• Settler -> The original owner
• Trustee -> Legal ownership, he manages and controls the trust property
• Beneficiary -> Equitable ownership, he benefits, enjoys the trust property. Can be individual/charity

Under the common law, once trust property is vested in T, he is deemed to be the legal owner. Equity does not dispute T's legal ownership but recognizes B as the equitable owner of the trust property. B has some property interest in the property.

T is responsible for administrating the trust property while B enjoys the benefit of it.

The following are notes compiled in 2007 for revision purposes on UK Trusts It might not be complete or accurate and should only be used for educational or reference purposes only.

GENERAL CONCEPTS

• Multiple actors are acceptable for S, T and B.
• The Settlor can declare himself as the only trustee.
• But there can't be a single Trustee/Beneficiary -> collapses into absolute ownership.

EXPRESS TRUST

This kind of trust arises as a result of a declaration of trust by a person in whom property is vested. The settler deliberately creates the trust.

2 situations:

Inter Vivos trust: "Settlor (S), the owner of a house, conveys it to Z on trust for B".

Testamentary trust: "The testator (T) leaves the house in will to Z with directions to hold it on trust for B".

3 certainties must be present in order to declare a valid express trust:

• Certainty of intention (or words)
• Certainty of subject matter
• Certainty of objects

CERTAINTY OF INTENTION (OR WORDS)

In declaring a trust, the settlor must use imperative words to indicate that he intends to impose an obligation on the trustee. Easiest way is to say ‘trust' or ‘trustee' or "I transfer something to T and I direct him to hold it for B".

• Difficulties if not clear specified beneficiaries
• Difficulties to distinguish trust and gift: gift accompanied by prefatory words (wish, hope...) instead of imperative words is not deemed an express trust.
• But not an absolute rule. The court must assess as a whole what was intended. Must perform an objective examination of all the facts (words, conduct of the settlor...) to construe the words and determine the intention.
• If no trust intended, the trustee is entitled to it beneficially.

CERTAINTY OF SUBJECT MATTER

A trust is liable to fail unless the property covered is properly identified.

• The trust property must be certain: Failure when the property to be held on trust forms an undifferentiated part of a larger quantity or when relative words are employed in defining the property ("the bulk of...")
• The beneficial interests must be defined in a sufficient manner: Failure when trust in favour of more than one B and it is impossible to ascertain the interests to be taken by the beneficiaries.

CERTAINTY OF OBJECT

The object, that is, the beneficiaries must be clearly identified.

2 types of object: charitable purpose (relief of poverty, education, religion...) and persons.

Trust for individuals: easy if the individual is named (person ascertainable?). May be more difficult if it is just a description.

1. class of persons: enforceable if sufficient certainty for the trustee to define who is the
2. Failure if language used is too vague or lack of evidence.

Charity: object clear enough?

OTHER TYPES OF TRUST

There are numerous instances where equity will compel one party to hold property on trust for another even though a trust has not been formally declared. à May be a resulting or constructive trust, both recognized by statutes of the Law of Property Act 1925..

RESULTING TRUST

The beneficial interest returns to the settlor or testator. This trust is traditionally imposed on the basis of presumption that A did not intend B to be given the beneficial interest.

The court must try to determine objectively what the S intended to do, who was the B???

2 types:

• PRESUMED RESULTING TRUST
  •  No express trust formally declared by the settlor and the recipient has failed to prove that it was an outright gift.
  • Possible to rebut the presumption of resulting trust, but onus on B. Otherwise, the beneficial ownership results back to S unless "Presumption of advancement" applies
  • A will be deemed to have intended an outright gift to B (Husband to wife or to legitimate child), unless there is evidence to the contrary.
• AUTOMATIC RESULTING TRUST
  • Express trust has failed because B was not defined properly or conditions not fulfilled. Equity automatically requires to hold the outstanding equitable interest on a resulting trust for S.

CONSTRUCTIVE TRUST

• Residual category of trust
  • It is when no other suitable category exists.
  • Kind of trust imposed by the courts in a wide variety of situations when it have found it necessary to compel a person to hold property for the benefit of another on the interests of justice and good conscience.
  • It is seen as remedy the judge provides to the part in certain situations, such as:
  • Case of misappropriation of the trust property
  • Breach of trust
  • Fraud

Debates ->some judge consider it as not intellectually justifiable.

FIDUCIARY DUTIES

The trustee's basic functions are to perform duties and exercise the powers provided for in the trust as well as general duties prescribed by statute or by the courts.

Duties are obligatory

Powers are discretionary (power to appoint specified property to certain beneficiaries...)

Duty of care: statutory based under the Trustee Act 2000. Under s1 a trustee must exercise reasonable care and skill. But the standard of care depends on the skills and position of the trustee:

An unpaid trustee: "Take all the reasonable precautions which an ordinary prudent man of business would take in managing similar affairs on his own."

A paid trustee: subject to a higher standard of diligence and knowledge. Special duty to display expertise.

Fiduciary duties are duties imposed by equity to ensure that a trustee's interests do not conflict with those of the trust:

• Unauthorized profits
• Keep the property safe
• Frauds

REMEDIES

A breach of trust occurs where a trustee fails to perform any of his duties or improperly exercises any of his powers. The beneficiaries may proceed against a trustee who commits a breach even where the trustee did it in good faith.

3 main remedies:

INJUNCTION: to prevent anticipated breaches (unauthorised sale, unnecessary mortgage...)

PERSONAL ACTION AGAINST TRUSTEE: trustee is personally liable to the beneficiaries for any resulting personal benefit or loss suffered by the trust.

VICIARIOUS LIABILITY: no vicarious (indirect) liability of the breach of co-trustee if the trustee himself has not actively participated in the breach.

• No liability either for the dishonesty or neglect of agents who acts for the trust.
• BUT trustee is vicariously liable if there is deliberate default (state of mind, objectively).
• Case: a trustee, by his own neglect, allowed the other co-trustee to sell the principal asset of the trust at undervalue -> even if no active participation in the breach.

JOINT LIABILITY: where 2 or more co-trustees are involved in committing a breach, their liability is joint and several and the beneficiaries may sue all or any of them.

• Originally, equity required each trustee to make an equal contribution but now under the law, the court can define the level of each trustee's contribution to reflect the extent of his responsibility for the breach. à Depending on their respective profits or loss caused to the trust.
• If any co-trustee is sued, he may claim contribution from other trustee who is also liable.
• Where two trustees are jointly liable for a breach, one may claim an indemnity for the other, in particular, in "solicitor-trustee" case or if fraud from the other.
• Defence available: if B consented or participated, or knew after and acquiesced.

PROPRIETARY REMEDY

TRACING: is a process by which a claimant establishes the property chain of the trust property or fund, by identifying the different persons having consecutively sold and purchased his property. He can then claim property against the property or any asset substituted for the original property.

Tracing allows transmission of legal claims from the original assets to either the proceeds of sale of the assets or new substituted assets.

A tracing order is an equitable remedy available when a personal action will not suffice, such as in case of insolvency of the trustee. Ask for a tracing order. B can establish the proprietary chain (tracing) and claim the assets acquired by T with the trust funds.

Depend on the subsequent use of the trust fund by the trustee

A title is relative: A -> B -> C -> D

Need of an initial fiduciary relationship between the person claiming to trace and the defendant. This requirement is satisfied because there is fiduciary duty between trustee and beneficiary in any type of trust.

Property in a traceable form: there must be something to trace into, that is, a property that the defendant acquired with the money resulting from his breach of trust.

• If the trust fund remains intact and kept separately à B entitled to trace into the fund
• If T purchased a specific asset with trust money without mixing it with its own à B entitled to tract into the asset. He can claim the asset itself!!
• Problem arises when trust fund mixed with T's funds
• Equitable remedy -> discretionary and must lead to equitable result
• Advantage: It allows the claimant to recover a greater amount than his original amount.

FOLLOWING:  possible to establish the proprietary chain (tracing or following) and to claim trust money or trust property which has been transferred by T, even though the recipient is innocent.

• A title is relative: A -> B -> C -> D. That means that B can only recover a property from C and D.
• Problem when mixed trust fund, determined by the court

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