Constitution of Trusts Flashcards
What are the different modes of constituting a trust?
- A valid will (automatically constitutes any incorporated trust)
- Declaration of self as trustee (Jones v Lock)
- Transfer of property to trustee (Milroy v Lord)
2 and 3 are inter vivos.
How do you constitute a trust by declaring self to be a trustee?
An absolute owner of certain property orally declares themselves to be trustee of that property for a certain beneficiary. The beneficial interest is transferred while the legal title remains. There must be clear evidence of intention.
The owner must not be deprived of his property unless they have demonstrated the seriousness of their intention.
Jones v Lock: cheque £900 payable to self given to baby. No effective transfer of gift.
How do you constitute a trust by transferring property to another as trustee?
Milroy v Lord: the settlor must have “done everything which was necessary to be done” in order to transfer the property.
Re Rose: “must have done everything within his power to transfer by the generally employed method.” As long as the transferor has transferred everything the transferee needs to perfect their title, then the transfer is effective.
Will equity assist a mere volunteer?
Mascall v Mascall: if a volunteer donee “needs to get an order from a Court of Equity to complete his title, he will not get it.”
Milroy: S intended to transfer shares to L on trust for M. Deed executed but companies register not updated to state L as new owner. L never acquired the shares. No trust. Formalities were not completed. The Court will not save failed trusts. Adheres to maxim.
Re Fry: wartime transfer of shares needed approval from Treasury. S died before Treasury gave approval. Court was unwilling to override the role of the Treasury and did not save the trust. Adheres to maxim.
Re Rose: seemingly offends the maxim. But the assistance given by the Court was not of the active sort. Deceased had done everything in his power to transfer legal and beneficial interest. Actual registration was beyond his control. No artificial ascription that Rose intended trust. Donee already had everything needed to perfect legal title. Does not offend maxim.
Choithram v Pagarani: Browne-Wilkinson, though equity will not assist a volunteer, it will not strive officiously to defeat a gift. “I give everything to the foundation” could only mean to the trustees. He was a trustee - sufficient to overcome failure to transfer. Unconscionable to assert continued beneficial interest and deny subject matter belonged to foundation.
What 3 ways can an apparently imperfect donation be perfected?
Briggs J, Curtis v Pulbrook:
- Where the donor has done everything necessary to enable donee to enforce the beneficial claim without further assistance.
- Where the donee has detrimentally relied upon apparent but ineffective gift, it may bind the conscience of the donor to justify imposing a constructive trust.
- Where effective gifts/implied declarations of trust can be implied from words used.
What is required to make a transfer of land valid?
S.52(1) LPA 1925: legal title only passes when transferred by deed.
LP(MP)A 1989: deed must be signed, witnessed, delivered and apparent on its face that it is a deed.
LRA 1925: where legal title is registered, it is not transferred until transferee is registered as new proprietor.
What is required to make the transfer of company shares valid?
Shares in a private company: must execute stock transfer form and deliver to transferee with share certificate. Becomes binding on transferor. Company must register him as new shareholder before legal title vests.
Shares in public companies: must be transferred via stock exchange.
What is required to make the transfer of ordinary chattels valid?
Chattel: moveable items of personal property i.e. books or jewelry
Re Cole: there must be physical delivery prior to/contemporaneous with/subsequent to words of gift. In absence of such evidence, the legal title does not transfer.
Harman LJ: when chattels are numerous or bulky, symbolic delivery may exist. I.e. church organ “where donor put his hand upon it in presence of donee accompanied by gesture with words of gift.”
Jaffa v Taylor: trust for a painting. Impractical to insist on delivery as one trustee was in Northern Ireland and the other was in England.
What assistance can the Common Law give to beneficiaries to enforce a trust?
Must not be mere volunteers to sue for performance of promise to set up a trust.
- Persons who provided money/money’s worth in consideration of promise, OR
- Persons who are parties to deed in which promise was then made: Cannon v Hartley.
Once a trust is constituted via common law, volunteer beneficiaries under the trust can claim their interests. The settlor cannot stop them. Paul v Paul.
Can transfers of “future” or “after-acquired” property be given effect?
Common Law, P.S. Atiyah: cannot take effect as actual transfer but can be effective as a promise or contract to transfer.
Equity: looks at the substance of purported transfer. Sees that as done which ought to be done.
Re Brooks’ ST: specific performance ordered in favour of any who have given valuable consideration.
Collyer v Isaacs: transfer effective in equity to pass beneficial interest the moment transferor acquires subject matter.
What counts as “future” property?
Future income: Re Gillott
Royalties of a book not yet sold: Re Trytel
Copyright royalties of songs not yet written: Performing Rights Society v London Theatre
Heir’s Expectation of Legacy: Hobson v Trevor
What is the rationale for allowing transfers of “future” property?
Buckley J, Re Ellenborough: an assignment for value binds the conscience of the assignor. The Court of Equity will compel him to do that which, ex hypothesi, he has not yet effectually done.
Essentially, valuable consideration may be given which binds the assignor.
Who can enforce covenants to settle “after-acquired” property?
(Usually marriage settlements)
- Any beneficiary who gave consideration. Burdens the conscience of the settlor.
- Covenantor’s husband per “marriage consideration”: A-G v Jacobs Smith
- Issue of marriage (marriage consideration): McDonald v Scott
Issue of previous marriage cannot unless the interests were closely interwoven: A-G v Jacobs Smith
Can the Contracts (Rights of Third Parties) Act 1999 be used to enforce a transfer?
Yes, if
A. Contract expressly provides that he may OR
B. Contract term purports to confer benefit on him
B does not apply if parties did not intend term to be enforceable by third party.
Re Pryce: mere volunteers can enforce post-99 Act Covenants if:
1) Identified by name, or
2) Identified as member of a class, or
3) Answer a particular description
