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WS1- Trusts - Coggle Diagram

- - - - Certainty of intention- necessary to show trust arrangement is intended rather than something else like agift or loan
        
        Re Oldfield- desire if different from telling someone to do something. In a will they expressed a desire for daughters to make provision for her son- not a trust as no obligation, just a moral one
        
        Courts adopt objective approach in determinding intention. It is irrelevant if they do not actually subjectively intend to create the trust or are unaware such a thing exists, if they: manifest an intention to impose or assume the duty which is characteristic of a trust, they intend to create a trust
        
        Segregation of funds in separate account which has been earmarked for certain person or purpose (not necessary or conclusive though) must must be considered in wider context
        
        Paul v Constance- does not matter if they dont know what a trust is. Words must be interpreted in context, 'money is as much yours as it is mine' and putting joint bingo winnings in an account, drawing on the account for their joint benefit were all signs of a trust
        
        Intentions can be spoken, written, or by conduct
        
        Meaning of words e.g. in a will will be interpreted with reference to: their natural and ordinary meaning, any relevant contextual features of the document, facts which were known to or assumed by the authors of the document when it was created, common sense
        
        Use of a word ‘trust’ is indicative but not determinative (presence or absence of the same). It is determined by rights and duties it creates
        
        Mussorie Bank Ltd v Raynor- gave wife all his property ‘feeling confident she will act justly to our children in dividing the same when no longer required by her- too vague
        
        conduct: Lyell v Kennedy- money paid into a separate bank acc with proceeds from a certain property ear-marked for a certain person, though was in that person’s control was still a trust as money was received in a fiduciary character- no express words needed
        
        Company case: Re Kayford Ltd- separate account made called 'customers trust deposit account' to take further payments from customers to ensure if company went into liquidation they could repay the customers. This created a trust
        
        Re Lehman Brothers-
        
        Modelboard Ltd v Outer Box Ltd- defendant bought sheets whoch could be paid within 30 days of delivery. They could use the sheets not paid for in manufacturing process in the meantime. Clause said proceeds would be on trust. No trust in this case.
      - certainty of subject matter- possible to identify or ascertain the trust property as well as the beneficiary’s interest in the trust property
        
        two requirements
        
        Must be possible to identify trust property
        
        ‘bulk’ of their residuary estate will not be certain enough to create a trust- Palmer v Simmonds
        
        Company cannot create a trust for their ‘net assets’ as this does not describe any specific property belonging to the company- Wilkinson v North- it’s an abstract monetary sum
        
        trust of a specific number of items from a larger quantity of similar items without identifying those to be held on trust
        
        Fractional interests: e.g. 20% settlor’s 100 ordinary shares, 20% of settlor’s five one carat diamonds
        In these examples: the 100 shares are the subject matter of the trust and the beneficiary has 20% interest in each of them, five diamonds are the trust property and the beneficiary has 20% share of each
        
        specific items from a larger mass: 20 of settlor;s 100 ordinary shares or one of settlor’s five one-carat diamonds
        
        Fractional shares share in profits or losses
        
        whether or not this is acceptable depends on if items are intangible, and fungible (identical and readily exchangeable)
        
        examples:
        
        2 more items...
        
        must be both FUNGIBLE and INTANGIBLE to be able to create a trust for number of items from a larger quantity
        
        Fungible, tangible assets: cannot be trust property when a specified number of a bulk of items
        
        Hunter v Moss- 50 of 950 ordinary shares was fine because the assets have identical rights. Whereas with tangible assets, physical properties can differ
        
        Re Lehman Brothers- if fungible and intangible they work it out fractionally rather than separating specific shares (shares in this case) instead of 20 out of 100 shares it will be 1/5 interest in all the shares
        
        Re London Wine Company- customers purchased wine on basis company issued certificate of title to purchaser stating they were the sole and beneficial owner of the wine. Compamy did not separate wine from it's general stock for this particular contract so there was no trust. There was no specific wine allocated to this contract and no trust for the purchaser
        
        It must be possible to ascertain the beneficiary’s interest in the trust property
        
        Must be able to ascertain the nature and extent of the beneficiary’s interest in that trust property or the trust will fail
        
        Re Golays Will Trusts- ‘reasonable income’ is an ‘objective yardstick
        
        What counts will likely be very specific to facts of each case
        
        Issues can arise where: a person attempts to identify the trust property by description or a person attempts to create a trust of a specific number of items from a larger quantity of similar items without identifying those to be held on trust
      - certainty of objects: must be possible to identify or ascertain the beneficiaries of the trust or the purpose of the trust in the case of a purpose trust
    - - Trust needs to be enforceable: without identifiable beneficiaries, there is no one to enforce the trust i.e. hold the trustee to account for their obligations (rare exception- for purpose only like charitable trust)
    - - inter-vivos self declaration of trust- Legal title does not change so only necessary to consider if there are any formalities for the creation of the beneficiary’s interest- the declaration of trust
      - Inter-vivos transfer on trust- Consider formalities necessary for creating beneficiary’s interest and transferring legal title to trustee.This is known as ‘constitution’ of the trust
- - - - Trustee has a legal interest in the property (rights of legal ownership) beneficiary has equitable interest
      - Beneficiaries right is still a property right, beneficiary can sell their interest under the trust but they cant deal with the legal interest of the property
      - Almost every asset/right can be held on trust- Lord Strathcona Steamship Co Ltd v Dominion Coal Company Ltd
        
        chattel (tangible item), chose in action (intangible right like a debt, company share
      - changes in property
        
        If the trustee is at fault, they will be personally liable to restore the trust property using their own funds. If trustee cannot replace the property, they will pay compensation instead, the compensation will then be subject to the trust- likely in this situation a new trustee will be appointed.
        
        Trust property can change without destroying the trust e.g. selling a property and investing in another property which changes the trust assets
        
        If, without any fault of the trustee, trust property is destroyed/consumed the trust will cease to exist
    - - the beneficiary has personal rights against the trustee and can sue for breach of trust
      - Trustee role is voluntary so typically unpaid unless a professional trustee who is entitled to remuneration
      - Purposes of the trust/beneficiaries are known as the trust objects
  - - - Foley v Hill shows money held by banks for customers is not being held as trustee for the customers. Bank can do whatever they want with the money but will be answerable for the amount they have contracted
- - - - Institutional constructive trusts: applied automatically on a qualifying event e.g. prevent fraud, perfect an imperfect gift or trust
      - Constructive trusts as remedy: awarded by a court as a remedy in a range of circumstances, such as: successful proprietary estoppel claim, fiduciary makes a personal profit in breach of the no-profit rule, at end of tracing process following a breach of trust or fiduciary duty
      - Common intention constructive trusts: used to resolve disputes of beneficial ownership of land occupied by unmarried cohabitees
  - - - fixed types:
        
        sole beneficiary
        
        multiple beneficiaries with fixed shares
        
        successive interest trusts: right to income and capital are owed separately- series of consecutive interests in same trust property
        
        common type: Life interest trust: involving a beneficiary receiving income during their lifetime (i.e. rent), with another beneficiary/beneficiaries becoming entitled to capital after the income beneficiary’s death (i.e. sale proceeds)
        
        key terms: Income beneficiary- beneficiary entitled to the income produced by a successive interest trust. Traditionally known as ‘life tenant’ in life interest trust, Capital beneficiary- beneficiary entitled to capital held on a successive interest trust. Traditionally the capital beneficiary of a life interest trust is known as the ‘remainderman’
      - discretionary
        
        Trustees of a discretionary trust have distributive discretion. Settlors still decide potential beneficiaries of a trust, known as ‘objects’ of the trust- trustees determine who from within that class is to receive what sum
        
        Potential beneficiaries have no equitable interest in the trust property until discretion is exercised in their favour. They do have a right to ensure the trustees exercise their powers properly
        
        Trustees must exercise their discretion and do so within a reasonable time (truat document can specify the time by which discretion must be exercised. If not, what is reasonable is determined on the facts. If trustees do not exercise their discretion, any of the ‘objects’ can sue to enforce the trust. Objects cannot compel the exercise of the discretion in their favour- they have no proprietary interest- merely a hope they will receive something
        
        contrast with power of appointment: power of appointment is a right to choose who, from a specified class of objects, receives property
        
        fiduciary power of appointment is a power of appointment given to a trustee- they must periodically consider whether to exercise the power
        
        personal power of appointment- power of appointment given to someone who is not a trustee- they do not have to even consider exercising the power
        
        powers are different to discretionary trusts as the objects have less power- they cannot compel donee to exercise the power. they can only constrain improper use. Trustees of a discretionary trust, on the other hand, must exercise their discretion
        
        good practice for powers to have 'gift-overs', this is a clause stating what will happen if power is not exercised.
    - - charitable purpose trusts or non charitable purpose trusts
- - - - Court decision: sum credited was held on trust for Quintclose. Barclays had notice of the trust so it could not use funds lended by Quintclose to pay off their money Rolls owed on other overdrawn accounts. It was ringfenced from insolvency as a trust is
  - - - court decision: money was not held on trust as there was no suggestion the money had to be kept aside pending the money being turned to vouchers, keeping money from january to november in separate account was implausable.