Equity and Trusts

What is a trust: 

A relationship, where a person is compelled to hold property, for the benefit of someone.

Trustee: 

Legal owner and hold the legal title 

Beneficiary:

Beneficial owner 

Waiting to receive their beneficial interest

If there’s a breach of trust:

May enforce proprietary rights or hold the trustee liable for loss caused

Self Declaration of trust: 

They can make themseleves the trustee of property as they are the same people. (Settlor and Trustee)

Appointment of the 3rd party trustees:

Settlor and trustees are different people.

Absolute Gift: 

Birthdays

Gift with a condtion precedent:

Finish Uni and I will Buy You A Car 

Donor to Donee:

One person to another 

Creation of Express Trusts:

Arise by deed, will or orally (Moorev + Williamson 2011)

The 4 requirements: 

18+

Intention, subject, object

Legal Formalities 

Trust obligation 

Capacity: 

18+ Edwards v Carter 1893

Inter Vivios:

Life time trust (Williams 2003)

Trusts by will:

Banks v Goodfellow 1870

3 Certainties:

Intention, Subject, Object

Certainity of intention:

Must be clear that the settlor intended to create a trust

Precatory Words:

Words can’t convey hope, wish or desire. Lambe v Eames 1871

If there is uncertainty:

There is no trust

Can a trust be created without an express declaration? 

Yes like a constructive trust

Ambigous Descriptions:

Not an effective description. Anthony v Donges 1998 

A Trust Over Unallocated Assets Tangible:

London Wine Company 1986

Unascertained bottles of wine - no trust 

A Trust Over Unallocated Assets Untangible:

Hunter v Moss 1994

50 Bottles all identical, so doesn't matter.

Certainty Of Trust Property:

Give to A anything and whatever is left give to B.

Palmer v Simmonds 1854

Not clear where they will leave there assets. 

Successive Interest Trust:

Give ‘A’ life interest and the remainder to ‘B’ of what is left is beneficial. 

Re Last 1958

Leave Property to wife (life interest) and when she dies, give the remainder to children (beneficial) 

2 Main Methods Of Ascertaining The Benefical Interest: 

Fixed Trust

Discretionary Trust

Certainty Of Beneficial Interest:

Boyce v Boyce 1849

No certainty of subject matter

Effect of Uncertainty of Subject Matter or Objects:

Property remains with the settlor - no trust.

Fixed Trust:

Each beneficiary has a fixed share. 

Like £100 to each of my siblings. 

Fixed Trust Test:

Listing principle / Class ascertainability test 

Look for clear words 

Proof of beneficary 

OT Computers 2003

Powers:

An authorisation to act but not obligatory.

Divide £100 among my children, if not, give it to my wife.  

Test for certainty of objects:

Mettoy v Evans 1991 

is or is not test?

are they any given person?

Enough information?

Discretionary Trust:

Trustees get to decide, who to benefit.

Like £100 trust for my siblings as they shall decide.  

Gift Subject to a Condition Precedent: 

A person satisfies the condtion and benefit to a specific extent.

Like £100 to my nephew when he turns 21.

Re Barlow 1979 

One Person Test:

As long as there is one person that satisfies the description.

S.53(1)(b) Law of Property Act 1925 -

Declaration must be in writing in land.

S52(1) LPA 1925 

Need to use a transfer deed

Equitable Interest:

S53(1)(c) LPA 1925

Applies to an existing equitable interest.

An action being capable of being owned/ transferred.

Must be in writing to transfer.

Grey v IRC 1960

Constitution:

Property must have been vested in the trustee or donee.

Trust / gift is completely constituted and other requirements are satisfied (valid and enforceable).

If not constituted (no trust and invalid).

Johns v Lock 1865 (Gift ‘i give this to baby’)

Doctrine of Every Effort:

Re Rose 1952

Applies where the settlor has done everything he can to transfer but has not been completed because the 3rd party needs to do something. 

Proprietary Estoppel: Winter v Winter 2024

Assurance - needs to be given by the settlor to the beneficiaries - ‘I will give this property to you’.

Reliance - act to show they did something so you can rely on them. 

Detriment - harm or disadvantage.

Strong v Bird: Re Freeland 1952

Imperfect immediate lifetime gift - it hasn’t been done. 

Intention continues until testators death - intention of donor or settlor continues until they die. 

Donee to appointed T’s executor - up to donee to appoint exectuor. 

Gift Perfected - they have the legal title. 

Donatio Mortis Causa: Rahman v Hassan 2024

Gift made in contemplation of death - someone is serioulsy ill and close to death.

Subject matter delivered to donee - need to pass to donee.

Condtional on death - close to death circumstances. 

Trust of a promise (Covenants):

Applies where the subject of the trust is the promise. 

If possible to sue on that promise, that right to sue is the subject matter of the trust.

Fletcher v Fletcher 1844

Equitable consideration: 

Shows the principle that ‘equity will not assist a volunteer.’

Considerations can be money or marriage trusts.

If someone creates a trust for their marriage and promise to transfer future property, if you don't transfer, it is constitute, you will get sued to transfer.  

Re Ellenborough 1903

Beneficiaries contractual rights:

Providing consideration in form of money or money’s worth.

Being a third party with rights under the contracts. 

Cannon v Hartley 1949 - separation agreement - able to sue for breach of transfer of property’.

Contract (Rights of Third Parties) Act 1999 Section 1:

If you are a third party, you can sue, only if the act is not excluded in the terms of the deed. 

Can Trustees Sue The Settlor As Parties To The Deed?

Trustees are not allowed to sue for a breach of contract. 

Courts do not like to allow this, as they don’t know where the money will go.

Purpose of Charities: 

Reputation 

Financial Advantages

Charity Comission

Setting up CIO

Meaning of Charity: 

The Preamble to the Charitable Users Act 1601

Income Tax v Pemsel 1891:

Relief of poverty

Advancement of education 

Advancement of religion 

Benefical to the community

Meaning of charity - Charities Act 2011: 

S1. Charitable purposes 

S2. Be for the public benefit set out in the list of s3.

S3. List of charitable purposes 

S4. Public benefit (no test)

The Prevention of Relief of Poverty: 

S3(1)(a): Re Gosling 1900

The Advancement of Education: 

S3(1)(b): The Wilderness Trust 1991

The Advancement of Religion: 

S3(1)(c): Scientology Decision 1999

The Advancement of Health: 

S3(1)(D): IRC V Baddeley 1955

The Advancement of Citizenship: 

S3(1)(E) 

The Advancement of Art and Culture: 

S3(1)(F) 

The Advancement of Amateur Sport: 

S3(1)(G): Re Nottage 1895

The Advancement of Human Rights: 

S3(1)(H): Re Strakosh 1949

The Advancement of Environmental Protection: 

S3(1)(i): The Wold Trust 2003 (Age, Health, Finance, disability) 

The Advancement of Animal Welfare: 

S3(1)(K): University of London v Yarrow 1857

The Efficiency of the Police, Fire and Rescue Services: 

S3(1)(L) 

Any Other Purpose Not Within Subsection 1:

S3(1)(M) - Includes any charitable purpose not covered by the descriptions and any new purposes that may be recognised in the future.

S5 Charities Act 2011:

Recreational and Similar to Trusts.

The Position Prior 2006 Act:

4 Pemsel Heads Of Charity

Refers to ‘purposes beneficial to the community’.

S4 Charities At 2011:

Public Benefit - No test set out in the statute.

S4(2):

Not be presumed that the purpose of the description is for the public benefit. 

s4(3):

Any reference to the public benefit is a reference to the public benefit as that term is understood for the purpose of the law relating to charities. 

2006 Act S3:

Confusion arose about the effect of s3. 

Brought focus to what it is that the pre existing law already required. 

Explains what the law now requires to benefit the provision.

Public Benefit S17:

1. Charity Commission must issue guidance in pursuance of its public benefit objective. 

2. The objective is to promote awareness and understanding. 

3. The Commission may from time to time revise any guidance issued under this section.

4. The Commission must carry out such public and other consultation as appropriate.

Defining Public Benefit:

The benefit aspect - be beneficial and any harm that results from the purpose must not outweigh.

The public aspect - must benefit the public in general or a sufficient section of the public. 

2 Key Aspects To Public Benefit:

A - Must be clear what the benefits are (identifiable). Must be possible to prove by evidence.

Re Pinion 1965

B - Benefits must be related to the aims. If more than one aim, all aims must be for public benefit. 

Morice v Bishop of Durham 1804 

C - Benefits must be balanced against any harm. If harm consequence is greater than benefit, the result of the organisation would not be charitable. 

National v IRC 1948

The Public Aspect: 

Benefit must be to the public or to a sufficient section of the public. 

Must not be a personal nexus between the beneficiaries.

The number of potential beneficiaries must not be numerically negligible.

Oppenheim v Tabacco 1951

Does not apply to the relief of poverty: 

Dingle v Turner 1972 - Employee

The benefit to the public, the opportunity to benefit must not be unreasonably restricted:

Geographical Restrictions - Verge v Sommerville 1924

People in poverty must not be excluded from the opportunity to benefit - Re Resch 1969 

Any private benefit must be incidental - Hadaway v Hadaway 1955

Non - Charitable Purpose Trusts:

Every trust must be made to benefit human beneficiaries 

There cannot be an obligation on the trustees unless there is a right to enforce the trust 

Trust must have a definite object 

Morice v Bishop 1804 

Enforcers: 

Offshore jurisdictions allow other people to appoint one person.  

The Rule Against Inailenability: 

A purpose trust is void if it is to continue beyond the perpetuity period. 

The period for NCPT’s is a life in being plus 21 years.

Prevents the trust from being tied up for a long time.

Re Khoo Cheng Teow 1932

Perpetuity: 

Trusts have been upheld for 21 years on the biases of the wording:

So far as the trustees can legally do so - Re Hooper 1932

As long as the law for the time being permitted - Pirbright v Salway 1896

Nature of the purpose means it will be completed within 21 years - Mussett v Bingle 1876

Certainty

The purpose needs to be clear to enable control and administration of the trust.

Re Endacott 1960

Public Policy:

Purpose of trusts will not be permitted where the purpose is useless. 

Brown and Burdett 1882 - wanted a fireplace and all the walls sealed.

NCPT’s Not Allowed Exceptions: 

Care of individual animals 

Graves, tombs and monuments

Saying of private masses

Unincorporated associations 

Re Endacott 1960

Exemptions Tombs, Graves:

Re Hooper 1932 - Graves and Vaults

Exemptions Care of Specific Animals: 

Re Dean 1889 - Horses and Hounds 

Exemptions Private Masses and Miscellaneous: 

Bourne v Keane 1919

Non Charitable Purpose Trusts Gifts: 

Gifts - Re Denley 1968

Purpose as the motive for the gift rather than the object of a trust: 

Re Andrews 1905 - Absolute Gift (the motive is education)

Re Bowes 1896 - Planting of Trees

Example: £100 to my sister for her to buy her new car - this is a gift (not a trust).

Gift to an incorporated body: 

An incorporated body (limited company) has a legal personality.

A company is similar to a person - they can buy. 

A gift to a limited company satisfies the beneficiary principle.

The company can use it for any purpose set out in the article of association 

Re Denley 1968:

The plot of land is used as a sports ground for a company - this can’t be charitable.

Non charitable trust set up for a purpose - courts allowed this trust to be valid. 

If the trust is directly or indirectly for the benefit of individuals - it is enforceable. 

Perpetuity period and gift over in default.

Unincorporated Associations:

Defined - Conservative Central Office v Burrell 1982

Unincorporated associations are fairly formal with rules that bind the members.

Like golfing, wife tasting society and bowls club.

No legal personality.

Consider if the donation would be a gift for purposes or gift for members of the UA. 

Gift For Members Possible Constructions:

Gift to existing members as joint tenants.

Fits to existing members subject to their contractual rights and liabilities. 

Gifts to existing and future members.

Estates v Madden 1961

Gift to Members as Joint Tenants: 

Valid but any member could claim their share. 

A gift can only be made if ‘the gift or directions given impose on the donee the character of a trustee’.

Bowman v Secular 1917

Gift to Members as JT’s (Cont):

Precluded from their share.

Their intention is relevant.

The clear wording is important.

Inwards looking - benefit is for the members 

Outwards looking - benefit is for the public like public talks. 

Would need to be an inwards looking society so it only benefits them.

Gift to Members Subject to the Contract Binding Them Together: 

Gift to members - valid as it satisfies beneficiaries. 

If a contract provides a gift should be applied for the purposes of UA.

Must be a possibility of members winding up the AU and distributing the property between themselves.

Gift to Members Subject to to Contract: 

Consider the donor's intention.

Re Lipinski 1976 - construction is possible even if the donor says the money is for a specific  purpose. 

Dissolution: 

If an UA is wound up, the surplus funds are divided between the current members on a per capita basis. 

Re Horley Town FC 2006 

Gift for the Members From Time to Time:

Applies if donors intention was for a gift to be held as an endowment for present and future members.

Suffers from danger of perpetuity though this may be partially remedied - s.7(2) P+A Act 2009. 

Problems still arise even if the money is applied to non charitable purposes.

Nature of Powers + Duties:

Duty - Buttle v Saunders [1950]

Power - Turner v Turner [1984]

Sources

The trust instrument

Trustee Act 2000

Trustee Act 1925

Appointment of Trustees:

By the settlor - deed/ will

By statute - S.36 TA 1925 trustees must be in writing

By the beneficiaries - s.19 TOLATA 1996

By the court - a trust will not fail for want of a trustee s.41 TA 1925