A Simple Definition of a Trust

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‘It is simply not possible to formulate a single, simplified definition of ‘a trust.’ “The word ‘Trust’ refers to a duty or aggregate accumulation of obligations that rests upon a person as a person described as a trustee. The responsibilities are in relation to property held by him or under his control. He will be compelled by a court in its equitable jurisdiction to administer that property in the manner lawfully prescribed by the trust instrument… As a consequence the administration will be in such a manner that the consequential benefits and advantages accrue, not to the trustee, but to the persons called the beneficiaries.”[1] A trust essentially is a relationship between the trustee and the beneficiary. The trustee (formerly known as a ‘foefee to uses’) will hold property on trust for the benefit of another person who is regarded as the beneficiary (formerly known as ‘cestui qui use’). For a trust to be valid there must be: capacity, three certainties, formality and constitution. A person must have legal capacity in order to create a trust. This means that a minor cannot do so unless they are soldiers.[2] A person may also be deemed to be unfit for capacity if they are held to be mentally disabled under the Mental Capacity Act2005.[3] However, if they made a trust when they were of sound mind, then this may be held valid as they were capable of understanding the conditions laid out. There must also be three certainties contained within a trust to make it valid. These three certainties were established in the case of Knight v Knight (1840).[4] Lord Langdale stated the criteria “First if the words were so used, that upon the whole, they ought to be construed as an imperative; secondly, if the subject of the recommendation or wish is certain; and thirdly, if the objects or persons intended to have benefit of the recommendation or wish also be certain."[5] Therefore, the three certainties are: certainty of intention, certainty of subject matter and certainty of objects. Without these certainties, the trust will not be validly ‘declared’ as such. The wording of a trust is fundamental to get correct and the wording may be sub-divided into imperative words and precatory words. In the cash of Jones v Lock (1865)[6] it was held that a cheque in the testators name, which he wished to give to his baby before dying, could not be held to be a valid trust or an absolute gift. When creating a trust, the Administration of Estates (NI) Act 1955 s2(3) must be adhered to. This states “A grant of probate or letters of administration shall, unless containing an express limitation to the contrary, have effect as well over the real as over the personal estate and the personal representatives of a deceased person shall hold his real estate as trustees for the persons by law entitled thereto.”[7] The certainty of intention is key in order to remove any ambiguity in wording. However, it must be acknowledged that the word ‘trust’ does not have to be present for a trust to occur. This was shown in Re: Kayford [1975][8] with Megarry J stating: As for the requisite certainty of words, it is well settled that a trust can be created without using the words “trust” or “confidence” or the like: the question is whether in substance a sufficient intention to create a trust has been manifested.[9] He later went on to add that “It is well settled that a trust can be created without using the word ‘trust’ or ‘confidence’ or the like”.[10] Another example of wording being important was the case of Re: Adams & Kensington v Vestry (1883)[11] where the testator used the phrase “I give, devise and bequeath all my real and personal estate...to my dear wife Harriet...in full confidence that she will do what is right.” Even though proper wording had been used, the court held this as an absolute gift as opposed to a trust as precatory words only were not sufficient. The most recent case in regards to certainty of intention is the case of Paul v Constance (1977).[12] This was in regards to a bank account where bingo winnings were deposited. The two people in question were not married however, the court ruled that there was a trust due to the fact that the two peoples conduct amounted to its validity. The second of the threefold criteria is the certainty of subject matter. It is vital that the property is described and no ambiguity can occur as was the problem in the case of Palmer v Simmonds [1854][13] when it was deemed that the word “bulk” could not be used as it was too problematic to describe. In Re: Golay (1965)[14], it was deemed that the statement of “one of my flats and a reasonable income”, was enough to satisfy the criteria that it could be regarded as a valid trust. The case of Re: Goldcorp[15] was a key decision as it was decided that the subject matter within the trust was not to be held separate from other assets and therefore this did not amount to a valid trust. However, in contrast, the case of Hunter v Moss [1994][16] stated that property must be identified or else it will be void for uncertainty. This was a matter which dealt with segregation of property when it is in regards to intangible, identical property. However, Alastair Hudson was quite critical of this decision and states “doctrinally, it is suggested that the decision inHunter v Mossis wrong and should not be relied upon.”[17] The final criteria is the certainty of objects. This relates to the actual recipient of the trusts who is regarded as the beneficiary. The beneficiary must be clearly outlined or else this may lead to a voidable trust. Lord Denning commented on this strand of the criteria by stating "It is clear law that a trust (other than a charitable trust) must be for ascertainable beneficiaries".[18] In Re: Gulbenkian’s Settlement Trust [1970][19] it was deemed that the list of beneficiaries was too ambiguous and therefore the “is or is not” test was established by Lord Upjohn to determine whether or not a debateable person is or isn’t a beneficiary.[20] This test was then used in the subsequent case of McPhail v Doulton [1970][21] however, Lord Wilberforce added an extra dimension added to it and it was amended to “Can it be said with certainty that any given individual is or is not a member of the class?”[22] The significance of this case was that, if a person is outlined as a beneficiary or not, then this will amount to the creation of a discretionary trust. Yet again, the “is or is not” test was also used in Re: Badens Trusts Deed (1973)[23] which addressed the issue of differentiating between conceptual certainty and evidential certainty. It was concluded that just because a person cannot be established to be in or out of the class as such then this does not render a trust to be void for uncertainty. Constitution is an important factor in the process of creating a trust. Constitution of a trust will enable each party to know their role as such. It will outline who the settlor/testator is, who the trustee is and who the beneficiary is. It places a duty upon the trustee to make sure the trust is enforced and it also gives a right to the beneficiary to profit from it. During the constitution phase, it is fundamental that the testator makes his intention clear that he wishes for it to be held as a trust. If he does not, constitution may be held to be incomplete. There are many different types of trusts. It is important to investigate whether the trust is public or private. If it is public, it will usually be a charitable trust however, if it is privates, this then can be sub-divided into 5 trusts. These 5 trusts include: Express, non-charitable resulting, constructive and statutory.[24] An express trust is created or implied by an instrument of declaration or imposed by an enactment.[25] “These trusts are the product of an express and expressed intention of the settlor to create a trust.”[26] An express trust can be further separated into fixed trusts and discretionary trusts. “The beneficiaries of fixed trusts have a definable, fixed claim to a share of the trust proceeds or trusts capital.”[27] However, on the other hand, “discretionary trusts have no definable claim to a share or trust capital.”[28] Therefore, in essence, a person who is a beneficiary of fixed trust is guaranteed to receive something from the trust whilst a beneficiary, under a discretionary trust, are seen as principally “potential beneficiaries and are incapable of disposing of their potential interests by way of a trust.”[29] “A non-charitable trust benefits a person or persons or an institution that is not considered a charitable institution.”[30] However, it should also be noted that these types of trusts do not benefit from certain advantages that a charitable trust would benefit from e.g. tax exemption. Non-charitable trusts are not created fora human beings benefit and it is usually left for a purpose for example to save an animal. However, non-charitable trusts have 3 objections against their validity. The first one is that the wording of the trust must be specific and unambiguous. This was shown in the Re: Astor [1952][31] case which dealt with shares of the observer newspaper. The trustees were required to apply the shares for “the maintenance of good understanding between nations” and “the preservation of the independence and integrity of newspapers”. The trust was ruled void as a result of the vagueness of the request. The second objection is the aspect of the beneficiary principle with many arguing that the trusts cannot be properly enforced. The case of Morice v Bishop of Durham (1805)[32] stated “Every trust must have an object; there must be somebody in whose favour the court can decree specific performance.” Therefore, the validity of these trusts often comes into question due to the sheer fact there is no beneficiary to actually enforce them which results in the trusts failure.[33] The second argument is over perpetuity duration. Common law states that if no particular life is specified, then the specified time for the trust will be 21 years and, if the trust eclipses this 21 year period, it will be ruled void for perpetuity. It is also important to note that, if there is a chance that the trust will exceed the 21 year period, it will automatically be ruled void. Section 1 (1) of the Perpetuities and Accumulations Act 1964[34] states that, under statute, the perpetuity period is 80 years.[35] A resulting trust happens when a “legal title is vested in a trustee, while the settlor and the beneficiary are actually the same person.”[36] “The term ‘resulting trust’ is derived from the Latin ‘resalire’, meaning to ‘jump back’ – that is, the equitable interest in property ‘jumps back’ to its original beneficial owner.”[37] It may be argued that the beneficial interest of the owner never actually leaves them and therefore this concept of the trust “jumping back” is actually a paradox. This presumption was supported in Re: Sick and Funeral Society of St John’s Sunday School, Golcar [1972][38] with Megarry VC stating “A resulting trust is essentially a property concept; any property that a man does not effectually dispose of remains his own.”[39] This was further backed by Plowman J in the case of IRC v Vandervell [1967][40] when he stated “As I see it, a man does not cease to own property simply by saying ‘I don’t want it.’ If he tries to give it away the question must always be, has he succeeded in doing so or not?”[41] It can be difficult to distinguish between an implied and a resulting trust with Richard Edwards arguing that “definitions in the law of trusts are usually difficult, and resulting trusts are no exception.”[42] A resulting trust will arise in three instance – where an express trust fails, when an entire beneficial interest is not disposed of or when a trust purpose is achieved and money is left over. Alastair Hudson describes a concept which he dubbed “the magic triangle”.[43] This is a threefold theory which consists of a settlor, a trustee and a beneficiary. Essentially, this theory states that a trust is formed when a settlor passes the legal title in land to the trustee whilst passing the equitable interest in land to the beneficiary. The trustee will eventually pass the legal title in land to the beneficiary given the terms set forth by the settlor. In the case of Re: Vandervells Trusts (no.2) [1974][44] Megarry VC stated that resulting trusts could be divided into two types: Presumed (based on the apparent intention of the testator) or automatic which occurs when a surplus is left. However, as Lord Browne-Wilkinson highlighted in the Westdeutsche v Islington [1996][45]a trust can not be “automatic” as such and thus criticised Megarry VC’s theory. He stated: Megarry J. inIn re Vandervell (No 2)suggests that a resulting trust of type (B) does not depend on intention but operates automatically. I am not convinced that this is right. If the settlor has expressly, or by necessary implication, abandoned any beneficial interest in the trust property, there is in my view no resulting trust: the undisposed-of equitable interest vests in the Crown as bona vacantia[46] It may be argued that this precedent, laid out in Westdeutsche[47], would have led to a different outcome in many preceding cases including the Gillingham Bus Disaster Trust [1958].[48] However, in essence, for a resulting trust to occur there must be a transfer of property and no permanent intention to create a beneficial interest for the recipient. This intention must only be temporary or else it will not be held as a resulting trust. “Aconstructive trustarises where the evidence shows that the parties had a common intention that the one who is not the legal owner should have a beneficial interest and, in reliance on that understanding the non-owner acts to his or her detriment.”[49] A judicial based definition of a constructive trust was shown in the case of Paragon Finance v DB Therakar[1999][50] when Millet J tried to define it as being: A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property… to assert his own beneficial interest in the property and deny the beneficial interest of another.[51] A constructive trust is derived from the conduct of the parties involved and unlike an express trust, it requires no formalities as per S. 53(2) of the Law of Property Act 1925.[52] For a constructive trust to be valid, it requires legal title in ascertainable property to be vested in one person and equitable or beneficial title in the other person. However, this may not be wholly true as highlighted by LJ Edmund Davies in Carl Zeiss Stiftung v Herbert Smith (no.2) [1969][53] when he said:   English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague so as not to restrict the court by technicalities in deciding what the justice of a particular case might demand.[54] A constructive trust can arise out of three situations. First, where parties show a common intention by both contributing to a mortgage, then this will amount to a constructive trust as was shown in Lloyds Bank v Rossett (1991).[55] Lord Bridge outlined what a “modern constructive trust” was and he stated that, essentially, intention can be established by agreement or by party conduct and this intention must be created expressly prior to the purchase of the property. Second, when a contract is formed which outlines the agreement between both parties to transfer rights, then it will be deemed that the equitable interest will be transferred.[56] Lord Browne-Wilkinson commented on the agreement aspect in Gissing v Gissing [1970][57] “when he said the Court cannot devise agreements which the parties never made. The Court cannot ascribe intentions which, in fact, the parties never had.”[58] Lastly, a constructive trust may arise where land is deemed to be misused. As was the principle derived from Pallant v Morgan [1953][59], an agreement may arise between two parties however, if one abuses this agreement, they will have to sell the land and give the other party half of the profit. This principle was further elaborated upon in Banner HomesGroup plcv LuffDevelopments Ltd[60] by LJ Chadwick who stated that, for such an agreement to occur, a pre-requisite must be present between both parties. He continued to state that the acquiring party can object to the agreement but must do so before they gain an advantage or they will be bound to split any profit they make from the sale with the non-acquiring party. Therefore, in conclusion, “Despite its long history there is no satisfactorydefinition of ‘trust’. The best attempt at a description is probably that of Sir Arthur Underhill: Atrust is an equitable obligation, binding a person (who is called a trustee) to deal with the property over which he has control (which is called thetrust property), for the benefit of persons (who are called the beneficiaries orcestuis quetrust), of whom he may himself be one, and any one of whom may enforce the obligation.”[61] “Many attempts have been made to define a trust, but none of them has been wholly successful. It is more useful to describe than to define a trust, and then to distinguish it from related but distinguishable concepts.” [62] As has been illustrated, trusts come in many different forms and this is why it is so hard to give a single, complete definition. Therefore, with regards to the statement in question, I would have to agree and say that it is indeed not possible to formulate a single, simplified definition of a trust. Bibliography Books
  • Alastair Hudson, ‘Equity and Trusts’, 6th Edition, (Routledge Cavendish Publishing, 2013)
  • Alastair Hudson, ‘Equity and Trusts’, 6th edition, (Routledge Publishing, 2009)
  • D Hayton, ‘Law Relating to Trusts and Trustees’, (London, Sweet & Maxwell, 2010)
  • Frank Maitland, ‘Equity: A Course of Lectures’, 2nd Edition, (Cambridge University Press, 1936)
  • Gary Watt, ‘Todd & Watts Cases and Materials on Equity and Trusts’, 9th Edition, (Oxford University Press, 2013)
  • Graham Moffat, ‘Trusts Law: Texts and Materials’ 4th Edition, (Cambridge University Press, 2005)
  • John Mowbury, ‘Lewin on Trusts’, 17th Edition (Sweet & Maxwell, 2000)
  • Michael Gau, ‘Estate Planning and Administration, (Thompson and Delmar Learning, 2005)
  • Mohamed Ramjohn, ‘Text, Cases and Materials on Equity and Trusts’, 4th Edition, (Routledge Publishing, 2008)
  • Richard Edwards, ‘Trusts and Equity’, 11th Edition (Pearson Publishing, 2013)
  • Richard Edwards, ‘Trusts and Equity’, 8th edition, (Pearson Longman, 2007)
  • Sarah Wilson, ‘Todd & Wilsons Textbook On Trusts’, 11 Edition, (Oxford University Publishing, 2013)
Case Law
  • Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372
  • Carl Zeiss Stiftung v Herbert Smith (no.2) [1969] 2 Ch 276
  • Gillingham Bus Disaster Trust [1958] Ch 300
  • Gissing v Gissing [1970] UKHL 3
  • Hunter v Moss [1994] 1 WLR 452
  • IRC v Vandervell [1967] 2 AC 291
  • Jones v Lock (1865) CA
  • Knight v Knight (1840) 49 ER 58
  • Lloyds Bank v Rossett (1991).
  • McPhail v Doulton [1970] UKHL 1
  • Morice v Bishop of Durham (1805) 10 Ves 522
  • Pallant v Morgan [1953] Ch 43
  • Palmer v Simmonds [1854] 2 DREW 221
  • Paragon Finance v DB Therakar [1999] 1 All ER 300
  • Paul v Constance (1977) UKCA
  • Re Vandervell’s Trusts (no 2) [1974] Ch 239
  • Re: Adams & Kensington v Vestry (1883) HL
  • Re: Astor [1952] 1 All ER 1067
  • Re: Badens Trust Deed (1973)
  • Re: Golay (1965)
  • Re: Goldcorp (1995)
  • Re: Gulbenkians Settlement Trust [1970]
  • Re: Kayford [1975] 1 WLR 279
  • Re: Sick and Funeral Society of St John’s Sunday School, Golcar [1972] 2 All ER 439
  • Re: Vandervells Trusts (no.2) [1974] Ch 269
  • Westdeutsche v Islington [1996] UKHL 12
Journals
  • Adrian Shipwright, ‘Back To Basics – Trusts and Settlements’. 2003, Tax Journal, Issue 681 Volume 13
  • Oliver Arter, ‘Trusts and Banking Relationships – Who is a Beneficial Owner?’, (2012), 1 TL 3-31
  • Roderick Ramge, ‘The Law in 101 Words’, (2010), 160 NLJ 1268
  • Yvonne Simmons, ‘Breaking Up Is Hard To Do’, 2001, CCN 3 (26)

[1] John Mowbury, ‘Lewin on Trusts’, 17th Edition (Sweet & Maxwell, 2000) Page.3. Taken from: Graham Moffat, ‘Trusts Law: Texts and Materials’ 4th Edition, (Cambridge University Press, 2005) Page 3. [2] Richard Edwards, ‘Trusts and Equity’, 8th edition, (2007, Pearson Longman) Page 90 [3] Mental Capacity Act 2005 [4] Knight v Knight (1840) 49 ER 58 [5] [6] Jones v Lock (1865) CA [7] Administration of Estates Act (Northern Ireland) 1955 S.2(3) [8] Re: Kayford [1975] 1 WLR 279 [9] Gary Watt, ‘Todd & Watts Cases and Materials on Equity and Trusts’, 9th Edition, (2013, Oxford University Press) Page 38 [10] Ibid [11] Re: Adams & Kensington v Vestry (1883) HL [12] Paul v Constance (1977) UKCA [13] Palmer v Simmonds [1854] 2 DREW 221 [14] Re: Golay (1965) [15] Re: Goldcorp (1995) [16] Hunter v Moss [1994] 1 WLR 452 [17] Alastair Hudson, ‘Equity and Trusts’, 6th edition, (Routledge Publishing, 2009) Page 105-106 [18] Lord Denning in Re Vandervell's Trusts (No 2)[1974] Ch 239 at 319 [19] Re: Gulbenkians Settlement Trust [1970] [20] Hudson Supra at 15, Page 123-124 [21] McPhail v Doulton [1970] UKHL 1 [22] Ibid at 454 [23] Re: Badens Trust Deed (1973) [24] Richard Edwards, ‘Trusts and Equity’, 11th Edition (Pearson Publishing, 2013), Page 15. [25] Roderick Ramge, ‘The Law in 101 Words’, (2010), 160 NLJ 1268 [26] Op. Cit. at 3. [27] D Hayton, ‘Law Relating to Trusts and Trustees’, 2010, (London, Sweet & Maxwell), Page 84. [28] Oliver Arter, ‘Trusts and Banking Relationships – Who is a Beneficial Owner?’, (2012), 1 TL 3-31 [29] Mohamed Ramjohn, ‘Text, Cases and Materials on Equity and Trusts’, 4th Edition, (Routledge Publishing, 2008) Page 92. [30] Michael Gau, ‘Estate Planning and Administration, (Thompson and Delmar Learning, 2005) Page 50. [31] Re: Astor [1952] 1 All ER 1067 [32] Morice v Bishop of Durham (1805) 10 Ves 522 [33] Richard Edwards, ‘Trusts and Equity’8th Edition, (2007, Pearson Longman Publishing) Page 188. [34] Section 1(1) Perpetuities and Accumulations Act 1964 [35] Ibid - “Subject to section 9(2) of this Act and subsection (2) below, where the instrument by which any disposition is made so provides, the perpetuity period applicable to the disposition under the rule against perpetuities, instead of being of any other duration, shall be of a duration equal to such number of years not exceeding eighty as is specified in that behalf in the instrument.” [36] Sarah Wilson, ‘Todd & Wilsons Textbook On Trusts’, 11 Edition, (Oxford University Publishing, 2013), Page 146 [37] Alastair Hudson, ‘Equity and Trusts’, 6th Edition, (Routledge Cavendish Publishing, 2013), Page [38] Re: Sick and Funeral Society of St John’s Sunday School, Golcar [1972] 2 All ER 439 [39] Richard Edwards Supra at 11, Page 247 [40] IRC v Vandervell [1967] 2 AC 291 [41] Richard Edwards Supra at 11, Page 247 [42] Ibid [43] Hudson Supra at 35, Page 51. [44] Re: Vandervells Trusts (no.2) [1974] Ch 269 [45] Westdeutsche v Islington [1996] UKHL 12 [46] Ibid Lord Browne-Wilkinson at Para 385-389 [47] Supra at 43 [48] Gillingham Bus Disaster Trust [1958] Ch 300 [49] Yvonne Simmons, ‘Breaking Up Is Hard To Do’, 2001, CCN 3 (26) [50] Paragon Finance v DB Therakar [1999] 1 All ER 300 [51] Ibid Millet J at Para 408 [52] S.53(2) LPA 1925 [53] Carl Zeiss Stiftung v Herbert Smith (no.2) [1969] 2 Ch 276   [54] Ibid LJ Edmund-Davies at Para 300 [55] Lloyds Bank v Rossett (1991) [56] Hudson, Supra at 17, Page 508. [57] Gissing v Gissing [1970] UKHL 3 [58] Ibid Lord Browne-Wilkinson [59] Pallant v Morgan [1953] Ch 43 [60] Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 [61] Adrian Shipwright, ‘Back To Basics – Trusts and Settlements’. 2003, Tax Journal, Issue 681 Volume 13 [62] Frank Maitland, ‘Equity: A Course of Lectures’, 2nd Edition, (1936, Cambridge University Press) Page 44  
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