#4628 - Introduction - GDL Equity and Trusts

Three specific areas:

1. Express Private Trusts

2. Express Charitable Trusts

3. Implied Trust – arising by operation of law: not expressly created (exempt from formalities)

• Resulting

• Constructive

• Statutory E.g. under Administration of Estates Act 1925

“Bare” trusts:

• Where a beneficiary (or beneficiaries) is of full age and capacity (sui juris) – they are absolutely entitled to the trust property

• IF their interest is vested, they may call for the trust property to be transferred to them or their nomine

• This is the rule Saunders v Vautier

• Assimilates equitable and legal ownership

• Equity sees the beneficiary as the ‘true owner’

• Saunders v Vautier extended in Curtis v Luken to apply to situations where there are multiple beneficiaries, so long as they are all in agreement

• Does it apply to discretionary trusts?

• Re Smith (1928)if all the discretionary beneficiaries, who btw them are absolutely beneficially entitled to the whole equitable interest, are of full capacity and of one mind – then they can do as they please with the equitable interest – legal titled is transferred to them in agreed proportions

• But – in Gartside v IRC and Sainsbury v IRC: potential beneficiaries of a discretionary trust have no proprietary interest in the trust property until selected by the trustees – merely a hope that they shall be chosen

  • Can only hope that all the beneficiaries will be of age and in agreement so that the property is transferred in agreed proportions

  • Practical difficulty when there are a large number of beneficiaries

• Saunders v Vautier doesn’t apply to powers of appointment

Types of private trusts:

Fixed Trusts

Where the settlor has already determined in the trust deed the beneficial interest which each beneficiary is to take

“to T1 and T2 on trust for A for life remainder to B absolutely”: successive interests

• A has life interest (income) – the life tenant

• B has ‘interest in remainder’ :but it is still a vested interest – the remainderman

Vested + Contingent:

• Vested = unconditional – it exists currently

  • A above has the present right to present enjoyment

• B has the present right to future enjoyment – interest ‘vested in interest’ – unconditional as he will enjoy the property once A dies (which will happen at some point)

If it was ‘to T1 and T2 on trust for A for life, remainder to B if he survives A’ - B’s interest would be contingent – subject to a condition which may or may not be met

Discretionary Trusts:

• Trustees have a mandatory obligation to distribute money – but discretion as to how

• Can decide who receives what sum – flexibility

• Can be exhaustive or non-exhaustive:

• Exhaustive - trustees are obliged to pay out all of the income each year within a reasonable time of its arising – discretion as to whom receives income and in what amounts

• Non-exhaustive – trust is qualified by a power to accumulate income – three discretions - (i) whether to accumulate the income or distribute it (ii) whom to pay the income and (iii) in what amounts

• Can be referred to as trust powers or powers in the nature of a trust - because they must be exercised – vs. powers of appointment where they need not be exercised at all

Protective Trusts

• To protect the trust fund and the principal beneficiary

• Initially B has a life interest– but if they become bankrupt or attempt to dispose of life interests – then it is replaced by a discretionary trust for the income for the rest of the principal beneficiaries life

Powers of Appointment

Powers – “may” – Donor/Donee/Objects

• Optional powers vs the exhaustive discretionary trusts conferring powers that must be exercised

• Personal power – given to someone who is not the trustee – ‘ I give my shares to my trustees to hold on Trust for A for life and subjects thereto for such of his and my children and remoter issue as A selects and in default of selection for my children equally’ – A is the donee of the personal power – can be restrained from exercising the power for the benefit of persons outside the class

• Fiduciary power – given to a trustee – need not exercise it but must bona fide consider exercising it

• General power - can be exercised in favour...