Top 10 English Trusts Law Cases

Trusts law is a fundamental area of English equity concerned with the ownership, management and distribution of property. It governs the legal relationships between settlors, trustees and beneficiaries, as well as the duties and obligations arising from the creation and administration of trusts.

Over the years, judicial decisions have established important principles governing the creation of trusts, the three certainties, fiduciary duties, imperfect gifts, resulting trusts and equitable remedies.

We have selected 10 particularly important cases in English trusts law, chosen for their legal significance and relevance to law students.

1. Knight v Knight (1840) 3 Beav 148

A dispute arose concerning the interpretation of a will containing provisions directing how the testator's property should be distributed among family members. The court had to determine whether the wording created binding trusts or merely expressed the testator's wishes.

Sir William Grant MR's principles were developed by Lord Langdale MR, who identified three essential requirements for a valid express trust: certainty of intention, certainty of subject matter and certainty of objects.

The case established the three certainties, which remain fundamental requirements for creating an express trust in English law.

2. McPhail v Doulton [1971] AC 424

A trust deed provided that trustees could distribute income among employees, former employees and their relatives and dependants. The issue was whether the class of potential beneficiaries was sufficiently certain for a valid discretionary trust.

The House of Lords established the 'is or is not' test. It must be possible to determine whether any given individual is or is not a member of the class of beneficiaries.

The case established the test for certainty of objects in discretionary trusts and relaxed the previous requirement that every beneficiary had to be identifiable.

3. Milroy v Lord (1862) 4 De GF & J 264

Medley intended to transfer shares to Lord as trustee for his niece. However, he failed to complete the necessary legal formalities for transferring the shares. The issue was whether equity could treat the incomplete transfer as an effective trust.

The Court of Appeal in Chancery held that the transfer was ineffective. Turner LJ explained that a settlor must use the appropriate legal method to transfer property or declare a trust.

The case established that equity will not perfect an imperfect gift or assist a volunteer by treating an incomplete transfer as a valid trust.

4. Re Rose [1952] Ch 499

A shareholder executed the necessary share transfer documents and delivered them, together with the share certificates, to the transferees. However, the company did not register the transfers until a later date. The issue was when the equitable transfer became effective.

The Court of Appeal held that the transfers were effective in equity once the transferor had done everything necessary on their part to transfer the shares.

The case established the principle that an equitable transfer may be effective before legal title is formally registered, provided the transferor has completed all necessary steps within their control.

5. Strong v Bird (1874) LR 18 Eq 315

A man owed money to his stepmother, who later expressed an intention to forgive the debt. However, she died without formally releasing it. The man subsequently became the executor of her estate.

The court held that the debt was extinguished because the intention to forgive it had continued until her death and he had subsequently become her executor.

The case established an exception to the rule against imperfect gifts, where the donor's intention continues until death and the intended donee becomes the donor's executor or administrator.

6. Saunders v Vautier (1841) 4 Beav 115

A beneficiary was entitled to receive trust income at a specified age, with the capital to be transferred later. Before reaching that age, he sought to obtain the entire trust fund.

The court held that because the beneficiary was of full age and absolutely entitled to the trust property, he could require the trustees to transfer the fund to him and terminate the trust.

The case established the rule in Saunders v Vautier, allowing beneficiaries who are collectively absolutely entitled and have full legal capacity to bring a trust to an end.

7. Keech v Sandford (1726) Sel Cas Ch 61

A trustee held a lease on trust for a child beneficiary. When the lease expired, the landlord refused to renew it in the beneficiary's favour but offered to grant a new lease to the trustee personally. The trustee accepted the offer.

The court held that the trustee had to hold the renewed lease on trust for the beneficiary, despite the fact that the beneficiary could not have obtained the renewal personally.

The case established the strict fiduciary principle that trustees must not make unauthorised profits from their position, even where the trust itself could not have obtained the benefit.

8. Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378

A travel agency collected money from customers for airline tickets but was required to hold the money on trust for Royal Brunei Airlines. The agency's managing director knowingly permitted the money to be used for other business purposes, resulting in its misappropriation.

The Privy Council held that the managing director was liable for dishonest assistance in the breach of trust. Lord Nicholls explained that dishonesty is assessed objectively by reference to the standards of ordinary decent people, taking account of the defendant's actual knowledge and beliefs.

The case established the modern test for dishonest assistance and remains a leading authority on accessory liability for breach of trust.

9. Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567

Quistclose Investments lent money to Rolls Razor Ltd specifically to enable the company to pay a dividend to its shareholders. The money was placed in a separate bank account but the company became insolvent before the dividend could be paid.

The House of Lords held that the money was held on trust for the specified purpose. When that purpose failed, the money was held on resulting trust for Quistclose Investments.

The case established the Quistclose trust, an important principle concerning purpose-specific payments and resulting trusts.

10. T Choithram International SA v Pagarani [2001] 1 WLR 1

Pagarani declared that he intended to establish a charitable foundation and announced that he was giving a substantial part of his wealth to it. He appointed himself as one of the foundation's trustees but died before completing the transfer of all the assets.

The Privy Council held that a valid trust had been created because Pagarani had declared himself a trustee. The transfer did not fail merely because the other trustees had not received legal title to the property.

The case established that equity will not allow a trust to fail simply because the settlor has not completed a transfer of legal title to the other trustees where the settlor has himself become a trustee.