Published on 20/03/2008

The nature of trusts

6.1 The Classification of Trusts

A trust exists where the owner of property is obliged to deal with that property for the benefit of some other person or persons, or for some purpose recognized by the law.
There are 3 necessary elements:
•    The trustee: the titleholder, under a personal obligation to deal with the property for the benefit of the beneficiary or object of the trust.
•    Trust property: must be identifiable and capable of being held on trust;
•    The beneficiary or object: a person or group of persons including an unborn child, for whose benefit the trustee holds the property.

Trusts fall into two broad groups:
1)    Express Trusts: trusts arising from express declaration, which can be effected by some agreement or common intention held by the parties to the trust. Trusts for charitable purposes are usually express trusts.

2)     Trusts arising by operation of law:
a.    Resulting Trusts: There are two kinds:
- An automatic resulting trust is imposed to fill what would otherwise be a gap in beneficial ownership: e.g., where a testator devises Blackacre to trustees on trust for A for life, and fails to dispose of the equitable remainder, or for A if she attains the age of 25 years and he or she does not.
A presumed resulting trust arises by virtue of the application of a rebuttable presumption of intention, deriving from the failure of the person who acquires title to contribute to the cost of its acquisition.
- Resulting trusts are also known as implied trusts, but the modern judiciary prefers ‘resulting’. Note that the implied trust referred to in the Conveyancing Act 1919 (NSW) s23C(2) is probably a presumed resulting trust, though this point has not yet been resolved.
b.    Constructive trusts: These are trusts imposed by the court irrespective of the intentions of the parties, in circumstances where it would be unconscionable for the legal titleholder to deny the beneficial interest claimed by another party.

•    The Origins of Trusts

Trusts have their origins in feoffments to uses employed in late medieval England. Under those arrangements, a landholder, the feoffer, would convey land to certain trusted agents, the feoffees to uses, who were bound to hold the land for the benefit of (to the use of) whomever the feoffor designated. Feoffments to uses allowed feudal landholders to make wills of their lands, which previously would simply pass to their heirs at law, the eldest son, or the eldest daughter if there were no sons. They also allowed land holders to effect settlements of their land which included limitations providing for future interests in the land, something unknown to the common law. By 1450, much of the land in England was held in use; that is, subject to feoffment to uses.

The courts of common law would not recognise these arrangements; the court of Chancery recognized uses and enforced the obligations of feoffees to uses in its ‘English’ jurisdiction by resort to principles which came to be known as equity. Henry VIII found himself in need of finances in the 1530’s and attempted to have a bill passed by the parliament abolishing uses, but that met with opposition in the commons, he then made a test case where the judges agreed that no will could be made of an interest in land held in use. The Commons then compromised and the result was the Statute of Uses 1535.

This statute provided that, where one person held any land to the ‘use’, trust or confidence’ of another person in any estate, that thereafter the second person would be deemed to hold an estate at law equal to that previously held for him in use.

In 1540, the Statute of Wills was introduced, which gave a statutory right to make testamentary gifts of land, subject to a proviso that a Crown should enjoy wardship of one third of the land so devised.

•    Discretionary Trusts

These are trusts so called because of the discretion or power conferred on the trustee in dealing with or distributing the beneficial interests in the trust estate. Those discretions will usually include:
1.    A discretion to select from the designated range of objects of the trust those who are to receive benefits of income, capital or both;
2.    an accompanying power to decide the amount or proportion of income or capital to be allocated to the selected object or objects; and
3.    a power to decide not to allocate benefits to some objects or, indeed, to allocate benefits to one object to the exclusion of all others.
There will sometimes be an additional discretion: a power to add to the designated range of objects.

In a trust established on such terms, no beneficiary has any entitlement to any specific part of the trust property unless and until the trustee decides to allocate some or all of the income or capital to that beneficiary. Prior to this, it is outlined in Gartside v IRC that the rights of the beneficiaries are restricted to:
1.    a right for nomination by the trustee;
2.    right to compel proper administration of the trust.

Point 1 may also be coupled with another power, a power not to distribute at all to the class or range of objects of the power. A trust set up on this way will usually be structured so that it is, on its face, a trust in favour of some designated group e.g the descendants of a certain person living at a defined date, usually 80 yrs from the date the trust comes into operation.  usually referred to as a gift-over in default of appointment.

Where the trustee is obliged to make a distribution, the trustee is said to hold under a ‘discretionary trust’  the trustee is bound to make a distribution. The only discretion he or she has is the discretion as to the proportions in which the property will be distributed. This is described as a power of appointment in the nature of a trust or trust power.

If the trustee has a ‘discretionary power’, it means that the trustee has the power to distribute, but it is not bound to do so and thus has a double discretion: whether to allocate the property in the first place, and if he or she does so, a discretion as to the proportions in which he or she makes the allocations, usually including power to give all to one to the exclusion of all others. Under the discretionary power, the trustee is ‘authorised’ but not obliged to distribute property among some group or class.  this is ‘mere’ or ‘bare’ power of appointment as opposed to power of appointment ‘in the nature of a trust’.

Under the trust power the trustee is obliged, or ‘directed’, to distribute among the designated group. A power of appointment is an authority vested in a person to deal with or dispose of property not his or her own, usually conferred by will or settlement.

In a discretionary power there is no trust in favour of the objects of the discretionary power because the objects of the power are not beneficiaries in the true sense because the trustee is not bound to hold the property for their benefit  they cannot compel the trustee to make a distribution, and the trustee can, refrain from conferring any benefits on any of them.

Even though the holder of a trust power is ‘obliged’ to exercise the power and appoint the property, that obligation, at least so far as the capital of the trust is concerned, is expressed as an obligation to distribute no later than the expiry of a period of time fixed by reference to the rule against perpetuities  during that time, there is no rule requiring the trustee to exercise the power within a ‘reasonable period’: Neill v Public Trustee.

Neither the objects of discretionary powers nor the members of a class of beneficiaries of a discretionary trust have any right to demand a distribution in their favour. Both have an ‘interest’ in the assets of the trust in the sense that they can enforce due administration of the trust. They are entitled to information about the trust: Spellson v George.

But they cannot require the trustees to give reasons for the exercise of their discretions: Re Londonderry’s Settlement.

Where a class of objects of a discretionary trust is ascertained (that is able to be identified and listed), are all of legal age and unanimous, that class of object combined can call for a distribution: Sir Moses Montefiore Jewish Home v Howell & Co (No 7) Pty Ltd.

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•    Unit Trusts

These are trusts in which property is purchased by a ‘manager’, usually a proprietary company, and vested in a trustee under the terms of a trust deed in which the beneficial interest is divided into a number of units which can be sold or granted by the original beneficiary, usually the managing company which established the trust. Purchase price will include the investment in the trust and a service charge or commission for the manager. The units entitle the holders to specific shares of the income of the trust and usually to a return of the proportion of the capital investment. The manager has a right to ‘redeem’, or repurchase the units on demand at some price determined by the term of the trust.

•    Trading trusts

These are trusts in which the trustee carries on a business for the benefit of the cestuis que trust. The trust deed will, of course, provide the trustee with the necessary powers to conduct a business, and will usually include wide powers of investment.

•    Family trusts

These are trusts for the benefit of a family group in which the trustee will often be one or more of the family members, or a proprietary company in which family members are the shareholders and directors. Usually held on discretionary trust and the principal advantage of the trust will lie in the taxation advantages of splitting the income earned by the trust among the family members.

•    Superannuation trusts

These are established for the purpose of providing superannuation benefits, in the form of retirement benefits – either by way of lump sum or pension – and other allowances. Attractive because contributions to them are generally tax deductible and superannuation fund investment income enjoys favourable treatment under the tax system provided the fund satisfies related legislation.

There are two principle types of superannuation funds:
1.    Defined benefit schemes – where the members are paid a lump sum on retirement, where the sum payable is calculated with reference to the number of years of service or membership of the scheme, salary at retirement and other factors such as age at retirement.  have predetermined levels of benefit.
2.    Defined contribution schemes – also called ‘accumulation schemes’, in which the level of contributions made by or on behalf of members is set, and each members benefit on retirement is based upon the total contributions made by or for that member, plus an appropriate share of total fund earnings attributable to that member’s account.

6.2 The distinction between trusts and other institutions

•    Trusts and fiduciary obligations

The key difference between a trustee and that of other fiduciaries is tied up in the trust property. The trustee has title to the trust property. Other fiduciaries this is not present. A trustee owes a fiduciary obligation but due to the aspect of title to property not all fiduciaries are trustees. It is possible for a trustee to be a fiduciary as well as in:

Chan v Zacharia
Where 2 doctors where held to occupy dual roles with regard to the legal rights under a lease formerly held by them as partners, including an option to renew.
The first role was that of trustee of those legal rights; the second was the stemming of their positions as former partners, in which each remained under a fiduciary obligation to assist in the realization, application and distribution of the partnership property.

A fiduciary who benefits improperly from the office of fiduciary holds any such gains on a constructive trust for the principal.

•    Trust and agency

Both trustee and agent must act in the interest of the beneficiary/principal and owe respective fiduciary obligations. But property is the difference. An agent may have possession of some of the principal’s property but not title to that property. Not holding title means an agent cannot give good title to a bona fide purchaser.

Re Brockman
An agent will also be more subject to the directions of his or her principal in matters concerning the agency, while a trustee cannot be governed by the instructions of its beneficiaries in its day-to-day management of the trust.

Re Jones, Ex parte Mayne
An agent who receives money on behalf of his or her principal will not ordinarily be trustee of that money; but a solicitor, who is bound to keep such money separate and to account for it, will hold any such money as trustee for client.

•    Trust and bailment

A bailment is a delivery of personal chattels to a bailee subject to a condition that they be returned to the bailer, or as he or she directs, when the purpose of the bailment as been carried out.

The bailee’s position is similar to a trustee’s in a general way – both are ‘entrusted’ with another’s property; the trustee’s duty to care of the trust property is roughly comparable with the duty of a gratuitous bailee, though generally the trustee’s duties are more onerous.
Consider, however, the following differences:
•    A bailee obtains only possession of and ‘special property’ in the goods bailed, whereas a trustee takes title the trust property;
•    A bailee cannot pass a title to the chattels valid against the bailor, whereas a bona fide purchaser who purchases the legal estate form a trustee for value without notice, acquires a good title.
•    Bailment is a common law notion; where as the trust is purely equitable.
•    Bailment applies only to personal property capable of delivery, whereas a trust may arise in respect of any kind or real or personal property;
•    Bailment is enforced by the bailor, but generally a trust is enforced by the beneficiary rather than the settlor.
Where A delivers his chattel to B with a limited purpose, it may be difficult to decide whether a trust or bailment was intended. The question may be tested by asking whether A intended to part with title as well as possession. A mere parting with possession, creating a bailment, will be more the common situation.

A bailee will also not be able to able to give good title to a bona fide purchaser without notice of the title of the bailor.

•    Trust and contract

A contract arises from agreement, while a trust is created principally by the intention of the settlor. The extent of the liability of a party to a contract for breach is to compensate the other party for loss occasioned by the breach as determined by the common law rules on assessment of damages, while that of a trustee involves a duty to restore the trust to the position in which it would have stood but for the breach.

Previously, it was stated in Wilson v Darling Island Stevedoring and Lighterage Co Ltd, it was the law that where A contracts with B to provide a benefit for C, C will acquire no rights at common law nor in equity because he or she is not a party to the contract and thus cannot enforce it. However, where A transfers money or conveys property to B on terms that the latter will use it for the benefit of C. C would not be able to sue on the contract but, in the event of a breach by A, B would be able to recover substantial damages on behalf of C.

The existence of a trust of the benefit of the promise is determined by the intention of the parties, particularly that of the promise. On this ‘trust’ approach it is only where the promise holds the benefit of the promise on trust for the third party that the promise can recover substantial damages for breach of the promise – unless the promise will suffer actual loss from the promisor’s failure to pay the third party e.g. if it was a creditor of the promise: Coulls v Bagot’s Executor and Trustee Co Ltd.

However, the existence of a trust in favour of the third party will not give that party any right of action against the promisor, they can only sue the promisee seeking either a mandatory injunction requiring the promisee to sue the promisor or equitable compensation for the ‘loss’ suffered by the trust.

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd

The HC held by a majority that a third party who was not a party to a contract in question, one of worker’s compensation insurance, was entitled to recover under the contract as a member of the class of persons intended to benefit from the performance of the contract. It only arises in special cases which can fit within its scope.
It provides an alternative to the argument that the promisee holds the benefit of the promise on trust for the third party, thus reducing the need for the construction of artificial trusts in contractual situations.

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•    Trust and debt

A debtor is not normally trustee for his or her creditor, there is no specified fund held on trust.

A beneficiary, of legal age and fully entitled, can call for the trustee to transfer the trust property to him or her at any time; a secured creditor may only sell the security to recover the debt in the event of a default by the debtor. Similarly, a creditor is restricted to the common law remedy of damages to recover lent money, whereas a person who has paid money on trust – by paying money into a solicitors trust account, for instance, can trace money into any property into which it has been converted.

Whether a trust or debt has been created depends on the intention of the parties. It was held that these two concepts are not mutually exclusive in Barclays Bank Ltd v Quistclose Investments Ltd.

Re Kayford Ltd
Facts:
1.    The company conducted a mail order business. Customers either paid the full price for goods in advance or paid a deposit.
2.    Its suppliers got into difficulties and Kayford could not meet the orders. Its accountants advised the company to open a separate ‘customers’ trust deposit account’ and pay into it all the money received form customers for goods not yet delivered, withdrawing money only upon delivery of the goods.
3.    The object was to allow the company to fully refund payments to customers should the company go into liquidation.
4.    The company accepted this advice except that the money was paid into a dormant account in the company’s name, the title of the account being changed later.
5.    When the company went into liquidation, the liquidators sought a declaration as to the ownership of the sums of money paid into the account.
Held:
[F]rom the outset the advice (which was accepted) was to establish a trust account at the bank. The whole purpose of what was done was to ensure that the moneys remained in the beneficial ownership of those who sent them, and a trust is the obvious means of achieving this. No doubt the general rule is that if you send money to a company for goods which are not delivered, you are merely a creditor of the company unless a trust has been created. The sender may create a trust by using appropriate words when he sends the money, or the company do it by taking suitable steps on or before receiving the money. If either is done, the obligations in respect of the money are transformed from contract to property, from debt to trust.

•    Trust and Body Corporate

Unlike a body corporate, a trust is not a separate legal entity. Property held in the name of the trustee is beneficially owned by the cestui que trust.

Property held in the name of a corporation is beneficially owned by the corporation, not by its shareholders. The shareholders are the beneficial owners of their shares which give them certain rights.

•    Trustee and Personal Representative

The respective powers and duties of executor and trustee differ. The executor’s duties are limited to matters necessary for the administration and distribution of the estate. They may become a trustee of property in the estate if he or she holds in it his or her name for the beneficiaries after the administration of the estate is completed.

The beneficiaries of a deceased estate do not obtain any equitable interest in the assets of the estate by virtue of the will alone. Their rights initially are restricted to a right to secure proper administration of the estate: Livingston v Commissioner of Stamp Duties (Qld).

6.3 Trusts and Powers of Appointment – the Machinery of Discretionary Trusts

•    Trusts and powers

A power of appointment is a power to dispose of or distribute the property of some other person. It is not necessary for the holder of such a power to have title to the property subject to the power, nor is the holder necessarily subject to any fiduciary duty in the manner of his or her exercise of the power.

There are basic differences between trusts and powers of appointment, however such powers form the basis of the modern discretionary trust, and the power then become part of the machinery of the trust, rather than something which can be distinguished from it.

Powers of appointment come in 3 different types:

1.    General :
-    power to appoint the property to anyone in the world, including the holder of the power himself or herself;
-    Gregory v Hudson: The Hallmark of a general power in his honour’s view was that it was a power to appoint to anyone in the world, including the donee or holder of the power;
-    these are not used in discretionary trusts;
-    they are sometimes used in wills;

2.    Special :
-    Power to appoint in favour of a class or group;
-    The object of such power must be described with the necessary certainty;
-    Under current law there is no need to be able to identify all the objects of the group for the power to be effective;
-    Thus it is better described as being a power to appoint in favour of a range of objects defined principally by inclusion;

3.    Hybrid or Intermediate Powers :
-    Usually described as a power to appoint in favour of anyone with the exception of some excluded group of class;
-    The holder of the power must be excluded, either expressly or by necessary implication, which will be the case if the power is conferred on a trustee;
-    This power can be described as a power to appoint in favour of a range of objects identified by exclusion;

What type of power has been conferred depends on the provisions of the instrument conferring the power.

Where the power of appointment is conferred on someone who is also a trustee or otherwise subject to fiduciary obligations, the trustee or fiduciary will usually not be entitled to exercise the power for his or her own benefit  the power will be a special and not a general power.

In light of Re Baden’s Deed Trusts, there are now good grounds for saying that there should only be two classes of powers of appointment, general and special.

Hybrid powers are acceptable in discretionary trusts formed inter vivos but are invalid when used in a will, since they infringe a supposed rule against delegation of will-making power: Tatham v Huxtable. However such a power may be validly conferred by will in England: Re Park.

As well as the ‘type’ of power, it is also important to identify the nature of a power. A power of appointment might fall into one of two categories:
1.    Trust powers: powers in the nature of a trust under which the holder of the power is ‘directed’ or obliged to exercise the power – a power of appointment that MUST be exercised in favour of the designated range of beneficiaries, the holder is under a fiduciary obligation to exercise the power. OR;
2.    Mere or bare powers: powers of appointment in which the holder of the power is ‘authorised’, but not obliged to exercise the power – the holder MAY exercise the power by distributing income favour of the range of designated objects but is not bound to do so;

•    Trustee holding mere or bare power

Where there is a mere power of appointment in a trust, it does not convert the power into a trust power. The trustee is still not bound to make any appointment under the power but is subject to fiduciary obligations in the manner in which the power is exercised, including any decision not to exercise it.

‘A settlor or testator who entrusts a power to his trustee must be relying on them in their fiduciary capacity so they cannot simply push aside the power and refuse to consider whether it ought in their judgment to be exercised’: Re Gulbenkian’s Settlement Trusts.

The objects of the mere power have no right to compel the holder to exercise it, however, they can prevent any improper exercise of the power, such as an appointment in favour of someone outside the designated range or benefit.

In determining whether a mere or trust power is intended, the whole of the instrument must be taken into consideration, not just the provision conferring the power, to ascertain the intention of the settlor or testator: Horan v Borthwick. The crucial test is whether the donee or holder of the power is bound to exercise it.

•    Trustee holding a trust power

The distinction between mere and trust powers is of less importance than it once was. In the case of trust powers, the class of objects had to be ‘ascertainable’ at the date the instrument came into operation, such that a complete list of those objects could be made at the date of the testator’s death, or at the date of execution of a settlement inter vivos: IRC v Broadway Cottages Trust.  test known as ‘list certainty’, while the test for the description of objects of mere powers is known as ‘criterion certainty’.

Re Baden’s Deed Trusts; McPhail v Doulton
Facts: A fund was settled on trustees to provide retirement and other benefits for the staff, including former staff of a certain company, together with their relatives and dependants. Clause 9 of the deed provided that ‘The trustee shall apply the net income in making at their absolute discretion grants to or for the benefit of any of the staff, former staff, their relatives and dependants in such amounts at such times and on such conditions (if any) as they think fit’. No-one was to have any rights to or in the fund except by exercise of the trustees’ discretion. The settlor’s executors sought a declaration that the trust was void.
Held: It was agreed that this was a trust power. The trust when considered as a whole, clearly cast an imperative obligation on the trustees to exercise the power of appointment in favour of the members of the designated range of objects. 3 judges held that the tests for certainty for the description of objects of mere powers and trust powers should be assimilated. A trust power will be valid if it can be said with certainty whether a given postulant is or is not a member of the range of objects. The courts main role was to give effect to the intention of the settlor, which could be done by appointing new trustees or authorising some scheme of distribution.

When discussing the application of criterion certainty, linguistic and semantic uncertainty, which would render any settlement void was distinguished from evidentiary uncertainty, which could be resolved by directions.
It was also stated that a trust might fail where the definition of beneficiaries was so hopelessly wide as not to form ‘anything like a class’ so that the trust was administratively unworkable.

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•    Criterion Certainty and Adminstrative Workability

Lord Wilberforce’s qualification that the description of objects of trust powers should not be so hopelessly wide as not to form ‘anything like a class’, with the result that the trust was administratively unworkable, has led to statements that there was an additional ‘loose class’ requirement to be satisfied for certainty of object in trust powers.

Administrative workability, which was the point of concern, is a matter which a court can assess. It the trust could not be practicably administered in its native form, then it might be a matter for opinion, advise or directions under the Trustee Act 1925 (NSW) s63, in which case it would be said to be unworkable; or, it might be irreparable and sufficiently serious to render the trust void.

Lord Wiberforce’s judgement was adopted in Horan v James.
That case involved a trust power to appoint to anyone other than the testator’s wife and his two sons. The power was struck down for other reasons, but was considered sufficiently certain within the terms laid down by Lord Wilberforce. This approach is followed in: Re Manistry’s Settlement.

If a trust power to appoint in favour of anyone except A, B or C is administratively workable, it is difficult to see how a power could fall foul of this requirement, unless it was also void for uncertainty.

Baden Trust was referred back to the courts for consideration of the question of certainty in the light of the new test. Re Baden’s Deed Trusts (No 2):
It was claimed that the power failed to satisfy criterion certainty, particularly in respect of the words ‘dependants’ and ‘relatives’.

Held: Sachs LJ rejected an argument that the court had to be able to say whether any given postulant was not a member of the class, provided that there was sufficient conceptual or semantic certainty to be able to say whether a given individual did fall within the description.
Megaw LJ thought the test was satisfied if, as regards a substantial number of objects, it could be said with certainty that they fell within the trust, even though for a substantial number of others, it would have to be said that they were not proven whether they were in or out.
Stamp LJ thought the test was not satisfied unless one could say affirmatively either that a given individual was within the class or that he or she was outside it, depending on the construction of the words used. In his view ‘relatives’ was not uncertain if taken to mean nearest blood relations.
In the event, the power to appoint in favour of ‘relatives’ and ‘dependants’ was upheld. Both expressions were sufficiently certain in semantic terms.

The primary task is to be able to say whether some postulant is in, it is not necessary to identify that someone is out. A power should not fail because of some doubt over some fringe candidate.

The Baden cases concentrated on semantic or linguistic uncertainty. There are cases where a gift could be administratively unworkable.

•    Powers and Testamentary Dispositions

The power to make wills expressing their testamentary intention is a fundamental freedom available to those living in a common law system. If in exercise of that power someone elects to use a standard devise for dealing with property by way of trust, and satisfies the requirement of certainty in the process, the courts should not interfere.

In Australia, there is a distinction between powers created in wills and powers conferred inter vivos. The distinction derives from a supposed rule against delegation of will-making power, which is based on the assumption that the power to make a will is derived solely from statute and must be exercised personally by the testator: Houston v Burns.

A distinction has been drawn between general and special powers of appointment on the one hand (which are said not to infringe this rule and which can be validly created by will), and hybrid powers on the other hand (which are said to infringe the rule at least in Australia).

Tatham v Huxtable
Facts: A testator included a provision in his will empowering his executor ‘to distribute any balance of my real and personal estate…to the beneficiaries of this my will and testament…or to others not otherwise provided for who in my opinion have rendered service meriting consideration by the trustee’. (‘In my opinion’ was taken to mean ‘in the opinion of the trustee’.)
Held: The validity of that clause was challenged and, by a majority, the HC held it to be invalid. Fullager J held that some powers of appointment would be valid if contained in a will. In the case of special power, he also said that he would recognise a special power to appoint in favour of a class designated with certainty as a valid testamentary disposition. Accordingly, he rejected the approach taken in English cases such as Re Park upholding hybrid powers in wills.
Kitto J said that there was a cardinal rule that a person may not delegate his or her testamentary power and that it was therefore necessary, except in the case of charitable trusts, for the objects to be benefited by the will to be ascertained or ascertainable. The creation of a will by general or special power did not amount to such a delegation, provided that in the case of a special power, the class or group of objects may be described with sufficient certainty.

This case has since been accepted as authority in Australia for the proposition that a hybrid power of appointment in a will is void because of the so-called non-delegation rule.

Re Manisty’s Settlement
Facts: A settlor conferred on his trustees a power to apply trust funds for a class made up of his infant children, his future children, and his brothers and their future issue born before a closing date defined as 79 years from the date of settlement. An ‘excepted class’ consisting of the settlor, his wife for the time being and any other person settling property on the trust was excluded from the benefit. The trustees were given power at their absolute discretion to declare that any person, corporation or charity other than a member of the excepted class or a trustee was to be included in the class of beneficiaries. The trustee’s then exercised that power to add the settlor’s mother and any widow of the settlor to the class of beneficiaries. A summons was taken out to determine whether the power to add beneficiaries was valid.
Held: It was held that it was, saying that the principle of non-delegation did not apply where the settlor or testator conferred an intermediate (hybrid) power on his or her trustees. Having regard to the definition of the excepted class, it could be said with certainty in this case whether any given individual is or is not a member of the class. Where the settlor gives his or her trustees a power which enables them to take into account all contingencies, the court will not strike it down unless it is capricious; that is unless the terms of the power negative any sensible consideration of the objects by the trustees. A power will not be uncertain because it is wide in ambit.

The court of appeal in Horan v James expresses approval of criterion certainty as the test for certainty of description of the objects of trust powers, and said that this power satisfied that test notwithstanding the absence of any HC authority in support of any test other than list certainty.

The decision in Horan v James has left the court in an unsatisfactory state.
•    Hybrid powers of appointment remain perfectly good dispositions if made by a settlement inter vivos but not when contained in a will.
•    A settlement in favour of a settlor for life, and thereafter for the benefit of such persons as the trustee shall select, with the exception of themselves and perhaps some other small group, will be good. But a trust in a will requiring the executors to appoint in favour of certain persons together with such others as they select, with the exception of themselves and some small group, will be bad.
NOTE: such a power will be good if created in a will in England – presumably even though it confers power over property in NSW – but not in a will made in Australia.
•    It is only necessary to be able to say whether a given individual is or is not within the range of benefit.

The creation of trusts continued on page 5

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The creation of trusts
6.4 The three certainties

An express trust can be created by anyone possessing adequate legal capacity, provided the necessary formal requirements are satisfied.

Those requirements involve 3 certainties: certainty of intention to create a trust, certainty of the subject matter of the trust, and certainty as to the object of the trust.

a.    Certainty of intention to Create a Trust

Usually where there is a deed, it is unlikely that a trust was not intended.
However, in other situations, no formal or technical words are required, provided that a sufficiently clear intention to create a trust is shown.

Where a person opens a bank account supposedly as trustee for someone else, the question of whether a trust has actually been created will depend upon the intention of the person opening the account, notwithstanding any words used. If the person wanted to open the account for his or her own benefit, no trust will be created: Commissioner of Stamp Duties (Qld) v Joliffe.

The matter will turn to the facts of each case: Kauter v Hilton.

The effectiveness to create a trust will also depend on the circumstances. A trust purportedly created by a debtor within 6 months of the presentation of a Bankruptcy petition will not be upheld, as it would constitute a voidable preference in favour of the beneficiary under s122 of the Bankruptcy Act 1966 (Cth), or possibly an unfair preference voidable at the suit of the liquidator, if the ‘settlor’ of the trust is a company under the Corporations Act 2001.

A trust will only arise in such an even where the circumstances are sufficient to cast obligations of a fiduciary nature on the recipient. It will depend on the intentions of the parties, the nature of the legal obligation imposed on them in the transaction. It will also depend on whether the agent is obliged to keep the principal’s money separate, or whether the agents obligation is simply to account to the principle for the money or other property from general funds.

Walker v Corboy (1990) involved fruit sold through an agent at Flemington. The quesiton was did the money received by the agent from the purchasers of the fruit go on trust for the growers? Crt held no trust is created as:
-    none of the words of consignment used the word trust.
-    sales were mostly by credit
-    the money from the sale did not go into a common fund and thus the fruit sellers were considered to have incurred a debt and not a trust relation
-    Thus the relationship between that of the grower and agent was one of creditor/debtor only.

Where one party places money with another, or advances money to that other in a commercial situation, the two will become creditor and debtor rather than beneficiary and trustee, unless the circumstances are sufficient to cast obligations of a fiduciary nature on the recipient: Barclays Bank Ltd v Quistclose Investments.
Facts: Rolls Razor Ltd, in serious financial difficulties, borrowed funds on the condition that they found a certain sum to pay a dividend which had been declared in July. Rolls Razor obtained the loan for the purpose of paying that dividend and a cheque for the necessary amount was paid into an account opened especially for the purpose. Before the dividend was paid, Rolls Razor went into voluntary liquidation and the respondent claimed that the amount was held by the company on trust to pay the dividend and, as the trust had failed, the money should be repaid. The appellant claimed that the money was part of the general funds of the company.
Held: Their Lordships decided that the funds were held on a resulting trust for the lender. Arrangements of this character, for the payment of a person’s debt by a third person, gave rise to a fiduciary relationship of a fiduciary character in favour, as a primary trust, of the creditors and, secondarily, if the primary trust fails, of the third person. Once the purpose is carried out, the lender has only a remedy in debt. Until then, the lender has an equitable right to see that the money is applied for the specified purpose.

Quistclose is authority for the rule that where one party advances money to another with the mutual intention that it should not become part of the assets of the borrower but should be used for some specific purpose, then a trust of moneys will be implied if the purpose fails: Australian Conference Association Ltd v Mainline Constructions Pty Ltd.

Re Kayford Ltd demonstrated a different principle.
A mail order company set up a trust account into which it deposited customers’ payments pending consignment to them of the goods ordered. On winding up, it was held that the moneys in that account were held on trust for the customers and did not form part of the general assets of the company. The trust in this case was formed unilaterally by the company rather than by mutual intention.

Re Fada (Australia) Ltd
It was held that payment into a ‘trust account’ did not, of itself, create any trusts in favour of the applicants. The question of whether a trust is created will turn on the intention of the alleged settlor.

The proposition that Quistclose trusts are founded on is, where A pays money to B for a specified purpose, such as the payments of certain debts of B, and B sets those moneys aside upon receipt, a trust of those moneys for the fulfilment of that purpose is created and, failing that, there is a resulting trust in favour of A.

Quistclose was also applied in Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd (in liquidation) as authority for the principle that a trust arose whenever money was transferred from one person to another for a specific purpose which was made known to that other person. The money was not received by the payee beneficially and the payee was not entitled to use the money for any other purpose.

In Australian Conference Association Ltd v Mainline Constructions Pty Ltd (in liquidation) where an advertising agency received money from client into a special account for sole purpose of paying bills incurred in the advertising arrangement of the client, it was stated that Quistclose is authority for the proposition that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that is the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust.

Lyell v Kennedy
“A man who receives the money of another on his behalf, and places it specifically to an account with a banker ear-marked and separate from his own moneys, though under his control, is in my opinion a trustee of the fund standing to the credit of that account. For the constitution of such a trust no express words are necessary; anything which may satisfy the Court of Equity that the money was received in fiduciary character is enough. It is not requisite that any acknowledgment of such a trust should be made to the cestui que trust or his agent; to whomsoever made it is evidence against the trustee.

If A pays money to B upon a primary trust to pay the money to C upon the happening of some event, a trust in C’s favour will be created, but will only be enforceable by C upon the happening of the event. B may be required to hold the money on a secondary trust in favour of A, a resulting trust which will come into play in the event of the failure of the primary trust.

Both the primary and secondary trust above will be enforceable by A. Once the primary trust is fulfilled (that is, once B pays C), both trusts will be discharged and a relationship between debtor and creditor will exist between A and B.

If A pays money to B to be applied for some purpose, such as payment to C upon the happening of some event, with the intention that C gives an administrative and not a beneficial receipt for the money, so that the money’s never become B’s beneficially, but A does not intend to create a trust for C, B will hold the money subject to a fiduciary power to pay it in accordance with A’s wishes or, failing that, upon trust for A. C will have no standing to enforce the arrangement.

•    Precatory trusts

Where words are used by the settlor or testator, the court must consider whether they display the necessary intention to bind the alleged trustee, whether they simply confer a power which is not binding, or whether they are no more than words of mere request.

In West v Federal Commissioner of Taxation (1949), a testatrix’s words ‘it is my will and desire’ that shares of a deceased estate be settled on the testator’s daughters in a certain way were held to be binding on the trustee.

However in Re Alston, a testatrix’s words ‘it is my express wish’ that Newman Spielvogal be granted a lease of two properties for 10 yrs at 2 pounds per week, with a right to terminate were held not to constitute a binding direction to the trustee to grant such a lease, although they clearly gave the trustee authority to do so.

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b.    Certainty of subject matter

The subject matter of a trust, trust property, must also be described with sufficient certainty. If the subject matter of the trust is not certain, then the trust will fail.

In Mussoorie Bank v Raynor, a testator left property to his wife ‘feeling confident that she will act justly to our children in dividing the same when no longer required by her’.
Held: That there was no trust in favour of the children created. Apart from precatory words, it is not clear what property is intended to be the subject of such a trust.

c.    Certainty of object

The objects of a fixed private trust must be identified with sufficient clarity to satisfy the list certainty rule, which requires that the beneficiaries are ‘ascertainable’ in the sense that they could be listed when the trust comes into operation.

The objects of a discretionary trust must be described with sufficient certainty to satisfy the criterion certainty test  whether it can be said that a given individual is or is not a member of the range of objects: Re Baden’s Deed Trusts.

Charitable trusts are treated more leniently, and will be upheld, if need be, by the application of some scheme, provided that a general intention to benefit charity is shown.

Morice v Bishop of Durham stands as authority for what is known as the ‘beneficiary principle’; that is, that for every non-charitable trust, there must be an identifiable beneficiary, or identifiable beneficiaries, in whose favour the court can decree performance.

Morice was cited as authority for the proposition that a trust ‘to be valid must be for the benefit of the individuals’ in Bowman v Secular Society. The underlying principle is that, in the event it become necessary for the court to take over administration of the trust, the court will distribute the trust assets in favour of the beneficiaries, in equal shares applying the maxim equity is equality.

Re Astor’s Settlement Trusts [1952]
Principle:
-    The beneficiary principle meant the trust failed because there was no person in whose favour the court could decree performance;
-    Equity does not recognize as valid a trust which it cannot both enforce and control

Re Baden’s Deed Trusts; McPhail v Doulton [1971]
Principles:
-    If the court is called upon to administer a trust or execute a power of appointment the court does not have to divide the proceeds equally;
-    The court will attempt to match the settlor’s intentions even if this means an apportionment in unequal shares;
-    The court can appoint new trustees if must to match the settlor’s intentions,
-    The court can order or propose a scheme of arrangement

The beneficiary principle is restricted to trusts in favour of beneficiaries whose shares in the beneficial interest of the trust are fixed.

In discretionary trusts, or other trusts where it is clear that the party creating the trust did not necessarily intend that the objects should share the benefits equally, the requirement of certainty will be satisfied if it can be said with certainty whether a given individual is, or is not, a member of the range of objects.

•    Certainty of Description of objects

‘List Certainty’ in Fixed Trusts

IRC v Broadway Cottages Trust [1955]
When the beneficiary principle is applied to fixed trusts the beneficiaries must be identifiable in such a way as to allow a court to draw up a complete list of the beneficiaries at the time their interests come into effect;

Re Gulbenkian’s Settlement Trusts [1970]
difficulty in finding the beneficiaries does not destroy the certainty of the disposition;
In such events the trustees can always apply to the courts for directions;
‘Criterion Certainty’ in Discretionary Trusts

Re Baden’s Deed Trusts; McPhail v Doulton
Trust where trustees given discretionary power to use net income of trust to benefit the staff of a company, their relatives, and dependents
Executors said – void – beneficiaries could not be ascertained with ‘list certainty’ and wanted funds to be part of the estate.
Trustees said – ok – disposition was mere power and so not under trust problem of ‘list certainty’.

Issue mere power vs. trust power
-    Mere power – holder is authorised but not obliged to exercise power, and there is usually a gift over.
-    Trust power – holder of powers in the nature of a trust are obliged to exercise the power and there is not usually a gift-over.

Thus the matter swung on the wording of the declaration in the will. House of Lord unanimously found a trust power.
The majority - Reid, Dilhorne, and Wilberforce advocated a test based on criterion certainty for beneficiaries;
-    Criterion test – test of certainty is whether or not it was possible to say with certainty any given individual is or is not a member of the class.
Lord Wilberforce at 457:
‘the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor's or testator's intentions. It may do so by appointing new trustees, or by authorizing or directing representative persons of the classes of beneficiaries to prepare a scheme of distribution, or even, should the proper basis for distribution appear by itself directing the trustees so to distribute….
Two final points: first, as to the question of certainty. I desire to emphasize the distinction clearly made and explained by Lord Upjohn between linguistic or semantic uncertainty which, if unresolved by the court, renders the gift void, and the difficulty of ascertaining the existence or whereabouts of members of the class, a matter with which the court can appropriately deal on an application for directions. There may be a third case where the meaning of the words used is clear but the definition of beneficiaries is so hopelessly wide as not to form 'anything like a class' so that the trust is administratively unworkable or in Lord Eldon's words one that cannot be executed.

6.5 Trusts for unincorporated Associations

Under a beneficiary principle, a trust, to be validly created, must be for the benefit of individuals and not for some purpose, unless for a valid charitable purpose. A gift in favour of a corporation satisfies the test as it is a gift to an individual, and not a trust for the purposes of a corporation: Bowman v Secular Society Ltd [1917].

For unincorporated associations it is different because they have no legal personality separate from their members.

Leahy v A-G(NSW) [1959]
The judicial committee advised that a gift on trust for an unincorporated association would, prima facie, be valid as a gift for the individual members. The presumption would be overturned, and the trust would fail, if on proper construction the gift was for present and future members, in which case it failed as a gift in perpetuity, or if it was a gift for the non-charitable purposes of the association, in which case it would fail under the beneficiary principle.

The rule in Leahy’s case was adopted and applied in the HC in Bacon v Pianta (1966) to strike down a gift by the testator of the whole of his estate ‘to the Communist party of Australia for its sole use and benefit’, on the grounds that it was both a bequest to present and future members of the party and that it was for the non-charitable purposes of the party.

The beneficiary principle was enhanced in Neville Estates Ltd v Madden [1962].
Held: a gift to an unincorporated association could be upheld, not only where it was a gift to the individual members as joint tenants, so that nay member could sever his or her share and claim it, but also where it could be construed to the members and tenants in common, subject to their contractual rights and liabilities to one another as members of the association.
Such a gift would not fail for uncertainty or perpetuity unless there was something in the rules of the association which prevented the members from dividing the subject matter of the gift between themselves at any time. - ‘the Constitutional principle’.

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Harrison v Hearn
Facts: The Executive Council of the students’ council at Macquarie University resolved to give some of the student’s council’s money to La Trobe University Students Representative Council to assist that council in paying legal costs incurred in what was called a struggle to retain control of that society’s funds. A student at Macquarie sought to restrain the council from making the payments.
Held: An injunction was granted holding that the Student’s Council was obliged to use the funds it received for the interests and welfare of students of Macquarie, and that members of the executive council owed a fiduciary duty to the people they represented in disposing of the funds. Even though individual students had no proprietary right in the property of the council, they had a sufficient interest to seek a declaration or to apply for injunctive relief to prevent improper use of the council’s funds.

The relaxation of beneficiary principle formed by Re Baden’s Deed Trusts; McPhail v Doulton applies to trusts for unincorporated associations. It thus is no longer necessary to ascertain all the members of an association or to show that the gift is one to the individual members as joint tenants, provided that the trust is ‘administratively workable’ and that it can be said with certainty whether a given individual is or is not a member of the group intended to benefit from the gift.

In such a case the emphasis rests on the enforcement of the trust, and the standing of the party seeking to enforce it. Should a court be called upon to enforce a trust, in favour of a club or society now, it is highly unlikely that it would do so by distributing the trust property among the members. It would be more likely to appoint new trustees or to order some scheme of arrangement.

In Re Denley’s Trust Deed [1969] it was stated that the beneficiary principle was confined to purpose trusts which were abstract or impersonal, and that it should not apply to purpose trusts which provided benefits to individuals, albeit indirectly, who possessed standing to enforce the trust. On this view, a trust will fall outside the beneficiary principle where, although expressed as a trust for a purpose, it is directly or indirectly a trust for the benefit of identifiable individuals who can approach the court to enforce the trust.

S16 Perpetuities Act 1984 (NSW)
-    sets a perpetuity period of 80 years for settlement in favour of a non-charitable purpose and allows for such dispositions to be dealt with on a wait-and-see basis.
-    This extends to purpose trusts in which the trust is limited for a period not in excess of the perpetuity period, usually 21 years and allows them to run for 80 years.
-    Act also saves gifts for present and future members of association.

S 106 Property Law Act 1969 (WA)
- Provides that any limitation in favour of such a class shall be construed as one in favour only of those members of the class who attain a vested interest within the perpetuity period.

The acceptability of trusts for the non-charitable purposes of unincorporated associations remains a matter of some controversy. A trust for a purpose and not for persons has been said to fail for lack of certainty of object, rather than just on the principle that, to be valid, a private trust must be in favour of a beneficiary and beneficiaries: Morice v Bishop of Durham (1804).

The approach taken in Re Denley does not sanction pure purpose trusts. It also seems necessary that the gift, either expressly or by necessary implication, must show an intention that the purpose is to be carried out for the benefit of individuals.

6.6 The Constitution of a Voluntary Trust

For a voluntary trust to be enforceable at the suit of the beneficiaries, it must be completely constituted. Once this stage has been reached it will not be open to the trustee to argue that the beneficiaries are volunteers: Paul v Paul (1882).

An incompletely constituted trust can only amount to an agreement to create a trust which, of course, will not be enforceable without consideration.

•    Transfer to a Trustee

This may be effected either by settlement inter vivos or by will. The general view is that it would be sufficient if the settlor does all that he or she alone can do, thus satisfying the rule in Milroy v Lord that, ‘In order to render a voluntary settlement valid and effectual, the settlor must have done everything which according to the nature of the property comprised in the settlement was necessary to be done to transfer the property and render the settlement binding upon him’: Corin v Patton (1990).

The result is that a valid trust may be constituted in some cases where the legal title has not vested in the trustees, but where they have been put in a position in which they can complete the title unaided.

The trust needs to be acknowledged by the intended trustee. In the case of a trust created by will, where the intended trustee is also the executor of the will, it is not necessary for the legal title to the trust property to be transferred into the executor’s name. An executor has complete rights of property in the assets of the estate by virtue of the grant of probate.

•    Declaration of trust

A voluntary trust created by way of declaration of trust will be fully constituted, and thus enforceable at the suit of the beneficiaries, even though they may be volunteers, once the settlor has made an express declaration of trust intended to be binding on himself or herself, subject only to any statutory requirement that such a trust be in writing.

•    Direction to a trustee

Where a beneficiary of an existing trust wishes to create a new trust in favour of a third party, he or she may do so by directing the trustee to hold the property on trust for the new beneficiary thereafter. Such a direction must be in writing: Grey v IRC.

Re Pryce [1917] caused some confusion with the principles.
Criticism rests on the principle that there can be a completely constituted trust of the benefit of a voluntary covenant (Fletcher v Fletcher), and that the trustees, rather than approaching the Chancery Division to ask whether they ‘ought’ to take proceedings for breach of the covenant to settle after-acquired property, should have commenced an action at common law for breach of covenant in accord with their duty to preserve the trust property.

•    The requirement of writing for express trusts

Under the Statute of Frauds legislation in each state, inter vivos declarations of trust respecting any land or interest in land must be manifested and proved by some writing, while any disposition of a subsisting equitable interest must be in writing signed by the disponer or the disponer’s agent.

Under the relevant wills legislation in each state, testamentary trusts must be in writing to be validly created.

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•    Secret trusts

This is a particular type of trust by will. These are trusts not disclosed on the face of a will, but which in certain circumstances, will be upheld.

Two categories:
1.    Wholly secret trusts: occur where a testator makes an apparently absolute gift; e.g. ‘I give Blackacre to X’. But X will not be able to take the property as his or her own if the testator, prior to his or her death, either before or after making the will, tells X that Blackacre must be held on trust for someone else, or some other object, and X accepts that trust. X will then hold Blackacre as trustee under the terms of the arrangement reached with the testator. If the agreed purpose becomes impossible to perform, or is otherwise illegal, X will not be able to take the property as his or her own. He or she will hold it on trust for the testators next of kin, or other takers on intestacy: Voges v Monaghan

Ottoway v Norman sets out the essential elements for a wholly secret trust as follows:
a.    The intention of the testator to subject the primary donee (the party actually named as recipient in the will) to an obligation in favour of the secondary donee (the party actually intended to benefit);
b.    Communication of that intention to the primary donee; and
c.    Acceptance of that obligation by the primary donee; either expressly or by acquiescence.

2.    Partially secret trust: occurs when the will shows that a trust is intended, but the precise object of the trust is not indicated.
In this case the nominated trustee cannot take beneficially and the property will either be held on trust for the testator’s next of kin or residuary beneficiaries, or for the object of the secret trust, depending on whether the nominated trustee is informed of the secret object before execution of the will or creation of the trust: Re Fleetwood, Sidegraves v Brewer (1880)

A trust created this way will only extend to the property covered by the instructions given to the proposed trustee; it will not cover property left in the same bequest: Re Cooper, Le Neve Foster v National Provincial Bank [1939].

•    Mutual Wills

These involve an agreement, usually between 2 people, to make wills in favour of each other providing reciprocal benefits with some provisions in each case that, should the one predecease the other, the survivor will make provision for some third party or parties mutually agree upon.

It is the essence of the agreement that the survivor is not to revoke the agreed will after the death of the first of the two.

If the survivor revokes the agreed will, he or she will then become constructive trustee upon the terms of that agreed will: Birmingham v Renfew (1937).

6.8 Trusts arising from Agreement or Common Intention

An agreement to create a trust is a contract rather than a trust, and the existence and enforceability of any such trust will be determined by the law of contracts, rather than that of trusts.

If consideration is provided for a promise to create a trust, the court can overlook formal defects that would be fatal to a voluntary declaration.

Despite the limited quantity of evidence available in domestic property disputes, they must still be decided upon established principle, under which the courts declare the rights of the parties, rather than altering them, subject to any statutory power to do otherwise.

The general rule is, where one person purchases property in the name of another, the legal titleholder will be presumed to hold that title upon a resulting trust for the purchaser.  this principle will apply where the purchase moneys are provided by two or more people.

The legal title holder will be presumed to hold that title on trust for those contributing to the purchase price in proportions which reflect their respective contributions to the cost of acquisition: Calverley v Green. This presumption can be rebutted by evidence of a contrary intention on the part of the purchaser, such as an intention to make a gift.

Pettit v Pettit
Facts: A husband claimed a share of proceeds of a sale of a house belonging to his wife, the basis of minor improvements he had made to the house and garden. The house had been purchased with his wife’s money.
Held: The House of Lords rejected the man’s claim, holding that in the absence of any agreement or common intention, or any question of estoppel, where one party performs work or expends money on the property of another he or she will have no claim to that property. Any such common intention will be an actual intention either expressed by the parties or one which could be inferred from the facts, and not an intention imputed to them on the basis of what reasonable spouses would do in the circumstances.

Lord Denning decreed constructive trusts on the basis of an intention imputed to the parties, or some general test of what was ‘fair’ in the circumstances: Eves v Eves.

In Cowsher v Cowsher, it was held, to be recognized under these principles, an agreement or common intention had to represent a consensus shared by the parties as to the proportions of the purchase moneys which the parties would be deemed to have provided. (‘the money consensus’).

In Re Densham however, Goff J said, if the parties thought about the matter at all, they would think about ownership and not some artificial monetary value which could be ascribed to their actual contributions (the ‘interest consensus’).

This doctrine was applied in Allen v Snyder [1977].
Facts: Mr Snyder took proceedings seeking to evict Mrs Allen from a house, a legal title to which stood in his name, in which they lived together for under 10 years.
Mrs Allen claimed that the beneficial interest in the house was shared equally between the two.
Held: The court would uphold a trust arising from an agreement or common intention as to the division of the beneficial interest, provided the claimant contributed as contemplated. The agreement or common intention had to be actual – either expressed or capable of being inferred from the facts. Majority found that this intention was not imputed by the parties.
Glass JA also held that the trust enforced in such a case was an express trust arising from an agreement between the parties as to their respective interests, rather than the deemed value of their contributions.

The respective shares of the parties in the beneficial interest of the property reflect the terms of the agreement, and not the level of their respective contributions to the purchase cost.  Those contributions which need not be direct contributions to the purchase price, act as consideration in the agreement and only have to be sufficient, not necessarily adequate.

In coming to the decision in Allen v Snyder, cases where cited which use the language of constructive trusts and it might be better to look at trusts arising in these cases, not as express trusts directly created by the parties, but rather as constructive trusts imposed by the court in the event of the unconscionable conduct of the defendant in failing to abide by the terms of the agreement and give effect to the express trust.  common intention constructive trusts.

In Zaborskis v Zaborskis it was held that there was a common intention to share the beneficial interest in a house equally where the parties had lived together for 36 years, during which time the woman had not made financial contributions but had produced 5 chidren. The only evidence presented of any statement of an intention as to the manner in which their interests were to be shared was a declaration by the man, when they went to one of the properties in which they had lived during the time, that ‘This is your house; this is my house!’.

By contrast in Burns v Burns, the English court of appeal found no common intention in a case where the parties had cohabited for 19 years and had 2 children. The woman made no contribution to the initial purchase price because she was pregnant at the time, but did earn income during the last 5 years of the relationship, and then at a greater rate than the man.

In Delehunt v Carmody, a contest arose between the former de facto spouse and the estranged wife of a man who had died. The man was a registered proprietor of the house in which he and the de facto had been living. The NSW court of appeal found that no enforceable agreement existed because there had been no agreement on the question of survivorship.

The Privy Council has stated that what their Lordships call the ‘common intention constructive trust’ is effectively no more than a particular application of proprietary estoppel principles. This cuts against the view of Glass JA that a trust arising from agreement or common intention is an express trust.
However Browne-Wilkinson VC has said that the two doctrines rest on the same foundation and have reached the same conclusions: Grant v Edwards [1986].