Zusammenfassung der Ressource
Express Private Trusts #1
- FIXED, PROTECTIVE
AND DISCRETIONARY
TRUSTS - AND POWERS
- Fixed Trusts
- What is a fixed T?
- The T instrument sets
out share/interest that
each B is to take and
the Ts must distribute
accordingly.
- Doesn't matter if
shares are different or
how many Bs there are
- Time of
distribution
can also be
established
- Nature of
B's
interest
- B is the
equitable owner
of his specified
interest or
share.
- Bs between them are entitled in
equity to the entire property and
may call for the T to be ended.
- Saunders v Vautier (1841)
- RULE - where all Bs are over 18
and mentally capable, they can
bring T to an end.
- Collection of
rights.
- Discretionary Trusts
- What is a
discretionary T?
- Exists where Ts have a discretion to decide (in relation to capital/income)
within the stated class WHO shall benefit and/or in WHAT SHARES.
- Advantage of flexibility and responsiveness
to changing circumstances.
- Modern DT - likely
to be a mixture of Ts
and powers,
designed to give Ts
the greatest
possible discretion.
- Further distinctions...
- Exhaustive DT
- All income must be applied (a duty to distribute, but a power to select
amongst a class) - must exhaust the whole fund
- Non-exhaustive DT
- In addition to the duty to distribute and the power to select, Ts have
power to 'accumulate' the income (i.e. where it turns into capital)
- Nature of Bs interest
- Very different
from FT. Where
does the B
interest actually
lie?
- Assumption that legal title is generally in the Ts.
Equitable title must be somewhere.
- Gartside v IRC [1968]
- Inland Revenue argued that a B under a
DT MIGHT receive whole lot of T
property. When he dies - subject to state
duty on entire undistributed capital in T
fund. Ambitions argument failed.
- Re Smith 1928
- More than a hope, but less
than a ben. int. in property
- Individual rights or ints. which
are separate, unquantifiable and
limited - more a right to be
considered as a potential B
- A right to have that int. protected by a court of
equity - e.g. if the trustees refused to exercise
their discretion at all of if they exercised it
improperly
- If court have to exercise, may
not be equal distribution
between Bs.
- A right to take whatever the Ts give him
- A right to have
the T property
managed
properly
- A right to have the
T account for his
management
- Where is the equitable
interest in a DT? Not the same
as FT. In suspense? - Until Ts
have exercised discretion?
- Does not have equitable interest
as would a named B under a FT.
- Protective Trusts
- What is a protective T?
- A determinable life
interest followed by a
DT.
- Designed to
protect against
(typically) the
perceived
threat of
insolvency of
the principal B
(life tenant)
- Determinable life int -
will come to an end.
- Used as if B is
likely to go off
the rails i.e. the
spendthrift son.
- If bankruptcy
occurs -
funds
available to
CREDITORS.
- PT cannot
protect against
the threat of
insolvency to the
settlor
- Re Burroughs-Fowler [1916]
- DT appears! Then payable, as Ts
discretion, to B and those entitled
- How is it created?
- Drafting is critical.
- Cannot be a life interest which is subject
to a condition subsequent whereby the
interest comes to an end on alienation.
The life int. has to be determinable LI.
- Condition precedent - must be complied
with BEFORE something happens/gift
takes effect. Condition subsequent - if
condition is complied with, then something
is going to be taken away. Must be known at
outset. Latter is a far more stringent test.
- s33 Trustee Act 1925
- Determining events
- Usually an act of bankruptcy,
but not necessarily
- Re Detmold (1889)
- Court order
following following
judgment debt
- Re Dennis' S T [1942]
- Son, at 21, entered a supplemental deed
(providing for accumulation of income) to
change previous agreement. Would let him
have some money but let rest accumulate for
6 years. Some income had been diverted -
acted to determine life interest. Became DT.
- Re Gourju's W T [1943]
- Testator of French origin
left estate on PT for widow,
who remained in France.
TWTEA 1939 - WW2.
Meant that she couldn't
receive income because
she was in France. Acted to
determine life int. under PT.
- Trading
with the
Enemy Act
1939
- Powers of Appointment
- What is a PoA?
- A power is
permissive;
whereas a
T is
mandatory.
- A power to appoint/allocate ben. ints. amongst a
class of objects; dispositive power, not a managerial
one; permissive rather than mandatory; revocable or
non-revocable; might envisage immediate distribution
or appointment of ints. in remainder,
- Testamentary P - donee may
exercise by his or her will.
- Different types of PoA
- General - allows to appoint anybody
in whole world. Not very common.
- Special - anybody with a stated
class/list. Confined group.
- Intermediate (or 'hybrid') - to
anyone EXCEPT those in a
confined group. Common.
- The donee may be someone
acting in a fiduciary capacity
or only a personal capacity
- Terminology
- Donor gives power to donee to appoint
among the objects (ones to benefit) of
power. Once/if exercised, donee =
appointer and objects =appointees.
- Donor is like the settlor,
donee like the T and
objects like the Bs.
- Fiduciary power = power conferred on
someone who is a fiduciary
- Duties of donee
- Fid and non-fid donee
- If the power is exercised, must
be exercised within terms and
not capriciously (properly and
not outside its powers)
- Fid also must...
- Consider, from time to time,
whether or not to exercise
power. Can't ignore it.
- 'Survey the field' -
get an idea of size of
the class, who is in it
etc.
- Should really only
survey when someone
claims to be in class.
- McPhail v Doulton, Re
Baden (No 1) [1971]
- Re Hay's
Settlement
Trusts [1982]
- Court may direct
him to consider
- Power or trust?
- Matter of construction
- A 'gift-over' will indicate that
a disposition is a power
- Consider the absence of a gift-over -
not always a resulting trust
- Burrough v Philcox (1840)
- Survivor of testator's children
given power to dispose by will
amongst nephews and nieces as
shall think proper. Didn't exercise.
Trust was 'created' and held in
favour of nephew and nieces.
- Objects must be sufficiently certain.
- The person entitled to take if the power
is not exercised has a vested int.
defeasible on the ex. of the P. That int.
becomes indefeasible (i.e. absolute) if
the donee decides not to ex. the P.
- How important is the
distinction between
PoA and Ts?
- T is imperative;
P is not.
- So what if not
exercised?
- Mettoy Pension
Trustees v Evans
[1990]
- Tests for certainty of objects used to be
very different, but no longer
- Re Sayer Trust [1956]
- 'The management committee
shall be empowered to make
payments...' POWER
- Re Saxone Shoe Co Ltd's Trust Deed [1962]
- '...fund shall in the discretion be applied...' DIS TRUST
- Duties of the donee/trustee
- What practical difference is there (if any) between
a non-exhaustive DT and a fiduciary power?
- Rights of the beneficiary?
- Schmidt v Rosewook Trust Ltd [2003]
- Senior Executive Director of oil company in
Russia. Father died in Moscow intestate.
Father involved in two off-shore trust
settlements. Son reckoned $105m had been
settled, but, acting as admin, had only
received $14.6m. Tried to find out where
funds had gone. Trustee was Isle of Man
corporate, and son was having difficulties
obtaining information. T argued that he had
no right to see documents because son was
a subject under a power. Court disagreed -
must recognise different natures.
- Might there be a difference in
the way courts apply concepts
of administrative unworkability
and/or capriciousness?
- REQUIREMENTS FOR EPTs
- The Three Certainties
- Certainty of INTENTION
- Intention that a trust
should exist must be
sufficiently certain. In
the absence of such
an intention, there
can be no trust.
- If property is transferred
by A to B, is it a gift to B
or is B to hold it on T?
- Do words import
obligation? Words
are construed in their
context; there is no
magic in the word
'trust'
- Precatory wording - careful!
- Re Diggles (1888)
- 'to X, desiring that
X should allow Y an
annuity of £25...' X
stopped doing this.
Y argued T. No T.
- Re Adams and the Kensington Vestry (1884)
- '...in full confidence
that she would do
what was right'
regarding the
children. No T.
- Comiskey v Bowring-Hanbury [1905]
- '...absolutely in full confidence
that she will make such use of it as
I should have made myself...'
Amounted to a T.
- Cases of surplus
- Re Abbott Fund
Trusts [1900]
- Doctor made provisions for
family, some of whom were
deaf and dumb. T
disappeared with all
money. Doctor's friend
asked for contributions -
fund set up. When the
sisters died, £376
remained. Should money
go back to donors?
Resulting T for Ds.
- Re Andrews Trust [1905]
- Fund paid for educating
certain children. Knew of
money - when finished, they
wanted money - and won.
Gift.
- Re Osoba [1979]
- Left estate to provide for widow
and daughter at university. Once
graduated, there was surplus.
Son claimed partial intestacy
and share. Held on T for wife
and daughter. Wife died, and
the daughter got everything.
- Payments in a commercial context?
- Re Kayford Ltd (in liquidation) [1977]
- Intended to set up T
despite not putting money
into T account.
- Re Nanwa Gold Mines Ltd [1955]
- Re Chelsea Cloisters Ltd (in liquidation) (1980)
- Tenants' deposits in
different accounts
against landlord. Were to
be held on T for tenants.
- Re Lewis's of
Leicester Ltd [1995]
- Re Farepak [2006]
- Christmas bust - saving scheme. Insolvent. 3 days before administration, claimed T over account of £1m. £390k received after bust. EPT
- but money already in account? Preferring the creditors. ET ruled out. Resulting failed - money not in separate account. Tried to argue
Quistclose case. Constructive on unconscionable conduct. Because nof difficulties in establishing when monies were paid in, also failed.
- No written document
- Jones v Lock (1865)
- Businessman
(father) came
home with
cheque for baby
(made out to
the father).
Father died.
Intended to
make gift but
you cannot gift
a cheque to
someone in
your own name.
- Paul v Constance [1977]
- C (Mr.) suffered
injury and
received
compensation. P
- mistress. C put
money in his
account and said
to P that the
money was as
much hers as his.
Trust?
- Certainty of SUBJECT MATTER
- If the
subject
matter is
uncertain,
there can
be no trust.
- Uncertainty as to the exact
LOCATION of identifiable
subject-matter does not prevent
a valid trust from arising.
- Difficulties in identifying the SM
- Palmer v Simmonds (1854)
- Tried to leave
'bulk of residue'
of estate on T.
No T as
couldn't define
SM.
- Re Golay's Will Trusts [1965]
- Reasonable income?
- Sprange v Barnard (1789)
- For husband's sole use - anything he didn't
want would go to X. Uncertain amount for X,
so held entirely for husband.
- Re Last [1958]
- Children (on T)
- Residue IS certain
- Where the T property is part
only of a larger whole
- Hunter v Moss [1994]
- Intention to give 50 shares to co. Tax wouldn't allow. Held 5% of share capital
on trust and would pay dividends. He owed 950 shares. He sold them. CoA - yes,
there was a T. However, shares are all the same. No need to be segregated, but
no necessarily all the same. There was no insolvency in this case.
- Re London Wine Co {1975)
- Buyers of wine, paying for/buying goods
(for investment) but remained in general
bulk - not separated from 'unidentifiable
chattels'. No T. Had wine been
segregated, there would have been a T.
- Re Goldcorp Exchange [1995]
- Bullion remained with co. No T.
- s.20A SGA 1979 (inserted by
s.1(3) SG(Am)A 1995) -
tenants in common over bulk.
- Distinguish
between inter
vivos and
testamentary
Ts?
- Uncertainty in the
ben. share in T
property which is
itself certain
- Boyce v Boyce
(1849)
- Two houses on T for
daughters; Maria
(eldest) and Charlotte.
M would get first
choice. M died before
she chose. M had
family involved in will
etc. Court did NOT
decide to choose, so
therefore no T for
Charlotte!
- Certainty of OBJECTS
- If the objects
specified are
uncertain, or if
none is
specified,
there will be a
resulting trust.
Depends on
the nature of
the disposition
how clearly it
should be
defined.
- Different types of certainty to be
considered; conceptual,
evidential, ascertainability,
administrative (un)workability.
- Fixed Ts
- View is that a FT requires
sufficient certainty that a list might
be drawn up of all bens. - list test.
- IRC v Broadway Cottages
Trust [1955]
- OT Computers Ltd v
First National Tricity
[2003]
- What should Ts
do if the bens
are unknown or
missing?
- s.27(2)
Trustee
Act
1925
- Benjamin orders
(with guarantee) or
insurance - lets Ts
'get on with it' and
distribute to those
they known. Court
may ask for
security.
- Discretionary Ts and Ps
- Used to be subject to different tests. DTs needed to satisfy
list test, but Ps were 'sufficiently certain' if it could be said that
he was or was not within the class of bens.. Latter known as
the 'individual ascertainability test.
- Re
Gestetner's
Settlement
[1953]
- Harman's test
for powers!
power with T in
default. '...for
such
member(s) of a
specified class
as the Ts
MIGHT appoint.'
Wide class.
- IRC v
Broadway
Cottages
Trust [1955]
- Wide class. T in absolute
discretion in Ts. £80k fund.
Charities included in class.
Need a list.
- Re Gulbenkian's Settlements [1970]
- Powers. HoL, unanimous. Poor
drafting; 'any person or persons in
whose house...or in whose company
or under whose care or control or by
or with whom the said Nubar Sarkis
Gulbenkian may from time to time be
employed or residing'. DA FUQ.
Power, gift-over.
- Following
development of
DT, and the
difficulties in
construction, the
law produced
results which were
difficult to defend.
- Re
Sayer
Trust
[1956] -
VALID
- Re Saxone
Shoe Co
Ltd's Trust
Deed [1962] -
VOID
- The tests
for DT and
Ps were
assimilated
by the HoL.
- Re Baden
(No 1) Mc
Phail v
Doulton
[1971]
- The application of the test
was not straightforward. See
SACHS, STAMP and
MEGAW LLJ in (No 2)
- Individual gifts subject to a condition precedent
- Different test applies if the disposition can be construed as a series of gifts, each
subject to a C.P. Sufficient if at least one person answers description.
- Re Barlow's Will Trusts [1979]
- Paintings - friends could purchase at lower price.
One painting to each of my friends - gift.
- Re Allen [1953]
- Re Tepper's Will Trusts [1987]
- 'Conditions of defeasance'
- Third party references
- To what extent can
uncertainty be
'cured' by giving a
third party the
power to resolve
disputes?
- Re Tuck [1978]
- Jewish faith - Chief Rabbi can decide?
- Administrative unworkability
- What
constitutes
this? To what
does the test
apply?
- Baden (no 1) [1971]
- Blausten v IRC [1972]
- R v District Auditor ex p
West Yorkshire
Mertropolitan CC [2001]
- Re Manisty [1974]
- Re Hay's Settlement Trusts [1982]
- Capriciousness
- What constitutes this? When
might this invalidate a disposition?
- Re Manisty [1974]
- Re Hay's Settlement Trusts [1982]