Law
of
Trusts
Introduction
Nature
and
Legal
Classification
• Proprietary
Interests
o A
right
subsisting
in
relation
to
a
thing,
and
not
as
against
a
particular
individual
or
group
of
individuals.
Rights
in
rem
o Must
be
definable,
identifiable
by
3rd
parties
and
have
some
degree
of
permanence
or
stability
(National
Provincial
v
Ainsworth).
o Central
characteristic
is
that
it
is
capable
of
enduring
through
changes
in
the
ownership
of
the
property
to
which
it
relates.
o Separated
into
legal
and
equitable
proprietary
rights.
• Personal
Interests-A
right
which
is
only
enforceable
against
a
specific
individual
Rights
in
personam
Fundamental
Principles
• Where
property
is
subject
to
a
trust
there
is
a
duality
of
ownership
and
a
distinction
must
be
drawn
between
the
legal
and
equitable
ownership.
• Legal
title
vested
in
trustee.
That
individual
subjected
to
trust
obligations.
Powers
of
management.
• Separation
of
equitable
and
legal
title
which
equitable
title
being
vested
in
the
beneficiaries.
• Trusts
share
some
characteristics
of
obligations
and
some
characteristics
of
proprietary
rights
(Pearce,
Stevens
and
Barr)
• Lord
Browne-Wilkinson
(Landesbank
v
Islington-House
of
Lords):
o Equity
operates
on
the
conscience
of
the
owner
of
the
legal
interest-‐the
trustee.
o Holder
of
legal
interest
cannot
be
trustee
if
he
is
ignorant
of
the
facts
alleged
to
affect
his
conscience.
o Must
be
identifiable
trust
property
in
existence.
o Once
the
trust
is
established
the
beneficiary
will
have
proprietary
rights
(enforceable
in
equity
against
any
subsequent
holder
of
the
property
other
than
a
purchaser
for
the
value
of
the
legal
interest
without
notice)
in
the
trust
property
as
well
as
personal
rights.
If
trustees
lose
the
trust
property,
the
trustees
can
be
pursued
who
will
have
to
restore
the
value
of
the
property
to
the
beneficiary
due
to
their
personal
obligations.
• Definition-“A
trust
refers
to
the
legal
relationship
created
by
the
settlor
when
assets
have
been
placed
under
the
control
of
a
trustee
for
the
benefit
of
a
beneficiary
or
for
a
specified
purpose”
(Hague
Convention)
, • Beneficial
interests
arising
under
a
trust
are
subject
to
the
operation
of
the
doctrine
of
notice.
• If
trustees
do
not
act
consistently
with
their
obligation,
their
breach
will
render
them
personally
liable
to
compensate
the
beneficiaries
for
any
loss
caused
by
the
breach.
• Beneficiaries
who
are
not
mentally
incapable
and
who
are
of
age
can
override
the
terms
of
the
trusts
(Saunders
v
Vautier)
• Maitland-“The
trust
is
the
greatest
and
most
distinctive
achievement
performed
by
Englishmen
in
the
field
of
jurisprudence”
Classification
of
Trusts-4
Methods
Traditional
Classification
1. Express
Trusts-intentionally
declared
by
the
creator
of
the
trust
(Settlor
or
Testator)
Requirements:
• Intention
• Trust
Property
• Beneficiaries
• Constitution
• Formalities
• Capacity
a. (Implied
Trusts)-Trusts
established
even
though
express
words
to
such
an
effect
have
not
been
used.
Still
express
trusts
as
the
settlor’s
intention
to
create
can
be
inferred
from
things
said
or
done.
2. Non-Express
Trusts-imposed
by
the
Courts:
a. Resulting
Trusts-Property
conveyed
to
someone
else
but
the
beneficial
interest
returns
back
to
the
transferor.
Property
transferred
to
trustees
upon
trusts
but
those
trusts
fail
or
do
not
account
for
the
whole
equitable
interest.
i. Automatic
Resulting
Trusts-‐Happens
by
operation
of
law.
Property
left
undisposed
of
such
as
making
a
trust
for
someone
for
life
and
then
they
die.
ii. Presumed
Intention
Resulting
Trusts-‐When
someone
contributes
towards
the
purchase
price
of
property
even
though
they
are
not
on
the
legal
title.
b. Constructive
Trusts-Arise
by
operation
of
law
i. Non-‐Controversial-‐Two
people
making
a
contract
for
the
purchase
of
land
or
if
the
trustee
obtains
benefits
from
the
trust
via
fraud.
ii. Controversial
(Remedial)-‐Courts
look
at
the
scenario
and
decide
that
owner
X
should
recognise
some
rights
of
Y
in
relation
to
the
property.
, c. (Implied
Trusts)-Another
label
for
“non-‐express
trusts”.
May
be
its
own
separate
category
though.
A
lot
of
confusion
over
this.
The
Trust
as
a
Response
to
an
Event
• Peter
Birks:
o Sought
to
question
the
traditional
classification.
o Developed
a
taxonomy
of
private
law
based
on
responses
to
events.
o All
private
law
rights
are
the
legal
response
to:
Consent-‐e.g.
making
a
contract
Wrongs-‐e.g.
tort
Unjust
Enrichment
Other
Events-‐e.g
statute
o May
be
personal
or
proprietary/legal
or
equitable.
o Acknowledged
that
express
trusts
as
a
response
to
an
event
involves
both
personal
and
proprietary
rights.
However,
in
resulting
and
constructive
trusts,
the
elements
of
personal
rights
and
obligations
is
overshadowed
by
the
proprietary
rights.
Trust
should
fundamentally
be
seen
as
a
proprietary
response
to
a
range
of
different
events.
Any
adjective
to
described
trusts
should
at
least
refer
to
the
event
to
which
the
trust
is
responding.
• Swadling
o Generally
endorsed
Birks’
taxonomy
idea.
Reclassified
as:
o Trusts
are
either:
Consensual
(express/presumed
intention
resulting)
or
Non-consensual
(constructive)
o Acknowledges
that
the
trust
is
a
personal
response
to
any
of
the
4
identified
events
but
as
a
proprietary
response
it
is
only
appropriate
for
non-consensual
trusts.
• Rickett
o Trust
is
always
a
response
to
consent
but
gives
‘consent’
a
very
wide
meaning.
• All
acknowledge
that
trusts
involve
personal
rights
and
obligations
but
stress
the
proprietary
characteristics
of
trusts
as
a
response
to
events.
The
Trust
as
a
Species
of
Obligation
• Hayton/Parkinson-Trust
is
better
seen
as
a
species
of
equitable
obligation
rather
than
a
proprietary
response.
• This
view
is
revolutionary
as
traditional
view
of
trusts
is
that
enforcement
requires
beneficiaries
who
have
proprietary
interests
in
the
trust
property.
They
hold
that
this
is
not
always
the
case
e.g
in
a
discretionary
trust
where
the
class
of
potentially
beneficiaries
is
so
wide
that
no
list
could
be
drawn
up
or
Re
Denley
(below)
where
indirect
beneficiaries
were
found.
, • A
legal
estate
can
be
vested
in
a
trustee
without
there
being
a
symmetrical
equitable
estate.
• They
believe
that
equitable
obligations
can
be
enforced
by
non-
beneficiaries.
There
is
no
need
for
specific
beneficiaries
and
merely
need
someone
to
enforce
the
obligation.
• Take
a
differing
view
as
to
who
constitutes
‘non-beneficiaries’-wider
vs.
narrow
e.g.
Parkinson
believes
it
needs
to
be
someone
who
has
something
to
gain
whereas
Hayton
takes
a
wider
approach.
• Many
such
as
Gravells
disagree
with
this
viewpoint.
Classification
by
Context
• Family
o Preservation
of
wealth-‐Tax
avoidance
in
certain
circumstances-
shifting
income
to
someone
else
on
trust
for
them.
o Machinery
for
co-‐ownership
of
property
o Settling
property
disputes
• Charity
• Commercial-more
recent
than
the
use
of
trust
in
family
context
o Pension
Funds
Most
funds
operated
by
an
employer
are
established
and
operated
under
trusts
law.
Pension
contributions
are
paid
into
a
trust
fund
with
powers
and
duties
for
the
trustees.
Advantage
is
that
trust
fund
is
kept
separate
from
the
employer’s
assets
in
the
case
of
company
liquidation.
Problem
is
that
the
pension
fund
depends
on
the
solvency
of
the
fund
and
the
will
of
the
employer
to
keep
it
going.
o Security
for
creditors
Trusts
emerged
as
another
means
of
ensuring
preferential
treatment
for
certain
operators.
Creditor
needs
to
establish
a
trust
of
the
property
in
the
commercial
context
and
will
therefore
prevail
over
all
other
creditors.
Barclays
Bank
v
Quistclose
(House
of
Lords)
• Issue
of
what
happens
if
a
loan
is
given
on
the
basis
that
it
is
used
for
specific
purpose.
Does
this
change
it
from
a
loan
transaction
to
a
trust
transaction?
• RR
(company)
in
financial
difficulties
but
wanted
to
give
a
good
impression
and
declared
dividend
on
their
shares.
They
didn’t
have
the
money
required
but
Q
agree
to
lend
RR
the
money
solely
for
the
purpose
of
paying
the
dividend.
• Money
paid
into
separate
account
with
Barclays
with
whom
RR
were
already
overdrawn.
Barclays
was
aware
of
the
agreement.
• Before
dividend
was
paid
RR
went
into
liquidation.
Question
was
who
owned
the
money
loaned
in
the
Barclays
account?
• House
of
Lords
held
that
Q
could
have
the
money
back
as
the
money
had
been
received
by
RR
on
trust
to
pay
the
dividend.
The
trust
had
failed
of
Trusts
Introduction
Nature
and
Legal
Classification
• Proprietary
Interests
o A
right
subsisting
in
relation
to
a
thing,
and
not
as
against
a
particular
individual
or
group
of
individuals.
Rights
in
rem
o Must
be
definable,
identifiable
by
3rd
parties
and
have
some
degree
of
permanence
or
stability
(National
Provincial
v
Ainsworth).
o Central
characteristic
is
that
it
is
capable
of
enduring
through
changes
in
the
ownership
of
the
property
to
which
it
relates.
o Separated
into
legal
and
equitable
proprietary
rights.
• Personal
Interests-A
right
which
is
only
enforceable
against
a
specific
individual
Rights
in
personam
Fundamental
Principles
• Where
property
is
subject
to
a
trust
there
is
a
duality
of
ownership
and
a
distinction
must
be
drawn
between
the
legal
and
equitable
ownership.
• Legal
title
vested
in
trustee.
That
individual
subjected
to
trust
obligations.
Powers
of
management.
• Separation
of
equitable
and
legal
title
which
equitable
title
being
vested
in
the
beneficiaries.
• Trusts
share
some
characteristics
of
obligations
and
some
characteristics
of
proprietary
rights
(Pearce,
Stevens
and
Barr)
• Lord
Browne-Wilkinson
(Landesbank
v
Islington-House
of
Lords):
o Equity
operates
on
the
conscience
of
the
owner
of
the
legal
interest-‐the
trustee.
o Holder
of
legal
interest
cannot
be
trustee
if
he
is
ignorant
of
the
facts
alleged
to
affect
his
conscience.
o Must
be
identifiable
trust
property
in
existence.
o Once
the
trust
is
established
the
beneficiary
will
have
proprietary
rights
(enforceable
in
equity
against
any
subsequent
holder
of
the
property
other
than
a
purchaser
for
the
value
of
the
legal
interest
without
notice)
in
the
trust
property
as
well
as
personal
rights.
If
trustees
lose
the
trust
property,
the
trustees
can
be
pursued
who
will
have
to
restore
the
value
of
the
property
to
the
beneficiary
due
to
their
personal
obligations.
• Definition-“A
trust
refers
to
the
legal
relationship
created
by
the
settlor
when
assets
have
been
placed
under
the
control
of
a
trustee
for
the
benefit
of
a
beneficiary
or
for
a
specified
purpose”
(Hague
Convention)
, • Beneficial
interests
arising
under
a
trust
are
subject
to
the
operation
of
the
doctrine
of
notice.
• If
trustees
do
not
act
consistently
with
their
obligation,
their
breach
will
render
them
personally
liable
to
compensate
the
beneficiaries
for
any
loss
caused
by
the
breach.
• Beneficiaries
who
are
not
mentally
incapable
and
who
are
of
age
can
override
the
terms
of
the
trusts
(Saunders
v
Vautier)
• Maitland-“The
trust
is
the
greatest
and
most
distinctive
achievement
performed
by
Englishmen
in
the
field
of
jurisprudence”
Classification
of
Trusts-4
Methods
Traditional
Classification
1. Express
Trusts-intentionally
declared
by
the
creator
of
the
trust
(Settlor
or
Testator)
Requirements:
• Intention
• Trust
Property
• Beneficiaries
• Constitution
• Formalities
• Capacity
a. (Implied
Trusts)-Trusts
established
even
though
express
words
to
such
an
effect
have
not
been
used.
Still
express
trusts
as
the
settlor’s
intention
to
create
can
be
inferred
from
things
said
or
done.
2. Non-Express
Trusts-imposed
by
the
Courts:
a. Resulting
Trusts-Property
conveyed
to
someone
else
but
the
beneficial
interest
returns
back
to
the
transferor.
Property
transferred
to
trustees
upon
trusts
but
those
trusts
fail
or
do
not
account
for
the
whole
equitable
interest.
i. Automatic
Resulting
Trusts-‐Happens
by
operation
of
law.
Property
left
undisposed
of
such
as
making
a
trust
for
someone
for
life
and
then
they
die.
ii. Presumed
Intention
Resulting
Trusts-‐When
someone
contributes
towards
the
purchase
price
of
property
even
though
they
are
not
on
the
legal
title.
b. Constructive
Trusts-Arise
by
operation
of
law
i. Non-‐Controversial-‐Two
people
making
a
contract
for
the
purchase
of
land
or
if
the
trustee
obtains
benefits
from
the
trust
via
fraud.
ii. Controversial
(Remedial)-‐Courts
look
at
the
scenario
and
decide
that
owner
X
should
recognise
some
rights
of
Y
in
relation
to
the
property.
, c. (Implied
Trusts)-Another
label
for
“non-‐express
trusts”.
May
be
its
own
separate
category
though.
A
lot
of
confusion
over
this.
The
Trust
as
a
Response
to
an
Event
• Peter
Birks:
o Sought
to
question
the
traditional
classification.
o Developed
a
taxonomy
of
private
law
based
on
responses
to
events.
o All
private
law
rights
are
the
legal
response
to:
Consent-‐e.g.
making
a
contract
Wrongs-‐e.g.
tort
Unjust
Enrichment
Other
Events-‐e.g
statute
o May
be
personal
or
proprietary/legal
or
equitable.
o Acknowledged
that
express
trusts
as
a
response
to
an
event
involves
both
personal
and
proprietary
rights.
However,
in
resulting
and
constructive
trusts,
the
elements
of
personal
rights
and
obligations
is
overshadowed
by
the
proprietary
rights.
Trust
should
fundamentally
be
seen
as
a
proprietary
response
to
a
range
of
different
events.
Any
adjective
to
described
trusts
should
at
least
refer
to
the
event
to
which
the
trust
is
responding.
• Swadling
o Generally
endorsed
Birks’
taxonomy
idea.
Reclassified
as:
o Trusts
are
either:
Consensual
(express/presumed
intention
resulting)
or
Non-consensual
(constructive)
o Acknowledges
that
the
trust
is
a
personal
response
to
any
of
the
4
identified
events
but
as
a
proprietary
response
it
is
only
appropriate
for
non-consensual
trusts.
• Rickett
o Trust
is
always
a
response
to
consent
but
gives
‘consent’
a
very
wide
meaning.
• All
acknowledge
that
trusts
involve
personal
rights
and
obligations
but
stress
the
proprietary
characteristics
of
trusts
as
a
response
to
events.
The
Trust
as
a
Species
of
Obligation
• Hayton/Parkinson-Trust
is
better
seen
as
a
species
of
equitable
obligation
rather
than
a
proprietary
response.
• This
view
is
revolutionary
as
traditional
view
of
trusts
is
that
enforcement
requires
beneficiaries
who
have
proprietary
interests
in
the
trust
property.
They
hold
that
this
is
not
always
the
case
e.g
in
a
discretionary
trust
where
the
class
of
potentially
beneficiaries
is
so
wide
that
no
list
could
be
drawn
up
or
Re
Denley
(below)
where
indirect
beneficiaries
were
found.
, • A
legal
estate
can
be
vested
in
a
trustee
without
there
being
a
symmetrical
equitable
estate.
• They
believe
that
equitable
obligations
can
be
enforced
by
non-
beneficiaries.
There
is
no
need
for
specific
beneficiaries
and
merely
need
someone
to
enforce
the
obligation.
• Take
a
differing
view
as
to
who
constitutes
‘non-beneficiaries’-wider
vs.
narrow
e.g.
Parkinson
believes
it
needs
to
be
someone
who
has
something
to
gain
whereas
Hayton
takes
a
wider
approach.
• Many
such
as
Gravells
disagree
with
this
viewpoint.
Classification
by
Context
• Family
o Preservation
of
wealth-‐Tax
avoidance
in
certain
circumstances-
shifting
income
to
someone
else
on
trust
for
them.
o Machinery
for
co-‐ownership
of
property
o Settling
property
disputes
• Charity
• Commercial-more
recent
than
the
use
of
trust
in
family
context
o Pension
Funds
Most
funds
operated
by
an
employer
are
established
and
operated
under
trusts
law.
Pension
contributions
are
paid
into
a
trust
fund
with
powers
and
duties
for
the
trustees.
Advantage
is
that
trust
fund
is
kept
separate
from
the
employer’s
assets
in
the
case
of
company
liquidation.
Problem
is
that
the
pension
fund
depends
on
the
solvency
of
the
fund
and
the
will
of
the
employer
to
keep
it
going.
o Security
for
creditors
Trusts
emerged
as
another
means
of
ensuring
preferential
treatment
for
certain
operators.
Creditor
needs
to
establish
a
trust
of
the
property
in
the
commercial
context
and
will
therefore
prevail
over
all
other
creditors.
Barclays
Bank
v
Quistclose
(House
of
Lords)
• Issue
of
what
happens
if
a
loan
is
given
on
the
basis
that
it
is
used
for
specific
purpose.
Does
this
change
it
from
a
loan
transaction
to
a
trust
transaction?
• RR
(company)
in
financial
difficulties
but
wanted
to
give
a
good
impression
and
declared
dividend
on
their
shares.
They
didn’t
have
the
money
required
but
Q
agree
to
lend
RR
the
money
solely
for
the
purpose
of
paying
the
dividend.
• Money
paid
into
separate
account
with
Barclays
with
whom
RR
were
already
overdrawn.
Barclays
was
aware
of
the
agreement.
• Before
dividend
was
paid
RR
went
into
liquidation.
Question
was
who
owned
the
money
loaned
in
the
Barclays
account?
• House
of
Lords
held
that
Q
could
have
the
money
back
as
the
money
had
been
received
by
RR
on
trust
to
pay
the
dividend.
The
trust
had
failed
