Formalities and perfecting an imperfect gift Flashcards
To understand the ways in which a gift can be perfected and the formalities of a trust
s.9 Will Act 1837
Amended by the Administration of Justice Act 1982
What does the s.9 Will Act 1837 provide?
it provides that a will must be in writing signed by the testator or person udner his direction and witnessed by 2 people
A trust contained in a will?
It is bound to fail, regardless of the law of trusts, if the will is void
exception: secret trust
What is a inter vivos trust?
“during lifetime”
s53 (1) (b) LPA 1925
a declaration of trust must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.
- enough to prevent fraud reliable evidence
- sanction for non-compliance: trust is unenforceable, but not void
- applies to express trusts only
- equity will not permit a statute to be sued as an instrument of fraud
s.53 (1) (c)
“a 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 there into lawfully authorised in writing or by will”.
s.53 (2)
the section does not “affect the creation or operation of resulting, implied or constructive trusts”
Nature of trust
Title to property must be vested in the trustee(s) -> ‘constituting’ the trust.
- What is necessary depends on type of trust and property.
- Where this is not completely satisfied equity may intervene
Timing of trust
Declaration and constitution of trust need not be contemporaneous.
- Settlor can change mind after declaration; however, after it has been constituted the property cannot be recovered.
- The trust must be declared before the property/trust is constituted otherwise the trustee will receive the property absolutely.
What are the maxims in equity?
Equity will not permit an imperfect gift, equity will not assist a volunteer, equity regards as done that which ought to be done
What does equity will not permit an imperfect gift mean?
- Idea is that if some formality is missing then gift will not take effect
- E.g.: if the share transfer form is not signed and sent to be registered, it is not valid and non-compliance with formalities
What does equity will not assist a volunteer mean?
volunteer = beneficiary who has provided no consideration.
- The intended beneficiary will normally have no rights to enforce the trust.
What does equity regards as done that which ought to be done?
- You ought to do it because you are legally bound to do it
- If not done properly, not under obligation
What is the leading case that talks about a failed trust?
Milroy v Lord 1862
What did the courts held in Milroy v Lord 1862?
Equity will not assist a volunteer beneficiary to save an incompletely constituted trust.
What did Lord Turner LJ state in Milroy case?
“…in order to render a trust valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done”
Which is the case that confirmed Milroy?
Deslaurier and another v Guardian Asset Management Limited 2017
If there is no intention of the settlor to transfer property then…
the courts will not give effect to another method (from Milroy)
What are the 3 methods to transfer property from Milroy v Lord?
Outright gift ,Transfer on trust and Self-declaration of trust
The outright gift method
title to property vests absolutely in the transferee
the transfer on trust method
legal/equitable title of property to be held on trust by transferee
self-declaration of trust method
Richards v Delbridge 1874: transferor holds property themselves on trust for someone else
- retains legal and relinquishes equitable title
- Paul v Constance 1977
Which case followed the strict approach from Milroy v Lord?
Re Fry 1946
What did the courts held in Re Fry?
court said the test was ‘complete and everything’ test.
-Gift failed because transferor had done everything they could except get consent from the HM treasurer to transfer the shares-> settlor died before receiving approval
What is the general rule on failed gifts?
equity will not perfect an imperfect gift
What is the case in which it stated that the court would adopt a new (relaxed) approach in cases of failed gifts?
Re Rose 1949
What was held in Re Rose 1949?
This is an exception. Court said if the settlor does al they could have done, then it would be sufficient and the gift will be effective
Which is the leading case that courts managed to save failed trusts and gifts?
Choithram v Pagarani 2001
what did the court held in Choithram v Pagarani 2001?
Privy Council: ‘Although Equity will not assist a volunteer, Equity will not strive officiously to defeat a gift’ per Lord Browne-Wilkinson.
Court held it was a gift an a trust.
-Foundation only existed by way of trust
-although he used the words “i give…” the foundation to the trustees for the foundation on gift, the courts said he was one of trustees and it was only vested in Pagarani, but a vesting in him=vesting in all trustees
- His conscience was affected and it would be unconscionable for the donor to carry out this trust= he was bound
What if the settlor/donor has done everything necessary to transfer title?
equity treats as done what ought to be done= settlor did everything he could in his power to transfer the property
what needs to be done for shares/formalities?
- Transferor signs the share transfer form
- The signed share transfer form is delivered by the transferor to the transferee
- The share certificate is transferred by the transferor to the transferee
- The transferee shares the share certificates and form to the company
- Company registers the shares in the name of the transferee
What is the exception to Milroy v Lord?
Re Rose IRC 1952
What did the courts held in Re Rose 1952?
legally the transfer had not occurred in March; however,
- Equitable title passed in March as the transferor had done everything in their power to effect the transfer by then so the property was to be held on constructive trust.
- intention to make a gift cannot be interpreted as an intention to create an express trust
- However, here the property was to be held on constructive trust.
What is the leading case for unconscionability?
Pennington v Waine 2002
What did the courts held in Pennington v Waine 2002?
unconscionable to deny validity of transfer -> extend Re Rose 1952
- COA relying on Pagarani -> applies only where donor/settlor is the trustee.
- “Equity has tempered the wind (of the principle that equity will not assist a volunteer) to the shorn lamb (the donee) by utilising the constructive trust”- per Arden LJ
- Transferor had not delivered transfer form to company, therefore transferor had not done everything necessary to transfer title before they died
- BUT CA held regardless that nephew (transferee) held equitable interest in the sahres. Arden LJ recognised that since nephew had been told of the shares and been made a director= unconscionable to revoke the gift before her death
In Pennington v Waine, which case could you distinguish with this one?
Re Rose 1952
-auditor acting as agent had not delivered the form unlike in Re Rose
Which case could you contrast with Pennington?
Kaye v Zeital 2010
What was held in Kaye v Zeital 2010?
Ineffective transfer of shares->not perfected.
transferor died and had not done everything they possibly could= “you must do everything you could have done”
What did the courts held in Curtis v Pulbrook 2011?
- Obiter dicta
- Brings 3 principles together.
- courts accepts the approach of Kaye v Zeital and Pennington
- Briggs J: suggests 3 ways equity can recognise a transfer that is ineffective at law (exceptions):
- Where the donor has done everything that is necessary to enable the donee to enforce a beneficial claim without further assistance from the donor
- where some detrimental reliance by the donee
- whereby some form of benevolent construction of an ineffective gift or implied declaration of trust may be teased out of the words used”
How can unconscionability be established?
By virtue of the intended donee’s reliance on the intended gift
The reliance has to be…
detrimental.
-Pennington: nephew relied on gift to his detriment by becoming director on assumption that he received an effective gift of qualifying shares. In contrast with Curtis= no detrimental reliance
What is the last act approach?
donor has done everything necessary-> Re Rose 1952
Explain the significance of Contracts Right of Third Parties Act 1999
-Legislation has reduced the effect of the equitable maxim “Equity will not assist a volunteer”
-Two ways in which a 3rd party who is not privy to a contract can enforce the terms:
-Contract expressly states a third party can enforce the terms,
-A term purports to confer a benefit to a 3rd party-> Unless the parties did not intend it to be enforceable by a 3rd party.
- 3rd party must be identified in the contract by:
Name, member of a class, answering a particular description. - 3rd party can obtain any remedy normally available had they been privy.
Irrelevant that they provided no consideration = volunteer.
-The 3rd parties’ rights cannot be altered/extinguished under the Act in three situations:
-3rd party communicated to the promisor their assent to the terms,
-Promisor aware 3rd party relied on the term,
-Reasonable that the promisor should have expected the 3rd party to rely on the term and the 3rd party did in fact rely on it.
-Applies to covenants after May 2000 where beneficiary is identified by name/description.
What are the mechanisms for assisting volunteers? (exceptions to the rule)
donatio mortis causa, rule in strong v bird and proprietary estoppel
What is donatio mortis causa?
A gift made in prospect of the donor’s death
Which is the leading case in donatio mortis causa?
Sen v Headley 1991
Explain the nature of donatio mortis causa
- The donee makes a gift in anticipation of their death but fails to properly constitute the gift and transfer the title so that it vests in the donee.
- The title will, after the donor’s death, vest in their personal representatives -> rather than donee.
- The doctrine allows the donee to compel the donor’s personal representatives to perfect the title of the gift even though they are a volunteer
What are the 3 necessary conditions to satisfy the doctrine of donatio mortis causa according to Sen v Headley 1991?
- Gift must be made in contemplation of donor’s impending death for a specific reason.
- Gift must be conditional uponn death. -> with intention for gift to revert to donor if he survives.
- There must be a transfer of the badge of title
Explain the meaning of “gift must be made in contemplation of donor’s impending death for a specific reason
Terminal illness or embarking on a hazardous journey.
King v Dubrey 2016 Jackson LJ: doctrine serves little purpose today, rules should not be extended.
Explain the meaning of “there must be a transfer of the badge of title”
‘Parting with dominion’ -> the donor must part with the ability to control the gift/property.
• Handing over a key to the property -> Re Cole 1964
• Keys to a box containing the title deeds -> sufficient to deliver dominion of unregistered land.
How does the donatio mortis causa function?
By way of constructive trust
- Donors personal representative = trustee -> holding on trust for the donee
- Trust arises by operation of law = constructive trust.
What is the rule in Strong v Bird?
donee acquires title to the gift through another unintended means
- A promises B a gift. A dies without properly constituting the gift.
- B is A’s personal representative/executor so acquires the legal title on A’s death.
- The gift to B will be perfected.
What is the idea of the importance of formality?
legal title is perfected by registration
What does the principle of Strong v Bird extend for?
- to effect the release of a debt -> beyond perfecting gifts to executors.
-Strong v Bird 1874 -> B owed a debt to A -> where A appointed B as executor of the will it is considered that this was an intention to release B from the debt they owe.
-Extended to appointment of administrator -> however it is criticised as they are not chosen by A and are appointed as a matter of chance by operation of law.
What is the case in which a trust is completely constituted as soon as the trustee becomes the owner of the trust property, no matter in what capacity he becomes entitled?
Re Ralli’s Will ST
Which is the leading case for Proprietary Estoppel?
Gillet v Holt 2001
What was held in Gillet v Holt 2001?
- Defendant was made promises to gain benefits for staying in the farm= regarded this as a clear an unequivocal promise and detriment was that he continued to remain loyal and stay there to look the farm.
- Court accepted that it created an estoppel
- Effect is that the estoppel creates a cause of action= he can sue on that promise
- Even though it was a matter of gift, and gift was not complete, he is able to sue and gift as part of the farm transferred to him
- Court would compel because of the promise and the detrimental reliance
- unconscionable because of his statement and detriment
