Principles of Trust
Wakila Hussain
1. Creation of Trusts
2. Classification of Trusts
3. Rights of Beneficiaries and Trustees
4. Duties of Trustees and Beneficiaries
Joseph Story - Associate Justice of
the Supreme Court of the United
States
Classification of Equitable
Rights
⚫Equities to protect confidences, i.e. Trust
⚫Equities to prevent oppression, i.e. issues relating to mortgage
and liens, protection of infants, lunatics.
⚫Equities to promote fair dealings, i.e. protection from fraud
and undue influence, Accident, Set off.
Definitions of Trust
‘A trust is an equitable obligation, binding a person(called a trustee) to deal
with property over which he has control(which is called the trust property)
for the benefit of persons(who are called beneficiaries) of whom he may
himself be one, and any one of whom may enforce the obligation”
Underhill, A and Hayton, D, Law of Trust and Trustees
• In Lewin on Trusts a comprehensive
definition of trust was given by Australian
Judge Mayo J, in Re Scott [1948].
• Trust refers to the duty/obligation that
rest upon a person described as
trustee.
• The responsibilities relate to property
held by him.
Definitions • He will administer the property in the
of Trust manner lawfully described by the trust
instrument.
• Where there is no provision written or
oral, in accordance with equitable
principles.
• A trustee himself may be a beneficiary,
in such case advantage will accrue in his
favour to the extent of his beneficial
• A trust has the following characteristics
• The assets constitute a separate fund and are
not part of the trustee’s own estate
• Title to the trust assets stands in the name of
Recognition the trustee or in the name of another person
on behalf of the trustee
of Trusts Act • A trustee has the power and the duty, in
respect of which he is accountable, to mange
1987(Section and employ or dispose of the assets in
accordance with the special duties imposed
1) upon him by law.
• The reservation by the settlor of certain rights
and powers and the fact that the trustee
himself have rights as beneficiary are not
necessarily inconsistent with the existence of
trust.
Protection of Confidence
⚫A transfers his property to B for the ‘use’ of
and in trust for X.
⚫A = owner/settlor
⚫B = trustee
⚫X = beneficiary
Why would anyone want to set
up trusts in modern era?
⚫To provide for loved ones in a way one cannot do, or it would
be unwise to do, simply by transferring legal title.
⚫A minor can not become a legal owner, therefore if someone
wants the minor to have any land, it must be held on trust by
someone else.
⚫One may be worried that his son is a spendthrift, and so give
money for his expenses to a trustee to dispense.
Classification of
Trust
Page 225 of BM Gandhi
According to the Nature of the duties
of the trustees
Simple Trust Special Trust
⚫ Property is vested in one ⚫ The author points out the
person upon trust for purpose of trust clearly.
another. ⚫ Can be divided into:
⚫ Nature of the trust is not a) Ministerial: ordinary trust
prescribed by the author. where trustee has mechanical
⚫ Beneficiary has the right to duties
the possession, control and b) Discretionary: trustee has
disposal of property. to exercise greater element of
⚫ Also called ‘bare trust’ as judgment and discretion
trustee has no duty to
perform
According to their Objects
Private Trust Public or Charitable
Confers the For the benefit of
benefit of the public at large
or some
the trust on considerable
certain portion of the
persons or public answering
class of a particular
description
persons.
According to their Mode of
Creation
1. Express or Declared Trusts
2. Implied or Presumed Trusts
3. Constructive Trusts
According to their Mode of
Creation
4. Resulting Trusts
5. Precatory Trusts
6. Secret Trusts
1. Express or Declared Trusts
⚫A trust clearly expressed or declared by the
author thereof, verbally or in writing.
⚫Can be further classified as:
a. Executed trust – A trust is said to be
‘executed’ when there is nothing left to be
done in order to constitute it, the trust being
fully declared by the instrument creating it.
1. Express or Declared Trusts
b. Executory trust – A trust is executory
when something remains to be done in
order to complete it.
If the service has been imperfectly
created at the outset, and the creator of
the trust has merely devoted his ultimate
object imposing on the trustee or on the
court the duty of effectuating it in the
most convenient way, the trust is called
executory.
2. Implied or Presumed
Trust
⚫A trust which is not so clearly expressed
but is indirectly gathered from the
settlor’s “presumable intention”.
⚫It arises where property is not held by a
person subject to any declared trust but
vested in him under such circumstances
that the court is held to presume that
the property so vested is intended to be
held in trust for his own benefit or for
benefit of another.
3. Constructive Trust
⚫A trust not created by words or circumstances
importing an intention to create a trust, but is
imposed by Courts of Equity in order to prevent
the inequitable acquisition of another’s property.
⚫It arises in case of an unconscionable advantage
gained by a fiduciary or by any other person.
Resulting Trust
⚫The beneficial interest in the property
‘results’ or comes back to the person who
transferred the property to the trustee, or
provided the means for obtaining it.
⚫A trust arising or resulting, in favour of
either of the person who creates it, or his
representatives.
⚫A species of implied trust.
Resulting Trust
⚫This trust arises in the following three
ways–
a) Where a purchase is made in another’s
name or a transfer is made without
consideration.
b) Where the beneficial interest has been
disposed of either wholly or partially
c) Where the trusts declared are illegal.
Precatory Trust
⚫A trust declared and created not by express
words, but by precatory words.
⚫No technical words are required to
constitute such trust.
⚫Where a trust appears to be intended, but
words of recommendation or entreaty are
used, it’s called precatory trust.
Secret Trust
⚫This trust arises only in cases of transfer by
will, when at the time of writing the will,
the testator does not declare his intention
to create trust, but he discloses his
intention after writing the will.
⚫A trust not disclosed on the face of the will.
Secret Trust
⚫A secret trust is created when property is
given to a person either absolutely or upon
an indefinite trust, but there has been an
understanding given by him or an
understanding between him and the donor,
that it shall be applied for the benefit of
some other person or object.
Section 3: Trusts
Act, 1882
A trust is an obligation annexed to the
ownership of property, and arising out
of a confidence reposed in and accepted
by the owner, or declared and accepted
by him, for the benefit of another, or of
another and the owner
Legal Definition of Trust
⚫This definition covers only a specific field in the
concept of trusts, which is private express trusts..
⚫Firstly, it emphasises upon obligation, laying down
that a trust is an obligation annexed to the
ownership of property for the benefit of another.
There is no trust where such obligation is absent.
⚫Secondly, the beneficiary has no interest in the
trust property but has only a right against the
trustee who is the owner of the property
⚫Lastly, the settlor himself can be a trustee.
The settlor’s position
Decides on the form of
Unless any interest is
trust, terms and
He may appoint himself as reserved, settlor loses all
conditions, interests of
one of the trustees or the control and interest in the
beneficiaries, the persons
sole trustee. trust property once trust is
to be appointed as
created.
trustees.
Re Bowden [1936]
Facts: A nun transferred her
property to beneficiaries.
Held: The settlor cannot
She later changed her mind
unwind a trust, so she was
and wanted to recover the
unsuccessful.
property to herself
absolutely
Four Certainties of Trust
1
•Certainty of Intention
2
•Certainty of Purpose
3
•Certainty of Property
4
•Certainty of Beneficiaries
Creation of Trusts
Parties to a Trust (Section 3)
⚫the person who reposes or declares the
confidence is called the author of the trust:
⚫the person who accepts the confidence is
called the trustee:
⚫the person for whose benefit the
confidence is accepted is called the
beneficiary:
Creation of Trusts
Who may create Trust (Section 7)
⚫A trust may be created-
(a) by every person competent to contract,
and,
(b) with the permission of a principal Civil
Court of original jurisdiction, by or on behalf
of a minor
Who are competent to
contract?
Section 11 of Contract Act, 1872
⚫Every person is competent to contract who is of
the age of majority according to the law to which
he is subject, and who is of sound mind, and is not
disqualified from contracting by any law to which
he is subject.
Sui Juris
Section 11 of Contract Act, 1872
⚫Every person is competent to contract who is of
the age of majority according to the law to which
he is subject, and who is of sound mind, and is not
disqualified from contracting by any law to which
he is subject.
Creation of Trusts
Who may be beneficiary (Section 9)
⚫Every person capable of holding
property may be a beneficiary.
Creation of Trusts
Who may be Trustee (Section 10 )
⚫Every person capable of holding
property may be a trustee; but, where
the trust involves the exercise of
discretion, he cannot execute it unless
he is competent to contract.
The Representative of the trust
Trustee A fiduciary relationship/ relationship of
’s confidence, trustworthiness to act for the
benefit of the beneficiary.
positio
n Liable for mismanaging the trust funds
Creation of Trusts
Right to proper trustees (Section 60)
⚫ The beneficiary has a right (subject to the provisions of
the instrument of trust) that the trust property shall be
properly protected and held and administered by proper
persons and by a proper number of such persons.
Explanation I - The following are not proper persons
within the meaning of this section:-
⚫ A person domiciled abroad:
⚫ an alien enemy:
⚫ a person having an interest inconsistent with that of the
beneficiary:
⚫ a person in insolvent circumstances; and,
⚫ unless the personal law of the beneficiary allows otherwise, a
married woman and a minor.
Creation of Trusts
When is a Trust Created (Section 6)
⚫ Subject to the provisions of section 5, a trust is
created when the author of the trust indicates with
reasonable certainty by any words or acts
(a) an intention on his part to create thereby a trust,
(b) the purpose of the trust,
(c) the beneficiary, and
(d) the trust-property, and
(e) (unless the trust is declared by will or the author of
the trust is himself to be the trustee) transfers the
trust property to the trustee.
Majority Act, 1985
⚫Every other person domiciled in Bangladesh
shall be deemed to have attained his majority
when he shall have completed his age of
eighteen years and not before
Important to remember
Beneficiary has no estate or interest in
the subject matter of the trust. He has
only right to proceed against the trustee
