1
Q
What is a private trust?
A
All non-chatitable trusts
2
Q
What is an express trust?
A
Intentionally created by the settlor (person creating the trust)
3
Q
What does inter vivos mean?
A
During the lifetime of the settlor
4
Q
What is a trustee?
A
Holds the legal title of the trust assets and are under a duty to administer the assets for the benefit of the beneficiaries
5
Q
What are the three certainties?
A
Requirements of a valid trust:
- Certainty of intention
- Certainty of subject matter
- Certainty of objects
6
Q
What will the court look at to ascertain intention?
A
Maxim - ‘equity looks to the substance rather than the form’
Intention/ conduct
7
Q
What is UNLIKELY to show intenton to create a trust?
A
Precatory words:
* expressing in confidence
* wish
* belief
* hope
* reccomendation
* ‘I have no doubt’
NO TRUST unless the whle document shows intention to create a trust
Precatory = absolute gift ONLY (donee full equitable & legal ownership)
8
Q
What is a gift over in default of appointment?
A
Settlor gives trustee discretion on distribution of the trust property = mandatory obligation
Includes an alternative gift/ instruction if failure to distribute
9
Q
When can informal words/ actions create a trust?
A
Series of declarations and conversations
e.g opening a bank account
Case law - awarded trust 50/50 split
10
Q
What amounts to intention to create a trust in the absence of words/ document? Example.
A
Conduct:
Keeping money in a seperate bank account evidence of a company creating a trust
11
Q
What will NOT amount to certainty of subject matter?
A
If the property is not described with sufficient certainty e.g ‘bulk of my residuary estate’
12
Q
What is the residuary estate?
A
Everything left after all debts/ taxes have been paid in full and all gifts distributed.
13
Q
What is the subject matter of a trust?
A
- Property under a trust
- Beneficial entitlement of each beneficiary (how much entitled to)
14
Q
When will the court use an objective assessment for certainty of subject matter?
A
‘reasonable income’ = sufficiently certain
15
Q
How do tangible assets have certainty of subject matter?
A
Property under a trust is clearly identified by separation
no segration customer = unsecured creditor (not entitled to order)
16
Q
How do intangible assets have certainty of subject matter?
A
If the assets are similar - no need for segregation
17
Q
What is certainty of objects?
A
Certainty on who the beneficiaries are
18
Q
What is a fixed trust?
A
Beneficiary is entitled to a specific share of the trust property
19
Q
What is a discretionary trust?
A
Trustees have disretion on whether or not to pay any member of a defined class of beneficiaries
Beneficiaries have no automatic right to payment ONLY to be considered.
20
Q
What is the test for certainty of objects in a fixed trust?
A
Ascertainability test - possible to compile a complete list of all beneficiaries
21
Q
What is the test for certainty of objects in a disctretionary trust?
e.g employees and their relatives
A
Individual ascertainability test - said with certainty an individual is/ isn’t a member of the class
22
Q
What issues arise when acertaining certainty of objects
A
- Conceptual uncertainty
- Evidential uncertainty
- Administrative workability
- Gifts to individuals answering a particular description - one-person test
23
Q
What is conceptual uncertainty?
A
Words used to describe beneficiaries are too vague = trust void
24
Q
What is considered conceptually uncertain?
A
- ‘friends’
- ‘relatives’
- ‘family’
- ‘dependants’
25
When is there NO conceptual uncertainty?
* Settlor gives information to identify the class e.g 'Facebook friends'
* Settlor gives someone discretion to decide who is within the class
26
What is evidential uncertainty?
Cannot determine who fits the description of a beneficiary due to lack of evidence = trust fails
27
What is extrinsic evidence?
Facts/ information used outside of a written document (will/deed)
Will stop a trust being evidentially uncertain.
28
What is administrative workability?
Trust will fail where the definition of beneficiaries is too wide to form a class
| e.g a population
29
What is the one-person test?
*“Can it be said with **certainty **whether any given individual is or is not a member of the class of beneficiaries?”*
Used to determine certainty of beneficiaries for gifts without making a complete list
Key Features:
* Gifts are made to individuals who fit a particular description
* Each beneficiary is entitled to a similar gift
* **The number of beneficiaries does not affect the size of each individual gift**
* Can be applied to a series of individual gifts to different beneficiaries
30
What happens if one of the certainties is not met?
Trust fails - property goes back on resulting trust to the settlor
31
What formalties are required for a trust of personalty?
No formalities required
| Can be through words/ conduct/ intention
32
What formalities are required for trusts of realty?
S53(1)(b) LPA 1925 :
* Evidenced in writing
* Signed by settlor
* Oral = date is the date of oral declaration
* Unenforceable if not complied with
33
What happens if formalities of a realty trust are not complied with?
Trust is **unenforceable** NOT void
(prevent trustee from gaining unjust enrichment)
Trustee will hold on RESULTING trust only
| if the trust was void, trustees could try to keep the property
34
When will an oral trust satisfy the formalities?
If the declaration is later written & signed
(date of oral declaration is the date of the trust)
35
When will a testamentary trust be valid?
Executed in accordance with the Wills Act 1837:
* In writing
* Signed by testator
* attested by 2 independent witnesses in the testator's presence
36
When is the transfer of equitable interest under a trust valid?
S53(1)(c):
* Subsisting equitable interest (already separated from legal title)
* Applies to trusts of personalty or realty
* In writing
* Void is if not complied with (NO TRANSFER
* Signature by an agent with authorisation is valid
37
What are the methods to dispose of an equitable interest?
1. Assigning to a third party
2. Direct trustees to hold the property for a third party
3. Contract for valuble consideration to assign the equitable interest
4. Declare oneself a trustee of such an interest
38
what are the requirements for a beneficiary to assign their interest to a third party?
Comply with S53(1)(c) or VOID:
Subsisting equitable interest (**already exists** and separated from legal title)
* Applies to trusts of personalty or realty
* In writing & signed 📝
* Void is if not complied with (NO TRANSFER)
* Signature by an agent with authorisation is valid 🥸
agent = parent, director, legal owner, POA
| void = no transfer of equitable interest
39
When can a beneficiary direct the trustees to hold their property for a third party?
**A bare trust**- assets are held by a trustee but an adult beneficiary has absolute rights to the assets (including income generated).
Trustee has no say in distribtuition of assets.
Beneficiary can instruct a trustee .
40
What can a beneficiary direct a trustee to do in a bare trust?
* Direct trustees to transfer trust property to another (but cannot move legal/ equitable interest at the same time)
* Direct trustees to hold equitable interest on trust for another
41
When will the disposition of equitable interest fail if trust property is transfered to another?
If both legal and equitable interest move at the same time they will merge - transferee becomes absolute owner.
s53(1)(c) is not satfisfied - no subsisiting equitable interest
42
When will entering into a contract to assign equitable interest be successful?
S53(1)(c) - contract in writing (usually execution of a deed)
A valid oral contract with consideration will not exempt the requirements of S53(1)(c)
Dispositon = void UNTIL all requirements are met.
| so parties cannot escape paying stamp duty.
43
What is a life interest?
Only lasts during the lifetime of the beneficiary.
Beneficiary is not entitled to the property.
Beneficiary is ONLY entitled to income generated by the property during their lifetime.
44
What is a remainder interest?
Beneficial interest that follows a life interest.
Only entitled to take ownership once the life interest has ended (usually on someone's death)
45
What is death duty?
Tax payable on assets of someone who has died (IHT)
46
What happens if a beneficary declares a trust of their own interest for a third party?
**Genuine sub-trust** = trustee retains legal ownership of the equitable interest i.e still a beneficiary under the old trust - only imposes new obligations on themselves to hold that interest for B - no transfer of the equitable interest to B (B gains a **new** equitable interest)
**Non-genuine sub-trust** = transfers equitble interest and must comply with s53(1)(c) -*it is like an assignment*
47
When is a sub-trust genuine?
The benefciary who declares the sub-trust exercises duties of a trustee (active role)
No duties = non-genuine subtrust = must assign equitable interest under S53(1)(c)
48
How can equitable interest be disposed? (not s53(1)(c))
1. Equitable interest is disclaimed (do not want benefit)
2. Nominations under a pension fund/ insurance policy
49
When do S53(1) (b)/(c) not apply?
* Implied trusts
* Resulting trusts
* Constructive trusts
50
When is a trust completely constituted?
When legal title is vested to the trustees using the proper formalities
51
Who is a volunteer?
Beneficiary who has not provided consideration (money or money's worth) for the trust
| Can ONLY enforce a COMPLETELY constituted trust
52
What are the equitable maxims on volunteers?
* Equity will not perfect an imperfect gift/ unconstituted trust (invalid attempt to make a gift to another or incomplete constituted trust)
* Equity will not assist a volunteeer
| Beneficiaries who have given consideration - court will enforce
53
When is a trust binding on the settlor?
Valid trust:
* meets 3 certainties
* formalities
* properly constituted (legal title vests) = enforceable
| Beneficiary is entitled to trust property without proving consideration
54
When is a trust completely constituted if the settlor is the trustee?
All 3 certainties, all formalities = constituted because settlor already hold legal title
| Creation of trust = legal/ equitable title split
55
When is a trust completely constituted if the settlor appoints someone else as a trustee?
When legal title is in property is transferred (vested)
| A trust deed will NOT automatically transfer legal title
56
What are the ways a donor can benefit a donee?
1. Owner of the property transfers the property to a donee = a gift
2. Owner of the property creates a trust where they hold the property as a trustee for the beneficiary - legal/ equitable title split on creation = a trust
3. The owner of property creates a trust with trustees holding the property for the beneficary - must transfer legal title to trustees = a trust
57
What are the formalities for transferring different types of property?
* Land: by deed (formalities met)
* Shares: stock transfer form
* Chattels: physical delivery (unequivocal) / deed
* Equitable interests: S53(1)(c)
* Choses in action: written notice to debtor
* Cheques: endorsing the cheque (signing the back)
| Chose in action - a right that can only be enforced by taking legal acti
58
Who cannot enfroce a trust/ gift?
* The volunteer donee of an imperfect gift
* The volunteer beneficiary of an incompletely consituted trust
59
What is a covenant to settle?
What is the position before?
Settlor had promised by deed that they would transfer property onto the trustees.
Until this transfer = incompletely constituted trust
60
What is is a covenant?
Promise made by deed
61
What term can be used interchangebaly with trust?
Settlement:
to settle property = place on trust
| Covenant to settle = promise to place on trust.
62
What is the exception to the equity maxim of an incompletely constituted trust?
Marriage consideration - beneficiaries are not volunteers and can enforce the convenant
| marriage consideration - type of consideration in equity
63
Who are the beneficiaries of a marriage settlement?
Parties to the marriage & their children
| Any other beneficiaries are volunterrs and must provide consideration
64
What is after acquired property?
Property the covenantor does not yet own at the date of the covenant but is due to acquire/ inherit at a later date
65
Who can enforce the transfer of property under a marriage settlement?
The parties to the marriage and their children only (provide marriage consideration)
| anyone else = volunteer = equity will not assist a volunteer
66
What happens if a beneficiary signs the deed contaning the covenant?
Beneficiary wiil become party to the covenant
67
How can a beneficiary who is party to the covenant (to settle trust property) enforce it?
**LAW** - Sue for breach at common law & claim damages - *treated the same as a contract*
**EQUITY** - Still a volunteer in equity- *CANNOT use specfic performance*
usually party if - marriage settlement, contractual
68
Can a trustee sue the settlor on behalf of the beneficiaries?
The court will direct trustees NOT to sue
| This would provide an equitable remedy to beneficiaries
69
What types of consideration are recognised in equity? What is the remedy?
Specific performance:
* money/ money's worth
* marriage settlement
70
What types of consideration are recognised in law? What is the remedy?
* money/ money's worth
* covenant in a deed
remedy = damages
71
What are the exceptions to the maxim:
'Equity will not assist a volunteer to perfect an imperfect gift'
* The rule in Re Rose
* The rule in Strong V Bird
* Donatio mortis causa
* Estoppel
72
What is the rule in Re Rose?
If the transferor has done all in their power to transfer title - equity will deem it effective - even if action is required by a third party to complete.
| Re Rose - effective after transferor posted share transfer forms
## Footnote
Only applies to an incomplete gift/ trust
73
When will the rule in Re Rose be extended?
Someone is on their death bed/ giving all their money to charity
74
What is the rule in Strong v Bird?
A donor makes an imperfect lifetime gift - intended donee becomes executor/ administrator on death - the gift is perfected
MUST BE EVIDENCE OF CONTINUING INTENTION TO MAKE THE GIFT UNTIL DEATH
| Can apply to a debt being written off
75
When will the rule in Strong V Bird not apply?
RULE: donor intends to make an immediate gift - imperfect because formalities weren’t completed - the gift can beperfected if donee later becomes the donor’s executor (or administrator).
No continuing intention -
e.g writing a cheque for the value of the property but never giving it to the donee
76
When will the rule in Strong V Bird be extended?
Settlor covenants to settle property - property becomes vested to trustees in a DIFFERENT CAPACITY
Property not transferred to the trustee by the covenantor but they obtain legal title another way = property vested = trust completed.
77
When should you consider the rule in Strong V Bird in the SQE?
The donee of an imperfect lifetime gift is appointed as the donor's personal representative.
| Must be continuing intention
78
What is donatio mortis causa (DMC)?
A gift made during the donor's lifetime but is not effective until after death (conditional)
79
What are the requirements for donatio mortis causa?
* Gift made in contemplation of death from a known particular cause
* Intention is that the gift is conditional on the donor's death
* Subject matter of the gift must be delivered to the donee and the property must be capable of passing by donation
80
What doe 'in comtemplation of death' mean? (DMC)
From a known cause - an elderly donor approaching end of natural life does NOT count
81
When is a gift conditional on the donor's death? (DMC)
If the donor only intended to give the gift if they actually die.
Can be revoked at any time
Automocatially revoked if donor recovers.
82
When is the subject matter of the gift delivered to the donee? (DMC)
* physical delivery
* handing over the means to obtain the gift
* handing over essential evidence of title (proof of reliquinshed control of property)
83
How are the types of property each delivered to the donee? (DMC)
1. Chattels - physical delivery/ delivery of the keys
2. Money - physical delivery (cash) / passbook / savings book
3. Land - delivery of title deeds and keys
4. Shares - share certificates
5. Cheques - cheques drawn by third parties only (not the donor)
84
How does estoppel perfect a gift/ unconstituted trust?
Promisor made a promise & an imperfect gift - promisee can use estoppel to perfect the gift if the promisee suffered DETRIMENT in RELIANCE.
85
What is a vested interest?
Beneficial interest where the beneificiary has a rightful claim to trust asssets. 2 types:
* vested in possession
* vested in interest
86
What does vested in possession mean?
A present right to present enjoyment - immediate right to income
87
What does vested in interest mean?
A present right to FUTURE enjoyment
88
What are the conditions on vesting?
1. The beneficiaries must be ascertained or ascertainable
2. They must be ready to take possession (may be prevented due to a prior interest)
| vested = rightfully entitled = cannot be lost
89
What happens if a beneficiary dies before their interest is vested in possession?
Depends on if interet has already *vested in interest:*
1. Entitled but remainder/ reversionary interest and do not have it yet
2. Has the present right to possess/ enjoy
above YES = the interest/ entitlement will pass to their estate
e.g dies before vested in possession - when the person with current possession dies = passes to estate **if all conditions satisfied**
90
What is a contigent interest?
Interest only vests once a condition is met
dies before conditon met = interest is lost
91
What are the key differences to look our for between vested/ contingent interests?
* Conditon to be met
* A specific intended beneficiary = vested
* A gift over = contigent (on an event) e.g To B if he survives A; if not, to C.
92
What does limited in perpetuity mean?
An interest intended to last indefinitely (forever)
**The interest must vest in the perpetuity period**
| Does not matter if they die before, only that that it COULD have vested
93
What is the purpose of a perperuity period?
To stop property from being in alienable for longer than the perpetuity period
A gift must vest in this period
94
What is a perpetuity period?
Maxiumm time when a gift/ interest must vest
**all lives in being died + 21 years added after death of last surviving life in being**
95
What is / are 'lives in being'?
* Express - settlor expressly states who is a life in being
* Implied - everyone **alive** at the date of settlement and has been implicated in the settlement
| descendants = children & grandchildren
96
What is S3 of the Perpetuities and Accumulations Act 1964?
**Wait and see** whether or not an interest will actually vest within the perpetuity period (stop it being automatically void).
Trustees now wait until the gift vests
If it vests outside the perpetuity period the gift will fail
97
What is the exception to the perpetuity period test?
Perpetuities Act 2009 - settlor can expressly specify a period of **up to 125 years**
All gifts are valid - paid to any beneficiary who meets the contingency in that period
not met = fails = back to estate/ given to those entitled to a gift over
98
What happens if a beneficiary does not meet the contingency in the period?
The gift fails and goes back to the estate OR to someone entitled to the gift over
99
What are the rights of a beneficiary in a fixed trust? What can they enforce?
Interests are fixed - have an automatic right to payment in accordance with the terms of the trust
B has an equitable interest in the property and can enforce against anyone with possession through a constructive trust / tracing - *inc stranger!!*
100
What are the rights of a beneficiary in a discretionary trust?
No automatic right to payment - the trustees can decide to distribute
ONLY a right to be CONSIDERED
| No proprietary interest-cannot enforce against trustees (can terminate)
101
What are the rights of a beneficiary in a bare trust?
Beneficiary has full control over trustee actions (in relation to trust property)
Trustees must comply with beneficiary's instructions
| bare trust = sole benefit of an adult beneficiary
102
When can a beneficiary terminate a trust?
Sui juris and is absolutely entitled to the whole beneficial interest
Can compel trustees to tranfer legal title = terminate the trust
| sui juris = of full age and no disability
103
When are beneficiaries entitled to terminate a fixed trust?
* No disability, adult & sole beneficiary
* All beneficiaries are adults, no disability & together are absolutely entitled (life & remainder interest combined)
| Trustees must transfer legal title
104
When are beneficiaries entitled to terminate a discretionary trust?
**Condition** - trustees hold the entire trust property but have discretion over who benefits and how much
**Requirements:**
* all beneficiaries are sui juris (legally capable / of age and sound mind
* All beneficiaries agree to terminate.
**Conditions are met** - beneficiaries can compel trustees to transfer the trust property
Applicable only if there are *no minors or incapacitated beneficiaries*
| ALL must be of age & no disability
105
What is a purpose trust?
* No beneficiaries
* Created for a purpose not a benefit of indentified persons
106
What are types of purpose trusts?
* Charitable (public)
* Non-charitable (private)
107
What is the general rule of a non-charitable (private) purpose trust?
Must have objects/ beneficiaries or VOID
| private/ non-charitable trusts without beneficiaries are void
108
What are the exceptions to the rule:
'A trust for a purpose trust is void unless the purpose is charitable'
Conditions:
* Fall in a category previously upheld (Re Endacott)
* Trust is limited in perpetuity (duration)
* There is someone willing to carry out the purpose
109
What are the rules on perpetuity for purpose trusts? Why?
* The purpose must vest in the perpetuity period & cannot continue longer than the perpertuity period
* Non-charitable purpose trust - perpetuity period of 21 years (no identified beneficiaries)
* Non-charitable - must expressly limit the trust in perpetuity or **risk being void**
purpose trust = not private = no beneficiaries!
**Applies to Re Endacott trusts** (tombs, masses, pets)
110
When does a trust not need to be limited in perpetuity?
Charitable trust (exempt - can last forever)
111
How long is perpetuity period for Private trusts created after 6 April 2010?
→ fixed statutory period of 125 years
112
What are the Re Endacott categories for a purpose trust to be charitable?
* Trusts for the erection/ maintenance of tombs/ monuments (religious gronds)
* Trusts for the saying of masses (open to public)
* Trusts for the maintenance of pets
| Should be expressly limited in perpetuity & someone willing to carry out
113
When should a purpose trust on tombs/ monuments be expressly limited in perpertuity?
**Limited in perpetuity** = an interest intended to last forever (subject to legal limits like the Rule Against Perpetuities)
Maintenance - must be expressly limited in perpetuity (continue forever)
Erection - impliedly limited in perpetuity (assumes erected in 21 years)
114
What is judicial notice?
Law of evidence that allows a fact to be introduced without proof IF the fact is so well known it cannot be doubted
e.g no express perpetuity limitaion for a pet - assumed pet will die within 21 years (certain animals)
115
When is a purpose trust valid if is NOT one of the categories in Re Endacott? (Re Denley)
(aka it is not charitable so exception to rule that non-charitable purpose trusts are invalid)
* It is directly/ indirectly for the **benefit** of an individual/ individuals (must be ascertainable so can enforce)
* Expressly limited in perpetuity
e.g trust for maintaining a sports ground for employees was upheld because employees had a direct **benefit** and could enforce it
| Re Denley
116
What is an institution in law?
* companies
* unincorporated associations
* trusts
117
What are the requirements for a valid charitable trust?
* Exclusively charitable purpose
* For public benefit
118
What are examples of 'charitable purpose'?
* Prevent a persons who are not poor becoming poor
* Advancement of education - scholarships, maintenance of educational buildings/ grounds
* Advancement of religion - religious buildings/ grounds, gift to someone in religious office (e.g vicar)
119
What is 'public benefit'? (charitable trusts)
* Public - general public/ sufficient section of the public (class of beneficiaries must not be connected by personal nexus )
* Benefit - must be identifiable/ tangible (any detriment must be outweighed by the benefit)
| connected personal nexus e.g employment by a particular employer
120
What is the general rule on politics and charitable trusts?
Purely political = cannot be charitable
HOWEVER if the main purpose is charitable, political activities which advance the trust will not make it void
| Look at if they tried to make people take action = political
121
What are the benefits of charitable trusts?
* Exempt from the beneficiary principle (objects do not need to be certain)
* Not subject to the rule against perpetuities (last indefinitely)
* Exempt from certain taxes
122
What are the differences between charitable and non-charitable trusts?
1. Charitable = act by majoirty
Non charitable = trustee acts unanimously
2. Charitable = enforced by AG
Non-charitable = private - enforced by beneficiaries
3. Charitable = last indefintely
Non-charitable = expressly limited in perpetuity
4. Charitable = trust assets saved (cy-pres doctrine)
Non-charitable = revert to settlor on resulting trust
123
What is the cy-pres doctrine?
Purpose charitable trust fails/ surplus after the purpose has been carried out - court/ charity to use property for other charitable purposes like the ones intended by the donor
124
What is the charity commission?
Independent non- ministerial government department responsible for regulating charities
125
What is the ownership structure of a resulting trust? Examples?
Transferee holds property on resulting trust for the transferor
transferee = legal title
transferor = equitable title
examples:
* Transfer for no consideration (no intention to be a gift)
* Contributes to purchase price
* Trust fails - results back
126
What does the transferee owe in a resulting trust?
A duty of care to the transferor (like any other trustee)
127
What is a presumed resulting trust?
Someone transfers property for no consideration...
Equity presumes the transferor does not intend to lose their beneficial intrest = holds on trust for transferor
128
When is a resulting trust presumed?
1. Transfers property to another for no consideration
2. Pays for property/ contributes to the purchase price but is in the name of another
| scenario 2 = holds equitable shares proportionate to contribution
129
What is the law on presumed resulting trusts of realty? (land)
Presumed trust = property is transferred without payment
Statute = **no presumed resulting trust** for a voluntary transfer (not automatic)
Case law - Statute will only apply if it is truly a gift *but if there is evidence to show did not intend to make a gift* = presumed resulting trust
| Voluntary transfer = no consideration
130
What is the law on presumed resulting trusts of personalty?
Equity presumes transferor is not willing to lose benefit = resulting trust
| e.g voluntary transfer of shares
131
What is the law on presumed resulting trusts for illegal purposes?
*Should someone get their money back for an illegal purpose? Should they rely on resulting trust?*
3 step approach:
1. Purpose of prohibition (reason for illegality) denial to trust enhance or undermine the purpose?
2. Any other public policy effected by denial of the resulting trust? e.g unjust enrichment
3. Is denial of the trust proportionate response to illegality
132
What factors do the court take into consideration for the illegality test?
Clue: someone trying to argue they have a resulting trust b.interest but the main purpos was illegal e.g hide money ✋🏼
* Seriousness of illegal conduct
* Was it central to the contract?
* The extent to which each party was culpable
* Was there knowing illegality?
e.g not putting both names on the house to claim housing benefit - claim resulting trust because contributed to pp?🏠🚫
| Look at if court action would give effect to the illegal act
133
What is the presumption if one person has paid for property in the name of another?
Presumed resulting trust in favour of the real purchaser:
The person with property in their name holds on trust for the real purchaser
134
How can you rebut the presumption of resulting trust?
Evidence to the contrary:
* Intended as a gift (e.g declarations/ handing over full control)
* Presumption of advancement (father - child or husband - wife)
BoP is on the recipient
135
What is the presumption of advancement?
Person transfers property/ contributes to purchase price but because of their relationship it is presumed to be a gift:
Father to child (somtimes mother)
husband to wife
*Presumption of advancement may displace property transferring under a will*
136
What is the current law on the presumption of advancement?
Equality Act 2010 abolished BUT not yet in force
137
What is admissable evidence for a resulting trust?
(**Resulting trust** - A transfers property to B without consideration, unless there is evidence of an intention to make a gift)
Rebutted = evidence of intention
**Admissible** = statements or documents showing the transferor’s intention **at or before transfer**
(sometimes immediately after)
**Inadmissible**= actions/ declarations AFTER the transfer of property CANNOT be used as evidence to argue the transferor did not intend to make a gift
*Actions after can only be used to show presumption of advancement by transferee*
138
When can an automatic resulting trust arise?
* Failure of beneficiaries (e.g no children)
* Partially expressed trust (no instructions after death of life interest beneficiary)
* Trust goes against public policy/ breaks perpetuity rule (void)
* Surplus funds after trust is performed
| Property held on automatic trust by trustees for the settlor / estate
139
What can sometimes happen with surplus funds from a trust?
Do not always go back on automatic resulting trust to the settlor/ donor - court may find an absolute gift from donees (not a failure)
e.g remaining funds could be outright gift to a son/ daughter (court looks at overall intention of testator)
140
Examples where automatic resulting trust arises
* Failure of Bs
* Trust only partially expressed (e.g no provision for property after life interests stops)
* Trust is void
* Surplus funds after trust performed
Trustees will hold on resulting trust for settlor if alive or settlor estate if dead
141
What is the presumption of ownership in a family home? (joint names)
Hold property on implied trust &
share beneficial interest equally
142
How can the presumption of equal shares be rebutted?
| (property held in joint names)
Evidence to the contrary
e.g contributions to purchase price and keeping finances separate (Stack v Dowden)
143
If the family home is in a sole name, how can the claimant establish interest in the property?
* Presumed resulting trust
* Common intention constructive trust
* Proprietary estoppel
144
What is a sitting tenant?
A tenant currently in possession of the leasehold and may be entitled to a discount when buying the freehold from the landlord.
145
What types of contributions gives rise to a presumed resulting trust?
* Direct contributions to the purchase price
* Paying the mortgage instalments
* Discount available to a sitting tenant
146
What are the requirements of a common intention construcive trust?
1. A common intention to share (evidence of agreement)
2. Detrimental reliance
147
What is common intention? (family home)
Both parties are in agreement that the claimant should have a share of the family home
must rebut presumption that one is sole beneficial owner
148
What is detrimental reliance?
C must shows they acted to their detriment based on the agreement tht are to have a share in the family home
149
What are the 2 categories of common intention constructive trusts?
1. Evidence of common intention - express agreement between parties
2. Court must infer common intention - conduct of parties
150
What is agreements will show a common intention in a constructive trust? Who has BoP?
Oral / written agreement - before or at the same time as the purchase
*The onus is on the claimant to prove they were to share with the legal owner*
| Implied, resulting & constructive trusts do not need to be in writing
151
How can common intention be evidenced in the absence of an agreement?
**An excuse** (like a lie) &
the other party acted to their detriment
An excuse should be with a promise that the property is to be shared e.g avoiding tax - "don't need to be named owner"
152
What are examples of detrimental reliance in a constructive trust?
* Heavy work done on the house (usually to increase value)
* Paying the deposit, purchase price or mortgage instalments
| NOT domestic duties/ looking after children
153
From what conduct can a court infer common intention/ reliance?
* Contribution to purchase price (inc joint wedding gift)
* Contribution towards initial deposit
* Discount to sitting tenant
| Used to prove common intention AND detrimental reliance
154
When will an indirect financial contribution create a common intention constructive trust?
Where without the claimants contribution to household expenses the legal owner could not have made mortgage repayments.
155
What is the relationship bteween resulting trust and common intention constructive trust?
What can be awarded?
If C can prove intention to share property, resutling trust principles are displaced
e.g
conversations, written agreements, financial contributions, improvements, or sacrifices
BENEFICIAL INTEREST DOES NOT NEED TO BE PROPORTIONATE TO THE CONTRIBUTION (can award a larger share)
| **Remember resulting = contribution to pp only**
156
How do you identify an estoppel claim?
The promise must come first (before reliance)
| Promise = interest in the property
157
What remedy is available for a successful proprietary estoppel claim? What must it be?
Based on the promise by the owner i.e **equitable remedy** to enforce the promise
e.g if promised land must give them the land or the land's value
or if not possible/ unfair - compensation
prevent them from going back on their promise but must be proportionate
158
How do you distinguish between proprietary estoppel and construcitve trust?
Legal owner made a promise (at any time) = propreitary estoppel
Verbal discussion to share before/ at the time of purchase = constructive trust
159
What remedies are available against a constructive trustee?
* Recovering property
* Tracing
* Personal claim
160
What is a 'stranger'?
Everyone who **does not have a duty to the trust** (apart from constructive trust when equity imposes a constructive trust on them!!)
e.g someone who has the means to pay for a trustee's breach
161
What is a fiduciary?
Someone who has undertaken an act for or on behalf of another in circumstances which give rise to a relationship of trust/ confidence
162
What claim is available to a beneficiary to who suffered loss due to actions of a trustee/ beneficiary?
Personal claim
163
What happens if a trustee/ fiduciary is insolvent? (acted in breach)
Beneficiary could claim against a stranger (non-trustee) who has means to pay
**Equity will impose a constrcutive trust on the stranger**
164
What is a constructive trust?
* A trust imposed by equity without reference to any express or presumed intention of the parties
* Exempt from formal requirements
* Equitable remedy to obtain restitution
| NOT THE SAME AS A COMMON INTENTION CONSTRUCTIVE TRUST
165
What is the duty of a constructive trustee?
Transfer property to the entitled beneficiary by:
* **Tracing / recovering** property if still have possession or its equivalent i.e value
* Beneficary will have **personal claim** against constructive trustee if do not have property *(if not bona fide purchaser for value/ not beyond what is fair)*
prevent unjust enrichment
166
What is restitution?
Unjust enrichment - a person should not be able to profit at another's expense without repaying value of property, services or benefits unfairly received
167
What must be established before imposing a constructive trust on a stanger?
| Becomes a constructive trustee
1 of the following:
* Recipient liability/ knowing receipt
* Accessory liability
* Intermeddling
168
What 3 ways is recipient liability established?
1. Stranger received property knowing it to be in breach of trust/ fiduciary duty (knowing receipt)
2. Stranger received trust property without notice of the trust, later becomes aware and acts inconsistently with the trust
3. Stranger recieves trust proeprty knowing it is trust property (no breach in transfer) **but** later deals with it inconsistently with the trust
169
What does liability of knowing receipt require?
Stranger had knowledge of the breach:
* Actual knowledge (or notice)
* Constructive knowledge (willfully shut their eyes, recklessly failed to make enquirires that an honest and reasonable pperson would make)
170
What is accessory liability?
Stranger who never received the trust property but dishonestly assisted
171
What is the claim against a stranger with accessory liability?
Personal claim - must make good on the loss to the trust
| No proprietary claim - stranger was never in receipt of the property
172
What are the requirements for dishonest assistance?
| (accessory liability)
* Existence of a trust (express & implied from fiduciary relationship)
* Breach of trust/ fiduciary duty
* Assistance by a stranger in that breach
* The stranger's dishonesty in providing that assistance
| Objective test
173
What is intermeddling?
A stranger who takes it upon themselvs to act as a trustee
Considered a constructive trustee if actions cause loss to the trust
Become personally liable like a trustee
| trustee de son tort
174
When is the remedy of "tracing" avaliable?
clue: against who?
Only avaliable against a stranger (constructive trustee) if they have the property (or equivalent) in their possession
* Recipient liability
* Intermeddling
| equivalent = proceeds from a sale
175
Which strangers will equity NOT impose an constructive trust on?
* Bona fide purchaser for value of the legal estate without notice
* Innocent volunteer (in good faith)
176
What remedy is avaliable to beneficiaries when a bona fide pruchaser for value of the legal estate purchases trust property? (Trustee breach)
Against the trustees for any loss to the trust on **proceeds of sale** - personal claim
Purchaser buys the land free from equitable interest (must be registered to be binding)
177
What remedy is avaliable to beneficiaries when an innocent volunteer purchases trust property? (Trustee breach)
Who is an innocent volunteer?
**Innocent volunteer** - no consideration and not knowing trust property
Tracing (return property or equivalent to the trust)
Innocent volunteers cannot be made a constructive trustees (no personal claim)
178
What remedy is avaliable to beneficiaries when purchasers/ volunteers take property with notice of a breach of trust?
Personal claim/ recovery of property/ tracing
(treated as constructive trustees)
179
What is the overriding duty of a trustee?
Avoid conflict between their personal interests and their duty to the trust
(not profit from their position as a trustee)
180
What is a trustee not allowed to do?
clue: profit
Make profit through:
* Unauthorised profits
* Retaining directors' fees
* Renumeration as a trustee
* Purchase of trust property
* Competition with trust business
| Breaches of trustee/ fiduciary duty
181
What is the remedy against unauthorised profits by a trustee? What happens in the meantime?
Account of profits - enables recovery of any profits made through a breach of fiduciary duty
| All unauthorised profits should be held on trust for a benficiary
182
Who has a fiduciary duty in the deceased's estate? What must they do?
Personal representaives (executor/ administrator)
MUST account for any profits
183
What is the duty of a trustee who is appointed as director of a company?
Must accont for any director's fees becusase the oportunity to obtain came from their position as a trustee
| Holds all fees on trust for the beneficiaries
184
When can a trustee retain director's fees?
* The directorship predated the trusteeship
* They were appointed as director independently of the votes of the trust (trust did not use its voting rights to elect)
* Th trust instrument expressly authorised the trustee to retain the fees
185
What is the rule on remuneration of trustees?
Trustees must not profit BUT professional trustees have a right to renumeration
| Trustees can be REIMBURSED for their out of pocket expenses
186
When can trustees be reimbursed?
For out of pocket expenses e.g:
* Administrative Costs: postage, printing, photocopying, stationery
* Travel and Accommodation: reasonable travel costs for attending meetings
* Professional Fees: legal advice, accountancy, valuation fees (if reasonably required), agents/ experts
* Property Management: repairs, maintenance, insurance premiums
* Court or Regulatory Fees: filing fees, probate costs, or compliance
187
When can non-professional trustees be renumerated?
* Expressly authorised in the trust instrument
* Authorised by the courts (inherent jurisdiction to grant/ increase if it is in the interest of the beneficiaries)
* Authorised by beneficiaries (sui juris)
188
What is the self-dealing rule?
Trustee purchases trust property:
Transaction is voidable if set aside by a beneficiary = property must be returned
(CANNOT retire as trustee first or nominate someone)
| beneficiary can also approve the pruchase
189
When does the self-dealing rule not apply?
* Authorised by trust instrument
* All beneficiaries (sui juris) authorised
* Purchase is pursuance to an option or contract prior to trusteeship
* The court uses its discretion to approve the purchase
190
What is the fair-dealing rule?
Trustee purchases the beneficiary's beneficial interest
ONLY voidable if the trustee acted unfairly
191
When will a fair-dealing transaction not be void?
Trustee can show that:
* They did not take advantage of their position
* They made full disclosure to the beneficiary
* The transaction was fair and honest
Cannot satisfy = set aside
192
Who has a statutory right to remuneration?
Professional trustees
193
When will the court award renumeration to a professional trustee?
Usually only if all beneficiaries agree but may use inherent jurisdiction if no express clause/ agreement exists &...
**acted honestly and openly for the benefit of the trust** e.g
* The work is beyond what a lay trustee could reasonably do
* The trust administration would suffer without professional input = **allow good administration**
194
How are first trustees appointed in an express trust?
By trust deed (give legal title)
195
Who CANNOT act as a trustee?
* Legally declared bankrupt
* Convicted of dishonesty and diception offences
* Lack capacity - mental disorder, ill health, disability
196
How many trustees for a trust of personalty?
1 mimimum
No maximum
197
How many trustees for a trust of land (realty)?
Minimum of 2 (overreaching)
Maximum of 4
| overreaching - purchaser takes land free of equitable interest
198
What happens to ownerhsip of a trust if a trustee dies?
Right of survivorship applies - title automatically passes to survivors
199
Who can appoint new trustees? (In order)
What should you look out for?
1. The persons nominated in the trust OR;
2. The surviving/ continuing trustees or PR of the last surviving trustee
3. The court (last resort)
Look at the **diections in the trust** - look carefully at who can appoint in the **circumstances** written by the settlor *these may be limited!!* and the next set of people may need to appoint
200
When can a new trustee be appointed in place of another? S36(1) AT 1925
| S36(1) Trustee Act
* Dies
* Out of UK more than 12 months
* Desires to be dishcharged
* Refuses to act
* Unift to act - bankrupt/ convictions (D/D)
* Incapable to act - lacks capacity
* An infant
* Removed under a power contained in the instrument creating the trust
201
When can beneficiaries appoint trustees in trusts of land?
Must be:
* adults
* mentally capable
* together absolutely entitled to the trust proprty
* all in agreement
| Where there is no one else nominated in the trust
202
How can beneficiaries retire/ appoint new trustees? S19 TOLATA
Directions:
* Give a written direction to a trustee to retire
* Give a written direction to the trustee/s to appoint a specified person to be a trustee/s
**must satisfy conditions e.g all adults, mentally capable & together absolutely entitled**
203
What duty does a trustee have who has been given direction to retire?
* Ensure either 2 trustees remaining or a trust corporation
* Replacement/ continuing trustees must consent to retirement by deed
| Trust corp - business or individual professional- administers the trust
204
When can a beneficiary appoint a substitute trustee? (S20 TOLATA)
Trustee lacks capacity:
* There is no one entitled/ willing to appoint a replacement trustee in the statutory order (s36(1))
* Give written direction to amount specified person/s
205
What powers does the court have to appoint a trustee?
Must be difficult/ impractical without court assistance
Appoint/ substitute/ remove trustees
| Can act as though there are no trustees
206
What must the court take into account when appointing trustees?
* Wishes of the settlor
* If the trustee would be even-handed to all benficiaries
* If appointment would promote/ impede execution of the trust
207
What will the court do if no one is willing to act as a trustee?
Appoint a:
* Public trustee (trust corp)
* Judicial trustee (appointed by high court where trustees failed in their adminitration of the trust)
208
How is property vested in newly appointed trustees?
Automatic if appointment is by deed
In writing = continuing trustees must execute a deed of vesting
| OR do the necessary forms for other types of property
209
How can a trusteeship be terminateed?
* Disclaimer
* Death
* Retirement
* Removal
210
When can a trustee disclaim? (refuse the role)
Any time before acceptance but NOT after.
deed, oral, inferred conduct/ length of time.
211
What happens to th trusteeship when a trustee dies?
survivorship rule OR
If no other trustes - trusteeship goes ot their PR who can appoint a new trustee
212
What are the requirements for a trustee to retire?
* Deed declaring desire to discharge trustee duty
* Remaining trustees must consent to retirement in the same deed
* After retirement must be a trust corp or 2 trustees remaining
213
How can a trustee be removed?
* Circumstacnes listed in S36(1)
* By the court
* By beneficiaries in a trust of land
214
What must a trustee do on appointment?
Duty of care:
* Ascertain terms of trust and identify beneficiaries
* Examine trust document/ other docs and proceed against a trustee in breach
* Find out trust property and vest in their name (legal tite)
215
What are a trustees continuing duties?
* Exercise powers with other trustees
* Keep acounts/ records
* Act impartially between beneficiaries
* Invest
* Personal interest does not conflict with trust duty
216
What are the standards of care for different trustees?
* Lay trustee - reasonable care and skill in the circumstances
* Knowledge/ experience - higher standard of care
* Professional trustees - higher standard of care
217
How can a trustee be even-handed?
Select fair investments:
investmenst that will benefit the life and remainder interest of beneficiaries (produce income and protect capital)
218
What is the meaning of investment?
Purchase of property for income yield and well as investments of pure capital growth
219
What is the modern portfolio theory?
Trustee standard of care:
The risk level of the entire portfolio rather than the risk of each investment
*Have all the investments together made profit?*
| explanatory notes of the Trustee Act 2000 - now law
220
What power is given to a trustee to invest?
| Trustee Act 2000
(If not expressly excluded by trust instrument)
S3 - Can make any kind of investment as if they were absolutely entitled to trust assets
S8 - Allows investment in free hold or leasehold land in the UK
221
What must a trustee take into consideration when investing?
Standard investment criteria:
Trustee should review investments and consider changes based on:
* Suitbaility to the trust
* The need for diversification
**diversification:**
- Different asset classes (e.g., equities, bonds, property, cash)
- Risk
- Liquidity (e.g., for paying income or legacies).
*reduces the risk of loss if one investment performs poorly*
222
What must a trustee do before investing?
Must obtain/ consider advice from a person who they reasonably belived to be qualified (ability and experience)
223
When can a trustee take non-financial considerations into account?
* Express authority in the trust document
* Beneficiaries are all sui juris and give consent
* If it can be proved ethical investment policy is just as financially sound
| Trustees should prioritise financial interests of beneficiaries
224
What is the exception for trustees to take non-financial consideration to account? (investing)
Charitable trusts - investments cannot conflict with the aim of the charity or prevent donors etc
225
What are the general principles - trustee duty to invest?
* Even-handedness towards all beneficiaries
* Income yield and capital growth
* Standard of care is based on the risk level of the entire portfolio
226
What is the difference between trustee duties and trustee powers?
Duties = mandatory
Powers = discretionary
| Powers not express in trust doc = statutory
227
What are the powers of trustees?
* Power of maintenance
* Power of advancement
228
What is the power of maintenance?
Statutory power to give maintenance / income to benefit the beneficiary
maintenance = any payment that benefits the beneficiary
S31 - hold on trust for a minor, can at any time use the whole trust/ part of the income of the trust toward maintenance, education, benefit
229
When can a trustee exercise their power of maintenance?
Discretionary power of the trustee even if other funds for maintenance or if there is someone else bound by law to provide maintenance for the child's maintenance / education
230
What is the limit on a trustees power of maintenance?
Subject to any prior life interests - NO power to use income towards maintenance of a minor with remainder interest.
| Must be no prior life interest
231
When is the power to maintain not avaliable?
Discretionary trusts
(beneficiaries have no automatic right to payment)
232
When does the power of maintenance apply to minors?
* Interest is vested
* Contigent interests provided the trust carries the immediate income - entitled to the income earned from the gift until the date it is actually tranferred
233
What are trusts that 'carry the immediate income'? What gifts have this?
Beneficiary is entitled to the income earned until the date the gift is actually transferred
Generally all vested/ contingent gifts in a will apart from gifts of cash
*(probably told in th SQE if a gift carries immediate income!!)*
234
What is the power of advancement?
S32 - Trustees can use any trust capital for the adavancement or benefit of any entitled beneficiary (cannot exceed beneficiary's share)
| advancement - use of money to improve material situation
235
What are the requirements for power of advancement?
* Must not exceed beneficiary's share of trust assets
* Once beneficairy becomes entitled to share - the money advanced must be deducted from their final share
* Person holding prior life interest must be an adult and give consent in writing
236
How is an advancement calcuated when beneficaries become entitled ot trust property?
Advancement value + trust asset value
Work out entitled share value (e.g 50%)
Deduct initial advancement value from entitled share
237
What is the rule on advancement for trusts pre 1 October 2014?
Maximum amount is half the benficiary's presumptive share
238
What is 'advancement'?
Any improvement to the MATERIAL situation of the beneficary
(Can include charity donation/ early advancement to avoid inheritance tax)
239
What should trustees do if advancement money is not used properly?
Not make any further advances without ensuring the moey is properly applied
240
What are the general principles for breach of trust?
* No mens rea - intention of trustee is not relevant for breach
* Action or omission - act outside scop fo power/ failed to protct trust assets
* Actions must fall below statutory standard of care
* Proprietary/ personal claim
* ONLy liable if can prove breach caused loss to trust/ unauthorised gain to trustee
241
When will a trustee/s be liable for breach of trust?
If the beneficiairies can PROVE breach of trust AND the trust suffered loss as a result of the trustee/s action/ inaction
242
What are the general principles of trustee liability?
* Trustee is **liable for OWN breaches**; not vicariouly liable for other trustees (Iiable if they should have known = trustees act unanimously)
* Not liable for breaches committed BEFORE appointent (must review docs/ accounts: failure =. breach)
* Not liable for breaches committed AFTER retirement (remain liable for breaches comitted in office)
* Joint and several liability (beneficiaires can sue all or 1 trustee - innocent trustees can rely on stat provisions/ indemnities)
* Court has discretion to determine each trustee/s contribution (just and equitable)
| Cannot escape laibility/ facilitate breach by RETIREMENT
243
When can a trustee claim indemnity from other trustees?
* Co-trustee was fraudulent
* Co-trustee is a solictor-trustee who used controlling influence
* Beneficiary-trustee has exclusively benefitted from the breach (indemnify extent of beneficial interest)
* Beneficiary instiagted the breach/ consent in writing = court can impound beneficiary's interest to compensate
| indemnity - money paid by way of compensation
244
What does 'impound a beneficiary's interest' mean?
Beneficiary instigated/ consented in writing to breach
Court can seize or take control of beneficiary's entitlement to indemnify the trustee (up to the full interest)
Beneficiariay cannot sue trustee for breach
245
What is the remedy for breach of trust?
Compensation (money awarded to make up for **loss**) = restore trust property e.g account for profits
**strict liability**
Trustee is personally liable to make up loss
(simple interest but compound interest for dishonesty/ profit)
246
What is the remedy where a trustee has made unauthorised profit?
Restitution (account for any profits made)
247
What interest do the court award on damages for breach of trust?
Simple - rate of interest is at the court's discretion
based on principal sum awarded
248
When is compound interest awarded?
Trustee has been fraudulent OR made unauthorised profits
| Principal sum plus interest accumulated on it
249
When is a breach of duty not a breach of trust?
Trustee used position to make unauthorised profits
| Subject to injunction / must account for profits
## Footnote
breach of trust usually act outside trust instrument
250
What protection/ defences are avalible to trustees?
* Exemption clauses
* Court power to relieve liability
* Defence of beneificiary involvement
* Limitation
251
What happens if there is ambiguity in an exemption clause?
Construe against the truste seeking to rely on it
| No ambiguity =. construe fairly
252
What is the law on exclusion of fraudulent liability? (Armitage V Nurse)
A fraudulent trustee (acting dishonestly) cannot rely on an exemption clause
BECAUSE the core of a trust is the trustee obligaton to act honestly an in the best interest of beneficiaires
253
What are the powers of the court for breach of trust?
S61 Trustee Act 1925 - court can excuse a trustee for breach of they believe acted honestly/ reasonably & ought to be excused
| Less likely for the breach of a professional-trustee (high standard S1)
254
What is 'beneficiary involvement'
Defence - trustee can be excused from a defence if they can show the beneficairy instigated/ excused the breach
255
What are the requirements for the defence of beneficiary involvement?
What happens if proved?
* Trustee can prove instigation/ consent BEFORE breach
* Beneficiaries must be sui juris
* Beneficiaries must fully understand the actions (do not need to know it is a breach)
* No need to show beneficiary benefitted
The court - IMPOUND (withhold or reducee) beneficial interest (damages to other beneficiaries which reduce their entitlemtent)
| The court-IMPOUND beneficial interest (damages to other beneficiaries)
256
What is release/ acquiescence by a beneficiary?
Beneficiary discovered the breach...
decided to take no action/ delayed taking action
=
Beneficiary waves right to sue & releases trustee liability
| Beneficiary must be sui juris & have full knowledge
257
When will the court infer acquiescence?
Delay in taking action MAY be evidence of acquiescence
(relates to doctrine of laches - too late to award equitable remedy)
| Question of fact by the court
258
What is the limitation period to bring an action against a trustee?
S21 - 6 years from the date the right to take action started (beneficial interest is vested in possession)
| Remainder interest time period starts on the death life interest
259
What are the exceptions of the 6 year time period to bring action against a trustee?
* No limitation period where a trustee party to fraud (sham trust)
* No limitation to recover trust property/ proceeds from a trustee
* Disability - time only starts running when disability ENDS (infants - end at 18, unsound mind - ends on death)
* Fraud, concealment/ mistake - time starts running when beneficiary discovers (or reasonably could have)
260
What is the doctrine of laches?
Equitable defence - must show C's delay to bring an action meant they are no longer entitled to equitable remedy...
would be unjust to the defendant
261
When does the limitation period NOT apply?
Claims of equitable remedies (specific performance/ injunctions/ tracing)
262
When will a claimant beneficiary use tracing?
* Trustee is bankrupt (priorty over other creditors)
* Trustee cannot be found (inc innocent volunteer)
* D is an innocent volunteer
* More profitable (than personal claim for compensation) - propert increased in value
263
What can a claimant do if property is traced?
* Charge over asset - sell property and take proceeds
* Claim constructive trust - take advantage from increase in value
| C can decide which is most profitable
264
Who is subject to tracing?
* Trustee who has taken trust property
* Constructive trustee
* Innocent volunteer
265
When is the right to trace lost?
Property no longer exists e.g paid for a service
| Must make a personal claim
266
What are the requirements of tracing?
* Fiduciary relationship (initial)
* C must have an equitable interest
* Property must be traceable (identifiable)
* Tracing must not produce an inequitable result
* No unreasonable delay
267
What can a claimant do when property is substituted? (tracing)
* Sue for compensation for loss
* Trace and claim the substituted property
(whichever is most profitable)
| CANNOT trace against a third party who gave consideration for property
268
What happens if property is mixed? (tracing)
Property increased in value = may recieve bigger sum
Decrease in value = must accept the loss
269
What is the rule on tracing property to an inncocent volunteer?
NOT allowed to trace a mixed fund where an innocent volunter has mixed trust money with their own money
(inequitable)
Innocent volunteer can use **change of position defence** - spent money in a way would not have otherwise in reliance
270
What are the options when tracing UNMIXED funds?
* Reclaim asset 🔒 OR
* Asset sold:
1. Claim proceeds of sale 💰
2. Proceeds used to buy property = trace and claim 🏠
3. Claim asset if purchaser was a constructive trustee (knew it was trust property) 😈
271
What are the options when tracing MIXED funds against trustee/ another trust?
* Against trustee - have first claim over property purchased. Trustee must prove part of the funds are theirs (divided pro rata)
* Against another trust/ third party - pro rata claim to funds/ property
272
What are the rules when tracing MIXED funds in bank accounts?
(trustee and beneficiary funds)
* Trustee presumed to spend own money first 💸
* Beneficiaries have first right to claim property purchased using mixed funds (so overrides the above principle) 🏡
* Subject to principle of lowest intermediate value (money withdrawn after deposit of T money - only claim what remains after) /balance (overdraft) 💳 cannot trace into negative balance
* No backwards tracing (only property directly bought with trust money) 🚫⬅️
273
What is the exception to the rules on lowest intermediate balance and backwards tracing?
Privy Council - coordinated scheme exception (to defeat tracing)
| Court will decide
274
What are the rules when tracing MIXED funds in bank accounts?
(2 trusts or trust & volunteer)
exception?
First out rule
(first some of money paid in is used in a transaction first)
NOT applied if the court considers unjust/ impractical/ alternative method (e.g pro rata)
275
What are the defences to tracing?
1. Change of position - innocent volunteers (change to personal circumstances)
2. Property has been dissipated (not traceable/ identifiable)
3. Bona fide purchaser for value without notice (consideration and no knowledge)
4. Doctrin of laches (claimant delayed bringing action = unjust outcome)
276
General principles of equitable remedies:
* Discretionary
* Principles of equity apply - clean hands maxim
* Court will not grant unless it can be carried out
* Where damages is inadequate/ inappropiate
* Court can award damages as well as/ substitution for injunction/ SP
| clean hands maxim - must have acted equitably to claim equitable remedy
277
What must a claimant do befor applying for specific performance?
Provide consideration
equity will not assist a volunteer!
equity will not perfect an imperfect gift!
| Used where damages are inadquate e.g unique rare item (inc land)
278
Example when court **cannot** impose specific performance
Compelling an employee to work (inequitable)
279
What principles apply to injunctions?
* C must give undertaking as to damages (promise to compensate if transpire should not have been granted)
* Court can award damages in lieu of injunction
* Injunction granted where damages is inappropiate
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