W1 - Lifetime Trust: Transfer to trustee Flashcards
What must the settlor do in order to create a valid trust?
1) Declaration - Make a valid declaration of trust; and
2) Constitution - Ensure that the property is properly vested in the trustee(s).
Four requirements for a valid declaration of trust
1) The Three Certainties must be present;
2) The Beneficiary Principle;
3) The Rule against Perpetuity;
4) The formalities for express declarations of trust.
The Three Certainties
1) Certainty of Intention
2) Certainty of Subject Matter
3) Certainty of Object
Certainty of Intention
The donor must have the intention to make a trust, manifested by words or conduct (Paul v Constance)
Paul v Constance
The donor must have the intention to make a trust, manifested by words/conduct.
Certainty of Intention: equitable maxim?
Equity looks at intent rather than form.
Re Adams and Kensington Vestry
Precatory words will not suffice.
What is a precatory word?
Words that express a wish/desire rather than an obligation. Generally won’t create a trust.
“hoping that” // “in full confidence that” // “expecting that”
Certainty of Subject Matter
1) The settlor/testator must identify the trust property clearly
2) It must be clear what type of interest each beneficiary has and what portion of trust property they will enjoy.
Palmer v Simmonds
“bulk of” is unclear
Re Golay
The subject matter of the trust is certain if the settlor provides a workable formula for calculating the amount.
“reasonable income” was sufficiently objective to provide an effective determinant.
“reasonable legacy” = unlikely to be valid
Re London Wine Company (Shippers)
There must be segregation of tangible items of trust property or else it will be deemed uncertain.
Segregated stock of wine could not establish a trust as the subject matter was uncertain.
Hunter v Moss
There need not be segregation of intangible items if the items are indistinguishable (eg identical shares).
Re Lewis’ of Leicester
Subject matter was certain because by placing the traders’ money in a separate account, it has been segregated from other money, creating a valid trust for them.
Mac-Jordan Construction
Subject matter was uncertain because the money was not retained in a separate bank account (ie not segregated).
Certainty of Objects
Settlor must define the beneficiaries with sufficient clarity when declaring the trust - otherwise the trust is invalid.
Beneficiary Principle
General rule: Trusts must have ascertainable human beneficiaries.
In the absence of human beneficiaries, there is no one to enforce the trustee’s obligation to deal with the trust property in accordance with the trust.
Re Jackson
Testarix left “legacy to my nephew, Arthur Murphy”.
She had three nephews called Arthur Murphy.
Held: Evidence showed that she had contact with one but not others and that she intended to benefit him.
Rule against Perpetuity: two rules
1) Rule against remoteness of vesting
2) Rule against alienability
Rule against remoteness of vesting
A contingent interest is void unless it vests within the perpetuity period.
For trusts before 6 April 2010 - perpetuity period of up to 80 years
For trusts on/after 6 April 2010 - perpetuity period of up to 125 years
Rule against alienability
Applies to trusts for non-charitable purpose trusts
If the trust capital is not freely alienable within the perpetuity period, the trust for non-charitable purposes will be void.
Formalities for express declaration of trust: Will
If the trust property is in a will, there is no need to consider this. It will be transferred by virtue of the will.
Formalities for Express Declaration of trust: Personalty
If settlors wish to declare a trust over personalty during their lifetimes, there are no formalities.
Declaration can be oral, but writing is desirable for evidential purposes.
Formalities for Express Declaration of trust: Land
Declaration of trust over land must satisfy (s53(1)(b) LPA)
It must be evidenced in signed writing. No need for a deed.
Constitution: Chattels
Simple physical deliver or by deed (but deed not necessary)
Constitution: Private shares
Falls outside the CREST system.
1) Transferor completes and signs the STF
2) Transferor sends the STF and share certificate to the transferee
3) Transferee sends the documents to the company to register as the new owner
Constitution: Public shares
Falls within the CREST system
1) Transfer of ownership by instructions of the shareholder.
No need to sign a STF.
Constitution: Land
Must be transferred by deed (s52(1) LPA) and sent to the Land Registry to notify them that there is a new legal owner (Richards v Delbridge)
Constitution: Equitable Interests
s53(1)(c) LPA - Transfer of equitable interests must be in signed writing by the person disposing of the interest or a lawfully authorised agent or by will.
Grey v IRC
Oral direction does not satisfy s53(1)(c) LPA and would be ineffective and void.
Vandervell v IRC
s53(1)(c) LPA does not apply to bare trusts where the beneficiary directs the trustee to transfer the legal estate to a third party with the intention that the third party takes the equitable interest as well.
When is s53(1)(c) LPA relevant?
When dealings with the equitable estate are divorced from dealings with the legal estate.
Constitution: Wills
Must follow formalities under s9 Wills Act to be valid.
s9 Wills Act 1847
No will is valid unless:
1) It is in writing and signed by the testator;
2) The testator intended to give effect to the will;
3) The signature is made in the presence of at least two witnesses who must attest and sign the will or acknowledge the signature.
How are trusts constructed in wills?
The will transfers the title to the trustees (via the personal representatives).
Note: The declaration of trust must still comply with the three certainties, the beneficiary principle and the rules against perpetuity.
Enforcing an incompletely constituted trust: equitable maxim
“Equity will not assist a volunteer”
When will an incompletely constituted trust be enforced?
Equity will only enforce an incompletely constituted trust in favour of a beneficiary who has given value (consideration).
Milroy v Lord
Uncompleted constituted trusts will not be construed as declarations of trust by the settlor, just as imperfect gifts will not be construed as a declaration of trust.
Rule in Strong v Bird
Exception to equity will not assist a volunteer.
On the death of a donor, the donee can claim legal title if:
1) Transfer fails due to not satisfying formalities (eg no deed for land)
2) Intention to make immediate gift by donor (Re Freeland)
3) Intention continues until death (Re Gonin)
4) Donee becomes executor/PR/administrator of donor.
Re Freeland
“as soon as I get the car on the road” was not an immediate gift.
Re Gonin
Mother dealt with the property which suggested she still owned it (sold part of the garden), which indicated that she still considered herself as the owner.
Every Effort test (Re Rose)
Exception to incompletely constituted trusts.
The gift completes in equity if the donor did everything he could.
Mr Rose sent a completed and signed STF along with the share certificate to his wife. His wife sent the documents to the company. Company did not register until months later.
Gift was perfected by equity on date of wife’s delivery.
Unconscionability - Proprietary Estoppel
Exception to the rule that equity will not assist a volunteer.
Despite the fact that the transferor does not hand the transfer form and share certificate to the transferee, it would’ve been unconscionable for the transferor to be able to retract the gift (Pennington v Waine)
Pennington v Waine
1) Transferor informed the auditor that she wanted to transfer shares to her nephew
2) Transferor signed STF and sent to auditor
3) Auditor told nephew that the transferor wanted to transfer shares to him and that he didn’t have to do anything.
4) Auditor sent the transferee a form agreeing to be a director, then he signed and returned.
5) Transferor passed away with the transfer incomplete.
Held: It was unconscionable not to treat the transfer as complete (in equity), even though every effort had not been made (Re Rose).
Curtis v Pulbrook
Confirmed that Pennington v Waine is of detrimental reliance.
Ada was bound because she had told her nephew that she was giving him the shares and he acted to his detriment by becoming a director of the company.
