Declaration & Constitution of Express Trusts Flashcards
What are the three certainties every valid private trust must satisfy?
Certainty of intention
+
Certainty of subject-matter
+
Certainty of object
What is the effect of uncertainty of intention in the declaration of a trust?
The trust fails & the ‘trustee’ takes absolutely as a gift
What is certainty of intention?
Did the settlor intend to create a trust?
Look at WORDS (eg. imperative language, command) & CONDUCT (eg. separating funds in commercial context)
‘In full confidence that she will do what is right’
Is there certainty of intention?
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
A mail order company pay customer money into a separate account to prevent them ranking as unsecured creditors
Is there certainty of intention?
Yes
Was held that separating funds showed an intention to create a trust (Re Kayford)
(Nb. difference between family & commercial)
Can intention to create a trust be inferred from conduct?
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)
What is certainty of subject-matter?
The property subject to trust must be certain
(trust property itself + beneficial entitlement)
What is the effect of uncertainty of subject matter?
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)
What happens if the trust property is uncertain?
The trust fails
What happens if the beneficial entitlement is uncertain?
There will be a resulting trust
(the beneficiary will be a life tenant - when they die, reverts to settlor’s estate)
Does ‘bulk’ satisfy certainty of subject-matter?
No - will be certain if objectively defined (eg. ‘50%’)
If it is subjective (‘bulk’, ‘some’ etc), will be insufficiently certain
If the trust property is not segregated, how can you tell if there is certainty of subject-matter?
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)
Will there be certainty of subject matter if the trust property is unsegregated tangible property?
No - will always be uncertain
Will there be certainty of subject matter if the trust property is unsegregated intangible property?
Yes if it is IDENTICAL
(eg. shares of same class, value, rights & responsibilities)
What is the rule about beneficial entitlement to satisfy certainty of subject-matter?
The beneficial entitlement must be certain (Boyce v Boyce)
There must at least be a mechanism for ascertaining
What is certainty of object?
Must be certain who the beneficiaries are (beneficiary principle)
What is the beneficiary principle?
There must be someone in whose favour the court can decree performance
What test must be satisfied for certainty of object in creating a fixed trust?
The complete list test
The trustee must be able to make a complete list of the beneficiaries
What is a fixed trust?
Settler fixes in place who the beneficiaries are & what the beneficial entitlements will be
(eg. ‘£300 to X, Y & Z in equal shares’)
Z
What is a discretionary trust?
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’)
What test must be satisfied for certainty of object in creating a discretionary trust?
‘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)
What is the effect of uncertainty of object?
It becomes a resulting trust (equitable life interest then reverts back to settlor)
What test must be satisfied for certainty of object in a gift subject to condition precedent?
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)
When creating an express inter vivos trust, what is required to validly declare a trust?
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)
When are formalities required in the declaration of a trust?
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
When are formalities NOT required in the declaration of an express lifetime trust?
Trust of property other than land
When are formalities not needed in the declaration of a trust?
**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)
What formalities are required for a new trust of land?
s53(1)(b) LPA 1925:
- Written evidence of declaration (recording all the salient terms of the trust)
- Signed by settlor
What happens if a new trust of land does not follow the formalities in s53(1)(b) LPA 1925?
(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
What is a constructive trust?
A trust imposed by the court to** prevent unconscionable conduct. **
Exempt from formalities.
What is a resulting trust?
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
What formalities are required for the assignment of an existing equitable interest to the third party?
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
What formalities are required when directing a trustee to hold an equitable interest for a third party (Grey instructions)?
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
What is constitution?
The vesting of the legal title of the trust property in the trustees
What is constitution required for?
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
How do you establish if an express lifetime trust has been properly constituted?
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
What are the rules of constitution for land?
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
What are the rules of constitution for chattels?
EITHER
A deed
OR
Intention to make a gift + delivery
?
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)
What are the rules of constitution for choses in action?
Must be in writing
(ie. write to the person holding that particular debt - eg. bank if transferring bank account)
What are the rules of constitution for cheques?
Transferor endorses cheque (ie. signs their name on the back)
What happens if the relevant constitution rules for the trust property have not been followed?
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)
What is the ‘every effort’ exception to the maxim that equity will not assist a volunteer?
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)
What is the Mascall v Mascall extension to the Re Rose every effort exception?
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
What is the Strong v Bird exception to the maxim that equity will not assist a volunteer?
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
- Continuing intention to make the gift - up to death
- Trust not created in settlor’s lifetime
- Intended trustee becomes settlor’s PR
What conditions must be satisfied for the Strong v Bird exception?
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)
-
Intention continued up to settlor’s death
ie. nothing in intervening period to indicate donor changed mind
3.** Trust not created during lifetime**
- Intended trustee becomes settlor’s PR
What are the 6 exceptions to the maxim that equity will not assist a volunteer for constituting an express lifetime trust?
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)
What conditions must be satisfied for the deathbed gift (Cain v Moon) constitution exception?
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)
What is the valid perpetuity period for trusts for people?
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
What is the Choithram v Pagarani exception to constitution?
Where the settlor is one of the intended trustees & it would have been unconscionable to back out of constituting the trust
