Formalities and Consitution Flashcards
Trusts created by Will
- Must be in writing signed by the testator or person under his direction and witnessed by two people (s. 9 Wills Act)
- A trust contained in a will is bound to fail if the Will is void
- exceptions of secret trusts.
Trusts created Inter Vivos
- Trusts created during the testator’s lifetime
- Trusts may be declared informally
orally or by conduct (Paul v Sonstance)
Testamentary Trusts
Trusts created upon death via a Will
- Must comply with s. 9 Wills Act
- must be in writing, signed by the testator and attested to by two witnesses (Payne v Payne)
Trusts of Land
Must be evidenced in writing (s. 52 LPA 1925)
- only applies to express trusts (Hodgeson v Marks)
Failure to comply with s. 53 will render the declaration of the trust unenforceable
Must also be registered (s. 27 LRA 2002)
Non compliance will render the trust unenforceable not void (Rochefoucauld v Boustead)
A disposition of a subsisting (already existing) equitable interest.
A disposition is an act by which a person ceases to own the item of property in question.
Constitution of a trust
As well as declaring the trust, the settlor must vest the property in the trustees.
- constitution makes the trust legally binding on the settlor and the beneficiaries can enforce their rights to the property.
If the trust property is not property vested in the trustee.
The trust is incompletely constituted.
It will be void, and unenforceable
- equity will not compel the settlor to constitute an imperfect trust (Milroy v Lord)
General Rules for Constitution
Set out in Milroy v Lord
Constitution: An absolute gift
Complete constitution is necessary
Constitution: transfer of legal title to a trustee to hold on trust for the beneficiary
Complete constitution is necessary
Constitution: Self declaration
- The Settlor retains legal title and holds it on trust for the beneficiary
No movement of legal title so constitution is not relevant.
A Trust that has been completed cannot be revoked
Paul v Paul
Equity will not perfect and imperfect gift, and equity will not assist a volunteer
So if a settlor intends to use one method to confer a benefit on a person but fails to complete the required steps, equity will not save the gift or construe the intended method as another method.
If the settlor intends to create a trust by transfer, but fails to vest the legal estate in the trustee
Equity will not view that as a declaration of trust - void
- Milroy v Lord
If the donor intended an absolute gift, but failed to effectively transfer the property
Equity will not construe the failed absolute gift as a declaration of trust.
Declared that he was going to give a cheque to his baby, but died shortly afterwards and he had not signed the cheque, so the property had not been transferred.
The court rejected the argument that he had declared himself as a trustee of the cheque
Jones v Lock
Declared that the deed to a leasehold property belonged to another, but died before the lease had been assigned by a separate deed.
Attempted transfer could not be construed as a declaration of trust, because he had not intended to declare a trust.
The Court cannot change the meaning of words in order to carry out someone’s intention
Richards v Delbridge.
There was an effective declaration of trust as there was sufficient intention on the party to make him a trustee of the money in the account
Paul v Constance.
The donor orally declared his intention to make a gift on trust to a charity but he did not actually transfer the legal title of the property to the charity before he died
Privy council prepared to uphold the gift
- the donor was already one of the trustees of the charity anyway. Therefore, one of the charities trustees had already had the property vested in him
Choithram v Pagarani.
Methods of transferring different types of trust property
in order to vest the trust property in the trustees, it must be transferred using the correct method for the particular property in question
Correct transfer: Estate in land
Transfer must be by deed (s. 52 LPA 1925)
- headed in deed, in writing, signed, witnessed and delivered
- registered.
Correct transfer: Shares
- using a stock transfer form
Correct transfer: Chattels (goods)
By deed or gift or by actual delivery (Re Cole)
Accompanied by the transferor intending to transfer them (Glaister-Carlisle)
Correct transfer: Bills of Exchange
Cheques made in favour of the transferee may be transferred to a third party by the transferor endorsing the cheque (signing) according to the Bills of Exchange Act
Correct transfer: Money
Transferred by actual delivery; merely writing a cheque does not transfer money as it is only transferred when the cheque clears.
Correct transfer: Chosen Action
- debts and money in bank accounts
Must be compliant with s. 136 LPA 1925
- in writing, signed with written notice to the debtor
Correct Transfer: Equitable interests
must be compliant with s. 53 LPA 1925
- in writing and signed
Exceptions to the maxim that equity will not perfect an imperfect gift
- Where the transferor has done everything in his power
- Fortuitous Vesting
- Proprietary Estoppel
- Donatio Mortis Causa
Where the transferor has done everything in his power
Re Rose
Mascall v Mascall
Pennington v Waine
Re Rose
Mr Rose executed 2 share transfers but they were not registered by the directors until 3 months later.
Court of appeal held that the transfers were effective in equity once MR rose had done everything in this power to vest the shares in the transferees.
Requirements:
1. The transferor must use the correct form of transfer
2. He must have done all that he can to the extent that the rest of the transfer is beyond his control
Mascall v Mascall
The principle in Re Rose was extended to the transfer of registered title in land
Once all the relevant documents had been executed, and the transfer stamped and handed to the transferee, the gift was viewed as complete in equity.
Re Rose and Mascall v Mascall
The transfer and other documents must either have been sent off for registration or delivered to the donee, such that the transfer is irrevocable by the transferor.
Pennington v Waine
Transfer forms and share certificates had been transferred to the agent of the transferor, who gave assurance that the transferor would not go back on his word.
Court held that it is not necessarily essential for the transferor to have irrevocably transferred ownership.
Arden LJ: ‘a donor will not be permitted to change hs or her mind if it would be unconscionable, in the eyes of equity to do so’
Fortuitous Vesting
Failure to perfect the intended transferee’s title may be resolved if they later happen to obtain the legal title.
When the donor intends to make a gift during his lifetime but fails to vest the legal title in the donee the gift may still be perfected if legal title fortuitously becomes vested in the donee because he becomes executor of the deceased donor’s estate.
Strong v Bird
Requirements for fortuitous vesting
a. The donor intended to make an immediate gift (Re Freeland)
b. Intention did not change before death (Re Gonin)
c. Donee acquires legal title as personal representative of the settlor.
Strong v Bird
Bird’s Stepmother expressly forgave in her lifetime a debt he owed to her, so the debt was released at common law when Bird was appointed as executor of her will
Bird would normally have been required to account in equity but this was displaced by proof of the stepmother’s unchanged intention.
Re Ralli’s Wills Trusts
The fortuitous vesting rule was extended by analogy to trusts.
Re Ralli suggested that the trust would become constituted if the trust property came into the trustee’s hands in any legitimate way.
Re Stewart
The fortuitous vesting rule was to apply to gifts
Re James
The fortuitous vesting rule applies where the donee becomes an administrator
Proprietary Estoppel
It arises where there has is an assurance, reliance and detriment so that it would be unconscionable to go back on the assurance (Gilet v Holt)
Donatio Mortis Causa
Where a gift is made on contemplation of death, but neither the rules for lifetime gifts nor those for wills are complied with. It is effective only if the conditions in Cain v Moon are met.
Cain v Moon Conditions (DMC)
a. The gift is made in contemplation of death, which the donor believes to be imminent.
b. The gift is conditional upon death (‘if i die)
c. There is actual or constructive delivery of the property - the donor must part with control of the property by handing it over or passing something that represents title to the donee.
Terminally ill man told a friend that his house was hers and that the deeds were in a steel box. He then slipped the keys to the body into her bad.
Sen v Headley
- this was a valid DMC of the house by constructive delivery of the title deeds.
The money is in a savings account and the savings book was handed over.
Birch v Treasury Solicitor
- this was a valid DMC
Exception to DCM
A donor’s cheque payable to the donee is recoverable by the bank on death (Re Beaumont), but if it is made in contemplation of death a cheque payable to the donor may be the subject matter fo a DMC if it is delivered, even without being properly endorsed (Re Mead)
Covenant to settle
Where a promise is made to create a trust but where the trust has not been completely constituted.
Whether the promise can be enforced depends on whether it is supported by consideration.
If there has been full consideration then the other party are not volunteers and the contract is enforceable (Pullan v Koe)
