Topic 1: Nature and Classification of Trusts

Goodbody Pensioneer Trustees Ltd. & anor v Hevac Ltd [2019]

a judgment obtained against the trustee personally cannot be executed against property which the trustee holds on trust.

Modern uses of the trust

• provision for family

• tax planning

• unincorporated associations.

Private Trust

• For the benefit of an individual / class of individuals

• Beneficiary principle applies

Public Trusts

• Charitable Trusts

• Set up for a purpose benefit to the community in generally

• Can incidentally benefit specific purpose of classes

Express Trust

• Created by settlor deliberately through a legal document e.g will or instrument inter vivo

• Certain formalities must be observed esp for land and wills

• Must have 3 certainties

Resulting Trusts

• Arises when beneficial interest is not disposed of

• Automatic = where express trust fails

• Presumed = inferred from the court

Constructive Trusts

• Arise by operation of the law, irrespective of the intentions of the parties

• Imposed to satisfy the demands of justice and good conscience, sometimes contrary to intentions.

• Historically, to prevent fraud. Now for broader justice.

Trust v. Contract

(i) Unlike contracts, trusts can arise without agreement or intention (constructive trusts).

(ii) Privity of contract – contract creates personal obligations. Trust creates proprietary obligations.

(iii) A trustee, unlike a contracting party, has defence of having taken reasonable care of trust property. 

Is beneficial interest property?

• Yes, but not like physical property.

  • It’s an equitable right (enforced by courts of equity, not common law).

  • Example: If you’re the beneficiary of a trust, you don’t own the house (legal title), but you have the right to live in it or get rent from it.

Beneficial ownership: Common Law v. Equity

• Common Law: Only recognises legal ownership (e.g., the trustee’s name on the deed).

• Equity: Recognises beneficial ownership (your rights as a beneficiary).

  • Conflict? Historically, yes. Today, they work together, but equity "wins" in trust disputes

Sausage Meat Theory

• Old Idea: Beneficial ownership is like sausage meat stuffed into the legal title’s casing (i.e., part of the same "property").

• Problem: Suggests legal and beneficial ownership can’t be separated.

• Lord Browne-Wilkinson’s Critique (Westdeutsche [1996]):

  • Called this nonsense – equitable rights are separate from legal title.

  • Beneficiaries have rights against the trustee, not the property itself.