5 - Express Trust: Formalities Flashcards
What are the formalities required for the declaration of a trust of land as set out in s 53(1)(b) LPA 1925?
Section 53(1)(b) LPA 1925 states that “a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.”
What is the effect of failing to comply with s 53(1)(b) LPA 1925 concerning trusts of land?
- Failing to comply with s 53(1)(b) renders the trust unenforceable rather than void.
- An unenforceable trust exists from the moment it is declared, but the beneficiary cannot enforce their rights unless and until s 53(1)(b) is satisfied.
Example: If a life interest trust is declared in January but evidenced six months later in June, the life tenant is entitled to the income produced by the land between January and June once the trust becomes enforceable.
Once the trust becomes enforceable, the life tenant can sue to enforce this interest, and the trustee can be sued for any breaches of trust occurring between January and June.
What does “manifested and proved” entail in the context of s 53(1)(b) LPA 1925?
“Manifested and proved” indicates that Section 53(1)(b) is an evidential requirement only, meaning the declaration and the writing of the declaration of trust need not be contemporaneous.
The order in which they take place is unimportant, and the trust will remain unenforceable unless and until s 53(1)(b) is satisfied.
What constitutes “some writing” for the declaration of a trust of land under s 53(1)(b) LPA 1925?
“Some writing” signifies that there is no prescribed form for the written evidence. All that is needed is something in writing that provides evidence of:
- The settlor’s intention to create the trust.
- The terms of the trust.
Who is required to sign the declaration of trust according to s 53(1)(b) LPA 1925?
- The declaration must be signed by some person who is able to declare such trust.
- Although the signature will usually be that of the settlor, it is arguable that the trustee (being the legal owner) can also provide the written evidence.
- This point is not settled, and it is preferable to seek directions from the court in situations where the trustee considers doing so.
How can a trust of land be validly created by will under s 53(1)(b) LPA 1925?
Section 53(1)(b) expressly provides for the possibility that a trust of land is created by will.
As long as the will is validly executed in accordance with s 9 of the Wills Act 1837, this will be sufficient to satisfy the requirements of s 53(1)(b).
What occurs if a trust of land is declared but the formalities of s 53(1)(b) are never satisfied?
If the formalities are never satisfied, the trust will simply not become enforceable, giving the settlor a chance to change their mind about parting with beneficial ownership.
In cases involving a gratuitous self-declaration of trust over land (the settlot creates a trust by declaring that they hold a certain piece of land on trust for the benefit of another person), the settlor can choose not to create the signed, written evidence of the declaration.
In the absence of any facts rendering it unconscionable for the settlor to deny the trust, such as proprietary estoppel, the beneficiary will not be able to assert any interest in the land.
What happens if the settlor changes their mind regarding an intended trust of land?
If the settlor changes their mind and makes no attempt to constitute the trust, their change in mind will not only be unenforceable under s 53(1)(b) but also void for lack of constitution.
This is again subject to any additional circumstances that may make it unconscionable for the settlor to deny the existence of the trust.
What should a trustee do if they transfer legal title but do not comply with s 53(1)(b) LPA 1925?
If the settlor transfers legal title but does not comply with s 53(1)(b), it would be prudent for the trustee to seek directions from the court regarding their obligations.
Provide a summary of the formalities for declaration of a trust of land set out in s 53(1)(b) LPA 1925.
A declaration of trust over land must satisfy the requirements of s53(1)(b) LPA 1925.
Section 53(1)(b) is an evidential requirement only. The trust will be valid but unenforceable unless and until it is ‘manifested and proved’ in signed writing.
If the trust is never evidenced in signed writing, it will remain unenforceable, subject to anything rendering it unconscionable to deny the interest of the beneficiary (such as proprietary estoppel or the imposition of a constructive trust).
If a trustee receives land to hold on a trust which has not been evidenced in writing, and the settlor is unable or unwilling to provide this evidence, it would be prudent for the trustee to seek directions from the court as to their obligations.
What are the requirements for correctly transferring legal title in the context of trusts and gifts, and what is the significance of constitution?
Constitution refers to the transfer of legal title from one party to another, which is essential for both trusts and gifts.
- For a trust, legal title must be vested in the trustees to constitute the trust.
- For a gift, the legal title must pass to the donee.
- A self-declaration of trust automatically constitutes the trust as legal title is already held by the settlor.
Example: In Milroy v Lord [1862], the settlor’s failure to properly transfer shares meant the trust was not constituted, demonstrating that equity does not perfect an imperfect gift.
How does the method of constitution differ between testamentary trusts and lifetime trusts?
Testamentary trusts are created through a will, where personal representatives obtain legal title after the testator’s death. They must ensure legal title is transferred to recipients of gifts and trustees of trusts.
In contrast, lifetime trusts require legal title to be transferred using the correct method during the settlor’s lifetime.
What are the formal requirements for transferring legal title to various types of property?
Registered land: Must be transferred by deed and registered with the Land Registry; legal title passes on registration.
Shares: Transferred by signing a stock transfer form and sending it to the company; legal title passes upon registration in the internal register.
Choses in action: Transferred by written notice to the debtor or bank; legal title passes on notice receipt.
Chattels: Can be transferred by deed of gift or delivery with intent.
Cheques: Must be endorsed by the transferor; legal title passes upon endorsement.
Example: In Jones v Lock (1865), a father’s failure to endorse a cheque meant legal title did not pass to his son, highlighting the importance of correct procedures.
What is the effect of constitution on the rights of the settlor or donor regarding the trust or gift?
Once a trust is constituted, the settlor has no legal or beneficial interest in the property, and the trustee holds legal title on trust for the beneficiary.
- For gifts, once the donee has legal title, the donor cannot reclaim it.
- Example: When Jamal transferred shares to Paul for Sian, once Paul was registered, Jamal could not revoke the trust. Similarly, when Tarek gifted a watch to Ariana, the gift was complete upon delivery, so Tarek could not demand its return.
What happens if legal title to trust property is not vested in the trustees, and what principle applies?
If legal title is not transferred, the trust is incompletely constituted and therefore void. Similarly, an imperfect gift means the donor can change their mind. This illustrates the equitable maxim that “equity will not assist a volunteer.”
Example: In Milroy v Lord, the settlor intended to create a trust but did not transfer legal title, resulting in the trust being void. Thus, the settlor’s intention alone was insufficient without proper legal transfer.
How is the concept of constitution linked to certainty of intention in the context of trusts and gifts?
Constitution is linked to certainty of intention as the court requires strong evidence that the owner intended to declare a trust or make a gift. Without legal title being transferred, the court must determine if the owner intended to divest themselves of beneficial ownership.
Example: In Choithram v Pagarani [2002], the court held that even though legal title was not transferred to all trustees, it would be unconscionable for the settlor to deny the trust due to his prior declaration that he was a trustee of the charitable trust he set up.
Provide a summary for the key points concerning constitution.
· In order to create an express trust, it is necessary for the trust to be constituted.
· Constitution occurs when legal title is transferred from one party to another.
· To constitute an inter vivos transfer on trust, legal title must transfer from the settlor to the trustee.
· To constitute an inter vivos gift, legal title must transfer from the donor to the donee.
· A self declaration of trust is automatically constituted when the trust is declared.
· Gifts and trusts contained in a will are constituted via the will.
· The method for transferring legal title will depend on the nature of the property in question.
· If legal title is not transferred correctly then the disposition will fail. Under Milroy v Lord equity will not assist a volunteer, perfect an imperfect gift or treat a failed gift as a self declaration of trust.
· It is sufficient that the trust property is vested in one of the intended trustees, including cases where the settlor is one of those trustees.
Under what circumstances will equity treat a gift or trust as complete, despite legal title being with the wrong person?
Equity also recognises that “equity will not strive officiously to defeat a gift.”
Re Rose [1952] established that a transfer is effective in equity when the transferor has done “everything within their power” to transfer the legal title, even if the legal title has not yet passed to the transferee.
Mascall v Mascall [1985] extended this principle to registered land, where the gift is irrevocable if the transferor has put the matter beyond their control.
Equity will treat the gift or trust as complete if:
- The correct method of transfer has been used.
- The transferor has done everything in their power to effect the transfer.
- The documentation ends up in the hands of the person capable of completing the legal transfer.
What are the exceptions to the rule in Milroy v Lord?
There are four key exceptions:
1. Re Rose principle: A transfer is effective in equity if the transferor has done everything in their power to transfer legal title.
2. Unconscionable principle: Equity will perfect an imperfect gift if it would be unconscionable for the donor to revoke it.
3. Fortuitous Vesting: Legal title may pass through fortuitous events.
4. Donationes Mortis Causa: A deathbed gift exception.
Example: In Mascall v Mascall, the father could not revoke the gift to his son because he had put the transfer documents beyond his control, even though legal title had not yet passed.
How did the Re Rose principle extend the application of equity in transfers of property?
Re Rose [1952] established that a transfer is effective in equity when the transferor has done everything within their power to transfer legal title, even if legal title has not yet passed.
The case involved a transfer of shares, where the transferor delivered the documents to the company registrar, and equity treated the transfer as complete despite the legal title not being registered until later.
The extension of this principle in Mascall v Mascall applied the same reasoning to registered land, establishing that once the transferor puts the matter beyond their control, the transfer is complete in equity, even if legal title has not yet passed.
What is the unconscionable principle and when does it apply in perfecting imperfect gifts?
The unconscionable principle allows equity to perfect an imperfect gift if it would be unconscionable for the donor to revoke it.
Example: In Pennington v Waine [2002], the Court of Appeal held that a gift of shares was complete in equity, despite the transfer documents remaining with the donor’s agent. The court deemed it unconscionable for the donor to revoke the gift because:
- The donor had made the gift freely and informed the donee.
- The donee had acted upon the gift by becoming a director, a position he could only take if he held shares.
The principle focuses on the conduct of the donor, not necessarily the reliance of the donee.
How does the principle from Re Rose apply when the transferor has done everything in their power but legal title has not yet passed?
Equity will recognise a transfer as complete in equity if the transferor has used the correct method of transfer and has done everything within their power to effect the transfer, even if legal title has not yet passed.
Example: In Re Rose, the transfer of shares was complete in equity when the transferor sent the documentation to the company registrar, despite the legal title being registered after the crucial date. The transferor was held to be holding the legal title on constructive trust for the transferee pending legal registration.
In what way did Mascall v Mascall extend the Re Rose principle, and what does it establish regarding control over the transfer?
Mascall v Mascall [1985] extended the Re Rose principle to gifts of registered land, where the gift was irrevocable once the father had handed the transfer documents to his son, despite legal title not having passed.
The case established that the gift is irrevocable if the transferor puts the matter beyond their control.
Once the transferor no longer has control over the transfer, equity treats the gift as complete.
How does the decision in Pennington v Waine differ from previous case law in terms of the unconscionable principle?
Pennington v Waine [2002] broadened the application of the unconscionable principle by allowing equity to perfect an imperfect gift when it would be unconscionable for the donor to revoke it, without requiring reliance by the donee. - This broadened the scope of the principle.
