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Trusts: Types of Trusts
Introduction:
This note will discuss the two broad classifications of trust: express trust and implied trust, and the further classifications of implied trust: resulting trust and constructive trust.
The Two Classifications of Trust:
In the case of Gateway Worship Center Vrs Soon [2009] GHASC 7 (21 January 2009), the Supreme Court of Ghana advanced that:
A trust can be express or implied (resulting or constructive) …
That is, there is:
These are now explained.
1. Express Private Trust:
A. Nature:
In Black’s Law Dictionary, 9th ed., an express trust is defined as
A trust created with the settlor's express intent, usually declared in writing; an ordinary trust as opposed to a resulting trust or a constructive trust.
In the case of Fortex Group Ltd v MacIntosh [1998] 3 NZLR 171, Tipping J. defined express trust as follows:
An express trust is one which is deliberately established and which the trustee deliberately accepts.
In the case of Akufo-Addo v. Catheline [1992] 1 GLR 377, Osei-Hwere JSC defined express trust as follows:
The ambit of the express trust is well known. As regards land, it is trust expressly declared by deed, will or other written instrument; as to personalty (other than leaseholds) the trust can be expressly created by parol.
What is common among these conceptions is that there is some overt act by the settlor to create a trust. An example of an express trust will be if X, the owner of land, conveys the land to Y and directs him to hold it in trust for Z. Another example is where X, the owner of land, declares that he is now holding the land in trust for Z. It will still be an express trust even without the use of the word “trust”, the important factor is the intention that can be collected from whatever expression is used. In Asante v. University of Ghana [1972] 2 GLR 86-99, the court advanced that “…no particular words are required for the purpose of creating a trust, so long as the intention to create one can fairly be collected from the expression used”.
B. The Three Certainties or Requirements for Establishing an Express Trust:
The creation of an express trust requires the existence of what has become known as the three certainties.
hese three certainties were stated by Lord Langdale in Knight v Knight (1840) 3 Beav 148, where the court said:
As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommended, or entreated, or wished, to dispose of that property in favour of another, the recommendation, entreaty, or wish shall be held to create a trust.
First, if the words are so used, that upon the whole, they ought to be construed as imperative;
Secondly, if the subject of the recommendation or wish be certain; and,
Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.
Also, in the Ghanaian case of Cofie and Others v. Forson and Others [1992] 1 GLR 312-325, it was stated that "to create a trust, there must be three prerequisites which are popularly described by textbook writers as the three certainties." These certainties are:
These are now explained.
1. Certainty of Words:
While no particular words are needed to create a trust, the words used by the owner of the property must show an intention to set up a trust. In Cofie And Others v. Forson and Others, the court stated that:
On the first certainty of intent, it has been held that no particular form of expression is necessary to create a trust, provided it is deducible from the general tenor of the words used that a trust was intended to be created. Indeed, in one case where the word "trust" was not expressly used, the court held that a trust was created when it became apparent from those words used in a document: see Page v. Cox (1852) 10 Hare 163 at 169 per Turner V.C.
From the original exposition of this requirement by Lord Langdale in Knight v Knight (supra), if a person gives property absolutely to another person, meaning he has transferred the legal title to that person, and the recipient is recommended, entreated or wished to dispose of that property in favour of another (the beneficiary), then there will be a trust if the words (those used to recommend, entreat or wish) can be construed as imperative. His lordship continued to illustrate this requirement as follows:
If a testator gives £1000 to A. B., desiring, wishing, recommending, or hoping that A. B. will, at his death, give the same sum or any certain part of it to C. D., it is considered that C. D. is an object of the testator's bounty, and A. B. is a trustee for him. No question arises upon the intention of the testator, upon the sum or subject intended to be given, or upon the person or object of the wish.
…
On the other hand, if the giver accompanies his expression of wish, or request by other words, from which it is to be collected, that he did not intend the wish to be imperative: or if it appears from the context that the first taker was intended to have a discretionary power to withdraw any part of the subject from the object of the wish or request, …it has been held that no trust is created.
Here, if the person to whom the property is conveyed for the benefit of another person has the discretion to decide if that other person gets the property, then there is no trust. Similarly, if precatory words such as “confidence,” “wish,” and “hope” are used, it is unlikely that the courts will hold that there is a trust. The cases of Re Adams and the Kensington Vestry (1884) 27 Ch D 394, Gyasi v. Quaigraine [1963] 2 GLR 161-167, and Sey v. Sey and Another [1963] 2 GLR 220-222 illustrate this principle.
In Re Adams and the Kensington Vestry (supra), a testator gave all his property to his wife
in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime, or by will after her decease.
In determining if there was a trust, Cotton LJ said:
Reading that will, and I will not repeat it, because it has been already read, it seems to me perfectly clear what the testator intended. He leaves his wife his property absolutely, but what was in his mind was this: "I am the head of the family, and it is laid upon me to provide properly for the members of my family - my children: my widow will succeed me when I die, and I wish to put her in the position I occupied as the person who is to provide for my children." Not that he entails upon her any trust so as to bind her, but he simply says, in giving her this, I express to her, and call to her attention, the moral obligation which I myself had and which I feel that she is going to discharge. The motive of the gift is, in my opinion, not a trust imposed upon her by the gift in the will. He leaves the property to her; he knows that she will do what is right, and carry out the moral obligation which he thought lay on him, and on her if she survived him, to provide for the children…
…
…some of the older authorities went a great deal too far in holding that some particular words appearing in a will were sufficient to create a trust. Undoubtedly confidence, if the rest of the context shows that a trust is intended, may make a trust, but what we have to look at is the whole of the will which we have to construe, and if the confidence is that she will do what is right as regards the disposal of property, I cannot say that that is, on the true construction of the will, a trust imposed upon her. Having regard to the later decisions, we must not extend the old cases in any way, or rely upon the mere use of any particular words, but, considering all the words which are used, we have to see what is their true effect, and what was the intention of the testator as expressed in his will.
Here, his lordship is of the view that particular words do not necessary create a trust. However, in the present case, if the transferee is simply required to “do what is right,” his lordship did not think there was a trust imposed on her.
In the case of Gyasi v. Quaigraine (supra), the late J.E. Biney appointed his nephew, J.B. Apprey as his sole heir and administrator. In a codicil, he defined an administrator as follows:
But by 'Administrator' I do not at all mean to place him conjointly with my said four executors, but only to administer also to the needs and requirements of the members of my household and those of my near relations abroad in the same way and manner as, in life, I would do myself as particularised in my said will.
By this, Apprey was enjoined to take care of the testator’s family in the same way the testator had been doing. In the opinion of the court, such directions did not make Apprey a trustee because
The discretion embodied in this direction is too wide to be enforceable by any court which is called upon to enforce such trust. It has always been held that where the donee is given too wide a discretion as to the disposition of the property, the idea of trust is excluded.
Finally, in the case of Sey v. Sey and Another (supra), the will of the testator contained the following provisions:
(a) I give to my brother Kwamin Abadoo my two chambers and hall, one extra room occupied by Hazel and my big store.
(b) My brother Kwamin Abadoo is not to sell this house for any reason thereby to cause my children to go astray. He is to look after my children well and live with them peaceably and quietly as I had been doing
It was contended by the daughter of the testator that the two clauses, when properly interpreted, make Kwamin Abadoo a trustee with respect to the house. At the trial court, it was held that Kwamin Abadoo was not a trustee. On appeal to the Supreme Court, the court held that upon consideration of the will as a whole, it could not be said that the testator intended to create Kwamin Abadoo as trustee and that “the mere fact that a testator in devising his house to his brother couples the devise with an admonition that the house be not sold so as not to render his children homeless, is no indication that the devise was not an absolute gift.” Thus, Kwamin was only admonished by the testator and this did not create a trust.
Summarily, where the discretion is given to the recipient of the property, it cannot be said that it was imperative for him to act in a particular way, and there will be no trust on grounds of uncertainty of words (intention).
2. Certainty of Subject:
In the case of Knight v. Knight (supra), Lord Langdale stated that the subject of the recommendation or wish must be certain. This means whatever property is being conveyed to the trustee for the benefit of the cesti que trust must be expressly designated and capable of identification.
To fulfil the requirement of certainty of subject matter, the settlor must do the following:
Pettit in “Equity and the Law of Trusts” characterised the above as certainty of subject-matter and certainty of beneficial interest respectively. They are now discussed.
A. Certainty of Subject-Matter
For a valid trust, the settlor must adequately describe the property to be held in trust. For instance, if the settlor has ten pieces of land and provides in his will that “I convey my land to my only brother to be held in trust for my first son,” the question that arises is, which land? Here, it will be difficult to identify the land to be held in trust. In such a case, the position is that the there is no trust. In the case of Palmer v Simmonds (1854) 2 Drew 221, the subject of an alleged trust was “the bulk of my said residuary estate.” Here, it was uncertain what is meant by “bulk” and the court held that there was no trust.
Also, in the case of Sprange v. Barnard 6 (1789) 2 Bro CC 585, the testatrix gave property to her husband for his sole use and provided that at his death, the remaining part of what is left, be divided between her brother and sister. It has held that there was no trust since it was uncertain what would be left at the husband’s death.
B. Certainty of Beneficial Interest:
In addition to identifying the property that will be the subject of the trust, the settlor must also adequately identify the beneficial interest that will be taken by the intended beneficiaries. In the same trust property, several interests can be taken. For instance, if the property is land, there can be a life interest and a remainder interest. The person with the life interest will only enjoy the property in their lifetime. Upon the person’s death, the person with the remainder interest will start to enjoy the property. If the settlor does not adequately specify the interest to be taken by multiple beneficiaries, the trust may be held invalid for uncertainty.
In the case of Boyce v. Boyce (1849) 60 ER 959 for instance, a testator devised two houses to his wife for life, and after her death, to be left in trust for Maria and Charlotte, his daughters. He also provided that Maria would choose one house from the two houses, and Charlotte would have the unchosen house. However, Maria died without making a choice and it was argued that Charlotte was entitled to one of the houses. The court, speaking through the Vice-Chancellor, said that the gift in favour of Charlotte was not a gift of all the testator's freehold houses, but of only the other of his freehold houses which Maria did not choose; and, therefore, it was only a gift of the houses that should remain, provided Maria should choose one of them. The court said that in the present case, no choice had been made by Maria, and the gift in favour of Charlotte had failed. Here, although the houses that were the subject matter of the trust were certain, what Charlotte was to receive was uncertain because it depended on Maria’s choice. Had Maria made a choice, Charlotte’s interest would have become certain; however, since Maria died before doing so, it was impossible to determine what property Charlotte was entitled to, and the gift therefore failed.
There are, however, two things to note:
3. Certainty of Objects (Beneficiaries):
The beneficiaries are persons that receive the benefit from the trust property. They are the persons with the beneficial interest in the trust property. The rule is that they must be capable of identification and must be sufficiently described to enable such identification. In Cofie and Others v. Forson and Others (supra), the court stated that "Certainty of objects is also explained at ... to mean that those to profit from the trust, i.e. the beneficiaries or the cestuis qui trust, should be identifiable and ascertainable."
Where the beneficiaries cannot be ascertained, the court will hold that there is no trust, as seen in the case of Gyasi v. Quaigraine (supra). In that case, the testator enjoined his nephew to take care of his blood relatives. The court said this was too vague and there could be trust. It delivered itself as follows:
"Blood relatives" is not a term of art. He failed to define what he meant by "blood relatives." Does the testator by that phrase mean all those persons who trace their descent from his father and mother, or from his grandmother and grandfather or from his great-grandmother and great-grandfather going backwards ad infinitum? In my view the expression "blood relatives" is so vague, that the testator could not have intended to create a trust.
Apart from express trust, there is also implied trust which consists of:
These are now explained:
A. Resulting Trust:
A resulting trust arises in several instances. These instances are now discussed.
1. Purchasing Property in the Name of Another:
First, a resulting trust arises when a person a person purchases property in the name of other. This was explained in In re Koranteng (Decd); Addo vs Koranteng & Others [2005-2006] SCGLR 1039 as follows:
In essence, a resulting trust, in this context, is a legal presumption made by the law to the effect that where a person has bought property in the name of another, that other would be deemed to hold the property in trust for the true purchaser. It is a trust implied by equity in favour of the true purchaser or his estate, if he has died. The trust is regarded as arising from the unexpressed or implied intention of the true purchaser. Obviously, though, for such a resulting trust to be implied, certain factual preconditions must exist and the issue is whether on the facts of the current case a resulting trust may validly be implied.
Even if the property is in the name of the purchaser and the name of another person, or exclusively in the name of that person, a resulting trust may still be held to exist. In re Fianko Akotuah (Decd.); Fianko &Another vs Djan & Others [2007-2008] SCGLR 165, the Supreme Court again stated that:
It is settled law in equity that the trust of a legal estate, whether freehold, copyhold or leasehold; whether taken in the names of the purchasers and others jointly, or in the name of others without that of the purchaser; whether in one name or several, whether jointly or successive, results to the man who advances the purchase money. In such cases, the provider of the purchase-money or the true owner in equity is not estopped from averring and proving that to be the truth of the transaction; neither can they be estopped from relating the real truth known to them at the time of making the statement. In such circumstances, a person with his own equal and clear knowledge to the contrary, cannot contend at common law or in terms of section 26 of the Evidence Decree, 1975, NRCD 323 that the other party in question has, by his own statement, act or omission, intentionally and deliberately caused or permitted another person to believe a thing to be true and to act upon such belief.
Summarily, the person who did not provide the purchase money may be held to hold the legal estate on trust for the person who advanced the purchase money, and equity will presume a resulting trust in favour of the provider of the purchase money.
In the case of Kwantreng v. Amassah & Others [1962] 1 GLR 241-255, it was, however, explained that if the person in whose name the property is purchased is a stranger, there is a resulting trust. However, if that person is the child of the purchaser or a person to whom the purchaser stands in locus parentis, there is an advancement of the property from the purchaser to that person.
The position in Kwantreng v. Amassah & Others (supra) is similarly captured in the case of Quist v George [1974] 1 GLR 1. In that case, the plaintiff, by a deed of gift, transferred the legal and beneficial interest in her land to her daughter who was married to the defendant. With the permission of the defendant, a hospital was built on the land. Subsequently, the plaintiff’s daughter is said to have been forced out of her matrimonial home by her husband. The plaintiff’s daughter, also by a deed of gift, revested the legal title in the land in the plaintiff. The plaintiff then claimed that the defendant was a bare licensee of the land, which licence was granted subject to the defendant continuing to live happily with her daughter as man and wife; and since they are no longer cohabiting, the licence is automatically revoked. On the other hand, the defendant argued that he had wanted to mortgage the land to get a loan, but could not do so because the land was in the name of the plaintiff. That to enable him mortgage the land, the plaintiff agreed to convey the land to her daughter to enable the defendant mortgage it. He argued that the plaintiff’s daughter held the land as trustee for his use and benefit. The issue was whether there was a trust created in favour of the defendant. First, the court held that the deed of gift cannot be held as a trust deed, as it clearly revealed that the plaintiff’s daughter was to be the only object of her bounty. In addition, the court held that the fact that the defendant built on it cannot raise a presumption of resulting trust or of advancement in his favour because
...the relation existing between the plaintiff and the defendant makes it difficult for such a presumption to arise. Because a widowed mother-in-law, as the plaintiff is, does not stand in loco parentis to her son-in-law so as to raise a presumption that in a transaction of this kind a benefit was intended for the son-in-law. In other words, the plaintiff is not under any legal or equitable obligation to support the defendant. Thus, even if the land had been purchased by the plaintiff in the name of the defendant, no presumption of advancement would have arisen.
In Bennet v. Bennet (1879) 10 Ch.D. 474, it was held that even where a mother makes a purchase or investment in the name of her own daughter or in the joint names of herself and her child, that does not of itself afford the presumption of advancement. For there is no obligation on a mother to make provision for her child, as in the case of a father.
The plaintiff’s daughter was therefore not holding the property for the benefit of the defendant.
2. Failure of an Express Trust:
Where property is conveyed to a trustee for the benefit of a beneficiary, and the express trust fails wholly or partially, a resulting trust arises in favour of the settlor or the settlor’s estate. The failure may occur because the trust purpose is impossible, unlawful, uncertain, or because the trust does not exhaust the whole beneficial interest in the property.
The following illustration and breakdown shows how a resulting trust may arise:
B. Constructive Trust:
This is a trust that arises by the operation of law or one that is imposed by law. In Black’s Law Dictionary, it is defined as
An equitable remedy that a court imposes against one who has obtained property by wrongdoing. - A constructive trust, imposed to prevent unjust enrichment, creates no fiduciary relationship.
In the case of Saaka v. Dahali [1984-86] 2 GLR 774, a constructive trust was defined as follows:
A constructive trust arises when, although there is no express trust affecting specific property, equity considers that the legal owner should be treated as a trustee for another. This happens, for instance, when one who is already a trustee takes advantage of his position to obtain a new legal interest in the property, as where a trustee of leaseholds takes a new lease in his own name. The rule applies where a person, although not an express trustee, is in a fiduciary position...A person receiving property subject to a trust ....becomes a constructive trustee if ... although he received it without notice of the trust, he was not a bona fide purchaser for value without notice of the trust, and yet, after he had subsequently acquired notice of the trust, he dealt with the property in a manner inconsistent with the trust.
Also, da Rocha and Lodoh, in Ghana Land Law and Conveyancing (2nd Edition), defined a constructive trust as follows:
A constructive trust is a trust which arises independently of the intention of the parties but it is imposed by equity because the circumstances demand that the person holding the title to the property should be considered as a trustee. This trust usually arises by operation of equity where a fiduciary relation exists. A trustee or a person in a fiduciary relationship is not permitted to profit from his position...
These definitions were cited with approval in Gateway Worship Center v. Soon Boon Seo (supra). In that case, the court added that the essential ingredients of a constructive trust are:
To illustrate, consider the case of Attorney General for Hong Kong v Reid (New Zealand) (UKPC) [1993] UKPC 2. In that case, Reid was employed as a Deputy Crown Prosecutor for the government of Hong Kong. During his employment, he took bribes to not prosecute some criminals and used the bribe money to acquire some property. He was subsequently convicted and the Attorney General brought an action to recover the bribes. In holding that the Attorney General could recover the bribes, the court held that there was a constructive trust. The reasoning for a constructive trust can be simplified as follows:
Also, in the case of Saaka v Dahali [1984-86] 2 GLR 774, the late Saaka Dagomba constructed a house in which he lived with his friend and the friend’s aunty, called Napari Yemo. Soon, Saaka Dagomba moved out of the house and the daughter of Nepari Yemo, called Nabia Dahali then moved into the house to take care Nepari Yemo. At some point, the house was entrusted to Nabia Dahali. After the death of both Saaka Dagomba and Nabia Dahali, the daughter of Saaka Dagomba, the plaintiff, sought to make extensions to the house but the defendant, who is the daughter of Nabia Dahali, refused. This was due to a false understanding that the house belonged to her grandmother (Napari Yemo), then her mother (Nabia Dahali), and now to her by way of inheritance. The plaintiff sued for declaration of title to the house. In defence of her title, the defendant tendered in evidence a lease in respect of the plot of land on which the house stood. The lease was executed between the Government of Ghana as lessor, and her mother (Nabia Dahali) as lessee. In applying for the lease, the defendant’s mother, despite not being a relative of Saaka Dagomba, lied that she was his next of kin and the rightful heir to his property. In holding in favour of the plaintiff, the court held that Nabia Dahali was herself a constructive trustee and held the house in trust for Saaka Dagomba’s rightful heir, who was the plaintiff. The reason for the existence of the constructive trust can be broken down as follows:
The above case is similar to the popular case of Keech v Sandford (1726) Sel Cas King 61. In that case, a lease of Rumford Market was devised to the defendant as trustee for the benefit of the claimant, then an infant. Prior to the expiration of the lease, the defendant sought to renew the lease for the infant but the landlord refused to renew it for the infant. However, he was prepared to give a new lease to the defendant. The defendant then took the lease for himself. The claimant subsequently instituted an action seeking a transfer (an assignment) of the lease to him. The court granted this relief. In that case, Lord Chancellor King said:
I must consider this as a trust for the infant; for I very well see, if a trustee, on the refusal to renew, might have a lease to himself, few trust-estates would be renewed to cestui que use; though I do not say there is a fraud in this case, yet he should rather have let it run out, than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease: but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew to cestui que.
The decision in Keech v Sandford (supra) is now used to support the position that where a trustee who holds a lease for the benefit of the cestui qui trust makes use of influence, which his position as trustee has enabled him to exercise, to obtain a new lease in his name, he will be compelled to hold the new lease that was acquired as a constructive trustee for the benefit of the cestui qui trust. This position is supported by the Ghanaian case of Emelia Dzidzienyo v. Janet Dzidzienyo and Others [1962] 1 GLR 301-305. In that case, the late E.A. Dzidzienyo was granted a lease by the government in respect of two plots. Upon his breach of a covenant, the government re-entered the land. However, it subsequently offered the land to him again. Unfortunately, he died before accepting the offer. The first defendant was appointed the administratrix of his estate. The government then made the offer to her, and she accepted it in her personal capacity (not on behalf of the estate). The first defendant subsequently sub-let the plots to the second defendant and the plaintiff, the customary successor of the late E.A. Dzidzienyo, instituted the present action to prevent the first defendant from dealing with the estate of the late E.A. Dzidzienyo alone. The court first noted that the first defendant was a constructive trustee and had the legal title to deal with the property, including granting a sub-lease. In its words,
As the leases were granted to the first defendant in her personal capacity solely because she was the administratrix of the estate of the late E. A. Dzidzienyo, I hold that she holds the leases as a constructive trustee for the beneficiaries of the late E. A. Dzidzienyo because an administratrix is not allowed to use her position as such and derive any benefit therefrom. As a trustee the legal estate in the leases vests in her and therefore it is competent for her to grant an under-lease for value provided there is no collusion or fraud between her and the under-lessee, second defendant.
Here, the first defendant was a constructive trustee because the government only made her the offer of the lease by virtue of her being an administratrix of the estate of the late E.A. Dzidzienyo. Although she took the lease in her own name, the court imposed a constructive trust to prevent her from personally benefitting from the property as a trustee.