Express trust: Formalities

Question 1

What is the difference between a gift, self-declaration of trust, and transfer on trust in terms of formalities?

I.e. which titles transfer

Answer 1

1. Only involves legal interests, so only necessary to consider formalities for legal title
2. No change in legal ownership, so only necessary to consider formalities for creating new equitable interest
3. Changes in legal and equitable title, so necessary to consider formalities for creation of equiatble and transfer of legal

Question 2

Must a settlor comply with specific formalities requirements to declare a trust?

Distinguish ‘declaration’ from ‘constitution’ (transfer of legal title)

Answer 2

No formalities must be complied with to declare a trust (so can create orally, in writing or conduct)

Subject to exception…

Question 3

What is the exception to no formalities for declaration?

Answer 3

Declaration of trusts of land

Question 4

What are the formalities for a declaration of trust of land?

Not constitution!

Answer 4

Written evidence of intention, terms and a signature

1. Manifested and proved - evidential requirement (order in which declaration and writing unimportant and trust unenforceable until formalities satisfied)
2. By some writing - no prescribed form for written eveidence but must contain evidence of S’s intention to create trust and trust’s terms
3. Signed by some person who is able to declare such trust - usually settlor but arguable that T can provide

I.e. signed, written evidence of intention and terms

Question 5

Where a trust of land is created by will, what formalities must be satisfied?

Answer 5

Where will is validly executed under s9 Wills Act it will satisfy formalities

Question 6

Will non-compliance with formalities for a trust on land render said trust void?

Answer 6

• Renders trust unenforceable (rather than void)
• Means trust exists from moment it is declared but cannot enforce rights until formalities are satisfied

Question 7

What can Bs enforce their rights in respect of over trust on land once trust becomes enforceable?

Answer 7

The period in between declaration (exists but unenforceable) and satisfaction of formalities (enforceable)

Question 8

What happens if formalities are never satisfied after declaration of trust on land?

Answer 8

Trust will not become enforceable; S has a chance to change mind about parting with beneficial ownership

Question 9

If T changes mind after declaration of trust on land what happens for
1. Self-declaration
2. Transfer on trust
?

Answer 9

1. Self-declaration = S can simply choose not to fulfil formalities and B cannot assert any interest in the land (provided absence of facts rendering it unconscionable for S to deny trust)
2. Intended transfer = trust will be unenfoceable but also void for lack of constitution (subject to circumstances making it unconscionable for S to deny existence of trust)

Question 10

Can trust on land arise in the absence of written, signed evidence?

Answer 10

As s.53(1) only applies to express trusts, s.53(2) includes exceptions for resulting, constructive and statutory trusts.

This means that there are cases where trust on land CAN arise in the absence of written evidence.

Question 11

Failure of formalities when considering a third party?

Answer 11

When the settlor is not the intended beneficiary in self-declaring trusts, a third party beneficiary makes things more complicated.

If the third party has no written evidence or unwilling/unable to share it, the trustee should seek the court’s direction as they cannot keep the land for themselves - leading to a constructive or resulting trust.

Question 12

What is constitution and how does it apply to the two ways of creating an express trust?

Two ways = transfer and self-declaration

Answer 12

Constitution = the transfer of legal title from one party to the other

• Transfer on trust (applies to gift too!) = legal title must be vested in Ts (this is ‘constituting’ the trust)
• Self declaration of trust = no movement of legal title as already vested in S; trust is automatically constituted when trust declared

Question 13

How will constitution occur in testamentary and lifetime (inter vivos) trust?

Answer 13

• Testamentary = takes place via will, legal title will transfer to PRs if they have been appointed trustees
• Lifetime = legal title must be transferred using correct method

Question 14

What is the method for transferring legal title and when will it pass for registered land, shares, choses in action (debts and money in bank account), chattels, and cheques?

Answer 14

• Registered land = by deed and registered with Land Registry, will pass on registration of new owner
• Shares = by transferor signing stock transfer form and sending it to company, will pass when transferee registered in company’s internal register
• Choses in action = by notice in writing to debtor/bank, passes once notice received
• Chattels = by deed of gift or delivery with evidence of intention to transfer
• Cheques = by transferor endorsing cheque by signing name on back

If these are not used = will not be validly constituted

Question 15

What is the effect of constitution for the settlor and T in terms of the rights they have?

In case of a transfer

Answer 15

Disposition is irrevocable, so…

• Settlor - ceases to have any beneficial or legal interest in trust property
• T - has legal title and holds on trust for B

Same true for gifts

Question 16

What is the effect on the trust or gift if there is incomplete constitution (legal title not transferred)?

Answer 16

Trust/gift is void (subject to exceptions!)

Question 17

Where incomplete constitution renders the trust/gift void, will equity intervene? Can it treat intended gift as self-declaration of trust or treat failure to constitute trust as a self-declaration?

Answer 17

No - equity will not assist equity will not assist a volunteer (volunteer because no consideration usually given in creation of a trust so B or recipient of gift are both volunteers)

Equity will not:

1. Treat intended (but failed) gift as a self-declaration of trust (or transfer donor to transfer legal title)
2. Treat failure to constitute trust as a self-declaration of trust (or compel S to transfer legal title)

Milroy v Lord = equity will not perfect an imperfect gift

Question 18

What must the transferor make sure to do to effect intended disposition?

Answer 18

Everything necessary by following the correct method for transferring legal title

• Failing to do so = equity will not perfect disposition or treat transferor as having used another method

Question 19

What is the effect on the S or the donee should the property not be transferred using correct method and disposition fails?

Answer 19

Trust/gift is void because imperfectly constituted

• Settlor example: J asks P to hold shares on trust for S. J forgets to complete stock transfer form and P not registered as shareholder. J dies and leaves shares to D as gift in will = D receives shares under will because imperfect constitution means trust is void
• Donee example: T says he is going to send A a watch as a gift. T does not deliver it so legal title does not pass. T can change his mind and A has no rights over the watch

Question 20

If legal title to property has not been transferred to a T (for transfer of trust) or to donee (as gift), how can certainty of intention help to make a trust?

Effectively a case of self-declaration (I think)

Answer 20

Strong evidence of intention that the owner intended to declare themselves a T; court must be satisfied that owner intended to take on onerous obligation of trusteeship and divest themselves of beneficial ownership

Effective declaration can happen despite not knowing what trust is!

I.e. if a S intends to make a transfer on trust but fails to transfer legal title to T, equity will not require S to take on role of T if that was not their intention!

Question 21

What happens if T intends to appoint themselves as one of a number of Ts but did not transfer legal title into joint names of co-Ts, remaining sole legal owner upon death?

Like a self declaration but also transfer of legal title!

Answer 21

As S had legal title, trust automatically constituted upon declaration - puts T under duty to vest shares in co-Ts

Transfer on trust to multiple Ts of which S is one; automatically const

Choithram - businessman decided to establish charitable trust and appointed himself as 1 of a number of Ts, validly established by deed - did not transfer legal title to shares to joint names of co Ts and remained sole legal owner on death - fact that S had not transferred legal title to all Ts did not prevent shares being held on terms of trust; he was one of Ts and would be unconscionable for him to deny that shares were subject to trust

Question 22

What is the rule in Milroy v Lord and what are its 4 exceptions?

Answer 22

Rule = if legal title has not been vested in intended recipient the disposition will fail (and equity will not intervene). Exceptions are…

1. Re Rose principles (and Mascall v Mascall)
2. The unconscionable principle
3. Fortuitous vesting
4. Donationes mortis causa (DMC)

Question 23

What is the Re Rose exception (three requirements) and what will the recipients get if fulfilled?

1st exception to Milroy v Lord

APPLIES TO BOTH TRUSTS AND GIFTS !

Answer 23

If…

1. Correct method of transfer used
2. Transferor does everything within power to effect transfer
3. Documentation ends up in hands of person capable of affecting legal transfer (e.g. registrar of company)

…then recipients will have the equitable interest under a CT and they can force the transfer of the legal title to them

2 and 3 subject to Mascall extension!

Re Rose - two transfers of share executed by Mr Rose on 30 March (one by gift to wife and other to Ts to be held on trust for wife and son) - had to be effected before 10 April if estate duty to be avoided on Mr Rose’s death 4 years later - transfers and share certificates delivered to company registrar but not registered until 30 June meaning legal title passed then (after 10 April). Was held that no estate duty payable because transfers effective in equity when Mr Rose delivered correct transfer documentation to Registrar before crucial date of 10 April = Mr Rose held legal title on constructive trust for recipients (pending registration of legal title) so as Bs they could force the transfer of legal title to them

Question 24

When will the second limb of the Re Rose exception - ‘transferor does everything within power to effect transfer’ - not be necessary?

Should consider if second limb does not apply

Answer 24

When transferor has ‘put matter beyond their control’ (as this makes a transfer irrevocable); so if correct method of transfer used = transfer irrevocable if transferor puts matters beyond their own control

Mascall v Mascall - father wanted to gift registered land to son, handed son signed transfer deed and land certificate which son’s solicitors sent to Stamp Office, then father wanted to revoke gift after argument at a time when the transfer had not yet been registered and so legal title had not passed to son - held that gift complete in equity and could not be revoked by father in spite of documents not yet being sent to Land Registry; by sending documents to son, father had given intended transferee everything needed to complete transfer for himself; had put matter beyond control and made gift irrevocable

Question 25

Does the Re Rose principle apply to registered land?

Answer 25

Yes (as seen in Mascall v Mascall)

Question 26

What will arise if the Re Rose (correct method, everything in power, document ends up in hands) or Mascall v Mascall (matter beyond their control) exception applies?

Answer 26

A constructive trust - transferor (or PRs if they die) will hold the property on constructive trust for intended T/B pending constitution (who may themselves hold the equitable interest on trust for intended B)!

E.g.

• N wants to transfer shares to S to hold on trust for K. N completes stock transfer form and gives to S who is not yet registered with shareholder.
• N dies and leaves shares to M in will.
• Applying Milroy v Lord = trust is void because imperfectly constituted
• Applying Re Rose exception = if N did everything in power to transfer shares to S it will be complete in equity, but it did not end up in the hands of person capable of effecting transfer!
• Applying Mascall extension = by giving S stock transfer form and share certificate, N has given them the means to effect transfer of legal title, so N (and consequently PRs) will hold shares on CT for S pending transfer or legal title, who in turn holds equitable interest on trust for K

Question 27

When will the transferor not have put the matter beyond their control?

Answer 27

• If the transferor sent document to agent e.g. solicitor or accountant (agency is revocable)
• If the transfer requires consent which has not been obtained (e.g. Treasurer as transferor domiciled abroad)
• Where not all documents are disposed of by transferor (e.g. stock transfer form but not share certificate)

Question 28

What is the unconscionable principle?

2nd exception to Milroy v Lord

Pennington v Waine

Answer 28

Perfection will be permitted in cases where it would be unconscionable to resile from transfer

Question 29

What factors are considered for the unconscionable principle to apply?

Answer 29

No comprehensive list of factors to considered but has a broad scope of operation:

• The transferee/donee believes the trust/property is theirs
• Relevant method has been carried out with few mistakes
• If transferor/donor has represented to TPs that they have no interest in the property
• If any legal claims/disputes re the property have been abandoned

Question 30

When will fortuitous vesting (the rule in Strong v Bird) operate and what is the result?

3rd exception to Milroy v Lord

Answer 30

• Where a gift is made to a donee who subsequently obtains legal title to it by becoming the donor’s PR
• Legal title transfers to PR (intended recipient of gift) and gift is perfected

Question 31

What are the three requirements for fortuitous vesting?

Answer 31

1. Intention to make an immediate gift
2. Intention must continue until donor’s death (cannot have changed e.g. writing a cheque for £200 for someone else after telling someone else they would get it)
3. Intended donee becomes (one of) executor(s)/administrator(s) of donor’s estate

Question 32

What is not an ‘immediate gift’?

Answer 32

• A future intention to give (e.g. after car is put in running order)
• A gift of future acquired property

Question 33

What is Donationes Mortis causa?

4th exception to Milroy v Lord

Answer 33

A gift made in contemplation of death (a ‘deathbed gift’) where person wants to leave property to another person but has no time to execute a will nor transfer legal title (also may not want to part with property just yet if unsure of when they will die)

Question 34

What are the three requirements for a DMC?

Answer 34

1. Gift made in contemplation (but not necessarily expectation) of death which donor believes to be imminent
2. Gift is conditional on death (not intended to be fully effective until then and can be revoked before death)
3. There is delivery of the property - donor must part with control of property by handing it/something representing title to the donee

Question 35

What does it mean for imminent death to be in contemplation?

Answer 35

Where there is a reason to anticipate dying

I.e. the death cannot have been by chance