Formalities

Question 1

What are the formalities for express trusts of land?

Answer 1

Section 53(1)(b) is an evidential requirement only. The trust will be valid but unenforceable unless and until it is ‘manifested and proved’ in signed writing.
If the trust is never evidenced in signed writing, it will remain unenforceable, subject to anything rendering it unconscionable to deny the interest of the beneficiary (such as proprietary estoppel or the imposition of a constructive trust).
If a trustee receives land to hold on a trust which has not been evidenced in writing, and the settlor is unable or unwilling to provide this evidence, it would be prudent for the trustee to seek directions from the court as to their obligations.

Question 2

True or false: Section 53(1)(b) LPA 1925 only applies to declarations of trusts of land.

Answer 2

True

Question 3

What is the effect of failure to comply with section 53(1)(b) LPA 1925?

Answer 3

The trust is unenforceable

Question 4

Which of the following trusts would be unenforceable?

A person sends their sibling a signed letter declaring that they now hold their house on trust for the sibling. The letter contains the terms of the trust.

A person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust

A person sends a signed letter to their friend to inform them that they will be transferring their house to the friend, to hold on trust for the person’s sibling. The letter contains the terms of the trust. The person then effects the legal transfer of the house.

A person orally declares themselves to be holding their house on trust for their sibling and then sends the sibling a signed letter to confirm the terms of the trust.

A person calls their friend to inform them that they will be transferring their house to the friend to hold on trust for the person’s sibling. After the legal transfer has been effected, the person sends a signed letter to the friend confirming the terms of the trust.

Answer 4

person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust

This trust does not satisfy the requirements of s53(1)(b) LPA 1925 as there is no signed, written evidence of the trust.

Question 5

Is constitution of trust necessary to make a transfer of trust binding?

Answer 5

Yes

Question 6

Is constitution of trust necessary to make a self declaration of trust binding?

Answer 6

A self declaration of trust does not require any movement of the legal title as legal title to the property is already vested in the settlor. This means that the trust is automatically constituted when the trust is declared.

Question 7

What is constitution of trust?

Answer 7

Constitution refers to the transfer of legal title from one party to another.

Question 8

Failed constitution?

Answer 8

If trust property is not vested in the trustees, the trust is incompletely constituted and is therefore void.

If legal title is not transferred correctly then the disposition will fail. Under Milroy v Lord equity will not assist a volunteer, perfect an imperfect gift or treat a failed gift as a self declaration of trust.

Question 9

Testamentary trust constitution?

Answer 9

If a trust is created in a will (a testamentary trust)then constitution will take place via the will. After the death of the testator, their personal representatives must obtain legal title to the testator’s estate.

Question 10

What is an inter vivid trust?

Answer 10

A lifetime trust

Question 11

Constitution for registered land?

Answer 11

Registered Land transfers must be made by deed under s52(1) LPA 1925 and registered with the Land Registry under s 27 LRA 2002. Legal title passes on registration of the new owner at the Land Registry

Question 12

Constitution for shares?

Answer 12

Shares in a private company are transferred by the transferor signing a stock transfer form and sending it to the company. (It is also common for the company to require the share certificate or an indemnity in respect of the transferor’s ownership as part of this process.) Legal title passes when the transferee is registered in the company’s internal register of members.

Question 13

Constitution for choses in action?

Answer 13

Choses in action (eg debts and money in a bank account) are transferred by notice in writing to the debtor or to the bank (see s 136 LPA 1925). Legal title passes once notice has been received.

Question 14

Constitution for chattels?

Answer 14

Chattels (including physical cash) may be transferred either (i) by deed of gift or (ii) by delivery of the chattel with evidence of the transferor’s intention to transfer it (Re Cole 1964 CH 175).

Question 15

Constitution for cheques?

Answer 15

Cheques (and other bills of exchange) in favour of the transferor may be transferred to a third party (i.e. someone other than the named payee) by the transferor endorsing the cheque by signing their name on the back according to the Bills of Exchange Act 1882.

Question 16

What constitutes as an inter vivos gift?

Answer 16

To constitute an inter vivos gift, legal title must transfer from the donor to the donee.

Question 17

A father writes to his daughter declaring himself to be holding his house on trust for his daughter. He signs the letter and sends it to his daughter.

Has this trust been validly constituted?

No. The transfer of beneficial ownership to the daughter must be registered with the land registry for the trust to be constituted.

No. In order to constitute a trust of land, the declaration of trust must be made by deed. Until this occurs, the trust is not constituted and so it is void.

Yes. In order to constitute a trust of land, the trust must be declared in writing and signed by the settlor. As the father has signed the letter, this means the trust has been constituted correctly.

Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.

No. The trust has not been constituted because the letter has not yet been received by the daughter. Until she has signed evidence of the declaration of trust, the trust is void.

Answer 17

Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.

The settlor is declaring himself a trustee and so legal title to the property is already vested in him and the trust is automatically constituted. Note the formality requirement of s53(1)(b) LPA 1925 which requires a declaration of a new trust of land to be evidenced in signed writing. This is also satisfied here.

Question 18

A man wanted to gift shares to his brother. He completed a stock transfer form in favour of his brother intending to post it to him the next day. However, the man died unexpectedly that night. The man’s validly executed will leaves the shares to his sister.

Which of the following correctly explains what will happen to the shares?

Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.

The gift was constituted when the man completed the stock transfer form. The brother is the legal owner of the shares.

The gift was constituted when the man completed the stock transfer form but, as this has not been communicated to his brother, the gift is imperfect. His sister will inherit the shares.

The brother is the legal owner of the shares but holds them on trust for the sister.

The brother is the beneficial owner of the shares. Completion of the stock transfer form can be interpreted as a self-declaration of trust over the shares.

Answer 18

Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.

In order to transfer legal title, the man should have sent the signed stock transfer form and share certificate to the Company’s registrar under s1 of the Stock Transfer Act 1963. Legal title would pass on registration of the brother as shareholder. As this has not occurred, the gift is imperfect. Equity will not perfect an imperfect gift under the rule in Milroy v Lord or assist the brother as a volunteer.

Question 19

What are the exceptions to the rule in Milroy v Lord?

Answer 19

Principle in Re Rose
2.The unconscionable principle
Fortuitous Vesting
Donationes Mortis Causa

Question 20

When does Re Rose apply?

Answer 20

· Re Rose applies if (1) the correct method of transfer is used (2) the transferor has done everything in their power to effect the transfer and (3) the documentation ends up in the hands of the person/organisation capable of effecting the transfer.

Question 21

How does Mascall v Mascall extend Re Rose

Answer 21

Mascall v Mascallextends the_Re Rose_ principle to registered land and says that the second limb of Re Rose is not necessary if the transferor has ‘put the matter beyond their control’ as this make would make a transfer irrevocable.
· If Re Rose or Mascall v Mascallapply the donor will hold the property on a constructive trust for the intended donee.

Question 22

What is fortuitous vesting?

Answer 22

*Fortuitous vesting is also known as the rule in Strong v Bird and it operates where a gift is made to a donee who subsequently obtains legal title to it by becoming the donor’s personal representative.

Question 23

When does fortuitous vesting operate?

Answer 23

*In order for the rule in Strong v Bird to operate there must be a continuing intention to make an immediate gift to the intended donee who becomes the executor/one of the executors under the donor’s will.

if the conditions in Strong v Bird (1874) LR 18
Eq 315 are satisfied:
(a) the settlor intended to create an immediate trust with a third party acting as trustee;
(b) that trust was not immediately created due to a failure to comply with a relevant
transfer rule;
(c) the settlor’s intention continued up to their death; and
(d) the intended trustee acquired legal title to the trust property by becoming the settlor’s
executor or administrator.

Question 24

The unconscionable principle?

Answer 24

*Pennington v Waine appears to create an exception permitting perfection in cases where it would be ‘unconscionable’ to resile from the transfer.

Question 25

Donationes mortis causa?

Answer 25

Donationes mortis causa are recognised in exceptional circumstances where a donor anticipates dying and wants to make a gift but does not have time to make a valid will.

Question 26

When is a valid donatio mortis causa recognised?

Answer 26

A valid donatio mortis causa will be recognised where the donor is contemplating their imminent death, expresses the intention that the gift is conditional on their death and parts with dominion of the property.

Question 27

A man tells his wife that he will transfer shares to her. He completes a stock transfer form and sends it with the share certificate to the company’s registrar. The man dies and the shares are still registered in his name. Can the wife claim beneficial ownership of the shares? No. Although she may have had a beneficial interest in the shares under Re Rose whilst the man is alive, this will not survive his death. Yes. Pennington v Waine will apply in this situation. The man has promised his wife that he will transfer the shares and so it would be unconscionable to go back on this. Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust. No. Legal title passes on registration of the shares into her name. As this has not occurred before the man’s death, equity cannot perfect this imperfect gift. Yes. Re Rose is likely to perfect the imperfect gift.

Answer 27

Yes. Re Rose is likely to perfect the imperfect gift. The correct method of transfer is used, the man has done everything in his power to effect the transfer and the documentation has ended up in the hands of the organisation capable of effecting the transfer i.e. the company’s registrar. Under Re Rose the wife will have a beneficial interest in the shares under a constructive trust and can force the transfer of legal title to her.

Question 28

A woman wanted to give her house to her adult son. She completed a transfer deed and gave this to her solicitor who said he would finalise the gift on his return from holiday in two weeks’ time. The woman died the next day and in her validly executed will the house was left to her boyfriend. Will the son be able to claim a beneficial interest in the house? Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust. The woman is treated as holding the house on trust for her boyfriend as soon as she expresses the intention to make a gift. No, because the woman has used the wrong method of transfer. No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control. Yes. The Re Rose exception to Milroy v Lord will apply because the woman has put the matter beyond her control. Yes. The Re Rose exception to Milroy v Lord will apply because the woman completed the correct m

Answer 28

No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control. Re Rose will not apply because, whilst she used the correct method of transfer (a deed under s52(1) LPA 1925) this has not yet been sent to the land registry and so has not ended up in the hands of the person capable of effecting the transfer. Instead, the transfer documentation is with her own agent (her solicitor); an extension of herself. Therefore, she has not done all within her power to effect the transfer under Re Rose. Nor has she put the matter beyond her control as in Mascall v Mascall.

Question 29

True or false: The rule in Re Rose can be used to perfect imperfect gifts but not to perfect imperfect trusts.

Answer 29

False

Question 30

True or false: If a person dies after expressing an intention to make a gift but before delivering the asset to the donee, equity will perfect the imperfect gift as long as the donor did not change their mind before they died.

Answer 30

False It is not sufficient that the donor’s intention remained unchanged before their death. The gift must either be conditional upon death and satisfy the requirements of a donatio mortis causa, or it must be intended to be immediate and satisfy the requirements of Strong v Bird.

Question 31

A man wishes to give a five-acre paddock to his adult granddaughter to open a riding stable. The man’s solicitor completes the transfer documentation, but the man then dies unexpectedly before the granddaughter is registered as the owner. In the man’s validly executed will, his grandson is due to inherit the land. The granddaughter and her sister are appointed executors. Can the granddaughter claim beneficial ownership of the land? No. The rule in Strong v Bird will not apply because she is not the only executor. Yes but she can only claim a beneficial share in half the land because there is another executor. Yes, because her grandfather made the gift shortly before his death, meaning that it was a donatio mortis causa. Yes, under the rule in Strong v Bird. No, because she was not registered as the legal owner before the grandfather’s death.

Answer 31

Yes, under the rule in Strong v Bird. The requirements for Strong v Bird are satisfied. There is a continuing intention to make an immediate gift and the intended donee is one of the executors of the donor’s will (Re Stewart).

Question 32

A professional musician decided to give her prized cello to her niece on her retirement. She took her niece out to lunch to announce the news, promising that she would arrange delivery as she played her last concert later that month. The woman died in an accident later that day. Her validly executed will, in which her niece was named executor, left all her instruments to a youth orchestra. Who owns the cello? The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift. The cello will go to the youth orchestra because the cellist did not contemplate her immediate death when attempting to make the gift and so the rule in Strong v Bird will not apply. The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist’s intention remained unchanged at her death. The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist had a continuing and immediate intention to make a gift. The cello will go to the youth orchestra under the cellist’s will. The rule in Strong v Bird will not app

Answer 32

The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift. Although there is continuing intention to make a gift (see Re Gonin) and the intended donee is the executor of the donor’s estate (Re Stewart), the cellist does not intend to make an immediate gift. The facts are analogous with Re Freeland. The cellist intends to give the cello in the future. As such, there is no intention to make an immediate gift of the cello and so this would prevent the operation of fortuitous vesting.

Question 33

How to transfer legal title to third party trustee over land?

Answer 33

If land is part of the trust fund, in order to transfer legal title to a third party trustee, the settlor must: (a) execute a deed (LPA 1925, s 52). A deed is a document that satisfies s 1 of the Law of Property (Miscellaneous Provisions) Act 1989, ie: (i) the document is stated to be a deed or is stated to be signed as a deed; and (ii) the person making the deed signs the document in the presence of a witness who also signs it. Where the land is registered (which most land now is), Form TR1 is used – this satisfies the above definition; and (b) give the executed deed either to the trustee (who will then pass it on to Land Registry) or send it to Land Registry direct. Land Registry will then register the trustee as the new legal owner. Legal title is not transferred until all steps have been completed and the trustee is the new registered proprietor of the land.

Question 34

How can legal title for shares be transferred?

Answer 34

Legal title in company shares can be transferred either: (a) within the CREST system – this only applies to certain shares in public quoted companies; or (b) outside the CREST system – this applies to all other shares, especially shares in private companies.

Question 35

How to transfer shares outside of crest system?

Answer 35

Transferring shares outside the CREST system For all other shares (especially in private companies – those companies whose names end in ‘Ltd’ or ‘Limited’), paperwork is required. The owner of such shares will have a share certificate as evidence of their ownership, and that ownership is confirmed by the name of the owner being entered in the company’s register of members. If private company shares are to be part of the trust fund, in order to transfer legal title to a third party trustee, the settlor must: (a) execute a stock transfer form – usually the settlor will execute the stock transfer form set out in Sch 1 of the Stock Transfer Act 1963; and (b) give the executed stock transfer form and relevant share certificate either to the trustee (who will then pass it on to the relevant company) or send it to the company direct. The company’s secretary will then register the trustee as the new shareholder (and therefore the new legal owner) in the register of members. Legal title is not transferred until all steps have been completed and the trustee is the new registered shareholder.

Question 36

How is transfer of legal title for money and chattels done?

Answer 36

Through delivery

Question 37

The ‘every effort’ test?

Answer 37

Where the settlor did everything they could to transfer legal title, the transfer may be regarded as complete in equity even though the transfer of legal title has not yet been completed. In order to take the benefit of this exception it is often said that the settlor must have passed the point of no return or put the property being transferred ‘beyond recall’. The settlor must have completed all the steps they were required to take, ie the settlor took steps to properly execute and send out all documents relating to the transfer of the property. All that remains for the transfer to be completed is the act of a third party.

Question 38

Question 1 Last month, a woman wrote to a banker as follows, ‘You will hold my house in Edale for my nephew, who shall become entitled to the house when he reaches the age of 25 years’. The woman executed a TR1 in favour of the banker. The woman died two weeks ago. In her will (executed five years ago), she appointed the banker to be her executor. Everything in the will was left to the woman’s daughter. When going through the woman’s belongings, the banker found the TR1 in the hall sideboard in the woman’s home. Land Registry have confirmed that the woman was still the registered proprietor of the house in Edale when she died. Is the house held on trust for the nephew? A Yes, because the woman executed a valid TR1 to transfer legal title to the banker. B Yes, because the woman made every effort to transfer legal title to the banker. C Yes, because the fact that the banker is the woman’s executor in this case constitutes the trust. D No, because the daughter is the sole beneficiary under the woman’s will. E No, because the woman failed to transfer legal title in the house to the banker while she was alive.

Answer 38

Answer Option C is correct. The woman tried to create a valid lifetime trust with the banker as the trustee. This would usually require the woman to transfer legal title in the house to the banker while she was alive. However, as an exception to the rule that ‘equity will not assist a volunteer’, equity can constitute this trust using the rule in Strong v Bird. This is because the woman intended to create an immediate trust; that trust was not immediately created due to a failure to comply with a relevant transfer rule; there is nothing to suggest that the woman’s intention did not continue up to her death; and the banker acquired legal title to the trust property by becoming the woman’s executo Option A is wrong. The mere execution of a TR1 is not sufficient by itself to transfer legal title in land. Option B is wrong. In order to satisfy the every effort test, the woman would have had to put relevant documents beyond recall, ie she would have had to send the TR1 to either the banker or Land Registry. She did neither. Options D and E correctly set out what the general position should be given that the woman failed to transfer legal title to the house during her lifetime. However, given that the nephew can rely on the rule in Strong v Bird to constitute the trust in his favour, neither statement represents the best advice on the facts.

Question 39

Question 2 An artist writes a letter to her brother saying, ‘The two of us shall be trustees over the sum of money in my savings account for your daughter until such time as your daughter marries or turns 30 years of age (whichever is the earliest), when it will become hers’. The brother telephoned the artist to agree. The daughter is aged 21 years. The artist dies two weeks later. The artist had taken no steps before her death to put the money into a joint bank account in the names of herself and her brother. In her will, the artist named the daughter as the executrix of her estate. Which of the following statements best describes why the money in the savings account belongs beneficially to the daughter? A The money belongs beneficially to the daughter because the letter is a valid declaration of trust and it would be unconscionable for the trust not to take effect. B The money belongs beneficially to the daughter because the letter comprises a deed of transfer of that money to the brother, which constitutes the trust. C The money belongs beneficially to the daughter because the letter demonstrates that the woman made every effort to constitute the trust. D The money belongs beneficially to the daughter because of the rule in Strong v Bird. E The money belongs beneficially to the daughter because the artist wanted the brother to act as trustee and he is still alive and able to act as trustee.

Answer 39

Answer Option A is correct. The artist intended to create a trust with herself and her brother as trustees. Ordinarily, the artist in this situation would have had to take whatever steps were required to put the legal title to the money into the joint names of herself and her brother. However, having made a valid declaration of trust, it would have been unconscionable for the artist to back out of constituting the trust. As a result, the trust is valid in equity and the money belongs beneficially to the daughter. Option B is wrong. The letter is not a deed (as it will not have been witnessed by a third party) and, in any event, is not sufficient to constitute the trust. Option C is wrong. The letter is not sufficient to satisfy the every effort test. The artist needed to take steps to open a joint account in the name of herself and her brother and transfer the money from her savings account into that joint account. The every effort test generally only applies in cases where land or company shares are being transferred. Option D is wrong. The fact that the daughter is appointed to be the executrix is irrelevant to the operation of the rule in Strong v Bird. In order to constitute a trust using this rule, it is the trustee who must be appointed the executor/ executrix, not the beneficiary. Option E is not the best answer. Had the artist intended to create a trust with just her brother as trustee, the money would not belong beneficially to the daughter even if the brother was still alive and able to act as trustee, because the trust in that case would not be constituted (no steps were taken to transfer the money to the brother). The trust is valid in this case because the artist intended that both herself and her brother would be trustees.

Question 40

Question 3 Last month, having taken legal advice that he should start to transfer some of his wealth to lower his potential future inheritance tax bill, a man telephoned an ex- colleague to say, ‘I would like you to have my shares in Wright Stuff Limited in case you want to give some for such of my friends that stood by me whilst I was having treatment for my cancer and in such shares as you think is right’. Following the call, the man executed a stock transfer form over his Wright Stuff Limited shares and sent this to his ex- colleague together with his share certificate. The ex- colleague forgot to tell the man during the call that she was about to take her children on a long holiday to Florida, so was not around when the documents arrived at her house. Last week, the man died. In his will, he appointed a solicitor as his executor and left his estate to the ex- colleague. The ex- colleague cut short her holiday to find the documents relating to Wright Stuff Limited on her doormat. Do the shares belong absolutely to the ex- colleague? A Yes, because what the man said over the telephone did not satisfy the test for certainty of intention. B Yes, because although the man wanted to create a trust, he failed to manifest and prove the declaration of trust in signed writing. C Yes, because although the man correctly declared a trust, he failed to constitute that trust during his lifetime. D No, because the man satisfied the every effort test and the shares are therefore held on trust. E No, because the man clearly intended that the ex- colleague hold the shares on trust for other people.

Answer 40

Answer You will remember that in order to create a valid trust, the settlor needs to take two steps: declare the trust and put assets into trust. This question is designed to test your knowledge about both aspects. Option A is correct. Objectively speaking, the man intended to gift the shares to the ex-colleague. The rest of the wording – ‘in case you want to give some shares’ – is precatory wording only and evidences no intention that the ex-colleague should hold the shares on trust for other people. As there was no lifetime trust, the ex-colleague takes the shares absolutely. (It should be noted that there are also problems with other certainties of subject-matter and objects.) Option B is wrong. If there were a trust, it would be over shares (personalty). In the case of personalty, the declaration of trust does not need to be manifested and proved in signed writing. This requirement only applies to declarations of trust over land. Option C is wrong. There was no trust to constitute. Option D is wrong. Whilst this option correctly applies the every effort test, it fails to take into account the fact that the trust cannot be valid due to the imperfect declaration of trust. (Had the declaration of trust been valid, the man would have satisfied the every effort test. The man executed all the documents that were required and put all documents beyond recall by sending them to the ex- colleague. He had done everything he could to transfer legal title to the shares while he was alive.) Option E is wrong. The man may have hoped that the ex-colleague might distribute shares to other people, but ultimately there was insufficient intention to create a trust over those shares.