Introduction
A trust is a legal arrangement wherein one party, the trustee, holds property for the benefit of another, the beneficiary. In English property law, trusts are fundamental mechanisms governing the management and distribution of assets. The core principles of trust law require certainty of intention, subject matter, and objects, as established in Knight v Knight (1840) 3 Beav 148. Trusts are categorized into various types: express, implied, resulting, constructive, and charitable trusts, each with specific requirements and legal implications.
Express Trusts
Express trusts are intentionally created by a settlor who transfers property to a trustee for the benefit of specified beneficiaries. This deliberate act requires compliance with formal legal requirements and reflects the settlor's clear intent.
Key Principles
- Intention: There must be a definitive intention to create a trust.
- Three Certainties: The trust must satisfy the certainties of intention, subject matter, and objects.
- Formalities: Trusts involving land must comply with the Law of Property Act 1925, section 53(1)(b), requiring written evidence signed by the person declaring the trust.
Types of Express Trusts
- Fixed Trusts: Beneficiaries' interests are clearly defined.
- Discretionary Trusts: Trustees have discretion over how to distribute income or capital among beneficiaries.
- Protective Trusts: Designed to safeguard beneficiaries' interests from creditors or adverse situations.
Example
A parent sets up a trust stating, "I leave £500,000 to my trustees to hold for my children equally upon reaching the age of 25." This arrangement forms an express fixed trust, satisfying the three certainties:
- Certainty of Intention: The parent's clear intention to create a trust.
- Certainty of Subject Matter: The specific sum of £500,000.
- Certainty of Objects: The identified beneficiaries—the children.
Implied Trusts
Implied trusts arise without explicit declaration, based on the conduct or circumstances of the parties. They are established by law to reflect presumed intentions or to prevent unjust outcomes.
Key Principles
- Arising by Operation of Law: Not created by express intent but inferred by courts from the facts.
- No Formal Requirements: Under section 53(2) of the Law of Property Act 1925, implied trusts do not require written formalities.
Application
Implied trusts are significant when parties haven't formalized their intentions regarding property ownership. For example, cohabiting couples who jointly contribute to a property may find that an implied trust reflects their shared interests, even without an express trust.
Example
Consider Sarah and Michael purchasing a home together, with both contributing to mortgage payments and household expenses. The property is registered solely in Michael's name. Although there's no express trust, their joint contributions and conduct may lead a court to recognize an implied trust, acknowledging Sarah's beneficial interest.
Resulting Trusts
Resulting trusts occur when it's presumed that the transferor did not intend to give the transferee full beneficial ownership. The beneficial interest "results" back to the transferor or their estate.
Key Principles
- Automatic Resulting Trusts: Arise when an express trust fails or doesn't dispose of all the beneficial interest.
- Presumed Resulting Trusts: Occur when someone contributes to the purchase price of property held in another's name without an express declaration.
Requirements
- Contribution to Purchase Price: Must be at the time of acquisition.
- No Contrary Intention: There's no evidence the contribution was a gift or loan.
Example
Alice and Bob purchase a property for £200,000. Alice contributes £60,000 towards the purchase price, and the property is registered in Bob's name. Without an express trust, a presumed resulting trust arises, granting Alice a 30% beneficial interest corresponding to her contribution.
Limitations
Resulting trusts focus solely on financial contributions at the time of purchase. They don't account for later contributions or non-financial efforts like renovations or household management.
Constructive Trusts
Constructive trusts are imposed by courts to prevent unjust enrichment when one party wrongfully holds property that should benefit another. They address situations where enforcing strict legal titles would result in inequity.
Key Principles
- Unconscionability: It would be unjust for the legal owner to retain full ownership.
- Common Intention and Detriment: Requires a shared intention and actions taken in reliance, leading to detriment.
Requirements
- Evidence of Common Intention: Through express agreements or inferred from conduct.
- Detrimental Reliance: The claimant acted to their detriment based on the shared intention.
Case Law
- Lloyds Bank plc v Rosset [1991] 1 AC 107 established strict criteria for inferring common intention.
- Stack v Dowden [2007] UKHL 17 considered the entire course of conduct between parties.
- Jones v Kernott [2011] UKSC 53 allowed courts to impute intentions based on fairness.
Example
Emma and Daniel live together in a house registered in Daniel's name. Emma contributes to mortgage payments and significant renovations. Their conduct suggests a shared intention of ownership. A constructive trust may be imposed, granting Emma a beneficial interest due to her detrimental reliance on their shared intention.
Charitable Trusts
Charitable trusts are established for purposes recognized as charitable under the law, benefiting the public or a substantial segment of it.
Key Principles
- Charitable Purposes: Defined in the Charities Act 2011, including relief of poverty, advancement of education, and promotion of health.
- Public Benefit: Must confer a tangible benefit to the public.
Requirements
- Exclusively Charitable: All purposes must be charitable.
- Compliance with Legal Framework: Must follow the Charities Act 2011 provisions.
Case Law
Independent Schools Council v Charity Commission for England and Wales [2012] UKUT 421 (TCC) clarified the public benefit requirement, emphasizing that charitable trusts must provide more than incidental private benefits.
Conclusion
Constructive trusts represent some of the most complex interactions within trust law. They are imposed to address situations where the rigid application of legal ownership would result in unfairness. Understanding their principles involves analyzing case law and equitable doctrines, focusing on common intention and detrimental reliance.
Resulting and constructive trusts often interact, especially in disputes over family homes. For instance, where one party contributes to the purchase price (leading to a resulting trust) and both parties share an intention of joint ownership with subsequent contributions (resulting in a constructive trust), courts assess both to determine equitable interests.
Each type of trust—express, implied, resulting, constructive, and charitable—has specific requirements but can overlap in practical scenarios. For example, in the absence of an express trust, implied trusts provide mechanisms to recognize parties' interests based on contributions and intentions.
A thorough understanding of these trusts is essential for understanding English property law. Recognizing how they function together enables a comprehensive approach to legal analysis and application, ensuring that equitable outcomes are achieved in complex property arrangements.
