Express Trusts - Constitution and Formalities Flashcards
(11 cards)
Constitution of Trusts
trust must be properly constituted by ensuring legal title is transferred to the trustee, either by self- declaration or transfer of the trust property
Failure to do so may render the trust ineffective
Formalities – Statutory Basis:
Law of Property Act 1925, s 53(1)(b) – Declaration of trusts over land must be evidenced in writing - future purchaser knows what they are buying by looking at legal title of property - mirror princip - if dont have notice - equity’s darling may override beneficial interest
Law of Property Act 1925, s 53(1)(c) – Disposition of existing interests under a trust must also be in writing
Wills Act 1837, s 9 – Testamentary trusts must comply with strict will making requirements
Formalities for a Declaration of Trust
Lon Fuller, ‘Consideration and Form’ (1941) - 3 functions
evidentiary function - Provides proof of the trust’s existence. Ensures that clear evidence is available for the courts, helping to resolve disputes about whether a trust was intended. It prevents false claims and protects the settlor’s intention - paper record relied on by existing and future parties
Cautionary Function – Ensures settlor’s intention is deliberate. Formal requirements impose a degree of seriousness and consideration upon the settlor before creating a trust. This prevents impulsive or uninformed decisions
Channeling Function – Creates clarity for legal recognition. Formalities provide a standard method of trust creation, making it easier for courts and parties to identify and enforce trust arrangements. They also reduce uncertainty and legal disputes by standardising the process
The Statutory Formalities for a Declaration of Trust in Land
Law of Property Act 1925, s 53(1)(b): A trust in land must be evidenced in writing, and signed (valid execution) or the beneficiary cannot enforce the trust
Statutory Exceptions:
Resulting, constructive, and implied trusts do not require written evidence, under s 53(2), because these trusts are not expressly declared but rather imputed by the court
Case Law Exceptions to the Formalities for a Declaration of Trust in Land
Bannister v Bannister (1948): A sold her cottage to B on the (unwritten) understanding that he would hold the property on trust for her to live in for life. B tried to evict A, and the Court of Appeal held that B could not rely on the lack of formalities fraudulently to deny that he was holding the property on trust for A for life
Rochefoucauld v Boustead [1897]: the mortgagee of A’s land transferred title to B under the (unwritten) agreement that B would hold the land on trust for A. B sought to claim absolute title to the land, and the court found an express trust so as to prevent the act of fraud
It would be unconscionable to allow these acts of fraud to occur and, as the maxim goes, Equity will not allow a statute to be used as an instrument of fraud
Formalities for a Declaration of Trust in Personalty and Intangibles
Declarations of trust in personalty do not require any statutory formalities – merely intention + delivery. - personal tangible property
No universal req for all personalty by some high value ones may req registration by deed with the relevant authority e.g. DVSA for motor vehicles
Law of Property Act, s 53(1)(c): with intangibles however, and with personalty that is already held on trust, a declaration of trust must be in writing
Declarations of trust of intangibles must always be in writing - Vandervell v IRC - as must an assignment of an existing equitable interest - Grey v IRC
Secret Trusts
Fully Secret Trusts: No mention of trust in will; communicated separately
Half-Secret Trusts: Acknowledged in the will but details are communicated separately.
Equity prevents statutes from being used as an instrument of fraud - making them an exception to the Wills Act 1837
Blackwell v Blackwell (1929): Confirmed the validity of half-secret trusts
ottaway v Norman (1972): Established fully secret trusts apply to land and chattels. - personal and tangible property not just land
Re Keen (1937): Communication of a half-secret trust after the will’s execution is invalid
Constitution of Trusts
A trust is validly constituted when legal title to the trust property is vested in the trustee
Methods of Constitution:
Declaration of Self as Trustee: Settlor retains legal title on trust, but creates a separate beneficial title held for the beneficiary.
Transfer of Property to Trustees: Requires valid legal transfer – land by deed per s 53(1)(b), shares by registration per s 53(1)(c).
Transfer by Will: A trust can be constituted through testamentary provisions in a will
key considerations about constitution of trusts
A trust cannot be enforced unless it is fully constituted. - even if satisfied 3 certainties if not fully transfer still fail
If a settlor retains control of the property without full transfer, the trust may fail.
If the transfer is incomplete, equitable principles may provide remedies in limited cases
T Choithram International SA v Pagarani [2001] - donor validly executed a trust deed to establish a philanthropic foundation, appointing himself as one of a number of trustees. He died before shares had been validly transferred to the foundation, but the Privy Council held that self declaration conferred an immediate irrevocable gift to the foundation, thus validly vesting the property in all of the trustees
Jones v Lock [1865]: cheque handed to infant baby but not cashed in at the bank. Mr Jones then died, and the court ruled there was no intention to make a self declaration of trust of the cheque for the benefit of the infant son as a means of perfecting the imperfect gift - intention was there (Q of emotional response), delivery - didn’t take it to bank and make an account, put it away in a safe, maybe if lived longer would have went to bank but he hadn’t so didn’t create a valid outright gift - perfect imperfect gift? - no - cannot then try say he was trustee himself - once intention decided courts must stick to it
If confusion ab method of transfer of property look to facts and must stick with orig intention even if fails rather than imposing another intention to rescue trust
Constitution, Failed Gifts and Exceptions
because the formalities for transferring title were not satisfied or because the gift property was not validly delivered to the donee – the transfer will not be rescued by Equity.
Two Equitable Maxims are relevant here:
* Equity will not assist a volunteer;
* Equity will not perfect an imperfect gift.
Failed Gifts where Equity did not intervene
Milroy v Lord [1862]: settlor cared for young niece but due to get married, thought transferring 50 shared in bank of louisiana for niece would make her financially independent - does not validly execute trust (not done by paper or registered with banks reigistrar) dies and in will, requests money to other beneficiaries - looked at fact shares were not registered, so by common law not completed transfer of legal title to trustee, still registered in uncles name - no trust - no beneficial title in niece - shares could be used to other beneficiaries
If haven’t followed nec req for registering a property/properties equity wont intervene to perfect the imperfect gift and niece was only a volunteer as no consideration
Failed Gifts where Equity did intervene
Re Rose [1952]: Created an exception to Milroy v Lord by establishing that if the donor had done everything in their power to transfer the legal title, equity would perfect the transfer
Pennington v Waine [2002]: Expanded the Re Rose exception - The court ruled that where it would be unconscionable to deny the transfer, equity would enforce it.
Covenants to Settle
A covenant to settle arises when a person covenants (ie makes a legally binding promise) to transfer property into a trust in the future
- A mere covenant to settle property does not itself constitute a trust.
- If consideration is provided, the promise may be enforceable as a contract.
- Equity may intervene to enforce the promise in limited circumstances.
If the intended trustee or beneficiaries provide consideration, the covenant may be enforced as a contractual obligation. Often arise in family settlements, marriage settlements and trust deeds.
- Courts may enforce the promise if an alternative equitable principle, such as detrimental reliance, applies.
Pullan v Koe - If a person voluntarily covenants to settle property without consideration, the covenant remains unenforceable
Trusts of a Promise
promise cannot prima facie be held on trust as impossible to have a trust over future property
covenant can operate as a promise to transfer the property once acquired, so that when the covenantor does get the property, Equity will assume that it has already been transferred to the trust so that the covenantee obtains an equitable interest in it.
three primary ways in which a trust of a promise may be enforced:
1) the rule in Fletcher v Fletcher [1844]: by a voluntary deed, Mr Fletcher covenanted with trustees to pay to them £60,000 to hold for his illegitimate son.
The trustees did not wish to establish the trust, but the court held that the son was entitled to enforce the covenant against the father’s executor.
2) Donatio Mortis Causa: a gift will be effective in Equity, even where the required formalities have not been followed, if: (i) it was made by the donor in contemplation of death; (ii) the gift was conditional upon his death; and (iii) the property or essential indicia of title to the property were given to the donee.
3) the rule in Strong v Bird (1874): if a donee had the intention to make an immediate gift of property, and still had that intention at the time of their death, then the gift will be perfected if the donee obtains title to the property by becoming an executor under the donor’s will.
