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Express private trusts (1.1) - Coggle Diagram
Express private trusts (1.1)
Creating them
Express trusts are trusts created intentionally by a person. We call this person a settlor or a testator/testatrix
A settlor - creates an inter vivos trust (means the trust comes into effect while the settlor is alive)
Self-declaration of trust: I can make muself a trustee of property
Trust ny transfer: I can make someone else a trustee of property
A testator/testatrix - creates a testamentary trust, which means the trust comes into effect via will (after the testator/testatrix dies)
Capacity
Settlor/testator must have capacity to create a trust
or there can be no trust
A settlement made by child is voidable on or soon after age of majority (18) - Edwards v Carter
Settlement made by mentally incapacitated person is void - Re Beany
S.18(1)(h), (i) Mental Capacity Act 2005:
Gives court power to make a settlement of property/execute a will on behalf of person lacking mental capacity
Formalities
Inter vivos trust
Trust of personality - no formality requirements
oral declaration of trust is insufficient, no need for writing - Paul v Constance
Trust of land/interest in land must be evidenced in writing and signed by the settler - Law of Property Act 1925, S.53(1)(b)
See Pereira Fernandes SA v Mehta
If a trust of land or interest in land is not evidenced in writing, then the trust is unenforceable
(but not void)
Relevant statute - Law of Property Act 1995 (LPA 1995)
Unenforceable trust is not the same as a void trust. Trustee can choose to perform the trust if they want to. If they don't wantl, the beneficiary cannot do anything about it
Testamentary trust
The trust must comply with the formality requirements of S.9 of the Wills Act 1837
If the formality requirements are not met, the will and any testamentary trusts contained in the will, will be invalid
Consequence for the property - look to intestacy rules for distribution
note: don't have to know the details of the intestacy rules for the purpose of this module
The will has to comply with the formality requirements per the Wills Act 1837
Intestacy - you die without making a will. So the first person to inherit your property will be your spouse etc
Even more rules
Perpetuity rules
They are rules regarding duration of trusts - we don't want trusts continuing forever
For express private trusts -
Perpetuities and Accumulations Act 2009 affects any EPT created after 6/4/2010
Statutory perpetuity period of 125 years, subject to a 'wait and see period'
If trust breaches the perpetuity rules, will be void
It's about the duration of the trust (how long can the trust last?
Beneficiary rights must come into action for 125 years
Beneficiary principle
There must be someone who can enforce the trust - we need a living human beneficiary
This means that generally, an express private trust must be a trust for persons
Exceptions are express purpose trusts, charitable trusts and non-charitable purpose trust
Trust must have an actual human beneficiary to enforce it (must be alive, NOT AN ANIMAL)
The 3 Certainties
Per Knight v Knight:
The settlor must act with sufficient certainty so that the trustees and the court know:
(i) That a trust was intended (certainty of intention);
(ii) Exactly which bit of property is to be held on trust (certainty of subject matter);
(iii) And who should/could benefit from the trust (certainty of objects)
If there is uncertainty about any of these 3 things, the trust cannot be performed
[There must be intention, which subject matter it is, then who is it meant for]
Certainty of intention
Why do we need it?
Ensures that property is held subject to trust obligations only when that was the settlor's express intention
How do we find it?
Matter of construction of words in context - look to the substance
Did the settlor intend the trustee to be under an obligation to hold the property for the benefit of another, and does the settlor intend for someone else to obtain the beneficial interest in the property?
Settlor does not need to understand the concept of a trust
in order to
create one
Paul v Constance [1977]:
Per Scarman LJ: We are dealing with simple people, unaware of the sublteties of equity, but understanding very well indeed their own domestic situation
A trust can be created without the word 'trust'
Re Kayford [1975]:
Per Megarry J: "it is well settled that a trust can be created without using the words "trust"... the question is whether in substance a sufficient intention to create a trust has been manifested"
The use of the word 'trust' does not mean that a trust has been created
- Singha v Heer [2016]:
Per Arden LJ: "merely by using the word trust, even though Mr Singha had a law degree, did not mean that Mr Singha intended to use the word trust in a legal sense. In the context of the relationship between Mr Heer and Mr Singha, all the word trust meant was that the properties would not be dealt with adversely to the interest of Mr Heer"
Precatory words - look to the substance
They are words that involve making a request. Such wording suugest that there is no intention to create a trust (because trusts are obligations)
e.g. 'desires', 'wishes', 'requests', 'is confident', 'fully lasting', 'in the firm expectation of', 'hoping that' etc
Re Gulbenkian [1970]
When there is ambiguity - the court will make sense of it
Twinsectra v Yardley [2002]:
Courts usually intepret intention objectively - would a reasonable person conclude that the settlor intended to create a trust?
Per Lord Millet: "A settlor must of course, possess the necessary intention to create a trust, but his subjective intention are irrelevant. If he
enters into
arrangements which have effect of creating a trust, it is not necessary that he should appreciate that they do so; it is sufficient that he intends to
enter into
them"
Rowe v Prance [1999]:
Nicholas Warren QC - "the regular use of 'our' in relation to the boat, coupled with the explanation why the boat was not registered in joint names, establishes that the boat was held by Mr Prance on trust for himself and Mrs Rowe equally. It is pointed out that there is no need for writing in the case of an item of personal property such as a bat to create an express trust"
It's the court's job to assess/interpret whether they actually meant it or not
Whether your conduct can objectively look like you want to create a trust
The case of sham trusts
On an objective assessment, there is an intention to create a trust, but the 'settlor' does not intend to depart with the beneficial interest in the property
For sham trusts subjective intention is relevant:
Is there an intention to create a false impression of a trust (Shalson v Russo)
Trust may be a sham even if there's no fraudulent intention (Midland Bank v Wyatt)
Sham trusts are void and unenforceable
Trusts that are created with wrong intentions like hiding property
Allegations that the settlor is hiding something