Soton Equity and Trusts - alastairhudson.com

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We will focus, for the time being, on trusts… (B) The structure of the trust relationship. Reading: Hudson, sections 2.1 and 2.2; Martin 49-78; Pettit 30-65 ‘The essence of a trust is the imposition of an equitable obligation on a person who is the legal owner of property (a trustee) which requires that person to act in good conscience when dealing with that property in favour of any person (the beneficiary) who has a beneficial interest recognised by equity in the property. The trustee is said to “hold the property on trust” for the beneficiary. There are four significant elements to the trust: that it is equitable, that it provides the beneficiary with rights in property, that it also imposes obligations on the trustee, and that those obligations are fiduciary in nature.’ - Thomas and Hudson, The Law of Trusts ‘A trust is an equitable obligation, binding a person (called a trustee) to deal with property owned by him (called trust property, being distinguished from his private property) for the benefit of persons (called beneficiaries or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation [or for a charitable purpose, which may be enforced at the instance of the Attorney-General, or for some other purpose permitted by law though unenforceable].’ - Underhill and Hayton, The Law of Trusts and Trustees, as amended by Pettit (C) Classification of trusts. Reading: Hudson, section 2.2; Martin 49-78; Pettit 66-85 The four types of trust 1. Express trusts 2. Resulting trusts 3. Constructive trusts 4. (Implied trusts) Section 53(2) Law of Property Act 1925 refers to “implied, resulting and constructive trusts”. **Westdeutsche Landesbank v. Islington [1996] 1 AC 669, per Lord Browne-Wilkinson:- “(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).” (D) The means by which the different forms of trusts come into existence. Reading: Hudson, section 2.2, Martin 123-154; Pettit 86-99 The three forms of trust come into existence in the following ways: ‘A trust comes into existence either by virtue of having been established expressly by a person (the settlor) who was the absolute owner of property before the creation of the trust (an express trust); or by virtue of some action of the settlor which the court interprets to have been sufficient to create a trust but which the settlor himself did not know was a trust (an implied trust); or by operation of law either to resolve some dispute as to ownership of property where the creation of an express trust has failed (an automatic resulting trust) or to recognise the proprietary rights of one who has contributed to the purchase price of property (a purchase price resulting trust); or by operation of law to prevent the legal owner of property from seeking unconscionably to deny the rights of those who have equitable interests in that property (a constructive trust).’ - Thomas and Hudson, The Law of Trusts 10
(E) The rudiments of express trusts. Reading: Hudson, section 2.3; Martin 79-122; Pettit 86- 99 An express trust can be understood as follows, comprising the “magic triangle” of settlor, trustee and beneficiary. The core of the “trust” is the inter-action of personal rights and claims between these persons in relation to the trust property. It is therefore vital to distinguish between “in personam” and “in rem” rights. SETTLOR (“absolute owner”) transfer of legal title TRUSTEE (legal title) legal title + personal obligations in equitable interest respect of trust property transfer of equitable interest BENEFICIARY (equitable interest) Significant features of the trust 1. Once a trust is created, the settlor ceases to have any property rights in the trust or any control over the trust in her capacity as settlor. 2. The instant that the trust is declared (or deemed to have been created in the case of a constructive or resulting trust) the legal title in the trust property is owned by the trustee(s) and the equitable interest is owned by the beneficiary(-ies). 3. The trustee(s) hold the legal title in the trust property. 4. The trustee(s) owe equitable obligations to the beneficiaries to obey the terms of the trust. The trustee(s)’ obligations are fiduciary in nature (thus requiring the utmost good faith and prohibiting any conflict of interest). 5. The beneficiaries own equitable proprietary rights in the trust fund (each has an “equitable interest” as a consequence). 6. There can be an infinite number of beneficiaries in theory, or there may be only one beneficiary (a bare trust). 7. The same human being can be settlor, one of the trustees and also one of the beneficiaries. If she is only one of the trustees or only one of the beneficiaries then some other person will have acquired rights in relation to that property. Importantly, she will be acting in different capacities in each context (as though she were three different people). However, the same person may not be the settlor, the sole trustee and the sole beneficiary because then no property rights would have moved at all. 8. The beneficiaries may fall into various classes with different qualities of rights: e.g. there may be a beneficiary entitled to the income from the trust fund during her lifetime (a “life tenant”) with the capital being divided among the other beneficiaries after her death (“remainder beneficiaries” or “remaindermen”). 9. Individual items of property making up the trust fund may, if the terms of the trust permit it, be sold or exchanged for other property – that other property then becomes part of the trust fund. 10. Significantly, then, more than one person can have property rights in the same property at the same time: this enables settlors to create an infinite range of property holdings to suit their circumstances. 11. The trustee(s) will be personally liable for any loss caused to the trust by her/their breach of trust. 12. The trust, or “settlement”, is endlessly flexible (provided it is not illegal). 11
Page 1 and 2: University of Southampton Law Schoo
Page 3 and 4: Lay-out of materials These “Lectu
Page 5 and 6: Formative assessment - (i.e. non-as
Page 7 and 8: How to study for this module 1. Uni
Page 9: Common law and equity were always d
Page 13 and 14: Lord Browne-Wilkinson in Westdeutsc
Page 15 and 16: (2) Trusts as opposed to merely mor
Page 17 and 18: (3) after all valid claims in (2) h
Page 19 and 20: Topic 2. CERTAINTY OF OBJECTS Readi
Page 21 and 22: 10) Mechanisms for eluding the “a
Page 23 and 24: Topic 3. THE BENEFICIARY PRINCIPLE
Page 25 and 26: (C) Alternative interpretations of
Page 27 and 28: **Leahy v. Att.-Gen. for New South
Page 29 and 30: purpose of blocking the house up an
Page 31 and 32: Topic 4. THE CONSTITUTION OF TRUSTS
Page 33 and 34: Richards v. Delbridge (1874) L.R. 1
Page 35 and 36: *s. 53 (1) (b): "A declaration of t
Page 37 and 38: Topic 5. THE DUTIES OF TRUSTEES & B
Page 39 and 40: [Considered in detail in relation t
Page 41 and 42: (a) to any special knowledge or exp
Page 43 and 44: ule does not afford the right to th
Page 45 and 46: Burrell v Burrell [2005] EWHC 245,
Page 47 and 48: (F) Judicial control of trustees’
Page 49 and 50: 1) Specific Restitution Harris v Ke
Page 51 and 52: EQUITY & TRUSTS PART II TRUSTS IMPL
Page 53 and 54: Topic 6. RESULTING AND QUISTCLOSE T
Page 55 and 56: (b) (c) father and child Bennet v.
Page 57 and 58: II. QUISTCLOSE TRUSTS Reading: Huds
Page 59 and 60: e. … other commercial-contract la
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(c) The nature of the constructive
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(b) where the company is a public c
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6) Profits from theft Reading: Huds
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Topic 8. TRUSTS OF HOMES General Re
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(5) Each case will turn on its own
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Ferguson, ‘Constructive trusts -
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*Pascoe v. Turner [1979] 2 All ER 9
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inging up the children is no doubt
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first sight this may seem surprisin
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(ii) Cases looking to the character
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*Niru Battery Manufacturing Co v Mi
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Hudson, 20.5.2. Hudson, Securities
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C. EQUITABLE TRACING Reading: Hudso
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D. REMEDIES AFTER TRACING Reading:
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e) Is change of position now equita
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2) The four heads of charity in Pem
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(c) (d) (e) Gifts for relief of dis
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(D) Advancement of education. Readi
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(H) Requirement of the exclusivity
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THEORETICAL PERSPECTIVES ON EQUITY
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Polly Peck International v Nadir (N
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Concepts Contract Torts Property Fi
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of what has been called unjust enri
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actions, then the claimant should b
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o Recovery of an enrichment will no
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£200,000 on Static plc shares whic
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