Trusts Notes

What is a Trust ......................................................................................................................... 3 Intention ............................................................................................................................. 5 Subject Matter .................................................................................................................... 7 Objects ................................................................................................................................ 9 Trusts and Other Legal Relationships ............................................................................ 11 Creating a Trust ..................................................................................................................... 13 Express Trust ................................................................................................................... 14 Settlor has done everything necessary........................................................................... 15 Settlor has not done everything necessary..................................................................... 17 Trustees .................................................................................................................................. 19 Trusts and Powers ........................................................................................................... 20 Duties of a Trustee ........................................................................................................... 25 Breach of Trust ....................................................................................................................... 31 Breach ............................................................................................................................... 32 Who can Sue? ................................................................................................................... 33 Remedies ........................................................................................................................... 34 Defences. ........................................................................................................................... 39 Charitable Trusts ................................................................................................................... 40 Business Trusts ...................................................................................................................... 46 Investment Trusts .................................................................................................................. 54 Resulting Trusts ..................................................................................................................... 61 Automatic Resulting Trusts ........................................................................................... 63 Quistclose Trusts.. ........................................................................................................... 66 Constructive Trusts ............................................................................................................... 71 Remedial Constructive Trusts ........................................................................................ 74 Institutional Constructive Trusts and Trustees ............................................................. 76 Third Party Liability ......................................................................................................... 77 TRUSTS | PAGE 2 WHAT IS A TRUST? TRUSTS | PAGE 3 TRUSTS A trust is where the propriety rights are held by one person on behalf of another. Settlor Trustee Beneficiary Person creating the trust Person holding the rights Person for whom the rights The trustee has legal are held ownership of the property Created inter vivos, (while Fiduciary obligations: Rights in rem, or in alive), or post mortem (in a - no conflict/no personam. will). profit - duty to invest trust property - impartially act between beneficiaries - act personally - duty to account * Trusts must be intentionally created o Defines the rights, duties, powers and obligations of the trustee in respect of the trust property o Inferred from the facts SS? Bahr v Nicolay o Three Certainties must be met SS? Certainty of intention SS? Certainty of the trust property SS? Certainty of objects * Types of trusts o Fixed SS? Beneficiary can enforce both the administration and distribution of trust property o Discretionary SS? Beneficiaries have no enforceable claim to distribution of trust property * Mere power SS? It is at the trustee's discretion o Resulting (implied) SS? The settlor intended to create a trust but either failed to complete the formalities or the intention to create is not rebutted o Constructive SS? The court imposes a trust where it would be a fraud for a person to assert beneficial ownership * Express trusts are created in two ways: o By declaration SS? Declaration of trust where the settlor declares himself to hold property on trust for a beneficiary o By transfer SS? Transfer of property + intention for the transferee to be the beneficial owner TRUSTS | PAGE 4 CERTAINTY OF INTENTION Express trust only upheld if there is certainty of intention to create a trust on the part of the settlor. * Construction of the trust o Words used SS? No particular words needed SS? Words given their ordinary meaning SS? Words must be imperative not precatory o Intention to create SS? Equity looks to intent rather than form SS? Determined in the context of the document SS? Can be express or inferred * "on trust" does not necessarily mean intention * If there is no certainty of intention, there is no trust Intention in the context of the document as a whole when there is a trustee, taking into consideration the ordinary meaning of words. It must be intended that the beneficiary have the benefit of the trust. Precatory Words include: * Hope * Wish * Confidence * Desire o Imply a moral obligation, not a trust Dean v Cole (1921) 30 CLR 1 * Precatory words o "trusting to her" * Did not establish a trust o The property was all the estate except the two monetary sums SS? The will was construed as a whole o "My estate" did not include the funds o Establishing a trust is inconsistent with the terms of the will Hayes v National Heart Foundation [1978] 1 NSWLR 29 * Precatory words o "on the understanding" * True construction of the document was the creation of a trust in favour of the charities o "retained" preceded "on the understanding" SS? clear intention to create a trust TRUSTS | PAGE 5 Does intention carry on to third parties/other contractors? Bahr v Nicolay (1988) 164 CLR 604 Bahr a? Nicolay a? Thompson * Whether the Thompsons were under a trust obligation to Baher o Acknowledgment of the agreement between Bahr and Nicolay created an express trust * Bahr should have a caveat over ownership of the property o They didn't and it would have ensured their ownership * Court construed all documents between parties o 1st agreement expressly carried over to the second SS? Express trust o Wasn't just notice but ensured the first agreement was to be honored SS? It would also be unconscionable to allow possession of the property, so if an express trust wasn't found the property would be placed in a constructive trust. Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Trident a? Blue Circle a? McNiece a? employees insurer a? insured a? sub--contracting party McNiece was not a contractor when Trident and Blue Circle entered into a contract * Whether a person not a party to a contract can rely on a trust o Can a third party take advantage of a contract between others * Majority held yes - can claim on their insurance policy o Deane J demonstrated how an express trust could alleviate problems SS? If the third party could not rely on the contract, other principles of law might apply to avoid injustice, such as an express trust Summary: * If the language is clear, determine the intention from the language * If the language is ambiguous, look to: o Whole of trust instrument and define the ambiguous language in light of that SS? Dean v Cole SS? Hayes v National Heart Foundation o Nature of the transaction and relationships between parties SS? Bahr v Nicolay SS? Trident General Insurance Co Ltd v McNiece Bros Pty Ltd TRUSTS | PAGE 6 CERTAINTY OF SUBJECT MATTER Trustees must be able to identify the trust property * * * Nature: o Any property, including intangible property, may be subject matter of a trust, except future interests and expectancies Quantum: o For a fixed trust, the actual entitlement of each beneficiary must be clear If the trust property is not ascertainable, the trust is void Re Golay [1965] 1 WLR 969 * Uncertainty of subject matter o The phrase "reasonable income" was uncertain, or could the court objectively assess * Can construe "reasonable income" by the context of the will o Uncertainty regarding "reasonable" not income * Subject matter not uncertain Hunter v Moss [1994] 1 WLR 452 * Moss was the absolute owner of 950 shares o Which shares were the employees SS? No uncertainty as the shares were the same * Intangible property may not need certainty of matter if they are the same o Re London Wine Co (Shippers) Ltd [1986] PCC 121 SS? Wine sold with certificate of title * Whether certificate of title with the wine transferred property SS? Held no, as it didn't link straight to which warehouse/storage property it came from o Mac--Jordan Constructions v Brookmount Estate SS? Held back--money for a subcontractor in his own account * Subject matter could not be identified separately TRUSTS | PAGE 7

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