Unit 3 Flashcards
Constitution of Trust
What is trust constitution?
Transferring the legal title of the trust property to the trustees.
What are the two steps required when creating a trust?
- Settlor needs to make a valid declaration of trust.
- Settlor validly needs to transfer property to T.
How are assets transferred to trustees?
Automatic:
Self-declaration by S.
S creates trust in will (s9 WA 1837; signed by S, S signature to give effect to will, witnessed by two or more).
NOT automatic:
S creates lifetime trust.
How is land transferred?
Settlor / transferor must execute deed (s52 LPA 1925).
For a deed to be valid, it must (s1 LP(MP)A 1989):
- be a written document;
- shows parties intended doc to be a deed;
- witnessed by at least one third-party.
Must also be registered in Trustee name for legal title to transfer (s27 LRA 2002).
Once transfer deed of land has been executed, what else must be done?
Registration of trustee as legal owner (s27 LRA 2002).
Failure to comply with formalities renders transfer ineffective and incompletely constituted trust (Richards v Delbridge).
What needs to be done post-land transfer and why does this need to be done?
Registration of trustee(s) as legal owner (s27 LRA 2002).
Failing to comply with this formality renders the transfer ineffective and incompletely constituted (Richards v Delbridge).
How are chattels / personalty transferred?
Delivery to T.
Transfer by deed (Jaffa v Taylor Galleries).
Methods to transfer money
Handed to T.
Bank transfer to T.
Cheque to T.
How are PUBLIC company shares transferred?
CREST.
How are PRIVATE company shares transferred?
Settlor (S) completes stock transfer form in favour of Trustee (T).
S gives T stock transfer form + share certificate OR S sends these docs to the company.
Company will register T as new owner of the shares - becomes LEGAL OWNER / acquires LEGAL TITLE at this stage.
In cases where trust property has not been completely transferred, what are the equitable exceptions that can assist?
Every effort test (Re Rose): In cases of transferring land / shares, for the legal title to pass to T, there requires an action made by a third party (i.e. LR / company) to transfer the legal title of the shares from S to T. S must have done everything they could to effect the transfer and left all to be done with a third party (LR / company) - ‘point of no return’.
The Rule in Strong v Bird: When S dies, individuals are appointed to administer / distribute their estate – (a) dies with a will = executors or (b) without a will = administrators. Executors and administrators acquire legal title to all the assets comprised in the deceased’s estate. However, if the settlor did not manage to transfer the legal title during their lifetime to the trustee and that trustee is then appointed as executor / administrator, does the fact they have legal title render the trust constitution? (i.e. effectively transferring the trust property) - YES, provided the conditions are satisfied.
What conditions must be satisfied for the every effort test?
Milroy v Lord (1862) = S must do everything necessary to transfer the property. (Original common law position).
Equity regards the transfer as complete when the transferor has done everything necessary to effect the transfer.
Re Rose (1952) = Equity will regard property has completely transferred when the transferor has done ‘everything in his power’ to effect the transfer of the property. (Exception to the position in Milroy v Lord).
Requirements of test:
- The doner must have done everything in their power to transfer legal title.
- The doner must have put the property / documents beyond his recall.
- The only outstanding matters are actions to be done by third parties (i.e. the Land Registry / the company).
What are the conditions to be satisfied in the rule in Strong v Bird?
S / transferor intended to make an immediate, unconditional, lifetime transfer.
The intended lifetime gift / transfer was imperfect.
The intention to give continuted up to the transferor’s death.
The transferee / trustee acquired the legal title by becoming the transferor’s executor / administrator.
List the 6 requirements for a valid declaration of trust?
[Step 1 for creating a valid trust]
Certainty of intention.
Certainty of subject matter.
Certainty of objects. (Fixed - complete list test (IRC Broadway); conceptual & evidential certainty / Discretionary - any given postulant test (McPhail v Doulton); conceptual. DT can still fail due to admin unworkability or capriciousness).
Beneficiary principle (Morice and Bowman).
Rule against perpetuities (s5 PAA 2009).
Dec of trust over land - signed writing (s53(1)(b) LPA 1925).
Go through Step 2 for creating a valid trust (constitution)
Method 1: self-declaration.
Method 2: Will (s9 WA 1837 - (a) signed by S/T, (b) intended signature will give effect, (c) witnessed by 2 or more individuals.
Method 3: Lifetime trust.
Land - deed (s52 LPA 1925 + s1 LP(MP)A 1989) + registration (s27 LRA 2002). LT passes upon reg.
Shares (ltd) - stock transfer form, share certificate, registration (LT passes upon reg).
Shares (plc) - CREST.
Chattels - delivery to T or transfer by deed (Jaffa v Taylor Galleries).
Have the rules been complied with? Has legal title passed to T?
Do the equity exceptions apply?
Re Rose (every effort)
Strong v Bird
