Formality & Constitution

Question 1

What criteria must be satisfied in order to create a valid private trust?

Answer 1

1. Any formalities required by the statute must be satisfied
2. The trust must be fully constituted
3. The trust must comply with the three certainties; intention, subject matter and objects.
4. The trust must not be contrary to public policy or the perpetuity rules

Question 2

What are the three certainties a private trust must comply with in order to be valid?

Answer 2

1. Certainty of Words/Intention
2. Certainty of Subject matter
3. Certainty of Objects

Question 3

What is meant by perpetuities and what are the rules designed against them?

Answer 3

Perpetuities is annuity that has no end, more known as continues forever. The rules designed against perpetuity’s exist to prevent a settlement/trust lasting indefinitely. The law states that a settlor should not be able to control his property for too long after his death as this prevents the beneficiaries from having full power over the property. While the trust exists, the property remains in the trustee’s hands not the beneficiaries.

Question 4

What is the perpetuity law and what is the perpetuity period?

Answer 4

The Perpetuities and Accumulations Act 2009 - All trusts created after the act came into force have a 125 year perpetuity period.

Question 5

What is the public policy a private trust must not be contrary too in order to be valid?

Answer 5

(Same as in the law of contract) A trust cannot be created for an immoral or illegal purpose.

Question 6

What is meant by formalities? Are there normally formalities required when creating a trust?

Answer 6

1. A thing done in order to comply with regulations. e.g. handshake.
2. Normally no formalities are required, this is because intention to create a trust is required as ‘‘equity looks to substance not form’’. Meaning it is possible to create a trust orally.

Question 7

What are the situations where formalities are required by statute?

Answer 7

1. Trusts made inter vivos
2. Trusts created by will
3. Transferring an existing interest under a trust

Question 8

What is meant by trusts made inter vivos?

Answer 8

These trusts become effective within the life of the settlor. Trusts of pure personality (money and shares) do not need to be created with formalities. Trusts of land require certain formalities to be satisfied due to value and technical rules of transfer.

S.2 Law of Property Act 1989 - Contracts to create a trust of land must be in writing.

Question 9

What is meant by trusts created by will?

Answer 9

S9 Wills Act 1837 - No will shall be valid unless it satisfies the requirements of s.9, including the will being written and witnessed by two witnesses.

Question 10

What is meant by transferring an existing interest under a trust?

Answer 10

s.53 (1)(c) Law Of Property Act 1925 - ‘‘A disposition of equitable interest or trust must be in writing signed by the person disposing of the same, by his agent or by his will’.

Grey v IRC - where there is no writing there is no disposition.

Vandervell v IRC - provides an exception to the rule, if the legal and equitable title are being transferred together, there is no need for a separate disposition ofn equitable interest.

Question 11

What is meant by the constitution of a trust?

Answer 11

The legal title of the trust property must be vested in the trustee.

Question 12

When is a trust created by will completely constituted?

Answer 12

When the personal representatives of the testator vest the intended trust property in the trustees

Question 13

When is a trust created by inter vivos completely constituted? (Milroy v Lord)

Answer 13

Milroy v lord - there are two ways of constituting an inter vivos trust - transfer and declaration. These two methods are mutually exclusive.

Question 14

From Milroy v Lord and both methods being mutually exclusive, what is meant by this?

Answer 14

Equity will not perfect an imperfect gift- if the settlor attempts a transfer but fails, the courts will not interpret this as the settlor actually intending a declaration

Question 15

Imperfect gift - Jones v Lock (1865)

Answer 15

Facts - farther wrote a cheque payable to himself but stated ‘I give this to the baby’. Farther of baby put cheque in safe.
Held - Court held this was an imperfect gift as cheque had not been endorsed. Farther intended to make provision for the child but he hadn’t intended to declare himself as trustee. Gift failed.

Question 16

What is the rule for trusts constituted by declaration?

Answer 16

The settlor must make an irrevocable declaration of trust. There is no possibility of returning to absolute ownership.

Land - Intention MUST be in writing - s53(1)(b) but otherwise may be oral. Informal expressions of intent will suffice eg “I undertake to hold this property for you” The property is clearly in the hands of the trustee provided he has declared himself as such.

Question 17

What is the rule for trusts constituted by transfer?

Answer 17

The settlor must ensure that legal title to the trust property is transferred. How this is done is dependent on the rules associated to different types of property

Question 18

Trusts constituted by transfer - Money

Answer 18

Three criteria must be satisfied in order to transfer legal title to money:

Intention
Identify the property
Some act to show intend legal title to pass to the trustee eg by giving the trustee the cash or a cheque

Question 19

Trusts constituted by transfer - Chattels

Answer 19

Two ways:

1. Physical delivery coupled with intention
2. Formally executed deed of gift.

Question 20

What is the case law associated with Chattels?

Answer 20

In order for a chattel to be delivered words alone are insufficient - Re Cole (1964).

There can be an oral transfer, provided the means of acquiring physical possession is given - Jaffa v Taylor Gallery Ltd (1990)

Question 21

Trusts constituted by transfer - Land

Answer 21

Transfer to the trustee must take the form of a deed - Law of Property Act 1925 s.52
If the land is registered then the name of the trustee must be registered on the title at the Land Registry.

Question 22

What was held in Mascall v Mascall (1984)?

Answer 22

Here a father executed a transfer of a house to a son. The transfer was sent to the land registry but the father sought a declaration that the transfer was ineffective as he had a disagreement with his son. The Court held that the gift was complete. The settlor had done everything required

Question 23

Trusts constituted by transfer - Shares

Answer 23

Settlor must sign the stock transfer form and send the share certificate to the company. The shares are not deemed to be transferred until the company enters the new name (the name of the trustee in the case of a trust) on its register of members.

Only by fulfilling this requirement would the settler have done “everything necessary” in accordance with Milroy v Lord

Question 24

What was held in Re Rose [1952]?

Answer 24

Even if everything necessary hasn’t been done the trust may still be deemed to be fully constituted if the settlor has done everything within his power to divest himself of ownership of the property and the only thing left to be done are acts of a third party. This is known as the Re Rose principle.

Question 25

What was held in Re Fry [1946]?

Answer 25

The donor who lived in America wanted to transfer shares in a British company. In order to transfer ownership, in addition to signing the share transfer form, permission of the treasury was also required. The donor signed the form and sent it to the treasury for permission but died before consent was granted. The Court held that it was up to the donor not only to apply for permission but also to acquire permission. The transfer was not valid.

Question 26

What was held in Re Paradise Motor Co Ltd [1968]?

Answer 26

The transferor was deemed to have done all that was necessary even though the transfer document was not signed.

Question 27

What are the two cases where the Re Rose principle has been applied and what came from them?

Answer 27

Pennington v Waine [2002] - Expanded Re Rose - Donor doesn’t have to have done everything. Must reach point where it would be unconscionable to go back on the transfer. The beneficiary need to act on his detriment.

T Choithram International v Pagarani [2001] - Settlor died before transfer complete. Court held that the settlor was a co trustee of the foundation and therefore his statement was a declaration of trust.

Question 28

What was held in Zeital v Kaye [2010]?

Answer 28

Indicate’s a return to the Rose approach

Question 29

What is a chose in action?

Answer 29

This is where all personal rights of property are enforced by taking action not possession They are rights of intangible nature which are recognized in Law and equity as being property.

Question 30

What are four examples of a chose in action?

Answer 30

Debts, Shares, Beneficiaries interest under a trust, the right to take action under a contract

Question 31

What was held in Don King Production Inc v Warren [2000]?

Answer 31

The benefit of a contract can be upheld even if the trust itself is unassignable

Question 32

What are the two types of chose in action?

Answer 32

1. Legal Chose - debts, rights under a contract

2. Equitable Chose - beneficiaries interest under a trust

Question 33

What is the criteria for Legal (statutory) assignment to be satisfied?

What is the other key thing to note?

Answer 33

Criteria is laid down - LPA 1925 s136

Assignment must be:

• Absolute - Entire interest must be transferred
• In writing
• Notice in writing given to debtor
• Must be debt or other legal thing in action

If the above circumstances are not satisfied, the assignment may still be valid as an equitable assignment

Question 34

What was held in Warner Bros v Rollgreen?

Answer 34

Notice in writing for legal assignment given by assignee later would be sufficient

Question 35

What are the requirements in order for an equitable assignment to be satisfied?

Answer 35

The requirement’s were summarized in Phelps v Spon-Smith and Co (2000) -

1. Intention to assign
2. Assignment must sufficiently identify the chose
3. Some act by the assignor showing the transfer to the assignee - broad approach is adopted here but writing is normally sufficient

Question 36

What is the difference between legal assignment and equitable assignment?

Answer 36

1. Doesn’t need to be in writing to show there is intention to transfer
2. Assignment doesn’t need to be absolute if it is a debt provided. All parties are joined in any action to enforce the debt (Deposit Protection Board v Dalia 1994)
3. No notice is required although it is desirable

Question 37

What is meant by non-assignable property?

Answer 37

Certain rights are not assignable either by equity or through statute. Arguably, such rights are not chose in action and thus are not pieces of property

Question 38

What are examples of rights that are not capable of assignment?

Answer 38

1. Contracts specifically declared to be non assignable 2. Contracts of a personal nature (debtor owes duties to a particular creditor alone + contracts to provide personal services as are contracts of employment. - Contracts for the sale of goods are assignable.
2. Mere right of litigation
3. Expectancies - (hope of inheriting property or will)
4. Public policy makes certain rights unassignable - eg salaries of public officials and maintenance payments

Question 39

What is meant by incompletely constituted trusts?

Answer 39

Position where there has been failure to transfer legal title in the purported trust property to the trustees.

Question 40

What is fortuitous vesting? (Strong v Bird 1874)

Answer 40

If a person intends to give property to someone during their lifetime but fails to make the transfer, normally the gift would fail. However, under this rule, if T then appoints the donee as executor of his will, ownership of the property falls into the donees hands as executor and can be used to complete the gift to the donee.

Question 41

What was the two criteria that must be met in order for fortuitous vesting to be met?

Answer 41

1. The intention to make the gift to the donee must have continued until the T’s death.
2. The donee must be appointed as executor

Question 42

What was held in Re Stewart [1908]?

Answer 42

Extended this principle to apply to all imperfect inter vivos gifts , not just debts as covered in Strong v Bird.

Question 43

What was hel din Re Ralli’s [1964]?

Answer 43

Extends Strong v Bird - Where legal title comes into the hands of the trustee by whatever means, the trust will be constituted. Case has not been followed, question of whether this is good law.

Question 44

What is the issue when the trust is not properly constituted and to beneficiaries?

Answer 44

Beneficiaries are volunteers as they give no consideration. Equity will not assist a volunteer, causing issues when a settlor has promised to put property on trust but has not done so, causing beneficiaries to have no enforceable rights

Question 45

What was held in Re Ellenborough [1903]?

Answer 45

The court would not enforce a voluntary contract. An individual executed a voluntary settlement by deed that she would transfer property she expected to inherit. When she inherited the property she did not transfer the property. If a beneficiary has given consideration then they can rely on a contractual remedy and additionally equity can specifically perform the contract and constitute the trust.

Question 46

What is the rule for consideration in relation to marriage settlements?

Answer 46

This is a settlement made in consideration of marriage before the marriage, with the marriage or subsequent to the marriage pursuant to an agreement made before the marriage.

Question 47

Who is within marriage consideration?

Answer 47

Settlors, spouses,children and grandchildren are all within marriage consideration and can all therefore enforce the promise in equity.

Question 48

What was held in Re Plumtre’s Marriage Settlement [1910]?

Answer 48

Here the only surviving relative covered by the marriage settlement had not given consideration so could not enforce the covenant.

Question 49

What was held in Pullan v Koe [1913]?

Answer 49

Here a marriage settlement settled property on the husband and wife and their children. The wife also agreed to settle on trust any property she might subsequently acquire. The wife received property but did not transfer it to the trust. When the wife died the children claimed the proceeds of that property. The court held that they could obtain specific performance as they were within the marriage consideration.

Question 50

What was held in Re Pryce [1917]?

Answer 50

Here there was a marriage settlement with a voluntary contract to settle after acquired property. There were no children so the only remaining beneficiaries were more distant relations. The Court held that the trustees could not sue on the beneficiaries’ behalf as they were volunteers.