Core Principles of Trust Law
Creation & Requirements of Express Trusts
The Three Certainties of Intention, Subject Matter & Objects
1. Intention
Question of fact subject to objective assessment (what a reasonable person would
conclude)
2. Subject Matter
Has to be sufficiently certain and identifiable; “bulk” of estate is not certain
Tangible assets to be segregated. Intangible assets (like shares) need not be provided they
are similar
3. Objects
The beneficiaries must be certain, if not the trust will be void and held on resulting trust for
the settlor
‘Is or is not’ test → they either are or aren’t a beneficiary
Fixed Interest Trusts
Settlor sets out exactly what each beneficiary should receive and the trustee hands out
accordingly
Discretionary Trusts
Trustees have discretion as to how to distribute trust assets
Formalities to Create Express Inter Vivos Trusts
A living trust, taking effect during the settlor’s lifetime
Settlor is alive when trust is established & takes effect
Formalities for Land
o Trust must be evidenced in writing by someone able to declare that trust
o Legal title must be transferred to trustee by deed
Formalities for Other Property
o No express formalities needed; can be established orally
o 3 certainties are required
Shares: must be transferred to trustee by the form of transfer prescribed by
CA 2006 & the stock transfer form prescribed by Stock Transfer Act 1963
Copyright: must be transferred by writing
Constitution of Express Inter Vivos Trusts & Exceptions to the Rule that Equity will
not Assist a Volunteer
Constitution
o Settlor must have done everything which was necessary to be done to transfer the
property to the trustee
o 2 main ways to create an inter vivos trust:
1. Settlor declares himself trustee for beneficiary
2. Settlor transfers property to trustee to hold for beneficiary
Equity Will Not Assist a Volunteer
o General Rule: Equity won't treat an incomplete gift or transfer as a valid trust if the
settlor didn’t follow the proper rules (Jones v Lock, 1865).
Exceptions: in the below situations, the law will step in to correct the settlor’s mistake
o Strong v Bird, 1874
Where the intended done becomes an executor of the settlor’s estate. By
operation of law, the legal title of the intended gift vests in the executor, which
is sufficient to perfect the gift, meaning the executor is entitled to it
o DMCs
1
, Provided DMC is valid (i.e. death occurs as contemplated) then on death the
gift is perfected as the death is the delivery of the gift
o Every Effort Rule
If settlor made every effort to transfer but has been unable to complete it due
to circumstances they aren’t in control of, court can complete the gift
o Proprietary Estoppel
If a trust isn’t fully set up, beneficiaries who gave valuable consideration (like
money or marriage) can force the settlor to complete it.
Beneficial Entitlement
Fixed Interests
Beneficiary has a clearly defined & predetermined share of trust property which the trustee
must distribute
Discretionary Interests
Beneficiary has no guaranteed entitlement. The trustee decides if, how much and when to
distribute trust assets
Vested Interests
Beneficiary has a definite interest in a subject matter which is not conditional in any event
Contingent Interests
Beneficiary has an interest subject to an event occurring, e.g. on graduating law school or
reaching a certain age
The Rule in Saunders v Vautier
In Saunders v Vautier (1841), the court held that if all beneficiaries are adults and
mentally capable, they can demand to end the trust and receive the trust property, even if
the trust’s terms specify a later date.
Distinction Between Charitable & Non-Charitable Purpose Trusts
Charitable Trusts
o A trust for:
(1) A charitable purpose
(2) Public benefit
o Trust must be exclusively charitable
o Charities Act 2011 states categories considered a charitable purpose:
Relieving poverty/helping those in need
Education
Religion
Health/saving lives
Community development
Advancement of:
Arts, culture, heritage, science
Amateur sport
Human rights
Religious or racial harmony
Environmental protection
Animal welfare
Efficiency of emergency services
o Public Benefit
Available to public or a section of the public (cannot be private)
Non-Charitable Purpose Trusts
o A trust for a purpose which is not charitable
o General rule: these trusts fail
o Exceptions:
2
Creation & Requirements of Express Trusts
The Three Certainties of Intention, Subject Matter & Objects
1. Intention
Question of fact subject to objective assessment (what a reasonable person would
conclude)
2. Subject Matter
Has to be sufficiently certain and identifiable; “bulk” of estate is not certain
Tangible assets to be segregated. Intangible assets (like shares) need not be provided they
are similar
3. Objects
The beneficiaries must be certain, if not the trust will be void and held on resulting trust for
the settlor
‘Is or is not’ test → they either are or aren’t a beneficiary
Fixed Interest Trusts
Settlor sets out exactly what each beneficiary should receive and the trustee hands out
accordingly
Discretionary Trusts
Trustees have discretion as to how to distribute trust assets
Formalities to Create Express Inter Vivos Trusts
A living trust, taking effect during the settlor’s lifetime
Settlor is alive when trust is established & takes effect
Formalities for Land
o Trust must be evidenced in writing by someone able to declare that trust
o Legal title must be transferred to trustee by deed
Formalities for Other Property
o No express formalities needed; can be established orally
o 3 certainties are required
Shares: must be transferred to trustee by the form of transfer prescribed by
CA 2006 & the stock transfer form prescribed by Stock Transfer Act 1963
Copyright: must be transferred by writing
Constitution of Express Inter Vivos Trusts & Exceptions to the Rule that Equity will
not Assist a Volunteer
Constitution
o Settlor must have done everything which was necessary to be done to transfer the
property to the trustee
o 2 main ways to create an inter vivos trust:
1. Settlor declares himself trustee for beneficiary
2. Settlor transfers property to trustee to hold for beneficiary
Equity Will Not Assist a Volunteer
o General Rule: Equity won't treat an incomplete gift or transfer as a valid trust if the
settlor didn’t follow the proper rules (Jones v Lock, 1865).
Exceptions: in the below situations, the law will step in to correct the settlor’s mistake
o Strong v Bird, 1874
Where the intended done becomes an executor of the settlor’s estate. By
operation of law, the legal title of the intended gift vests in the executor, which
is sufficient to perfect the gift, meaning the executor is entitled to it
o DMCs
1
, Provided DMC is valid (i.e. death occurs as contemplated) then on death the
gift is perfected as the death is the delivery of the gift
o Every Effort Rule
If settlor made every effort to transfer but has been unable to complete it due
to circumstances they aren’t in control of, court can complete the gift
o Proprietary Estoppel
If a trust isn’t fully set up, beneficiaries who gave valuable consideration (like
money or marriage) can force the settlor to complete it.
Beneficial Entitlement
Fixed Interests
Beneficiary has a clearly defined & predetermined share of trust property which the trustee
must distribute
Discretionary Interests
Beneficiary has no guaranteed entitlement. The trustee decides if, how much and when to
distribute trust assets
Vested Interests
Beneficiary has a definite interest in a subject matter which is not conditional in any event
Contingent Interests
Beneficiary has an interest subject to an event occurring, e.g. on graduating law school or
reaching a certain age
The Rule in Saunders v Vautier
In Saunders v Vautier (1841), the court held that if all beneficiaries are adults and
mentally capable, they can demand to end the trust and receive the trust property, even if
the trust’s terms specify a later date.
Distinction Between Charitable & Non-Charitable Purpose Trusts
Charitable Trusts
o A trust for:
(1) A charitable purpose
(2) Public benefit
o Trust must be exclusively charitable
o Charities Act 2011 states categories considered a charitable purpose:
Relieving poverty/helping those in need
Education
Religion
Health/saving lives
Community development
Advancement of:
Arts, culture, heritage, science
Amateur sport
Human rights
Religious or racial harmony
Environmental protection
Animal welfare
Efficiency of emergency services
o Public Benefit
Available to public or a section of the public (cannot be private)
Non-Charitable Purpose Trusts
o A trust for a purpose which is not charitable
o General rule: these trusts fail
o Exceptions:
2
