Constitution of Trusts Flashcards
s.9 Wills Act 1837
Sets out the formalities requirements for testamentary trusts - i.e. a trust arising when S dies, set out in their will.
s.9 provides that a will is only valid if it was signed in writing by the testator in the presence of another witness.
s.53(1)(b) Law of Property Act 1925
Sets out the formalities requirements an inter vivos express declaration of trust.
s.53(1)(b) provides that a declaration of trust respecting any land or interest therein must be MANIFESTED by some signed writing - so there does not need to be a written trust deed necessarily, but there does need to be some signed writing evidencing the creation of the trust.
Milroy v Lord
The general rule for incompletely constituted trusts (i.e. where the formalities have not been complied with), equity will not assist the volunteer. So if S failed to make a valid gift during their lifetime, equity will not then intervene and hold that the property was validly held on trust for B.
Exceptions to Milroy v Lord
1) Re Rose/Pennington v Waine - where S has done everything in their power
2) Strong v Bird - where B is the appointed executor of S’s estate and there was an incomplete gift during S’s lifetime
3) T Choithram v Pagarani - interpreting S’s words to find declaration of trust, rather than an absolute gift
4) Proprietary estoppel - B gets a proprietary interest in the property through a constructive trust, proportionate to the detriment that they suffered/would suffer if S could go back on the promise
T Choithram International v Pagarani
However, the first exception to the rule that ‘equity will not assist a volunteer’ set out in Milroy v Lord is where the courts are willing to effectively stretch the interpretation of the settlor’s words in order to find that there was an intention to create an express trust.
Privy Council essentially interpreted S’s words which were really about making an outright gift, as words of a gift to be held on trust. Therefore, there was a valid inter vivos trust declared in S’s lifetime just before he died, so the fact that he had not completed all of the formalities that were required for him to make a gift to the foundation did not matter - there was a valid declaration of trust instead.
Re Rose
There is an exception to Milroy v Lord where S has done everything in their power to create the trust. In the case, Rose sent the share transfer form to his registrar to be formally completed, but he died before she had completed the formalities.
Court held that there was a valid trust here and his wife became owner of the shares in equity once Rose had done everything in his power to create the trust - he had done everything in his power to create the trust at this point as he could only wait for his registrar to complete the share transfer formalities.
Pennington v Waine
This extended the Re Rose principle to situations where S has taken steps to create the trust, but has NOT done everything in their power, where it would be unconscionable to not allow the trust to be created.
In this case, S wanted to transfer shares to her nephew, so she filled out a share transfer form and sent it to Pennington, who represented her company’s auditors, to sort the transfer to Harold. However, the share transfer form was not sent to Harold or the company before S died. So she had not done everything in her power to complete the share transfer here.
Arden LJ (majority CA reasoning) emphasised that it would be unconscionable for S to have gone back on the creation of the trust after sending the transfer form to Pennington, so there was a valid trust from the point she did this.
Strong v Bird
This is another exception to the general principle that equity will not assist a volunteer by finding a trust where S failed to comply with the formalities to make a gift during their lifetime. The rule is that where A made an incompletely constituted gift to B during their lifetime and B is the appointed executor of A’s estate, then upon A’s death the gift is validly made - this completes the transfer of property.
Re James
This extended the principle in Strong v Bird - where B is simply the administrator of A’s estate, then an incompletely constituted gift during A’s lifetime is validly made upon A’s death.
Re Stewart
This confirms that Strong v Bird applies to incompletely constituted gifts made during A’s lifetime - not that in Strong v Bird it was for a discharged of debt that was regarded as being completed upon A’s death despite the lack of formalities. So Re Stewart just confirms that Strong v Bird applies to positive gifts of property incompletely made during A’s lifetime.
Re Gonin
Affirms Re Stewart that Strong v Bird does apply to incompletely constituted gifts, but adds the condition that A’s intention to transfer property to B must continue up until their death
What is the difference between a gift and a declaration of trust?
All trusts are gifts, but not all gifts are trusts - e.g. absolute gifts are where S intends to simply transfer legal and equitable title to B, without holding the property on trust.
