Topic 3 - Completely and Incompletely Constituted Trust Flashcards
(26 cards)
Milroy v Lords
Facts
The settlor, Mr Medley, executed a deed to transfer 50 shares in the Bank of Louisiana for Mr. Lord (L) to hold on trust for Eleanor Medley (M), Mr. Medley’s niece.
The settlor also handed the relevant share certificates to L.
However, the shares were never registered in L’s name by the bank as L failed to hand over the deed of transfer and share certificates to the bank.
Registration is required under company law for legal title in shares to be transferred.
When the settlor died the shares still remained in his name.
M sought to argue that the shares had been held on trust by the settlor for L, who then held such beneficial interest on a sub-trust for herself.
Issue
Did the settlor hold the shares on trust for L?
Held (Court of Appeal)
No, the legal and beneficial title remained with the settlor.
Jeffreys v Jeffreys
A father by a voluntary deed conveyed freehold to trustees and agreed to convey leasehold for the benefit of his daughter and then died. By Will, he left both freehold and leasehold to his wife. It was held that the daughter was entitled to freehold because it was completely constituted trust but not entitled to leasehold because it was an incompletely constituted trust.
AG v Jacobs-Smith
In equity, marriage is recognized as the most valuabe consideration.
Mackie v. Herbertsib and Others (Gloag’s Trustees) (21 SLR 465)
This is a landmark case decided by the United Kingdom House of Lords on March 6, 1884. This case revolves around the interpretation of a marriage settlement entered into by a widow with children from her first marriage and her second husband. The central issue was whether the provisions made for her children constituted a vested interest (jus crediti) or merely a testamentary provision, affecting the enforceability of those provisions against subsequent settlements.
Summary of the Judgment
The widow, anticipating a second marriage, entered into an antenuptial contract with her second husband. She conveyed her property to trustees for her benefit during her lifetime and for the benefit of her children “procreated or to be procreated” from her body. The key contention was whether the provisions for her children from the first marriage were irrevocable and vested (jus crediti) or whether they were revocable and merely testamentary. The Court of Session had previously held that these provisions were testamentary and revocable. However, the House of Lords reversed this decision, holding that the children of the first marriage were entitled to a jus crediti, thereby securing their interests against any subsequent settlements by the widow.
Pullan v Koe
Case Summary
A Marriage settlement made in 1859 contained a covenant by the husband and wife with the trustees to settle the wife’s after acquired property of value of 100 pounds and above in 1879 the wife paid 285 pounds into her husband’s bank account part of which was invested in two bearer bonds which were kept in the bank until death of her husband in 1909 and thereafter came into the possession of the executors. Intending to benefit the wife and the 9 children of the marriage the trustees of the settlement brought an action against the husbands executors. Held:
It was held that equity sees as done, that which ought to be done. The moment the wife received the sum of 285 pounds in 1879, the amount was specifically bound by covenant and was subsequently subject to a trust enforceable by the wife and children coming within the scope of marriage consideration. A beneficiary under a completely constituted trust can enforce the trust even if he is a volunteer just as a cestui que trust who has given consideration. But a volunteer beneficiary will not receive assistance from the court. Contrast with Re Plumptre’s Marriage Settlement, [1910]1 Ch 609
Re Plumptre’s Marriage Settlement
On their marriage in 1878 the husband and wife covenanted with their trustees to settle the wife’s after- acquired property for the benefit of herself and her husband successively for life, then for the issue of the marriage and then for the wife’s next of kin. In 1884 the husband bought some stocks in the name of his wife, which the wife sold and reinvested, in another stock. In 1909, the wife died without issue leaving her husband as her administrator.
Held:
It was held that her next of kin being volunteers could not enforce the wife’s covenant to settle the stock against her husband as her administrator and that the trustees could not sue for damages for breach of the covenant as the claim was statute-barred. Where claim under a covenant is not statute barred, a volunteer beneficiary will not be allowed to compel trustees to enforce the covenant and court will restrain the trustees from suing the settlor for breach of covenant.” Contrast with Pullan v Koe, (1913) 1 Ch 9
Re Cook Settlement Trust
Facts:
In 1933, H. and his son F. made a deal: F. would exchange a future interest he had under a will trust for property of equal value.
F. agreed to create a trust using part of that property (plus some of his own) for the benefit of his family (but not H.).
The rest of the property — including valuable pictures — wasn’t required to be put in trust.
However, they agreed that if F. ever sold any of those pictures while alive, the sale proceeds would go to the trustees of the settlement trust.
In 1934, a formal settlement was made, where F. promised (covenanted) to do just that.
Fast forward to 1962, F. gave a picture to his wife, who wanted to sell it. The trustees were like: “Uhh, what happens if we don’t get the money from the sale?” and went to court.
Judgment:
The court said the covenant (F.’s promise) was an executory contract — meaning it was a promise to create a trust in the future, but only if those sale proceeds ever came in (and they might never).
This meant it wasn’t a present trust — it was a potential future obligation.
Even though H. gave consideration for the agreement, the beneficiaries of the trust weren’t parties to the original agreement and didn’t give any consideration themselves.
So, they couldn’t enforce the covenant or force the trustees to do so either.
Basically, unless you’re in the contract or legally tied to it, you’re out of luck in enforcing it.
Richard v Delbridge
Case Summary
A settlor attempted to assign a lease of business premises to his grandson by endorsing the lease and signing a memorandum not under seal with the following note: ‘This deed and all thereto I give to R from this time henceforth with all stock in trade.’ He gave the lease certificate to R’s mother to hold on his behalf. On the death of the settlor, it was ascertained that his will made no reference to the business premises. The question in issue was whether the lease belonged to the grandson or to the residuary beneficiaries under the testator’s will.
Held:
There was an imperfect gift inter vivos to the grandson as the assignment, not being under seal, was ineffectual to transfer the lease. Although there was a clear intention to make a gift, the gift failed because it was imperfect and passed no legal interest. The lease was subject to a resulting trust for the residuary beneficiaries. Further, there was no declaration of trust and no trust had been created for the grandson, as the grandfather did not declare himself a trustee of the lease for him. The court will not construe an ineffectual transfer as a valid declaration of trust. Sir George Jessel MR:
Antrobus v Smith
Case Summary
The owner of shares in a company endorsed on the share certificate a memorandum to the effect that he assigned it to his daughter Held:
The endorsement on the share certificate was completely constituted. It did not constitute a valid assignment. In rectifying the present, the question was which was necessary to the transfer of shares to a beneficiary and the court held that the trust and the gift were not completely constituted and the shares formed part of the owner’s residual estate.
Re Fry
The donor, who was domiciled in U.S.A. had shares in a company in U.K. He executed transfers of these shares, partly to his son and partly to a trust. Because of Defence Regulations operative at that time which required the consent of the Treasury, the company was unable to register those shares, as the Treasury’s consent had not been obtained. The company then sent to him the forms required for obtaining this, which he signed and sent back to the company in U.K. He died before the consent was obtained. Held:
Romer J held that the trust and the gift were not completely constituted and consequently, the shares formed part of his residuary estate. This case establishes the principle that if something remains to be done by the transferor to vest the property, the subject matter of the gift in the donee then the gift is ineffective. However, a gift is perfect once the donor has done all that he needs to do to effectively transfer the property even though something remains to be done by the donee or some third person.
Re Rose
the transferor executed on March 30, transfer of shares in a company to be held on trust. The transfers were registered by the company on June 30. The transferor died more than five years after the execution of the transfer, but within five years of the registration by the company. If the gift had been made five years or more before his death, the giftwould not have attracted estate duty. The question for determination was whether or not the gift had been perfected at the date of execution of the transfer. The court of Appeal held that since the transferor had done all that he was required to do to transfer the shares; the transfer was effective in equity. Accordingly, the transferor holds as trustee for the transferee until registration is effected by the company and when the shares are registered, the transfer becomes effective in law.29
Gilbert v. Overton
A parcel of land under an agreement for a lease was assigned by deed to trustee on certain trusts. Later the lease was granted. It was held that a trust was complete as tgere could be a valid transfer of an equitable interest and the Transferor need not have converted his equitable interest to a legal interest, even though such is possible.
Cochrane v Moore
Cochrane v Moore (1890) Involved purported gift of a ¼ share in a horse. The owner told the stables of the gift but didn’t communicate it to the defendant.The horse was sold & the defendant claimed a share of the proceeds.*Fry LJ said – Cochrane was in fact constituted a trustee of ¼ share in the horse.Decision leaves open whether there can be delivery of a share – hard to see how a share under tenancy in common being intangible can ever be physically delivered. Fry LJ conclude:“No gift or grant of a chattel was effectual to pass it whether by parol or by deed, and whether with or without consideration unless accompanied by delivery: that on that law twoexceptions have been grafted, one in the case of deeds, and the other in that of contracts of sale where the intention of the parties is that the property shall pass before delivery.A gift of a chattel capable of delivery, made per verba de presenti by a donor to a donee, and assented to by the donee, whose assent is communicated to the donor, does not pass the property in the chattel without delivery.Constructive delivery how do you deliver a quarter of the horse? Communication between giver and receiver amounted to delivery – verba de presenti
Paul v Constance
Facts
T separated from his wife (D) and went to live with another woman, C
T deposited money including both his and C’s bingo winnings in an account in his name, from which C would also withdraw money
T told C that ‘the money is as much yours as mine’
When T died, D claimed that the money in the account passed to her by intestacy
Held (Court of Appeal)
T had created a trust over the account in favour of C
Scarman LJ
There must be clear declaration of trust and that means there must be clear evidence from what is said or done of an intention to create a trust
A trust may be created without using the word ‘trust’, for what the court regards is the substance and effect of the words used
Though T never used explicit words to create a trust, it should be remembered that they are simple people unaware of the subtleties of equity but are well aware of their own domestic situation
On the evidence, T viewed the money as much C’s as his, based on what he told C
Furthermore, the one withdrawal from the account was shared by both C and T
Strong v Bird
The defendant borrowed 1100 pounds from his stepmother who lived in his house, paying 200 pounds a quarter for board. It was agreed that the debt should be liquidated by deduction of 100 pounds from boarding fee quarterly. After deducting for two quarters, the stepmother generously agreed not to deduct 100 pounds and this continued till she died four years later. The defendant was sole executor of her will and he proved the Will. The next- of-kin claimed that the defendant still owed the balance of the debt to her estate. Held:
It was held that the debt was extinguished because the appointment of the defendant as executors had released the debt and that any claim in equity was rebutted by evidence of a continuing intention to release it on the part of the step mother.
Re Stewart
It was held that a mere intention to make a testamentary gift would not suffice. Similarly, there must be certainty as to subject-matter: the intention must relate to specific property and cannot consist of a general desire to make provision for the donee.
In Re Dillon
The donation mortis causa rule was established
Re Beaumont
Buckley J described the rule of donatio mortis causa as a gift of amphibious nature, being a gift, which is neither entirely inter Vivis nor testamentary. It is an act inter vivos, by which the donee is to take the gift property absolutely subject and at the death of the donor.
Re Craven’s Estate
Farewell J established three elements that must be present for the application of the rule;
- A clear intention to by the donor to give the property entirely or absolutely to the donee and not merely for the donee to hold for security.
2A.There must have been a clear contemplation of death either from illness or hazardous situations (but clearly not from normal everyday risk such as air travel)
2B. The absolute transfer of the gift must be conditional upon the death of the donor. - The donor must have part with the dominion over the subject matter, either by delivery of the subject matter, or un the case where physical delivery is possible, by delivery of an inidcia of title thereto.
Sen v Headley
Re-established tge rule in Re Craven’s Estate
Facts
In 1986 the deceased (T) was diagnosed with terminal cancer. While in hospital the claimant (C) was told by T that his house would thereafter belong to C, and that she would find the deeds to the property in a steel lockbox to which she had the keys. T passed away several days later. C bought an action against T’s estate, claiming to be entitled to the property on the basis that the actions of T amounted to a valid “donatio mortis causa” DMC. The judge at first instance found that there could not be a valid DMC of land and an appeal was brought by C.
Issues
The Court of Appeal were required to determine whether real property could form the subject-matter of a valid DMC or, in the alternative, whether the trust imposed under a DMC must comply with the formality requirements mandated by s.53(1) of the Law of Property Act 1925 (LPA) in order to be upheld.
Decision/Outcome
In allowing the appeal of C, the Court found that the question of whether land could be the subject of a valid DMC had to be determined as the law had now developed, especially that concerning constructive trusts. Section 53(1) LPA does not apply to constructive trusts (s.53(2) LPA) and, as the trust arising under a DMC was imposed by operation of law, s.53(1) LPA could not apply to defeat a DMC of land where the requirements for a valid DMC were otherwise made out.
Thompson v Mechan
The deceased, who was very apprehensive of flying, delivered the keys of his car and the vehicle permit to the plaintiff shortly before departing on a regular flight to Winnipeg. The deceased arrived safely, but died suddenly from a coronary thrombosis two days later whilst still in Winnipeg.
• Held : the risk of normal air travel did not satisfy the requirement of contemplation of death. It is not sufficient merely to recognise that death will occur sometime.
Wilks v Allignton
In Wilkes v Allington 2 Ch 104, the court established that a gift made in contemplation of death, also known as a donatio mortis causa, can be valid even if the donor’s actual cause of death is different from the cause they anticipated. In this case, the donor, who knew he had cancer and believed he was “doomed”, made a gift, but he died from pneumonia instead. The court ruled the gift was valid, emphasizing that the anticipated cause of death did not need to be the actual cause.
Tate v Hibert
Donatio mortis causa may be revoked during the lifetime of the donor. Where however, the donee predeceases the donor, tge gift fails.
Bunn v Markham
The donor directed that name of the donees should be written on three parcels. The donor declared that the parcels were intended for the named donees but that the parcels should be given to them after his death. The parcels were then replaced in the chest to which the deceased retained the key. Held: The court held that there was not sufficient delivery and that there was no effective donatio mortis causa.
