Ways to create a trust
1)Declaration – where a title holder expresses his or hers intention to hold their property on trust for another.
2)Transfer - where title is transferred to a person with instructions that it be held on trust for another. -inter vivos occurs during the life of the person (referred to as a ‘settlement’). It may be for consideration or a gift. (NB: Equitable Assignment check list). -post mortem occurs after the death of the person (in their will).
3)Direction – where a beneficiary instructs their trustee to hold an interest on trust for another person.
Kinds of Trust
Trusts are either:
1.Express Trusts (being examined in this lecture).
3.Resulting Trusts (intention presumed)
4.Constructive Trusts (used as a remedy)
The law of equity states that a trust must satisfy the 3 certainties. If any of the 3 certainties do not eventuate, the trust will fail:
Certainty of Intention – it must be clear that the settlor or testator/testatrix (person creating a trust) wanted the trust to exist. Resulting (intention presumed) and Constructive (used as a remedy) trusts are immune from this certainty. Intention does NOT need to be expressed through the word ‘trust’. Only the elements of a trust need to be present.
Commissioner of Stamp Duties v Joliffe (1920) 28 CLR 178
-At this stage Qld law stated that a person could only have 1 bank account. -Joliffe set up a 2nd bank account, as a ‘trust account’ for his wife. -When Joliffe’s wife died, death taxes/duties were owed on the account. -Joliffe went to court and argued that he lied and wasn’t actually holding the account on trust for his wife – it was for him. -HC agreed with Joliffe.
-Rule: If it is possible for the creator of the trust to display to the court that he never/did intend for a trust to exist, the presence or absence of the words ‘trust’ or ‘trustee’ is irrelevant. -Clean Hands: There appears to be an issue here of equity’s requirement that all parties relying on equity have ‘clean’ hands (issue seemed to have been ignored here). -Evidence: Burden of proof will fall on whoever wants to prove a trust is in existence. ~Inter vivos trust written evidence or oral evidence will be accepted. (NB: There is often a limitation of what kinds of evidence can be brought – i.e. the parole evidence rule).
Parole Evidence rule will NOT apply where (text 18.2.8):
1)The disposition of the property that constitutes the trust is not required to be in writing (e.g. disposition was of personal property) – Boccalatte v Bushelle  Qd R 180 2)The document was not intended to be a complete expression of the transferor’s intention – Star v Star  SASR 263 (E.g. A deed may contain recitals, that recite a previous set of events where an agreement was made. Consequently the accuracy of the deed’s ‘memory’ can be challenged) 3)The document is ambigious – Lutheran Church of Australia v Farmers Cooperate Executive and Trustees Ltd (1970) 121 CLR 628 4)Document was created in circumstances of fraud, duress or mistake – Boranga v Flintoff (1997) 19 WAR 1
~Post mortem Trusts in addition to the parole evidence rules, there is law restricting extrinsic evidence in the interpretation of a will.
Precatory words – the use of precatory words will NOT satisfy the requisite of showing a certainty of intention (if trust was drafted by a lawyer, the use of precatory words indicates an intention against there being a trust).
~Quistclose Trusts there must be mutual intention of both trustee and settlor (see Barclays Bank Ltd v Quistclose Investments Ltd)
Barclays Bank Ltd v Quistclose Investments Ltd  AC 567;  3 All ER 651 -Rolls Razor Pty Ltd (RR) borrowed money from Quistclose Investments Ltd (QC). -QC lent the money on the basis that it should be used solely for the purpose of paying RR’s shareholders dividends. -RR...