3 - Constitution of trusts Flashcards

Question

What was necessary for the settlor to have done everything he could?

Answer 1

**Re Rose** - the settlor must have completed the necessary documentation and sent all the documentation to the third party or the donor gives all the documents to the donee who can then send them to the third party Jenkins J in Re Rose said settlor could not have demanded the documents back Arden in Pennington v Waine commented that by delivering the documents, to either the donee or the company, the donor then loses control over whether the transfer is completed and this is essential. Settlor doesn’t have to do everything he COULD have done, but everything he and he alone can do.

Answer 2

Re Rose in context of transfer of shares. 1. Only the settlor as owner of the shares has to do: Settlor must complete and sign CORRECT form of transfer. 1. This ground that Re Rose distinguished Milroy v Lord because in Milroy v lord, the wrong form was used. 2. Having completed correct form, the settlor must then provide everything necessary for registration of the new owner of the shares. **Settlor must provide:** 1. transfer form and share certificates. The new owner cannot be registered unless the company has share certificates, these can be provided to the company or someone who will then provide them to the company.

Answer 3

Settlor must complete and sign CORRECT form of transfer. This was the ground that Re Rose distinguished Milroy v Lord because in Milroy v lord, the wrong form was used.

Answer 4

The transfer form was not handed over. It was duly completed (filled in and signed) but kept by donor’s agent. So Re Rose was not satisfied.

Answer 5

Share certificae was missing so transferor had not done everything in his power because he could have applied for a duplicate certificate. So Re Rose was not satisfied.

Answer 6

**Facts:** Transferor lived in the US. He had executed the transfers and sent them to the company but the company could not register them unless Treasury consent was obtained. Transferor had sent the relevant application forms but consent had not been obtained at his death. **Held:** the transferor had not done all that was required at his death because it was necessary to obtain (not just apply for) consent. * The Treasury might have acquired extra information from him which he could have refused to give or consent might never have been obtained, though that was unlikely.

Answer 7

Re Rose looks for the consent of the directors and in Re Fry, it is looking for the consent of Treasury. _Similarity?_ In Re Fry, the treasury might have asked for further information but so might have the directors in Re Rose. _Distinction_ The only way in which a distinction can be made is: on the basis that the director’s consent in Re Rose was the absolute final consent that needed to be given and that unless the directors had refused their consent within a specific period, they would have HAD TO register as a new owner of the shares.

Answer 8

The principle of Re Rose applied in a tranfer of registered land. **Facts:** A father wished to transfer land to his son. He made and gave him a deed of transfer and the land certificate. Then they fell out, and the father changed his mind. The son had not yet gone through with the registration at HM Land Registry. The father argued that it was still his property.[1] Judgment: property belonged to the son in equity, and was held on constructive trust for the son by the father, because the father had done everything in his power to make the transfer effective. Although without registration, legal title had not passed, title had passed in equity and the father could not take back his agreement.

Answer 9

**Re Rose,** _Evershed MR -_ Evershed MR talks about a trust “arising” not being created. Terminology appropriate for constructive trust **Pennington v Waine,** _Arden LJ **-**_ she does refer to imposition of a constructive trust.

Answer 10

Milroy v Lord – where he intended to make an outright gift, it was not be interpreted as a self-declaration of a trust. CA in Re Rose held: a trust can arise, donor can hold property on trust, but it is not an express trust. Comments in Re Rose take the view that a constructive trust arises (Evershed MR) and both Evershed MR (Re Rose) and Arden LJ (Pennington v Waine) held that a constructive trust is not inconsistent with Milroy v Lord. This distinction may be valid: the courts are not reinterpreting the donor’s intention, they say his actions are such that a trust arose. In theory, Re Rose may not be inconsistent with Milroy v Lord, to the extent that the courts do not reinterpret the intentions, but the ultimate outcome of Re Rose is that the donor becomes a trustee, even though he never intended to become a trustee, this outcome is contrary to the donor’s intention. He never intended to subject himself to the obligations of being a trustee. However, this is the outcome. To this extent, Re Rose is inconsistent with Milroy v Lord. Milroy v Lord said that where the transferor attempts to make outright gift, the courts will not give effect to it by reinterpreting it as a self-declaration of trust. Re Rose imposes a constructive trust on the transferor, even though the transferor never intended to be a trustee (with all the obligations imposed). Nevertheless, he ended up being a trustee and holding this on trust.

Answer 11

In Re Rose, the CA was only involved in the interim period – the transferor had taken all the steps HE needed to do in March. In June, the new owner was registered in company books. By the time the case came to court, legal title had past. The only issue for the court was that interim period - from the period he took all the necessary steps to when legal title was passed. Outcome: although he was a trustee, he was only a trustee from March to June. However, the reasoning of the CA in Re Rose was not limited to such a situation. It would appear that the principle in Re Rose applies even if the directors of the company refused on justifiable grounds to register the new owner. In this situation, the transferor would remain a trustee indefinitely. Therefore, it has been suggested that principle in Re Rose should be limited to two situations: 1. Where there is an automatic right for the transferee to be registered as new owner 1. This is the case where you transfer registered land or transfer shares **_IN A PUBLIC COMPANY_** 2. In any situation like Re Rose, where the final steps to transfer legal title have been taken. On this basis, Re Rose is inconsistent with Milroy as the transferor never intended to be a trustee, the principle in Re Rose should only apply where trusteeship is only for a limited period.

Answer 12

Re Rose involved an imposition of constructive trust on the transferor. Constructive trusts are imposed where it would be unconscionable otherwise. The unconscionability is usually found in detrimental reliance or in some unfair benefit. But in circumstances covered by Re Rose, what is there to make it unconscionable for transferor to change his mind? There is no question of the transferor unfairly benefiting, no requirement for the transferee to have acted in reliance to his potential detriment. The case is different to the majority of cases imposing constructive trust – more of a technical rule rather than rule based on unconscionability.

Answer 13

A transfer will be effective in equity when it would be unconscionable for the transferor to recall the gift, even if the transferor has not done everything he is required to do to complete the transfer.

Answer 14

**Facts:** Ada wanted to transfer 400 of her shares in a company to her nephew H, and to make him a director of the company which required H to hold at least one share in the company. Ada signed a share transfer form and the company's auditors wrote to H to inform him of the share transfer, asking that he complete the prescribed form of consent to act as a director. H was also told he need take no further action. H signed the form and it was countersigned by Ada. But the auditors never gave it on to the company for the registration of shares before Ada died. The other people who stood to inherit argued that unlike Re Rose, Ada had not done all she could have, because she had not handed the completed transfer form to Harold or the company. Harold contended that the shares were held on trust for him, so that the transfer must be completed. Ada died having executed a will but made no mention of the 400 shares because she thought she had disposed of them. An action was brought to determine whether there had been a valid equitable transfer of the shares. **Held**: transfer was effective in equity. Re Rose could not be applied but CA held: it was effective in equity and that Ada and her personal representatives, held the shares on constructive trust for H. This is a step further than Re Rose.

Answer 15

Arden LJ - Referred for two reasons that gift was effective in equity: 1. Ada had a clear and continuing intention until her death to make that transfer 2. It would otherwise be unconscionable. **What then are the relevant facts here?** 1. A made the gift of her own free will 2. She not only told H about the gift and signed a form of transfer which she delivered to Mr Pennington for him to secure registration: her agent also told H that he need take no action. In addition H agreed to become a director of the Company 3. If A had changed her mind in my judgment the court could properly have concluded that it was too late for her to do this as by that date H signed the form.

Answer 16

1. It would otherwise be unconscionable 1. She relied heavily on judgment of PC in *Choithram* for the relevance of unconscionability in this area. However, this is a misreading (Arguably) of what the PC said in Choithram. 2. The PC did not say that a trust arose because otherwise it would be unconscionable. 3. Unconscionability was not a reason for decision in Choithram, rather the CA is saying that since we can see that Choithram is a trustee, since we have found a declaration of trust, he cannot do back on it. In Choithram, the reference to unconscionability only came into place once the court already found the existence of a trust. Whereas Lady Arden in Pennington v Waine creates a trust on grounds of unconscionability so her reasoning (reliance in Choithram is suspicious). _Her biggest criticism_ is her reliance on unconscionability because unconscionability is too vague, it is too uncertain. Why would it be unconscionable if the gift was not effective in equity. Arden gave no indication in judgment as to what amounts to unconscionability, all she did was consider what amounts to unconscionability on the facts.

Answer 17

1. Signed transfer form 1. (this is not enough, we saw this in other cases) 2. Told H she would make a transfer 1. (but simply telling someone they are going to make a gift would not be unconscionable 3. H was told he does not have to do anything further 1. (but he could not have done anything more, he could have asked for the share certificate, but she did not have to). 4. Arguably only factor which made in unconscionable to change her mind was that he agreed to be a director of the company that he agreed to take on obligations in reliance on the transfer.

Answer 18

Mr Justice Briggs in case of Curtis v Pulbrook

Answer 19

Lord Browne- Wilkinson In Choithram said: **There can in principle be no distinction between the case where the donor declares himself to be sole trustee for a donee or a purpose and the case where he declares himself to be one of the trustees for that donee or purpose. In both cases his conscience is affected** and it would be unconscionable

Answer 20

Mr Justice Briggs’ analysis of Pennington v Waine is that it is the detrimental reliance giving rise to the constructive trust - but this was not said in Pennington v Waine. Arden LJ only spoke of unconscionability, she did not rely on detrimental reliance. Briggs J - On its facts, Pennington v Waine appears to have been an example of a sufficient detrimental reliance by the donee.

Answer 21

By agreeing to be a director, he is potentially liable if he does something wrong.

Answer 22

* They wanted to give effect to the clear and continuing intention that the law is there to have certain effects but if, on the case, you do not need protection (where donor does not want to change his mind) then the transfer should, arguably be effective. We have references to “clear and continuing intention” in older cases such as (Jones v Locke – father give a cheque to son), Richards v Delbridge, in both these cases little doubt of clear a continuing intention, no aim by the transferor of changing his mind - this intention continued until deaths of transferor. But in these cases, the intended transfer was ineffective. So In Pennington v Waine, the courts are shifting away from protection to a position where protection is not required, we need to be more flexible.

Answer 23

1. Ada and the auditor, although the auditor kept the STF, they actually held that STF as agents for H because: 1. They told H of gift 2. Told H he did not need to do anything further So they became agents for H, so it was as if the STF had been given to H. The share certificate was already with the company so on this analysis, Re Rose was satisfied. **Although Halliwell** thinks this strentches the concept of ahency beyond its normal limirs. 1. Lord Justice Clarke took different approach: His view: the signing of the transfer form, on its own, effected a valid equitable assignment. But arguably this reasoning is wrong because Ada was the sole owner of the property, this was not a case where there was a separate equitable interest which could have been assigned by writing in s53(1)(c) LPA. A person who is the sole owner of the property is regarded as owning the whole, they own one composite interest. Arguable for there to be an assignment of equitable interest only, you need to separate that equitable interest from legal, which would require a declaration of trust which there was not. Therefore, his reasoning is arguably insupportable. **Pearce and Barr** also believe that it directly contravenes Re Rose itself(where no trust was found).

Answer 24

1. Lord Justice Clarke took different approach: His view: the signing of the transfer form, on its own, effected a valid equitable assignment. But arguably this reasoning is wrong because Ada was the sole owner of the property, this was not a case where there was a separate equitable interest which could have been assigned by writing in s53(1)(c) LPA. A person who is the sole owner of the property is regarded as owning the whole, they own one composite interest. Arguable for there to be an assignment of equitable interest only, you need to separate that equitable interest from legal, which would require a declaration of trust which there was not. Therefore, his reasoning is arguably insupportable.

Answer 25

**Fortuitous vesting of legal title** There is conflicting authority as to whether a trust will be completely constituted if the trustee acquires legal title other than by transfer by the settlor. Re Brooks' ST is authority that the trust is not constituted; Re Ralli's WT [1964] Ch 288, in which Re Brooks was not cited, contains dicta that it is on the basis the trustee now has the legal title and neither the settlor nor her personal representatives could assert an equity against him. **Authority that acquisition of legal title does not complete constitute the trust. Clear from the case that the court’s view was that the trustees must acquire legal title by act of the settlor not by some other means.**

Answer 26

**Facts:** Settlor executed a voluntary settlement in favour of a trustee of any interest he might be appointed under his parents' marriage settlement. A sum was later appointed to him, by which time the trustee had also become the trustee of the parents’ marriage settlement. Question whether the trustee held the property as trustee of the parents’ marriage settlement and was under an obligation to give the sum to settlor because appointment to settlor under the marriage settlement or whether he held it on the terms of the settlor’s voluntary settlement, as settlor said he would transfer property on trust to the trustee (that it would be held on these terms). **Held**: the settlor could demand from the trustee the sum appointed to him and could not be compelled to transfer to the trustee the funds. There was no trust. did not constituted the voluntary settlement, settlor could demand transfer of property to him. As it was a voluntary settlement (gift, as was not fully constituted settlor was not required to transfer property into trust, there was no trust.

Answer 27

Contray view to Re Brooks' ST was expressed OBITER here. Re Brooks was not cited in this case. View expressed in Re Ralli was that the trustee had acquired the legal title and the settlor was unable to assert a right to that property against the trustee. **Facts:** Settlor's marriage settlement contained a covenant to settle existing and after-acquired property. One of the trustees (T) was later appointed a trustee of the will of the settlor's father under which the settlor acquired an interest under father’s will. T became the sole surviving trustee under each (marriage settlement and fathers will. Again intended trustee had actually acquired legal title of property intended to be transferred on trust but not due to settlor’s acts **Held:**. Actual decision was on the basis that there was an independent declaration of trust by the settlor in the marriage settlement. So when settlor acquired settlors property, there was a trust fully constituted. Had there not been a desperate declaration by trust of settlor, the could said obiter: it was irrelevant how, and in what capacity, T became the legal owner of the property. There was no need to invoke the assistance of equity for specific performance of the covenant because T had the legal estate and it was therefore irrelevant that the beneficiaries were volunteers. The sole question was who could assert an equity against T. The settlor could not have done so because of the covenant and neither could her personal representatives.

Answer 28

The moment T became legal owner of property, he held it on trust of the marriage settlement and it could not be claimed by either settlor or settlor’s personal representatives because once the trustee had the legal estate, the sole question was who could assert an equity against a trustee. Who had a right to claim that property in the hands of the trustee. And the Court expressed the view (inconsistent with Re Brooks) that the settlor and their representatives could not asset a right of property in hands of trustee because the settlor had covenanted to transfer property on trust. So the only person in any rights of property, once in hands of trustees, were the beneficiaries under marriage settlement. This was because the legal title had been fortuitously invested in the trustee in another capacity because there was no need to seek specific performance of the covenant. If someone else was appointed as trustee of the father’s will, the trust would have been incompletely constituted. This was the result purely because trustee under marriage settlement was also trustee under the father’s will. Reference as made by the court to the case of Strong v Bird.

Answer 29

It was pure chance in Re Ralli that the father chose to appoint the same person as the trustee of his will as his son had already chosen in the marriage settlement. So why should mere chance of the same person be appointed in two different capacities make the trust completely constituted? The outcome may be acceptable if the settlor has a role in the appointment. If the settlor appointed the trustee in another capacity where he gets the legal title because here we can say it is still settlors acts which means legal title gets to the trustee.

Answer 30

Practical problem: the reasoning in Re Ralli was that the settlor who was, on the face of it, intended to benefit under his father’s will, was not permitted to enforce that right because of a covenant in another settlement. And **Penner** has pointed out that this seems wrong where you have a professional trustee because professional trustees will be acting for a number of different trusts. At any one moment they cannot be expected to remember any one terms of the trust and therefore to know whether a beneficiary under one trust cant enforce their rights in the terms of another trust. **He argues that IF dicta in Re Ralli is to be followed, it should only be where trustees know that there is a connection between the trust.**

Answer 31

The rule in Strong v Bird is often referred to as an exception to the equitable principle that equity will not help those voluntary. But instead it is better to see it as comparable to Re Ralli and another example of a fortuitous case. Rule applies: Where a donor intends to make an immediate lifetime gift of specific property and that intention continues to his death, the appointment of the donee as the executor of the donor’s will or as administrator of the donor's intestate estate will perfect the gift. If the donee is appointed either as executor of the donor’s will or administer this appointment perfects the gift.

Answer 32

*Strong v Bird* was actually a case involving the release of a debt; the rule was applied to a gift in *Re Stewart* [1908] She orally released a debt but was ineffective, but the step mother appointed the debtor as her sole executor and it was held: as a consequence of this appointment, the debt was released. Although strong v bird involved a release of debt, it was applied in case of gift in re steward.

Answer 33

3 requirements for Strong v Bird to be effective: 1. Donor must intended to make **a lifetime gift** 1. Not apply where intention is to make and testatory gift. (Re Steward 2. This intention to make a lifetime gift must have intended right up and until donor’s death. 1. Donor must believe right up till his death that he has made a gift. If change of mind, the doctrine does not apply. (Re Gonin) 3. Donee must have been appointed as either executive or administrator of donor’s estate so acquire legal estate in question. 1. Donee does not need to be sole executor or administrator only as long as he is ONE of these (Re Stewart) 2. Appointment of administrator is sufficient (Re James)

Answer 34

Daughter brought a claim against her mother’s estate based on an intention to make gift of land; however, the mother later wrote a cheque in favour of her daughter instead which was taken to show a change in intention (though cheque was not found until after death and was ineffective). In fact, the gift of money was ineffective, and was ineffective but showed intention to make gift of land had not continued until death so strong v bird did not apply.

Answer 35

1. The fact that all that seems to be necessary for the rule in Strong v Bird to apply is that done acquires the legal estate on the donor’s death. That, according to Re James does not need to be because the donor has appointed the donee as executor, it can be simply because the donee has become administrator of the donor’s estate. There is a distinction between appointment of executor and administrator because appointment of executor is the choice of the deceased, they choose who should be appointed as executor so donors chose as to who acquires legal estate. But appointment of administrator is an act of law, not the deceased. Because of this Mr J Walton in Re Gonin expressed doubt that rule should apply to an administrator rather than an executor.

Answer 36

He said it was fine if the donor intends donee to become legal owner - we can accept this because the donor has meant the donee has meant to get the legal title, but if extended to administrators, it could be a mere chance if the donee is the first person asked to be administrator, so he is arguing that it should not extend to that extent. In Re Ralli – it is the same issue, should it be the mere chance that the intended donee gets the legal estate which is sufficient or should we limit fortuitous vesting where donor or settlor has a role in the donee/trustee getting the legal title. It could be argued that when a testator is writing his will and choosing his executors, it still is a matter of chance where the donor is appointed as executor because the testator probably doesn’t have ruling in strong v bird in mind when choosing executors. **BUT VIRGO says that this rule is fine.**

Answer 37

They all involved: outright gifts/ release of debts. But there is no reason why in principle it should not be extended to an intended lifetime gift to trustees.

Answer 38

All the cases about the ruling in Strong v Bird have been outright gifts or release of debts in them. In principle, there is no reason why it could not extend to an inten\ded lifetime gift to trustees which is ineffective, but trustee was appointed as executor. Reasoning: justification is that the done has got the legal estate, no longer needs assistance of court to acquire the legal estate. So equity does not need to assist a volunteer because volunteer has got the legal estate. This reasoning was made clear in Strong v Bird and Re James.

Answer 39

A promise or agreement to assign.

Answer 40

You cannot transfer or create a trust of future property. BUT if you attempt to assign future property and consideration has been given, it is regarded as a promise a contract to assign to future property. If valuable consideration is given, then contract and equity will enforce the contract to assign. An express promise to transfer in future for valuable consideration will be enforceable.

Answer 41

An attempted assignment of future property will also be regarded as a promise/agreement to assign

Answer 42

If the promise relates to land there must be writing complying with section 2, Law of Property (Miscellaneous Provisions) Act 1989.

Answer 43

Where there is valuable consideration so the beneficiary can force completion of the promise, then the remedies available will be either: 1. Specific performance 2. Damages

Answer 44

Specific performance is only available to property where damages would be inadequate. If specific performance is appropriate, the settlor will hold the property on constructive trust. If the settlor does not have the property at the time the promise is made (promise to transfer future property) then there is no property initially which can be held on constructive trust but from the moment donor/settlor acquires the property, it will be held on constructive trust for the intended donee/transferee (Pullan v Koe)

Answer 45

If the settlor does not initially have the property, it will be impressed with a trust in favour of the assignee as soon as it is acquired by the settlor Held: the £285 was impressed with the trust the moment the wife received it, equity looks upon that as done which ought to be done.

Answer 46

**Facts:** Marriage settlement with covenant by husband and wife to settle the wife’s after-acquired property of a value greater than £100. She received £285 which was partly invested in bonds. Action by trustees. **Held:** from the moment it was received the £285, the money was specifically bound by the covenant and therefore subject in equity to a trust in favour of all persons within the marriage consideration. Held: the £285 was impressed with the trust the moment the wife received it, equity looks upon that as done which ought to be done. The trust was constituted by way of constructive trust the minute the covenant could be performed.

Answer 47

crucial issue: this promise is only enforceable only IF valuable consideration has been given for it. Where there was an intended gift, there is no consideration. However, what most of the cases in this area have been concerned with (where valuable consideration) are cases involving marriage settlements because valuable consideration does not just include money but also marriage consideration. Most of the cases concern covenants in marriage settlements to transfer after acquired property.

Answer 48

Marriage consideration exists where a promise is made before and in consideration of marriageThose within the marriage consideration include the parties to the marriage, their children and remoter issue. Next of kin are mere volunteers.

Answer 49

Next of kin.

Answer 50

Settlements promises made in contemplation to marriage. Not applied if settlement created after marriage, it is only in contemplation, just before a couple get marred. Where marriage settlement in these circumstances then certain people are regarded as within marriage settlement and these are regarded as having given valuable consideration.

Answer 51

The children

Answer 52

Anyone who is not within marriage consideration will not be able to enforce a promise, they will be volunteers and equity will not assist a volunteer and it is relevant where someone has given consideration but rather people seeking to enforce the promise have given consideration

Answer 53

Even if someone has given consideration, that is not enough to make the promise enforceable. Consideration must have been given by the intended beneficiary who is trying to enforce. In re Plumptre, it was the next of kin who were trying to enforce the promise/covenant. Next of kin are not within the marriage consideration.

Answer 54

A promise will not be enforceable in favour of a beneficiary who has not given consideration, even if someone else has ## Footnote **Facts:** Marriage settlement with covenant by husband and wife to transfer after-acquired property to the trustees. Wife died and husband held property acquired by her as her administrator. There were no children, so, after husband’s death, the next of kin would be entitled to the trust property. Action by trustees to ask, inter alia, whether they should take steps to enforce the covenant on behalf of the next of kin. Held: Next of kin could not enforce the covenant and therefore trustees were not bound to take any steps to obtain transfer of the property. Next of kin tried to enforce covenant. Held: they could not, even though there were people who had provided consideration, those who were seeking to enforce covenant had not.

Answer 55

A promise will not be enforceable in favour of a beneficiary who has not given consideration, even if someone else has. ## Footnote **Facts:**Settlement made pursuant to agreement between settlor and his father which contained a covenant to settle on trust for his children the proceeds of sale of any picture received from his father and sold during his lifetime. Consideration was provided by father. Held: the beneficiaries were not parties to the covenant and had given no consideration so they could not enforce it. Undoubtedly consideration for this covenant had been given by the father, however it was the beneficiaries of the settlement who sought to enforce the covenant, they had given no consideration, therefore they could neither enforce the covenant nor require the trustees of the settlement to enforce the covenant.

Answer 56

If a beneficiary who has given consideration sues, then the trust will, at the order of the court, become fully constituted for the benefit of all beneficiaries. So as long as the beneficiary who sues has given consideration, all beneficiaries will benefit from the court order, even those beneficiaries who have not themselves given consideration.

Answer 57

If the trustee (but not the beneficiary) has provided valuable consideration can he sue for specific performance for the benefit of the beneficiary and thereby fully constitute the trust for the benefit of the beneficiaries? There is no direct authority.

Answer 58

If the trustee (but not the beneficiary) has provided valuable consideration can he sue for specific performance for the benefit of the beneficiary and thereby fully constitute the trust for the benefit of the beneficiaries? There is no direct authority: **Facts:** Mr Beswick had sold his business to his nephew. The agreement contained a promise by the nephew to pay a pension to Mr B’s wife. After Mr B’s death, Mrs B sued as his personal representative and was awarded specific performance of that promise on the basis damages would be an inadequate remedy as Mr B had suffered no loss. Damages would be to compensate for Mr B’s loss and he had suffered no loss. Clearly here this was an example of effectively a party to an agreement – Mr B’s personal representative – suing to enforce a promise for which that party had given consideration, but suing to enforce it for the benefit of somebody else. It could be argued that this is comparable with a trustee suing in order to fully constitute a trust for the benefit of the beneficiaries.

Answer 59

Will the Beswick v Beswick be applied in this context? This case suggestes that it would not be applicable in this area **Facts:** In Re Cook the fact that someone had given consideration was irrelevant.

Answer 60

*Re Cook.* In Re Cook the fact that someone had given consideration was irrelevant. The other problem in the application of Beswick v Beswick is Mr B was not a trustee. Going to look at cases shortly where the courts have prevented trustees from suing where the aim is to benefit a volunteer beneficiary.

Answer 61

Equity does not regard a deed/seal as consideration,so specific performance will not be available if the covenant is voluntary. However, a covenant is effective at law and there may be a right to damages. Therefore, merely because a promise is contained in a deed does not make it enforceable in equity. Equity always looks for valuable consideration for a promise to be enforceable. However, a covenant – a promise in a deed – is effective at law. So if there is a promise to transfer or settle property which is contained in a deed, then in theory there is a right to sue on that covenant at law. Although specific performance will not be available because it is an equitable remedy, there may be a right to damages.

Answer 62

**Covenants to transfer** If a settlor covenants to transfer property to trustees to hold on trust, then, any party to the covenant can sue for damages for breach of that covenant

Answer 63

The trustee will normally be a party to the covenant, but sometimes the beneficiary will be a party to the covenant, and if this is the case, the beneficiary can sue for damages at law even if the beneficiary is a volunteer. An action can be brought whether it relates existing or future property.

Answer 64

**Facts:** Voluntary covenant in deed of separation between husband, wife and their daughter that the husband would settle certain after-acquired property on trust for his wife and daughter. Held: as a party to the covenant, daughter was entitled to damages for its breach. However, this is rare that a beneficiary will be a party to a covenant to settle.

Answer 65

If they are a party to the covenant: Cannon v Hartley. If not, they can enforce it via the Contracts (Rights of Third Parties) Act 1999.

Answer 66

A covenant to settle property undoubtedly is to the benefit of the beneficiary. On the face of it, the beneficiary may be able to sue directly under subsection 1, unless subjection 2 applies. This only applies to contracts entered on or into after 11^th May 2000. Also, some doubt which courts need to resolve, the act refers to “contracts” and some academics question whether a covenant is a contract.

Answer 67

Prima facie a trustee still has the right to sue as a party to the covenant even if the property is to be held for the benefit of someone else. The trustee will almost certainly be a party to a contract to settle property. At first sight, as a party, the trustee can sue even though the covenant is not for trustees’ benefit, but for someone elses. There are a number of cases where the trustee can ask for directions from the court as to whether they should bring an action for the benefit of the volunteer beneficiaries. They are all first instance decisions (chancery division of high court: Re Pryce) and Re Kay's Settlement.

Answer 68

**Covenants to settle property** Prima facie a trustee still has the right to sue as a party to the covenant even if the property is to be held for the benefit of someone else. **However, it has been held that the trustees ought not to sue.** The judge held that the trustees ought not to sue. The reasoning was that the beneficiaries were volunteers, they could not themselves sue, and if the trustees sued it would give the beneficiaries indirectly what they could not get directly.

Answer 69

**Covenants to transfer or settle property** Prima facie a trustee still has the right to sue as a party to the covenant even if the property is to be held for the benefit of someone else. But they have been directed not to sue. The judge felt bound by Re Pryce but went further and actually directed the trustees not to sue.

Answer 70

The beneficiaries cannot force them to sue . The judge therefore held that volunteer beneficiaries cannot force the trustees to sue.

Answer 71

If the beneficiaries are volunteers and not party to covenant, then they cannot sue, they also cannot force trustees to sue. If we allowed trustees to sue, then it indirectly assists volunteers and leaves the decision in the hands of the trustees, the trustees have the choice whether or not to sue. Arguably, it would be wrong that the rights of beneficiaries should be held the whim of the trustees. If the trustees were allowed to sue, and hold them on trust, this contravenes the basic rule that it is for the settlor to completely constitute a trust. If there is a covenant, but the beneficiaries are party to it, it is unlikely that the trustees will actually sue because in practise most trustees seek leave of court to sue and will be told not to do it. But in theory, there is no reason for the trustee to not seek leave of court and should simply sue on the covenant, if this were to happen then there are issues relating to the available remedies. These are issues that remain unanswered by the court and may never be answered if trustees do not take initiative and sue.

Answer 72

If the trustee is suing, is measure of damages his personal loss, if so, the damages will be zero. Penner argues, on the other hand, that the remedy for breach of covenant is the agreed sum, there is support for this in the Re Cavendish Browne ST.

Answer 73

If a trustee did sue, what would be the measure of damages and who would be beneficially entitled to them? The trustee was awarded substantial damages. The covenant related to specific property, so damages could be measured. The position might be different if the covenant did not relate to specific property or related to after acquired property. Held: the damages were held by the trustee on trust for the intended beneficiary.

Answer 74

There are theoretical difficulties with this. **Lee (1969)** saysThe trustee is clearly not intended to benefit personally, so the argument could be made that the only possibility is that the damages for breach of covenant are held on resulting trust for the settlor so what is the point in suing? Another possibility is to draw a comparison with fortuitous vesting and to say that when the trustee receives damages for breach of covenant then this fully constitutes a trust. There are lots of problems in the way a trustee sues for breach of covenant, some may never be resolved because the courts have indicated that a trustee should not to sue, so we may never get resolution of measure of damages. There is one case which may help potential beneficiaries: Fletcher v Fletcher – situation where trust of the covenant. The covenant itself is property, it is an asset.

Answer 75

Re Cook considered the issue as to whether a covenant to settle future property can be held on trust and suggested that that is impossible. However, arguably the dicta in Re Cook is wrong, because even if the covenant deals with future property, the covenant itself is in existence. The promise in the deed exists, even if it is only a promise to transfer future property. So that covenant itself should be seen as capable of being held on trust.

Answer 76

There can be a completely constituted trust of the benefit of the covenant itself,we are not talking about a completely constituted trust of property which should be transferred under trust, but the beneficiary has an equitable interest in the covenant and therefore the beneficiary can either demand the trustee sues to enforce covenant or the beneficiary can seek to enforce it himself.

Answer 77

There can be a completely constituted trust of the benefit of the covenant itself : Fletcher v Fletcher. Although the courts are reluctant to find this

Answer 78

* The rule in *Strong v Bird* * Proprietary estoppel

Answer 79

Beswick v Beswick - Penner thinks this avenue for specific performance would not be avaibale as this is an equitable remedy. Penner thinks it is clear that he would not be able specifically to enforce the covenant in favour of the beneficiary, that is to obtain an order that the covenantor transfer the property on trust to him, because an order of specific performance is an equitable remedy and the trustee is a volunteer. **Penner distinguishes Beswick v Beswick** because in that case we are considering both the trustee and the beneficiary are volunteers, so this equitabl remedy is unavailable.

Answer 80

The court suggested that it would be unconscionable if Mr Rose had kept any dividends that accrued after he had executed the deed of transfer.

Answer 81

Penner believed that the rule in Strong v Bird created an unprincipled lottery, because one canot truly suppose that the appointment of a person to be one's executor indicates anything about the testator's intention to perfect imperfect gifts. People will not have the rule in Strong v Bird in mind when instructing. **He said the rule has nothing to recommend it and the HL has never affirmed it; the UKSC should overrule it the first chance it gets.**

Answer 82

The court said tht they should not enfoce a covenant to settle in favour of a next of kin who were volunteer beneficiaries.

Answer 83

The deceased had sought to transfer shares to his wife and another, to be held on trust but there was a delay in registering the change in share ownership. For tax purposes, it was necessary to determine if the transfer was effective to dispose of his legal interest or if it continued until the new ownership was registered. The shares were held in a private company, which had the power to refuse to register someone as a shareholder. The deceased and the transferees were themselves directors of the company, and thus the people with that power. The only thing left was for the new shareholders to be registered in the company register. Although directors had the power to refuse to register the change of ownership, **this case contrasted with Re Fry because Mr Rose was one of the directors and the other directors were the intended recipients of his shares. What if Rose had changed his mind about the transfer? Would there have been any means to force him – as director – to register the change of ownership?**