Formalities and Constitution Flashcards
Why do we have formality rules?
- Clarity - Helps show that a trust has or hasn’t been created
- Makes it clear that the settlor intended to create a trust, as you have to go through certain hurdles - you cannot really do it accidentally or lightly
- Publicity - Become public documents
- Can also prevent fraud - You cannot claim the trust doesn’t exist if there are formalities, or claim a beneficial right where you don’t have one.
S53
(1)(b) - Declaration of trust respecting any land or interest therein, must be manifested and proved by some writing signed by some person who is able to do so or by his will.
(c) - Disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2) This section does not affect resulting, implied or constructive trusts.
Breaking down s53(b)
Must be a trust respecting land or an interest therein.
Must be manifested and proved by some writing
If not, it is unenforceable (not void) until it is written up and signed.
Breaking down s53(c)
Must be a disposition of an equitable interest or trust
Needs to be manifested and proved by some writing.
Is void if not compliant - must be in writing at the time of the disposition.
Rochefoucauld
D’s estate manager purchased C’s property. C contended he did so on his behalf - she only agreed to sell them as he would hold it on trust.
No proof in writing of this arrangement.
Trust found in C’s favour - express trust. Equity will not allow a statute to be an instrument of fraud, which would be the case if we denied the existence of the trust.
Trust could be evidenced by oral evidence.
Grey v IRC
Disposition is to be given its ordinary meaning - a transfer of beneficial interest.
A direction given by Mr Hunter to his trustee, whereby the beneficial interest vested in him became vested in others, had to be a disposition.
Broad meaning of disposition, includes destruction or extinction of an equitable interest with the creation of one elsewhere. English argues this shouldn’t be the case - disposition should be taken to mean a strict transfer, as this is consistent with P intention (to ensure trustees know who the beneficiary is at all times) which isn’t in issue here.
Hudson v Hathaway
Leaving a name at the bottom of an email is effective as signed writing. Law should recognise progresses in technology.
IRC v Vandervell
Mr Vandervell wanted to donate to Royal College of Surgeons, didn’t want to pay tax.
Ordered trustees to transfer shares, so RCS could receive dividends, but kept buy back clause.
Held: This was not a valid disposition under s53(1)(c), as he was exercising his Saunders v Vautier right to transfer the entire ownership - no split between equitable and legal ownership - absolute ownership going to RCS.
Vandervell had not divested himself of ownership however since the Trust Company could buy back the shares, so a resulting trust operated.
Thus, he was liable to pay tax.
Oughtred
Mother and son made oral contract to transfer his shares to herself. Did so orally to avoid stamp duty which applies where there is a conveyance.
Deed of release executed after, saying the shares were now held for mother alone.
They wanted to take advantage of s53(2) LPA, which says that an exception to signed writing rules exists for constructive trusts, and thus they would have a CT and not have made a disposition.
IRC argued that the deed transferred the beneficial interest rather than the oral contract, and thus there is a disposition.
Held: Value was transferred in the document (not the oral contract) since s53(1)(c) had not been complied with. S53(2) does not do away with the necessity for signed writing. When the son told the trustees to transfer, this had no effect.
Overturned in Neville - CT found, s53(2) operated so the agreement can vest even without writing.
England argues this is right because s53(1)(c) not engaged in first place - no disposition required signed writing, it was the extinguishment of one equitable right and the creation of a new one.
What formalities are needed for the creation of trusts of personal property?
No special formalities!
LA Micro Group
Mr Bell holding property on trust, ends up as absolute owner.
This would have involved a disposition within s53(1)(c) and required writing, but the prior agreement was specifically enforceable and gave rise to a CT, which was sufficient by virtue of s53(2).
How is a trust constituted?
Transferring legal title to the trustee.
Declaring trust (if a self-declaration)
Remember: Equity will not perfect an imperfect gift, and you cannot switch-horses mid
race.
Choithram v Pagarani
Very wealthy man setting up charitable donation - ‘I now give all my wealth to the foundation’.
He died before transfer completed, did not fill out forms.
Held: Equity will not strive to defeat a gift, especially where it was a charitable donation and he clearly used the language of transferring it to the trustees (the foundation) to hold on trust.
Re Rose - Has the donor done everything in their power?
If everything not been done, but settlor has done everything in their power, it will be treated in equity as having been done.
Testator had done everything - executed transfer, handed it to his solicitor.
However important to note they need to have done EVERYTHING in their power, not just ‘a lot of things’.
Pennington v Waine
Even if donor hasn’t done everything in their power, there may exist a point where it is unconscionable to renege.
Depends on the court’s evaluation of all circumstances.
Khan v Mahmood
Joint owners of property, held on trust for themselves.
M executes defective form, purporting to transfer his beneficial interest to K, but didn’t pay registration fee.
Held: Would be unconscionable to resile from the gift.
English article
The broad meaning of disposition adopted in Grey is problematic and should not extend to destruction or extinction of an interest as these are not dispositions. This just complicates things by requiring signed writing where it is not necessary for the purposes of the statute (to make sure the parties know who the beneficiaries are).
Further, the person who holds a right does not always absolutely hold legal and equitable interest, and the creation of a trust does not operate to ‘carve out’ an equitable interest from the subject matter of the trust. It just creates an obligation for the trustee with regard to that subject matter.
