Express trusts: formalities

Question 1

What are the requirements for a trust of land?

Answer 1

Must satisfy requirements of s53(1)(b) LPA 1925. “Must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will”

‘Manifested and proved’: means declaration and writing need not be contemporaneous.

‘Signed by some person who is able to declare such a trust’: usually settlor, but arguable for trustee to provide written evidence.

‘Some writing’: no prescribed form, just something in writing that proves evidence of the settlor’s intention to create the trust and the terms of the trust.

‘By will’: can create a trust of land by Will. Just needs to comply with s9 Wills Act 1837

Question 2

What happens if a trust of land does not comply with the requirements?

Answer 2

Non-compliance renders the trust unenforceable rather than void.

Crucial because:
- an unenforceable trust exists from the moment is declared but the beneficiary cannot enforce their rights unless and until s53(b) is satisfied
- a void trust does not exist at all

Once the trust becomes enforceable the beneficiaries can enforce their rights in respect of the period between declaration and satisfaction of s53(1)(b).

Question 3

What happens if the formalities for a trust of land are never satisfied?

Answer 3

Trust will simply not become enforceable.

Question 4

What is constitution for trusts?

Answer 4

A transfer on trust requires the legal title in the property to be vested in the trustees. Constitution refers to the transfer of legal title from one party to another.

Constitution is also required for gifts.

Question 5

When don’t you need to constitute trust property?

Answer 5

A self declaration of trust.

Question 5

How is legal title transferred for registered land?

Answer 5

Transfers must be made by deed under s52(1) LPA 1925 and registered with the Land Registry under s27 LRA 2002. Legal title passes on registration of the new owner at the land registry.

Question 6

How is legal title to shares transferred?

Answer 6

Shares in a private company are transferred by the transferor signing a stock transfer form and sending it to the company. Legal title passes with the transferee is registered in the company’s internal register of members.

Question 7

How is legal title to choses in action transferred?

Answer 7

Transferred by notice in writing to the debtor or to the bank. Legal title passes once notice has been received.

Question 8

How is legal title to chattels transferred?

Answer 8

Chattels (including physical cash) may be transferred either by (i) deed of gift or (ii) by delivery of the chattel with evidence of the transferor’s intention to transfer it

Question 9

What is the effect of constitution?

Answer 9

The effect of constitution (transfer of legal title) is that the disposition is irrevocable.

Trustee ceases to have any beneficial or legal interest in the trust property. The trustee has legal title and holds it on trust for the beneficiary.

Same is true for gifts.

Question 10

What happens if legal title is not vested in the trustees?

Answer 10

This means the trust is incompletely constituted and is therefore void.

Equity will not assist a volunteer - Milroy v Lord (not completing process of transferring legal title and equity would not treat beneficiary as if it had).

Question 11

What is the rule in Milroy v Lord?

Answer 11

There are three methods of transferring property.

1. An outright gift
2. A transfer on trust
3. A self declaration of trust

Transferor must do “everything necessary” to effect the intended disposition by following the correct method for transferring legal title.

If they fail to do equity will not perfect the disposition or treat the transferor as having used one of the other methods.

Note: if fail to transfer on trust or gift, will NOT be treated as having made a self-declaration of trust.

Question 12

How do you transfer legal title for a cheque?

Answer 12

Transferor must endorse the cheque by signing their name on the back.

Question 13

Do you have to transfer legal title to all of the trustees?

Answer 13

No, just transferring to one would be enough. Would also be fine if settlor was one of a number of trustees and kept legal ownership in their sole name.

Question 14

What are the four exceptions to Milroy v Lord?

Answer 14

1. Principle in Re: Rose
2. The unconscionable principle
3. Fortuitous vesting
4. Donationes mortis causa

Question 15

What is the principle in Re: Rose?

Answer 15

That equity will intervene and find an equitable interest (held on constructive trust) where:

1. The correct method of transfer had been used
2. The transferor had done everything within his own power to effect the transfer
3. The documentation ended up in the hands of the person capable of effecting the legal transfer

This also extends to registered land.

If correct method of transfer has been used, the transfer will be irrevocable if the transferor puts the matter beyond their own control.

Question 16

What is meant in the re: rose principle of ‘putting matters beyond the control of the transferor’?

Answer 16

• A transfer is irrevocable if the matter is put beyond the control of the transferor.

However, if the transferor sends the documents to their own agent such as solicitor or accountant, that would not be sufficient as agency is revocable.

Question 17

What is the unconscionable principle?

Answer 17

Perfection will be permitted in cases where it would be unconscionable to resile from the transfer.

• Focuses more on the conduct of the donor
• Reliance is a good indicator but not necessary

Question 18

What is Fortuitous Vesting/the rule in Strong v Bird?

Answer 18

Where a failure to perfect the intended recipient’s title may be cured if they obtain legal title through another route.

Usually occurs because the intended recipient of a gift is also the personal representative of the transferor’s estate.

Question 19

What are the condition for the Rule in Strong v Bird to apply?

Answer 19

1. There must be an intention to make an immediate gift
2. The intention must continue until the donor’s death
3. The intended donee becomes an executor (or one of the executors) of the donor’s estate

Note: also applies where donee is appointed as an administrator

Question 20

What is a donationes mortis causa?

Answer 20

A gift made in contemplation of death (deathbed gift).

Conditions:
1. Gift is made in contemplation (though not necessarily expectation) of death which the donor believes to be imminent

2. The gift is conditional on death (i.e. it is not intended to be fully effective until then and can be revokes before death)
3. There is delivery of the property; the donor must part with ‘dominion’ (control) of the property by handing it, or something which represents title (not simply possession) to the donee