Common Professional Examination (CPE) Equity and Trusts Syllabus

Equity and Trusts syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Equity and Trusts in Common Professional Examination (CPE), not a summary of it.

1. 1

   Foundations of Equity and the Trust

   3 topics

   • Nature of Equity
     • Historical development and maxims of equity
   • The Trust Concept
     • Distinction from gifts, contracts and powers
   • Classification of Trusts
2. 2

   Creation of Express Trusts

   3 topics

   • The Three Certainties
     • Certainty of intention, subject matter and objects
   • Formalities and Constitution
     • Constitution of trusts and the rule in Milroy v Lord
     • Exceptions to 'equity will not assist a volunteer'
   • Secret and Half-Secret Trusts
3. 3

   Purpose Trusts and Charities

   3 topics

   • The Beneficiary Principle
     • Non-charitable purpose trusts and exceptions
   • Charitable Trusts
     • Charitable purposes and public benefit (Charities Act 2011)
     • The cy-pres doctrine
   • Unincorporated Associations
     • Holding and distribution of association property
4. 4

   Resulting and Constructive Trusts

   3 topics

   • Resulting Trusts
     • Automatic and presumed resulting trusts
   • Constructive Trusts
     • Institutional and remedial constructive trusts
   • Trusts of the Family Home
     • Common intention and quantification of beneficial shares
5. 5

   Trusteeship and Breach

   3 topics

   • Duties and Powers of Trustees
     • Duty of care and the Trustee Act 2000 investment powers
     • Fiduciary duties and the no-conflict rule
   • Breach of Trust and Remedies
     • Personal liability and defences
   • Tracing
     • Tracing at common law and in equity
     • Liability of strangers: knowing receipt and dishonest assistance

Equity and Trusts flashcards for Common Professional Examination (CPE)

20 of 72 cards from the Equity and Trusts deck — real questions with worked answers.

1. What is 'equity' in the context of English law, and from which historical court did it develop?

   Equity is the body of law that developed from the decisions of the Lord Chancellor and the Court of Chancery to supplement and mitigate the rigidity of the common law. It operates on conscience to provide remedies and rights (e.g. the trust) that the common law did not recognise.

2. State the principle established by the Earl of Oxford's Case (1615) regarding conflicts between law and equity.

   Where there is a conflict between the rules of common law and the rules of equity, equity shall prevail.

3. List four of the traditional equitable maxims.

   (1) Equity will not suffer a wrong to be without a remedy; (2) He who comes to equity must come with clean hands; (3) Equity looks to the intent rather than the form; (4) Equity will not assist a volunteer / Equity will not perfect an imperfect gift. (Others: delay defeats equity; equity is equality; equity acts in personam.)

4. What does the maxim 'equity follows the law' mean?

   Equity does not override or contradict common law rights without good reason; it respects and applies legal rules and titles, intervening only where conscience requires, rather than creating an arbitrary parallel system.

5. Define a trust.

   A trust is an equitable obligation binding a person (the trustee) to deal with property over which they have legal control (the trust property) for the benefit of persons (the beneficiaries), any of whom may enforce the obligation. The trustee holds legal title; the beneficiaries hold equitable/beneficial title.

6. Distinguish legal title from equitable (beneficial) title in a trust.

   Legal title is held by the trustee and gives the power to manage and deal with the property at law. Equitable title is held by the beneficiary and gives the right to enjoy the benefit of the property and to enforce the trust. The two titles are split, which is the defining feature of a trust.

7. Distinguish a trust from a contract.

   A contract is a common-law personal obligation founded on agreement and (usually) consideration, enforceable only by parties to it. A trust is an equitable proprietary relationship that does not require consideration and is enforceable by beneficiaries even though they are volunteers; it binds third parties who take the property with notice.

8. Distinguish a trust from a gift.

   An outright gift transfers both legal and equitable title absolutely to the donee, who takes the property for their own benefit. A trust splits title: the trustee takes legal title but must hold it for the beneficiary, who has the equitable interest.

9. Distinguish a trust from agency.

   An agent acts on behalf of a principal but does not necessarily hold property; the relationship is personal and the principal controls the agent. A trustee holds legal title to property and owes proprietary obligations to beneficiaries; trustees act independently and the relationship is fiduciary and proprietary, not based on the beneficiary's control.

10. Distinguish a trust from a bailment.

    In bailment, the bailee acquires only possession of a chattel, not title, and the relationship is governed by common law. In a trust, the trustee acquires legal ownership (title) of the property, the subject matter may be any property, and the relationship is governed by equity.

11. Define an express trust and how it is created.

    An express trust is one deliberately and intentionally created by the settlor, by lifetime transfer (inter vivos) or by will, expressly declaring the trust. It requires the three certainties, and the relevant formalities and constitution.

12. Compare a fixed trust with a discretionary trust.

    In a fixed trust the beneficiaries' shares are fixed and defined by the settlor (e.g. 'equally to A, B and C'). In a discretionary trust the trustees have discretion as to which beneficiaries within a class receive property and/or in what amounts; no beneficiary has a defined entitlement until the discretion is exercised.

13. What is a bare (simple) trust?

    A bare trust is one where the trustee holds property on trust for a single, adult, sane beneficiary absolutely entitled, with no active duties beyond conveying the property as directed. Under the rule in Saunders v Vautier such a beneficiary can call for the legal title.

14. State the rule in Saunders v Vautier.

    A beneficiary (or beneficiaries acting together) who is of full age, sound mind and absolutely entitled to the entire beneficial interest may direct the trustees to transfer the legal title and terminate the trust, regardless of the settlor's wishes.

15. Distinguish a private trust from a public (charitable) trust.

    A private trust is for the benefit of identifiable individuals or a defined class and is enforced by those beneficiaries. A public/charitable trust is for purposes beneficial to the public, has no individual beneficiaries, is enforced by the Attorney General/Charity Commission, and enjoys special privileges (e.g. exemption from the beneficiary principle and perpetuity rules).

16. What are the three certainties required for a valid express trust?

    Certainty of intention (to create a trust), certainty of subject matter (the trust property and the beneficial interests), and certainty of objects (the beneficiaries). Stated in Knight v Knight (1840).

17. What is required for certainty of intention, and can it be inferred without the word 'trust'?

    There must be a manifested intention to impose a binding obligation to hold property for another. No technical words are needed; precatory words (hope, wish, desire) generally do not suffice (Lambe v Eames; Re Adams and the Kensington Vestry). Intention is found objectively from the words and conduct (Paul v Constance).

18. What two elements must be certain for 'certainty of subject matter'?

    (1) The trust property itself must be identifiable; and (2) the beneficial interests/shares must be certain. Failure of (1) means no trust at all; uncertain quantum of shares may also defeat the trust (Boyce v Boyce). 'The bulk of my estate' is too uncertain (Palmer v Simmonds).

19. Contrast Re London Wine Co with Hunter v Moss on certainty of subject matter for unsegregated assets.

    In Re London Wine Co (tangible bottles of wine), an unsegregated, unascertained portion of a bulk could not form trust property. In Hunter v Moss (50 of 950 identical shares), the court held a trust of intangible, identical shares valid without segregation because the shares were indistinguishable.

20. What is the test for certainty of objects in a FIXED trust?

    The 'complete list' test: it must be possible to draw up a complete list of every beneficiary (IRC v Broadway Cottages). If a comprehensive list cannot be compiled, the fixed trust fails for uncertainty of objects.

See more Equity and Trusts flashcards →

Planning Equity and Trusts for Common Professional Examination (CPE)

Equity and Trusts (Common Professional Examination (CPE)) FAQ