Introduction
This essay explores the fundamental aspects of trusts in English law, focusing on the mechanics of creating an express trust and the rights of beneficiaries, alongside distinguishing different types of trusts with an analysis of the nature of respective rights and obligations of the parties involved. Trusts are a cornerstone of equity, providing a mechanism for managing property where legal ownership is separated from beneficial enjoyment. Understanding the creation of express trusts and their operational dynamics is critical for grasping how rights and duties are distributed among trustees, settlors, and beneficiaries. Moreover, distinguishing between various types of trusts—such as discretionary, bare, and resulting trusts—offers insight into their practical applications and legal implications. This essay will first outline the essential requirements for establishing an express trust, including an examination of beneficiaries’ rights. It will then differentiate key types of trusts, evaluating the obligations and rights of the parties involved. Through this analysis, supported by legal principles and academic sources, the essay aims to provide a comprehensive understanding of trusts at an undergraduate level.
Mechanics of Creating an Express Trust
An express trust is a trust created intentionally by a settlor through a clear declaration of intent to hold property for the benefit of another. As established in English law, the creation of an express trust requires adherence to the ‘three certainties’: certainty of intention, certainty of subject matter, and certainty of objects (Knight v Knight, 1840). First, certainty of intention refers to the settlor’s clear intent to create a trust, evidenced through explicit language or conduct. Without such clarity, a trust cannot be inferred, as mere precatory words (expressions of hope or desire) are insufficient (Adams v Kensington Vestry, 1884). Secondly, certainty of subject matter demands that the property to be held on trust is identifiable, whether tangible or intangible. Ambiguity in identifying the trust property renders the trust void. Lastly, certainty of objects necessitates that the beneficiaries—or the class of beneficiaries—must be ascertainable. For fixed trusts, beneficiaries must be specifically identifiable, while for discretionary trusts, it must be possible to determine whether an individual falls within the defined class (McPhail v Doulton, 1971).
Additionally, formalities may be required depending on the nature of the trust. For trusts of land, Section 53(1)(b) of the Law of Property Act 1925 mandates that the trust must be evidenced in writing and signed by the settlor. Failure to comply with such formalities can invalidate the trust, though equity may intervene in cases of fraud or unconscionable conduct. Once established, the trust vests legal title in the trustee, who holds and manages the property for the benefit of the beneficiaries, creating a fiduciary relationship underpinned by obligations of loyalty and care (Bray v Ford, 1896).
Rights of Beneficiaries in Express Trusts
Beneficiaries under an express trust possess equitable rights to the trust property, which are enforceable against the trustee. One primary right is the right to compel the trustee to administer the trust in accordance with its terms, ensuring that the trustee acts in the beneficiaries’ best interests. This includes the right to receive income or capital as stipulated by the trust instrument. Moreover, under the rule in Saunders v Vautier (1841), beneficiaries who are sui juris (of full legal capacity) and collectively entitled to the entire beneficial interest may terminate the trust and demand the trust property, illustrating the significant control beneficiaries can exert.
Beneficiaries also have the right to information regarding the trust, including access to trust accounts and documents, as established in O’Rourke v Darbishire (1920). However, this right is not absolute and may be limited if disclosure conflicts with the trustee’s duties or the trust’s purpose. Furthermore, beneficiaries can seek remedies for breaches of trust, such as compensation for loss or the tracing of misappropriated trust assets, highlighting the protective mechanisms available in equity (Target Holdings Ltd v Redferns, 1996). Despite these rights, beneficiaries’ interests are generally contingent on the trustee’s proper administration, and in discretionary trusts, their entitlement is subject to the trustee’s discretion, demonstrating the nuanced balance of power in trust relationships.
Distinguishing Different Types of Trusts
Trusts in English law can be categorised into various types, each with distinct characteristics and implications for the rights and obligations of the parties. Express trusts, as discussed, are deliberately created and include fixed trusts—where beneficiaries have a defined share—and discretionary trusts, where trustees have the power to decide the distribution among a class of beneficiaries. In fixed trusts, beneficiaries possess vested rights, and trustees are bound to distribute accordingly. Conversely, in discretionary trusts, beneficiaries hold no immediate entitlement, only a hope of benefiting (a ‘spes’), and trustees owe a duty to exercise their discretion reasonably and in good faith (McPhail v Doulton, 1971).
Another category is bare trusts, where the trustee holds property for a beneficiary with no active duties beyond transferring the property as directed by the beneficiary. Here, the beneficiary’s rights are akin to legal ownership, with the trustee acting merely as a nominee. In contrast, resulting trusts arise automatically by operation of law, often when an express trust fails or there is an incomplete disposition of property (Vandervell v IRC, 1967). The beneficiary in a resulting trust—typically the settlor—regains beneficial interest, and the trustee’s obligation is limited to returning the property.
Constructive trusts, on the other hand, are imposed by courts to prevent unjust enrichment or remedy wrongdoing, such as in cases of fiduciary breaches or proprietary estoppel (Lloyds Bank plc v Rosset, 1991). Beneficiaries under constructive trusts have rights based on equitable principles rather than settlor intent, while trustees are subject to court-imposed duties. Each type of trust thus reflects a unique balance of rights and obligations, shaped by the trust’s purpose and legal context.
Analysis of Rights and Obligations Across Trust Types
The nature of rights and obligations varies significantly across trust types. In express discretionary trusts, trustees wield considerable power, obliged to act impartially and consider relevant factors when exercising discretion, yet beneficiaries’ rights remain contingent. In fixed trusts, trustees’ obligations are more prescriptive, with little room for discretion, and beneficiaries enjoy enforceable entitlements. Bare trusts, by contrast, place minimal obligations on trustees, with beneficiaries effectively controlling the trust property. Resulting and constructive trusts shift the focus to equitable restitution, where trustees’ duties are shaped by legal presumptions or judicial intervention rather than settlor intent, and beneficiaries’ rights are often restorative.
This variation underscores the flexibility of trusts as legal instruments but also highlights potential limitations. For instance, the discretionary trust’s structure may lead to disputes over trustee impartiality, while resulting trusts can complicate property dispositions if not clearly documented. Understanding these distinctions is essential for practitioners and settlors to ensure that the chosen trust structure aligns with intended outcomes, balancing trustee duties with beneficiary protections.
Conclusion
In conclusion, the creation of an express trust in English law hinges on the three certainties and, where applicable, compliance with formalities, establishing a framework where trustees hold legal title and beneficiaries enjoy equitable rights. Beneficiaries’ rights, including the ability to enforce trust terms and access information, are central to the trust’s operation, though they vary based on the trust type. Distinguishing between express, bare, resulting, and constructive trusts reveals diverse applications, with each type shaping the rights and obligations of settlors, trustees, and beneficiaries differently. While express trusts offer structured control, resulting and constructive trusts address equitable concerns, and bare trusts provide simplicity. These variations highlight the adaptability of trusts but also their complexity, necessitating careful consideration in their creation and administration. Ultimately, a sound understanding of trust mechanics and distinctions is vital for navigating the legal and practical challenges in trust law, ensuring equitable outcomes for all parties involved.
References
- Adams v Kensington Vestry (1884) 27 Ch D 394.
- Bray v Ford [1896] AC 44.
- Knight v Knight (1840) 3 Beav 148.
- Lloyds Bank plc v Rosset [1991] 1 AC 107.
- McPhail v Doulton [1971] AC 424.
- O’Rourke v Darbishire [1920] AC 581.
- Saunders v Vautier (1841) 4 Beav 115.
- Target Holdings Ltd v Redferns [1996] AC 421.
- Vandervell v IRC [1967] 2 AC 291.
- Law of Property Act 1925, Section 53(1)(b).
- Virgo, G. (2018) The Principles of Equity and Trusts. 3rd ed. Oxford University Press.
