Trusts: Constructive and Implied

1. Trusts: Constructive and Implied

2. Further developments • Since the seventeenth century many new types of trust have been recognised by the courts. • These include: • The Quistclose trust in commercial situations. • Recognition of constructive and implied trust in de facto relationships.

3. Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 • This important decision established the principle that where money is loaned for a specific purpose and the borrower is unable to apply the money for any other purpose, the borrower is under a fiduciary obligation to the lender. • The lender receives an enforceable right to prevent the borrower from applying the loan to any other purpose. • If the loan is mixed with the borrowers other assets the lender may have a resulting trust over those assets for the amount of the loan. (although this will depend on the terms of the loan agreement.

4. Gillies v Keogh [1989] 2 NZLR 327 • A de facto couple had lived together for three years. The house was in her name and she had bought the house with her own money. He had done considerable work on the house and thought he had an interest in the property. • The Court of Appeal found that she had made it clear from the outset that she had no intention of giving him any interest in the house. As this was the case he could have no reasonable expectation that a constructive trust existed.

5. De Facto Trusts summary • Legal Title is always the starting point. • A clear expression by the owner of intention not to share beneficial ownership is decisive. • Clear expression or inference of both parties’ intention will be effective. • Financial contributions may be important in the absence of either 2 or 3. • 4 can be varied by the reasonable expectations of the parties. What would a reasonable person in their situation expect to be the case?

6. Certainty of Intention • While there is no set formula for creating a trust any trust document needs to make it plain that the settlor intends to create a trust. • Words such as “in the hope of” “in the belief that” insufficient and viewed as precatory. • Whether the wording is effective depends upon the true construction of the entire document.

7. Certainty of Subject matter • The property that is to be subject to the trust must be precisely identified. • In White v White (1908) 28 NZLR 129 the trust property was expressed as “a small portion of what is left”. This was found ot be insufficient.

8. Certainty of Object • The beneficiaries of the trust and the amount they are to receive must be readily ascertainable. • Re Sparrow [1984] 1 NZLR 750 involved a will which left money to Alex Wyllie and Sid Going. While the identities of the beneficiaries were clear, the amount specified was not. These gifts failed. • There has been a marked reluctance for courts to overturn trusts on this ground in more recent times.

9. Charitable Trusts • The requirement of certainty of object has always been less strictly applied to charitable trusts. • Prior to 1957 unclear objects were rectified under the cy-pres doctrine. If a similar charity existed, the court would direct unclear legacies to the similar charity. • This is now covered by s 32 of the Charitable Trusts Act 1957.

10. 32. Property may be disposed of for other charitable purposes— (1) Subject to the provisions of subsection (3) of this section, in any case where any property or income is given or held upon trust, or is to be applied, for any charitable purpose, and it is impossible or impracticable or inexpedient to carry out that purpose, or the amount available is inadequate to carry out that purpose, or that purpose has been effected already, or that purpose is illegal or useless or uncertain, then (whether or not there is any general charitable intention) the property and income or any part or residue thereof or the proceeds of sale thereof shall be disposed of for some other charitable purpose, or a combination of such purposes, in the manner and subject to the provisions hereafter contained in this Part of this Act.

11. (2) Subject to the provisions of subsection (3) of this section, in any case where any property or income is given or held upon trust, or is to be applied, for any charitable purpose, and the property or the income which has accrued or will accrue is more than is necessary for the purpose, then (whether or not there is any general charitable intention) any excess property or income or proceeds of sale may be disposed of for some other charitable purpose, or a combination of such purposes, in the manner and subject to the provisions hereafter contained in this Part of this Act.

12. (3) This section shall not operate to cause any property or income to be disposed of as provided in subsection (1) or subsection (2) of this section— (a) If in accordance with any rule of law the intended gift thereof would otherwise lapse or fail and the property or income would not be applicable for any other charitable purpose: (b) In so far as the property or income can be disposed of under Part 4 of this Act. (4) Subject as aforesaid, this section shall extend to cases where the charitable purpose affecting any property or income is defined by a scheme approved by the Court under this Part of this Act or otherwise, or approved by the Attorney-General under Part 4 of this Act, and in any such case the original purpose or purposes may be restored, with or without modifications. (5) The provisions of this section shall apply with respect to trusts created, and to schemes approved, before or after the commencement of this Act.