What is the difference between a gift, self-declaration of trust, and transfer on trust in terms of formalities?
I.e. which titles transfer
- Only involves legal interests, so only necessary to consider formalities for legal title
- No change in legal ownership, so only necessary to consider formalities for creating new equitable interest
- Changes in legal and equitable title, so necessary to consider formalities for creation of equiatble and transfer of legal
Must a settlor comply with specific formalities requirements to declare a trust?
Distinguish ‘declaration’ from ‘constitution’ (transfer of legal title)
No formalities must be complied with to declare a trust (so can create orally, in writing or conduct)
Subject to exception…
What is the exception to no formalities for declaration?
Declaration of trusts of land
What are the formalities for a declaration of trust of land?
Not constitution!
Written evidence of intention, terms and a signature
- Manifested and proved - evidential requirement (order in which declaration and writing unimportant and trust unenforceable until formalities satisfied)
- By some writing - no prescribed form for written eveidence but must contain evidence of S’s intention to create trust and trust’s terms
- 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
Where a trust of land is created by will, what formalities must be satisfied?
Where will is validly executed under s9 Wills Act it will satisfy formalities
Will non-compliance with formalities for a trust on land render said trust void?
- Renders trust unenforceable (rather than void)
- Means trust exists from moment it is declared but cannot enforce rights until formalities are satisfied
What can Bs enforce their rights in respect of over trust on land once trust becomes enforceable?
The period in between declaration (exists but unenforceable) and satisfaction of formalities (enforceable)
What happens if formalities are never satisfied after declaration of trust on land?
Trust will not become enforceable; S has a chance to change mind about parting with beneficial ownership
If T changes mind after declaration of trust on land what happens for
1. Self-declaration
2. Transfer on trust
?
- 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)
- 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)
Can trust on land arise in the absence of written, signed evidence?
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.
Failure of formalities when considering a third party?
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.
What is constitution and how does it apply to the two ways of creating an express trust?
Two ways = transfer and self-declaration
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
How will constitution occur in testamentary and lifetime (inter vivos) trust?
- 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
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?
- 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
What is the effect of constitution for the settlor and T in terms of the rights they have?
In case of a transfer
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
What is the effect on the trust or gift if there is incomplete constitution (legal title not transferred)?
Trust/gift is void (subject to exceptions!)
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?
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:
- Treat intended (but failed) gift as a self-declaration of trust (or transfer donor to transfer legal title)
- 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
What must the transferor make sure to do to effect intended disposition?
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
What is the effect on the S or the donee should the property not be transferred using correct method and disposition fails?
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
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)
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!
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!
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
What is the rule in Milroy v Lord and what are its 4 exceptions?
Rule = if legal title has not been vested in intended recipient the disposition will fail (and equity will not intervene). Exceptions are…
- Re Rose principles (and Mascall v Mascall)
- The unconscionable principle
- Fortuitous vesting
- Donationes mortis causa (DMC)
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 !
If…
- Correct method of transfer used
- Transferor does everything within power to effect transfer
- 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
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
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
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Introduction to the trust41
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Creation of trusts19
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Express trust: The three certainties35
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Express trust: Formalities35
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Beneficial entitlement42
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Purpose Trusts50
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Implied Trusts: Resulting trusts19
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Implied Trusts: Trusts of the family home87
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Overview: Administration of trusts + Role, appointment, and removal + The Fiduciary relationship58
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Trustees: powers and duties78
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Trustees: liability51
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Equitable remedies12
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Liability of strangers7
