TUTORIAL 1
EXPRESS TRUSTS
1
, I. INTRODUCTION TO TRUSTS
1. THE CONCEPT OF THE TRUST
- Thelaw & equity divide
Before 1875, law and equity administered in separate courts
The main court of equity was the court of Chancery
How did this work?
Classic example is double payment on a bond:
I sign a bond which states I owe you £100. You go to the court of law and sue me
for the £100. Judgment is made against me and I pay up.
BUT I fail to get the bond cancelled. So you sue me for £100 again in the court of
law. According to the procedures at common law, you are entitled to a judgment
against me for the £100. This is where equity steps in...
At this stage, I go to the court of chancery (a court of equity) and say
“this isn’t fair – I have paid this debt already”. On receipt of the evidence, the
chancery will decree an injunction on the common law action for debt and order the
bond to be delivered into the court and cancelled. This is how equity operates: it is
said to “mitigate the harsh rigours of the Common law”
After the passage of the Judicature Acts 1873-75, law and equity began to be
administered in the same court with a rule that, where law and equity conflict, equity will
prevail (JA 1873 s 25)
But the underlying rules remain the same: where the rules of the common law operate too
harshly, equity can intervene and provide an equitable remedy
e.g. Undue influence in contract is an example of an equitable doctrine
At law, the contract is valid, but in equity the presence of undue influence permits
the court to decree rescission
The trust is also a creation of equity
Where I transfer title to property to you to manage for my benefit, a trust arises
At law, you are the owner of the property; you have legal title and the right to use
and manage the property
BUT in equity, I am the owner and equity will force you to manage the property for
my benefit because you are my trustee and I am the beneficiary of that trust
1.1 What is a trust?
Penner, The Idea of Property in Law (Oxford, 1997), at 133:
A trust exists when a particular fund of property is held by a legal owner ‘on trust’ for a cestui
que trust or beneficiary, which means roughly the following: the legal owner has all the legal
powers to deal with the trust property, but he must do so entirely for the benefit of the cestui,
who is said to have the benefit or enjoyment of the property.
- Separation of legal & equitable ownership
By placing property on trust, a settlor arranges for control of the property to be separated
from the right to benefit from it. The trustee has legal title, which confers control of the
property, and the beneficiary or beneficiaries have an equitable interest, which is a right to
an actual or possible benefit from the property in the way specified in the terms of the
trust. The separation of control and benefit represented by the separation of legal title and
equitable interest allows for the benefit to be allocated in many different ways that an
owner of property could not achieve by a simple transfer. There is no doubting the
enormous practical utility of this arrangement. [My emphasis]. (Jaffey, ‘Explaining the
Trust’ (2015) 131 LQR 377, at 377)
- A trust arises when property is held by trustees subject to obligations owed in favour of
2
,beneficiaries Such obligations arise where the outright owner (the owner with legal &
equitable title to the property in his own right) of the property (i) deliberately subjects it to a
trust / (ii) is presumed to have subjected it to a trust / (iii) if a trust is imposed by law
(i) Express intention to impose trust obligations
The person creating an express trust is the “settlor”, & as he is said to “settle” the
property on trust for the benefit of the beneficiaries
(ii) Implied intention to impose trust obligations
If a presumption of trust arises, & it is not rebutted by counter-evidence that no
trust was intended, the property will be subject to a resulting trust
Resulting trusts arise in 2 main circumstances (Westdeutsche Landesbank
Girozentrale v Islington LBC):
o Where A makes a voluntary payment to B / pays (wholly / partly) for the
purchase of property which is vested either in B alone / in the joint names
of A & B, there is a presumption that A did not intend to make a gift to B;
the money / property is held on trust for A, if he is the sole provider of the
money / in the case of a joint purchase by A & B, in shares proportionate
to their contributions
o Where A transfers property to B on express trusts, but the trusts declared
do not exhaust the whole beneficial interest
(iii) Imposed trust obligations
Where the owner’s unconscionable conduct demands that he be required to hold
the property for the benefit of others, in which the law imposes a constructive
trust
1.2 The express trust: its constituent parts
Settlor (absolute title)
Trust property
Trustee (legal title) – Personal obligations as to trust property
- Someone who owns property subject to personal obligations to manage & apply it in
accordance with the terms of the trust to the advantage of the beneficiaries thereof
Beneficiary (also known as cestui que trust) (equitable interest)
Trust instrument – Transfer of legal title
2. THE FUNDAMENTAL ESSENCE OF A TRUST
Westdeutsche Landesbank v Islington LBC [1996] AC 669 per Lord Browne-Wilkinson, at 70:
(i) Equity operates on the conscience of the owner of the legal interest. In the case of a
trust, the conscience of the legal owner requires him to carry out the purposes for which the
property was vested in him (express or implied trust) or which the law imposes on him by reason
of his unconscionable conduct (constructive trust).
(ii) Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of
the legal interest being affected, he cannot be a trustee of the property if and so long as he is
ignorant of the facts alleged to affect his conscience, ie until he is aware that he is intended to hold
the property for the benefit of others in the case of an express or implied trust, or, in the case of a
constructive trust, of the factors which are alleged to affect his conscience.
(iii) In order to establish a trust there must be identifiable trust property….
(iv) Once a trust is established, as from the date of its establishment the beneficiary has, in
equity, a proprietary interest in the trust property, which proprietary interest will be
enforceable in equity against any subsequent holder of the property (whether the original property
or substituted property into which it can be traced) other than a purchaser for value of the legal
interest without notice.
- The beneficial interest under a trust is a proprietary interest in rem Enforceable in equity
against any subsequent holder of the property other than a bona fide purchaser for value of the
3
, legal interest without notice
3. CLASSIFYING TRUSTS:
3.1 The traditional classification
Express trusts:
(1) Fixed trusts
- Ts to held for A & B in equal shares
(2) Discretionary trusts
- Ts to hold for employees of UoN (objects of the trust; not beneficiaries as they have not
yet received the benefits right to be considered; not right to receive the benefits) in such
shares as they think fit
- No immediate right to the asset but instead has a discretion to distribute the asset to
persons of a defined class
(3) Charitable trusts
- Ts to use money to set up a school for impoverished children
- For the benefit of the public in order to advance a particular charitable purpose No
actual beneficiaries
- Object of the trust = Specific charitable purpose
Implied trusts: (don’t arise by the acts of parties implied by the operation of law)
(1) Resulting trusts
- Gratuitous transfers; Failed express trusts; Purchase in the name of another
- Tends to arise where property is transferred to another person, & the law says that the
transferee has to hold the property on trust for the transferor
- Results back to the transferor
(2) Constructive trusts
- Proprietary estoppel; Binions v Evan; Unauthorised profits; Knowing receipt
- No accepted definition
3.2 The trust as a response to an event
Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 UWALR 1
[W]hen we think about trusts we use a terminology which averts our eyes from the very enquiry
which we most want to make, namely … as to the facts which bring trusts into being. …
[W]ith trusts, we know they can arise by consent (express declaration) but as for such trusts as
do not arise expressly, we know only two bits of gobbledegook, that they are resulting or
constructive. These words turn out to tell us, so far as they tell us anything at all, something
entirely negative, namely that in non-express trusts the intentions of the parties play no part at
all (constructive trusts) or a minor role in rebutting presumptions (resulting trusts). Meanwhile
all we actually want to know is the facts on which non-express trusts do arise. … Do
trusts arise from consent? We know they do. Do they arise from wrongs? Do they arise from
unjust enrichment? And do they arise from any other events?
Chambers, Resulting Trusts (Oxford: Clarenden Press, 1997), at 5.
Much more useful than the conventional classification of trusts, as express, implied, resulting or
constructive, would be a classification distinguishing trusts as generated by consent, wrongs,
unjust enrichment or other events. The advantage of this approach would be the greater ease of
aligning the law of trusts with other areas of law responding to the same ideas.
- Consent (contract law) – Express trust
- Wrongdoing (tort law) – Constructive trust
- Unjust enrichment
4
EXPRESS TRUSTS
1
, I. INTRODUCTION TO TRUSTS
1. THE CONCEPT OF THE TRUST
- Thelaw & equity divide
Before 1875, law and equity administered in separate courts
The main court of equity was the court of Chancery
How did this work?
Classic example is double payment on a bond:
I sign a bond which states I owe you £100. You go to the court of law and sue me
for the £100. Judgment is made against me and I pay up.
BUT I fail to get the bond cancelled. So you sue me for £100 again in the court of
law. According to the procedures at common law, you are entitled to a judgment
against me for the £100. This is where equity steps in...
At this stage, I go to the court of chancery (a court of equity) and say
“this isn’t fair – I have paid this debt already”. On receipt of the evidence, the
chancery will decree an injunction on the common law action for debt and order the
bond to be delivered into the court and cancelled. This is how equity operates: it is
said to “mitigate the harsh rigours of the Common law”
After the passage of the Judicature Acts 1873-75, law and equity began to be
administered in the same court with a rule that, where law and equity conflict, equity will
prevail (JA 1873 s 25)
But the underlying rules remain the same: where the rules of the common law operate too
harshly, equity can intervene and provide an equitable remedy
e.g. Undue influence in contract is an example of an equitable doctrine
At law, the contract is valid, but in equity the presence of undue influence permits
the court to decree rescission
The trust is also a creation of equity
Where I transfer title to property to you to manage for my benefit, a trust arises
At law, you are the owner of the property; you have legal title and the right to use
and manage the property
BUT in equity, I am the owner and equity will force you to manage the property for
my benefit because you are my trustee and I am the beneficiary of that trust
1.1 What is a trust?
Penner, The Idea of Property in Law (Oxford, 1997), at 133:
A trust exists when a particular fund of property is held by a legal owner ‘on trust’ for a cestui
que trust or beneficiary, which means roughly the following: the legal owner has all the legal
powers to deal with the trust property, but he must do so entirely for the benefit of the cestui,
who is said to have the benefit or enjoyment of the property.
- Separation of legal & equitable ownership
By placing property on trust, a settlor arranges for control of the property to be separated
from the right to benefit from it. The trustee has legal title, which confers control of the
property, and the beneficiary or beneficiaries have an equitable interest, which is a right to
an actual or possible benefit from the property in the way specified in the terms of the
trust. The separation of control and benefit represented by the separation of legal title and
equitable interest allows for the benefit to be allocated in many different ways that an
owner of property could not achieve by a simple transfer. There is no doubting the
enormous practical utility of this arrangement. [My emphasis]. (Jaffey, ‘Explaining the
Trust’ (2015) 131 LQR 377, at 377)
- A trust arises when property is held by trustees subject to obligations owed in favour of
2
,beneficiaries Such obligations arise where the outright owner (the owner with legal &
equitable title to the property in his own right) of the property (i) deliberately subjects it to a
trust / (ii) is presumed to have subjected it to a trust / (iii) if a trust is imposed by law
(i) Express intention to impose trust obligations
The person creating an express trust is the “settlor”, & as he is said to “settle” the
property on trust for the benefit of the beneficiaries
(ii) Implied intention to impose trust obligations
If a presumption of trust arises, & it is not rebutted by counter-evidence that no
trust was intended, the property will be subject to a resulting trust
Resulting trusts arise in 2 main circumstances (Westdeutsche Landesbank
Girozentrale v Islington LBC):
o Where A makes a voluntary payment to B / pays (wholly / partly) for the
purchase of property which is vested either in B alone / in the joint names
of A & B, there is a presumption that A did not intend to make a gift to B;
the money / property is held on trust for A, if he is the sole provider of the
money / in the case of a joint purchase by A & B, in shares proportionate
to their contributions
o Where A transfers property to B on express trusts, but the trusts declared
do not exhaust the whole beneficial interest
(iii) Imposed trust obligations
Where the owner’s unconscionable conduct demands that he be required to hold
the property for the benefit of others, in which the law imposes a constructive
trust
1.2 The express trust: its constituent parts
Settlor (absolute title)
Trust property
Trustee (legal title) – Personal obligations as to trust property
- Someone who owns property subject to personal obligations to manage & apply it in
accordance with the terms of the trust to the advantage of the beneficiaries thereof
Beneficiary (also known as cestui que trust) (equitable interest)
Trust instrument – Transfer of legal title
2. THE FUNDAMENTAL ESSENCE OF A TRUST
Westdeutsche Landesbank v Islington LBC [1996] AC 669 per Lord Browne-Wilkinson, at 70:
(i) Equity operates on the conscience of the owner of the legal interest. In the case of a
trust, the conscience of the legal owner requires him to carry out the purposes for which the
property was vested in him (express or implied trust) or which the law imposes on him by reason
of his unconscionable conduct (constructive trust).
(ii) Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of
the legal interest being affected, he cannot be a trustee of the property if and so long as he is
ignorant of the facts alleged to affect his conscience, ie until he is aware that he is intended to hold
the property for the benefit of others in the case of an express or implied trust, or, in the case of a
constructive trust, of the factors which are alleged to affect his conscience.
(iii) In order to establish a trust there must be identifiable trust property….
(iv) Once a trust is established, as from the date of its establishment the beneficiary has, in
equity, a proprietary interest in the trust property, which proprietary interest will be
enforceable in equity against any subsequent holder of the property (whether the original property
or substituted property into which it can be traced) other than a purchaser for value of the legal
interest without notice.
- The beneficial interest under a trust is a proprietary interest in rem Enforceable in equity
against any subsequent holder of the property other than a bona fide purchaser for value of the
3
, legal interest without notice
3. CLASSIFYING TRUSTS:
3.1 The traditional classification
Express trusts:
(1) Fixed trusts
- Ts to held for A & B in equal shares
(2) Discretionary trusts
- Ts to hold for employees of UoN (objects of the trust; not beneficiaries as they have not
yet received the benefits right to be considered; not right to receive the benefits) in such
shares as they think fit
- No immediate right to the asset but instead has a discretion to distribute the asset to
persons of a defined class
(3) Charitable trusts
- Ts to use money to set up a school for impoverished children
- For the benefit of the public in order to advance a particular charitable purpose No
actual beneficiaries
- Object of the trust = Specific charitable purpose
Implied trusts: (don’t arise by the acts of parties implied by the operation of law)
(1) Resulting trusts
- Gratuitous transfers; Failed express trusts; Purchase in the name of another
- Tends to arise where property is transferred to another person, & the law says that the
transferee has to hold the property on trust for the transferor
- Results back to the transferor
(2) Constructive trusts
- Proprietary estoppel; Binions v Evan; Unauthorised profits; Knowing receipt
- No accepted definition
3.2 The trust as a response to an event
Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 UWALR 1
[W]hen we think about trusts we use a terminology which averts our eyes from the very enquiry
which we most want to make, namely … as to the facts which bring trusts into being. …
[W]ith trusts, we know they can arise by consent (express declaration) but as for such trusts as
do not arise expressly, we know only two bits of gobbledegook, that they are resulting or
constructive. These words turn out to tell us, so far as they tell us anything at all, something
entirely negative, namely that in non-express trusts the intentions of the parties play no part at
all (constructive trusts) or a minor role in rebutting presumptions (resulting trusts). Meanwhile
all we actually want to know is the facts on which non-express trusts do arise. … Do
trusts arise from consent? We know they do. Do they arise from wrongs? Do they arise from
unjust enrichment? And do they arise from any other events?
Chambers, Resulting Trusts (Oxford: Clarenden Press, 1997), at 5.
Much more useful than the conventional classification of trusts, as express, implied, resulting or
constructive, would be a classification distinguishing trusts as generated by consent, wrongs,
unjust enrichment or other events. The advantage of this approach would be the greater ease of
aligning the law of trusts with other areas of law responding to the same ideas.
- Consent (contract law) – Express trust
- Wrongdoing (tort law) – Constructive trust
- Unjust enrichment
4
