Forms, constitutions and 3 certainties Flashcards
(20 cards)
what do formalities and consitutions mean
Formalites and constitutions relate to the form and method of creation.
Formalities: legal rules about HOW creating a trust/ gift, must be done. They ensure that the transaction happened and was intended.
Constitution: the moment when a gift or a trust is complete and binding. For a gift, its when the transfer is complete. For a trust, it’s when the declaration is made and the trust property is transferred to the trustees. If the settlor declares themselves as the sole trustee, the trust is constituted once the declaration is complete
What is the general rule and Equity’s role?
At common law, to be binging, a gift or trust must be 100% complete in terms of formalities and constitution- all relevant rules must be completely fulfilled.
Milroy v Lord (1682): Equity will complete an incomplete gift
M’Fadden v Jenykns (1842): Equity’s role is to step in and override rigid legal formalites and ensure fairness: Equity looks to intent over form (if it’s clear that a trust/ gift was intended, minor errors may not invalidate it)
What are Milroy v Lord 1862’s 4 ways to set up a gift or trust
1) Make a gift (transfer ownership): directly transfer their ownership to another person. Must meet legal formalities depending on the property type.
2) Declare SELF as trustee: the owner declares they hold the property on trust for beneficiaries. Need certainty of intention. less common
3) Declare trust AND transfer trust property to trustees: the settlor declares the trust terms and transfers legal title to nominated trustees. Not need to be in writing, unless land, but meets proper formalities- most common
4) Contract to do transfer: an agreement to transfer property in the future
What are the formalities for wills
Must comply with s.9 Wills Act 1837- writing, signed and witnessed by 2 people
Secret trusts are an exception to the strict formality requirements of the Wills Act
what are types of inter vivos (lifetime) trusts:
Governed by s.53 LPA 1925
Decleration of trust personalty(choses in posession/ action): can be informal no requirements it be created or evidenced in writing, however deed is common
Decleration of trust of land: must be in writing and signed by the person declaring the trust - s.53.1.b LPA 1925.
But the trust itself doesn’t need to be created in writing but there must be signed written evidence of its exsistence.
What are the formalities for land, shares, choses in posession, action, cheques and debts
Land: conveyance by deed and registration at the land registry s.52 LPA 1925
Shares: execution of a share transfer form, handover of share certificate and registration in the company’s register
Choses in Posession: deed or delivery with the intention to transfer ownership (Glaister- Carlisle v Glaister v Carlisle (1968)
Choses in Action: need to be legally assigned in writing and notification to new owner
Cheques: endorsement
Debts: signed assignment
Resulting trust vs Constructive
Resulting: arise when equity presumes beneficial ownership jumps back to original owner
Constructive: imposed by courts to prevent unconscionable conduct
implied trusts are exempt from formality requirements. they can also be used when an express trust land fauls due to lack of writing
Exceptions to the need for full consideration
The rule in Re Rose: if the donor/ settlor has done everything in their power to transfer the property but it’s not yet completed at law (e.g pending registartion by third party)
Pennington v Waine: equity may perfect and imprefect gift when it would be unconscionable for a donor to change their mind given their actions making the gift seem binding
Donatio Mortis Causa: the donor must make the gift while believing their death is near (King Chiltern Dog Rescue 2015)
- Donot must be contemplating imminent death
- the gift was conditional upon death
- the donor must part with control (death)
Rule in Strong v Bird: when a donor makes an immediate gift but fails to complete all formalities required for a valid trasnfer, if the intended recipient later becomes the executor or administration of the donor’s estate upon death, the gift is perfected and debt is cleared
- donor intended to make immediate gift- clear and not conditional
- donor’s intention must continue until death
- donor must be appointed as the donor’s executor or administartor
what are formalities for dealings with equitable interests
an equitable interets is the beneficial right in property held under a trust
a disposition of an exsisiting equitable interest must be in writing and signed by the person disposing. if not it is void
Exception: if the trust was made by constructive or resulting, meaning they’re excempt from the writing requirement
What are the basics to the three certainties
They are the requirements for making a valid express trust, holding the minimum content of the trust. both three certaintied and forms/ consti must be met to create a valid trust
What is certainty of intention: precatory/ imperative words
The settlor must objectively intend to create a trust as opposed to a gift or other relationship
Need to look to substance not form (wording). “trust” is not stricly essential as long as overall wording indicates: (The High Commissioner for Pakistan v Prince Mukarram Jah)
Precatory words: e.g hope, desire are generally insufficient (Lamb v Eames)
Imperative words: e.g shall hold, on trust for indicate intention
- Cominskey v Bowring- Hanbury- however precatpry words used in conjunction or read in the context of the whole document may show clear intention
- Re Steele’s Will Trusr- created a trust with precatory words, court disregarded actual wording and relied on another case to justfiy upholding trust
Vucicivev v Aleskic- “in full confidence” must be interperatred within the context of the will.
certainty of intention: inferred from conduct and circumstances
Even without express verbal recognition, intention may be inferred from language, conduct and circumstances of the case
- Paul v Constance “the money is much yours as mine” repeatedly said and allowed her to use the account. Court said this was enough to infer a trust, even without formal declaration
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Re Kayford: a company set up a separate account for customer payments. Even without formal trust declaration, court ruled the segregation of funds
showed an intention to create a trust for customers - Jones v Locke- father handed a cheque to his baby- “I give this to baby and I am going to put it away for him”. Court said no trust but a failed gift as words were too vague
certainty of intention: sham and illusory trusts
a sham trust appears valid on paper but not generally intended to operate as a trust. Courts fail these if they find the settlot and trustee never truly intended to create a binding agreement.
Elements:
- false intention
- used to decieve
court will declare these void
Illusory Trusts- settlor retauins too much control, making it a functionally ineffective trust
Thandi v Sands- suddenly created a trust to defeat creditors “rabbit out a hat”
JSC BTA Bank v Ablyazov- trust created to avoid judment debts and freezing order
certainty of subject matter
The property forming the trust must be clearly defined and ascertainable, this includes:
- Certainty of the trust property: specific assets placed into the trust must be defined
- Certainty of beneficial interests:shares or portions for each beneficiary must be clear
certainty of subject: certainty of the trust property
Assests must be clearly identified or provide the machinery by which it can be ascertained. Vaguness makes a trust invalid
Palmer v Simmonds: “bulk of my residue”- bulk was uncertain
Re Kolbs Will Trust: testator directed trustees to buy “first class” and “blue chip” investments. Court found terms too subjective and void as they did not establish an objective standard, trustees could not have know what testator intended.
MacJordan Construction Ltd: cannot mix funds up with another funds, must be able to ascertain with certainty
Re Goldcorp Exchange: company had unsegregated assest, went into recievership, since didn’t have enough stock, court ruled that the property could not be ascertained, failed trust
certainty of subject: tangible/ intagible and exception for shares
certainty of trust property
Tangible property(books), there must usually be segregation if only a portion is intended for the trust.
Intangible property (shares), segregation may not be required (Hunter v Moss). Vague terms like “the bulk of my estate” are uncertain
- Hunter v Moss: all shares of the same class in the same company are identical and indistinguishable. Unlike tangible goods, there is no physical difference between one share and another. Case involved 50/950 shares.
certainty of subject: certainty of beneficial interests
Beneficiaries shares must be identifiable
Fixed trusts: the beneficiaries and their amounts set out must be certain
- Sprage v Barnard: not certain on the amount left for named beneficiaries after husband- can’t be certain
- Boyce v Boyce: gave 2 houses to daughters, but first decider died before choosing, 2nd couldn’t get the house as it was impossible to know which the 1st daughter would’ve picked. Resulting trust
Discretionary trusts: the total fund subject to discretion must be certain
BUT
Re Golay’s Will Trusts [1965]
“receive a reasonable income.” - valid
Certainty of Objects:
The beneficaries or purpose must be clearly identified and ascertainable
Certainty of objects: tests
Fixed trusts: “the complete list”- each and every beneficiary must be ascertainable and a complete list must be able to be drawn up.- IRC v Broadway Cottages Trust (1955)
Discretionary: “given postulant test”- trustees need not list every beneficiary but must be able to determine whether a person qualified as a potential beneficiary- (McPhail v Doulton (1971)
- Re Manistry 1974- trustees were given power to add people to the beneficiary class
- Re Tuck 1978- external experts can resolve uncertainty, preventing trust failure
Certainty of objects: Conceptual vs Evidental uncertainty
Even if the test is satisfied, uncertainty may still airise from
- Conceptual uncertainty- when the categories of beneficiaries is unclear, e.g “friends”-
- Evidential uncertainty- when its difficult to prove someone is a beneficiary e.g proving someone is a long lost relative- for fixed trusts only
Re Baden’s Deed Trust No 2 1973- conceptual uncertainty will invalidate a trust, but evidential uncertainty won’t necessarily, in this case relatives were accepted but proving each individual’s status was a separate issue.
