1
Q
if a trustee mixes trust money with their own bank account, the law presumes that the trustee will withdraw which money first?
A
their own money first
2
Q
limitation period for making a claim for breach of trust
A
6-year limitation period
3
Q
when does time begin to run for a remainder person to bring a claim for breach of trust?
A
time does not begin to run against a remainder person until their interest vests in possession
4
Q
when does time begin to run for a minor beneficiary to bring a claim for breach of trust??
A
only when they reach the age of majority
5
Q
what will the courts look at to establish an implied common intention constructive trust?
A
the financial contributions of the parties
6
Q
which financial contributions would demonstrate an implied common intention?
A
only direct contributions towards the purchase price of a house can be used to find a common intention eg payment towards mortgage instalments or the initial purchase (unless the money was loaned)
7
Q
What happens where property is transferred to a trustee but the trust fails?
A
The trustee will hold the legal title to the shares on an automatic resulting trust for the settlor
8
Q
Perpetuity period requirement for non-charitable purpose trusts
A
common law perpetuity period of 21 years - must be certain on creation that the trust will come to an end within that time
9
Q
Factors for assessing the exclusively charitable purpose of a charitable trust
A
(a) Charitable purpose? +
(b) Public benefit? +
(c) Exclusively
charitable? eg is there a political dimension?
10
Q
Formalities for beneficiaries to remove a trustee
A
They must do so in writing and must appoint a new trustee first.
11
Q
Is “employees of my company” sufficiently clear to satisfy certainty of objects?
A
Yes, ‘employees of my company’ is specific enough to identify the beneficiaries, as the employees can be determined by the records of employment at the company.
12
Q
Is a trust of land void if not made in writing?
A
NO, it is valid but unenforceable. The trust is not void because s 53(1)(b) renders trusts unenforceable, not void. It exists, but cannot be enforced without the required formalities.
13
Q
What is a trust?
A
a means of separating legal and beneficial ownership of property
14
Q
Who has the legal title to trust property?
A
the trustees hold the legal title to the trust property and must hold/apply the property for the benefit of the beneficiary
15
Q
Does a trust have a separate legal personality?
A
No, the trustee themselves is sued if they breach their trustee duties
16
Q
Bailment
A
the transfer of possession of chattels from one person to another
17
Q
Main difference between bailment and a trust
A
Only tangible personal property (chattels) can form the subject matter of a bailment whereas any asset or right can be held on trust (with a few exceptions).
Bailment involves transfer of possession but does not impact the bailor’s legal title to the property.
18
Q
General rule for formalities required to set up a trust (Paul v Constance)
A
generally possible for a settlor to declare a trust without complying with any specific formalities requirements
19
Q
Bare trust
A
Property is transferred by the settlor to another to be held on trust for third party absolutely
20
Q
Limitation period for non-fraudulent breaches of trust
A
6 years from date the action accrued
21
Q
limitation period for a remainderman starts on the
A
death of the life tenant / when their interest vests in possession
22
Q
minor beneficiaries can bring an action for breach of trust when they
A
turn 18 / reach age of majority
23
Q
Where a beneficiary was under a disability when the breach occurred, the limitation period only starts running when…
A
the disability has ended
24
Q
no limitation period in actions against a trustee who was a party to
A
fraud – however, C will only be permitted to sue, where it is not unconscionable for him to do so: “the law will not help those who sleep on their rights” and “equity aids the vigilant”.
25
no limitation period in actions to recover
trust property or its proceeds from a trustee
26
In an action for fraud, concealment or mistake, time only starts running from
the date of knowledge ie when the beneficiary discovers the fraud, concealment or mistake
27
When does a rebuttable presumed resulting trust arise?
where the transfer of property fails, and there is no reason to assume it was intended as an outright gift.
28
How can the presumption of a resulting trust be rebutted?
the presumption can be rebutted by evidence that the transferor did not intend the recipient to hold the property on trust for them.
29
the doctrine of presumed resulting trusts
when a transfer is made without consideration and there is no evidence of the transferor's intention to make a gift, the equitable interest results back to the transferor
30
What must D show to successfully argue the s.61 TA defence for breach of fiduciary duty?
D must demonstrate that he acted honestly, reasonably, and ought fairly to be excused for the breach of trust considering all the circumstances
31
What is the correct procedure if the named executors wish to renounce their position?
The named executors have the authority under s 36(5) TA 1925 to appoint new trustees before renouncing their position.
32
When there is a gratuitous transfer of property without clear evidence of the transferor's intention to make a gift, the law presumes that the transferee holds the property on a resulting trust for the transferor. This presumption can be rebutted by...
evidence showing that a gift was intended eg transfer was made on the recipient's bday
33
When can a lay trustee charge for their time?
if the trust instrument allows them to do so
34
How do beneficiaries rank in the statutory order of priority if the trustee has misappropriated and dissipated trust property and gone bankrupt?
beneficiaries will be unsecured creditors
35
How is the duty/standard of care for trustees judged?
duty of care applies to all trustees but the standard to be applied to their conduct takes into account professional skills and knowledge
36
The person seeking to establish a common intention constructive trust needs to demonstrate that there was a shared common intention to...
share the beneficial ownership of the property and that S acted to their detriment based on that intention
37
s 36(6) TA 1925 allows the current trustees to appoint an additional trustee in writing, but the total number of trustees must not exceed
4 unless the trust instrument permits otherwise
38
according to the Re Rose principle, a transfer is effective in equity once the transferor has done...
everything necessary to transfer the legal title
39
What happens when a trust is void for uncertainty of objects?
The trust assets return to the settlor, or to the testator’s estate, on a resulting trust.
40
Which beneficiaries can benefit from the power of advancement?
a beneficiary who has an interest in capital (which may be a contingent or remainder interest)
41
For trusts created before 1 October 2014, the power of advancement only applies to how much of a beneficiary's interest?
half of a beneficiary's interest in the trust fund
42
Who must give their consent for the trustees to be able to exercise the power of advancement?
Any beneficiary with a prior interest (such as a life tenant) must consent to the exercise of the power.
43
Can the statutory powers of maintenance and advancement be overridden by the terms of the trust instrument?
Yes
44
“falsifying the account”
trustees have to return the trust to the position it would’ve been in as if the unlawful investment had not occurred
45
When do resulting trusts typically arise?
a legal owner has transferred ownership of their property to a third party but, for some reason, equity recognises that they should retain or regain the beneficial interest in that property.
46
Constructive trust
A constructive trust arises when, although there is no express trust affecting specific property, equity considers that the legal owner should be treated as a trustee of an interest in it for another because it would be UNCONSCIONABLE for them to retain it.
47
Are constructive trusts imposed automatically?
No, a claimant must assert their rights in the property and seek to claim beneficial ownership of the property or a share of the property
48
If you have possession of (but not title) to chattels, what are you?
A bailor
49
Administrative unworkability is not relevant to what type of trusts?
fixed trusts (usually applies to discretionary trusts)
50
Fair dealing - The trustee may purchase the equitable interest of a beneficiary if they can prove they
acted fairly, there was no undue influence, they gave full value and the beneficiary was fully informed
51
A transfer will be recognised in equity as complete where a settlor has done
everything within their power to effect the transfer
52
Does a trust have a separate legal personality?
No, the trustee(s) can be sued for breach of fiduciary duty
53
Does the trustee(s) own the property they hold under trust?
No, they hold the legal title.
Equity only recognises the beneficiary as the owner.
54
Resulting and constructive trusts arise by
operation of law
55
Formalities for creating an express trust
a settlor can declare a trust without complying with any specific formalities (except trusts of land).
The 3 certainties must be satisfied:
- certainty of intention
- certainty of objects (beneficiaries)
- certainty of subject matter (property held on trust)
56
the rule in Milroy v Lord
Equity will not perfect an imperfect gift
57
beneficiaries who have given consideration can rely on the maxim
‘equity deems as done that which ought to be done’: the recipient of an imperfect gift or the beneficiary of an incompletely constituted trust who has provided consideration can enforce the obligation
58
Vested in possession
a present right to present enjoyment
59
Vested in interest
a present right to future enjoyment
60
Perpetuity period with a 'lives in being' clause
The perpetuity period covers the ‘lives in being’ plus 21 years. All the lives in being (eg the King) must have died, and 21 years is added on after the death of the last surviving life in being.
61
Implied lives in being
If the settlor did not specify express lives in being, they may be implied from the settlement. The implied lives in being are everyone who is alive at the date of the settlement and has been implicated in the settlement.
62
Indicators of a power, rather than a discretionary trust
- ‘must’ suggests a discretionary trust whereas ‘may’ suggests a power of appointment;
- if discretion has been given to a third party (not a trustee) it is a power of appointment, not a discretionary trust.
63
Bare trust
- A bare trust arises where trustees are holding property for the sole benefit of an adult beneficiary;
- The beneficiary has full control over the actions of the trustees in relation to the trust property.
- The trustees must comply with the beneficiary’s instructions, including how to invest the assets, how much to pay the beneficiary or even terminating the trust and transferring the legal title to the beneficiary if so ordered.
64
The Variation of Trusts Act 1958
where property is held on trust, the court may, where it thinks fit, approve on behalf of certain persons any arrangement varying/revoking the trust
65
The rule in Saunders v Vautier
the beneficiaries may terminate a trust early and receive legal title to the trust property if:
(a) the beneficiaries are absolutely entitled to the trust property;
(b) all beneficiaries are over 18 and have capacity; and
(c) they all agree.
66
67
Examples of fiduciary relationships
solicitor-client, company director-company, agent-principal
68
No-profit rule for trustees
A fiduciary must not obtain an unauthorised benefit as a result of their position as a fiduciary either for themselves or for a third party.
69
Can professional trustees charge for their services?
Yes, professional trustees have a statutory right to remuneration under Part V of the Trustee Act 2000
70
Can a trustee who gains employment through their trusteeship keep the proceeds of their employment?
No, they will hold the remuneration on constructive trust for the trust beneficiaries.
71
When would non-professional trustees be entitled to remuneration for their trusteeship?
If authorised by the trust instrument, the courts or the beneficiaries
72
Are trustees entitled to reimbursement?
Yes, trustees are entitled to be reimbursed from the trust fund for their out-of-pocket expenses
73
Can a beneficiary void a transaction where the trustee has done self-dealing to/fro the trust?
Yes, the transaction is voidable by the beneficiary/ies within a "reasonable" time after they discover the self-dealing (they can also ratify it)
74
When can a self-dealing transaction NOT be set aside?
- if the court’s approval to the sale has been obtained;
- the trustee or PR has retired and sufficient time has elapsed;
- all the beneficiaries, being of full age and capacity, have given their written consent after receiving ILA;
- The sale has been authorised by the trust instrument.
75
fair dealing
the trustee’s purchase of a beneficiary’s equitable interest in the property
76
Who cannot be appointed as a trustee?
'incapable of acting'
- lacks capacity/minor;
'unfit to act'
- bankrupt;
- convicted of offences involving dishonesty/deception
77
If there is a sole trustee, and they die, who has the power to appoint a replacement?
- The beneficiary has a power to appoint trustees under s 19 TLATA.
- The trustee’s PRs can exercise the s36 TA 1925 statutory power.
- The court also has a power to appoint trustees under s 41 TA 1925 (last resort)
78
Delegation of trustee’s functions by power of attorney
a trustee can delegate his functions to an attorney to act as deputy by deed for max. 12 months
79
Procedure for a trustee to delegate their position by power of attorney
give written notice to the other trustees and to any other person with the power to appoint new trustees within 7 days of the delegation.
80
Standard investment criteria requires the trustees to consider
the suitability of investments and diversification of the portfolio
81
Advice to trustees re investments
- must periodically review investments: suitability and diversification;
- should always seek proper financial advice;
- must treat all beneficiaries fairly when selecting investments
82
Can a trustee delegate their power to invest in land?
Yes, trustees have a statutory power to delegate their power of investment and power to acquire land to an agent. They must keep the agency arrangement under review. The trustees may appoint the agent in writing and provide the agent with a written policy statement.
83
What can trustees do to ensure they are remunerated if the trust deed is silent on remuneration?
If the trust instrument is silent as to trustee remuneration, a professional trustee is entitled to remuneration for their services as long as there is more than one trustee in office and the co-trustees agree to the charge in writing.
84
Can beneficiaries of a trust see "confidential" documents, such as those pertaining to the trustees' decision-making process?
No, beneficiaries and potential beneficiaries do not have an entitlement to "confidential" trust documents. However, they can ask the court to exercise its discretion to order disclosure of such documents.
85
Which trust documents are beneficiaries entitled to see as of right?
Any beneficiary is entitled to see the trust deed, accounts and information about investments as of right
86
If a trustee goes travelling for a few months, how can they best ensure that they fulfil their responsibilities as trustee?
They could delegate their functions to an attorney to act as their deputy by deed using the form prescribed in s.25 TA 1925. They should give written notice to the other trustees and to any other person with the power to appoint new trustees with seven days of the delegation.
87
What is the risk of a delegating trustee appointing an attorney?
the delegating trustee will be automatically liable for the acts or defaults of the attorney as if they were the acts or defaults of the trustee
88
Trustees are permitted to retire without being replaced under s39 Trustee Act 1925 provided...
at least 2 trustees (or a trust corporation) remain to continue the trust
89
Formalities for a trustee to retire
The retirement must be by deed and the remaining trustees must consent
90
Are trustees who become bankrupt automatically removed from their trusteeship?
No
91
Formalities for replacing a trustee under the statutory procedure
The appointment of the replacement trustee must be in writing (preferably by deed) and executed by the remaining trustees
92
If the division of trust assets is not specified in the trust deed, what is the presumption?
that the trust property will be shared equally between the beneficiaries
93
Elements of a claim for accessory liability
A breach of trust, which the defendant assisted, the defendant acting dishonestly (the test for dishonesty being objective).
94
Why is it advantageous to use a deed to appoint a new trustee?
a deed automatically vests the trust property (apart from company shares) in the continuing and new trustee
95
Is a trustee who has retired liable for breaches of trust?
A retiring trustee remains liable for their own breaches but will not be liable for future breaches unless they retired to facilitate the breaches
96
Grounds for replacing a trustee
(a) the trustee is dead;
(b) remains outside the UK for more than 12 months;
(c) wants to retire;
(d) refuses to act (disclaims);
(e) unfit to act;
(f) incapable of acting (lack capacity);
(g) is a minor.
97
If all trustees have died, who appoints a replacement trustee?
the PRs of the last surviving trustee
98
A replacement of a trustee must be executed
in writing (ideally by deed)
99
Court procedure to replace a trustee (s.41 TA 1925)
- trustees or beneficiaries apply to court;
- court will replace if expedient to do so and in best interests of the trust.
100
Procedure for beneficiaries to replace/appoint new trustees (s 19 TLATA 1996)
- beneficiaries serve a valid written direction on the trustee to retire and can also appoint a replacement/additional trustee;
- all beneficiaries must be of full age, capacity and collectively absolutely entitled to the trust property;
- Not possible if s.19 excluded in trust instrument or someone is expressly appointed to nominate replacements.
101
the beneficiaries can only use the s.19 removal power if they are all
of full age, capacity and collectively absolutely entitled to trust property
102
Following a valid written direction given by the beneficiaries, the trustee must retire by deed if:
(a) reasonable arrangements have been made to protect their rights;
(b) after their retirement there will be 2 trustees or a trust corporation left; and
(c) another person is appointed to replace them or the continuing trustees consent by deed to their retirement.
103
For how long can a trustee delegate their position to a deputy (attorney)?
max. 12 months
104
Components of a proprietary estoppel claim
(1) Assurance: Legal owner encourages C to have an expectation by either telling them they have an interest in land; or affirming C's conduct / remaining silent
(2) C detrimentally relied on the assurance
(3) Reliance
105
Examples of C's conduct which would amount to "detrimental" reliance in a proprietary estoppel claim
(a) spending money on refurbishing a home or improving property;
(b) working without adequate remuneration;
(c) giving up a job and moving to a new area; and
(d) looking after someone who is gravely ill
106
(proprietary estoppel claim): C's detriment in relying on the legal owner's promise must outweigh
any benefits gained eg living there with no rent
107
(proprietary estoppel): the legal owner's assurance must cause C to act to their
detriment (ie causation must be satisfied)
108
Does the court have to award remedies for proprietary estoppel?
No, they have discretion as to what (if any) award is made
109
Possible (discretionary) remedies for a proprietary estoppel claim
(a) transfer of the legal ownership in land;
(b) grant of a lease;
(c) some right of occupancy (eg the right to live in a house rent-free for life);
(d) financial compensation; or
(e) a beneficial share in the home.
110
(proprietary estoppel) When would the court be likely to limit the remedy awarded?
If the detriment suffered was only minor, and it would be disproportionate to enforce the assurance eg legal owner promised them an inheritance if they cared for them for the rest of their life and then died suddenly
111
(proprietary estoppel) How will the court consider the effect of an award on others?
The court should consider any remedy ‘in the round’, asking itself whether the remedy would do ‘justice between the parties, and whether it would cause injustice to third parties’.
112
Main difference between remedies for a common intention constructive trust and proprietary estoppel
the common intention constructive trust, if established, guarantees the claiming partner a beneficial share in the home; whereas proprietary estoppel gives the court a discretion over the remedy that the claiming partner will be awarded
113
When could a claim for proprietary estoppel be BARRED?
- delay (delay defeats the equity)
- unconscionable conduct ('clean hands')
114
Proprietary estoppel claim flowchart
(1) Did the legal owner make an assurance (actively/passively)?
(2) Has the claiming party relied on the assurance?
(3) Have they suffered a detriment in reliance?
(4) Any bars?
Court will exercise its discretion to award a remedy.
115
What limits could prevent the trustees from exercising the statutory power of maintenance/education for minor beneficiaries?
(a) a contrary provision in the declaration of trust; and
(b) the trustees can only exercise this power in favour of minor beneficiaries who have some kind of interest in income, whether vested or contingent, but not where there are any ‘prior interests’ to income.
116
In life interest trusts, trustees must pay income to the
life tenant
117
Can the trustees be compelled to pay to a beneficiary for their education?
No, their power of maintenance/education is DISCRETIONARY
118
Duty to pay income to adult contingent beneficiaries
Trustees MUST pay trust income to adult contingent beneficiaries as it arises
119
The power to pay capital to or for beneficiaries is
discretionary
120
What must the trustees obtain before advancing capital if there is a prior interest beneficiary?
the prior interest beneficiary's written consent (assuming they are an adult)
121
How much capital can trustees advance to beneficiaries?
- For Oct 2014 trusts onwards, can advance up to all of beneficiary’s share
- For trusts predating Oct 2014, can advance up to half of beneficiary’s share
122
Advice to give to a newly appointed trustee
- ensure that they have been properly appointed;
- ascertain what the trust property consists of and take all reasonable and proper measures to obtain control of the trust property;
- review the trust document and associated paperwork to familiarise themselves with the trust and how it works;
- enquire into the past business of the trust to ensure that there have been no past breaches of trust, and to take appropriate action to remedy any breaches; and
- where there are chattels held on trust, ensure that a proper inventory is drawn up
123
Duty to act impartially between beneficiaries
a trustee must not benefit one beneficiary at the expense of another and may find themselves in breach of trust if they continually prefer the interests of one beneficiary over the other.
124
Best practice for number of trustees to be operating the trust
2 - 4 trustees appointed at any given time
125
Co-trustees must generally take decisions
unanimously
126
Trustee's duty to act "personally"
they must be personally active in the running of a trust
127
Which trust docs are beneficiaries entitled to see?
(a) the trust document or will that created the trust;
(b) the trust accounts; and
(c) a schedule of trust investments
128
If the beneficiaries want to see documents that record the reasons trustees took for exercising or not exercising a power in a particular way, what should they do?
apply to the court for disclosure
129
When will the courts order disclosure of trust docs?
the court will usually start with the presumption that such documents should not be disclosed, unless such disclosure is in the interest of the sound administration of the trust.
130
When would the court be likely to refuse disclosure of trust documents?
where it would cause family members to fall out, or if it were to reveal confidential information about the finances or state of health of individual beneficiaries.
131
What docs are the trustees NOT obliged to share with the beneficiaries?
documents that record the reasons for their decisions (although the beneficiaries may go to court to try and access these)
132
If a trustee 'self-deals' trust property, the beneficiaries can have the transaction set aside so long as they take action within a
reasonable timeframe
GDL recap
flashcards
Decks in class (37)
# Cards
-
Offer and Acceptance51
-
Contract Formation72
-
Duress and undue influence51
-
Contractual Terms68
-
Exemption Clauses21
-
Misrepresentation44
-
Mistake20
-
Privity of Contract15
-
Discharge/Frustration36
-
Contract - Remedies73
-
Principles of Land Law25
-
Land - Enforcing interests61
-
Land - Easements43
-
Land - Covenants1
-
Land/Trusts - Co-Ownership of Land33
-
Land - Mortgages46
-
Tort Recap100
-
Tort - Duty of Care19
-
Tort - Breach and Causation68
-
Tort - Remoteness7
-
Tort - Remedies36
-
Tort - Psychiatric Harm17
-
Tort - Private Nuisance41
-
Tort - Public Nuisance19
-
Tort - Rylands v Fletcher22
-
Tort - OLA 1957/198445
-
Tort - EPL / Vicarious Liability34
-
Tort - Product Liability - Negligence16
-
Tort - Product Liability - CPA 198711
-
Tort - Defences23
-
Trusts misc.132
-
Trusts - Tracing and Equitable Remedies20
-
Trusts - Co-ownership22
-
Trusts - Charitable purpose trusts41
-
Trusts vocab38
-
Trusts - Creation and perfection of trusts63
-
Constructive and Resulting Trusts26
