Equity and the Law of Trusts

841 Pages·2012·7.63 MB·English

by  Pettit, Philip H.

Equity and the Law of Trusts
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Equity and the
Law of Trusts
Twelft h Edition
philip h pettit
ma
of the Middle Temple, Barrister
Emeritus Professor of Equity, Universities of Bristol and Buckingham
1
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3
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First edition published by Butterworths 1966
Ninth edition published 2001
Tenth edition published 2005
Eleventh edition published 2009
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Preface
I began the preface to the previous edition by saying that the single major task in preparing
that edition had been to make the considerable revisions necessary as a consequence of
the provisions of the Charities Act 2006. Most of that Act has now been repealed by the
Charities Act 2011 which repealed (as will be noted in the text) in whole or in part several
other charity statutes. It has carried out a useful consolidation of the statutory law, but has
made little change of substance.
An addendum to the previous preface noted that the Perpetuities and Accumulations
Bill had received a fi rst reading in the House of Lords. It duly became an Act in 2009 and is
referred to in the text where necessary. One way in which it amended the law was by pro-
viding that for the future the perpetuity period was to be 125 years and no other period.
Until the relevant provisions of the Equality Act 2010 came into force the position in re-
lation to discrimination by charities was governed by the provisions of the Race Relations
Act 1976 and the Sex Discrimination Act 1975. Both these Acts were repealed by the 2010
Act, which in general applies to charities, but there are some special provisions which
apply only to them. One important provision of the 2010 Act in relation to trusts has not
yet been brought into force, namely the abolition of the presumption of advancement: this
is discussed in Chapter 9.
Th e Trusts (Capital and Income) Bill, based on a Law Commission recommendation,
received its fi rst reading a few days before I was due to return the proofs. It is uncontrover-
sial and likely to become law in its present form. I have therefore noted it in the text, also
noting that some of its provisions have limited retrospective eff ect.
Th e Law Commission Report which deals with illegality in trusts has not yet received
a Government response. I have therefore merely noted its existence in the text, but have
summarized its provisions in an appendix.
Notable cases which called for signifi cant rewriting of the relevant areas include Jones
v Kernott (discussed p 193 et seq) where the Supreme Court put beyond all possibility of
doubt the validity of the approach of the House of Lords in Stack v Dowden to the rights
of the parties to the family home under a common intention constructive trust; Pitt v
Holt (discussed p 488 et seq) where Lloyd LJ in eff ect overturned the so-called rule in Re
Hastings-Bass which he himself had lucidly explained in Sieff v Fox when he had been sit-
ting as a High Court judge and was bound by precedent. His statement of the law in that
case, which he now held was not correct, had subsequently been applied in numerous
cases; Th e Independent Schools Council v Th e Charity Commission for England and Wales
(discussed p 283 et seq) where the Upper Tribunal gave detailed consideration to the re-
quirement of public benefi t in relation to the technical legal meaning of charity. Th ough
the Tribunal said that they were dealing with the question in the context of a trust for the
advancement of education, it is thought that much of what was said is of more general
application; Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (in administra-
tive receivership) which reasserted the authority of Lister v Stubbs aft er the doubts as to
its correctness raised by the Privy Council in A-G for Hong Kong v Reid; and Th orner v
Major where their Lordships clarifi ed the principles of proprietary estoppel and where
Lord Walker dismissed the suggestion that had been made by some commentators that its
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vi Preface
earlier decision in Yeoman’s Row Management Ltd v Cobbe had ‘severely curtailed, or even
extinguished the doctrine’.
Other new cases have, of course, been duly incorporated and appropriate amendments
made. Th e opportunity has been taken to slightly enlarge the discussion of some topics—
for example the need for certainty; the principles established in Milroy v Lord; the rule in
Strong v Bird; the Quistclose trust; and sections 31 and 32 of the Trustee Act 1925, noting
the relevant Law Commission recommendations; and to reduce the discussion of others—
for example the administration of charities and the equitable rules of apportionment. Th e
injunction has once again proved a lively area and there has been some rearrangement of
the material and a new section on super-injunctions.
It is forty-six years since I published the fi rst edition of this book, and the time has come,
as the phrase goes, for me to lay down my pen—or perhaps I should say, abandon my com-
puter. I hope that all my readers will fi nd this edition to be a helpful exposition of the law,
and in particular, that it will assist my undergraduate readers in preparing for their exams,
and will continue to be found of value by them in their future careers.
I would like to thank all those in the OUP with whom I had contact for their helpfulness,
at all stages, and in particular for their sympathetic response when I was unable to meet
the original deadline for submission because of illness.
Th e law is stated on the basis of material available to me on 24 May 2012.
Philip H Pettit
May 2012
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Contents
Preface v
Table of Cases xv
Table of Statutes lxxvii
Tables of Secondary European and International Legislation xci
Abbreviations xciii
1 History of the Court of Chancery and Introduction
to Equity 1
1 History of the Court of Chancery 2
2 Jurisdiction of the Court of Chancery 5
3 Fusion of the administration of law and equity 8
4 Uses and trusts 12
5 Equitable interests and equities 20
6 Th e maxims of equity 25
7 Trusts and taxation 28
8 Trusts and the confl ict of laws 29
2 The Trust Concept 30
1 Trust and bailment 31
2 Trust and contract 31
3 Trust and agency 32
4 Trusts and powers 33
5 Trusts and the administration of estates of deceased persons 39
6 Trust and restitution 43
3 The Essentials of a Trust 45
1 Capacity of settlor and benefi ciaries 45
2 Th e three certainties 48
3 Th e benefi ciary principle 59
4 Trusts for the benefi t of unincorporated associations 63
4 Classification and Juristic Nature of Trusts 67
1 Classifi cation 68
2 Discretionary and protective trusts 78
3 Nature of a trust 84
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viii Contents
5 Formal Requirements of Express Trusts 87
1 Inter vivos transactions 87
2 Th e creation of trusts and the disposition of equitable interests by will 100
6 Completely and Incompletely Constituted Trusts 101
1 Th e perfect creation of a trust 102
2 Th e position of a volunteer 108
3 Trusts of a chose in action 113
4 Trusts of the benefi t of a contract and volunteers 118
5 Trusts of future property 120
6 Exceptions to the maxim that ‘equity will not assist a volunteer’ 121
7 Secret Trusts and Mutual Wills 130
1 Fully secret and half-secret trusts 130
2 Mutual wills 138
8 Constructive Trusts 142
1 Th e rule in Keech v Sandford 142
2 Obligation to account as a constructive trustee for profi ts
received by virtue of his position as trustee 144
3 Strangers to the trust 153
4 Th e vendor under a contract for the sale of land 168
5 Undertaking by purchaser 169
6 Executor de son tort 171
9 Resulting Trusts 172
1 Failure to dispose of the equitable interest 172
2 Transfer into and purchase in the name of another, and related cases 180
10 Common Intention Constructive Trusts; Proprietary
Estoppel; Licences 193
1 Common intention constructive trust 193
2 Proprietary estoppel 206
3 Th e Pallant v Morgan equity 219
4 Licences 221
11 Unlawful Trusts 225
1 Trusts that off end against the rule against perpetuities 225
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Contents ix
2 Trusts that off end against the rule against perpetual trusts 226
3 Th e eff ect of declaring a trust void as off ending against the
policy of the law 226
4 Trusts tending to prevent the carrying out of parental duties 228
5 Trusts designed or tending to induce a future separation of
husband and wife 229
6 Trusts in restraint of marriage 230
7 Trusts that are not merely unlawful, but also fraudulent 232
8 Law Commission Report 320 236
12 Voidable Trusts 237
1 Transactions at an undervalue 237
2 Transactions defrauding creditors 240
3 Voluntary settlement of land followed by conveyance for
valuable consideration 242
4 Provisions for protection of spouse or civil partner and family 242
5 Sham trusts 243
6 Illusory trusts 245
13 Charitable Trusts 248
1 Diff erence between charitable and non-charitable trusts 249
2 Th e legal meaning of ‘charity’ 258
3 Designated descriptions of charitable purposes 262
4 Recreational charities 278
5 Trusts that have been held not to be charitable 280
6 Th e Requirement of Public Benefi t 283
7 Exceptions to the Requirement of Public Benefi t 292
14 The Administration of Charities 295
1 Scope of the regulatory provisions of the Charities Act 2011 296
2 Legal framework of charity 297
3 Charity trustees and other persons and bodies responsible for the
running of charities 299
4 Persons and bodies responsible for the regulation and control of
charities 307
5 Registration of charities 324
6 Charity accounts, audit, annual reports, and annual returns 327
7 Schemes 330
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