Intro to trusts

HideShow resource information
  • Created by: Nikki
  • Created on: 12-04-16 11:11

Development of trusts and equity

Body of additional rules/law --> to supplement common law where common law was deficient

Equity recognised new ways of creating property rights, typically informally, and it created new types of property rights (inc trusts)

Trusts --> where property transferred on understanding that recipient would hold it for someone else's benefit 

T undisputed holder of legal title but under an obligation not to treat property as his own but instead to apply it for benefit of intended beneficiaries

Equity extending beneficiary's rights --> began to prevail over recipients with notice, recipients who don't give value, creditors

Once B had such rights in asset which were good against TP, made sense to see him as having a property right --> equitable title 

1 of 8

Intro to trusts

Trustee = person holding property

Beneficiary = person for whose benefit property held

Settlor = person (if any) who set up trust

Beneficiary has rights against trustee that property be applied for his benefit and his own equitable title to trust property --> this combo of fid obgliations owed by T to B and split between legal and equitable title to property describes core cause of a trust

Express trusts - arise because settlor wanted to do this with his property

Constructive ( and resulting) trusts - imposed by law, irrespective of owner's wishes

Trusts = versatile lgal device 

Admin of common law and equity has been fused since 1875 --> but good argument that more needs to be done to ensure that substantive rules of common law and equity form a coherent principled whole --> none of this would jeopardise law of trusts

2 of 8

Basics

Fixed trust --> settlor sets down exactly who is to get what property
Discretionary trust --> settlor leaves it, at least to an extent, to trustee to decide how the property is to be distributed
Powers of appointment --> trustee given option to distrubte property to named class of beneficiaries but is free not to do this

Overreaching --> B's equitable title may be overreached by trustee making an effective disposition of trust property to TP, who then takes property free of B's interest

Bona fide purchaser rule --> B's equitable title will be extinguished and he wil not have a claim against TP if trust asset is acquired by TP who (1) is a pruchaser for value; (2) had no notice of the trust

Rule in Saunders v Vautier --> If beneficiary is of full age and sound mind and is absolutely entitled to trust property, he may call on trustee to transfer it to him outright, even if this is inconsistent with settlor's wishes

Equitable and beneficial title are not synonymous -->
(1) Beneficial --> held by whomsoever is currently entitled to benefit of property (where no trust this is holder of legal title)
(2) Equitable --> arises only when a trust is created, and endures only so long as trust lasts

S can make a trust by simply declaring  to hold some asset of his for B's benefit --> S is trustee of asset he previously held absolutely

Equity considers taht person with legla title should not be free tokeep that asset for himself, but must apply it instead for some other person's benefit 

3 of 8

Creating a trust

Necessity of formality requirements to pass property --> although sometimes unfair results, to give exception to these simply in order to give effect to parties' intentions would undermine concept of formality requirement altogether

3 ways of passing beneficial interest in property

(1) outright transfer of interest
- normal requirements of land transfer --> deed and registration
- debts can be transferred by writing accompanied by notice of assignment to debtor

(2) self-declaration of a trust of that interest, whereby you then hold property on trust and new equitable title arises in the beneficiary 
- no transfer of donor's interest 
- as a general rule, the law doesn't require one's intention to create a trust to be manifested in a particular form
- 2 principle exceptions --> trusts of land; trusts which are to take effect on settlor's death

(3) transfert oa TP trustee on trust for B, whereby your interest passes to trustee and, as before, new equitable interest arises in B
- application of both sets of rules discussed above
- more formal requirements
- need to declare trust effecively and ensure that his own interest is trasnferred to trustee
- until T has S's interest transferred to him, trust is incompletely constituted and so has no effect

4 of 8

A challenge (1)

Challenge -->

  • suggested that B's rights have other limits which mean we shouldn't class them as proprietary
  • If I have a prop right in a thing, we should expect, at a bare minimum, that I ca insist that everyone else (who doesn't have a stronge property right) refrain from interfering with teh thing without my consent and that I'll have a claim against those who don't
  • isn't quite what we find
  • B can calim against non-bona fide purchasers who have received trust property from T in breach of trust, but has no claim against TP who steals trust property form T or a TP who negligently damages it
  • instead cases say that any such claim must be brought by T

2 possible explanations

5 of 8

A challenge (2)

EXPLANATION 1--> beneficiaries don't in fact have property rights in trust assets

  • persistent rights --> rights attaching to (specific) rights
  • B has right which attaches not to trust property but to T's right to that property
  • TP who receives trust property from T in breach of trust receives not just physical thing but also T's legal title to that thing --> since B's right follows T's right, B can now sue holder of right (TP)
  • someone who simply steals or damages trust property never obtains title from T --> B only has a claim against T, compelling him to sue TP 
6 of 8

A challenge (3)

EXPLANATION 2 

  • B originally had only rights against thei trustees
  • over time courts started to allow claims against certain classes of TP
  • process of expanding protection offered to B is incomplete
  • equity gave C rights where, but only where, common law left them inadequately protected
  • but in cases of theft and damage, B has benefit of T's own claim against theif/damager
  • no direct claim by B against TP needed to see that B's interests receive proper protection
  • implicaiton of law denying him these claims is not that he doesn't hve an interest in the asset but that this interest doesn't need to be protected in this way as it receives adequate protection already 
7 of 8

Equity (1)

Fusion of the courts suggests that equity is a term of purely historical significance - identifies set of rules or decisions deriving from one set of courts rather than another and nothing more

Some think it means more --> 2 possibilities

(1) EQUITY HAS A DISTINCT CONCERN WITH FAIRNESS
- historical support - why equity arose
- but is common law any different? are equity's additions any more grounded in fairness? do they reflect principles of fairness or justice?

(2) 'EQUITY' IN LEGAL JURISDICTIONAL SENSE, IS AN APPLICATION OF A BROADER PHILOSOPHICAL IDEA OF EQUITY
- idea builds on observation that general rules are insufficienctly nuanced or sensitive to do justice in all cases
- so: must be scope for discretaionary derogations from those rules in individual cases if justice is to be done
- when equity intervenes and an exception is made the reasons for intervention must apply in other like cases, so rather than being a one-off, isolated relaxation to rule it creates a new, more detailed, more nuanced version of the rule
- series of rules, not individual rulings
- this itself is a requirement of justice --> like cases must be treated alike
- equity didn't add a series of isolated exceptions to rules of common law but created a single, more nuanced, more detailed and more just set of rules
- we no see the same sort of development in common law as old rules are revised and refined
- so nothing distinctively fair or discretionary about equity

8 of 8

Comments

No comments have yet been made

Similar Law resources:

See all Law resources »See all Trusts law resources »