Constitution of a Trust Flashcards
1. Requirements for trust constitution 2. When court will or will not perfect an imperfect gift 3. Law determining whether a purported gift or trust is valid
What is constituting a trust?
Transferring legal title of property/chattel/choses in action to trustee(s)/donee(s)
E.g. Constituting a trust by a will
What if trust incompletely constituted but no consideration was given?
Trust is void, subject to certain exceptions
Equity will not perfect an imperfect gift;
Equity will not assist a volunteer
What if trust incompletely constituted but consideration was given?
Trust may be specifically enforced
Equity regards as done that which ought to be done
How do you dispose of your property after you die?
S9 Wills Act 1837
1) In writing
2) Signed by testator
3) With two witnesses (S15 WA 1837: Cannot be beneficiaries)
What are the key ways in which a legal owner may dispose of his property?
OUTLINED IN MILROY V LORD
1) Outright gift
• Must comply with any legal transfer requirements
• Intention to transfer present
2) Transfer on trust
• Must comply with any legal transfer requirements
• 3 certainties, other formalities
• If land, S53(1)(b) LPA
3) Self-declaration of trust
• Must have 3 certainties, other formalities
What if X is a beneficiary for a piece of land, and wishes trustee Y to transfer X’s interest to Z?
1) Grey v IRC: This is a disposition and must comply with S53(1)(c) LPA
2) X already holds legal interest, so there are no legal transfer requirements
What if A is the owner of a piece of land, and wants B to be a trustee of the land for C?
1) Transfer legal title to B through S52(1) LPA
2) Make valid declaration of trust for C (S53(1)(b))
3) Fulfil 3 certainties
What are chattels?
What are choses in action?
Chattels:
• Items of personal property, e.g. Paintings, Jewellery
Choses in Action:
• Right to sue due to an intangible personal property right, e.g. Debts, Bank account rights, Breach of contract, Claim for damages
How can legal title to chattels be transferred?
Chattels:
• Items of personal property, e.g. Paintings, Jewellery
1) A deed; or
2) Actual delivery [Re Cole] + Intention to give [Glaister-Carlaisle]
Re Cole [1964]
[DELIVERY OF GOOD IS IMPORTANT FOR CHATTEL TRANSFER]
Facts:
• Husband showed table to wife, told her, ‘It’s all yours, darling.’
Held:
• Not enough to show intention where there is no delivery
Glaister-Carlaisle v Glaister-Carlaisle [1968]
[INTENTION TO GIVE AWAY GOOD IS IMPORTANT FOR CHATTEL TRANSFER]
Fact:
• During an argument, husband threw poodle at wife and said, ‘Here, you keep the bitch.’
Held:
• Actions were in heat of the moment; intention to give away is necessary
When legal title of shares is transferred, at what point does donee/trustee receive legal title?
When the company’s registrar receives the share certificate + stock transfer form, and registers the change
How must legal title to land be transferred?
Through S52 LPA by deed
If creating a new trust of land, must also abude by S53(1)(b) LPA
How must legal title to a cheque be transferred?
Bills of Exchange Act 1882:
• Transferor must endorse (sign the back of) the cheque
How must legal title to shares be transferred?
Stock Transfer Act 1963:
• Transferor must sign a stock transfer form
•Then deliver the form and share certificate to the company’s registrar
How must legal title to money be transferred?
By delivery (i.e. cheque must be cleared before transferor dies)
How must legal title to choses in action be transferred?
S136 LPA 1925:
• By writing, with notice given to debtor/other party
Milroy v Lord [1862]
[GENERAL RULE: EQUITY WILL NOT PERFECT AN IMPERFECT TRUST]
Facts:
•Mr M executed a deed meant to transfer shares in a bank to Lord for L to hold on trust for Milroy
• No transfer of the shares was made by the bank
Held:
• No valid trust in the shares, shares went to M’s estate
• ‘The settlor must have constituted the trust’ and transferred legal title correctly
What made the general rule in Milroy v Lord applicable to failed gifts?
Jones v Lock
Can Equity treat a failed gift as a self declaration of trust?
(Failed gift = Failed constitution)
Can argue that a failed gift is a self-declaration of trust
• Self-declaration requires no constitution, settlor = trustee
• If property is not land, then no other formalities to follow apart from 3 certainties
BUT courts will not see a failed gift as a self-declaration of a trust
[Jones v Lock]
[Richards v Delbridge]
Exceptions to the general rule in Milroy v Lord?
1) Point of no return
[Re Rose]
[Mascall v Mascall]
2) Reliance on ineffective transfer
[Pennington v Waine]
3) Proprietary estoppel
[Gillet v Holt]
4) DMC/Death Bed Gift
[Cain v Moon]
5) Fortuitous vesting
6) One’s enough
[Choithram v Pagani]
Re Rose [1952]
[TEST FOR POINT OF NO RETURN (MILROY V LORD); APPLIES TO SHARES]
Facts:
• Mr R wanted to transfer shares to Mrs Rose in consideration of her love and affection
• Filled in share transfer forms and passed them to Mrs Rose, who gave them to the company
• Company refused to register share transfers
Held:
• 3-stage test:
– Transferor must use correct method of legal title transfer
– Do all you can to make the transfer happen
– Documents must end up with registrar of company (for shares)
Mascall v Mascall [1985]
[ALTERED RE ROSE; APPLIED POINT OF NO RETURN TO LAND]
Facts:
• Father made and gave son a deed of transfer and the land certificate
•Father and son fell out and father changed his mind; son had not yet registered at HM Land Registry
Held:
• Altered Re Rose test
– Transferor must use correct method of legal title transfer
– Transferor need not do everything within his power to effect the transfer
– BUT transfer must be irrevocable by transferor (i.e. pass to registrar/independent 3rd party/donee, not just leave it with your agent)
Zeital v Kaye [2010]
[FOR RE ROSE AND MASCALL TO APPLY, MATTER MUST BE OUT OF TRANSFEROR’S HANDS]
Facts:
• Share certificates were missing
Held:
• Transferor should have sent off for new certificates
Pennington v Waine [2002]
Fact:
• Testator gave share transfer documents to her agent and told donee of her intentions
• Agent assured testator and donee that there was no more for them to do
• Donee acted in reliance on the ineffective transfer by becoming director of the company
Held:
• Incomplete transfer + Reliance on transfer + Agent’s assurance = Unconscionable to deny the gift
[Virgo: Curtis v Pullbrook sets Proprietary Estoppel sets standard of unconscionability (A makes promise; B relies on it; B therefore suffers damage)]
Argument against Pennington v Waine?
Judges and academics say it has no rational basis, therefore only likely to be used on a case fact-specific basis
Alastair Hudson: At what point should it be considered unconscionable? + Equity is effecting a transfer that not even common law nor other exceptions is allowing
Gillet v Holt [2000]
[PROPRIETARY ESTOPPEL CAN OVERCOME THE GENERAL RULE IN MILROY V LORD]
Facts:
• C dropped out of school at 15 to work on D’s farm, was treated as one of the family and told ‘one day this will be yours my son’
• C worked on the farm for 40 years
• C and D fought, D kicked C off the farm and said C was no longer entitled to the farm
Held:
• Proprietary estoppel: C had acted to his detriment + D had made many clear assurances/promises to C
• ‘Award is based on the minimum equity to do justice’ = C got the farm cottage only
Cain v Moon [1896]
[ESTABLISHED DMC REQUIREMENTS FOR IMPERFECT GIFT TO BE PERFECTED]
Test:
• Gift is made in contemplation of death, which donor believes to be imminent
• Gift is conditional on death (i.e. can be revoked before death)
• Property is delivered to the donee
For DMC, what can count as delivery of the property?
1) Keys to a steel box containing deeds to the house are valid
[Sen v Headley [1991]]
2) Savings account can be subject to DMC by handing over essential indicia of title, e.g. savings book
[Birch v Treasury Solicitor [1951]];
post office savings book
[Re Weston [1902]]
3) Cheque from donor payable to the donee NOT subject to DMC
[Re Beaumont [1902]]
4) Cheque from donor delivered to donee, even if not endorsed CAN BE subject to DMC
[Re Mead [1880]
5) Handing executed share transfer form will suffice
[Staniland v Willott]
Re Mead [1880]
A CHEQUE TO THE DONOR (from a 3rd party) CAN BE SUBJECT TO A DMC, IF IT IS DELIVERED TO THE DONEE, EVEN IF IT ISN’T ENDORSED.
Re Beaumont [1902]
A CHEQUE FROM THE DONOR (e.g. written by the donor), PAYABLE TO THE DONEE CANNOT BE A DMC
Birch v Treasury Solicitor [1951]
A SAVINGS ACCOUNT CAN BE THE SUBJECT OF DMC, BY HANDING OVER THE ESSENTIAL INDICIA OF TITLE E.G. THE SAVINGS BOOK
Sen v Headley [1991]
KEYS TO A STEEL BOX CONTAINING DEEDS TO HOUSE = OK
Re Weston [1902]
DELIVERY OF A POST-OFFICE SAVINGS BOOK = SUFFICIENT TO MAKE THE POST OFFICE SAVINGS ACCOUNT SUBJECT TO A DMC
Bunn v Markham [1816]
DELIVERY IS ESSENTIAL TO DMC
Facts:
• Dying donor ordered items to be put into 3 parcels, sealed and addressed to each of his nephews
• Donor declared that they were intended for the named donees and that they should be delivered after his death
• Parcels then placed into a chest, to which the donor retained the key
Held:
• No sufficient delivery
For DMC, when is delivery considered completed?
When property travels from donor/donor’s agent to donee/donee’s agent BEFORE THE DONOR DIES
Strong v Bird
[ESTABLISHED FORTUITOUS VESTING - DEBTS]
Facts:
• D borrowed £1000 from Grandma, who lived with D and paid D rent
•D agreed to repay in instalments so G deducted £100/mth
• 2 months later, G expressly forgave debt and paid full rent until death
• D became executor of G’s will
Held:
•D owned legal title to G’s property as G’s executor +G had continuing intention to give release from the debt, thus perfecting the imperfect release
For fortuitous vesting, what property types are concerned?
1) Release from a debt [Strong v Bird]
2) Gifts [Re Stewart]
Re Stewart [1908]
RULE IN STRONG V BIRD APPLIES TO GIFTS ALSO
Re Freeland [1952]
FOR STRONG V BIRD TO APPLY, MUST HAVE INTENTION OF GIVING (NOT TO GIVE)
Re Gonin [1979]
FOR STRONG V BIRD TO APPLY, MUST BE A CONTINUING INTENTION TO GIVE THE GIFT
For fortuitous vesting, what are the rules?
1) Intention to make an immediate gift
2) Intention that continues until death (NOT but for death, gift would have been given in near future)
3) Donee acquires legal title as personal representative
Re Ralli [1964]
[DODGY CASE APPLIED STRONG V BIRD TOO WIDELY – HELD THAT TRUSTS CAN BE SUBJECT TO FV NO MATTER HOW TRUSTEE ACQUIRED LEGAL TITLE, AND THAT IMMEDIACY AND CONTINUING INTENTION NOT NECESSARY]
Facts:
• Man left property to wife for life and daughter the remainderman (remainder of estate + will possess after wife)
• Daughter agreed to settle property she acquired as part of marriage covenant, but died before wife
• When wife died, interest fell into possession of X, who was sole surviving trustee of man’s will and daughter’s marriage settlement
Held:
• X required to hold the property on the trusts of the daughter’s settlement
Choithram v Pagarani [2001]
[EQUITY WILL PERFECT AN IMPERFECT TRANSFER OF PROPERTY (SHARES) TO OTHER TRUSTEES BY A TRUSTEE]
Facts:
• C leaves wealth to a charity he is a trustee of, but died before successfully transferring
Held:
• Legal title could spread to the other trustees and create an effective self-declaration of trust
