Question (1)
In the context of trusts, particularly in property law, the three
certainties are fundamental principles that must be satisfied for a
trust to be valid. These certainties include certainty of intention,
certainty of subject matter, and certainty of objects. The case
of Constants v Cooley (1972) provides an illustrative example of
how these principles apply in the context of industrial development.
Certainty of Intention
The first requirement for a valid trust is the certainty of intention.
This means that the settlor (the person creating the trust) must
demonstrate a clear intention to create a trust rather than merely
making a gift or expressing a wish. In Consstants v Cooley, the
court examined whether the language used by the settlor indicated
an intention to create a trust.
In this case, it was established that the settlor had explicitly stated
their desire for certain properties to be held in trust for specific
purposes related to industrial development. The use of terms such
as “to hold on trust” or similar phrases can indicate this intention
clearly. Therefore, if the settlor’s intentions are expressed
unambiguously in written documents or through actions, this
requirement is likely satisfied.
Certainty of Subject Matter
The second requirement is certainty of subject matter, which
refers to the need for clarity regarding what property is included in
the trust. For a trust to be valid, it must be clear which assets are
being placed into it.
In Consstants v Cooley, the court assessed whether there was
sufficient clarity regarding the properties intended to be included in
the trust. The properties involved were specifically identified and
described within legal documents associated with industrial
development projects. This specificity ensured that there was no
ambiguity about what constituted the subject matter of the trust.
Thus, if all properties intended for industrial development were
clearly delineated and identifiable, this criterion would also be met.
Certainty of Objects
The final requirement is certainty of objects, which pertains to
identifying who will benefit from the trust. The beneficiaries must be
clearly defined or at least ascertainable.
In Consstants v Cooley, it was crucial to determine who would
benefit from the industrial development projects funded by the
trust. The court found that beneficiaries could either be individuals
or entities involved in industrial activities specified by the settlor’s
intentions. If these beneficiaries were named or could be
determined based on clear criteria (e.g., businesses operating within
a certain area), then this requirement would also be satisfied.
Conclusion
In summary, for a property to be passed in trust while satisfying all
three certainties as illustrated in Consstants v Cooley (1972):
1. There must be clear evidence of intent from the settlor to
create a trust.
2. The subject matter (the properties) must be clearly defined
and identifiable.
3. The beneficiaries (objects) must either be explicitly named or
capable of being determined through objective criteria.
When these elements are present, they support not only compliance
with legal standards but also facilitate effective management and
execution concerning industrial development projects.
Answer: A property can be passed in trust satisfaction of the
three certainties having merit for industrial development as
demonstrated in Constants v Cooley (1972) by ensuring
certainty of intention through explicit language indicating a
desire to create a trust; certainty of subject matter by
clearly identifying and describing specific properties; and
certainty of objects by defining or making ascertainable who
will benefit from those properties related to industrial
activities.
QUESTION 1B
Constructive trusts are a significant legal mechanism in property
law, particularly in situations where it would be unconscionable for a
legal owner to deny the beneficial interest of another party. The
formation of constructive trusts can arise from various
circumstances, often grounded in principles of equity and fairness.
Below, I will critically explain the circumstances under which
constructive trusts can be formed, referencing relevant case law.
Definition of Constructive Trusts
A constructive trust is not created by the express intention of the
parties involved but arises by operation of law when it would be
unjust or unconscionable for one party (the legal owner) to assert
ownership over property while denying another party’s beneficial
interest. This principle is rooted in equity and aims to prevent unjust
enrichment.
Key Circumstances for Formation
1. Common Intention Constructive Trusts
One of the most common scenarios for establishing a constructive
trust is through common intention between parties regarding
property ownership. This typically occurs in domestic relationships
where one partner contributes financially or otherwise to a property
that is legally owned by another.
Case Law Example: Lloyds Bank v Rosset [1991]
In this case, the House of Lords established that a common intention
constructive trust could arise when both parties demonstrate an
agreement or understanding about sharing beneficial ownership.
The court emphasized that contributions to the purchase price or
mortgage payments could indicate such an intention, even if not
formally documented 1.
2. Detrimental Reliance
For a constructive trust to be imposed based on common intention,
it is essential that one party has acted to their detriment in reliance
on that common intention. This means that the claimant must show
they have significantly altered their position based on the belief that
they would share in the beneficial interest.
Case Law Example: Jones v Kernott [2011]
In this case, Mr. Kernott and Ms. Jones purchased a home together;
however, only Mr. Kernott’s name was on the title deed. The
Supreme Court ruled that Ms. Jones had acted to her detriment by
making substantial financial contributions towards maintaining and
improving the property, thereby establishing her beneficial interest
through a constructive trust 2.
3. Unconscionable Conduct
Constructive trusts can also arise when one party has engaged
in unconscionable conduct, such as fraud or misrepresentation,
leading to unjust enrichment at another’s expense.
Case Law Example: Westdeutsche Landesbank Girozentrale
v Islington London Borough Council [1996]
This case highlighted that if one party receives money under
circumstances where it would be unconscionable for them to retain
it—such as receiving funds paid by mistake—they may hold those
funds on constructive trust for the original payer 3. The court
emphasized that equitable principles should govern transactions
involving potential unjust enrichment.
4. Breach of Fiduciary Duty
Another circumstance under which constructive trusts can be
formed is when there is a breach of fiduciary duty by someone who
holds property for another’s benefit.
Case Law Example: Keech v Sandford [1726]
In this early case, a trustee who renewed a lease for his own benefit
rather than for the beneficiary was found to hold the renewed lease
on constructive trust for the beneficiary 4. This established that
fiduciaries cannot profit from their positions without consent from
those they owe duties to.
5. Mutual Wills
Constructive trusts may also arise from mutual wills, where two or
more individuals agree not to revoke their wills without mutual
consent.
Case Law Example: Olins v Walters [2008]
In this case, it was determined that if one party deviates from
agreed terms after one party dies, they may hold any resulting
benefits on constructive trust for the deceased’s estate 5. This
reinforces how mutual agreements regarding wills can create
binding obligations recognized through constructive trusts.
Conclusion
Constructive trusts serve as an essential tool within equity law to
address situations where legal title does not reflect true ownership
intentions or where unfairness exists due to actions taken by one
party against another’s interests. By examining cases like Lloyds
Bank v Rosset, Jones v Kernott, Westdeutsche Landesbank, and
others, we see how courts apply these principles flexibly yet firmly
to ensure justice prevails over strict legal entitlements.
QUESTION (2)
Introduction to Secret Trusts
Secret trusts are a unique aspect of trust law, primarily recognized
in equity. They arise when a testator (the person who has made a
will) intends to create a trust but does not explicitly declare it in the
will itself. Instead, the intention is communicated to the trustee
outside of the will, often leading to disputes regarding the validity
and enforcement of such trusts.
The assertion that “equity cannot allow a statute to be used as a
conduit pipe for fraud” suggests that equitable principles prevent
individuals from using statutory provisions to perpetrate fraud. This
principle is particularly relevant in the context of secret trusts,
where the intentions of the testator may conflict with statutory
requirements for wills and trusts.
Overview of McCormick v
Grogan
McCormick v Grogan (1869) is a seminal case in English law that
addresses issues surrounding secret trusts. In this case, the
testator, Mr. McCormick, had made a will leaving his estate to his
wife but had also communicated an intention to create a secret trust
for certain beneficiaries. The court had to determine whether this
secret trust could be enforced despite not being explicitly stated in
the will.
Key Points from McCormick v Grogan
1.
Intention of the Testator: The court emphasized that the true
intention of the testator should be respected and upheld by equity.
Mr. McCormick’s intention was clear; he wanted certain individuals
to benefit from his estate beyond what was stated in his will.
2.
Equity vs Statutory Requirements: The case illustrates how
equity can intervene when statutory provisions might otherwise lead
to unjust outcomes. The court recognized that allowing strict
adherence to statutory requirements could result in fraud or unjust
enrichment at the expense of intended beneficiaries.
3.
Fraud Prevention: The ruling reinforced that equity seeks to
prevent fraud and ensure that individuals do not benefit from their
wrongdoing. In this context, if Mr. Grogan were allowed to deny the
existence of a trust based solely on statutory formalities, it would
effectively enable him to commit fraud against those whom Mr.
McCormick intended to benefit.
4.
Trustee’s Role: The role of the trustee becomes crucial in secret
trusts as they are expected to carry out the wishes of the testator as
communicated outside of formal documentation. This reinforces the
idea that equitable principles can override strict legal interpretations
when necessary.
Critical Commentary on Fraud
and Equity
The assertion that “equity cannot allow a statute to be used as a
conduit pipe for fraud” aligns closely with established legal
principles highlighted in McCormick v Grogan:
Equitable Principles: Equity operates on principles such as
fairness and justice rather than rigid adherence to statutes. In cases
where statutes may facilitate fraudulent behavior or undermine
genuine intentions, courts have historically favored equitable
remedies.
Protection Against Fraud: By recognizing secret trusts, courts
protect against potential fraud where individuals might otherwise
exploit statutory loopholes or formalities designed for wills and
trusts.
Judicial Discretion: Courts have considerable discretion when
interpreting cases involving secret trusts, allowing them to consider
broader contexts beyond mere legal texts—this discretion is
essential for preventing fraudulent outcomes.
Conclusion
In conclusion, McCormick v Grogan serves as an authoritative
reference point illustrating how equity intervenes in situations
where strict adherence to statutes could lead to fraudulent
outcomes or unjust enrichment. The assertion that “equity cannot
allow a statute to be used as a conduit pipe for fraud” is supported
by this case’s emphasis on upholding true intentions over formalistic
constraints imposed by law.
QUESTION 2B
Overview of Inherent
Jurisdiction in Trust Variation
The case of Chapman v. Chapman is a significant legal precedent
in the context of trust law, particularly concerning the inherent
jurisdiction of courts to vary trusts. This jurisdiction allows courts to
modify the terms of a trust under specific circumstances, ensuring
that the intentions of the settlor (the person who created the trust)
are honored while also addressing changes in circumstances or
needs of beneficiaries.
Instances Authorizing
Variation of Trusts
Inherent jurisdiction can be invoked by courts to vary trusts under
several key instances:
1. Change in Circumstances
One primary instance where variation may be authorized is when
there has been a significant change in circumstances since the
creation of the trust. This could include:
Changes in Beneficiary Needs: If a beneficiary’s financial
situation changes dramatically (e.g., due to illness, disability, or loss
of employment), the court may find it appropriate to adjust
distributions from the trust.
Alteration in Family Dynamics: Changes such as divorce,
remarriage, or birth of new children can impact how a trust should
be administered and who should benefit from it.
2. Unforeseen Events
Courts may also consider variations necessary due to unforeseen
events that were not anticipated at the time the trust was
established. Examples include:
Economic Changes: Significant economic downturns or
booms that affect asset values within a trust may necessitate
adjustments to ensure equitable treatment among beneficiaries.
Legal Changes: New laws or regulations affecting taxation or
property rights could prompt a reevaluation and modification of how
a trust operates.
3. Clarification of Ambiguities
Another critical instance for variation involves clarifying ambiguities
within the trust document itself. Courts have inherent jurisdiction to
interpret and amend unclear provisions that might lead to disputes
among beneficiaries. This includes:
Ambiguous Language: If terms used in the trust are vague
or open to multiple interpretations, courts can step in to provide
clarity and ensure that the settlor’s intentions are fulfilled.
Intent vs. Wording: When there is evidence suggesting that
the wording does not reflect what was intended by the settlor,
courts can modify those terms accordingly.
4. Best Interests of Beneficiaries
The overarching principle guiding variations is often centered on
what serves the best interests of beneficiaries. Courts will assess
whether maintaining strict adherence to original terms would result
in unfairness or hardship for any beneficiary involved.
Equitable Distribution: Adjustments may be made if they
promote fairness among beneficiaries, especially if one beneficiary
is disproportionately affected by rigid adherence to original terms.
5. Consent from All Beneficiaries
In some cases, if all beneficiaries consent to a proposed variation,
courts may exercise their inherent jurisdiction more readily. This
reflects an understanding that collective agreement can facilitate
modifications without contentious litigation.
Conclusion
In summary, inherent jurisdiction allows courts considerable
flexibility when it comes to varying trusts under specific
circumstances such as changes in circumstances, unforeseen
events, clarification needs, best interests considerations, and
unanimous consent from beneficiaries. The case of Chapman v
Chapman exemplifies these principles by highlighting how judicial
intervention can ensure that trusts remain relevant and fair over
time.
