust Co Ltd. Here there was an educational trust to pay for the educations of children of the employees of British American Tobacco. HELD: Not valid charity - children here were private part of public- it was too narrow. Defined by relationship to one legal person.

Oppenheim: The more flexible test for PB in education. Surely depends on the wording? Eg education for coal miners are ok vs education for employees of National Coal Board which is not ok. Proposed the question should be "Are they a section of the public?" - considering numbers and names. Approved in Dingle v Turner.

Gilmour v Coates: A charitable trust must have a public purpose in as well as a public benefit. Nuns living secluded lives not good enough- giving them money did not necessarily mean that there would be any public benefit.

Re Wilson’s Home Trusts: Example of where the Trust was altered by a scheme under S32CTA to suit a similar, more relevant purpose- Cy Pres Doctrine. McGovern v A-G [1982] Ch. 321: Why political purposes cannot be charitable? Not considered to be a question for the court but forparliament. It could mean a Risk to reputation or be for Political purposes.

Re Pinion [1965] Ch 85: An artist, wanted to leave all of his sculptures and paintings in a shop. Wanted to leave it all to a museum. Harman was the judge. His art wasn’t expanding knowledge. Called it ‘junk’. I see no reason why we should foist this mass of junk on an

unsuspecting public. Very subjective lawmaking. Sometimes too subjective/narrow things are not considered charitable.

Niyazi: The people must be in actual need.

AG v Ross (1986) held that bodies that are considered to be charitable in educational circle will be precluded from engaging in political activities or supporting political causes.

Cy Pres Doctrine: Principle that allows for the money given to charity to be transferred to another charity working in a similar space. Ensures that the settlor’s charitable intention is not frustrated.

4. Creation of Trusts (3 Certainties, etc.)

Looking at three certainties here, stated in Knight v Knight. Intention Subject Matter Objects

Intention: It must be certain that a settlor intended to create a trust together with its onerous fiduciary duties rather than simply express a wish or hope. This decision brings trust into being.

Subject Matter: Courts must know what specific property the trust attaches. Problems arise where this property is mixed with the Trustee's own and is not segregated.

Objects: There must be someone in whose favour the courts may decree performance (enforceability). Test differs depending on type of trust. There has to be a beneficiary.

Lambes v Eames: Precatory wording (mere hopes or wishes) are insufficient to create a trust.

Re Adams v Kensington Vestry: Precatory wording example - "To...my wife... in full confidence that she will do what is right".

Comiskey: Imperative wording imposes a trust obligation - "To...my wife... in full confidence that she will [leave it] to such of my nieces"

Palmer v Simmonds: Insufficient certainty of subject matter: "The bulk of my residuary estate"

Re Golay’s Will Trusts: "Reasonable income" was held to be sufficiently certain. "Reasonable" is the limit of certainty. Rational that reasonability is something a court can judge.

Re London Wine Co Shippers Ltd: You must know with absolute certainty what property the trust attaches itself to. Wine was not segregated so no trust. There was no separation of tangible products here. Re Goldcorp confirmed this, where it was stated that unless the gold was segregated in some way, London Wine Co would have to apply.

Hunter v Moss: Controversial case. Shares were not segregated so trust should have been deemed uncertain. Argument was that they didn't have a physical property but a number so just a proportion of them was certain. So you don't have to segregate with intangible property.

IRC v Broadway Cottages: 'List Test' applies to certainty of objects of fixed trusts. Terms are absolutely fixed, trustee must know exactly who and what they are with absolute certainty.

McPhail v Doulton: 'Is/Is not' test applies to certainty of objects of discretionary trusts. Must be able to say with certainty whether or not anyone in the world is or is not a beneficiary of the trust. Also applies to power of appointment

Test = can it be said with certainty that any given person is or is not a member of the class of beneficiaries. So the testator/settlor will have given a group – my children, my employees, tall people – and we need to be able to say with certainty whether a person is or not a member of that class. Class ascertainability

Re Baden confirmed this. Although there were four different takeaways put forward regarding this- a) Limited relatives to next of kin. However is this in line with the settlor's intentions? B) Reversed the burden of proof, beneficiary must be able to prove that they are a relative. Shouldn't do this as burden of proof is reversed so maybe inappropriate. C) If a 'substantial number' of beneficiaries are within the class then the class itself becomes certain. Not very satisfactory conclusion. D) Gift subject to conditions precedent upheld where the class of beneficiaries was "Any member of my family and any friends of mine" certain for gifts but not trusts. Difficult as friend is a difficult subjective word.

Boyce v Boyce: The two houses were certain, but as to which daughter gets which house was not - trust failed. So there was a certainty of subject, but not of objects. If there is no certainty of trust property, then the trust goes back to the settlor (resulting trust).

Re Gulbenkian’s Settlement Trusts: Calouste Gulbenkian made a settlement in 1929 that said the trustees should ‘in their absolute discretion’ and while his son Nubar Gulbenkian was still alive, give trust property to 'Nubar Sarkis Gulbenkian and any wife and his children or remoter issue for the time being in existence whether minors or adults and any person or persons in whose house or apartments or in whose company or under whose care or control or by or with whom the said Nubar Sarkis Gulbenkian may from time to time be employed or residing'. It was argued this was too uncertain to be enforced.

Re Barlow’s Will Trusts [1979] 1 W.L.R. 278: Both Barlow and Tuck are NOT trusts cases. Testatrix says in her will – any friends of mine who wish to do so may purchase any of my paintings – at market rate and before an auction to sell off all the rest. Uncertain concept is ‘friends.’ Again, a gift subject to a conditioned precedent – therefore not a trust case and cannot be used as an authority.

5. Construction of Trusts (Constitution)

Will equity help a volunteer?

Milroy v Lord: A gift will not be perfected by interpreting the donor of the gift as trustee of the property. An uncle gave share certificates to hold on trust for his niece. Physical certificates did not mean legal title- the trust was never constituted. Turner LJ said for a voluntary settlement to be valid, the settlor has to have done everything necessary. An incompletely constituted trust will not be made effective to aid a volunteer (a party that has provided no consideration for the transfer- as seen in Brook’s Settlement Trusts) Equity tries to remain steadfast.

Recently there are cases that mitigate Milroy’s approach when it comes to imperfect transfers. These cases are exceptions to the rule that equity will not help a volunteer.

Re Rose: Rose completed company share transfer forms and sent them to the claimant who passed them to the company to register the claimant as the new shareholder. Was the beneficial interest transferred? The Court held that legal title passed when the claimants were registered, and the beneficial interest happened when the forms reached the company. Subjective test- if the transferor does everything in their power to transfer the property, then it takes effect in equity; once the donor puts the transaction beyond their control- which can happen if docs are sent to a 3rd party, or if docs are handed to the donee (Mascall v Mascall)

Pennington v Wane: Similar to Re Rose- a donor informed her nephew (Harold) that she wanted to transfer her company shares to him. The nephew was made director, which required him to have at least one share. The share form was sent to the company’s auditor, but the donor died before the form reached. The issue was that the donor hadn’t done everything she needed to- the auditor had to deliver the form to the company as the auditor was her agent. However, the court held that the nephew had an equitable interest. Arden LJ said the test of unconscionability was to be applied.

Virgo says there was “absence of certainty and principle”. Arden LJ couldn’t come up with a list of factors to determine unconscionability.

Choithramvs Pagarani: A settlor declared a trust deed in favour of a charitable organization and nominated himself and eight others as trustees. But he failed to execute the docs for a formal transfer before he died. The court held it was sufficient for one of the trustees to have legal title, even if the others didn’t- “benevolent construction”.

Proprietary Estoppel- further exception to the rule that equity will not perfect an imperfect gift. Aims to compensate a claimant that has suffered a detriment caused by reliance on a representation by the defendant that the donee will receive rights in property.

Strong v Bird: Rule dictates that where a deceased person intended to make a gift of property without making a complete gift, if the person is named as the executor or administrator of the deceased’s estate, the gift is completed. Three requirements for this: 1) Intention to make an immediate gift 2) Intention must continue until death 3) The donee must obtain legal title in the property, either as executor or administrator.

Some tightening in Zeital v Kaye: In order for the Re Rose & Mascall exception to apply, the transferor must have done all that he/she could have done, and the matter must be out of his/ her hands. In this particular case, there share certificates were missing, and the transferor should have just asked for new ones but didn’t.

Jones v Lock: The rule in Milroy v Lord is applicable to gifts. Equity won’t rescue a failed gift or trust. This case concerned a gift- equity will not treat a failed gift as a self-declaration of trust. Mr Roberts had a cheque payable to him for £900. Mr Roberts got home & it was his child's birthday, but he had forgotten to buy his child a gift therefore, when asked if he had brought a gift, he handed the £900 cheque to the baby and said 'I give this to baby' A few days later, Mr Roberts died (NOTE - cheque constitution, MUST endorse it to new owner) C tried to argue that Mr Roberts actions = self-declaration of trust HELD - equity will not perfect an imperfect gift. Equity will not treat an imperfect gift as a self-declaration of trust.

5. Construction of Trusts & Formalities a) Milroy v Lord (A gift will not be perfected by interpreting the donor of the gift as trustee of the property. An uncle gave share certificates to hold on trust for his niece. Physical certificates did not mean legal title- the trust was never constituted. Turner LJ said for a voluntary settlement to be valid, the settlor has to have done everything necessary.) b) Re Rose (Rose did company share transfer forms, sent them to C who passed them onto the company to register C as new shareholder. Court held legal title passed when C was registered and beneficial interest happened when forms reached the company.) c) Mascall v Mascall (If transferor does everything in their power, then it takes effect in equity; once transaction is beyond their control, such as docs handed to donee) d) Pennington v Wane (Donor informed her nephew that she wanted to transfer company shares to him. Nephew made director. Share form sent to company auditor, but donor died before form reached. Donor hadn’t done everything she needed to- auditor hadn’t delivered the form and auditor was her agent. Court held nephew still had equitable interest. Would be unconscionable not to.) e) Choithram v Pagrani (Settlor declared a trust deed in favour of a charitable organization and nominated himself and eight others as trustees. But he failed to execute the docs for a formal transfer before he died. The court held it was sufficient for one of the trustees to have legal title, even if the others didn’t- “benevolent construction”) f) Strong v Bird (Rule dictates that where a deceased person intended to make a gift of property without making a complete gift, if the person is named as the executor or administrator of the deceased’s estate, the gift is completed. Three requirements for this: 1) Intention to make an immediate gift 2) Intention must continue until death 3) The donee must obtain legal title in the property, either as executor or administrator.) g) Zeital v Kaye (For Re Rose or Mascall exception to apply, transferor must have done all he could and matter must be out of his hands. Here, the share certificates were missing, and the transferor should have just asked for new ones but didn’t.) h) Jones v Lock (Equity won’t recuse failed gift. Mr Roberts forgot to get his kid a birthday gift- he handed a £900 cheque to the baby and said 'I give this to baby' A few days later, Mr Roberts died (NOTE - cheque constitution, must endorse it to new owner) C tried to argue that Mr Roberts actions were that of a trust, but it was just a gift - equity will not perfect an

imperfect gift. Equity will not treat an imperfect gift as a self-declaration of trust.) i) Richards v Delbridge (Uncle tried to sign his company to his nephew. For a lease, new deed of transfer was needed. Judge said an ineffective attempt to transfer property; equity would not step in to turn it into a trust.) j) Re Fry (Donor executes share transfer form to set up 3rd party trust. Gave form to trustee, and Treasury’s consent was required. Donor died and Treasury consented after. Transfer did not happen due to third party failure.) k) Nelson v Greening & Sykes (About charging order in land law- different formality. All sub-trusts are trusts. l) Grey v IRC (Hunter, owner of shares, transferred them to trustees to hold on bare trust for him. To save stamp duty, he made an oral direction to the trustees that they hold the trust for members of his family. Later did a written document. Hunter claimed claimed that the oral declaration transferred the beneficial title and thus no stamp duty was payable. Inland Revenue said the written instrument transferred the beneficial interest so stamp duty was payable. HoL found in favour of Inland Revenue. Oral declaration was void under LPA 1925.)

6. Quistclose Trusts

Quistclose trust is a trust created where a creditor has lent money to a debtor for a particular purpose. In the event that the debtor uses the money for any other purpose, it is held on trust for the creditor. (Let’s say I give Suns 50 dollars to buy a pony, and instead she buys a new camera lens. Then that 50 dollars will be held on trust for me.)

Any inappropriately spent money can then be traced, and returned to the creditors. The name and trust comes from the House of Lords decision in Barclays Bank Ltd v Quistclose Investments Ltd (1970), although the underlying principles can be traced back further.

Facts of that case: Rolls Razor Ltd owed £484,000 to Barclays Bank Ltd. It still needed more money to pay a dividend which it had declared to its shareholders on 2 July 1964. Quistclose Investments Ltd agreed to a loan of £209,719 8s 6d on the condition that the dividend would be paid with it, and the money would be put in a separate account (also with Barclays Bank). The money was paid into the account, but before the dividend was distributed, Rolls Razor Ltd went into voluntary liquidation. Quistclose sought to recover the money, contending that its agreement meant Rolls Razor Ltd held the money on trust. Barclays contended that the account was part of the general assets of the company and that they were entitled to exercise a set-off of the money in the account against the debts that Rolls Razor owed with respect of Barclays.

The House of Lords unanimously held that the money was held by Rolls Razor on trust for the payment of the dividends; that purpose having failed, the money was held on trust for Quistclose.

Shortly after the decision, an article appeared in the Law Quarterly Review written by Peter Millett QC suggesting how the traditional trust need for certainty of objects (beneficiary) could be squared with the decision of the House of Lords, and the refusal to accept new

categories of purpose trust in equity. In Twinsectra Ltd v Yardley, the House of Lords reviewed the law and the leading judgment was given by Lord Millett, whose judicial analysis, unsurprisingly, closely mirrored that which he suggested twenty years previously.

The key issue, according to Lord Millett, in upholding the trust concept is ascertaining where the beneficial interest in the money lies. Lord Millett suggests that there are four possible answers: (1) the lender, (2) the borrower, (3) the ultimate purpose, and (4) no-one, in the sense that the beneficial interest remains "in suspense". Lord Millett then analysed all of the foregoing, and determined that the beneficial interest remains with the lender, until the purpose for which the funds are lent is fulfilled. The only other reasoned decision was Lord Hoffmann, who agreed with Lord Millett, though disagreed as to whether it was an express or resulting trust.

Some have suggested that this means a Quistclose trust, whilst it is indubitably a trust, it would not be a resulting trust as the beneficial interest never 'results back' to the lender; it was with him all the time. However, others point out that there are many resulting trusts where the beneficial interest never leaves the donor: the classic example of a trust failing for uncertain objects, for example.

Requirements:

It is sometimes argued that Quistclose trusts are not a separate species of trust at all, but merely a simple trust, which has certain characteristics. However, Quistclose trusts are often regarded as somewhat special and distinct. The English Court of Appeal in Twinsectra Ltd v Yardley [1999] Lloyd's Rep 438 suggested, obiter dictum, that it was in fact a 'quasi-trust' which is not required to satisfy "the usually strict requirements for a valid trust so far as 'certainty of object[s]' is concerned. However, the House of Lords, on appeal, declined to endorse those comments.

Purpose: However, what differentiates the Quistclose trust from other trusts, is the existence of the specific purpose for which the sums on credit must be applied, and the failure of which gives rise to the trust (like the pony). It must also be clear that, if that specific purpose fails, the sums will revert to the person who originally advanced them.

The situations in which Quistclose trusts have been upheld are varied. They have been upheld in cases of: a) sums advanced for the specific payment of a dividend; b) sums advanced for the specific payment of a creditor; c) sums advanced on the basis of an undertaking for a specific project; and d) advance payments made on credit for the purchase of specific goods.

One issue that has escaped notice in the judicial consideration of Quistclose trusts to date is how narrowly the purpose has to be defined. Suggestions have been made to the effect that the general law in relation to powers would apply (such that if the purpose is sufficiently well defined to be a power, a Quistclose trust may arise), but others have argued that to take tests from one branch of the law and apply it to another may not be appropriate. The lower courts in Twinsectra suggested that the purpose must be sufficiently well defined, but Lord Millett

distanced himself from that position, claiming that "uncertainty works in favour of the lender, not the borrower."

Certainty of intention: In Twinsectra v Yardley, Lord Millett spent some time considering the necessary intention. It has long been settled law that a person need not have a specific intention to create an express trust, so long as the court can determine from the person's intention that a beneficial entitlement should be conferred which the law (or equity) will enforce. So in Twinsectra where there was a solicitor's undertaking that the money should only be used for one purpose, this was held to be sufficient intent. In Quistclose itself and in Carreras Rothmans v Freeman Mathews Treasure where loans were made for a specific purpose, this may also amount to sufficient intention. Where a loan is advanced for the borrower to use as he will, no Quistclose trust can arise.

Criticisms: In the early stages of development of the Quistclose trust, it was suggested that the concept was unambiguously good. In Re Kayford it was suggested that a segregated account for customers' money to be placed in to guard against the insolvency of the company was a proper and responsible thing to do.

However, more recently criticism has been mounted that giving a proprietary claim to a lender which enables the lender to reclaim the loan ahead of unsecured creditors has the effect of putting the lender in the position of a secured creditor, but without the need to register any security interest against the borrower (and thus meaning that other creditors would not be aware of the preferential status of the lender's claim).

Quistclose trusts still remain relatively uncommon, and as yet there has been no clamour for legislation or regulation (Quistclose trusts were not even addressed under English law when the insolvency law was last revised in the Enterprise Act 2002). However, should the courts start finding them with increasing frequency, it may be that regulation, or judicial revision, follows.

Lord Wilberforce distinguished such earlier cases as mere “examples which show that, in the absence of some special arrangement creating a trust… payments of this kind are made upon the basis that they are to be included in the company’s assets” (emphasis supplied). Lord Wilberforce found that there was such a “special” arrangement in relation to the moneys advanced by Quistclose: “It is not difficult to establish precisely upon what terms the money was advanced by the Respondents to Rolls Razor Ltd. There is no doubt that the loan was made specifically in order to enable Rolls Razor Ltd to pay the dividend. There is equally, in my opinion, no doubt that the loan was made only so as to enable Rolls Razor Ltd to pay the dividend and for no other purpose. This follows quite clearly from the terms of the letter of Rolls Razor to the bank… The mutual intention of the respondents and Rolls Razor Ltd, and the essence of the bargain, was that the sum advanced should not become part of the assets of Rolls Razor Ltd, but should be used exclusively for payment of a particular class of its creditors, namely, those entitled to the dividend. A necessary consequence from this, by process simply of interpretation, must be that if, for any reason, the dividend could not be paid, the money was to be returned to the respondents: the word “only” or “exclusively” can have no other meaning or effect.” (pp. 579H- 580D)

It followed that the monies advanced by Quistclose were trust monies and could not be the subject of the claimed set off by Barclays.

7. Equitable Tracing

Tracing in English law is a procedure to identify property (such as money) that has been taken from the claimant involuntarily. It is not in itself a way to recover the property, but rather to identify it so that the courts can decide what remedy to apply. The procedure is used in several situations, broadly demarcated by whether the property has been transferred because of theft, breach of trust, or mistake.

Tracing is divided into two forms, common law tracing and equitable tracing. Common law tracing relies on the claimant having legal ownership of the property, and will fail if the property has been mixed with other property, the legal title has been transferred to the defendant, or the legal title has been transferred by the defendant to any further recipient of the property. Equitable tracing, on the other hand, relies on the claimant having an equitable interest in the property, and can succeed where the property has been mixed with other property.

Defences to tracing are possible, particularly if returning the property would harm an innocent defendant, where the claimant has made false representations that the defendant relied on to his detriment, or where the property has been transferred to an innocent third party without anything given to the defendant in return that the claimant could recover in lieu.

This is about equitable tracing. Common law tracing won’t help here as the funds were mixed and they were transferred electronically between bank accounts.

Re Diplock: Common law does not have the "far-reaching remedy of a declaration of charge" - limitations of common law tracing Requirements for equitable tracing established- initial fiduciary relationship, property in traceable form, and no inequitable result. Claim defeated as inequitable - monies spent on improvements for the hospital should not give rise to right in buildings as small in comparison to value of land + children's hospital

=>The fiduciary relationship need not be between the claimant and the defendant. In this case, the fiduciary relationship was between the claimant and the executors, and the action was against the charities to which they had handed the money.

=>The requirement of an equitable proprietary interest has also been criticised, but again, is very easily found. =>In this case, it was established by the equitable claim the claimants had against the executors, despite the fact that a person named as a beneficiary in a will is not normally regarded as the equitable owner of assets in the unadministered estate.

Advantages of Equitable Tracing: More flexible, priority creditor status, benefit of increase in value, no limitation period

Westdeutsche: (Requirements for tracing in equity)

Facts: The Westdeutsche Landesbank Girozentrale sued Islington LBC for the return of £1,145,525, which included compound interest, as money that it had paid under an interest rate swap agreement with the council. Interest rate swap agreements had been declared by the House of Lords, a few years earlier in Hazell v Hammersmith and Fulham LBC, to be ultra vires and void because they exceeded councils' borrowing powers under the Local Government Act 1972. The council accepted that it should repay the money it had received under the void contract, but that it should only repay simple interest. Previously, the courts had only allowed awards of compound interest if the claimant could establish a property right (though this was later reversed in Sempra Metals Ltd v IRC.

Accordingly, Westdeutsche argued that when it paid over the money a resulting trust arose immediately, because the bank plainly did not intend to make a gift. Among the arguments, counsel for the bank submitted that a resulting trust arose on all unjust enrichment claims, which this was, given that the basis for the initial contract had failed. The council contended that on traditional trust law principles there could be no resulting trust (and therefore no property right, and compound interest) because the council's conscience could not be affected when it could not know (before the judgment in Hazell) that the contract was void. A resulting trust needed to be linked to a deemed intention of the parties that money be held on trust, but there was none because the bank had intended the money to pass under a valid swap agreement (even though it did not turn out that way). It followed that compound interest could only begin accruing from the later date of the council's conscience being affected.

On the 18 February 1993, Hobhouse J held at first instance the bank could recover the money because the council had been unjustly enriched at the bank’s expense, and could recover compound interest. Hazell v Hammersmith and Fulham LBC was considered and Sinclair v Brougham was applied. On the 17 December 1993, the Court of Appeal, with Dillon LJ, Leggatt LJ and Kennedy LJ, upheld the High Court, with Andrew Burrows acting for Islington LBC, and Jonathan Sumption QC for Westdeutsche. The council appealed.

The House of Lords by a majority (Lord Browne-Wilkinson, Lord Slynn and Lord Lloyd) held that Westdeutsche bank could only recover its money with simple interest because it only had a personal claim for recovery in a common law action of money had and received. But the bank had no proprietary equitable claim under a resulting trust. There was no resulting trust because it was necessary that the council's conscience had been affected when it received the money, by knowledge that the transaction had been ultra vires and void. Consequently, it was necessary that there would be an "intention" that the money be held on trust, but this was not possible because nobody knew that the transaction would turn out to be void until the House of Lords' decision in Hazell v Hammersmith and Fulham LBC in 1991. In his Lordship's view all resulting trusts (even those described by Megarry J as "automatic" in ReVandervell's Trusts (No 2)) depended on intention and were not connected with the law of unjust enrichment. It followed that no trust arose, and there was only a personal claim for the money back. This meant, said the majority, that only simple interest, and not compound interest was payable (a controversial decision that was overturned in Sempra Metals Ltd v IRC)

The House of Lords approved the requirement that a fiduciary relationship was required. This decision has been much criticised. The decision in Chase Manhattan was discussed in the House of Lords in this case, where the judge's reasoning was doubted in holding that the Israel-British Bank held the additional $2m on constructive trust when it knew of the mistake made by Chase Manhattan. Lord Browne-Wilkinson said that mere receipt gave rise to no trust but the retention of the moneys after the receiving bank learned of the mistake 'may well have given rise to a constructive trust' which allowed a claim in equity, being, it seems, a personal liability to account as a constructive trustee under the knowing receipt.

Foskett v McKeown: Lords Steyn and Millett considered, obiter, that there was no logical justification for insisting on a fiduciary relationship for the tracing process to be available, though the existence of such a relationship would be relevant to whether the claim in respect of the traced assets was a proprietary one or merely a personal one. The remedy is not confined to claims between trustee and beneficiary but to other fiduciaries such as solicitor & client (Re Hallet's Estate) and account & employer (Agip v Jackson). However, fiduciary relationships have readily been found in circumstances where tracing is sought. (Tracing into mixed funds): Where trust money or property has been mixed with other funds, the beneficiaries have the right to a proportionate share of the property acquired with the mixed fund or an equitable charge (or lien) over the property mixture, to secure their claim.

(House of Lords rejected Re Hallett's Estate as apparent authority for a claimant only having a charge over property of the defendant fiduciary that had been purchased with mixed money.)

Chase Manhattan Bank v Israel British Bank: Fiduciary relationship. Goulding J held that a person who paid money to another under a mistake of fact retained an equitable interest and the conscience of the payee was subjected to a fiduciary duty to respect that interest.

Property can be traced: 1) It can be traced into the hands of the person who misapplied it.

2) It can be traced into the hands of a person who received it with knowledge that it was misapplied. (This can lead to a proprietary claim and a personal action.)

3) It can also be traced into the hands of an innocent volunteer, that is, a person who is given property without providing consideration and who has no knowledge of the property's provenance (Re Diplock).

=>Property cannot be traced into the hands of a bona fide purchaser for value without notice.

=>According to dicta in Lipkin Gorman v Karpnale Ltd, the consideration given by the purchaser need not be adequate.

Re Hallet: (Tracing into unmixed funds) 1) If the trust property has been kept separate, it can be reclaimed.

2) If the trust property has been sold, the beneficiaries can trace into and claim the proceeds of sale. If the wrongdoer has used trust funds to purchase other property, the claimant has a choice of remedies. =>In this case it was held that the claimant may elect either to take the property or to have a charge over the property for the amount of his money expended in its purchase. (If the property has appreciated, the claimant would be best advised to take the property, but if it has depreciated, he would be best advised to have a charge over the property and sue the defendant for the balance.)

Re Clayton’s Case: (Tracing into mixed funds with another trust or an innocent volunteer)- Active Current Bank Accounts- This rule states that the first payment in to the account will be the first payment out. The rule has been applied as between two trusts and between a trust and an innocent contributor, e.g. in Re Diplock.

Boscawen v Bajwa: (Subrogation)- Where a secured debt is paid off with the use of misappropriated assets, subrogation allows the debt to be 'revived' in favour of the party whose money was used to pay off the original secured debt. However, it is important to realise that the terms of the revived mortgage can be no more favourable to the claimant than the terms of the original mortgage were to the original lender. (This remedy was defeated in Re Diplock on the grounds that it was inequitable.)

Barlow Clowes v Vaughan: (Tracing into mixed funds with another trust or an innocent volunteer). ACTIVE CURRENT BANK ACCOUNTS

Reluctantly confirmed that the rule in Re Clayton's Case is still good law, although subject to any contrary intention which the courts are ready to find.

It can be said that the rule should not be applied if;

1) It was contrary to the express or implied intentions of the claimants;

2) It was impractical; or

3) It would cause injustice.

The rationale for this, as explained by Dillon LJ, is that the rule has been enshrined in English law for so long that it can only be replaced by a House of Lords (now a Supreme Court) judgment.

The case concerned the collapse of an investment company in Gibraltar. Investors had paid into investment plans, but the money had been stolen and the company was left owing £155m with assets of far less. The rule would mean that the later investors would recover nearly all of their money and the earlier investors, nothing.

=>The rule need only be applied when it is convenient to d oso and its application can be said to do broad justice.

=>The rule is sensibly not applied when the costs of applying it is likely to exhaust the fund available for the beneficiaries.

On the facts of the case, it was decided that the investment fund was regarded by the investors as a common pool, and that they should share rateably in what remained because they had experienced a common misfortune. Accordingly, the court ordered a rateable distribution among the claimants who were investors.

1. The Beneficiary Principle a) Morice v Bishop of Durham (Court of Appeal held that non-charitable purposes were void for want of objects.) b) Re Endacott (A bequest to leave £60,000 to the ‘North Tawton Parish Council for the purpose of providing some useful memorial to myself’ was held not to be valid as it was too vague) c) Pettingall v Pettingall (A valid trust for a horse. £50 per year for the maintenance of the testator’s favourite horse, which the executor of his estate had promised to honour. The court held that there was a trust because the residuary legatee could enforce the trust.) d) Re Denly’s Trust Deed (Land conveyed to Ts for 21yrs after death of X. Land to be maintained and used as for sports for employees of company; held as valid, employees got a tangible benefit from it) e) Re Astor’s Settlement Trusts (Astor wanted to create a trust for “maintenance of good understanding b/w nations” and “preservation of independence and integrity of newspapers”- this was too abstract and not for real people, no beneficiary and nobody who can move the court to enforce the trust) f) Re Shaw (Reform of English alphabet- Court said there were no human beneficiaries) g) Re Osoba (Courts can take attempt trusts and make them gifts. Here, dad left money to educating his daughter; turned into a gift. Even if it wasn’t, it’d have gone back to his estate and the daughter would’ve received it as she was next of kin) h) Musset v Bingle (300 for monument, 200 for maintenance. 300 was valid as tomb would be during the perpetuity period, but 200 was void as maintenance could go on for much more than 21 years) i) Re Hooper (Money for ... upkeep of family graves as far as trustees can legally do so’was held valid as the phrase ‘ can legally do so’ meant the trust had to end within the perpetuity period.) j) Re Dean (The maintenance of the testator’ s horses and hounds for a period of fifty years, if any should so long live was allowed- perpetuity wasn’t addressed) k) Neville Estates v Madden (Trust for purposes of unincorporated associations- this works if you use a contractual approach, a club having rules and members having rights) l) Leahy v AG for NSW (Contractual theory didn’t work, as a cattle ranch was the property in question- decided to use “to the existing members not as joint tenants but subject to their contractual rights and liabilities towards one another as members of the association. In such a case a member cannot sever his share. It will accrue to the other members on his death or resignation, even though some members include persons who became members after the gift took effect.”)

2. Secret Trusts a) Ottoway v Norway (Testator made will leaving house to housekeeper. T’s son was around when T announced that despite the will, everything was to be left to the son after Housekeeper’s death. Silence meant acceptance and that that a fully secret trust concerning land can be made orally) b) Irvine v Sullivan (Sometimes, a Half Secret Trust which appears to fail because of precatory wording in the will may be found to be a Fully Secret Trust because previously communicated instructions made him legally obligated to fulfil the testator's wishes.)

c) Wellgrave v Tebbs (Testator left 12k in his will to T and M. Letter was found specifying how he wanted them to hold the money. As this was not communicated prior to his death, no binding trust. T and M could keep the money as they want. Communication before death) d) Re Boyes (Testator told intended trustee he was going to leave property under an ST. He failed to communicate terms. Post-mortem communication is insufficient.) e) Blackwell v Blackwell (The testator had left money in his will to five legatees to be applied for the benefit of people whose names he had previously communicated to them. He gave proper instructions to only 1 of the 5 legatees. Held there was a secret trust as details were laid out at the same time as the execution of the codicil of the will) f) Re Rees’ Will Trusts (T declared half-secret trust. Told trustees that any surplus could be retained by them. Held surplus was to be held on resulting trust for T’s estate. Terms about surplus conflicted with terms of will which said trustees were to receive property as trustees) g) Re Oldham (Evidence required for an express agreement not to revoke the wills must be certain and unequivocal) h) Re Hagger (T1 and T2 left mutual wills leaving everything to each other, and once either died, to X. T1 died, then X did, and T2 was left. Decided X’s interest did not fail so his estate took under constructive trust. Trust must have arisen before T2 died.) i) Comiskey (“Absolutely in full confidence that she will make such use of it as I would have made myself and that at her death she will decise it to such one or more of my nieces as she may think fit” - Puts pressure on the intention of words and actions. ‘As she may think fit’ normally creates a discretionary trust. She has complete discretion.) j) Re Snowden (Onus of proving ST is on person claiming it exists. T left gifts in her will and residuary estate to her brother claiming he “knows her wishes”. He died 6 days later. Held she’d imposed a moral, not legal obligation.)

3. Charitable Trusts & Cy press Doctrine a) Re Clarke (Poverty- poverty is a relative term) b) Re Coulthurst Will Trust (Poverty- poor does not mean necessarily destitute. Reduced circumstances suffice. Money transferred to widows and orphans of employees of the company.) c) Re Gwyon etc (Poverty- Gave school boys a pair of underwear each year. It went to all the boys in the area so was not really poverty. Also the terms of the trust were capricious/ perverted. Wanted a label stitched into them declaring “Gwyon’s present”.) d) Re Shaw (Advancement of Education- wanted to make 40 letter language and redo his plays in this language; but this was criticized for being too narrow. Probably would not have been denied today though.) e) Re Hopkins (Education- woman believed Francis Bacon wrote Shakespeare’s plays. Wanted to research this. Held as a trust- “education must be used in a wide sense, beyond teaching, research must be of value”. Very flexible definition) f) Re Compton (Personal nexus test- trust to pay fees for pre-named families, but this was not a section of the public as they were named.) g) Oppenheim v Tobacco Securities (Educational trust to pay for the education of kids of employees of British American Tobacco; not valid as this was again too narrow; defined by relationship to one legal person- proposed the question “are they a section of the public?”) h) Gilmour v Coates (Charitable trust has to have public purpose as well as public benefit.

Giving nuns in a cloisters money did not have public benefit) i) Re Wilson’s Home Trusts (Trust was altered by a scheme under S32 of the CTA to suit a similar, more relevant purpose- Cy Pres Doctrine) j) McGovern v AG (Political purposes cannot be charitable. Not a question for the court but for Parliament. Amnesty International wanted to do some things, but held to be political- might change the law, etc.) k) Re Pinion (An artist wanted to leave sculptures, etc to a museum. Harman LJ said this was not expanding knowledge as the art was junk- “I see no reason why we should foist this mass of junk on an unsuspecting public. Lawmaking can be subjective which can result in some things being considered non-charitable) l) Niyazi (Poverty- the people must be in actual need. Gift of £15,000 to build a working men’s hostel in Cyprus was held to be charitable as the term "working men’s hostel" connoted poverty as the sum available would only fund a very modest hostel and would only provide the basic facilities and amenities, thus only the relatively poor would occupy it.) m) Re Sanders’ Will Trust 8 (A gift to provide for the "working classes" was held not to be charitable as the expression "working classes" did not indicate poor persons) n) AG v Ross (Held that bodies that are considered to be charitable in educational circle will be precluded from engaging in political activities or supporting political causes) o) Re Wright (Once money has been effectually dedicated to charity, whether in pursuance of a general or a particular charitable intent, the testator's next of kin or residuary legatees are forever excluded- subsequent failure in Cy Pres Doctrine) p) Re Faraker (The charity named in the gift had been amalgamated with others. The CoA held that the amalgamated charities were entitled to the gift, since the charity named effectively continued as part of the amalgamated one.) q) Re Scarisbrick (A gift for such relations of my son and daughter who ‘shall be in needy circumstances’ was upheld. Poverty is relative in some ways.) r) IRC v McMullen (A trust to provide facilities for pupils at schools and universities in the United Kingdom to play soccer or other sports was held to be valid. It was upheld because it was connected with education. Although promoting amateur sport is another subheading under Charities Act 2011.) s) Bowman v Secular Societies (It was held by Lord Parker that only monotheistic faiths could qualify as a religion. This would not work today.) t) Re Wedgewood (Property left for protection of animals. Held to be charitable as it benefitted people who’d learn/feel sentimental) u) Re Grove-Grady (An animal sanctuary was not held to be charitable as humans apparently derived no benefit from that) v) Re Koeppler’s Will Trusts (A gift of money to Wilton Park was upheld as charitable because it promoted greater co- operation in Europe and was not allied to any political party. The Charity Commission now takes a slightly more relaxed approach to what may be regarded as political purposes, holding that if a charity is not engaging in campaigning or political activity as its sole purpose but merely in order to support its charitable purposes it can carry out some political activity.)

4. Three Certainties a) Knight v Knight (3 certainties are listed)

b) Lambes v Eames (Precatory wording (hopes or wishes) are insufficient to create a trust.) c) Re Adams (Precatory wording example that does not work- “To my wife in full confidence that she will do what is right.”) d) Comiskey (Imperative wording imposes trust obligation, e.g. “To my wife in full confidence that she will leave it to such of my nieces”) e) Palmer v Simmonds (Insufficient certainty of subject matter; “the bulk of my residuary estate” is not clear at all; how much is a bulk?) f) Re Golay’s Will Trusts (“Reasonable income” was held to be sufficiently certain though. “Reasonable” is the limit of certainty. Courts can judge reasonability.) g) Re London Wine Co Shipper’s Ltd (About wine, but wine was not segregated so there was no trust. No separation of tangible products here. Absolute certainty what property the trust attaches itself to is required.) h) Re Goldcorp (Stated that unless the gold was segregated in some fashion, the judgment in London Wine Co would have to apply) i) Hunter v Moss (Controversial- shares were not segregated so trust should have been deemed uncertain. However, it was held to be valid, with the argument that there was no physical property in question, but a number, so a proportion of them could be certain- 50 of 950. No need to segregate with intangible property.) j) IRC v Broadway Cottages (List test applies to certainty of objects of fixed trusts. Trustee must know exactly who and what the terms are with absolute certainty.) k) McPhail v Doulton (Is/Is not test applies to certainty of objects of discretionary trusts. Must be able to say whether or not anyone is or isn't. Same goes for power of appointment.) l) Re Baden (Trust was made for employees, relatives and dependants of his company. Beneficiary must prove that they are a relative/dependant here, but that should not have really been hard.) m) Boyce v Boyce (2 houses were certain for trust property, but which daughter would get which was not. So the trust failed; no certainty of objects. Trust goes back to the settlor.) n) Re Gulbenkian (Asked trustees to give property in a very vague fashion: “'Nubar Sarkis Gulbenkian and any wife and his children or remoter issue for the time being in existence whether minors or adults and any person or persons in whose house or apartments or in whose company or under whose care or control or by or with whom the said Nubar Sarkis Gulbenkian may from time to time be employed or residing'. It was argued this was too uncertain to be enforced.) o) Re Barlow’s Will Trusts (Not a trust case. Testatrix said “any friend of mine who wish to do so can purchase any of my paintings before the rest are auctioned.” But unclear who a friend is here.) p) Re Steele's Will Trust (Identical words to those before- person who wrote the will wanted to create a trust to protect a family heirloom, copied another case to do so- act of copying a previous trust showed intention to create the trust) q) Paul v Constance (Mr Constance started relationship with Miss Paul. Opened bank account for them but did not put her name on it as they weren’t married. He told her the bingo winnings they’d deposited were as much hers as his. Mr Constance died and his estranged wife claimed the money. Constance held the account on trust for himself and Paul- words were enough to create a trust, but courts will look at conduct of parties too. Unlikely court would accept Paul’s word w/o other evidence.)

r) Sprange v Barnard (Property was given to the donor’ s husband for ‘his sole use’(hence an outright gift) and ‘the remaining part of what is left that he does not want . . . to be divided b/ w various individuals. Trust failed as it could not be worked out how much would go to other beneficiaries. The husband took it all in the end) s) R v District Auditor ex P West Yorkshire (Local authority created trust for all inhabitants of West Yorkshire- 2,500,000 of them. Held, but trust was void for administrative unworkability- too many people.)

5. Construction of Trusts & Formalities a) Milroy v Lord (A gift will not be perfected by interpreting the donor of the gift as trustee of the property. An uncle gave share certificates to hold on trust for his niece. Physical certificates did not mean legal title- the trust was never constituted. Turner LJ said for a voluntary settlement to be valid, the settlor has to have done everything necessary.) b) Re Rose (Rose did company share transfer forms, sent them to C who passed them onto the company to register C as new shareholder. Court held legal title passed when C was registered and beneficial interest happened when forms reached the company.) c) Mascall v Mascall (If transferor does everything in their power, then it takes effect in equity; once transaction is beyond their control, such as docs handed to donee) d) Pennington v Wane (Donor informed her nephew that she wanted to transfer company shares to him. Nephew made director. Share form sent to company auditor, but donor died before form reached. Donor hadn’t done everything she needed to- auditor hadn’t delivered the form and auditor was her agent. Court held nephew still had equitable interest. Would be unconscionable not to.) e) Choithram v Pagrani (Settlor declared a trust deed in favour of a charitable organization and nominated himself and eight others as trustees. But he failed to execute the docs for a formal transfer before he died. The court held it was sufficient for one of the trustees to have legal title, even if the others didn’t- “benevolent construction”) f) Strong v Bird (Rule dictates that where a deceased person intended to make a gift of property without making a complete gift, if the person is named as the executor or administrator of the deceased’s estate, the gift is completed. Three requirements for this: 1) Intention to make an immediate gift 2) Intention must continue until death 3) The donee must obtain legal title in the property, either as executor or administrator.) g) Zeital v Kaye (For Re Rose or Mascall exception to apply, transferor must have done all he could and matter must be out of his hands. Here, the share certificates were missing, and the transferor should have just asked for new ones but didn’t.) h) Jones v Lock (Equity won’t recuse failed gift. Mr Roberts forgot to get his kid a birthday gift- he handed a £900 cheque to the baby and said 'I give this to baby' A few days later, Mr Roberts died (NOTE - cheque constitution, must endorse it to new owner) C tried to argue that Mr Roberts actions were that of a trust, but it was just a gift - equity will not perfect an imperfect gift. Equity will not treat an imperfect gift as a self-declaration of trust.) i) Richards v Delbridge (Uncle tried to sign his company to his nephew. For a lease, new deed of transfer was needed. Judge said an ineffective attempt to transfer property; equity would not step in to turn it into a trust.) j) Re Fry (Donor executes share transfer form to set up 3rd party trust. Gave form to trustee,

and Treasury’s consent was required. Donor died and Treasury consented after. Transfer did not happen due to third party failure.) k) Nelson v Greening & Sykes (About charging order in land law- different formality. All sub-trusts are trusts. l) Grey v IRC (Hunter, owner of shares, transferred them to trustees to hold on bare trust for him. To save stamp duty, he made an oral direction to the trustees that they hold the trust for members of his family. Later did a written document. Hunter claimed claimed that the oral declaration transferred the beneficial title and thus no stamp duty was payable. Inland Revenue said the written instrument transferred the beneficial interest so stamp duty was payable. HoL found in favour of Inland Revenue. Oral declaration was void under LPA 1925.)

6. Quistclose Trusts a) Barclays Bank Ltd v Quistclose Investments Ltd (Rolls Razor Ltd owed £484,000 to Barclays Bank Ltd. It still needed more money to pay a dividend which it had declared to its shareholders on 2 July 1964. Quistclose Investments Ltd agreed to a loan of £209,719 8s 6d on the condition that the dividend would be paid with it, and the money would be put in a separate account (also with Barclays Bank). The money was paid into the account, but before the dividend was distributed, Rolls Razor Ltd went into voluntary liquidation. Quistclose sought to recover the money, contending that its agreement meant Rolls Razor Ltd held the money on trust. Barclays contended that the account was part of the general assets of the company and that they were entitled to exercise a set-off of the money in the account against the debts that Rolls Razor owed with respect of Barclays. The House of Lords unanimously held that the money was held by Rolls Razor on trust for the payment of the dividends; that purpose having failed, the money was held on trust for Quistclose.) b) Carreras Rothmans v Freeman Mathews Treasure (Loans were made for a specific purpose, this may also amount to sufficient intention.) c) Re Kayford (suggested that a segregated account for customers' money to be placed in to guard against the insolvency of the company was a proper and responsible thing to do.) d) Twinsectra v Yardley (Money was to be used for purchase of property. Was given to Y’s solicitors. A lot of it was used for other purposes by Yardley, and loan was not repaid. Money was held on express trust. First held that one solicitor, Mr Leach was not dishonest enough, but then he was.)

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