Equity and Trusts: Core Principles, Express Trusts, and Constructive Trusts

Comprehensive practice flashcards reviewing Equity and Trusts, covering the history and definition of Equity, three certainties, non-charitable purpose trusts, unincorporated associations, and constructive trusts arising from breaches of fiduciary duties.

How is Equity defined in the lecture notes?

Equity is the body of law developed through the Chancellor and the Court of Chancery to supplement the Common Law and provide appropriate remedies where Common Law was inadequate.

What change did the Judicature Acts of 1873 and 1875 make regarding Common Law and Equity?

They merged the administration of Common Law and Equity by abolishing separate courts and creating a unified High Court, but they did not merge the substantive rules of the two systems.

How does a trust divide the ownership of property?

A trust divides ownership between the trustee, who holds legal title, and the beneficiary, who holds equitable (beneficial) title.

What is absolute ownership in property law?

Absolute ownership occurs when one person holds both legal title and equitable title, possessing the complete beneficial interest in the property.

Historically, what medieval arrangement during the Crusades developed into the modern trust?

The 'use', in which a crusader transferred legal title to land to a trusted friend who promised to manage it and return it, an obligation that was recognised and enforced by Equity rather than Common Law.

What are the two distinct types of rights held by a trust beneficiary?

1. Equitable proprietary rights: Rights in the trust property itself, enforced against the property or its recipient to recover or protect trust assets.
2. Personal rights: Rights against the trustee personally, requiring performance, accounting, or compensation for breach.

How do express trusts differ fundamentally from non-express trusts?

Express trusts are intentionally created by a settlor or testator, whereas non-express trusts (constructive and resulting trusts) arise by operation of law from surrounding legal circumstances.

What are the 'three certainties' established in Knight v Knight (1840)?

1. Certainty of intention (that a trust was intended)
2. Certainty of subject matter (which property is held on trust and in what shares)
3. Certainty of objects (who can benefit or be considered)

What is the core objective test for certainty of intention?

Whether a reasonable person would conclude from the words and conduct that the settlor intended the trustee to hold the property for another's benefit.

Does the creation of a valid trust require the explicit use of the word 'trust'?

No. Under Re Kayford (1975), the word 'trust' is unnecessary if the arrangement objectively shows sufficient intention. Conversely, using the word 'trust' is not conclusive if it was not used in its legal sense (Singha v Heer [2016]).

What are precatory words, and what is their typical effect on the creation of a trust?

Precatory words express a wish, hope, or request (such as 'in full confidence' in Re Adams or 'desiring that' in Re Diggles). They usually indicate no binding trust obligation, meaning the recipient takes the property absolutely, unless construed otherwise in the context of the whole instrument (Comiskey v Bowring-Hanbury).

What is the legal consequence if certainty of intention fails?

The trust is void and the person with legal title retains the property absolutely (the settlor in a self-declaration, or the transferee/purported trustee in a transfer).

How does the rule for identifying mixed tangible property differ from identical intangible property in certainty of subject matter?

Tangible, non-fungible property must be physically segregated from general stock (Re London Wine; Re Goldcorp). Identical intangible, fungible assets of the same class (such as ordinary shares) do not require segregation of specific units to be certain (Hunter v Moss [1994]; Re Harvard Securities [1998]).

What happens if there is uncertainty regarding the beneficial shares under a trust?

The trust is void and the property is held on resulting trust for the settlor, or falls into the residuary estate in a testamentary trust (e.g., Boyce v Boyce [1849]).

What test applies for certainty of objects in a fixed trust with a class disposition?

The 'complete list test' from IRC v Broadway Cottages Trust (1955), which requires both conceptual certainty and evidential certainty so trustees can compile a complete list of beneficiaries at distribution.

What test determines certainty of objects for a discretionary trust?

The 'is or is not' test (or given postulant test) from McPhail v Doulton (1971), asking whether it can be said of any given individual that they are or are not within the class.

What are the three competing judicial approaches to evidential uncertainty in Re Baden (No 2) [1973]?

1. Stamp LJ (strict approach): It must be possible to say of every person whether they are in or out.
2. Sachs LJ: Evidential uncertainty is not fatal; if the definition is conceptually clear, an individual who cannot prove they qualify defaults to 'out'.
3. Megaw LJ: The trust is valid if a substantial core group of objects can clearly be proven to qualify.

What was held regarding class size in R v District Auditor, ex parte West Yorkshire Metropolitan County Council (1986)?

A class consisting of 'the inhabitants of West Yorkshire' (approximately $2.5\text{ million}$ people) was held invalid for administrative unworkability because the class was too large to execute.

What is the Beneficiary Principle established in Morice v Bishop of Durham (1804)?

The principle that an express private trust must have identifiable human beneficiaries who have standing to enforce the trust before the court; trusts for abstract non-charitable purposes are generally void.

What are the three recognised exceptions to the Beneficiary Principle?

1. Charitable trusts
2. Trusts of imperfect obligation (TIOs)
3. Re Denley trusts

What are the three recognised common-law categories of trusts of imperfect obligation?

1. Care of particular animals (e.g., Pettingall v Pettingall; Re Dean)
2. Saying of private masses (e.g., Bourne v Keane)
3. Erection or maintenance of specific graves and monuments (e.g., Re Hooper; Trimmer v Danby)

What is a Pettingall order?

An order allowing trust funds to be released to a willing trustee in a trust of imperfect obligation in exchange for an undertaking to apply the funds to the stated purpose, granting residuary beneficiaries liberty to apply to court if the undertaking is breached.

What criteria must be satisfied for a purpose trust to be valid under the Re Denley doctrine?

The trust must provide a direct and tangible benefit to identifiable individuals who have standing (locus standi) to enforce it, and it must comply with certainty and perpetuity limits.

What is the Contract Holding Theory (CHT) regarding property transfers to unincorporated associations?

Formulated in Neville Estates v Madden and Re Recher's Trusts, it treats property given to an unincorporated association as an accretion to the club's general funds held by officers on a bare trust, governed by the contract between members who agree not to claim individual shares while members.

What are the two core negative rules manifesting a fiduciary's overriding duty of loyalty?

1. The no-conflict rule: A fiduciary must never place themselves in a position where their personal interest conflicts with their duty to the principal.
2. The no-profit rule: A fiduciary must not use their position, trust property, or confidential information to make an unauthorized secret profit.

What principle regarding fiduciary liability for unauthorized profits was affirmed in Boardman v Phipps (1967) and Rukhadze v Recovery Partners (2025)?

Equity applies strict liability: if a fiduciary makes a personal profit using opportunities or knowledge gained through their fiduciary position, they must account for that profit even if they acted in good faith and the trust could not have taken the opportunity itself.

According to FHR European Ventures v Cedar Capital Partners (2014), what remedy applies when a fiduciary receives a bribe or secret commission?

The bribe or secret commission is treated as acquired on behalf of the principal, and an institutional constructive trust arises automatically the moment it is received, providing the principal with an immediate proprietary claim.

How does a Common Intention Constructive Trust (CICT) operate as an exception to section 53(1)(b) of the Law of Property Act 1925?

Section $53(1)(b)$ of the Law of Property Act 1925 requires express declarations of trust over land to be manifested in signed writing, but equity imposes a CICT without writing where denying a shared intention of ownership would be unconscionable.