Certainty, Constitution & Formalities

Re Vandervell's Trusts (No. 2)

'The mere existence of some unexpressed intention in the breast of the owner of the property does nothing: there must at least be some expression of that intention before it can effect any result.'

Richards v Delbridge

A donor who tries to make an outright gift but who fails in the attempt has not declared himself a trustee. An imperfect attempt to create a trust using a third party as trustee will not be interpreted as a declaration by the settlor of himself as trustee. (failure to effect transfer of the lease. S, tenant, sought to transfer business premises to son; did not execute conveyance necessary to effect a transfer of legal land; grandson argued that court should discern an intention to create a trust; court rejected reasoning as they cannot regard failed transfer as amounting to a gift)

Pennington v Waine -- Unconscionability [Exception]

A equitable title will pass in the situation where, though the transferor has not done everything needed of them to secure the transfer, it would be unconscionable for the transferor to change his mind about the transfer. Requirements: • There must have been a promise to transfer property to transferee • Transferee must have acted in relation to the property as if it had been transferred to him (reliance). • It must be unconscionable to rely on the strict rule of law to deny the transferee the promised property. (Ada executed an appropriate share transfer form but instead of passing it to the company for registration she delivered to the auditor. She then told Harold of her intention to transfer the shares into his name, and also that she wanted him to be appointed director. The articles provided that directors must hold at least one share in the company; at this time, Harold was company secretary but held no shares. Auditor soon told Harold that he had been made director and Harold duly signed forms giving his consent. Auditor also told Harold that Ada had instructed him to give effect to the transfer of the shares and that Harold need not concern himself with this. In fact, nothing further was done to complete the formalities required to transfer the shares--he merely passed the transfer form to a colleague, who promptly filed it.) *Common error is for students to take this case as the remedy for all failure in vesting. The facts of this case were important, the relationship, and thus the elements must be adhered to.

Passing Rights to registered land

A title to registered land, the trustee will need to be registered as proprietor of the title. This can only be effected by the Chief Land Registrar, and he will do so on the instruction of the settlor given by the completion of the correct form of transfer and lodging it with the Land Registry.

Tailby v Official Receiver [Future Property]

An assignment of future property for consideration is effective to pass an equitable interest in the property to the assignee once the property comes into the assignor's hands. It is not possible to create a trust of future property, create a trust of rights which the settlor does not currently have. Thus, I cannot today create a trust of the rights I expect to receive under my father's will. Example, if one executes a deed whereby he purport to assign to you all the royalties from a book not yet published, that deed assigns nothing, for no royalties exist. If, however, you give consideration for the assignment, then equity will perfect this imperfect transaction: equity will treat the assignment of future property as a contractual obligation to assign the future property "if and when it is received" - Tailby v Official Receiver (L had an expectancy of a share in his insane mother's estate. Mother is still alive. L mortgaged it to N (i.e. assigned the expectancy to N in exchange for value (money)) in 1905 and to A in 1908. Between 1908-1910 L is bankrupt and neither N or A make claim on L's estate (L is discharged in 1910). In 1914 mother dies, L acquires interest in estate, assigns it all to Plaintiff, P, for value (P has taken an assignment of presently existing property for value, but it is an equitable assignment). P argued that debts owed to N and A were discharged and that he took the expectancy unencumbered by any other interest, because P wants to be first in line for payment.)

Paul v Constance [certainty of intention]

An intention to create a trust can be inferred from the conduct of the donor. Inter vivos trust can be declared orally or by conduct. In general, oral evidence may be admitted as evidence that a donor has made a declaration of trust. Exceptions: declarations of trust regarding land must be 'manifested and proved' by some writing - s.53(1)(b) LPA 1925 (Made arrangements for his girlfriend to be able to withdraw money from his bank account w/ his written permission and told girlfriend on several occasions that the money in the account 'was as much yours as mine'. Held, his actions were sufficient to infer that he had made a declaration of trust of the money and the wife also was entitled to half the money. This is similar to a trustee and beneficiary relationship.)

Jones v Lock

Equity will not perfect an imperfect gift. Equity will not treat an imperfect gift as a self-declaration of trust. THE RULE IN MILROY V LORD APPLICABLE TO GIFTS... EQUITY WILL NOT RESCUE A FAILED GIFT OR TRUST. THIS CASE CONCERNED A GIFT, AND ALSO IMPORTS THE RULE THAT EQUITY WILL NOT TREAT A FAILED GIFT AS A SELF-DECLARATION OF TRUST (Mr Roberts had a cheque payable to him for £900. Mr Roberts got home & it was his child's birthday, but he had forgotten to buy his child a gift therefore, when asked if he had brought a gift, he handed the £900 cheque to the baby and said 'I give this to baby'. A few days later, Mr Roberts died. (NOTE - cheque constitution, MUST endorse it to new owner) C tried to argue that Mr Roberts actions = self-declaration of trust. HELD - equity will not perfect an imperfect gift. Equity will not treat an imperfect gift as a self-declaration of trust.)

Milroy v Lord

Equity will not perfect an imperfect trust. The general rule is that if the settlor has not managed to create a perfect trust, the courts will not intervene to create one for him. This would be creating a constructive trust. Equity will not assist a volunteer to perfect an imperfect trust. *However, in the case of a promise to create a trust for which the intended beneficiary has provided consideration, equity will again specifically enforce the promise and find a constructive trust in his favour. An imperfect attempt to create a trust using a third party as trustee will not be interpreted as a declaration by the settlor of himself as trustee. *Same applies to an outright gift (Richards v Delbridge) For a settlement to be effective "the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him"

Knight v Knight

For a valid express private trust, the three certainties of intention, subject matter and objects must be satisfied. Except for charitable trusts, all trust must satisfy the three Certainties Test: 1. Certainty of intention: Is a trust intended? (intention of the settlor or testator to create the trust) 2. Certainty of subject matter: What property is to be held and what are the beneficial interests? (Note: Two elements, the property to be held, and the beneficial interest must be certain) 3. Certainty of objects: Who are the potential and actual beneficiaries? -- Re Golay's WT *Note every trust must also satisfy the formality requirements in respect of the type of property. Thus, if the certainties are present, but, for example, a trust of land is not written or evidenced in writing as s.53(1)(b) of the LPA 1925 requires, it will be unenforceable.

Re Gulbenkian - Powers vis-a-vis Certainty of Objects

For powers of appointment, objects are sufficiently certain if any given individual could be said to be in, or not in, the class. (This was more relaxed than the list, which required everyone to be said to be in the class.) Since powers may be created in favour of classes of people described only in generic terms this can create similar issues found in trust. However, given that there is no duty to appoint equally to all members of the class but merely to stay within the terms of the power, the same test for certainty of objects (the 'is or is not' test) applies to powers of appointment as to discretionary trusts.

Settlor Passing Rights to Chattel

If it is a title to a chattel (including cash), it will have to be conveyed by either deed or delivery, a physical handing over of the thing in respect of which the title subsists.

IRC v Broadway Cottages

In order to satisfy the certainty of objects requirement in a fixed trust, a complete list of the beneficiaries must be able to be created.

Re Baden (No 2) -- Conceptual uncertainty

In order to satisfy the is or is not test set out in McPhail v Doulton, the class of beneficiaries must be conceptually certain. A class of beneficiaries will be conceptually certain when the description enables you to define the group clearly. • Distinction: Conceptual uncertainty relates to the certainty of the class; evidential certainty relates to the issue of whether an individual can be found or proven to be a member of a class or not. • Where a trust is conceptually uncertain the trust will be void, but evidential uncertainty will not defeat a trust. Where the language is unclear the trust would result in the declaration of trust being void for conceptual uncertainty - Palmer v Simmonds (bulk of my ...) However, where a court can determine an appropriate meaning of the terms in the trust, the declaration of trust will be valid - Golay's WT (B to receive a 'reasonable income'. Court was able to determine what was reasonable by reference to the beneficiary's previous standard of living.) 'Conceptual uncertainty' arises from the settlor's use of imprecise or vague language in expressing his intentions. Vagueness can be understood as the problem of the uncertain boundaries which arise when we try to apply words to things in the world.

Equitable Interest: s.53(1)(c)

In regards to equitable interest, the disposition must be in writing, signed by the owner or his agent. Failure to comply renders the disposition void. Evidence in writing of a prior oral disposition will not suffice. A direction by a beneficiary to his trustees to hold the rights on trust for a third party is covered by s.53(1)(c) with the result that there was no effective disposal by the beneficiary of his interest under the trust until he put his direction in writing. A requirement that assignments be made by writing protects the trustees because they can now, by demanding sight of the documentary transfer, ensure they pay out only to genuine assignees. This applies to land and personalty. Grey v IRC

Settlor Passing Rights to Chattel

Includes cash, paintings, jewelry, etc. Must be conveyed by either deed or delivery, a physical handing over of the thing in respect of which the title subsists. A valid transfer money merely requires delivery

Settlor Passing Rights to Unregistered land

Must satisfy s.52(1) LPA 1925 (transfer must be by deed). Deed is defined in s.1 LP(MP)A 1989- written, signed, witnessed, headed as a deed, delivered. Unregistered=conveyance Registered=transfer

Sen v Headley

Regarding a deathbed gift, the handing over of the title deeds of unregistered land constitutes the granting of dominion to the donee. (he wished her to have the house, and he delivered the keys to the donee, and the donor told her where the title deeds were located.)

McPhail v Doulton - "the is or is not test"

Since McPhail v Doulton, the test for certainty of objects for discretionary trusts and powers has been the same. Objects are sufficiently certain if it could be said with certainty whether any given person is, or is not, in the class. HOL restated the law, abandoning the "complete list" test in favour of an "is or is not" test which is the test for certainty of objects and is sometimes called 'any given postulant' test. This test applies only to conceptual uncertainty. In a discretionary trust, the trustee has a discretion to choose which of the potential objects is to be given income generated by the trust rights, thus he is not required to distribute income or capital equally to all - the share each will receive is not contingent on the number of people in the class. There is therefore no need for the trustees to be able to compile a complete list of all potential beneficiaries to make any distribution. If, for example, I give T a discretion to distribute income from a trust fund to 'tall students of the UOL', the test of validity is whether they are able to tell which students are tall and which are not, for otherwise they may stray outside the terms of their discretion and thereby commit a breach of trust. Since neither they nor the court can tell where 'tall' starts and 'not-tall' ends, such a trust will fail for 'conceptual' uncertainty. It is different where we know what the defining term means but do not have enough evidence to determine whether a particular person is or is not a member of the class, sometimes called a case of 'evidential uncertainty': • Re Baden (No 2). There, the burden of proof is on the postulant, the person claiming to be in the class and if he does not prove that he is, then he is not.

Boyce v Boyce [Certainty of subject matter]

The beneficial interest under the trust must be certain. In a fixed trust, property must be capable of determination. I.E., the settlor must identify the shares in which the beneficiaries are entitled under the trust or there will be a resulting trust. This will obviously not be a problem with a discretionary trust, as these are left to be determined by the trustees themselves. (testator left four houses for his daughters; one for Maria to choose whichever one she wanted and the other three to be held for Charlotte." Maria predeceased the testator before choosing. The gift lapsed as there was no way of knowing what would be held on trust for Charlotte. Here, the property had been clearly identified but the beneficial interest had not. The trust would have succeeded if the trustees had been given the power to choose the house, but neither they nor the court could. The result was that the four properties were held on resulting trust for the testator's estate. If Maria had survived the testator, then the trust would have been valid as Maria's estate could have made the choice and Charlotte would have been certain as to her beneficial entitlement.)

Palmer v Simmonds [Certainty of subject matter]

The donor must be clear what property is to be held on trust. The donor must properly identify what he intends to be subject matter under this trust (testatrix (by will) left residue of her estate to her friend subject to proviso that, if he died childless, "he will leave the bulk of my said residuary estate unto" four named persons - reference to 'bulk' was ineffective to create a trust; failed to identify 'a definite, clear, certain part of her estate') • However, recently Hunter v Moss and, Holland v Newbury says that there is no requirement to individually identify or separate the shares intended for the trust. Shares are deemed a special case as they are completely identical incapable of being individually identified. • However, where the question relates to a portion of different types or shares in different companies, the rule in Hunter v Moss will not apply and the trust will be void if there is no further identification of the relevant property -- Re Harvard Securities

The six substantive requirements of a valid declaration of trust

The intent which is expressed must show that the settlor intended to create a trust. This means it must be shown that the transferor (S) intended the transferee (or himself in the case of a self-declaration of trust) to be legally obliged to hold the rights in question for another, and not simply leave the matter to the third party's 'conscience', e.g., "she will do what is right as to the disposal thereof between my children"?. - Re Adams & the Kensington Vestry The rights which are to form the subject-matter of the trust have been identified The persons who are to be the beneficiaries of the trust have been identified The shares in which such beneficiaries are to be entitled under the trust have been identified The trust is workable by the trustees The trust does not offend the rule against perpetuities.

Re Adams & the Kensington Vestry [certainty of intention]

There must be a clear intention to create a trust For a declaration to have occurred, it must be shown that the words used show an intention that the transferee is legally obliged to hold the rights in question for another. Precatory words is insufficient to establish a trust (moral obligation, hope, wish). ("in full confidence that she will do what is right as to the disposal thereof between my children". Held, not a trust, thus the wife could do as she pleased with the money.) -- re Adams & the Kensington Vestry • Examples; to be at her disposal in any way she may think best, for the benefit of herself and her family; it is my desire that my daughter allows Anne an annuity of $25 during her life. *Note however that precatory words language will not necessarily prevent the court from finding a trust exists as long as it is satisfied that this was the intention of the donor -- Comiskey v Bowring-Hanbury. For example, an intention to create a trust can also be inferred from the conduct of the donor - Paul v Constance

Mascall v Mascall

When the transferor can no longer change their mind, that the property has been taken out of the control of the transferor, the courts will perfect the transfer. Follows the Re Rose Principle (A donor handed over a signed Land Registry transfer which was sent off for stamping. The parties (Father and son) fell out but the gift was made; signing the transfer completed the deed and the gift could not be revoked. Father held on trust until transfer was duly registered. Where by acquiring the land certificate and the transfer form the son was able to have the title transferred into his own name by sending these to the land registrar.)

Re Rose [Exception]

Where a settlor could be taken to have done all that was necessary to create a trust the equitable interest in his property should be taken to have passed automatically. Where the power to complete the transfer is out of the hands of the transferor equity will look upon as done that which ought to be done. Further, the transferor must have 'gone beyond the point of no return', in effect that he cannot change his mind because he has practically lost dominion of the property -- Re Fry (Treasury consent was required before the transfer of shares could be effective and because this could have involved action by the donor the gift was ineffective.) The re Rose principle: if the donor has done everything that can be expected of him to transfer the legal title, but the effective transfer is delayed by the routine operation of law, the gift is effective despite the lack of a valid transfer of title. Re Rose applied to shares but, in principle, can apply to any transfer where legal formalities take time to complete. It is routinely applied to land transfers, which are invariably deemed to be effective in equity from the moment contracts are exchanged, despite the lack of transfer of legal title. The court makes the Re Rose principle work: Once the donor is committed to transfer the legal title, he is deemed to hold the legal title on constructive trust for the recipient. Where the transfer is to constitute a trust -- suppose A contracts to transfer land to B to hold on express trust for C -- then from the moment contracts are exchanged, A holds the legal title on constructive trust for B, who holds the equitable title under this Constructive Trust on express sub-trust for the C. The reason, said the court, was to be found in notions of 'common sense'. (Forms under a transfer of shares were completed and sent to the company but there was a 3-month delay between sending the forms and when the company actually registers the forms. Held, transfer was effective at the moment he had done everything within his power to make the gift of shares to his wife perfect. There being no declaration of trust on Mr Rose's part, this was a genuine example of a constructive trust.)

Dillwyn v Llewellyn / Proprietary Estoppel [Exception]

Where the offeree has acted to his detriment, by the expenditure of money or otherwise, in reliance with a misrepresentation by the offeror, equity will perfect an imperfect gift as it would be inequitable not to enforce the assurance. Where a landowner has made an incomplete transfer of an interest in land and the transferee has relied to his detriment on the belief that the transfer is effective, equity will compel the owner to transfer the property or do whatever else is necessary to give effect to the transferee's interest. Requirements: • Clear promise or acquiescence • Reliance (can be a variety of actions) • Inequitable no to enforce the assurance • Examples of reliance include: worked for years on low wages and not taking employment elsewhere -- Gillett v Holt; Caring for the family -- Greasley v Cooke; decoration and repair -- Pascoe v Turner. (a father purported to transfer some land to his son although he knew that the transfer was ineffective as the transfer was not contained in a deed. Believing himself to be the owner of the land, the son spent some 14,000 on erecting a dwelling on the land with the full knowledge and encouragement of his father.) *This is proprietary estoppel, not promissory, thus it can be used as a sword and shield.

Re Bowden

Where the property is vested in the trustee the settlor/donor cannot change his mind and reclaim property.

Re London Wine Co [Certainty of subject matter]

Where there is an attempt to create a trust over part of a bulk of tangible property, the trust property will only be certain if it has been separated from the rest. It must be possible to identify exactly what rights are to form the subject-matter. (example: furniture in a home or warehouse filled w/ computers)

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Evidential uncertainty

'Evidential uncertainty' arises when there is insufficient evidence to conclude that an object is within the specified class of objects. • The terms of a trust may be conceptually clear, but actually providing evidence to meet them may be impossible. Where a question of fact, such as whether C is a beneficiary, cannot be answered, this does not always lead to invalidity. In other words, evidential uncertainty as regards any particular object will not invalidate a discretionary trust, nor a power of appointment. As long as there are objects who can provide sufficient evidence to prove that they are within the class, there will be valid objects under the trust, and it will not fail. However, evidential uncertainty defeats a fixed trust entirely. The reason is straightforward: if the settlor expresses his gift in such a way that evidence must be adduced to identify the rights or person and that evidence is not available, the trust cannot be executed according to its terms.

Hunter v Moss

(D made a voluntary (i.e., gratuitous) declaration that he held 50 of his 950 shares in a particular company on trust for C. D failed, however, to identify which 50. When C later tried to enforce the trust, D, relying on re London Wine, argued that it failed for uncertainty of subject-matter. Held, distinguished London Wine on the ground that shares were intangible whereas bottles of wine were not.) Despite re London Wine, the CoA did not say that the declaration was invalid but instead distinguished intangibles (shares) from tangibles (wine). The case consequently raises practical difficulties which currently have not been resolved.

Yeoman's Row Management v Cobbe

(Property owner entered into a gentleman's agreement to sell property to Cobbe when he obtained planning permission, sharing the proceeds by an agreement they would draw up legally at a later date. After expending a great deal of money on the planning application the property owner refused to complete the agreement. Cobbe claimed they were estopped from doing this. Held, both were commercially experienced people who took the risks in the gentleman's agreement.)

Abates

A gift abates....

Adeems

A gift adeems, ie fails, if the testator's estate does not include the specific property.

Volunteer

A person who does not promise consideration for what he receives.

Personalty

A person's personal, movable property. This is in contrast to real property.

Romalpa clause (retention of title clause)

A provision in a contract for the sale of goods that the title to the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer. Where A provides the materials to B on credit, A may worry about B's becoming insolvent and so, in the contract of sale, A may employ what is called a reservation of title or'Romalpa' clause (Aluminium Industrie Vaassen BV v Romalpa Aluminium), under which the legal title to the materials remains with A until (1) they are sold by B after they are incorporated into his manufactured products, whereupon the title to them passes to the buyer of the products, or (2) B has paid off all outstanding debts to A, whereupon the title passes to B himself. If B becomes insolvent, A can reclaim all of the materials B has on hand. There is no trust here; the legal title to the goods simply remains with A until either (1) or (2) occurs.

Residuary Gift / Testator's residuary estate

A residuary gift is a testamentary gift where all of the leftover property or residual property is gifted away. As to certainty of subject matter, there is nothing uncertain about a residuary estate, which is simply everything left after the satisfaction of specific legacies in the will. Again, a testamentary gift or trust under a will is NOT UNCERTAIN. In the course of executing the will, the executor will determine to the very penny the residue of the estate.

Constituting a trust

A trust is constituted when the legal title to the trust property is vested in the intended trustee or the settlor declares herself a trustee. Where the settlor himself is to be the sole trustee, no transfer is required and therefore no issues of constitution arise in such cases. Once constituted, the beneficiaries of that trust can enforce it against the trustee, whether or not they have given value to anyone in exchange for its creation. Note, therefore, that where the settlor transfers property to B on trust for C, he must both effectively 1. declare the trusts (making a deed or other instrument that contains the owner's statement that he holds the property for the benefit of another person), and: 2. effectively transfer the title to the property to B (once completely transferred it is considered 'vested') - it is the second step that constitutes a trust. Like an outright gift, a settlor cannot revoke a perfectly constituted trust on the ground that the beneficiaries gave nothing in return. It matters not in the case of a perfectly constituted trust that the beneficiaries are volunteers. The point only becomes contentious where there is some defect of constitution. As to an equitable interest under any trust these can only be transferred by writing signed by the asignor - s.53(1)(c) LPA 1925. How that settlor manages to pass the right to the trustee depends on the nature of the right itself.

Re Golay

A trust of 'reasonable income' was held to be certain (reasonableness being an objective limitation that could be decided by the court), but a settlor should be warned not to rely on the court adopting a similarly generous construction of the will.

Testamentary Trusts

An express trust set out in the testator's will, and comes into being when he dies and his will is executed by his executors (trustees). All wills must comply w/ the requirements of s.9 of Wills Act 1837: • In writing • signed by testator or one acting at his direction in his presence, and • in the presence of two witnesses who sign

Transferring legal title to a cheque (bill of exchange)?

BILLS OF EXCHANGE ACT [1882] Cheques made in favour of the transferor (settlor/donor) can be transferred to a 3rd party (trustee/donee) by the transferor endorsing the cheque.

Transferring legal title to 'choses in action'?

Debts and other choses in action (including rights under a bank account) are transferred by writing, complying with s136 LPA 1925 - notice must be given to the debtor/other party

6 Exceptions to Milroy v Lord

Equitable Principles which perfect a transfer: Proprietary Estoppel / Detrimental reliance" may lead the court to order the perfection of the imperfect gift/trust. Equity to perfect an imperfect gift is proprietary estoppel which arises if the beneficiary has acted to his detriment, by the expenditure of money or otherwise, in reliance with a misrepresentation by the offeror. Example. if property owner, O, by his words or conduct represents to another person, P, that P is entitled to an interest in the property, thereby inducing P to act to his detriment, O is estopped in equity from denying the truth of the representation. - Dillwyn v Llewellyn The Re Rose principle: if the donor has done everything that can be expected of him to transfer the legal title, but the effective transfer is delayed by the routine operation of law, the gift is effective despite the lack of a valid transfer of title. Re Rose applied to shares but, in principle, can apply to any transfer where legal formalities take time to complete. It is routinely applied to land transfers, which are invariably deemed to be effective in equity from the moment contracts are exchanged, despite the lack of transfer of legal title. The court makes the Re Rose principle work: Once the donor is committed to transfer the legal title, he is deemed to hold the legal title on constructive trust for the recipient. Where the transfer is to constitute a trust -- suppose A contracts to transfer land to B to hold on express trust for C -- then from the moment contracts are exchanged, A holds the legal title on constructive trust for B, who holds the equitable title under this Constructive Trust on express sub-trust for the C. The reason, said the court, was to be found in notions of 'common sense'. . The rule in Strong v Bird provides where the donee of the gift is appointed as executor of the donor's will and if the donor had a continuing intention until death to make the gift, equity will perfect an imperfect gift. . Donatio mortis causa . Unconscionability - Pennington v Waine

Rochefoucauld v Boustead

Exceptions to the rule: The court will not allow the requirement of a written declaration of trust, as set out in s.53(1)(b) LPA 1925, to be used as a cloak for fraud. ((land was transferred to D and it was alleged that he took it on trust for C as she was having difficulty in repaying the mortgage and therefore wanted D to take the land off her hands and repay the mortgage, but the land would still be held on trust for C. The problem was that there was no written evidence of the trust as required by what was then s.4 of the Statute of Frauds 1677 (now s.53(1)(b) of the LPA 1925). If the lack of written evidence was fatal to her claim, then D would commit the fraud of keeping the land absolutely and beneficially when he was not intended to. So, equity imposed the trust despite the lack of written evidence. Held, a statute designed to prevent fraud could not be used to perpetrate a fraud, and therefore admitted oral evidence to substantiate an allegation of a declaration of trust on the ground that the 'trustee' himself would commit a fraud if he were allowed to shelter behind the statutory provision and deny the declaration of trust.)

Re Stewart

Extended the Strong v Bird principle: Any imperfect gifts made inter vivos to a person who later became the donor's executor would be perfected if the testator manifested an intent to give the gift in his lifetime and this intent continued until his death. • Thus, the Strong v Bird principle applies not only debts but to complete imperfect gifts where the donee is made an executor. • Note, it must be shown that the deceased had a 'continuing intention' to release the debt or make the gift. This means the deceased's intention must be that he had made an immediate gift that he thought was effective, and maintained that view up until his death. This could be better framed as a continuing belief that he had released the debt or made an outright gift. • The doctrine specifically does not cover an intention to make an inter vivos gift in the future, a promise to make a gift, or the intention to give the property at one's death.

Donatio mortis causa / Cain v Moon -- [Exception]

Gifts made in contemplation of, and conditional upon, the death of the donor (aka 'deathbed gifts). • Cain v Moon provides for a valid DMC: the gift must have been made in contemplation of imminent death, though not necessarily in expectation of death (includes active service during war, dangerous trip, hazardous undertakings) contingent (conditional) on death (donor intended property to revert to him if he lives). Note, donor can revoke during his lifetime but not by will as the gift is complete on death, ie, death bed gift prevails over the will. there is actual or constructive delivery of the subject matter to the donee • Constructive delivery: deeds in unregistered land - Sen v Headley; keys to car -- Woodard v Woodard; keys to safety deposit box -- re Lillingston; passbook to bank account -- Re Dillon). However, for a cheque to pass under a trust it must be cashed within the donor's lifetime -- Re Beaumont • It is irrelevant if the donor dies from a cause other than that which he was contemplating -- Wilkes v Allington (thought cancer, died of pneumonia)

Twinsectra v Yardley

If an otherwise unsecured loan is made for a specific purpose, and for no other purpose, then it may be inferred that the borrower holds the money on resulting trust for the lender. The main question is whether the parties intended to create a normal loan arrangement, which creates merely a debtor-creditor relationship, or a Quistclose trust loan, i.e., require B to hold the loan money on trust until spent properly according to purposes specified in the contract. (Special bank accounts were set up to receive the money. Payment into B's solicitor's client account is sufficient for this purpose, because although a solicitor's client account mixes money from different clients, it is a trust account and there are specific rules by which solicitors track each client's equitable interest in the account). However, if neither L nor B see anything wrong in paying the loan money to B's current account this should give rise to a strong presumption that whatever the terms of the loan contract including the use of the word 'trust' there was no intention to create a Quistclose trust. Commercially-speaking, a Quistclose trust is a means by which a lender of money can retain a "security interest" in loan moneys by inserting a clause into the loan contract which provides that the borrower may use those loan moneys only for specified purposes. If the borrower uses the money for some other purpose, then a trust is imposed on the moneys in the lender's favour. This form of trust is particularly significant as a means of protecting the lender against the borrower's insolvency because the loan moneys are treated as being held on trust for the lender and therefore are not distributed in the insolvency proceedings as part of the insolvent borrower's estate. Even if the borrower remains solvent after lending the money then the lender has a right under the Quistclose trust to recover the loan moneys or to trace those loan moneys into the hands of any third party who has received them in breach of the loan contract.

Settlor Passing Rights to a chose in action

If it is a chose in action then the rules differ as between the different types of choses in action. A debt can only be transferred at law by a written instrument. Checks, debts or rights to sue under a contract must comply with s.136 LPA 1925

Self-declaration of trust

If such an intention cannot be shown, the rights in question will, if there has been a transfer, be taken by the transferee absolutely; where there is no transfer but only a failed allegation of self-declaration of trust, the right holder will remain absolutely entitled.

Explicit gift over in default of appointment

If there is an explicit gift over in default of appointment there is a power of appointment intended and not a trust. • The settlor/testator may have provided for a 'gift over in default of appointment' (that is, a direction as to where the property should go if the power is not exercised).

S.53(1)(b) LPA 1925

In general, oral evidence may be admitted as evidence that a right-holder has made a declaration of trust. However, for declarations of trust regarding land, there must be evidence of the trust in writing and the evidence must have been signed by the settlor himself, not his agent: s.53(1)(b) LPA 1925 • Writing is required only as evidence of the intention to declare a trust, the declaration itself need not be in writing and the writing need not be in the form of a deed but contain all the relevant terms -- the three certainties. Evidence could be in several documents. • Also, s.53(1)(b) only deals w/the creation of express trusts of land. • Rochefoucauld v Boustead - The court will not allow, a lack of formality, the requirement of a written declaration of trust, as set out in s.53(1)(b) LPA 1925, to be used as a cloak for fraud. (land was transferred to D and it was alleged that he took it on trust for C as she was having difficulty in repaying the mortgage and therefore wanted D to take the land off her hands and repay the mortgage, but the land would still be held on trust for C. The problem was that there was no written evidence of the trust as required by what was then s.4 of the Statute of Frauds 1677 (now s.53(1)(b) of the LPA 1925). If the lack of written evidence was fatal to her claim, then D would commit the fraud of keeping the land absolutely and beneficially when he was not intended to. So, equity imposed the trust despite the lack of written evidence)

Gissing v Gissing

In the absence of signed writing, an express trust is not enforceable. Courts can infer an agreement of common intention if the evidence supports it, viewed objectively in the absence of any express statement (Concerns an attempt to say there is a trust of a title to land on which stands the 'matrimonial home'. Such trusts are therein called 'constructive trusts', more particularly, 'common intention constructive trusts'. Note however, that constructive trust are trust which arise for reasons other than a declaration of trust.)

What are choses in action?

It is a right to sue due to some intangible personal personal property right. Covers... debts, rights under a bank account, right to sue for breach of contract, right to claim damages... etc...

Workability

It may be that the class of the discretionary trust is 'administratively unworkable' and so void for 'secondary uncertainty'. This concept was expounded in McPhail and it is clear from R v District Auditor ex p West Yorkshire MC (1986) that if the settlor or testator stipulates a class so large that the trustees cannot effectively fulfil their duties, nor exercise their discretion properly under a discretionary trust, that trust will fail. The requirement of administrative workability is largely unclear, though it may be given content by regarding the absence of a core class as rendering a trust administratively unworkable. There may also have been a problem of administrative workability since the cost of identifying the entire class may be out of proportion to the value of the residue left for distribution. Certain classes as huge as 'relatives of X' or 'all the inhabitants of Greater London'. The members of such classes cannot be surveyed one by one. But it may be suggested that if there is a 'core class' of objects within the larger class to whom the trustees may primarily devote their survey of objects before making payments, then the trust will not be administratively unworkable, although no case has explicitly stated that the absence of a 'core class' is the basis for the finding of such unworkability. On the 'core class' view, 'relatives of X' is workable because a core class easily identifies itself, i.e. the close relatives of X as opposed to distant relatives. 'Residents of Greater London' is not workable, because there is no such core class.

What does it mean when a trust is completely constituted?

It means that the trust property is vested in the trustees. It is then binding on the settlor, who cannot change his mind and revoke the trust. The beneficiaries have enforceable rights, even though they may have given no consideration for the trust.

Two methods of creating an express trust

Milroy v Lord (1862) Transfer and declaration mode: Where S transfers property to T subject to a declaclartion of trust Self-declaration mode: S declares himself a T of the property for the benefit of B

Timpson's Executors v Yerbury

Provides the four ways to dispose of an equitable interest 1) Assign to third party 2) Direct trustees to hold it on trust for third party 3) Contract for valuable consideration to assign equitable interest 4) Self-declaration of trust

B directs Trustee to hold the beneficial interest for third party

S.53(1)(c) applies. a direction by a beneficiary to trustees to hold on trust for another is a disposition within LPA 1925 s.53(1)(c)) Where there is a disposition of subsisting equitable interest, under s.53(1)(c) it will be void if not declared in writing -- Grey v IRC (an example of a ineffective disposition of a trust under s.53(1)(c) due to lack of compliance with the writing requirement. The attempted disposition was made orally. Held: a direction by a beneficiary to trustees to hold on trust for another is a disposition within LPA 1925 s.53(1)(c))

B1 Directly assigns subsisting equitable interest to B2

S.53(1)(c) applies. Direct assignment of the equitable interest to a third party A disposition of subsisting equitable interest. Here, B instructs Trustee to hold interest for C. There will be no effective disposal by B1 of his interest until he put his direction in writing. Thus, B1 would still own the equitable interest. The requirement of writing under s.53(1)(c) is to ensure that the ownership of beneficial interest can be identified by the trustee, beneficiary, the courts and the Inland Revenue -- Grey v IRC. The legal title remains w/ the trustee. Applies to any type of property held beneficially, not just interest in land

B1 declares himself a sub-trustee holding his equitable interest on trust (sub-trust) for B2

S.53(1)(c) does not apply -- Nelson v Greening & Sykes. Note, however, Grainge v Wilberforce argues that it would apply where it is a bare trust, meaning B1 retains no control, but where he retains control as in a discretionary trust S.53(1)(c) does not apply. Nelson v Greening & Sykes provides that there is no distinction in such a transfer of a bare and discretionary trust and this is the preferred judgement. Where a beneficiary declares a trust of his equitable interest, creating a sub-trust, s.53(1)(c) does not apply. Note, the trustee remains w/ the legal title. However, where that equitable interest is in land, any trust must be evidenced in writing by s.53(1)(b). If the equitable interest is in personalty, such as a trust of company shares, an oral declaration of sub-trust is valid.

Vandervell No1: B (B1), absolutely entitled, direct T to transfer legal title to (B2) third party (intends equitable title to transfer as well)

S.53(1)(c) does not apply and may be effected orally by an absolutely entitled beneficiary This is NOT a disposition of subsisting equitable interest. Where the legal and beneficial interest transfer to the same person there is no need to comply w/ s.53(1)(c). Vandervell (no.1). This is an alternative to the rule under Saunders v Vautier, where an absolutely entitled beneficiary ask that the legal title to the trust is transferred to him, thus collapsing the trust and making him the absolute owner. However, the settlor must ensure that he divest himself of any benefit under the trust. (Mr Vandervell was the beneficiary under a bare trust, and directed the trustees to transfer the legal title to the property. As he had equitable title, this was transferred concurrently with the legal title, and no separate disposition of the equitable title was required. Therefore s.53(1)(c) LPA 1925 did not come into play.)

S declares that he will hold equitable interest for B

S.53(1)(c) does not apply as this is an original declaration of trust. However, while such a trust is valid in regards to personalty, oral declaration of trust in land is also valid but unenforceable. Example: A declares orally that he holds house on trust for B. B now holds an enforceable beneficial interest. One week later A writes to C to tell of what she has done -- now there is evidence in writing and the trust becomes enforceable. Personalty does not require writing and is valid.

B agrees by oral contract to assign equitable interest to B2 for valuable consideration

S.53(1)(c) does not apply. Neville v Wilson: Where the owner of a beneficial interest wishes to transfer their beneficial interest to a third party by way of a contract (including valuable consideration) the transfer is not subject to s.53(1)(c) as, once a contract has been signed, 'equity sees as done, that which ought to be done', therefore, there will be a constructive trust, and by way of s.53(2), constructive trusts are exempt from s.53(1)(c).

Right-holder

Settlor

Settlor Passing Rights to Shares

The Stock Transfer Act 1963, sets out requirements: For a private company, the transferor must sign a STOCK TRANSFER FORM in favour of the transferee, send the form to the company's registrar for registration. The title only passes on registration of the transferee as the new shareholder. For a PLC, compliance with the electronic CREST system and the instructions will suffice. • (NOTE - in a PLC, directors cannot refuse new shareholder. But, in a private limited company, they may be able to, as in Re Rose)

Certainty of Objects [fixed & discretionary]

The certainty of objects test is different for fixed trust and discretionary trust Fixed trust: A complete list of the beneficiaries must be able to be created -- IRC v Broadway Cottages Discretionary trust or a power of appointment: In a discretionay trust, so long as any given claimant can be said with certainty to be a beneficiary, or not, a trust is valid -- McPhail v Doulton. IE, the trustee must be able to determine whether any given postulant "is or is not" a member of the class. The problems of certainty of objects only arise where S uses a generic term to describe the class (for example, my children, my relatives, my friends, and so on). Where the beneficiaries are individually named, no question of uncertainty of objects arises. The whereabouts of such individuals may be unknown, but that is not something which will cause the declaration to be adjudged invalid.

Quistclose trust / Barclays Bank v Quistclose

The manner in which the Quistclose trust arises then is by means of a "secondary trust" coming into existence for the benefit of the lender if the "primary trust ... cannot be carried out". • Quistclose trust - a special purpose trust by which it is recognised that money held by one person is held on trust for a special purpose o If the money is paid for the special purpose, the person becomes a debtor of the settlor o If the purpose fails, a resulting trust arises in favour of the settlor • Where money is advanced upon a condition that it will be used for a certain purpose, and that purpose becomes impossible to fulfill, the money loaned will be held on a resulting trust for the lender and will not be treated as part of the general assets of the borrower: Barclays Bank Ltd v Quistclose Investments Barclays Bank Ltd v Quistclose Investments Facts: Rolls Razor Ltd owed the bank a large sum of money. Rolls was in financial trouble and wanted to issue shares to existing shareholders to raise money. Before doing so, the company declared a dividend to shareholders (which constitutes a debt to shareholders), but had not paid it yet. Quistclose was a private company which had an interest in Rolls surviving. Quistclose provided funds to Rolls for the dividend payment only. Rolls went into voluntary liquidation prior to paying out the dividend. The question was who owned the dividend fund? The bank argued that Quistclose had lent money to Rolls, and so Quistclose was just another unsecured creditor. As an unsecured creditor, it would rank behind the bank's secured charge. Quistclose argued that the money never belonged to Rolls. It was held on trust for a purpose (to pay the dividend to shareholders), and when that purpose failed, the money resulted back to Quistclose. Held: The court found in favour of Quistclose. The loan funds were held on trust to pay the dividend. When that trust became impossible, there was a resulting trust back to the lender (Quistclose). Here, the money held by Rolls is held on trust for a special purpose (to pay the dividend to shareholders). If that purpose is fulfilled, the trust no longer exists, and Rolls simply becomes a debtor of Quistclose. If that purpose fails, there is a resulting trust in favour of Quistclose. (third category of RT; Rolls Razor Ltd no funds for shareholders so took loan for Quistclose that said that the funds may only be used to pay dividends to shareholders but before dividend could be paid, RR went into liquidation thus the primary trust failed and secondary trust replaced this. (Second trust being the trust between RR and Quistclose thus money reverted to Quistclose))

Strong v Bird principle [Exception]

Where the donee of the gift is appointed as executor of the donor's will and if the donor had a continuing intention until death to make the gift, equity will perfect an imperfect gift. To rely on Strong v Bird: 1 • Testator intended to make an immediate ('Re Freeland') inter vivos gift or to forgo a debt ('Strong v Bird'); an intention to make a testamentary gift is not sufficient -- 'Re Innes': 2 • The intention persisted until the donor's death. 3 • The donee is appointed executor, administrator or person representative -- Re James (idea is that the trust completed by legal vesting at death) (Stepson owed mother $11,000 he borrowed. Told mother he would pay her back by letting her live w/ him at $100 quarterly. After two deductions mother said she would pay the full rent and did not want the loan repaid. At common law this release of debt should have been by deed; it is otherwise nothing more than a bare promise not to sue -- imperfect. However, a person appointed executor, in whom the totality of the deceased's rights automatically vest, who owed the deceased money before their demise was automatically relieved of the debt, on the ground that it was not possible for the executor to sue himself to recover it. Technically, equity does not perfect an imperfect gift here, it simply declines to interfere with the common law position.)

Failure to identify the objects

Where the would-be settlor transfers rights to a would-be trustee and the declaration is void for failure to identify the objects, the would-be trustee holds them on automatic resulting trust for the would-be settlor.

Gillet v Holt

Where there was a clear unequivocal assurance by the transferor, followed by reliance by the transferee, which meant that it was inequitable for the transferor to go back on the promise, the court would do the minimum to do justice. (C worked for D since age 16, rejected other better opportunities to work elsewhere on assurances by D that he would leave C the farm. After 40 they fell out an D made a new will leaving farm to another.)

Restrictions on admissible evidence to prove a trust occurred

While the general rule is that all types of evidence are admissible to prove the fact that a declaration of trust occurred, the legislature in two instances has placed restrictions on the evidence courts are allowed to admit. Allegations of declarations of trusts of land need to be 'manifested and proved by some writing signed by some person able to declare such trust or by will': s.53(1)(b), LPA 1925. Allegations of declarations of trusts in wills are required to be proved by signed, witnessed writing: s.9 of the Wills Act 1837