Week 3) Constitution of trusts and promises to settle Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

What are the three modes of making a gift outlined in Milroy v Lord 1862 by Turner LJ?

A

The three modes of making a gift were given in Milroy v Lord 1862 by Turner LJ

1) An outright transfer of legal title (or outright assignment of subsisting equitable interest)
2) A transfer of legal title to a trustee to hold on trust, A to B to hold on trust for C.
3) A self-declaration of a trust- this constitutes a trust automatically, whilst any other constitution of trust eg a settlor transferring to B to hold for C, he has to both declare the trust and effectively transfer the title to B in order for it to be valid.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the primary equity maxim relevant to the constitution of trusts and modes of gifting, and how is it split into two further equity maxims?

A

“Equity will not assist a volunteer” is the maxim which dictates the question of ownership in the event that a trust is not properly constituted. It is comprised of two strands:

1) Equity will not enforce a gratuitous promise- overreach of the part of the law and intruding on relations between individuals with no sufficiently strong basis for doing so. Would undermine formality rules if equity were to step in to enforce every promise.
2) Equity will not perfect an imperfect gift.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Why are equity maxims often quoted to prevent undermining Fullers justifications for formality rules?

A

To encourage compliance with formality rules, if equity was to step in to assist every volunteer (those who do not give consideration) or perfect every imperfect gift, then formality requirements become redundant.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Facts and significance of Milroy v Lord 1862??
What rule is explained by LJ Turner in relation to one possible way of explaining the imperfect gift, and hence the failure of the trust?

A

Facts- The uncle wished for Lord to hold shares on trust for his niece, giving him the share certificates. This did not suffice as a transfer of title for the shares, as it did not comply with the bank’s constitution (no entry into the books of the bank was made in order to transfer title to the trustee, so Lord was not the effective trustee as the shares were never registered in his name). Lord was given a power of attorney to transfer the uncles shares (this included transferring them to himself, so he the power to make himself the owner of the shares even though the uncle had failed to do so), and further, there was a power to receive dividends from the shares, and pass them to the plaintiffs, sometimes through the Uncle and sometimes directly. When the uncle died, he had bequeathed a legacy of £4000 to the niece, as well as the shares in the Bank of Louisiana.

Significance- held that there was no valid trust constituted by the uncle and Lord, and although Lord had the powers of attorney to effectively vest the shares in himself, he failed to do so. The niece sought to recover title of the shares. The disposition of the shares failed as an imperfect gift from the uncle to Lord
-Lord Justice Turner: “I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a [275] declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust. These are the principles by which, as I conceive, this case must be tried.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Facts and significance of Jones v Lock 1865 regarding what an imperfect gift may look like and the boundaries of the courts in coming to the aid of volunteers?

A

Jones v Lock 1865 1 Ch App 25:
Facts- incomplete gift of a substantial cheque from father to baby by placing the cheque in the baby’s hand and telling him “I give this to baby for himself”. It was held that no valid gift or trust had been set up of the cheque for the baby.

Significance- Lord Cranworth: “If I give any chattel that, of course, passes by delivery, and if I say, expressly or impliedly, that I constitute myself a trustee of personality, that is a trust executed, and capable of being enforced without consideration. I do not think it necessary to go into any of the authorities cited before me; they all turn upon the question, whether what has been said was a declaration of trust or an imperfect gift. In the latter case the parties would receive no aid from a Court of equity if they claimed as volunteers. But when there has been a declaration of trust, then it will be enforced, whether there has been consideration or not. Therefore, the question in each case is one of fact; has there been a gift or not, or has there been a declaration of trust or not?”

“It was all quite natural, but the testator would have been very much surprised if he had been told that he had parted with the £900 and could no longer dispose of it. It all turns upon the facts, which do not lead me to the conclusion that the testator meant to deprive himself of all property in the note, or to declare himself a trustee of the money for the child”- he had neither gifted it outright to the son, nor could any construction of the facts lead to the conclusion that he made a self-declaration of a trust in favour of the son.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Facts and significance of Richards v Delbridge regarding the equity maxim “equity will not perfect and imperfect gift”?

A

Facts- D, in possession of a leasehold business and stock-in-trade wanted to gift this all to his grandson shortly before his death, E, an infant. “This deed and all thereto belonging I give to E. from this time forth, with all the stock-in-trade.” The lease was then delivered to E.’s mother on his behalf.

Significance- Held that no valid trust had been set up in favour of the grandson.
Sir G. Jessel: “The principle is a very simple one. A man may transfer his property, without valuable consideration, in one of two ways: he may either do such acts as amount is law to a conveyance or assignment of the property, and thus completely divest himself of the legal ownership, in which case the person who by those acts acquires the property takes it beneficially, or on trust, as the case may be; or the legal owner of the property may, by one or other of the modes recognised as amounting to a valid declaration of trust, constitute himself a trustee, and, without an actual transfer of the legal title, may so deal with the property as to deprive himself of its beneficial ownership, and declare that he will hold it from that time forward on trust for the other person. It is true he need not use the words, “I declare myself a trustee,” but he must do something which is equivalent to it, and use expressions which have that meaning; for, however anxious the Court may be to carry out a man’s intention, it is not at liberty to construe words otherwise than according to their proper meaning.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Why can T Choithram international SA v Pagarani be considered the turning point in the role of the court of equity in aiding (or not) volunteers in receipt of an imperfect gift?

What did Lord Browne-Wilkinson say with regards to this point, and why can this be considered detrimental in the wider context of the role of the court of equity?

A

T Choithram International SA v Pagarani 2001 2 ALL Er 492: in the context you can infer the intention as a self-declaration of trusts- the trust is immediately constituted. No reliance on unconscionability, so Pennington and Waine has clearly misinterpreted this.

Facts- A rich businessman sought to transfer almost all his wealth on trust before he died. Having executed a deed of trust establishing a charitable foundation and appointing himself as one of the trustees, he orally declared that he was transferring his wealth to the foundation. It was contended whether he could be taken to have vest the trust property in all the trustees through a self-declaration of trust even though there had been no transfer of trust property to all the intended trustees; he merely made up one of an array of intended trustees, only self-declaring a trust in favour of himself.

Significance- The Court found in favour of the businessman, construing the oral declaration of a gift as self-declaration of a trust, and because he was himself a trustee, this constituted the trust, despite failing to comply with the necessary documents to transfer the legal title to the rest of his trustees.
Lord Browne-Wilkinson said that the words “I give to the foundation” could only mean “I give to the trustees of the foundation trust deed to be held by them on the trusts of the foundation trust deed”. There could be no difference between saying that the donor declared himself a sole trustee for a done or purpose and the case where he declared himself as ONE of the trustees for that done or purpose- it would be unconscionable to suggest that his gift had been. This is the creation of the benevolent construction idea which is expressed in Pennington v Waine.
-The turning point as to the equity maxim appears to be when Brown-Wilkinson said “although equity will not aid a volunteer, it will not strive officiously to defeat a gift” which shows the courts leaning towards a less paternalistic approach, as mentioned by Halliwell.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the facts of Re Rose and what is the Re Rose principle?

What is a principal problem with the Re Rose principle, which is echoed in Mascall v Mascall?

A

The Re Rose principle is that a trust can be fully constituted (enforceable by the courts) so long as the testator has done everything in his power to legally pass the property to the trustee or beneficiary- in the mean time, a constructive trust will be set up in favour of the donor, with the volunteer or recipient as trustee.

Re Rose 1952 Ch 499:- this impedes on the autonomy of the donor and there doesn’t seem to be a good reason why the donor should be bound. They may change their mind prior to their death, if there is a testamentary disposition, or prior to the recipient registering property in their name, if it is an inter vivos disposition.
Facts- Rose properly executed a share transfer form and delivered it with its certificate to his wife, entitling her to have the shares registered in her name. The CA held that in equity, “such a gift is valid from the time that the donor does everything he is obliged to do to transfer the shares”- known as the Re Rose principle. The IRC sought to claim duty from the wife for the time between the share transfer was executed (the death of the husband) and the point at which she became legal owner and registered the shares in her own name. There was a term of contract that Mrs Rose had to accept and take the shares subject to conditions, which she had to agree upon- resulting from the fact that the shares were in an unlimited company rather than a limited company. It’s important to note that in this case, the shares were in fact registered, it was just contended when they were actually registered.

He wanted to make his wife outright owner of one batch of shares, and wanted to transfer another batch of shares to hold on trust.
There could not be a transfer of legal title until registration and equity cannot do this- it instead invokes a constructive trust on the donor, from the moment he had done everything in his power to effect the transfer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How does the Re Rose principle operated on the facts of Re Rose, and how was it distinguished from Milroy v Lord as per Justice Jenkins in Re Rose?

Why does a ‘power analysis’ of the woman’s position in Re Rose make it inconsistent with Milroy v Lord?

A

In distinguishing this case from Milroy v Lord, and holding in favour of the plaintiff, the CA said that the uncle had not done all that he was meant to do to gift the shares to the trustee on trust for his niece. In this case, as the plaintiff had done all that was required to transfer title, he held the shares on trust for the volunteer until she, his wife, had registered the shares in her own name. If dividends were accrued between the share transfer form being completed, and the wife declaring the shares in her own name, the donee (husband) holds the dividends on trust for the wife.

LJ Jenkins: “In Milroy v. Lord the imperfection was due to the fact that the wrong form of transfer was used for the purpose of transferring certain bank shares.” – Presumably he was referring to the deed poll (A DEED POLL ONLY BINDS ONE PERSON AND EXPRESSES ONLY AN INTENTION RATHER THAN A PROMISE). “The document was not the appropriate document to pass any interest in the property at all.”- Justice Jenkins in Re Rose explaining that this was the correct understanding of Milroy v Rock, whereas Turner in this case had proceeded on the basis that the uncle had not done all that he could to divest himself of all interest in the shares.

Evershed MR: “I agree that if a man purporting to transfer property executes documents which are not apt to effect that purpose, the court cannot then extract from those documents some quite different transaction and say that they were intended merely to operate as a declaration of trust, which ex facie they were not; but if a document is apt and proper to transfer the property - is in truth the appropriate way in which the property must be transferred - then it does not seem to me to follow from the statement of Turner L.J. that, as a result, either during some limited period or otherwise, a trust may not arise, for the purpose of giving effect to the transfer.”…
-IN EFFECT, AN IMPERFECT GIFT CANNOT BE CORRECTED THROUGH EMPLOYING A TRUST, BUT A PERFECT GIFT CAN BE SUBJECT TO AN INTERMEDIATE TRUST TO CATALYSE AND SAFEGUARD THE TRANSACTION

Also, the power analysis, which says that the wife had the power to make herself the owner of the shares, and would become owner from that point onwards. However, in Milroy v Lord, Lord also had an express power of attorney to register himself as trustee/ legal owner of the shares, and therefore this would make this inconsistent with the decision in Milroy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What were the facts of Mascall v Mascall 1985 and how do they show the application of the principle in Re Rose? What is the potential problem with the decision?

A

Facts- The father had executed a complete gift to his son by executing the registered land transfer document and handing it to him, with the land certificate. The father re-claimed the land certificate because he no longer wanted to gift the land to his son, having fallen out with him.

Significance- in applying Re Rose, the transfer had taken effect when the two documents were simultaneously provided to the Son, and the transfer was enforced. The gift was complete in equity and he was ordered to hand over the land certificate in order that the son completes the registration of the legal title in his own name. Held, dismissing P’s appeal, that P had done everything in his power to transfer the house to D. He had intended to do it. He had executed the transfer and handed over the land certificate. P was not obliged to register D’s title at the Land Registry, that obligation lay upon D. The transfer and land certificate were documents belonging to D that P had no right to retain. In the circumstances there was in equity a completed gift in D’s favour.
LJ Lawton: “But, in the course of the 1952 case, Lord Justice Jenkins pointed out that the statement that a failed transfer cannot be construed in any circumstances as a trust was a statement which was much too wide. He qualified the proposition by saying that, if the effect in law is that the donor holds the legal interest for the benefit of the donee, in those circumstances there is a trust to which the court will give effect.
In my judgment, that is the situation here. The father had done everything in his power to transfer the house to his son. He had intended to do it. He had handed over the Land Certificate. He had executed the transfer and all that remained was for the son, in the ordinary way of conveyancing, to submit the transfer for stamping and then to ask the Land Registry to register his title.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Why is unconscionability also a threat to the equity maxims relating to imperfect gifts?

A

Unconscionability: the expansion to the exception that equity will not perfect an imperfect gift- it is recognised that Pennington v Waine represents the “unfettered discretion according to the individual judge’s notion of what is fair in any particular case” that was feared in Milroy v Lord

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What 3 ways do Penningotn v Waine (reiterated in Curtis v Poolbrook) recognise as cases where the court will perfect an imperfect gift, contrary to the principle, and which of the three situations does Pennington v Waine represent?

A

IN CURTIS V POOLBROOK: “In Pennington v. Waine , Arden LJ (with whom Schiemann LJ agreed) identified three routes by which, in the context of a defective voluntarily transfer of shares, the court might avoid the rigorous application of the principle that equity will not compel the completion of an imperfect gift, in the absence of a valid declaration of trust. She described all three as methods whereby a court of equity might temper the wind to the shorn lamb. The first is where the donor has done everything necessary to enable the donee to enforce a beneficial claim without further assistance from the donor: see paragraphs 55 to 56 and Rose v. Inland Revenue Commissioners [1952] Ch 499 . The second is where some detrimental reliance by the donee upon an apparent although ineffective gift may so bind the conscience of the donor to justify the imposition of a constructive trust: see paragraph 59. The third is where by a benevolent construction an effective gift or implied declaration of trust may be teased out of the words used: see paragraphs 60 to 61, apparently based upon Choithram International SA v. Pagarani [2001] 1 WLR 1 . On its facts, Pennington v Waine appears to have been an example of a sufficient detrimental reliance by the donee, who had agreed to become a director of the subject company upon an assumption that he had received an effective gift of qualifying shares in it: see paragraphs 64 and 66.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Facts of Pennington v Waine?

A

Facts- A shareholder correctly completed a share transfer form in favour of her nephew, but instead of passing this to the company for registration, they delivered it to an auditor. She had also told her nephew that she intended to make him a shareholder and intended therefore to transfer him the shares. On this evidence, the nephew became a director of the company (it was required that he be a shareholder before being appointed as a director of the company). The actual shareholder died before the transfer was completed with the relevant formalities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Significance of Pennington v Waine?

A

Significance- the CA held that the shares were held on trust for the nephew, as a beneficiary, even though she had not done all in her power (as testator) to divest herself of all interest in the shares. The basis for this decision seems to be that all that was required for this trust to arise was that there was an intention to make the nephew a legal owner of the shares, and that the execution of the transfer form is intended to have immediate effect in circumstances where it would be “unconscionable” for the transferor to go back on their promise. Unconscionable means not right or reasonable.
The approach of Lord Arden: “56. That exception was extended in Rose v Inland Revenue C [1952] Ch 499 and other cases by holding that for this exception to apply it was not necessary that the donor should have done all that it was necessary to be done to complete the gift, short of registration of the transfer. On the contrary it was sufficient if the donor had done all that it was necessary for him or her to do.”

A benevolent interpretation of words is not incompatible with the equity maxim “equity will not perfect an imperfect gift” because in construing the intention and acts of the donor, it can sufficiently be said that they sought to make a gift, as in T Choithram, as explained below.
61. “Accordingly the principle that, where a gift is imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not prevent the court from construing it to be a trust if that interpretation is permissible as a matter of construction, which may be a benevolent construction. The same must apply to words of gift. An equity to perfect a gift would not be invoked by giving a benevolent construction to words of gift or, it follows, words which the donor used to communicate or give effect to his gift.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What principal criticism arises under the principle of unconscionability in pennginton v Waine??

What aspects of the facts of the case seemingly justified the unconscionability approach?

A

Unconscionability has no underlying unified principle, too arbitrarily enforced if not reined in by other cases.

Intention, nephew was told about it and told not to take any further action, and then subsequent reliance upon this by the nephew as well.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Which two of the three exceptions to the equity maxim “equity will not perfect an imperfect gift” do Zeital v Kaye and Curtis v Pullbrook attempt to rein in?

A

Zeital v Kaye= unconscionability

Curtis v Pullbrook= benevolent interpretation

17
Q

Facts and significance of Zeital v Kaye?

A

In Zeital v Kaye [2010] EWCA Civ 159, the deceased had held an apartment through beneficial interests in shares in a limited company. His recent partner claimed that he had informally given shares to her, whereas an old partner, the deceased’s widow, claimed that she was the owner of the shares, as the deceased had died intestate. This was a case of transferring an equitable interest rather than of making a gift.

Significance- G and K submitted that R’s method of purportedly transferring the second share to S fell so far short of the formalities required that the gift failed as an imperfect one. S argued that R had done all he could to transfer the share to her and should be regarded as having held the legal title to it on trust for her.

Significance- Appeal allowed: There was no problem with the transfer of a first share, as an outright gift had been made which complied with the relative formalities required. Form wasn’t good enough regarding the second share because it was unsigned and undated, and no share certificate had been provided- even if it would be unconscionable to recall the gift, the form was nevertheless inadequate. Pennington and Waine went a bit far and this should reel it in without overtly overruling.
-The appeal was allowed with respect to the contentions that the second share was improperly constituted. K was the legal owner of the second share, and R was only a beneficial owner. There was an existing equitable interest which could only be transferred in a number of ways; a sub-trust, in writing as per s53(1)c of LOPA 1925 or transferring to a trustee to hold for S. R did not divest himself of the equitable interest towards S. Mrs Kumar was the legal owner of the second share, with D as the beneficial owner; therefore the cases of Rose etc do not help in this case because different formalities must be complied with to transfer an existing equitable interest, compared to making a gift. This is not the case of an imperfect gift. Another distinction between the cases is that, in Rose, the share transfer form and the share certificates were both provided, and so too were the relevant certificates relating to land transfer in Mascall v Mascall.
“The principle of the Rose cases, however, requires that Raymond should have done all within his power to procure the transfer of the share to Stefka. If he duly did that, so that all that remained (subject to restoring Dalmar) was for her to apply to be registered as its legal owner, it may well follow, and I will assume, that pending such registration, Mrs Kumar, as the legal owner, would hold the share upon trust for Stefka, who would thereupon become its beneficial owner.

EVEN IF IT WAS UNCONSCIONABLE TO ALLOW THE GIFTED FIRST SHARE TO STEFKA, BUT DENY THE SECOND ONE FOR WANT OF FORMALITIES (EVEN THOUGH THE SHARE FORM WAS THERE IT WAS INADEQUATELY COMPLETED) UNCONSCIONABILITY IN PENNINGTON V WAINE WOULD OTHERWISE REMAIN UNCONSTRAINED.

18
Q

Curtis v Poolbrook 2011 facts and significance?

With regards to the three exceptions to the maxim that equity will not perfect an imperfect gift, which one appears to be the only one left following LJ Briggs obiter comments?

A

Facts- The purported gift of two tranches of shares in a company by the company’s director to his daughter and wife were set aside in circumstances where neither legal nor beneficial title had been properly transferred and where, in any event, the substantial purpose of the transaction was to put those shares beyond the reach of individuals who might have brought a claim against him. The settlor had failed to provide the share certificates and give them to his wife and daughter, as well as keeping the stock transfer documents- as he did not assist in making available all the required documents and the wife and daughter could not be given interests in any right due to the failure of the donor.

Significance- On the question of whether P transferred a beneficial interest to either his wife of daughter:
3 ways where an imperfect gift may be made perfect- 1) where the donor does all that he can do to make the donee legal owner, short of signing the share transfer document. 2) where the donee relies on information that the gift is effective and there is no more he himself can do 3) where a benevolent construction of the apparent trust justified the creation of a constructive trust.
In this case, there was a clear intention to pass, with immediate effect, his beneficial interest, although had failed to do so correctly. No benevolent construction could tease out an implied intention to create a constructive trust.
The father could not be treated as a constructive trustee for the purposes of the wife and daughter being under the impression that they were beneficiaries under a constructive trust with the husband as trustee.
LJ Briggs in obiter comments said that only detrimental reliance might be sufficient ground for unconscionability.

19
Q

What did LJ Briggs say in obiter comments in Curtis v Poolbrook as to what might be the only justifiable situation where the courts will perfect an imperfect gift on the grounds of unconscionability?

A

LJ Briggs in obiter comments said that only detrimental reliance might be sufficient ground for unconscionability.

20
Q

What is a covenant and which act dictates the formalities of covenants?

How do covenants differ to contracts?

A
  • Covenants are promises expressed as a written deed and must be signed and witnessed as per the Law of property Miscellaneous provisions act 1989 s1. If the covenantor, the party making the promise, fails to perform his promise, the covenantee may sue under the common law for damages. Thus, covenants are expressions of voluntarily undertaken obligations that, because they are expressed in a particular form, can be enforced at common law.
  • A promise which is binding because of it’s form.

-They are two separate types of document, governed by different laws. Contracts do not require any formal expression of agreement for it to be legally binding (other than relevant statutory formality requirements). Contracts are not legally binding unless consideration is given in exchange for the promise eg money in exchange for the promise to deliver goods. Consideration has nothing to do with covenants however; a covenant can be enforced under the common law regardless of consideration. As they are not truly contracts, they are not enforceable by third party beneficiaries under the Contracts (rights of third parties) act 1999 in the way that contracts are (beneficiaries being third parties because the covenant is made between settlor and trustee).

21
Q

What is a covenant/ promise to settle?

A

A deed promising to create a trust

22
Q

What are covenants in marriage trusts?

A
  • Equity will enforce covenants to settle (historically used by husbands to settle property for wives, or for both parties to settle after acquired property for equal enjoyment, by transferring property acquired after marriage to trustees to be held on trust for the husband and wife, and any children/grandchildren who could also enforce the covenant).
  • Equity considers marriage as the ‘most valuable consideration imaginable’
23
Q

What do the two contrasting cases of Pullan v Koe 1913 and RE Plumptre’s marriage settlement 1910 show about the boundaries of marriage settlements and the enforceability of said settlements?

A

Pullan v Koe 1913: Facts- settlement included covenant for after-acquired property worth £100 or more to be held on trust for the wife. The wife received £285, spending part of it and putting the rest in bonds in her husband’s name. Upon his death, the trustees of the settlement sued his executor so they could hold the bonds on the marriage settlement trust for the benefit of the wife.

Significance- The court held that it was the duty of the trustees to enforce the covenant, and the court ordered specific performance of the transfer the shares from the executor to the trustees to hold on trust for beneficiaries, who were in the marriage consideration. Also, the £285 was held on a constructive trust by the trustees as soon as the wife received it, so the trust was constituted the minute the covenant could be performed.
-The beneficiaries (the wife) was entitled to sue for the covenant as they were not volunteers; consideration had been given in this case (marriage consideration).

Re Plumptre’s marriage settlement:
Facts- The next-of-kin tried to sue for the enforcement of a covenant as they would take the property if there were no issue of the marriage (children). The issue of marriage (children) would be within the marriage settlement and would be able to sue under equity for the enforcement of the covenant to settle in their favour.

Significance- they were not within the marriage consideration, so they were unable to receive the property under an order of specific performance. THEY WERE VOLUNTEERS WHO COULD NOT CLAIM THE AFTER-ACQUIRED PROPERTY. THEREFORE NEXT OF KIN CANNOT ENFORCE A COVENANT TO SETTLE AS THEY WERE NOT PART OF THE MARRIAGE CONSIDERATION IN THE WAY THAT HUSBAND/WIFE/CHILDREN/GRANDCHILDREN ARE.

Also shows the distinction between covenants and contracts, and how the Contract (Rights of third parties) act 1999 would operate (or would not operate in fact, had it existed when these cases were decided).

24
Q

When a covenant to settle is awaiting enforcement by the courts, how does a trustee have any entitlement to the trust property?

A

So far we have considered the equitable enforcement of promises to settle, and we see that where consideration has been given, equity will order the promisor to transfer property to the trustee thereby constituting the trust, and that in the meantime the promisor will hold the (p. 225) property in question upon constructive trust. On the other hand, where the intended beneficiary is a volunteer, equity will not order the constitution of the trust. This is all quite straightforward. So far the fact that these promises to settle have been expressed in covenants has not really mattered; if these promises had been made orally, the results would have been exactly the same. Equity is not concerned with form, and its willingness to enforce promises to settle turns, as we have seen, on whether consideration (including marriage consideration) for the promise has been given, not on the form in which the promise has been expressed.

25
Q

In general, where a settlor promises to transfer property to the trustee on trust for the beneficiary, who is neither party to the covenant nor providing consideration, can the trustee recover common law damages on behalf of the volunteer beneficiary?

A

In general the cases appear to show that the trustee cannot use common law remedies to provide for the third party beneficiaries

26
Q

What is the significance of Re Pryce 1917?

A

Eve J held that covenantees / trustees were not able
to enforce a covenant to settle in favour of next of kin who were volunteer beneficiaries.
Reasoned that next of kin had no action either for
enforcement of covenant or for damages.
Also no trust relationship between covenantor and next
of kin – merely voluntary contract to create trust.
For court to direct trustees to take proceedings to
enforce covenant would be to give next of kin by indirect means what he cannot
obtain directly.

27
Q

What is the significance of Re Ellenborough regarding the enforceability of a covenant which only promises to be fulfilled contingent on the completion of an expectancy rather than a guarantee?

A

Facts- An intended beneficiary under a will voluntarily covenanted to transfer her inheritance to another upon trusts as declared. Before the testator had died the intended beneficiary (covenantor) changed her mind. The covenantee brought an action claiming that the covenantor was under a duty to transfer the relevant property. Held: No trust of the covenant had been created, because the property was not owned by the covenantor at the time of the covenant. In addition, the covenantee could not bring an action to enforce the agreement for he had not provided consideration. In order for there to be a trust for the benefit of the covenant, the parties to the covenant to express an intention to hold the rights on trust.

JUDGEMENT: ‘The question is whether a volunteer can enforce a contract made by deed to dispose of an expectancy. It cannot be and is not disputed that if the deed had been for value the trustees could have enforced it … Future property, possibilities, and expectancies are all assignable in equity for value: Tailby v Official Receiver [1888] 13 App Cas 523. But when the assurance is not for value, a court of equity will not assist a volunteer.’
Buckley J
It should be noted that although a trust cannot be created in respect of future property, a contract is capable of being created in respect of such property. Subject matter is too uncertain, although other cases will allow a non-disclosed value to be held on trust. The case is really just enforcing the requirements of the 3 certainties.

28
Q

How does Fletcher v Fletcher try to circumvent the rule in Re Pryce, that third parties not party to the covenant cannot gain indirectly, through enforcement by the covenantee, the benefit of the covenant?

A

In Fletcher v Fletcher, the covenant was not said to be for the monetary value but rather for a right to enforce the covenant upon attaining 21 years of age.

It allowed a trustee to sue under the common law for enforcement of a covenant

Inconsistent with Pryce regarding the ability of trustees to sue at common law- However, due to the far-reaching consequences that this would have on equity, this case has been confined only to cases of debts enforceable at law ie a legal obligation to pay a quantified amount of money.
Facts- father covenanted to transfer property upon trust to named persons as trustees for his sons but failed to do so. The fact that the deed was kept by the covenantor rather than communicated to the beneficiaries did not affect its validity. The testator bequeathed all his property upon trust for the benefit of his wife, his sons A and B, and his legitimate children. The deed said that upon turning 21 years old, the son was entitled to £60,000 held on trust for him. He sought to recover this from the executors, in accordance with the voluntary deed which his father had created.

Significance- The intended trust property was the right to benefit from the covenant, allowing the volunteer beneficiary to enforce it, the trustees having held this right to benefit at the time that the covenant to settle/trust was set up by the father, and having reached 21, the son could enforce his interest to claim the £60,000
Wigram VC held that either the intended beneficiary (the intended beneficiary suing in the name of the trustee under common law) or the trustee could sue at common law for the trust property, and that there was no difficulty in a trust of the right to benefit being given to the third-party beneficiary when the covenant to settle was made. The trust of a benefit of a covenant was not a determining factor in finding in favour of the plaintiff however.

29
Q

What is the rule in Strong v Bird?

A

The rule in Strong v Bird:
At common law, the appointment of a debtor to be one’s executor had the effect of cancelling the executors debts to the estate, because, as simultaneously holding position as a debtor to the deceased’s estate, and holding all property of that estate, he would have to sue himself for the recovery of the debt. Equity used to make the debtor account for all his debts owed to the estate, but the rule in Strong V bird had prevailed, allowing the debtor to be relieved of his debts to the estate only if the testator had manifested an intention to forgive the debt within his lifetime, and this was continued up until the testator’s death. It somewhat represents the correction of an imperfect gift because the debt is discharged without formally being released.

The rule in Strong v Bird requires that the property of a gift be perfected is specific and identifiable as subject matter than have been previously transferred in accordance with the deceased beliefs/ intentions. Thus ineffective gifts of or promises to give future property or sums of money cannot be perfected by the rule.

30
Q

In what situations will volunteer third party beneficiaries benefit from the Third party act 1999, allowing them to enforce the covenant?

What effect has the act had on the earlier cases of Re Kay and Re Pryce, which held that neither the beneficiary or the party to whom the promise was made (trustee/ covenantee) could enforce the covenant as equity in general does not assist a volunteer.

A

as long as third party meets relevant criteria in s1 of the act, and they will benefit from the term and named/identified as a beneficiary of the contract. Then they will be able to enforce the covenant unless there is a contrary intention. The defences available against a contracting party also works against a third party. The statute itself has superseded the reasoning in earlier cases eg Re Pryce and Re Kay, and therefore it cannot be relied upon as a defence under s3.

31
Q

Facts and significance of Re Cooks settlement 1965 regarding trust over future property and the boundaries of the rule created in Fletcher v Fletcher?

A

Facts- A number of valuable paintings were gifted by his father to Sir Francis Cook, who covenanted with trustees to the effect that if any of the paintings was sold during his lifetime, the net proceeds of sale were required to be settled on trust for stated beneficiaries. Sir Francis gave one of the paintings to his wife who wanted to sell it. The question in issue was whether the covenant may be enforced as an agreement to create a trust or as a trust. Held:

(a) The parties to the agreement were volunteers who could not enforce the covenant.
(b) The intended trust was imperfect for the subject-matter concerned future property, i.e. the proceeds of sale in the future. For this reason, the Fletcher [1844] principle was not applicable. In any event the Fletcher principle was applicable to debts enforceable at law.

JUDGEMENT
Buckley J: ‘The covenant with which I am concerned did not, in my opinion, create a debt enforceable at law, that is to say, a property right, which, although to bear fruit only in the future and on a contingency, was capable of being made the subject of an immediate trust, as was held to be the case in Fletcher v Fletcher … this covenant on its true construction is, in my opinion, an executory contract to settle a particular fund or particular funds of money which at the date of the covenant did not exist and which might never come into existence. It is analogous to a covenant to settle an expectation or to settle after acquired property.’

32
Q

Following curtis v Pullbrook, what remains the only test for what was previously considered unconscionability in Pennington v Waine?

A

That the intended beneficiary has relied on the gift being perfected/ perfect, to their detriment, and it was objectively reasonable for them to have done so.