This is an extract from Lawbook Company's Nutshell: Trusts by Howard K Insall & Gino E Dal Pont (Sydney: LBC, 1999, 3rd ed). LBC Nutshells are the essential revision tool: they provide a concise outline of the principles for each of the major subject areas within undergraduate law. Written in clear, straightforward language, the authors clearly explain the principles, and highlight key cases and legislative provisions for each subject.
Express trusts
Express trusts are trusts which arise when a person (the settlor) expresses the
intention, either orally or in writing, whether express or
inferred, to create a trust. Express trusts may be
inter vivos or testamentary. An inter vivos trust would arise where X says to Y: "I give you $500 to hold on trust for my son Z". A testamentary trust would arise where X provides in his will: "I give $500 to my trustees to hold on trust for my wife for life and then to my son absolutely".
Express trusts are generally divided into
private express trusts and
public express trusts. The latter are also known as
charitable trusts, and are discussed in Ch 7. Private express trusts are therefore those valid express trusts that are not charitable trusts.
Express trusts can also be classified according to the nature of the interest they create in their beneficiaries. Where an express trust is described as a
fixed trust, this means that it creates a fixed (and therefore proprietary) interest in the trust property, or in the income derived from that property, in each beneficiary. Where, on the other hand, an express trust is described as a
discretionary trust, this means that a beneficiary only receives an interest in the trust property, or the income derived from that property, if the trustee exercises his or her
discretion to make a distribution of that kind to the beneficiary. Hence, the beneficiaries of a discretionary trust have only an
expectancy or
hope of receiving a distribution from the trustee, and as such do not have proprietary interest in the trust property until such a distribution is made to them.
Express trusts require greater formality than other types of trust. There are rules requiring that the details of the trust must be clear or certain. Moreover, some express trusts must be in writing. These requirements are discussed in Chs 2 to 4.
Non-express trusts
In certain circumstances, even in the absence of express or inferred intention to create a trust, equity will recognise the existence of a trust. As such a trust does not arise from the express or inferred intention of a settlor, it cannot be termed an express trust. Non-express trusts are generally grouped into resulting trusts and constructive trusts.
Resulting trusts arise where a person (the settlor) confers legal title to property to another person but is
presumed by law to have intended to retain beneficial ownership of the property, in whole or in part. For example, the law
presumes that a person who transfers his or her property to a stranger without charge does not intend the stranger to take the property absolutely, but rather to hold the legal title to that property for the benefit of the transferor. In such a case the legal owner is said to hold the property on resulting trust (and therefore as trustee) for the transferor (who is therefore the beneficiary of the trust). Any such presumption can be rebutted by evidence to the contrary.
In other circumstances, the resulting trust is adopted as a vehicle to fill an apparent gap in beneficial ownership of property. For example, where X transfers his or her property to Y 'as trustee' (thereby evidencing an intention to create a express trust), but fails to identify the beneficiaries of the trust (that is, the persons to whom Y owes a duty as trustee), it cannot be said that X intended Y to gift the property absolutely to Y, as Y was only given
legal ownership of the property. The gap in beneficial ownership is filled by the court presuming that X would have intended that the property be returned to himself or herself, and so it is said that Y holds the property on resulting trust for X.
It is important to remember that a resulting trust is not created pursuant to the actual express or inferred intention of the settlor, but arises in particular circumstances or transactions in order to give effect to what the law
presumes is the intention of the settlor. Resulting trusts are further discussed in Ch 8.
Constructive trusts involve the imposition on a person of the duties of a trustee in relation to some item of property because it would be
unconscionable for that person to claim the beneficial ownership of the property. For example, a constructive trust will arise where a person receives money which he or she knows is being given in breach of the terms of a trust. The person will be held to be a constructive trustee and will hold the property on trust for the beneficiaries entitled to it under the original trust. Importantly, the imposition of a constructive trust is not premised on any actual, inferred or even presumed intention, but on
conduct which is inconsistent with the dictates of equity.
Howard K Insall
LLM (Hons)
Barrister
Blackstone Chambers
Gino E Dal Pont
BCom LLB (Hons), LLM, CPA
Senior Lecturer in Law
University of Tasmania
1999
