The Formalities

Question 1

Why are formalities required?

Answer 1

The purpose of the formalities is to create certainty of transactions in the transfer of property. In relation to formation of a trust the formalities provide a protectorate function from undue influence and the prevention of fraud, as well as a evidentary function.

Question 2

What are formalities required for?

Answer 2

In order to create a valid trust, the property subject to the trust must be validly transferred to the trustees, and the trust must be constituted inline with the formalities.

Question 3

What are the formalities required for a valid transfer of land, and what should be considered?

Answer 3

Section 52(1) of the Law of Property Act 1925 states “all conveyances of land or any interests therein are void for the purpose of conveying or creating a legal estate unless made by deed”. This establishes for a valid transfer of land it must be evidenced by a deed, the requirements of a deed are laid out in s.1 of the Law of Property (Miscelanious Provisions) Act 1989, which requires that a document is a.) stated to be a deed and b.) the person who signs the deed does so in the presence of a witness. It should also be noted for the valid transfer of land the Land Registration Act 2002 s.4 hold that registration of the transferee as the new proprietor is required in all case.

Question 4

What are the formalities required for a valid transfer of shares?

Answer 4

For the valid transfer of shares, the Stock Transfer Act 1963 s.1 outlines the requirements of delivery of the share certificate as well as a signed stock transfer form.

Question 5

What are the formalities for the valid transfer of Banknotes and Chattels?

Answer 5

Valid transfer of Banknotes and chattels can be executed solely by delivery coupled with the requisite intention to do so.

Question 6

What is the case law surrounding a valid transfer of a chattel?

Answer 6

This can be evidenced by the case of:
Thomas v. Times Book Co. [1966], where it was held that effectively delivery could consist of informing a friend that if he found a lost manuscript, he could keep it.
OR
Re Cole [1964], where it was held that a statement of “everything here is yours”, could not amount to effective delivery.
The court noted in the case of Jaffa v. Taylour Gallery that in cases where effective delivery is impossible a deed will suffice.

Question 7

What are the formalities for the valid transfer of pre-existing equitable interests?

Answer 7

To successfully transfer a pre-existing equitable interest, s.53(1)(c) of the LPA 1925 notes “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 thereunto lawfully authorised in writing, or by will” .

Question 8

In the case of a valid transfer of a pre-existing equitable interest, what is the meaning of the word disposition?

Answer 8

The courts considered the meaning of the word disposition in relation to s.53(1)(c) LPA 1925 in the case of Grey v. IRC [1960].

Question 9

Grey v. IRC [1960]

Answer 9

In this case to avoid paying stamp duty, G attempted to transfer shares on trust for himself to his grandchildren, in this case the court held that the word disposition had it natural meaning, and therefore the confirmation documents confirming this transfer could amount to a disposition for the valid transfer of a trust. This case should be contrasted with that of Vandervall v. IRC [1967]

Question 10

Vandervall v. IRC [1967]

Answer 10

where V attempted to transfer the legal title and the equitable title of some shares to the Royal Collage of Surgeons. In this case the court considered in cases where the legal and equitable title is transferred, it need only comply with the Stock Transfer Act 1963 as the equitable title and legal title should not be split up.

Question 11

When executing a valid transfer of an pre-existing equitable interest, what does the nature of that interest must entail?

Answer 11

As stated in s.53(1)(c) LPA 1925, the interest must be subsisting, therefore it was held in the case of Re Danish Bacon [1971], that an equitable interest in a pension fund was not subsisting as it was a future equitable interest. Therefore this case need not comply with the requirements of s.53(1)(c).

Question 12

When a valid transfer of a pre-existing equitable interest has occurred, yet there was a oral rejection of such transfer, is the interest valid.

Answer 12

In the case of Paradise Motor Co. Ltd [1968], a step-son declined an equatable interest of shares, however upon changing his mind, he argued that as his interest was not written down it did not amount to a valid disposition under s.53(1)(c). In this case the court held that this section did not apply to disclaimers.

Question 13

What are the formalities for creating a valid will?

Answer 13

It is established in the Wills Act 1837 s.9 as amended by the Administration of Justice Act 1982 s.17 that for a will to be valid it must be a.) made in writing and signed by the testator, b.) it appears that the testator intended to give effect to the will c.) the signature is made or acknowledge in the presence if 2 or more witnesses d.) and each of the witnesses attests to the signature of the will and acknowledges so.

Question 14

How is property transferred testamentary?

Answer 14

Property may also be transferred after death via a valid will

Question 15

How is a trust validly established after death?

Answer 15

For a valid trust to be established after death it must be do so through a valid will. The requirements for a valid will are laid out in Wills Act 1837 s.9 amended by the Administration of Justice Act 1982 s.17

Question 16

How would a trust for personalty be correctly formulated?

Answer 16

To declare a trust for personality conduct alone is sufficient to amount to a creation of a trust, providing it complies with the three certainties. This can be evidence by the case of Paul v. Constance.

Question 17

Paul v. Constance

Answer 17

in this case the shared bank account between the unmarried couple was held to be on trust for Mrs Paul through using words and behaviour to indicate such intention. Such behaviour as considered in this case was paying shared bingo winnings into the account.

Question 18

What case upholds Paul v. Constance in a commercial setting?

Answer 18

Re Kayford

Question 19

How may a valid trust for land be established?

Answer 19

Per the LPA 1925 s.53(1)(b) it is stated that “a declaration of trust respecting any land or interest in land must be manifested and proved by some signed writing by some person who is able to declare such trusts or by his Will”. It should be noted that some signed writing should be considered distinct from a deed. It is also stated in LPA 1925 s.53(2) that this section does not affect the creation or operation of resulting, implied or constructive trusts”.

Question 20

What is the effect of a valid declaration of a trust?

Answer 20

Once the required formalities have been complied with for the transfer of property, and the formalities for a valid declaration of a trust have been fulfilled then there is now a completely constituted trust. The effect of such is that the settlor may not change his mind and the beneficiaries have an enforceable equitable interest.

Question 21

What has occurred if the formalities for a valid transfer of property have not been correctly adhered to?

Answer 21

If the formalities for a valid transfer of property have not been adhered to, the transfer will constitute an imperfect gift. If it is an imperfect gift then the property will be held on resulting trust for the settlor of the attempted trust.

Question 22

What has occurred if the formalities for a valid declaration of a trust have not been complied with?

Answer 22

Non-compliance with the formalities when attempting to declare a trust will result in a incompletely constituted trust. This trust will not be enforceable, and the property will be held on resulting trust for the settlor of the trust.

Question 23

A valid trust has been completely constituted, however the settlor of that trust has changed their mind and wishes to regain their property, is this possible?

Answer 23

If a completely constituted trust has been established, the court has considered that the settlor can no longer change their mind to regain their property. This was shown in the case of Re Bowden [1936], a women gave all her property on trust for a charity in order to become a nun, the court held on abdication of the convent, the nun could not regain her property as a perfectly constituted trust had been formed.

Question 24

What are the methods for validly transferring ownership to trustees of a trust?

Answer 24

In the case of Milroy v. Lord [1873] Lord Justice Turner analysed ways in which the absolute owner of property could benefit another with their property.

Question 25

What are the three Milroy v Lord principles?

Answer 25

These are; firstly an outright gift, in which case a valid transfer of the property is required. Secondly a settlor may declare them self as a trustee, in which case a valid declaration of a trust is required. Thirdly a settlor can transfer the property to the trustees for them to hold on trust. This disposition requires a valid declaration of a trust and a valid transfer of the property.

Question 26

In terms of benefiting another with property, what would occur if one of the Milroy v. Lord dispositions was not used?

Answer 26

Due to the maxim: Equity will not assist a volunteer, then it can be asserted that if a transfer does not comply with the rules laid out in Milroy v. Lord it will be held void. This was seen in the case of Jones v. Lock.

Question 27

Jones v. Lock

Answer 27

a man handed a baby a cheque for £900 and stated that “he can do what he wants with it”. It was held that as an imperfect gift as their was no valid transfer of the property, and there was no intention for it to be declared on trust for the baby. This can also be evidenced through the case of T Choithram International v. Pagarani [2001],

Question 28

T Choithram International v. Pagarani [2001]

Answer 28

it was held that in this case the facts were novel, and the concept of prevention of unconscionably should be prioritised.
He transfer money to a charity on his death bed.

Question 29

What is the method of upholding an imperfect gift?

Answer 29

If the property gas failed to vest despite every effort of the transferor to perfect title in the transferee, the principle of the every effort test outlined in Re Rose [1952] may apply.

Question 30

Re Rose [1952]

Answer 30

In this case the court outlined if the settlor had made every effort to transfer the property, it will be made complete in equity. In relation to land this was upheld in the case of Mascall v. Mascall (1984).

Question 31

What is the link between unconscionably and imperfect gifts?

Answer 31

The case of Choithram International v. Pagarani [2001], the privy council held that despite none of the Milroy v. Lord criteria were met, it was not the role of equity to strike down a gift, Lord Browne Wilkinson stated that it would be unconscionable and contrary to equity to not uphold the gift. This decision was Arden LJ basis for widening the Re Rose ‘every effort’ concept for one more inclusive of unconscionably in the case of Pennington v. Waine [2002].

Question 32

Pennington v. Waine [2002].

Answer 32

In this case an aunt had attempted to transfer shares to her nephew, who had taken on a important role in the company. Unbeknown to them the solicitor had not completed the transfer. The court held in this case that although the ‘every effort’ had not been passed, it would be unconscionable for equity to not complete the transaction. However, this case and widened concept has attracted academic criticism, for example Halliwell (2003) was critical of it.

Question 33

What are the modern requirements of the Pennington v. Waine [2002] principle?

Answer 33

Following the case of Pennington v. Waine, the high court have ruled that in combination to falling short of the ‘every effort’ test, in Curtice v. Pulbrook [2011], it was held that for it to be unconscionable, it requires the recipient to have done something to his detriment.