Formalities Flashcards
Milroy v Lord (1862)
3 basic methods of giving property to another person:
- Outright gift
- Transfer of trust
- Self-declaration of trust
A transfer of trust
Transfer legal title to a third party (T) to hold on trust for B
Self-declaration of Trust
Retain legal title but declare that holds it on trust for beneficiary
Formalities
Formal requirements for creating new equitable interest and transferring equitable interest.
Formalities for Declarations of testamentary dispositions
- Must comply with s9 Wills Act 1837
- In writing
- Signed by testator in presence of 2 witnesses who must attest by signing
Paul v Constance [1977]
Inter vivos trusts may be declared informally (orally or conduct) unless there is a specific requirement to be declared in writing
Formalities for transfers of trust and self-declarations of trust
- Comply with 3 certainties
- Be validly constituted
Formalities for Transfers or self-declarations of trusts of land
- Require some form of evidential writing (signed by the settlor) before it will be recognised by the courts – S53(1)(b) LPA 1925
- Non-compliance renders declaration of trust unenforceable
- AND constitutional requirements
Formalities for Dispositions of Subsisting Equitable Interests
-
Whenever a beneficiary under a trust is attempting to do something with their equitable interest, regardless of type of property, must comply with S53(1)(c) LPA 1925
- Requires disposition to be in writing
- Disposition VOID if non-compliance
Timpson’s Executors v Yerbury [1936]
- Romer LJ suggested all 4 as a ‘disposition’ of a subsisting equitable interest:
- A direct assignment to a 3rd party
- Contract for valuable consideration to assign equitable interest
- Direction to trustees to hold the property for a new beneficiary
- Declaration of trust over the interest (sub-trust)
s53(1)(b) v s53(1)(c)
Neville v Wilson [1996]
- If a contract for valuable consideration to assign the equitable interest is enforceable by specific performance, a constructive trust arises in favour of the intended transferee.
- As constructive trusts are immune from requirements of s53(1)(c), by virtue of s53(2), such a contract does not need to comply with s53(1)(c)
Grey v IRC (1959)
Direction to trustees to hold property on trust for another
- There will be no transfer of the equitable interest when the declaration is made orally (due to non-compliance with s53(1)(C)) but later evidential writing may be held to conform with S53(1)(c).
- Mr Hunter orally directed trustees to hold shares for his grandchildren instead of himself; did so orally to avoid paying stamp duty to IRC. Later executed a deed confirming the beneficial interest. IRC challenged the validity of the oral direction. Concluded that the equitable interest passed under the later deed.
- Unlikely to be followed in future and probably be distinguished.
- Legal title does not change hands, but equitable title passes from one to another. Therefore, must comply with S53(1)(c)
Vandervell v IRC [1967]
Direction to trustees to transfer legal title to new owner
- Where a trustee (the bank) holds property on bare trust for a beneficiary (Vandervell), and that beneficiary instructs the trustee to transfer the property absolutely to a third party (RCS), the transfer of legal title will take the beneficial interest with it and no separate written disposition of the subsisting equitable interest will be necessary. Having authorised the transfer, the former beneficiary cannot dispute the title of the new owner.
- Legal title changes hands and equitable title goes with it. Unlike in Grey, there is no trust at the end of the transaction. Simply an outright owner of the property so does not require protection of s53(1)(c)
Nelson v Greening and Sykes (Builders) Ltd [2007]
Declaration of sub-trust
- Sub-trusts amount to declarations of new trusts, rather than dispositions of subsisting equitable interest.
- Therefore, s53(1)(c) does not apply
