CONSTITUTION OF A TRUST Flashcards
1
Q
Conveyance
A
- Getting legal title to the trustee otherwise there cannot be a trust
- Has there been an adamant conveyance of legal title into the hands of the trustee
- Some cases involve gifts, others involve trusts – a question of whether title has been vested
- A gift and a trust are mutually exclusive
2
Q
Relevant maxims
A
- Equity will not assist a volunteer
- About when you can change your mind about a gift?
- Equity will not assist a volunteer to get to the stage of a trust being set up
- Equity will not perfect an imperfect gift
- Until a trust / gift is effectively constituted, it is open to the settlor to change their mind
- In cases where no consideration has been given, equity will not assist a volunteer
- Until the trust is completely constituted, you can change your mind
3
Q
Milroy v Lord
FACTS
A
- Settlor executed a deed which purported to transfer some shares to a bank to Mr Lord to be held on trust for the claimant. However, the shares could only be transferred in the name of the transferee, which was not done.
4
Q
Milroy v Lord
HELD
A
- There was no trust because it had not been effectively constituted
- You can benefit someone with something in one of three ways
- By actually transferring the property to the persons for whom he intends to the provision – outright gift
- By transferring the property to a trustee for the purposes of the settlement – transfer to trustee to hold on trust
- By declaring that he himself holds it in trust for those purposes – declaration of self as trustee
- Whichever option is chosen, it has to be followed through, it cannot be changed
- “There is no equity in this Court to perfect an imperfect gift … [otherwise] every imperfect instrument would be made effectual by being converted into a perfect trust”
5
Q
Jones v Lock
A
- A man forgot to buy a present for his baby, and so he takes out a cheque and says it is for the baby. He had shown an intention for the gift to be for the baby, but he had not written at the back of the cheque (he did not complete the intention)
- It was held that you cannot say that the transfer to a trustee to hold a gift on trust is a declaration of self as trustee
6
Q
Richards v Delbridge
A
- An intended gift fails
- The settlor “need not use the words ‘I declare myself a trustee,’ but he must do something which is equivalent to it and use expressions which have that meaning; for, however anxious the Court may be to carry out a man’s intention, it is not at liberty to construe words otherwise than according to their proper meaning”
7
Q
Cloithram v Paragrani
FACTS
A
- A man wanted to set up a charitable foundation and he was to be one of the trustees of the foundation. He said ‘I not give all my wealth to the foundation,’ instead of complying with the formality requirements. He died before he could property vest his wealth in the foundation
- The settlor used the language of a gift, but if you give money to a charity you are giving the money to the trustees to hold on trust for the purpose of the charity
- Although the language of gifts was used by the settlor, he was actually intending to transfer property pursuant to a trust
8
Q
Cloithram v Paragrani
HELD
A
- On the facts, it was actually intended to be a transfer to the trustees
- “The foundation has no legal existence apart from the trust declared by the foundation trust deed. Therefore, the words “I give to the foundation” can only mean “I give to the trustees of the foundation trust deed to be held by them on the trusts of foundation trust deed”. Although the words are apparently words of outright gift they are essentially words of gift on trust”
- It was valid because the settlor was one of the trustees
9
Q
Deslauriers v Gaurdian Asset Management
A
- FACTS: Mrs D intended to set up a trust and wanted to convey the property to her children to be held on trust. It was argued that the fact that Mrs D intended to transfer the trust property should be treated as her declaring herself trustee
- HELD: this argument was rejected; “the settlement was intended to be effected by transfer to trustees and, in the present circumstances, it is not open to the court to give it effect as a declaration of trust”
10
Q
The rule in Re Rose
A
- Re Rose rule – “In equity it is held that a gift is complete as soon as the settlor or donor has done everything that the donor has to do … as soon as the donee has within his control all those things necessary to enable him, the donee, to complete his title”
11
Q
Re Rose
Ruling
A
- The donor must have done everything in their power to completely constitute the trust of give effect of the gift
- The issue is only there if there is a third party that had to do another part of the process but the donor has done everything necessary
- You are not yet the owner of the property
- Equity will treat the trust as complete from the moment the settlor or donor has done everything in their power so that the recipient only needs to do a little bit to get the gift
- In Re Fry, the donor had not done everything in his power, and so the principle could not apply
-
Mascall v Mascall: the son had not yet fully registered the transfer of the land; the father had done all he could
- “Equity will not come to the aid of a volunteer”
12
Q
Pennington v Waine
A
- Even if you have not done everything in your power, would it be unconscionable to go back?
- An aunt wanted her nephew to become a director in a company, and so he needed some shares. The donor executes the share transfer form, which the aunt does, and then she sends it to the auditor of the company. The nephew had not yet been registered, although he had agreed to becoming a director, when the aunt died. The auditor told the nephew he could not
- The justification of the Re Rose rule is that if the settlor has done everything in their power, it would be unconscionable to go back on the trust
- The court held it would be unconscionable to go back on the arrangement; the nephew had agreed to becoming a director and was told he needed to do no more and the aunt had not changed her mind
13
Q
Extent of Pennington
A
Although there is the exception that if it is unconscionable to go back, the court will still treat it as effectively constituted as a matter of equity, it does not mean that all bets are off.
See
- Zetial v Kaye
- Shah v Shah
14
Q
Zeital v Kaye
A
- Question of whether a man had effectively transferred his equitable interest to his new partner, and the court said that he had not
- Pennington does not mean that the court will always say yes to whether or not a trust has been created
- The man had not done enough for it to be considered unconscionable to go back on the arrangement
15
Q
Shah v Shah
A
- A letter was sent saying that “I am as from today holding 40,000 shares in the above company for you,” but the registration was incomplete
- Signed but not dated transfer form
- This was not effective to transfer the shares
- The court ruled that this statement was a declaration of trust
