Declaration & Constitution of Express Trusts

Question 1

What are the three certainties every valid private trust must satisfy?

Answer 1

Certainty of intention
+
Certainty of subject-matter
+
Certainty of object

Question 2

What is the effect of uncertainty of intention in the declaration of a trust?

Answer 2

The trust fails & the ‘trustee’ takes absolutely as a gift

Question 3

What is certainty of intention?

Answer 3

Did the settlor intend to create a trust?

Look at WORDS (eg. imperative language, command) & CONDUCT (eg. separating funds in commercial context)

Question 4

‘In full confidence that she will do what is right’

Is there certainty of intention?

Answer 4

No
(Same for eg. ‘hoping she will give’, ‘trusting she will give’)

There would be certainty of intention if it said ‘in full confidence’ + must go to eg. nieces

Question 5

A mail order company pay customer money into a separate account to prevent them ranking as unsecured creditors

Is there certainty of intention?

Answer 5

Yes

Was held that separating funds showed an intention to create a trust (Re Kayford)

(Nb. difference between family & commercial)

Question 6

Can intention to create a trust be inferred from conduct?

Answer 6

Yes

Eg. In Paul v Constance, Mr C was separated from his wife (but not divorced). Had arranged for his new partner, P, to withdraw money from his bank account with his permission. They had paid joint winnings into the account & he often told P the money was ‘as much yours as mine’
–> HELD: enough to infer that C had made declaration of trust of money in the account. P entitled to half the money in the account (estranged Mrs C to the other half)

Question 7

What is certainty of subject-matter?

Answer 7

The property subject to trust must be certain

(trust property itself + beneficial entitlement)

Question 8

What is the effect of uncertainty of subject matter?

Answer 8

If the property is uncertain, the trust fails

If the beneficial entitlement is uncertain, there will be a resulting trust (ben = LT; when die, reverts to settlor’s estate)

If gift + ‘trust’, the donee takes absolutely (‘£300 for my husband, at his death whatever is left to my siblings’ - husband takes absolutely)

Question 9

What happens if the trust property is uncertain?

Answer 9

The trust fails

Question 10

What happens if the beneficial entitlement is uncertain?

Answer 10

There will be a resulting trust

(the beneficiary will be a life tenant - when they die, reverts to settlor’s estate)

Question 11

Does ‘bulk’ satisfy certainty of subject-matter?

Answer 11

No - will be certain if objectively defined (eg. ‘50%’)

If it is subjective (‘bulk’, ‘some’ etc), will be insufficiently certain

Question 12

If the trust property is not segregated, how can you tell if there is certainty of subject-matter?

Answer 12

Depends on whether it is tangible or intangible

Unsegregated tangible = always uncertain (even if identical)
(eg. wine bottles)

Unsegregated intangible = certain if identical (eg. shares of same class, value, rights, responsibilities)

Question 13

Will there be certainty of subject matter if the trust property is unsegregated tangible property?

Answer 13

No - will always be uncertain

Question 14

Will there be certainty of subject matter if the trust property is unsegregated intangible property?

Answer 14

Yes if it is IDENTICAL

(eg. shares of same class, value, rights & responsibilities)

Question 15

What is the rule about beneficial entitlement to satisfy certainty of subject-matter?

Answer 15

The beneficial entitlement must be certain (Boyce v Boyce)

There must at least be a mechanism for ascertaining

Question 16

What is certainty of object?

Answer 16

Must be certain who the beneficiaries are (beneficiary principle)

Question 17

What is the beneficiary principle?

Answer 17

There must be someone in whose favour the court can decree performance

Question 18

What test must be satisfied for certainty of object in creating a fixed trust?

Answer 18

The complete list test

The trustee must be able to make a complete list of the beneficiaries

Question 19

What is a fixed trust?

Answer 19

Settler fixes in place who the beneficiaries are & what the beneficial entitlements will be

(eg. ‘£300 to X, Y & Z in equal shares’)

Question 20

Z

What is a discretionary trust?

Answer 20

Settlor defines the class & directs the trustee to choose shares. Trustee must choose.

(eg. ‘£300 to such of X, Y & Z, as T shall select’)

Question 21

What test must be satisfied for certainty of object in creating a discretionary trust?

Answer 21

‘is/is not’ test

ie. Must be able to say with 100% certainty whether any person anywhere is/is not a beneficiary

Requires conceptual certainty (ie. beneficiary group capable of objective definition) + administrative workability (eg. so many beneficiaries may defeat trust = unworkable)

Question 22

What is the effect of uncertainty of object?

Answer 22

It becomes a resulting trust (equitable life interest then reverts back to settlor)

Question 23

What test must be satisfied for certainty of object in a gift subject to condition precedent?

Answer 23

Take each person in turn (no need to survey whole class) -** can prove themselves part of beneficiaries by any reasonable method
**
(eg. ‘follower of CofE’ sufficient)

Question 24

When creating an express inter vivos trust, what is required to validly declare a trust?

Answer 24

Certainty of INTENTION

Certainty of SUBJECT MATTER

Certainty of OBJECT
(fixed interest = list test)
(discretionary = ‘is/is not’)

BENEFICIARY PRINCIPLE

PERPETUITY PERIOD

FORMALITIES (if trust over land)

Question 25

When are formalities required in the declaration of a trust?

Answer 25

Testamentary trust (comes into effect on death) - s9 Wills Act

New trust of land - s53(1)(b) LPA 1925

Straight assignment of existing equitable interest (ie. moving pre-existing title within trust) - s53(1)(c) LPA

Directing trustee to hold for a third party (Grey instructions) - s53(1)(c) LPA

Question 26

When are formalities NOT required in the declaration of an express lifetime trust?

Answer 26

Trust of property other than land

Question 27

When are formalities not needed in the declaration of a trust?

Answer 27

**Secret trusts **to take effect on death

Constructive trusts

Trusts of property other than land

Directing trustee to transfer legal title to new owner (Vandervell instructions)

Question 28

What formalities are required for a new trust of land?

Answer 28

s53(1)(b) LPA 1925:
- Written evidence of declaration (recording all the salient terms of the trust)
- Signed by settlor

Question 29

What happens if a new trust of land does not follow the formalities in s53(1)(b) LPA 1925?

Answer 29

(written evidence of declaration + signed by settlor)

The trust is valid, but it is not enforceable

A constructive trust may be implied under s53(2) LPA

Question 30

What is a constructive trust?

Answer 30

A trust imposed by the court to** prevent unconscionable conduct. **

Exempt from formalities.

Question 31

What is a resulting trust?

Answer 31

Equitable interest goes to life tenant (‘to B for life’) & then reverts back to settlor

When the beneficiary dies & no remainder interest is stipulated, the remainder must go to the settlor or their estate

Exempt from formalities

Question 32

What formalities are required for the assignment of an existing equitable interest to the third party?

Answer 32

s53(1)(c) LPA 1925: in writing + signed by EXISTING BENEFICIARY

Nb. Assignment of an existing equitable interest to a third party = the beneficiary directly moving the pre-existing title within a trust

Question 33

What formalities are required when directing a trustee to hold an equitable interest for a third party (Grey instructions)?

Answer 33

s53(1)(c) LPA 1925: In writing + signed by EXISTING BENEFICIARY

Nb. here, legal title does not change hands - if were directing trustee to transfer legal title to a new owner (Vandervell instructions), no formalities required

Question 34

What is constitution?

Answer 34

The vesting of the legal title of the trust property in the trustees

Question 35

What is constitution required for?

Answer 35

A standard trust (ie. not self-declaration of trust) and a gift

Nb. not required for a testamentary trust - constitution takes place via the will

Question 36

How do you establish if an express lifetime trust has been properly constituted?

Answer 36

Step 1: Is the settlor the only trustee?

If yes - the trust self-constitutes, valid express trust

If no-
Step 2: What is the property being held on trust? What are the relevant transfer rules for that property and have they been followed?

If yes - the trust is constituted, valid express trust

If no-
Step 3: Can you rely on an exception to the maxim that equity will not assist a volunteer?

If yes - trust is valid in equity

If no - trust is invalid

Question 37

What are the rules of constitution for land?

Answer 37

i. Must be a valid deed (TR1)
(clear on face intended to be deed + signed & witnessed by settlor + dated)

ii. Land must be registered in the name of the trustee

Question 38

What are the rules of constitution for chattels?

Answer 38

EITHER
A deed

OR
Intention to make a gift + delivery

Question 39

?

Answer 39

Transferor** fills out & signs STF in favour of trustee**

STF & share certificate sent to Companies’ Registrar

Registrar registers transferee as new legal title shareholder

(ie. STF + STF & share cert to trustee/company + re-reg)

Question 40

What are the rules of constitution for choses in action?

Answer 40

Must be in writing

(ie. write to the person holding that particular debt - eg. bank if transferring bank account)

Question 41

What are the rules of constitution for cheques?

Answer 41

Transferor endorses cheque (ie. signs their name on the back)

Question 42

What happens if the relevant constitution rules for the trust property have not been followed?

Answer 42

The trust / gift fails because equity will not assist a volunteer

UNLESS can rely on an exception:
- Every effort (Re Rose)
- Strong v Bird
(+ proprietary estoppel, deathbed gift, one of intended trustees, unconscionable to revoke)

Question 43

What is the ‘every effort’ exception to the maxim that equity will not assist a volunteer?

Answer 43

If the settlor has passed the point of no return / the documents are put beyond recall (ie. done everything in their power to constitute - Re Rose)

Must have:
- Correct method of transfer of property used
- Transferor has done everything in their power to effect the transfer, nothing else they can do to get legal title across
- All the necessary documentation is in the hands of the person/institution (eg. Land Reg, Comp Reg) capable of effecting the legal transfer

It must be irrevocable by the transferor (Mascall v Mascall)

Question 44

What is the Mascall v Mascall extension to the Re Rose every effort exception?

Answer 44

Correct method of transfer of property used

The transferor need not do everything within their power to effect the transfer but it must be irrevocable by the transferor (eg. giving docs to other party)

Nb. use of agents - only irrevocable if passed to recipient’s agent, not transferor’s agent

Question 45

What is the Strong v Bird exception to the maxim that equity will not assist a volunteer?

Answer 45

The trustee gets legal title to the property in a different capacity - ie. becomes PR (executor / administrator)

Must be:
1. Immediate intention to make a gift

2. Continuing intention to make the gift - up to death
3. Trust not created in settlor’s lifetime
4. Intended trustee becomes settlor’s PR

Question 46

What conditions must be satisfied for the Strong v Bird exception?

Answer 46

1.** Intention to create an immediate trust**

(eg. woman owned car & intended to give to friend but car offroad in possession of TP = not immediate gift)

2. Intention continued up to settlor’s death
   ie. nothing in intervening period to indicate donor changed mind

3.** Trust not created during lifetime**

4. Intended trustee becomes settlor’s PR

Question 47

What are the 6 exceptions to the maxim that equity will not assist a volunteer for constituting an express lifetime trust?

Answer 47

Exception 1: Every effort (Re Rose)

Exception 2: Settlor/Donor still in control but unconscionable to revoke (Pennington v Waine - nb. courts have refused to apply in all future cases)

Exception 3: Settlor/Donor is one of the intended trustees (Choithram v Pangarani - treated as self-declaration, so no constitution, but will only be followed on very similar facts)

Exception 4: Trustee gets legal title as PR (Strong v Bird)

Exception 5: deathbed gift (Cain v Moon)

Exception 6: Proprietary estoppel (promise/assurance made to recipient, ideally evidenced & repeated + detrimental reliance)

Question 48

What conditions must be satisfied for the deathbed gift (Cain v Moon) constitution exception?

Answer 48

Applies when it is impossible to make a lifetime gift/will (eg. injured suddenly)

3 requirements:
1) Gift must be made in contemplation of imminent death (subjective, ie. they believe it)

2) Must be conditional upon death (if recover, gift revoked)

3) Actual or constructive delivery of the property through the passing of control over the asset
(constructive = something indicating passing ownership, eg. SOLE set of car keys, keys to lockbox with title deeds)

Question 49

What is the valid perpetuity period for trusts for people?

Answer 49

125 years (automatic by statute)

Places time limit of 125 years on length of time property may be held without anyone obtaining a vested interest in that property

Question 50

What is the Choithram v Pagarani exception to constitution?

Answer 50

Where the settlor is one of the intended trustees & it would have been unconscionable to back out of constituting the trust