Formalities and Constitution

Question 1

What is meant by the formalities for declaration of trusts?

Answer 1

The formal requirements for creating a completely new trust

Question 2

What is meant by the formalities for constitution of trusts?

Answer 2

The formalities requirements for transferring legal title to another person

Only required where gift or transfer on trust - not self-declaration of trust as legal title does change

Question 3

When will a testamentary trust be valid?

Answer 3

Where the Will complies with s 9 Wills Act 1837, any trust created by it will be valid.

Valid Will = valid gift and trust

Question 4

What are the formalities for trusts of land?

Answer 4

Must comply with s 53(1)(b) LPA 1925

Must be:

• manifested and proved - declaration and writing need not be contemporaneous and the trust will be unenforceable unless and until s 53 (1)(b) is satisfied
• some writing - must be in writing (no prescribed form), must show settlor’s intention to create the trust and the terms of the trust
• signed by some person who is able to declare such trust - arguable that the trustee (being the legal owner) can also provide the written evidence
• by Will - expressly provides for the possibility that a trust of land is created by Will. Valid Will = valid trust

Question 5

What is the consequence of a trust not complying with s 53(1)(b)(a)?

Answer 5

General rule - it is unenforceable but not void

Trust exists from moment that it is declared but beneficiary cannot enforce their rights unless and until s 53(1)(b) is satisfied

S 53(1)(b)(a) is an evidential requirement not a constitutive requirement

Question 6

What are the exceptions to the s 53(1)(b)(a) rule?

Answer 6

Only applies to creation of express trusts.

So exception for resulting, constructive, and statutory trusts

Question 7

What is the consequence of failing to comply with s 53(1)(b) where there is a gratuitous self-declaration of trust?

Answer 7

If gratuitous self-declaration of trust over land, if not unconscionable for settlor to deny existence of the trust, beneficiary will not be able to assert any interest in the land

Question 8

What is the consequence of failing to comply with s 53(1)(b) where there is a gratuitous transfer on trust?

Answer 8

If gratuitous transfer on trust and settlor changes their mind, trust will be enforceable because of not complying with s 53(1)(b) and void for lack of constitution (providing not unconscionable for settlor to deny existence of trust)

Question 9

What is the consequence of failing to comply with s 53(1)(b) where there is a legal transfer on trust?

Answer 9

Conflicting case law but equity will not allow a statute to be used as an instrument as fraud

Will either result in there being an express trust despite lack of formalities or constructive trust over land or resulting trust

Question 10

What happens if the settlor transfers to a third party trustee who then denies the trust or if the settlor denies the trust?

Answer 10

Trustee should take advice from court regarding their obligations

Question 11

What is required for transferring legal title of registered land?

Answer 11

Transfer must be made by deed under s52(1) LPA 1925

Registered with Land Registry under s 27 LRA 2002

Legal title passes on registration

Question 12

What is required for transferring legal title of shares in private company?

Answer 12

• transferor signs stock transfer form and sends it to company
• legal title passes when transferee is registered in company’s internal register of members

Question 13

What is required for transferring legal title of choses in action (debts and money in bank account)?

Answer 13

Transferred by written transfer and notice in writing to debtor or bank

Legal title passes on notice being received

Question 14

What is required for transferring legal title of chattels?

Answer 14

May be transferred either by:

• deed of gift
• delivery of chattel with evidence of transferor’s intention to transfer it

Question 15

What is required for transferring legal title of cheques?

Answer 15

Transferor endorsing the cheque by signing their name on the back according to the Bills of Exchange Act 1882

Question 16

What is the effect of constitution?

Answer 16

The disposition is irrevocable

Settlor ceases to have any beneficial or legal interest in the trust property

Trustee has legal title and holds it on trust for the beneficiary

Question 17

What is meant by ‘equity will not assist a volunteer’? (Milroy v Lord)

Answer 17

Equity will not step in to compel a settlor/donor to transfer legal title to the trustee/donee where there has been an imperfect transfer so legal title has not passed

Question 18

What is the relationship between constitution requirements and certainty of intention?

Answer 18

If legal title to property has not been transferred to a trustee or donee, the court needs strong evidence that the owner intended themselves to act as trustee.

Court must be satisfied that the owner intended to take on the onerous obligation of trusteeship and divest themselves of beneficial ownership

Question 19

What requirements are there for the exception to Milroy v Lord in Re Rose to apply?

Answer 19

Equity will step in to say there is a trust where the legal transfer has not taken effect where:

• the correct method of transfer has been used
• the transferor has done everything in their power to effect the transfer; and
• the documentation ends up in the hands of the person/organisation capable of effecting the transfer

Question 20

What is the extension of the Re Rose extension to the Milroy v Lord rule in Mascall v Mascall?

Answer 20

The transferor does not have to have done everything in their power to effect the transfer IF they have put the matter beyond their control

Which case transfer will be irrevocable

(Instructing agent to transfer is not putting matter beyond their control because can instruct agent to not transfer)

Question 21

What is the effect of the exception of Re Rose or Mascall v Mascall applying?

Answer 21

The court will find that there as a constructive trust for the intended donee

Question 22

What is the rule in Pennington v Wine?

Answer 22

Exception to Milroy v Lord rule where it would be ‘unconscionable’ to resile the transfer

Generally seen as confined to own facts

May best be characterised as case of proprietary estoppel

Question 23

What is fortuitous vesting? Strong v Bird

Answer 23

• Rule in Strong v Bird
• Where gift is made to donee but not constituted at time but donee subsequently obtains legal title to it by becoming the donor’s personal representative

Question 24

When will the rule in Strong v Bird apply?

Answer 24

Must be continuing intention to make immediate gift to intended donee who becomes the executor/one of the executor’s under donor’s Will

Question 25

When will there be a valid donatio mortis causa?

Answer 25

• donor is contemplating imminent death
• donor expresses intention that the gift if conditional on their death
• donor parts with dominion (control) of property