Lecture 8 - Constructive Trusts
I. What is a trust?
A way of dividing up property. Trustee is the person with the legal title, but it is affected by
other people. It’s essentially a division of assets.
Gov.uk: a trust is a way of managing assets (money, investments, land or buildings) for
people. There are different types of trusts and they are taxed differently.
The essence of a trust of land is that the formal tutle of the land (‘the legal estate’) is
separated from the underlying ownership (the ‘equitable interest’ or ‘beneficial interest’).
Trustee always has the legal title.
Trusts involve:
- the ‘settlor’ - the person who puts assets into a trust, i.e. who starts the trust up
- the ‘trustee’ - the person who manages the trust, the person who has the legal title
- the ‘beneficiary’ - the person who benefits from the trust, trust is held for them
Trusts are set up for a number of reasons, including:
- to control and protect family assets
- when someone’s too young to handle their affairs
- when someone can’t handle their affairs because they’re incapacitated
- to pass on assets while you’re still alive
- to pass on assets when you die (a ‘will trust’)
- under the rules of inheritance if someone dies without a will (in England and Wales)
II. Formalities
Separation between formally acquired interest and Informally acquired interests. CT don’t
need formalities. Constructive trusts are informal hence no formalities. They are what
happen when formalities fail, CT is what kicks in.
To formally create a trust (in concurrent ownership): A private trust of land can arise in
several ways – section 52 LPA):
(1) It may be expressly created in writing (writing is necessary (section 53(1)(b) of the Law of
Property Act 1925))
, (2) It may be a bare trust where the trustee is merely a nominee for a beneficiary of full age
– their only job is to transfer the property
(3) It may arise by operation of law either:
(a) as an implied, resulting or constructive trust, for example where the proprietor has
acquired the land using funds provided by another (exempted from formalities, s53(1)(c)),
or
(b) as a statutory trust - examples are those imposed when two or more persons own land
jointly (sections 34 and 36 of the Law of Property Act 1925) or on intestacy (section 33 of
the Administration of Estates Act 1925)
And see section 53 LPA.
Case: Goodman v Gallant: an express, i.e. when you do sit down and actually agree
something, the trust will have conclusive effect:
Slade L.J.: If “the relevant conveyance contains an express declaration of trust which
comprehensively declares the beneficial interests in the property or its proceeds of
sale, there is no room for the application of the doctrine of resulting implied or
constructive trusts unless and until the conveyance is set aside or rectified; until that
event the declaration contained in the document speaks for itself.”
You also need a land registry Form Tr1. A declaration of who has what.
Informal creation of trusts – section 53 LPA 1925, i.e. constructive trusts:
Essentially, everything about writing, deeds, etc. does not apply to the creation of
constructive trusts. They are informal. That’s section 53.2. It says, “this section does not
affect the creation or operation of resulting, implied or constructive trusts”.
What is equity?
Equity is where formalities fail. The history of equity relates to the idea of unconscionability
(idea of conscience, right and wrong).
- Traditionally related to fairness, or unconscionability - an abhorrence of fraud or acts
which subvert basic intentions or understandings.
- BEFORE the Judicature Acts 1873/1875: A different court system with a distinctive
set of rules
- AFTER the Judicature Acts 1873/1875: A parallel set of rules that English courts may
apply.
I. What is a trust?
A way of dividing up property. Trustee is the person with the legal title, but it is affected by
other people. It’s essentially a division of assets.
Gov.uk: a trust is a way of managing assets (money, investments, land or buildings) for
people. There are different types of trusts and they are taxed differently.
The essence of a trust of land is that the formal tutle of the land (‘the legal estate’) is
separated from the underlying ownership (the ‘equitable interest’ or ‘beneficial interest’).
Trustee always has the legal title.
Trusts involve:
- the ‘settlor’ - the person who puts assets into a trust, i.e. who starts the trust up
- the ‘trustee’ - the person who manages the trust, the person who has the legal title
- the ‘beneficiary’ - the person who benefits from the trust, trust is held for them
Trusts are set up for a number of reasons, including:
- to control and protect family assets
- when someone’s too young to handle their affairs
- when someone can’t handle their affairs because they’re incapacitated
- to pass on assets while you’re still alive
- to pass on assets when you die (a ‘will trust’)
- under the rules of inheritance if someone dies without a will (in England and Wales)
II. Formalities
Separation between formally acquired interest and Informally acquired interests. CT don’t
need formalities. Constructive trusts are informal hence no formalities. They are what
happen when formalities fail, CT is what kicks in.
To formally create a trust (in concurrent ownership): A private trust of land can arise in
several ways – section 52 LPA):
(1) It may be expressly created in writing (writing is necessary (section 53(1)(b) of the Law of
Property Act 1925))
, (2) It may be a bare trust where the trustee is merely a nominee for a beneficiary of full age
– their only job is to transfer the property
(3) It may arise by operation of law either:
(a) as an implied, resulting or constructive trust, for example where the proprietor has
acquired the land using funds provided by another (exempted from formalities, s53(1)(c)),
or
(b) as a statutory trust - examples are those imposed when two or more persons own land
jointly (sections 34 and 36 of the Law of Property Act 1925) or on intestacy (section 33 of
the Administration of Estates Act 1925)
And see section 53 LPA.
Case: Goodman v Gallant: an express, i.e. when you do sit down and actually agree
something, the trust will have conclusive effect:
Slade L.J.: If “the relevant conveyance contains an express declaration of trust which
comprehensively declares the beneficial interests in the property or its proceeds of
sale, there is no room for the application of the doctrine of resulting implied or
constructive trusts unless and until the conveyance is set aside or rectified; until that
event the declaration contained in the document speaks for itself.”
You also need a land registry Form Tr1. A declaration of who has what.
Informal creation of trusts – section 53 LPA 1925, i.e. constructive trusts:
Essentially, everything about writing, deeds, etc. does not apply to the creation of
constructive trusts. They are informal. That’s section 53.2. It says, “this section does not
affect the creation or operation of resulting, implied or constructive trusts”.
What is equity?
Equity is where formalities fail. The history of equity relates to the idea of unconscionability
(idea of conscience, right and wrong).
- Traditionally related to fairness, or unconscionability - an abhorrence of fraud or acts
which subvert basic intentions or understandings.
- BEFORE the Judicature Acts 1873/1875: A different court system with a distinctive
set of rules
- AFTER the Judicature Acts 1873/1875: A parallel set of rules that English courts may
apply.
