MLL406 Lecture Notes - Lecture 9: Intestacy, Bona Vacantia, Advantageous
1 Jul 2018
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Topic 9: Constitution of Express Trusts – 3 Certainties Requirement
Creation of trusts – Declaration:
•Declaration, transfer and direction.
Declaration:
•real property: the trust must be evidenced in writing
•personalty: need not be written unless subsisting equitable interest
•Property Law Act 1958 (Vic) s 53
Transfer:
•complete and irrevocable transfer of title
•INTER VIVOS
•If executory need not be evidenced in writing
•real property or a subsisting equitable interest - written form
Milroy v Lord:
•1. that everything necessary to be done to transfer the property be done; and,
•2. doing everything necessary to render the assignment binding upon the assignor.
•POST MORTEN
•as for a will under Wills Act 1997 (Vic) s 7
•written form; and,
•signed by the testator before at least two appropriate witnesses.
Secret Trust:
•exist as independent trusts separate of the will (In Re Snowden (Dec’d) [1979])
•validity of secret trusts does not rely on the validity of the will
•Requirements (Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at
535)
–The testator’s intention that the donee is subject to a trust obligation
–The testator’s communication of the intention to the donee
–The donee’s acceptance of the obligation upon the testator’s death.
Direction:
•direct a trustee to hold their interest on trust for another
•in writing
Three Certainties:
1. Certainty of Intention
intention means that specific language (such as references to trusts, trustees, or
beneficiaries) is unnecessary
word ‘trust’ does not in itself create a trust – just need to intent consequences of a
trust
party alleging bears the burden of proving intention
parol evidence
‒disposition need not be evidence by writing
‒document only part of intentions
‒ambiguity, fraud, duress or mistake.
less extensive than what was claimed: Kauter v Hilton (1953)
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Knowledge of the law of trusts is not a requirement
nature of the intention - vest others with interests in or an entitlement to benefit from
specific property.
Precatory words: wish, hope, desire, trust
V
Mandatory words: will, must
words used by the settlor unequivocally point towards an intention to create a trust
domestic situations - mere conversation or expressions of thought
Jones v Lock [1865] LR 1 Ch App 25: loose or idle domestic conversation will be
insufficient to prove a requisite intention to declare a trust
Paul v Constance [1977] 1 All ER 195: language used, but also because of the
context.
Korda v Australian Executor Trustees (SA) Ltd (2015) HCA
•Facts: A trustee (AET) claimed on behalf of investors that the proceeds of the sale of
timber and land which were payable to the companies were subject to an express
trust in favour of the investors, and therefore not available to the receivers and
managers.
•The High Court overturned the decision of the Supreme Court and concluded that no
express trust existed because the there was no clause in the agreement which
indicated that the companies should hold the proceeds separately from other monies
of their own, and as such there could be no imputation of a contractual intention to
create a trust over that money.
•French CJ, Hayne, Kiefel, Gageler and Keane JJ in Korda held that the investment
scheme in various forestry companies did not create a trust because the schemes
documentation, when placed in its commercial and regulatory context, did not
support the existence of a trust.
•French CJ noted that whilst the trust might be ‘commercial advantageous’ it simply
did not reflect the joint intention of the promisors and promises.
•Hayne and Kiefel JJ felt that the dealings between the parties were purely contractual
and no trust could be presumed.
•Gageler J felt that the critical point was the absence of an obligation to hold the
proceeds separately from their own – this precluded any intention to separate legal
and equitable title and this is the foundation of the trust. He stated: “The question is
whether recognition and enforcement of a trust is appropriate to give effect in law to
entitlements and obligations which the parties, according to the ordinary principles
of contractual interpretation, can be taken together to have intended to exist in fact.”
•Keane J felt no trust arose. His Honour stated:
•The need for clarity as to the intention to create a trust and its subject matter is of
particular importance in a commercial context where acceptance of an assertion
that assets are held in trust is apt to defeat the interests of creditors of the putative
trustee. The traditional inclination of the courts is to protect creditors against the
use of a straw company as a trading trustee
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Byrnes v Kendle (2009) 342 CLR 253
•This case concerned a house in Murray Bridge, South Australia. The house was
registered under the Torrens system to Clifford Kendle.
•Clifford was married to Joan Byrnes. In 1997 Clifford signed an ‘acknowledgment of
trust’ which declared that he held one undivided half interest in the property as
tenant in common for Joan.
•The couple separated in 2007. Later in that year Joan assigned her interest under the
trust to her son Martin. Clifford argued that he did not have a real intention to create
a trust and that he could bring evidence to show his true intention and in this respect
relied upon an earlier decision – Jolliffe – which permitted oral evidence to prove
intention.
•The High Court disagreed and found that there was an intention to create a trust and
that intention could be proven by the objective evidence contained in the
acknowledgment. The legal effect of a document is not ascertained by extrinsic evidence
as to the subjective intentions of its parties, but rather by an objective construction of its
words.
•Intention is determined objectively. It is extracted from the words used and is not a
subjective intention that may have existed but cannot be extracted from the words used.
•The "terms of the [deed] are clear … [The husband] might not have fully understood what he
was doing, but that is neither here nor there".
•The question was not what the Respondent meant to say, but what was the meaning of what
he did say in the deed (Gummow and Hayne JJ).
•While a party’s subjective intention is relevant in relation to a claim for mistake,
misrepresentation, non est factum, estoppel, illegality and the like, it ‘is irrelevant both to
the question of whether a trust exists and to the question of what its terms are.’
Mutual intention:
•Barclays Bank v Quistclose Investments [1970] AC 567; [1968] 3 All ER 651
•Quistclose Trust
•language of the parties, the nature of the transaction, the surrounding circumstances,
the nature of the account in which the monies are held
An imperfect gift is not a valid trust:
•‘Equity will not perfect an imperfect gift’
•intention to transfer property as a gift, but failure of formal requirements for the
assignment
•Difficulties:
•not necessary for the parties to understand the nature of a trust to create it
•whether a person who has attempted an imperfect assignment actually
intended to create a trust.
IF: general expression of intention to benefit
could be given effect in law or equity by only
one legal mechanism
COURT WILL: give effect to that expression
provided satisfies formalities
IF: general expression of intention to benefit
could be given effect in law or equity by one of
several methods and the expression of intention
cannot be referred to any one method.
COURT WILL: consider the circumstances.
If invalid gift, the court will not impose a trust:
Richards v Delbridge (1874).
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find more resources at oneclass.com
Document Summary
Topic 9: constitution of express trusts 3 certainties requirement. Creation of trusts declaration: declaration, transfer and direction. Declaration: real property: the trust must be evidenced in writing personalty: need not be written unless subsisting equitable interest: property law act 1958 (vic) s 53. If executory need not be evidenced in writing real property or a subsisting equitable interest - written form. Milroy v lord: that everything necessary to be done to transfer the property be done; and, doing everything necessary to render the assignment binding upon the assignor. as for a will under wills act 1997 (vic) s. 7: post morten, written form; and, signed by the testator before at least two appropriate witnesses. The testator"s intention that the donee is subject to a trust obligation. The testator"s communication of the intention to the donee. The donee"s acceptance of the obligation upon the testator"s death. Direction: direct a trustee to hold their interest on trust for another in writing.
