Equity & Trusts Revision Cards

There are multiple overreaching legal principles in Equity law

• Equity will not suffer a wrong without a remedy 
  • Equity fills in where common law cannot help the claimant
• He who comes to equity must come with clean hands (Douglas v Hello 2001)
  • The court can look at the claimant's previous conduct to see if there is any previous wrongdoing
• He who seeks equity must do equity (O'Sullivan v management agency & music Ltd 1985)
  • The court can ask the claimant to do something with the equity they get 
• Equity regards as done that which ought to be done (AG for Hong Kong v Reid 1994)
  • In relation to implied trusts, the trust comes into force as soon as the equity is transferred
• Equity cannot assist a volunteer 
  • constitution of trusts
• Equity is Equity 
  • A fallback maxim, the court can decide how to divide the money up equally if it's too complicated to work out each individual equity
• Equity follows the law 
  • can look at what the common law would do first and then rule with or against it
• Delay defeats equity 
  • Equity equivelant of limitation periods
• Equity looks to the intent rather than the form

Definition based on Keeton, the law of trusts 

• A trust is a relationship that arises whenever the turstee is compelled in equity to hold property on behalf of the beneficiary. 

OR

• for some purpose in such a way that the real benefit of the property belongs not to the trustee but to the beneficiary for the purpose of the trust. 

What is a trustee? 

• The legal owner of the equity 
  • Takes subject to the equitable rights of the beneficiary and must comply with the duties of the trustship 

what is a beneficiary?

• The beneficial owner of the equity 
  • If there is a breach of trust then the beneficiary may hold the trustee liable for the loss caused and may enforce property rights via tracing 

What is a gift? 

• an absolute gift 
  • Is the kind you receive/give on birthdays and on special occasions 
• Gift with a condition precedent 
  • would only really arise in wills 
  • this is where the person receiving the gift must do something that the person giving the gift wants them to do before they can get the gift. 

Capacity to make a trust

• Should be over 18 to make a trust or will (S.9 Family law reform act 1969 & Edwards v Carter 1983) 
• The person making the trust must have the sufficient mental capacity
  • during the person's lifetime - Beaney 1978
  • after the person's lifetime (trusts by will) - Banks v Goodfellow 1870 & S.9 Wills act 1837 

Certainty of Intention

• Must be clear that the settlor intended to create a trust (once a trust is made the settlor cannot change their mind) 
• There is no set language/words needed to expressly create a trust
• words that just convey the wishes of the recipient will not e upheld as a trust (Adams v Kensington 1884) 
• the courts will use common sense when deciding if something is a trust (RE Harding 2007)
• if there is no certainty of intention then it is either seen as an absolute gift to the recipient, it goes back to the settlers estate or stays with the solicitor if they have the legal title) 

Trust can arise from the following situations 

•   Funds were transferred and segregated with both parties intending the money to be held in trusts (Barclays v Ouitstclose investments 1970 
• both parties agree on restrictions on the recipient's use of the money (Freeman v commissioners for customs & exercise 2005) 
• the recipient does an act that becomes enough to demonstrate a trust was intended (RE kayford Ltd 1975  - the company having customers' money in a separate bank) 

Sham trusts

• The court can still decide if a trust is a sham even if there is a declaration of trust (Midland Bank v watt1995)

Subject matter - is it clear what property is to be subject to the trust & are the beneficial interests in the property accessible? 

ambiguous/subjective description 

• RE Klob's will - a person held first-class "blue chip" securities. There is no definition of lists for blues chip 

Certainty of the trust property  - remainder provisions

• using a structure - "to A anything that is left to B" 
• palmer v simmods1854 - residue estate but wants all of it to go 
  

Trust over unallocated assets

• if someone has a large number of items but only wants to give a few of them away they need to separate their tannable assets
  • hunter v Moss 1986 

• Certainty of beneficial interests
• specified method of determination that could be carried out (Boyce v Boyce)

• The two formats
  • TWO types of express trusts (Boyce v Boyce 1896)
    
    • FIXED TRUSTS -  
    • DISCRRSIONARY 

Fixed trust 

• Each beneficiary has a fixed entitlement set out in the trust by the settlor
• Beneficiaries immediately acquire their interest in the trust
  • Test for the certainty of objects 
    • listing principle/class ascertainabiliy test 
    • requires conceptual & evidential certainty 
      • conceptual certainty - must be no linguistic or semantic ambiguity such as "friends" or " good customers". Terms such as "my children" or "my nieces" should be used instead 
      • Evidential certainty - don't need to be able to locate all the beneficiaries immediately but you do need to be able to identify them. 

What is the certainty of objects? 

this means is it clear who the beneficiaries are in the trust. 

Types of trust

there are different types of trust

• Fixed - where the beneficiaries get a fixed amount that was set out in the trust the settlor 
• Discretionary - trustees have discretion on who is t benefit and how much they benefit from the trust

Discretionary trust 

• Trustees have discretion as to who is to benefit
  • EXAMPLE - £10,000 to my siblings in such shares as my trustees decide
• Trustees have the power to decide who benefits and how much they get

Test for the certainty of objects

• is/is not test (McPhail v doulton)
  • A discretionary trust is more like powers and therefore has the same test

Administrative workability

• A certain class might be unworkable due to its large size (R v District Auditor of West Yorkshire)
  • Trustees have a duty to survey the field and the size of the class and then decide wether it is workable or not

What are powers? 

these are authorization to act but not obligatory 

EXAMPLE - £10,000 divided among my children as my trustees May decide, if they do not decide then my wife is absolute. 

• If the trustees don't decide then the clause states what will happen to the money (Mettoy v Evans 1991)

Test for the certainty of objects

• The same as discretionary trusts - Is/Is not test (RE Gulbenkian 1968) 

What is a gift subject to a condition precedent?

• A member of the class who satisfies the condition may come forward and benefit to a specified extent (RE Barlow)
  • EXAMPLE - £100 to each of my nephews who attains the age of 21

Certianty of objects test 

• One-person test (RE Barlow 1979) 
  • If you can identify one person in the class who meets the description then the gift will be valid
• If there is uncertainty then the resulting trust will go back into the settlers estate