Constitution

Question 1

What is formalities?

Answer 1

• Transfer property
• Express private trusts
• Generally, none required other than intention - can be oral
• Trust can be made verbally, holding money for somebody
• Some property it is valid to be verbal, but it is never a good idea. You can do it but not a good option.
• Equity looked for substance rather than form, equity is concerned what they identified rather than they did to follow the formalities.
• Formalities are required to protect the parties
• provide documentary evidence of the transaction to minimise fraud and to provide clarity as to what was intended.
• Transfer property.

Question 2

Which Situations where formality is required?

Answer 2

• Trusts made inter vivos
• Trusts created by will
• Transferring an existing interest under a trust

Question 3

What are the exceptions of formalities?

Answer 3

• Inter vivos trusts of land - (This must be in writing) cannot verbally create a trust in a house, these are created whilst alive.
• Trusts created by a will - Wills Act 1837 S9 (Testamentary trust is a trust made by a will)
  There are after we die signed and witnessed by 2 people. If not complied with everything in the will, it will be void.
• Existing equitable interests - Law and Property Act 1925 S53 (1)
  > When the land already has trust and it is already split. You have to do the transfer of the equitable interest under the act - Money shares or anything else.
  > It must be signed by the testator and witness by 2 people.
  > If this is not complied then everything will be void,
  > It has to be in writing
  > This includes Land, money or anything else.

Question 4

What is constitution?

Answer 4

• Legal ownership is vested, and passed to the trustee.
• A legal title has a part of a trustee
• Legal title must be vested or transferred to the trustee.
• Incorrect to say that the property is invested in the property, important to specify

Question 5

How to vest legal title in the property in the trustee? (Constitution)

Answer 5

• Death
  -> Happens automatically on death for trusts in a will (testamentary trust)
  ->This is easier.
  ->The legal title automatically goes to those wo have been named a trustee in the will
• Inter vivos
  MILROY V LORD held there are three ways of transferring property to somebody else.
  -> Gift: You are given both the legal and equitable interest to the precipitant.
  ->Transfer to a trustee (another person) -
  –> Declare oneself trustee – Settler and trustee are the same person.
  –> You cannot get it back because you have already transferred legal interest and legal equitable interest.
• Mutually exclusive (JONES V LOCK)
  -> Father tried to give a gift to his child but did not do it properly
  -> Messed up formalities
  -> Father died
  -> It was argued if it was not successful he declared as trustee.
  -> However this was not allowed and the gift remained barred.

Question 6

How is property transferred? (Money)

Answer 6

• Intention to transfer the legal title -> Has been invested in the trustee
• Identify property -> Money itself must be identified
• Some act to show intent to transfer -> Settlor has to do some acts t show they are legal
• Always apply the criteria to the scenario facts, even if it seems possible

Question 7

How is property transferred? (Chattels)

Answer 7

• Chattels - items, phones, jewelry, etc…
• Deed - Legal instrument, signed and witnessed

OR
- Delivery and intention

Question 8

RE COLE CASE (Chattels)

Answer 8

• Delivery and intention, one is insufficient.
• This is a general case
• Married couple
• Husband worked away a lot
• Brought apartment
• Visited the apartment.
• She liked the furniture.
• He said this is yours
• After this, Husband went bankrupt
• Saying it was her intention, but the delivery weren’t there
• Showing one was insufficient
• The court spoke about symbolic delivery beyond handing it over or means to get it.
• Gave example of a church organ, it is hard to move away from church
• They usually have keys for this
• If you get something big that you cannot hand over or means to collect themselves, it is unsufficient if you bring the other person to the bag item, but their hand on it and say you are giving the item to them
  -This is only giving an exception for big items like a church organ
• Delivery had to be like saying where the item is, safe locks etc…
• Giving someone keys for the car is sufficient for delivery, giving someone that means to get it themselves.

Question 9

JAFFA V TAYLOR GALLERY LTD CASE (Chattels)

Answer 9

• Pragmatic approach
• Exception case decided on facts
• Cannot apply to Jaffa unless it is very similar circumstances
• Involved painting
• Painting were in different locations
• The settlor wanted to put it in a trust and use a written document.
• It was a deed, in writing.
• Showed in evidence
• Document showed intention
• Based on Cole, there wasn’t a delivery, Wasn’t handed over or given keys/code.
• It was held here through, however it was constituted, it is unusual circumstances
• Trustee in different locations from one to the other.
• It is better to transfer it through deed as long as the deed is valid, the legal title will be transferred.

Question 10

What are the key features of a trust?

Answer 10

The legal and equitable interests are split
- Legal interest -> Trustee
- Equitable interest -> Beneficiary

Question 11

How is property transferred? (Land)

Answer 11

• LPA 1925 S52 -> Requires a deed
• LPA 2002 S7 -> Must register, transfer or registered land at land registry -> Mascall v Mascall

Question 12

How is property transferred? (Land) info

Answer 12

• Land requires special formality
• To transfer the legal property of land, tell us in LPA 1925 that a deed must be owned.
• A legal ownership of land. It must be signed and witnessed.
• TP form
• Transfer also has to be registered for legal ownership to pass.
• The settlor fills out a TP 1 form and the settlor to the trustee and this will be signed.
• Then it will be sent to the land registry.
• They will update the registrar then they will put the trustee as the legal owner.
• The legal title will go to the trustee.

Question 13

MASCALL V MASCALL CASE (Land)

Answer 13

• This is a case on transfer to legal ownership.
  This is NOT a trust case.
  Father owned trustee and wanted to transfer to son
• Deed was signed and given to the son
• Before the son sent it to the land registry, Father and son fell out
• Father had changed his mind
• Father tried to go back on the transfer and tried to argue for claim that he can retain the title.
• Court looked at the ‘every effort rule’ (Means people has done everything that they were required to do)
• Held that father could not go back on the transfer because he made every effort to go back on the land.
  Father signed deed and given it to the son.
• Nothing left that the father could do.
• This meant he could not go back on the transfer.
• Legal title remained with the father.
• When father made every effort, the equitable transfers.
• The son ceases the equitable interest.
• He was reluctantly holding on trust for the son who was equitable owner.

Question 14

Nathan owed Ellie a debt of £20,000. Ellie wrote to Beatrice to tell her she would be transferring £10,000, of the debt owed by Nathan to Beatrice. Ellie did not Inform Nathan.
What is Ellie trying to do?

Answer 14

• Transfer half of the debt by Nathan to Beatrice.
• She tried to transfer both equitable and legal interests.

Question 15

Choses in action (Legal Assignment)

Answer 15

S136 LPA 1925

1. Absolute
   - Must transfer the right to enforce the full debt or contract.
   - Always start by transfer by legal assignment because that’s where they always start.
2. First requirement must transfer the whole debt.
3. Notice in writing to the person who owes the debt or contract.
   - Next requirement means in writing.
   - Writing must take place.
   - It does not have to be a deed but must be a written document or some sort.
4. Debt/Legal thing in action
   - Last requirement is a debt will always be made.
   - The legal title to the choses action can be transferred to the trustee.

Question 16

What is another word for transfer?

Answer 16

Assignment

Question 17

Choses in action (Equitable Assignment)

Answer 17

• Equitable assignment is a backup
• If the Section 135 is not met, in certain circumstances, equity must step in.
• It is possible for equitable interest to be transferred.

Question 18

PHELPS V SPON - SMITH CASE

Answer 18

This case sets out criteria/ transfer the equitable interest in chosen action:

1. Intention to transfer
   - There must be intention to transfer from the settlor.
   - This can be shown from something said.
   - Don’t rely on something said, get it in writing by law.
   - Writing isn’t required but it is difficult to show evidence without it.
2. Identify chose in action
   - Chosen in action needs to be identified
   - This means it must be clear which debt or contract is transferred.
3. Act by assignor to show intention
   - Act by assignor to show intention so expressing it is insufficient by expressing it is better.
   - Must have shown verbally and show, intention in practice to express.

Question 19

Under S136

Answer 19

• You can have a partial transfer through equity only.
• There is no need to give notice to the person who is in debt or in the contract.
• If equitable assignment is successful, only the equitable interest is transfrred and the legal interest is remained with the person and that is because the S136 is a statute, and an equity override statute.

Question 20

Nathan owed Ellie a debt of £20,000. Ellie wrote to Beatrice to tell her she would be transferring £10,000 of the debt owed by Nathan to Beatrice. Ellie did not inform Nathan.
What is Ellie trying to do?

Answer 20

• Transfer half of the debt by Nathan to Beatrice. She tried to transfer both equitable and legal interest.
• Equitable:
  There is the intention to transfer interest because writing is good evidence to show this.
  There is evidence to show what is to be transferred.
  There is an act to show intention to transfer due to the writing.
  You can transfer the equitable interest
  The legal interest is with Ellie.
  Half of the equitable interest has gone to Beatrice.
  Now have a trust.
• S136 Legal interest:
  It is not absolute because its only half the debt and the legal must be full.
  It is in writing because it states that she told her.
  She did not inform Nathan.
  The legal interest stays by Ellie.

Question 21

What are shares?

Answer 21

• Special type of intangible property
• Companies are owned by shareholders who have shares in the property
• Shares are valuable as the holder owns a percentage of the company
• If the company is doing well, shareholders may be paid dividends
• Shareholders vote on some important decisions related to the company

-You can own them but cannot touch them.
- Shares are special because they have different rules to transfer property of legal ownership.
- Shares are valuable as the holder owns a percentage of the company E.G Amazon. 1.3 billion. Owning 1% will make you billionaire.
- Shareholder example director
- If a company fails, the shares become worthless.
- They can be very valuable but hold a lot of risks.
- Gift is when someone transfers legal and equitable trust.
- Trust can involve gift. IF gift goes wrong, it may be trust instead.

Question 22

How to transfer ownership in shares?

Answer 22

Complete a stock transfer form
- Give the stock transfer form and the share certificate to the recipient
- The recipient will send them to the company
- Legal title to the shares is transferred when the company has updated its register of shareholders
- Transferring them to a trustee to a trust
- You must use all these formalities.
- First step is to complete online transfer form. Simple form that identifies the shares. You give the details and sign it.
- Transfer form is sent to the person who receives the form, and they give their detail and sign them
-You give them your shared certificate.
- The recipient has the form completes and shared certificate.
- The recipient will send it to the company directly.
- All these steps need to meet.
- The legal interest is not transferred to the new owner until company is registered. Company updates this.
- The recipient becomes the new owner.

Question 23

What are the key cases for Transfer in Equity?
If successful, transfer is in equity only

Answer 23

1. Milroy v Lord - Have to do everything necessary
2. Re Rose – transferor making every effort is sufficient
3. Pennington v Waine – sufficient if there is unconscionability

• If the require of transfer is not met, equity cannot transfer the legal interest
• This means legal ownership will remain with the person
• What equity can do to some circumstances is transfer the equitable interest only to the person they want to pursue the shares.

Question 24

MILROY V LORD CASE ( Have to do everything necessary)

Answer 24

• Settlor executed a deed to transfer the shares to Lord to hold on trust for Milroy
• Held that the transferor must do everything necessary to transfer the shares
• Everything necessary is sending the share certificate and stock transfer form to the company who will update the register
• This gives the traditional approach.
• It is the hardest test to satisfy.
• The share certificate and stock transfer was never sent to the company. A deed was insufficient.
• The principles were that a person transferring the shares has to do everything necessary.
• Despite the deed, everything necessary was not done and the shares was not transferred to the lord.
• The settler did not send the share certificate hence the company could not register.
• A deed has been the clearest way to transfer property but insufficient to transfer shares
• The share remained with the settler.

Question 25

RE ROSE CASE (transferor making every effort is sufficient)

Answer 25

• The husband gave the stock transfer form and share certificate to his wife, she gave them to the company who were slow to update its register. When did ownership change?
• The transferor does not have to do everything necessary but does have to do everything within their power – the every effort rule
• This gives every effort test.
• Waited 3 months.
• Husband died several years later.
• The reason it became in court is due to timing.
• This matters for inheritance tax and many equities is around tax,
• If gift is given several years after debt, the gift may be subject to inheritance tax.
• The relevant date was gifted before the date could be free before inheritance tax was in April.
  -m The issue was when he transferred the shares.
• This is a legal requirement that requires formality.
• When equity steps in, they
• The legal ownership could not be passed on the wife.
• Equity affects the ownership.
• It was held in equity, the transfer has not have to do anything necessary but has to do everything in their power.
• When husband had given his wife the certificate and form, he had done everything he was required to do and with his shares.
• On the 30th of March, the owner of equity had passed
• 3 months later, when the company registered, the legal owner got passed to the wife
• The husband was only the legal owner of the shares.
• The value is in the equitable interest.
• 10th April, wife already had equitable interest, so she did not have to pay inheritance tax.
• Other way to transfer, you can send them directly to the company, that shows every effort rule.
• If this gets lost in post, this will be tricky for the court.
• If a transfer case of equity only, only equitable is transferred.

Question 26

What is the effect of Re Rose?

Answer 26

• 30 March – submitted documents –
  equitable interest passed to his wife,husband still had legal interest (so owned the shares on trust for his wife)
• 30 June – company updated its shareholder register – the legal interest passed to his wife (she now has both legal and equitable interest in the shares)

Question 27

PENNINGTON V WAINE CASE (Sufficient is there is unconscionability)

Answer 27

• Aunt sent forms to company auditor, nephew relied on assurance to become a company
  director
• Sufficient if the transferor had intention to transfer and in the circumstances it would be
  unconscionable for it not to happen
• Detrimental reliance was important
• Zeital v Kaye tells us Pennington v Waine went too far
• Every effort test was not met.
• It was criticised having gone too far.
• Rule was if you wanted to become a director, you must have shares in the company.
• She filled in the stock transfer form.
• She sent the form to the company auditor.
• They accepted the form and certificate and said they’d handle it
• Ensured the nephew would receive the shares.
• This did not pass every effort test.
• The aunt died; the auditor had not given document to company.
• It was held the equitable title relied on the shares and the document of the company.

Question 28

What are the 2 Factors in the Pennington v Waine case?

Answer 28

1. The aunt intended it to happen. He was told he would receive the shares
   Not done anything to change her mind. She did not mention the share in her will because she thought she already gave the share.
2. The court took the view that it would be unconscionable which means unfair for the shares to pass the nephew.
   - Detrimental reliance because a nephew needed a share to become director
   - First the aunt to give shares to him and the auditor reassuring.
   - The son relied on the reassurance of their words.
   - The court said it was unconscionable.
   - The principle is that there must be intention by the transferee and unconscious for indictable reliance not to be passed on the recipients.

Question 29

In Zeitl v Kaye, what does it tell us about the Pennington v Waine case?

Answer 29

• Tells us that they went too far,
• It only rerose,
• Required every effort to be made.
• It caste doubts

Question 30

What are the other every effort cases?

Answer 30

• Mascall v Mascall – transfer of land where the son had not registered the transfer with the land
  registry
• Re Fry - international transfer where the additional formality of treasure consent had not
  been obtained
• Paradise Motor Co – the transferor had signed the share transfer form, but the recipient had not
  signed it

Question 31

MASCALL V MASCALL CASE

Answer 31

• The father had executed a deed to transfer to his son.
• Gave deed to his son but his son has not given to land registry.
• They fell out.
• The father tried to get his land back.
• He still had legal interest.
• The court applied every effort test.
• The father had made every effort test.
• This is because they did everything required of them.
• He gave the recipient who is his son, his deed.
• The equitable interest had been passed on to his son.
• A person cannot change their mind once it’s been passed on.

Question 32

RE FRY CASE

Answer 32

• There was extra formality for shares to be transferred.
• As a transferee, lived abroad.
• The transferee has completed stock transfer form with share certificate to company.
• But he had not obtained consent.
• It was not enough because he had not done everything he was required to do.
• The treasure could have refused and asked more questions or may not of responded.
• Due to consent needed, it was possible for transfer of the shares would never of happened if treasure refused the transfer.

Question 33

PARADISE MOTOR CO CASE

Answer 33

• The father had intended to give step son a gift of his shares
• Father completed and submitted form but step son had not signed it
• They fell out
• Father wanted his shares back.
• Did father make every effort rule? It was held that the father had made every effort and he did not make regularity.

Question 34

How do you go about your application?

Answer 34

• STATE the case
• STATE the principle
• APPLY the principle
• COMPARE the facts
• Give name of the case (3 key cases and any other additional as bonus)
• Apply principle to the case to the scenario.

Question 35

EXAMPLE 1:
On 1st September Dylan gave a written document to his trustees asking them to hold some shares in Hinckley Haulage Ltd on trust for his children.
On the same day Dylan sent his share certificate and share transfer form to Hinckley Haulage Ltd. The transfer form contained two minor errors, which caused an officious employee of the company to refuse to register the transfer. He returned the form to Dylan on 25th September. On 26th September Dylan was killed in an accident, having taken no further steps with respect to the trust.

Answer 35

Legal parties have not passed to the trustee because the step where the company shareholder update has not happened.

The equitable title has passed. This is under Milroy v Lord.
Everything necessary hasn’t been done, because the transfer hasn’t been registered in the company who have not updated it in the shareholder.

Every effort test did not happen. This is under Re Rose.
In the Re Rose case, no errors were made but, in this scenario, there were errors made.
The shares were eventually registered in Re Rose whereas in this scenario, they were not registered.

There is intention shown by Dylan. This is under Pennington v Wayne.
because despite the errors he made, he still made intention to send the application form.
There was no insurance.

• CASE – Milroy v Lord
• PRINCIPLE – “Everything necessary”
• APPLY – Not satisfied as not registered
• CASE – Re Rose
• PRINCIPLE – “Everything within your power”
• APPLY – Mistakes on form so not done
  everything within power
  - Only minor mistakes
  - “Officious employee”
• COMPARE – Send to Co (preferable to Re Rose)
• DISTINGUISH – No errors in Re Rose
  - Form not still with settlor at death
• CASE – Pennington v Waine
• PRINCIPLE – Intention & unconscionable
• APPLY – Intention due to written document
  - Minor error
  - Died next day
• COMPARE – Send to Co (preferable)
• DISTINGUISH – No errors in Pennington
  - B not informed
  - Not needed for directorship
  - No “detriment”

Zikkel and K said Pennington went too far to every effort.

Question 36

EXAMPLE 2:
Helen’s godson, Samuel, needs to become a shareholder in Midland Electrical Limited (“MEL”) in order to be appointed as a Director of that company and so Helen decided to transfer 1,000 of her shares in MEL to Samuel.
In September Helen sent her share certificate and stock transfer form to MEL’s accountants and told Samuel that she had done so. The shares have not, as yet, been registered in Samuel’s name.

Answer 36

Legal interest has not passed to Samuel because we haven’t got the full procedure of the shareholder.
The equitable interest has not passed.
Everything necessarily has not been done because the update of the shareholder by the company has not been done.
Every effort test has been done because she has filled the form and sent them somewhere. This is under Re Rose.
There is unconscionability, due to intention to her intention to transfer

• CASE – Milroy v Lord
• PRINCIPLE – “Everything necessary”
• APPLY – Not satisfied as not registered

Example 2 Slide 3
* CASE – Re Rose
* PRINCIPLE – “Everything within your power”
* APPLY – Relying on 3rd party
- Could have sent to Co
* COMPARE – No comparison
* DISTINGUISH – Sent to accountant not trustee

Example 2 Slide 4
* CASE – Pennington v Waine
* PRINCIPLE – Intention & unconscionable
* APPLY – Intention due to written document
- Died next day
- Told Samuel
* COMPARE – Sent to 3rd party
- Told Samuel
* DISTINGUISH - Not needed for directorship
- Accountant didn’t tell Samuel
- No “detriment”

In both the scenario, neither of the equitable interest were transferred.

Question 37

What are the Non assignable property?

Answer 37

• Contracts declared to be non assignable
• Personal contracts
• Rights of litigation
• Expectancies
• Public policy

Question 38

What is contracts declared to be non assignable?

Answer 38

Property that cannot form a trust because it cannot be a signed to a trustee.
It is possible to create a trust over a large range of property.
The right to enforce a contract, cannot be transferred if a contract contains a clause preventing the transfer.
You cannot transfer it to sell your rights to create a trust.
Contract of goods can be transferrable unless clause prevents the transfer.

Question 39

What is personal contracts?

Answer 39

• Personal contracts are those who must be performed personally.
• This will include a contract of employment.

Question 40

What is rights of litigation?

Answer 40

• Contracts of sign of goods are transferrable but if there is a breach of contract, this creates right of litigation.
• You cannot transfer this to somebody else.

Question 41

What are expectancies?

Answer 41

• You expect to inherit, to receive some money or a car or anything within the will.
• You cannot transfer expectancy.
• This does not mean that you will 100% get it because people can change their will any time up until they die.
• You would have an understanding hope.
• You will have either a legal or equitable interest.

Question 42

What is Public policy?

Answer 42

There are certain property right that cannot be transferred to another as a matter of public policy.

Question 43

What is incompletely constituted trusts?

Answer 43

• This is where a person tries to break a trust but doesn’t do it properly.
• If you are trying to give someone a gift by transferring legal/ equitable interest, equity as a general rule will not step in and sort it out for you however, certain circumstances will step in which:
• Equitable maxim – equity will not assist a volunteer.
• Volunteer is someone who has done nothing.
• Equity will try to protect them.

Question 44

What is the Rule in Strong v Bird?

Answer 44

• The rule in Strong v Bird is a Trustee is made executor of exist will.
• Case about the release of debt
• Intent to discharge the debt during lifetime and
• Nothing to indicate a change of mind, then.
• Appointing that person as executor will discharge the debt.
  Release of a debt.
• After the case, it has been applied to transfer a property to constitute a trust.
• Instead of paying back money but in a different way.
• Agreement he would let her live with reduced rent until debt is paid off.
• Despite the agreement, she paid full amount.
• In her will, she made bird her executor.
• Executor deals with the decreased property.
• Pay off any debts the decreased must call in any debts that they have.
• Bird di owe her the money but as he is her executor that discharged the debt that he has no longer owed money.
• If you intent to discharge someone of debt during your lifetime and there is indicate a change of mind.
• If you then appoint that person as your excutor, it will discharge the debt.

Question 44

Incompletely constituted trusts:

Answer 44

• Equity will not perfect and imperfect gift
• The rule in Strong v Bird
• Re Stewart/ Re Ralli’s
• Equity will not assist a volunteer
• Marriage settlements
• Pullan v Koe
• Re Pryce

Question 45

How did the rule apply in Re Stewart?

Answer 45

applies to wanting to make a gift to another

Question 46

• How did the rule apply in Re Ralli’s?

Answer 46

applies to constitution of trust
* If constitution of trust fails, appointing the trustee as executor will constitute the trust on death (law of fortuitous vesting)

Question 47

Marriage settlement

Answer 47

• Equitable maxim – equity will not assist avolunteer
• Marriage is considered to be consideration
• Pullan v Koe – child of the marriage can enforce the promise
• Re Pryce – other relatives cannot enforce the promise

Question 48

What are the 4 criteria to create a valid private trust?

Answer 48

1. Formalities
2. Constitution
3. Three Certainties
4. Not contrary to public policy/ Perpetuinty rules