BPP University College Of Professional Studies Limited (BPP)
BPP University College Of Professional Studies Limited
Equity & Trusts
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Summary GDL Trusts Law Revision Notes 2020 (Distinction)
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Equity & Trusts
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BPP University College Of Professional Studies Limited (BPP)
Notes on Equity & Trusts Law for the GDL at BPP University. These revision notes summarise key SGS course content in a way that is easy to understand and helped me achieve a Distinction.
BPP University College Of Professional Studies Limited (BPP)
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Equity & Trusts
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BPP GDL – Equity & Trusts Law Exam Notes
The Three Certainties
According to Knight v Knight, three certainties are required for a valid express trust:
1. Intention (to create a trust);
2. Subject-matter (the property subject to the trust);
3. Objects (beneficiaries).
1) Certainty of Intention
à There are no set formalities for declaration of a trust. No writing requirements, nor any particular
words required.
Imperative and Precatory Words
- A distinction is drawn between
i. Imperative words, which show intention to create a legally binding obligation –
Comiskey v Bowring-Hanbury; and
ii. Precatory words, which merely express a hope or a wish – Re Adams
- Modern cases lean against finding a trust when precatory words are used.
- If words are not held to impose a trust on the recipient, they take absolutely, seen to be
intended as a gift.
- Words in each case interpreted in their context, rather than according to previous cases.
Evidence of Intention – Words and Conduct
- Where there is no written document creating a trust, the court must look at the words and/or
conduct of the parties to see if there was sufficient intention to create a trust.
- Paul v Constance
• Bank account opened in Mr Constance’s name alone, but couple treated it as a joint
account (paying in bingo winnings and using funds for joint holidays). Mr Constance
regularly assured Mrs Paul that the money in the account was as much hers as his,
despite it being in his sole name.
- Do not need clear words giving an unequivocal demonstration of settlor’s intentions. Need
not be words at all – Re Kayford.
• Paid customers’ moneys into a separate bank account, in an attempt to prevent them
ranking as unsecured creditors of the company if it went insolvent. Court held that by
segregating the customers’ funds the company had evinced an intention to create a
trust over those funds.
Equity & Trusts Law – Distinction Level Revision Notes | Page 1 of 20
,2) Certainty of Subject Matter
- It must be certain what property is subject to the trust for there to be a valid trust. If it is not
clear what property is subject to the trust, the beneficiaries will not know what they have
rights over and the trustees will not know how to exercise their obligations.
- No certainty = trust void.
Certainty of Property
- Palmer v Simmonds – Court held ‘bulk of my estate’ was insufficiently clear to ascertain the
trust property.
- Sprange v Barnard – must be certain at time of creation.
Certainty of Beneficial Entitlements
- Boyce v Boyce: M died in testator’s lifetime and so could not choose a particular house. Court
HELD no trust in favour of C, interest could not be determined until M had chosen and as this
was no longer possible, trust was void for certainty of subject matter.
- Re Golay’s WT – A ‘reasonable income’ was held valid as an objective criterion which would
allow the court to step in and enforce the trust.
Property forming Part of a Bulk
Tangible Property
- Re London Wine Co.
• Buyers of wine sought to establish a trust over bottles of wine stored in the seller’s
warehouses. Court held no such trust had been created, as the bottles had not been
segregated. As such, when the seller went into liquidation, the customers could not
claim priority over other creditors by saying particular bottles were held on trust.
- Re Goldcorp Exchange
• Purchasers of gold bullion claimed rights to it on insolvency of the company. Their
claims were rejected, apart from a group whose bullion had been segregated. There
was no trust for the others as there was no identifiable property on which any trust
could attach. No particular bullion had been segregated for them. It did not matter in
this case that, unlike the wine (which could be of different quality), every piece of gold
bullion was fundamentally identical.
Intangible Property
- Hunter v Moss.
• Owner of 950 of the 1000 shares in a private company orally declared himself as a
trustee of 5 per cent of the issued shares – 50 shares.
• This was held to be sufficiently certain even though no particular 50 shares had been
identified as subject to the trust, so it was unclear which shares he kept for himself.
- At first instance, significant that the subject matter of the trust was intangible. No need to
identify which shares are being held on trust, as long as shares of the same class and therefore
fungible (i.e. interchangeable).
- à Subsequent cases indicate that the key distinction is between trusts of tangible and
intangible property.
Equity & Trusts Law – Distinction Level Revision Notes | Page 2 of 20
, Rationalising Hunter v Moss
- It could be argued that there remains a crucial difference between tangible and intangible
property, in that it is possible to destroy or damage tangible property.
- An alternative argument has been raised by Professor Brian Goode in that shares are
fundamentally different to most other property because they are not truly individual assets,
rather they are mere fractions of a single asset. Co-ownership analysis NOT applied in Hunter
v Moss.
- Perhaps a better way of rationalising Hunter v Moss from both Re Goldcorp and Re London
Wine is to look more closely at the particular facts. Hunter v Moss is a straightforward case in
which the settlor attempted to declare a trust over 50 shares out of an ascertainable bulk.
- In contrast, the other cases involved attempts by purchasers of goods to claim that a trust had
arisen over the relevant proportion of equivalent goods before the transaction had been
completed by the transfer of legal title. In these cases, recognising the trusts would have given
the purchasers priority over the other creditors. As a matter of policy, therefore, the court
needed to be absolutely certain that a trust had been intended in the first place. Unlike in
Hunter v Moss, there was no clear declaration of trust.
- It is therefore essential to demonstrate both an intention to create a trust and to be able to
identify the property to which the trust relates, whether that property is tangible or
intangible.
Equity & Trusts Law – Distinction Level Revision Notes | Page 3 of 20
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