Equity and trusts is one of the most technically demanding modules on a UK law degree. Problem questions in this area require methodical analysis and precise application of complex rules.
1. Identify the Trust Type
The first step is always to identify what type of trust is at issue:
- Express trust: Created intentionally by the settlor
- Resulting trust: Arises by operation of law (e.g., Vandervell v IRC [1967])
- Constructive trust: Imposed by equity to prevent unconscionability
- Charitable trust: For purposes recognised as charitable under the Charities Act 2011
2. Check the Three Certainties
For an express trust to be valid, there must be certainty of:
- Intention: Did the settlor intend to create a trust? (Paul v Constance [1977])
- Subject matter: Is the trust property identifiable? (Palmer v Simmonds (1854))
- Objects: Can the beneficiaries be identified? (McPhail v Doulton [1971])
3. Check Formalities
Different types of property require different formalities:
| Property Type | Requirement | Authority |
|---|---|---|
| Land | Signed writing (s.53(1)(b) LPA 1925) | Grey v IRC [1960] |
| Existing equitable interest | Signed writing (s.53(1)(c) LPA 1925) | Vandervell v IRC [1967] |
| Personalty | No formality required | Paul v Constance [1977] |
4. Consider Constitution
Is the trust properly constituted? Has legal title been transferred to the trustee? Apply the rule in Milroy v Lord (1862): equity will not perfect an imperfect gift. But note the exceptions: Re Rose [1952], Pennington v Waine [2002], and the Strong v Bird (1874) rule.
5. Breach of Trust and Remedies
If the problem involves a trustee acting improperly, consider:
- Personal liability: The trustee must restore the trust fund (Target Holdings v Redferns [1996])
- Proprietary remedies: Tracing into substitute assets (Foskett v McKeown [2001])
- Third-party liability: Dishonest assistance (Royal Brunei Airlines v Tan [1995]) and knowing receipt (BCCI v Akindele [2001])