THE LAW OF

TRUSTS
FLAW 407
DEFINING A TRUST

• According to Underhill & Hayton, Law of Trusts and Trustees (14ed.) a Trust is:

“An equitable obligation binding a person (who is 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 or cestui que trusts), of whom he
may be one, and any one of whom may enforce the
obligation.”
IS THE DEFINITION IN UNDERHILL’S LAW OF
TRUSTS PERFECT?
Criticisms of the definition
• 1. Trusts are not created for only human beings; a trust may have non-human
beneficiaries. e.g. a trust for the maintenance of a tomb;
• 2. The definition does not cover charitable trust;
• 3. Not all beneficiaries are entitled to enforce a trust.
TRUSTS AND OTHER LEGAL CONCEPTS

It is better to describe than to define a trust, and then to distinguish it from related but
distinguishable concepts. The related concepts are:
• Agency,
• bailment,
• contract,
• debt,
• power,
• administration of estates.
NB: Read Kludze’s Modern Principles of Equity, Chapter 8, for a discussion of these concepts.
WHY CREATE A TRUST?

1. Proper management of resources;

2. To enable property to be held for persons who cannot hold the legal title to
property;
3. A trust allows the enjoyment of rights to be split on a plane of time or it
enables property to be used to benefit persons in succession.
4. Protecting assets
5. Avoiding compulsory succession.
6. Tax exemptions
CLASSIFICATION OR KINDS OF TRUSTS

• They may be broadly classified as Private and Public trust. This division is according to their
purpose.
• Private trust
• “A private trust is for the benefit of an individual or class of individuals, even if the benefit may
be incidentally conferred on the general public.” (Kludze, Modern Principles of Equity)
Private trusts are divided into:
• 1. Express Trust;
• 2. Constructive Trust and
• 3. Resulting Trust.
EXPRESS TRUSTS

• An express trust is one that is intentionally created by the holder of rights when he or
she effectively declares a trust. This may be done by a trust instrument or a will.
Testamentary and inter vivos trusts
• This is a simple distinction, applying to express trusts. A testamentary trust is an
express trust which is set out in a person’s will, and comes into operation when the
testator dies and his will is executed.
• All testamentary trusts must comply with the formalities of the Wills Act, 1971 (Act
360). Accordingly, among other requirements, it must be in writing.
EXPRESS TRUSTS

• Typically, executors are also the first trustees of any trust which arises under
someone’s will. If not, the executor must vest the trust property in the trustee by a
vesting assent. See Administration of Estates Act, 1961 (Act 63) section 96(1).
• An inter vivos trust is one which is created by a settlor to take effect in his life
time. A settlor could even name himself or herself as trustee or even beneficiary.
Most express inter vivos trusts are declared in writing (trust deed). However,
inter vivos trusts of personal property may be made orally, but a written
document is necessary for the transfer of land.
EXPRESS TRUSTS

• Executed and Executory trusts

An executed trust: is one in which the precise interests of the different beneficiaries or
charitable purposes are determined at the outset in the trust instrument; the trustee has
no decisions to make as to how the value of trust assets should be distributed.
Egerton v. Lord Brownley 10 ER 359.
An executory trust: is one where the trustee has a ‘dispositive’ discretion as to how the
assets or beneficial rights are shared. Discretions
NB: The ‘executed’ or ‘executory’ nature of a trust turns upon whether the trustee has
discretion in his distribution of the trust assets.
EXECUTED TRUSTS

Contingent or defeasible interests

A beneficiary may receive a contingent or defeasible interest under a trust. A
contingent interest is one which will only arise if a certain event occurs. A
defeasible interest is one which may come to an end upon a certain event.
EXPRESS TRUSTS

Completely and incompletely constituted trusts

• Completely constituted: A trust is said to be completely constituted when the
trust property has been vested in trustees for the benefit of beneficiaries. Until
this is done, the trust is incompletely constituted.
• Antrobus v. Smith (1806) 12 Vesey 39;
• Re Rose [1949] 1Ch.78.
COMPLETELY CONSTITUTED TRUSTS

• If it is a trust of land, there is the need for the transfer to be in writing. If the land
is unregistered there must be a conveyance.
According to section 34 of Land Act 2020 (Act 1036):
A contract for the transfer of an interest in land is not enforceable if it is
not (a) evidenced in writing, and (b) signed by (i) the person against
whom the contract is to be proved; or (ii) a person who was authorised
to sign on behalf of that person; or (c) exempt under section 36.
COMPLETELY CONSTITUTED TRUSTS

Section 35 of the Land Act also states that:

• Mode of transfer 35. (1) A transfer of an interest in land other than a transfer
specified in section 36, shall be in writing and signed by (a) the person making
the transfer or by the agent of that person duly authorised in writing; and (b) the
person to whom the transfer is made or the agent of that person duly authorised
in writing.
• NB: Sections 34 and 35 do not apply to a transfer or contract for the transfer of an interest in land
which takes effect (a) by operation of law; (b) by operation of the rules of equity relating to the
creation or operation of resulting, or constructive trusts;
COMPLETELY CONSTITUTED TRUSTS

• Where the subject matter of the trust is registered land, it must be transferred in accordance
with section 132 of Act 1036.

• Disposition of registered land and registered interest in land

132(1) Despite the provisions of any enactment to the contrary, land
or interest in land registered under this Act shall be disposed of in
accordance with this Act, and a disposition of land or interest in
land otherwise than in accordance with this Act shall not create,
extinguish, transfer, vary or affect a right or interest in the land.
COMPLETELY CONSTITUTED TRUSTS

• If it is movable property, conveying it to the trustee may be sufficient. It can also

be transferred by deed. A trust arising under a will may be a completely
constituted trust because, generally, the will vest the property in the trustee.
• Milroy v. Lord 1861-73 All ER Rep 783; Richards v. Delbridge (1874) LR 18 Eq 11.

• A completely constituted trust can be enforced by the beneficiaries whether or

not they have given consideration.
INCOMPLETELY CONSTITUTED TRUSTS

• A trust is said to be incompletely constituted when the trust property has not
been vested in trustees for the benefit of beneficiaries. A trust that is not
completely constituted is generally not enforceable by the beneficiaries, unless
they have given consideration because equity will consider as done what ought
to be done and will not aid a volunteer. Gateway Worship Center vrs. Soon
(J4/12/2008) [2009] GHASC 7 (21 January 2009.)
CONSTRUCTIVE TRUSTS

Lord Denning in Hussey v Palmer (1972) 3 All E.R. 70 described a constructive trust as:

“By whatever name it is described, it is a trust imposed by law whenever justice

and good conscience require it. It is a liberal process, founded upon large
principles of equity, to be applied in cases where the defendant cannot
conscientiously keep the property for himself alone, but ought to allow another to
have the property or a share in it. It is an equitable remedy where the
court can enable an aggrieved party to obtain restitution.”

• The principle of “unjust enrichment” lies at the heart of the constructive trust. See also the
case of Saaka v Dahali [1984-86] 2GLR 774.
CONSTRUCTIVE TRUSTS

• There are certain factual circumstances that will cause the court to recognize such
a trust.

1. Profit from fiduciary relationship

2. Profit from crime
3. Profit from mistake
CONSTRUCTIVE TRUSTS

PROFIT FROM A BREACH OF FIDUCIARY RELATIONSHIP

• Where a fiduciary makes a profit in breach of that duty, usually by using

privileged information or diverting a profit making opportunity to himself
instead of the person to whom the duty is owed, the profit is held on a
constructive trust for the person to whom the duty is owed.
• Boardman v Phipps [1967] 2 AC 46.
• Keech v. Sandford 25 E.R 223.
CONSTRUCTIVE TRUSTS

PROFIT FROM CRIME

Bribes or secret profits received by fiduciaries
It is unconscionable for a fiduciary to obtain and retain a benefit in breach of his or
her duties. A fiduciary who obtains a benefit from committing a crime or an
unconscionable act in breach of his duties to another, may hold the benefit on a
constructive trust and is under a duty to pay and account for the benefit to the
person to whom that duty was owed. AG For Hong Kong v. Reid (1993)3 WLR 1143.
Unconscionable/knowing receipt of trust property disposed of in breach of trust
• A person who knowingly receives trust property holds it on a constructive trust for the
beneficiaries.
CONSTRUCTIVE TRUSTS

PROFIT BY MISTAKE
A party who obtains an advantage over others, as a result of a mistake and contrary
to a common intention, may be held to be a constructive trustee of the benefit
acquired thereby.
Brown v Brown 152 S.W.3d 911, (Mo. Ct. App. 2005)
RESULTING TRUSTS

• A resulting trust arises where in the absence of an express declaration, the

beneficial interest in the trust assets ‘jumps back’ to the person who
provided trust assets to the trustee, i.e. the settler. A resulting trust gives
effect to the implied intentions of the owner.

• A resulting trust may be automatic or presumed. It is automatic where the

dispositive provisions in an express trust fail. It is presumed where there is
insufficient evidence to determine the real terms of a transaction to which
one has contributed or made a transfer.
RESULTING TRUSTS

• A PRESUMED RESULTING TRUST

A resulting trust may arise when a person providing assets receives a benefit under
a trust because of an evidentiary presumption that the settlor intended the property
to come back to him. This trust arises when there is no evidence of the provider’s
intentions when he or she makes a gratuitous transfer or contributes to the
purchase of property in another’s name.
Example:
a) If A transfers an asset to B gratuitously (i.e. taking no payment of any kind in return, ‘for no
consideration’), and there is no reliable evidence of A’s true intentions, the court will find that B holds the
asset in trust for A.
PRESUMED RESULTING TRUST

• In the case of In re Koranteng (dec’d), Addo v Koranteng and others [2007-2008]

SCGLR 1039 This was said;
• “In essence, a resulting trust was a legal presumption made by the law to the
effect that where a person had brought property in the name of another, that
other person would be deemed to hold the property in trust for the true
purchaser. It was a trust implied by equity in favour of the true purchaser or
his estate upon death. The trust was regarded as arising from the unexpressed
or implied intention of the true purchaser. Thus for a resulting trust to be
established there had to be proof that the purchase money for the disputed
property had been advanced by the beneficiary of the resulting trust.”
PRESUMPTION OF ADVANCEMENT

• Advancement

A presumed resulting trust may be rebutted by the counter

presumption of advancement.

• A presumption of advancement arises when a person providing

purchase money for an acquisition has an equitable obligation to
support or make provision for the person to whom the property is
conveyed. This arises between a husband and wife, father and child.
PRESUMPTION OF ADVANCEMENT
Husband and wife
The presumption of advancement is recognized where a husband transfers property to his wife or
purchases property in their joint names or in her name alone. Ramia v. Ramia [1981[GLR] 275.

Cohabitation
The presumption of advancement is not destroyed by the subsequent dissolution of the marriage.
Diwell v. Farnes [1959] 1 WLR 624.

Wife to Husband
The presumption of advancement does not arise when a wife buys property in the name of her
husband. In such a case he holds the property as a trustee for his wife. Heseltine v. Heseltine [1971]1
WLR 342; Quist v. George [1974] GLR 1; Harrison v Gray Jnr [1979] GLR 330.
PRESUMPTION OF ADVANCEMENT

Father and child

The relationship between a father and his child gives rise to the presumption of
advancement.
Re Roberts Trust [1946] Ch.1.
In Re Sasu-Twum (decd.); Sasu-Twum v. Twum [1976] 1 GLR 23.
Mother and child
The presumption of advancement does not arise between mother and child unless
the mother stands in loco parentis. Bennet v. Bennet (1879) 10 Ch D474.
REBUTTING THE PRESUMPTION OF
ADVANCEMENT
The presumption of advancement may be rebutted by evidence that the person
paying the money did not intend to forgo the beneficial interest.
• Oppong v. Oppong [1992] 1 GLR 83;
• Ussher v. Darko [1977] 1GLR 476.
• Kwatreng v. Amassah [1962] 1 GLR 241.
RESULTING TRUST

• b) Where A provides the money for the purchase of property, but buys the
property in the name of A and B, it may be held that B holds the property in trust
for A, if there is no reliable evidence regarding A’s intentions. Reindorf v. Reindorf
[1974] 2 GLR 38.
• NB: Currently, marital property is understood to be “property acquired by the
spouses during the marriage, irrespective of whether the other spouse has made a
contribution to its acquisition.” Arthur v. Arthur, [2013-2014] 1 SCGLR 543.
RESULTING TRUST

• c) Where A and B contribute money or other value to purchase of an asset in

B’s name, if there is no reliable evidence as to A’s and B’s intentions, B will hold
the asset on trust for himself and A in shares proportionate to the amount they
contributed to the purchase price.
Quartey v. Armar [1971] 2 GLR 231.
RESULTING TRUSTS

Automatic
• A resulting trust may arise when a trust ‘fails’, in whole or in part,
that is, when any or all of the beneficial interests created under an
express trust fails. In such cases the undisposed interest(s) in the
trust property results to the settlor. An express trust, which fails for
uncertainty of objects.
• Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147.
• Sylvia Gregory v Nana Kwesi Tandoh IV and Brigget Hanson CIVIL APPEAL NO.HI/13/2004.
FORMALITIES FOR THE CREATION OF A TRUST

Capacity to create a trust

Capacity to hold an interest in property is governed by customary, statute and

common law. It seems that any person can create an interest in land in Ghana and
also make a trust of such property.
It seems that in Ghana an infant can create a trust. Under our laws such a
disposition is voidable and may be repudiated any time during his infancy or
within a reasonable time on the attainment or majority. See Edwards v Carter [1893]
Ac 360. Such a disposition may be set aside if it is prejudicial to the interest of the
child.
FORMALITIES FOR THE CREATION OF A
TRUST
• Mental incapacity- such a person cannot create a trust because such a person
lacks dispositive intent. Any trust created by such a person is void. If the trust
was created during the time that such an insane settlor was in his lucid period
and he/she fully understands the nature of his act and the consequences of the
same, such trust may be upheld as valid. Re Beaney [1978] 1 W.L.R. 770.
THE ESSENTIAL REQUIREMENTS FOR THE
CREATION OF AN EXPRESS TRUST

These were laid down in the case of Knight v. Knight (1840) Beav 148 (49
ER 58) by Lord Langdale

1. There must be a clear intention to create a trust(certainty of Words)

2. The property to be held in trust must be certain. (Certainty of subject
matter)
3. The persons or objects to benefit from the trust must also be
certain.(certainty of objects)
CERTAINTY OF WORDS/INTENTION

There should be a clear intention to create a trust. The words used by the
testator or the settler should demonstrate an unequivocal intention to create
a trust in favour of some intended beneficiaries or objects. The language
used by the settlor must be imperative, clear, and unambiguous. No
particular form or technical words are required.

In Jones v Lock [1865] 1 Ch App 25;

Knight v. Knight (1840) Beav 148 (49 ER58);
Lambe v. Eames (1871) 6 Ch. App 597;
Re Adams and the Kensington Vestry (1884) 27 Ch. D. 394.
CERTAINTY OF WORDS/INTENTION

Generally, an inference of a trust will not be made from precatory words. Lambe v.
Eames (1871) 6 Ch. App 597.
Gyasi v. Quaigraine [1963] 2 GLR 161.
Sey v. Sey [1963] 2 GLR 220.
The court will construe precatory words as creating a trust if an intention to do so
can be determine by construing/interpreting the trust documents as a whole.
Comiskey v. Bowring-Hanbury [1905] A.C. 84.
 CERTAINTY OF SUBJECT MATTER

The subject matter must be clearly defined or described so that

it is capable of being identified. If the subject matter is not
certain the gift is void and no trust is created. The subject matter
would remain part of the assets or estate of the donor.
• In Re Last [1958] P 137.
• Sprange v. Barnard (29 E.R 320)
• Palmer v. Simmonds (61 ER 704):
• Boyce v Boyce (1849) 60 ER 959.
CERTAINTY OF SUBJECT MATTER

• In addition, even if the trust property is clearly defined, the share or shares in
that property to which the beneficiaries are entitled must also be clearly defined.
• Where there are two or more beneficiaries and their interests (proportion) are not
expressly indicated, this may be resolved by recourse to the maxim “equality is
equity.” In this case the beneficiaries will share the property equally.
CERTAINTY OF SUBJECT MATTER
• In a fixed trust the entitlements of the beneficiaries in the
property must be known. Apart from the physical subject
matter, the beneficial interest must also be known e.g. is it
a life interest?
Certainty of Beneficiaries

The beneficiaries of a trust must be clearly ascertainable. They must be sufficiently described
so as to be ascertainable.
This requirement of certainty is not so strict for a charitable trust since the courts will apply
the trust to the nearest object to that indicated by the testator.
Where the beneficiaries are not certain, there arises a resulting trust in favour of the settlor or
his estate.
Re Ball, Hand v. Hall [1947] Ch. 228
It has been held that the three certainties are interrelated and the absence of one may cast
doubt on the existence of the others. Mussoorie Bank v. Raynor (1882) 7 App Cas 321
Secret Trusts

• Secret Trusts
There are two types of secret trust: fully secret and half-secret trusts
Fully secret trusts- This is one in which the instrument or document
conveying the property does not disclose evidence of a trust,
although the property is conveyed or given on trust. The striking
feature of such a trust is that it looks like an absolute and beneficial
gift to the transferee in his/her own right, but the secret trustee or the
“ostensible beneficiary” would have agreed or promised to hold it in
trust for the true beneficiary. A fully secret trust is used to hide the
true recipient of a testamentary disposition.
Secret Trusts
There is a limit to the enforceability of secret trusts as to avoid the device of the secret trust being used to
make unattested testamentary dispositions.

In Blackwell v. Blackwell [1929] A.C. 318, at 339, Lord Summer stated: "It is communicated of the
purpose to the legatee, coupled with acquiescence or promise on his part”
In Ottaway v. Norman [1971] 3 All E.R. 1325/ (1972) Ch 698 Brightman J. stated the essential
requirements of a secret trust as follows:

1. Intention of the testator to subject the primary donee to an obligation in favour of the secondary
donees;
2. Communication of that intention to the primary done;
3. Acceptance of that obligation by the primary donee either expressly or by acquiescence.
Secret Trusts
The communication between the donor and donee may be made before or after the
date of the will provided it is made during the life time of the donor.

Communication and acceptance may be determined constructively. Re Boyes [1884]

26 Ch D 531.

It is not sufficient if the donee is just told that he is to hold the property in trust. The
relevant details, about the trust must be communicated to him.
Re Colin Cooper (1939)3AER 586.
Secret Trusts
If the trust is accepted by the trustee/donee, but the objects are not
communicated during the testator’s lifetime, the trustee will hold the
property for a residuary legatee or devisee, or for the persons
entitled upon intestacy.
Secret Trusts

• Where property is transferred to 2 or more donees as joint tenants in a fully secret

trust and only one is informed about the trust and accepts to be a trustee, a trust
will be declared if the donee promised to accept the trust before the making of
the gift.
• If the promise was made after the execution of the will or the document
transferring the property, only the donee who promised to accept the trust will be
bound see Re Stead [1900] 1 Ch 237- The other will be a beneficiary because his
interest will not be tainted with ‘fraud’ and this will bring the joint tenancy to an
end.
Secret Trusts
• Where the donees are tenants in common only the one who accepts
the trust will be bound whether acceptance was before or after the
execution of the will. In other words, where property is transferred
to trustees as tenants in common, the secret trust will only bind
those donees who have received communication of, and accepted
the trust obligation.
Tee v Ferris (1856) 2 K & J 357.
In Re Stead [1903] 1 IR 73.
Secret Trusts
Half Secret trust
• In a half secret trust, the will or the instrument conveying the property discloses
the general existence of a trust, but the terms of the trust do not fully or
sufficiently appear in a will or the trust instrument. It is said expressly that there
is to be a trust. E.g. to my trustees A and B for purposes which I have
communicated to them.
Secret Trusts
• As a safeguard by equity to prevent fraud, the particulars must be
communicated to the trustee and accepted by him before or at the
time of the execution of the will. Such a trust fails if the details are
not communicated to the trustee before the will is executed. Re Keen
[1937] Ch 236.
• If a half-secret trust fails for lack of communication, the trustees
hold the property for those entitled to the residue or the intestate
estate. The trustees cannot hold beneficially because the will makes
it clear that they are trustees. Re Rees [1920] 2 Ch 59.