Equity and Trusts Flashcards

Which type of trust arises by operation of law where a property owner makes a detrimental reliance-based promise regarding shared ownership, as illustrated in Lloyds Bank plc v Rosset [1991]?

Answer: Constructive trust based on common intention

In Lloyds Bank plc v Rosset, Lord Bridge identified two categories of common intention constructive trust: (1) where there is evidence of an express agreement or understanding that ownership would be shared, plus detrimental reliance; (2) where a party has made direct contributions to the purchase price. The approach was later developed in Stack v Dowden [2007] and Jones v Kernott [2011].

A trustee mixes £50,000 of trust money with £50,000 of their own money in a bank account, then withdraws £60,000 to purchase shares. The remaining £40,000 is dissipated. The shares are now worth £120,000. What is the beneficiary's claim?

Answer: Under Re Hallett's Estate, the trustee is deemed to have spent their own money first, so the beneficiary can trace into the shares and claim the full £50,000 or a proportionate share of the shares

Re Hallett's Estate established that where a trustee mixes trust and personal funds, the trustee is presumed to have drawn out their own money first (the 'lowest intermediate balance' principle works alongside this). However, under Re Oatway, if the first withdrawal was used to buy an asset, the beneficiary can trace into that asset. Here, the beneficiary can elect to claim a proportionate share of the shares (worth £60,000 of £120,000 = £100,000 proportionate claim for the £50,000 trust money).

Which equitable maxim provides that equity will not assist a volunteer and how does this affect the enforceability of an incompletely constituted trust?

Answer: It means that a beneficiary who has provided consideration can compel the settlor to complete the trust, but a volunteer cannot

The maxim 'equity will not assist a volunteer' means that where a trust is incompletely constituted (the legal title has not been vested in the trustee), a beneficiary who is a volunteer (has not provided consideration) cannot compel the settlor to complete the transfer. Only beneficiaries who are parties to a deed or have given consideration can enforce. However, exceptions exist including the rule in Strong v Bird and the principle in Re Rose.

In the law of proprietary estoppel, what three elements must a claimant establish to succeed, as summarised in Thorner v Major [2009]?

Answer: Representation or assurance, reliance, and detriment

Proprietary estoppel requires: (1) a representation or assurance by the landowner (which can be implied from conduct, as in Thorner v Major where years of unpaid farm work sufficed); (2) reliance by the claimant on that assurance; (3) detriment suffered as a result. The court then has discretion to satisfy the equity in a proportionate manner (Jennings v Rice [2002]).

What is the liability of a trustee for breach of trust where they have acted honestly and reasonably?

Answer: The court has discretion under s.61 Trustee Act 1925 to relieve the trustee wholly or partly from personal liability if they acted honestly, reasonably, and ought fairly to be excused

Section 61 of the Trustee Act 1925 provides the court with discretion to relieve a trustee from personal liability for breach of trust where the trustee acted honestly and reasonably and ought fairly to be excused. This is a discretionary power, not an automatic defence, and the trustee bears the burden of satisfying all three conditions.

Under the Variation of Trusts Act 1958, on whose behalf can the court approve an arrangement varying the terms of a trust?

Answer: On behalf of persons who lack capacity to consent, including minors, unborn persons, and those with a mere expectation under discretionary trusts

The Variation of Trusts Act 1958 s.1 empowers the court to approve arrangements on behalf of four categories: (a) minors and those lacking capacity; (b) persons with future contingent interests; (c) unborn persons; (d) persons with interests under discretionary trusts. Adult beneficiaries with capacity must consent themselves. The court must be satisfied the arrangement is for the benefit of those on whose behalf it consents.