Session 1_DN

Which of the following best defines a trust?

•  A legal arrangement where one person holds property for the benefit of another.

• A legal arrangement where one person holds property for their own benefit

• A legal arrangement where one person transfers property to another for management

• A legal arrangement where one person borrows property

Which of the following statements best describes the distinction between a beneficiary and a trustee in terms of ownership within a trust?

• The beneficiary holds the legal title to the trust property, while the trustee has the right to benefit from the trust assets.

• The trustee holds the legal title to the trust property and is responsible for managing it, while the beneficiary has the right to benefit from the trust assets.

• Both the beneficiary and the trustee hold equal ownership rights to the trust property and share responsibilities equally.

• The trustee and the beneficiary both manage the trust property together and share the benefits equally.

Harry, paid $90,000 towards the extension of his son and daughter-in-law's home on the basis that he would use that accommodation indefinitely. The subsequent breakdown of the son’s marriage made it impossible for Harry to continue to live on the premises and he had to move out. Harry now wishes to claim reimbursement for the $90,000. What legal remedy should Harry pursue to seek reimbursement of the $90,000 given the nature of the arrangement?

• An express trust arrangement as beneficiary of the $90,000

• A bailment for the sum of $90,000

• An agency arrangement as principal

• An equitable charge on the property for his $90,000

Answer explanation

Morris v Morris [1982] 1 NSWLR 61

Linda inherits a valuable painting from her great-grandmother. She decides to lend the painting to her friend, Sam, who owns an art gallery, so that it can be displayed for a limited period. Linda and Sam agree that Sam will return the painting to Linda after one year. What was the legal nature of the arrangement between Linda and Sam regarding the painting?

• An express trust arrangement

• A bailment

• An agency arrangement

• An equitable charge

Emma wanted her grandchild, Lily, to have a secure start to her education. She gave $50,000 to Max, with the understanding that Max would manage this sum by investing it wisely and ensuring that Lily receives the money when she turns 18. Max agreed to take charge of the funds, and Emma provided a written document outlining her wishes regarding the handling and future disbursement of the money to Lily. What was the legal nature of the arrangement between Emma and Max?

• An express trust arrangement

• A bailment

• An agency arrangement

• An equitable charge

Ron comes home from a work trip with a cheque of $900, which was made out to him. His son John complains that he never bought him a Christmas gift, so Ron shows John the cheque and says "this cheque is for you” and places the cheque in John’s hand. Ron dies shortly thereafter before endorsing the cheque over to John or completing any formal steps to transfer ownership. Was there certainty of intention to create a trust in favour of John for the cheque?

• Yes

• No

Answer explanation

Jones v Lock (1865) 1 Ch App 25. This was an imperfect gift.

Peter and Rose were in a romantic relationship. During the course of their relationship Peter purchased a yacht, registered in his sole name, on which he and Rose would live in. He repeatedly tells Rose that the yacht is ‘for both of us’ or refers to it as “our yatch”. Their relationship finally breaks down. Was there certainty of intention to create a trust over the yacht in favour of Rose?

• Yes

• No

Answer explanation

Rowe v Prance [1999] 2 FLR 787

 Mr Gardiner left his house to his son, Ivor, "subject to my said son paying the sum of £1,000 within 2 years from my death to my other son, Albert." The money was not paid at the end of the 2 years. Was there certainty of intention to create a trust over the house in favour of Albert?

• Yes

• No

Answer explanation

This is a condition precedent. Re Gardiner [1971] 2 NSWLR 494.

A testator left his pty to his wife “feeling confident she will act justly to our children in dividing the same when no longer required by her”. Was there an intention to create trust?

• Yes

• No

Answer explanation

Mussoorie Bank Ltd v Raynor (1882) 7 App Cas 321

A testatrix left her estate to her brother, Jason, absolutely “in order that the Jason might split it between our [their] numerous relatives as he thought best”. Was there an intention to create trust?

• Yes

• No

Answer explanation

Re Snowden (dec’d) [1979] Ch 528