Trust

A trust is an equitable obligation, binding a person, called a trustee, to deal with property (called trust property), owned by him as a
separate fund, distinct from his own private property, for the benefit of persons (beneficiaries)
• Beneficial ownership is an equitable ownership of property
• If the same party owns the beneficial ownership and legal title, then there is no Trust
• The obligation imposed on a trustee is imposed by equity and not law.
• Common Law is not concerned with what the trustee does with the property they legally own.
➢ There can be multiple trustees
➢ There can be multiple beneficiaries
• A Trust is established when the creator (settlor) transfers legal ownership of their property to another person (Trustee)
with instructions to use it for the benefit of a 3 rdP (Beneficiary)
• A Trust usually ends when all the property has been disposed of
Elements of a trust
Once a Trust comes into existence, there are 3 essential elements:
• Trustee – legal person (fiduciary) holding vested legal title or vested equitable title in property subject to fiduciary duties
➢ May be among the beneficiaries of a trust, but cannot be the only beneficiary of the trust.
E.g. A group of people benefiting from a trust, and one of those are the Trustee.
• Trust property – real or personal property, legal or equitable, identified or ascertainable, capable of being held on trust
• Beneficiary –object of the trust – person or group holding beneficial equitable estate in property on whose behalf trustee
must act
• Settlor – can be a testator or a creator
A Trust has 4 Key Elements
1. Trustee: can be a person or corporation.
a. Trust survives if the Trustee dies or otherwise becomes unavailable. The trust instrument which establishes the
trust will usually have some provision for what happens if a trustee does or is unavailable. If there is no
provision, then a court will appoint a trustee.
2. Trust Property: the property which is capable of being held on trust.
a. Must be identifiable
b. Must be vested in the trustee.
c. Must be presently existing and not conditional.
d. Can be real/personal and corporeal or incorporeal
3. Must have an identifiable beneficiary or a charitable purpose: If the Trust does not have an identifiable beneficiary or a
charitable purpose (so someone who can enforce the trust) then the Trust fails.
a. Attorney-General will enforce charitable trusts.
b. A trust may be created without communication to beneficiary and beneficiary does not have to be born or even
selected from a designated class.
4. The trustee must be under a personal obligation involving the trust property: The personal obligation of the trustee
towards the trust property is the core characteristic of the trust.
a. The personal obligation attaches to the trustee in personam but is also annexed to the property and confers
upon the beneficiary an equitable interest in the trust property.
Exam: Trust can be created as part of a ‘Will’ to hold property for children until they reach a certain age
Exam: Testator Trust comes into being after a person’s death
Exam: Inter-Vivos trust comes into existence during the life of a settlor
Exam: Trust is not a juristic person like a corporation
There are three species of trust:
• Express
➢ Parties intentionally create a Trust for the benefit of another
• Resulting (‘implied’)
➢ Parties tried to create a trust but failed through a lack of formality or some other error so a court will establish a
Trust
• Constructive
➢ Created by courts to remedy a legal problem the court cannot fix.
➢ As it is imposed by the courts, intention of the parties is irrelevant.
Certainty Requirements for Express Trusts
Certainty of intention
An ‘Express Trust’ is not valid unless it is clear that that the intention of the settlor was to create the Trust: Kauter v Hilton (1953)
• Not an issue if Trust is in the form of a deed
• Intention to create trust is presumed = Resulting Trust
• Intention to create trust is irrelevant = Constructing Trust
o No requirement for Settlor to have knowledge of trust law
NB: Precatory words don’t point towards a Settlor’s intention to create a trust: ‘wish, hope, desire, trust’
NB: Mandatory words point towards a Settlor’s intention to create a trust: ‘will, must’
NB: mere conversation or loose expressions of thought will be insufficient to prove an intention to declare a trust: Jones v Lock
[1865] → cannot be intention to gift in the future
NB: “the money is as much yours as it is mine” → language used sufficient to create a trust + also because of the context (couple
and husband died, first wife tried to claim money): Paul v Constance [1977] ** borderline case
NB: word ‘trust’ does not in itself create a trust
NB: party alleging trust was intended (applicant) bears the burden of proving intention
NB: For Inter Vivios Trust – can be evidenced through oral or written statements
NB: Parol evidence rule does not apply in situations where:
• the disposition of the property constitutes the Trust is not required to be evidence by writing ???
• the document was not intended to be a complete expression of the transferor’s intentions
• the document is ambiguous, fraudulent, duress or mistake
Korda v Australian Executor Trustees (SA) Ltd (2015) HC tb 27.2.3
FACTS
• A trustee of an investment scheme argued that a 1964 trustee deed should limit the interests of investors to those proceeds
from the scheme that were transferred to the trustee.
• The VSCA upheld the decision of the trial judge, by a majority, that the parties intended the proceeds from timber sales
to be held on trusts for investors who applied for covenants issued through a prospectus.
• Subsequently issued prospectuses meant that the proceeds were held on trust for the investors.
• The VSCA held that the investors only took on risks related to the forestry operations and it was a matter of necessity that
the timber investments not be at risk from the company’s other operations.
• AET sought declarations that the Forrest Company and the milling company hold the proceeds of the sale of the timber
and the land on trust for the benefit of the covenant holders
ISSUE
• Whether the arrangements between the parties gave rise to a trust?
• Whether commercial necessity imposed a trust?
HELD
• Rule: An Express Trust will not be inferred when it is just a means to protect or create an interest in a commercial setting.
It will only be created where an intention to create a trust can be discerned of inferred from the text of their written
agreements and/or their oral dealings, rather than from their commercial preferences
o Rule: 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 was the foundation of a trust: Gageler J
o Rule: no trust arose because the documents did not make express provision for a trust: Keane J
o Rule: A perceived need for commercial protection of covenant holders is not a proper basis for discerning a
Trust relationship
• Dealings between the parties were purely contractual and no trust could be presumed. The documentation provided, when
placed in its commercial and regulatory context, did not support the existence of a trust.

Charitable Trusts
Charitable Trusts
The definition of Charitable Trusts is precisely in relation to beneficiaries as defined in Attorney General (NSW) v Perpetual
Trustee Co Ltd (1940) 63 CLR 209:
• A charitable trust is:
o An Express Trusts for unidentified beneficiaries.
o for a purpose, not for a person
o disposes of property for the fulfilment of ends considered beneficial to the community → (public benefit
function)
• Contrasts to an Ordinary Trust which is:
o For identified beneficiaries or class of beneficiaries
o To create equitable estates and interests and limiting them to beneficiaries
Test: If a trust lacks identifiable or ascertainable subjects (beneficiaries) but has a public benefit function, then the trust is valid as
a charitable trust.
A charitable trust is not subject to the beneficiary principle. They exhibit the same characteristics and are subjected to the same rules
of an Express Trust, namely constitution, fiduciary duties etc, but there are differences between Charitable Trusts and other forms of
Express Trusts.
Differences:
1. Charitable trusts have a purpose to benefit the general public → supervised by courts and Attorneys General
2. Charitable trusts can exist indefinitely:
a. not subject to ‘rule against indestructible trusts’
b. are subject to ‘rule against perpetuities’: Monds v Stockhouse (1948)
i. The Trustees interest must vest within the perpetuities period.
3. Courts, unlike Express Trusts, have inherent power to enforce and extensively vary charitable trusts: Commissioner of
Stamp Duties (NSW) v Way (1951) … due to this Court power, it is unlikely that for a Charitable Trust to fail due to
administrative unworkability – the Court will make it work.
Charitable Purpose
There is no single or exhaustive definition of a Charitable Purpose. When a court examines whether a Trust has a Charitable
Purpose the courts will look to the following purposes (except in ACT, NSW, QLD), known as a ‘Classically Charitable Trust’:
Statute of Charitable Uses 1601 (43 Eliz I c 4)
• Relief of poverty
• Care of the aged and sick
• Care of soldiers and mariners
• Advancement of education
• Repair of bridges, havens, ports, churches and highways
• Care of orphans
• Maintenance of prisons
• Marriage of poor maids
• Support for young tradesmen and persons decayed
• Relief or redemption of prisoners or captives
• Relief for poor persons concerning the payment of taxes
Rule: if there is some analogy between the purpose of a new Charitable Trust and one of the purposes set out in the preamble or
other case law, then the new Charitable Trust purpose will be deemed sufficient.
Rule: Anything for the benefit of the public, falls within the Statute of Charitable Uses 1601
Reason by analogy
In Royal National Agricultural and Industrial Association v Chester (1974) a trust for the breeding and racing of pigeons failed as
there was no analogous Charitable Purpose to that in the preamble of Statute of Charitable Uses 1601
In Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) a Trust for the ‘not for profit’
publication of law reports was found to be charitable as the reporting of cases had a public benefit that was fundamental to society
akin to the ‘Repair of bridges, havens, ports, churches and highways in Statute of Charitable Uses 1601.
• NB: Results not always logical, but procedure flexible