Formalties and constiution? Flashcards
Introduction?
Rights of legal owner
- Can make a gift – full transfer of legal ownership from one person to another
- Declare themselves as trustee – distinction between legal and equitable interest/
- Transfer property on trust
Formalities for declaration and constitution
- Formalities for declaration of trusts –
- No specific formalities are required for declaration of a trust of property other than land
Formalities for constitution of trusts
- Constitution rules will always be relevant.
- Need to deal with when there a movement of legal ownership.
Formalties for trusts of land?
‘a declaration of trust respecting any land or any interest
therein must be manifested and proved by some writing signed by some person who is able to
declare such trust or by his will’.
- Manifested and proved – unenforceable unless satisfied
- Some writing – that proves an indication of settlor’s intention to create a trust and the terms of the trust
- Noncompliance renders it unenforceable RATHER THAN VOID – once it becomes enforceable can sue for the interim period
Oral declaration subsequently evidenced by signed writing
Consider a life interest trust of land which is orally declared in January but evidenced six months
later, in June.
The life tenant is entitled to the income produced by the land between January and June. Once
the trust becomes enforceable, the life tenant can sue to enforce this interest. The trustee can also
be sued for any other breaches of trust between January and June.
Exceptions to formlaties for land?
S53 only applies to express trust
Exception for resulting, construction and statutory trusts.
- Automatic resulting trusts – when legal title has been transferred to an intended trustee but trust fails for some reasons
- Presumed resulting trust – when legal title is transferred but there was no evidence it was intended to be a gift
- A constructive trust arises in circumstances where it would be unenforceable for the legal owner of property to assert beneficial ownership of that property.
Failure of formalties?
- If never satisfied– then is unenforceable.
- Position is difficult where legal transfer of land but no evidence satisfying s53. In such cases can intended trustee rely on non-compliance with s53 to deny the existence of the trust.
- Conclusion – equity will not allow a statue to be used as an instrument to fraud.
- Sometimes will find an express trust with no formalities – very limited
- If find resulting or constructive trust – then exempt from formalities anyway.
Constitution of trusts an
Constitution refers to the transfer of legal title from one party to another.
- A transfer on trust requires legal title in property to be vested in the trustees.
Transferring legal title?
- In order to constitute a gift or trust, legal title must be transferred using correct method.
- Registers land – transfers must be made by deed under s52 LPA. Passes on registration of new owner as land registry
- Shares – transferred by transferor signing a stock transfer form and sending it to the company. Title passes when transferrer is registered in company’s internal registers of members.
- Choses in action – are transferred by a written transfer and notice in writing to the debtor or the bank – like a credit balance. If settlor wants to create a trusts, assignment and notice in writing and assign credit balance to trustees.
- Chattels – by deed of gift, by delivery of the chattel with evidence of transfers intention to transfer it.
- Cheques –
Effect of constituion?
that disposition is irremovable
- Settlor ceases to have any beneficial or legal interest in trust,
Rule that equity will not assist a volunteer? MILROY V LORD?
If trust property is not vested in the trustees, the trust is incompletely constituted and is therefore
void. In the case of a gift, if legal title has not passed to the donee the gift is imperfect and the
donor can change their mind.
Usually no consideration is given in the creation of a trust and so the beneficiary of a trust and
the recipient of a gift are both volunteers. Equity will not assist a volunteer by compelling the
settlor/donor to transfer legal title to the trustee/donee.
This is an example of the equitable maxim: ‘equity will not a
Turner LJ in the Court of Appeal noted three methods of transferring property:
(a) An outright gift;
(b) A transfer on trust; and
(c) A self-declaration of trust.
He made clear that the transferor must do ‘everything necessary’ to effect the intended
disposition by following the correct method for transferring legal title. If they fail to do so, equity
will not perfect the disposition or treat the transferor as having used one of the other methods.
If a donor intends to make a gift but fails to transfer legal title, they will not be treated as having
made a self-declaration of trust. The transferor did not intend to take on the obligations of
trusteeship and should not be treated as having done so.
Similarly, if a settlor fails to constitute a transfer on trust, they will not be interpreted as holding
the trust property for the intended beneficiary.
Relationship with certainty of intention?
Constitution is intrinsically linked with certainty of intention. If legal title to property has not been
transferred to a trustee (for a transfer on trust) or to a donee (for a gift), the court needs strong
evidence that the owner intended to declare themselves a trustee. The court must be satisfied that
the owner intended to take on the onerous obligation of trusteeship and divest themselves of
beneficial ownership.
For contrast, you may wish to compare the outcome of Jones v Lock and Richard v Delbridge with
Paul v Constance [1977] 1 WLR 527. In this case, an effective declaration of trust was found
despite the fact that Mr Constance was seemingly unaware of what a trust was.
Exceptions to tule in milroy v lord? EXCEPTION 1
3 EXCEPTIONS
Re Rose line of exceptions
- ‘Owner must do everything necessary to be done’ has been interpreted as everything in their own power to transfer legal title, as such even if transfer of legal title had not occurred, equity may still regard it as complete.
- Mr rose delivered it to the company registrar but it was not registered until later – but CA held that transfers were effective in equity as
- Established that Mr rose held legal title on constructive trust for recipients. At this point the intended transferees had the equitable interest because:
o Correct method of transfer was used
o Transfer had done everything within his own power
o Documentation ended up in hands of person capable of effecting the legal transfer.
In Mascall v Mascall [1985] 50 P & CR 119 the Re Rose principle was applied by the Court of
Appeal to the gift of registered land from a father to his son. The father handed the son the signed
transfer deed and land certificate, which was sent by the son’s solicitors to the Stamp Office. The
father and son quarrelled and the father wanted to revoke the gift. The transfer had not yet been
registered and so legal title had not yet passed to the son.
Applying Re Rose:
(a) The correct method of transfer had been used (a signed transfer deed).
(b) The father had not done everything within his power to effect the transfer because he had
not sent the transfer deed and land certificate to the Land Registry. Was giving them to the
son enough?
(c) The documentation had therefore not ended up in the hands of the person capable of
effecting the transfer.
Held: The Court of Appeal held that the gift was complete in equity a
SO THESE TYPES HAVE PUT MATTERS BEYOND CONTROL OF TRANSFEROR
In contrast, if the transferor had sent the
documents to their own agent, such as their solicitor or their accountant, that would not be
sufficient as agency is revocable.
For the principle in Re Rose or Mascall v Mascall to apply, Ada should have done all in her power
to transfer ownership to Harold. However:
* She had not given the documents to the company registrar; and
* She had not given the documents to Harold or his agent.
The documents were with her own agent, an extension of herself, and so she could revoke her
decision at any time.
So why was it unconscionable?
Arden LJ said that there could be no comprehensive list of factors that make it ‘unconscionable’
for the donor to change his mind. It was relevant that:
* Ada made the gift of her own free will;
* She told Harold about the gift and signed the transfer form which she gave to Mr Pennington
to secure registration
EXCEPTION TO MILROY 2?
- In some cases, a failure to perfects the intended recipients title may be cured if they obtain legal title through another route. Called fortuitous vesting’s
- Usually occurs when intended recipient of a gift is also the PR of the transferor’s estate. Because on death all property legal title passes to PR
- STRONG V BIRD – WAS ABOUT A STEP mother forgiving a debt orally (which is not binding) and so at death bed still owed her money. But he was appointed executor of her estate and debt was released at common law because bird was then both creditor and debtor.
- Even if intended recipient is one of several executors.
- Must be continuing intention
- Applies even to administrators (appointed by statute
ample: Perfection of imperfect gift by fortuitous vesting
Diane intends to give Ciara an antique sword, but Diane dies before this is delivered to Ciara and
so legal title has not transferred to her. Ciara is named as executor in Diane’s will.
Ciara will obtain legal title to the antique sword as executor. The gift to Ciara will be perfected via
fortuitous vesting because Ciara has obtained legal title in her capacity as executor
Extension of this
- following conditions must be met for it to apply
- must be an intention to make an immediate gift
- intention must continue untill donors death
- intended donee becomes an executor of donors etsate
Milroy EXCEPTION 3?
- A deathbed gift is the final exception Milroy v lord
- Conditions for a valid DMC – Cain v moon
- Gift is mad in contemplation of death to be imminent
- Death is conditional upon death
- Delivery of property
- Words of ‘if I die’ help to constitute a DMC
