Constitution

Question 1

Why do we need constitution of a trust?

Answer 1

To prevent casual creation of trusts

To show you have parted from the property

Question 2

Why will equity not assist a volunteer?

Answer 2

Because if it did, it would undermine the common-law rule: valid contract needs consideration

Question 3

3 modes of constitution

Answer 3

1) A valid will
2) Settlor declares himself trustee → Jones v Lock
3) Settlor transfers prop to trustee

Question 4

Milroy v Lord (1862) *Note: before was Court of Chancery

Answer 4

Where trust prop consists of shares.
→ Settlor owned shares in bank which purported to transfer to Lord by deed, to be held on trust for Milroy. Settlor passed share certificate to Lord. L was settlor’s attorney and authorised to transfer shares to M, but transfer could only be completed by registration at a bank which never occurred.
→ Could M claim shares under trust?
→ Held: No valid trust had been created. M not provided consideration for shares - had been made by settlor ‘voluntarily’ s M was a ‘volunteer’ - equity does not assist a volunteer - so settlement was not binding on settlor
→ After Re Rose - requirement changed

Question 5

How must shares in a public company be transferred?

Answer 5

Via stock exchange

Question 6

How must shares in a private company be transferred?

Answer 6

Only valid if appropriate stock transfer form is executed and delivered to transferee. Company must then accept transfer and register it in its books

Question 7

Re Fry (1946)

Answer 7

F (resident of US) owned shares in English company which he transferred by way of GIFT to son. Wartime restrictions imposed prohibition on registration without Treasury consent. Forms sent to donor to sign, which he did and returned to company. F died before consent obtained from treasury.
→Held: transfer was ineffective and intended gift incomplete. Shares passed to F’s residuary estate.

Question 8

Re Rose (1952)

Answer 8

March 1943 - R transferred 10,000 shares in unlimited company to wife, and same day, 10,000 shares to company for trustees to hold upon terms of settlement. Transfers were in authorised form. But, not registered until June 1943. R died 1947. IRC claimed estate duty on shares as gift not completed before April 1943.
→ COA: R done everything in power to transfer legal and equitable interest in shares on date of transfer (March) but some factor which delayed it was out of R’s control.
→ IRC argued transfer not effective under Milroy v Lord
→ Held: Court not invalidate transfer where donor, after transfer, has not kept any beneficial entitlement. Estate not liable to pay tax

Question 9

T Choithram International SA v Pagarani (2001)

Answer 9

TCP successful businessman diagnosed with cancer. Executed a trust deed at bedside to establish a foundation as an umbrella organisation for a no. of charities he had established. He signed the deed, and orally stated all wealth now belonged to foundation/trust. TCP was a trustee of foundation and other T’s signed the deed the same day or shortly after. Later, directors of 4 companies controlled by TCP passed resolutions confirming shares/assets would be held by trustees of foundation. TCP didn’t transfer any shares during lifetime. After TCP death, companies registered trustees of foundation as shareholders.
Held: TCP had made immediate, unconditional gift to foundation.
→ First sight, no valid trust - TCP not transferred shares into their name. Not done everything he could have
→ Words ‘I give to the foundation’ - gift on trust? Not effective unless there is delivery
→ However, TCP was a trustee, so trust prop had vested in one of trustees. As trustees, TCPs conscience was bound to give effect to trust so beneficiary could enforce it.

Question 10

Pennington v Waine (2002)

Answer 10

Mrs C told Mr P she wished to transfer 400 shares in private company to her nephew, Harold. Signed share transfer form and gave to P (partner in firm of auditors). Placed form in file and took no action prior to Mrs C death, but, did write to Harold and inform him of the 400 shares, and that he need not take any action. Mrs C will made no reference to shares.
→ First held that gift of 400 shares taken effect immediately after share transfer forms had been executed, even though form never delivered.
→ COA upheld this - more generous than Rose/Choithram → unconscionability - by the time Mrs C died, would have been unconscionable of her to change her mind about making the disposition because she had told Harold about gift, signed the form etc.

Question 11

Why Is Pennington v Waine more generous than Re Rose?

Answer 11

Re Rose → actually been transfer to donee, but all that remained was to register the donee at the company, a step which donor had no control
Pennington more generous

Question 12

Why is Pennginton v Waine more generous than Choithram?

Answer 12

Choithram → Where there had been a notional ‘transfer’ from Mr C as his capacity as trustee of donee foundation
Pennington → Donor had merely passed forms to agent - had she disposed of beneficial interest?

Question 13

Arden LJ in Pennington v Waine

Answer 13

Where gift is imperfectly constituted, court will not hold it to operate as trust unless interpretation is permissible
→ Policy concerns?

Question 14

Staden v Jones (2008)

Answer 14

Mother & father divorced. Family house in father’s name on understanding will be held for daughter’s benefit. F remarried and died intestate, house devolved on step mother who refused the daughter of any share.
→ 1st instance, court said cannot aid a volunteer. CoA in favour of daughter.
→ Held: assumption of obligation to hold property for benefit of another so house was on trust for daughter so could claim her share.
→ Generous interpretation of ‘equity does not assist a volunteer’

Question 15

Kaye v Zeital (2010)

Answer 15

→ More orthodox approach than Staden v Jones?
→ Held: intended transfer of BI in company shares failed because transferor had done none of actions necessary to effect transfer. Had not declared himself a trustee of BI or assigned it in writing by way of gift/trust

Question 16

Kaye v Zeital followed in Curtis v Pullbrook (2011) → 3 ways to perfect an imperfect trust

Answer 16

1. Donor done everything necessary to enable B to enforce a beneficial claim
2. Where some detrimental reliance by donee on ineffective gift, may bind conscience → justify constructive trust
3. Benevolent trust → gift due to words used

Question 17

Where trust property comprises land…

Answer 17

Conveyances of land must be made in a DEED - s52(1) LPA 1925

Question 18

Richards v Delbridge (1874)

Answer 18

TRUST PROP COMPRISES OF LAND
→ D was tenant of premises and owner of a business which ran in the premises. D purported to make a gift of his lease and business to grand-son, R. D endorsed and signed memorandum on lease ‘I give to R’. Delivered deed to R’s mother to hold on trust for her son. D died, making no reference to gift in will.
→ Held: Prop passed under will - no valid gift/trust - no formal conveyance of LT to R. No certainty of intention. R gave no consideration for prop so was a ‘volunteer’

Question 19

How can you transfer prop without consideration? (2 ways → Jessel LJ in Richards v Delbridge)

Answer 19

1. Acts that amount to conveyance which divest him of legal ownership
2. Legal owner of prop may constitute himself as trustee without actual transfer of LT, deprive himself of BT

Question 20

Prerequisite to a valid transfer of legal estate

Answer 20

Registrar enter transferee on register as new proprietor → S7(1) Land Registration Act 2002

Question 21

Construction for trust property → ordinary chattel

Answer 21

To transfer LT, must be physical delivery coupled with requisite intention and a formally executed deed of gift

Question 22

Re Cole (1964)

Answer 22

Husband bought house in London whilst family/wife living elsewhere. Took wife to house, she was impressed by certain chattels - silk carpet and card table. After tour of house, husband announced ‘it’s all yours’. 16 years later, husband declared bankrupt. Year after, wife sold moveable contents of house. Action brought by trustee in bankruptcy to recover from wife proceeds of sale of chattels.
→ Held: words of gift being in themselves insufficient to perfect gift of chattels. Wife have to prove some act of delivery/change of possession to show Husband transferred title to Wife. None so LT was with husband.

Question 23

Jaffa v Taylor Galleries Ltd (1990)

Answer 23

→ May not be necessary to transfer physical possession of chattel
→ Trust of painting had been validly constituted where the trust had been formally declared in document (not a deed), of which trustees had a copy, even though painting had not been physically transferred to trustees

Question 24

Requirement for trust prop in chose in action

Answer 24

→ Express notice - s136(1) LPA 1925

Question 25

Requirement for constitution by transfer where subject of gift/trust is an equitable interest

Answer 25

Transfer of EI not complete until trustees of trust have been given notice of transfer

Question 26

Re McArdle (1951)

Answer 26

Monty (child) had no entitlement in law and equity to receive £488
→ Testator (M) left his residuary estate upon trust for his widow for life and remainder 5 children in equal shares
→ 1 child - Monty, carried out improvements to a farm forming part of testator’s residuary estate - Other children signed doc to terms that will repay Monty from estate - £488
→ Widow died and Monty claimed money, other children objected
→ Held: Doc did not constitute an enforceable contract because the works of improvement completed before execution of doc & therefore the consideration for agreement was wholly in the past. Nor could doc constitute a perfect gift of EI
→ Doc = contract for valuable consideration - would be artificial to construe as equitable assignment (equity does not perfect an imperfect gift)

Question 27

How does the common law assist?

Answer 27

Can sue at common law for performance of promise to set up the trust
→ Sue within limitation period laid down by Limitation Act 1980
Can be :
→ Persons who have provided money or money’s worth in consideration of promise
→ Persons who are parties to a deed in which a covenant was made (covenant = consideration)

Question 28

Common law damages …

Answer 28

Inadequate where trust relates to specific property → equitable remedy

Question 29

Re Plumtre (1910)

Answer 29

Claims within marriage consideration → Consideration not effective if made in past or in exchange for a present promise
→ X executes a marriage settlement to which the trustees are parties, in which X covenants to settle any after acquired property on trust for X, X’s spouse and issue of marriage
→ Held: Next of kin did not fall within marriage consideration & therefore were volunteers. Not entitled to enforce covenant to settle. Next of kin not beneficiary’s under settlement → husband kept stock

Question 30

Pullan v Koe (1913)

Answer 30

Under statute of limitations - T’s too late to sue at common-law for damages on covenant.

Question 31

Strong v Bird (1874)

Answer 31

→ Claims of persons who are parties to the covenant to settle
→ B borrowed £1,100 from step-mum. Lived in his house and paid rent quarterly, so was agreed B would repay loan by deducting £100 from rent payments.
→ Deduction made on 2 quarters, but then step-mum insisted on paying full rent without deduction. Died 4 years later
→ B appointed executor. Action brought by S (next of kin) alleging B be charged £900 debt (unpaid loan)
→ Jessel said no debt owed as appointment of B as executor had released debt at law. Also, step-mum had continuing intention to make a gift of £900 to B had released the debt in equity. Intention shown through making 9 full rent payments.
→ Held: Not liable to pay and B not required assistance of equity

Question 32

2 rules from Strong v Bird

Answer 32

1) Must be evidence of donor’s intention to make immediate inter vivos gift (if gift testamentary will fail → lack of formalities)
2) Intention to make gift must have continued right up until D’s death

Question 33

Day v Royal College of Music (2013)

Answer 33

Held: COA upheld judge’s decision that the rule in Strong v Bird operated to perfect the forma imperfect gift when, upon Sir M’s death, Mr D became an executor under Sir M’s Will.
→ Strong v Bird should apply to trusts as well as gifts

Question 34

Re Ralli’s WT (1964)

Answer 34

Held: C (I’s husband) held H’s share of R’s estate on trust of the marriage settlement. Became constituted when LT to prop vested in C as capacity as T of R’s will trust
→ Rule applied in Strong v Bird applied to constitute a trust
→ Regardless of how the trustee acquired LT, Strong v Bird would still work to perfect the trust, AND ALSO THAT IMMEDIACY AND CONTINUING INTENTION WERE NOT NECESSARY… THEREFORE = DODGY RULING = Odd law, crit. for applying Strong v Bird too widely.
→ Man died, left property for wife for life and daughter remainderman. As part of a marriage covenant, daughter agreed to settle property she acquired, including after-acquired property. Unfortunately, daughter died before her mother. When mother died, Helen’s interest fell in to possession. X was the sole surviving trustee of the father’s will and as such, the legal title to the property vested in him. However, he was also the sole surviving trustee of the daughter’s marriage settlement…. therefore, he was trustee of the daughter’s settlement AND, because he was trustee of the father’s settlement, he held the legal title to the property the daughter had intended to form the trust.
HELD - X was required to hold the property on the trusts of the daughter’s settlement

Question 35

Donatio Mortis Causa

Answer 35

→ A gift made because of death → exception to maxim: equity will not assist a volunteer
→ Assistance from Roman law
→ Donee can claim a gift of certain prop. where that gift has not been perfectly executed in accordance with common-law rules applicable to transfers of prop of that type

Question 36

King v Dubrey (2015)

Answer 36

Requirements in English law

1) Donor should be contemplating his impending death
2) Form of gift must be such that it will only take effect if and when his contemplated death occurs. Until then, D has right to revoke gift
3) Donor should deliver ‘dominion’ over subject matter → means physical possession of subject matter or some means of accessing the subject matter or documents evidencing entitlement to possession of subject matter