Trust Law Disputes:

Trust law is a practice area that largely falls under the body of law known as Equity. Equity arose as a separate body of law in England many centuries ago as a response to the increasing rigidification of the prerogative writ system of the common law itself. Trusts are devices which seek to cure or provide a remedy in situations where there is a failure of consideration in a transaction between parties. There are three common types of trusts that one can encounter in both the civil and commercial context:

• The Express Trust;
• The Resulting Trust or Implied Trust;
• The Constructive Trust.

An “express trust” is where an agreement is entered into, generally in writing but sometimes it is verbal, where one party declares that certain property is to be held for the benefit of a beneficiary. There will ordinarily be a set of rules relating to the conduct of the trustee, in relation to the use of the property and the administration of the trust. The beneficiary will be able to keep the trustee accountable at law by claiming breach of the trust deeds if the trustee makes a decision which goes beyond his powers. 

A “resulting trust” is a trust which is created by a Court which determines that there was an intention between tow parties to create a trust. The trust relationship is implied from the evidence where a Court finds that it is to be taken that the parties conducted themselves in such a way that a trust can be said to have come into existence. A “constructive trust” is a trust where there has been a claim of unjust enrichment and a Court declares that property be transferred to the victim party.

The legal title to the trust property will rest with the trustee and the beneficial title, or equitable title will be vested in the beneficiary. A trust may dissolve under what’s known as the doctrine of merger. This is where the beneficiary calls on his legal title from the trustee. Under the doctrine of merger, the legal title falls with the equitable title and “merges” so that the beneficiary now has the whole title to the trust property and the trust is effectively eliminated. Of course, the right of the beneficiary to call on title may be governed by the terms and conditions of the trust deed. For example, a trust may be set up for the benefit of a minor (a child, or a young adult who has not yet reached majority) where that minor can call on the legal title at some future date (when he reaches majority, or when he or she marries or at some other such stipulated date). In the interim, the trustee may have the right to use the property for the beneficiary’s health, education and so forth.

A discretionary trust can be an express trust which stipulates that certain powers of the trustee are discretionary, which means that he can decide how and when to use or dispose of the property. These are the most flexible trust types from the perspective of the trustee but the beneficiary will have a more difficult time compelling the trustee to deal with the trust property. Nevertheless, the discretion itself may have a framework of rules and responsibilities within which the discretion is to be exercised. A dispute concerning the discretionary trust will naturally require a close investigation of the deed documents before the rights and liabilities f the trustee and the beneficiary can be properly determined. 

A trust can also be created in a Will. There are procedures to give effect to a trust in a last will and testament and proper legal advice should first be obtained from a trust solicitor before any documents are drafted, executed, witnessed and stored. Superannuation trusts and self managed super funds will also be subject to the laws of trust, but these laws will necessarily be tempered by statutory and other legal requirements. A trust lawyer with experience in superannuation and tax law may be an invaluable guide to ensuring that trust property is dealt with appropriately by either the trustee or the beneficiary. As can be seen, the area of legal practice arching across trust law and trust legal disputes can crow over into other areas of legal activity. For this reason a solicitor who has exposure and carriage of both civil and commercial litigation will be best placed to offer legal advice and services in the preparation and prosecution of a dispute involving trust property.

If you require assistance with a trust litigation matter you may wish to contact our firm by telephone on (02) 9233 4048 or send an email to info@navado.com.au and make an appointment to see one of our solicitors. 

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