Equity and Trusts 2012-2013

Topic Three: Requirements of a Trust - Constitution

Recommended Reading
Pearce, Stevens and Barr, The Law of Trusts and Equitable Obligations (5th ed) Ch 7 Hayton and Mitchell: Commentary and Cases on the Law of Trusts and Equitable Remedies (13th ed) Ch 2 Hanbury and Martin, Modern Equity (19th ed) Ch 4 Rickett Completely Constituting an Inter Vivos Trust: Property Rules? *2001+ Conv 515 Halliwell Perfecting Imperfect Gifts and Trusts: Have We Reached the End of The Chancellors Foot? *2003+ Conv 192 Kodilinye, A Fresh Look at the Rule in Strong v Bird [1982] Conv 14

Lecture Objectives
Able to determine if a trust is completely constituted Able to investigate if an effective transfer of trust property to trustees has taken place Able to assess if a settlor has made a sufficient declaration of trust where he wishes to be a trustee of the trust property Able to critically analyse the exceptions to the maxim which states equity will not assist a volunteer

Requirements for an express trust

To create a valid express trust, there are three requirements: The declaration of trust must contain the three certainties. The declaration of trust must comply with the requisite statutory formalities The trust must be completely constituted

Constitution of a trust
Milroy v Lord (1862) 4 De G F & J 264 at 274 per Turner LJ: I take the law of this court to be well settled, that, in order to render a voluntary settlement valid and effectual, 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.(cont. next slide)

Constitution of a trust
He may, of course, 1). do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if 2). he transfers the property to a trustee for the purposes of the settlement, or 3). declares that he himself holds it in trust for those purposes;...but, in order to render the settlement binding, one or other of the modes must, as I understand the law of this court, be resorted to, for there is no equity in this court to perfect an imperfect gift.

Constitution of a trust
Hanbury and Martin give a simple example of how a trust is set up. The settlor must make a declaration that A is to hold Blackacre on trust for B. He must transfer Blackacre to A.

Effective transfer of trust property to trustees

Legal interests Legal interests in land must be transferred by deed Milroy v Lord (1862) 4 De G F & J 264

Exception? Re Rose [1952] Ch 499 Re Fry [1946] Ch 312- he hadnt done everything he was supposed to do so cant rely on Re Rose. Pennington v Waine [2002] 1 WLR Muddied the waters

Effective transfer of trust property to trustees

Once a trust is constituted, the settlor may not reclaim the property even though the beneficiaries may be volunteers. See Paul v Paul (1882) 20 Ch D 742 A trust may be constituted where the property is vested in the trustees in a capacity other than that as trustees. See Re Rallis Wills Trusts [1964] Ch 288 Strong v Burn.

Effective transfer of trust property to trustees

Equitable interests Kekewich v Manning (1851) 1 De G M & G 176

Ineffective transfers
Maitlands Lectures on Equity (1932) Richards v Delbridge (1874) LR 18 Eq 11

If there is an ineffective gift to someone, the court will not assume that the settlor intended to be a trustee for the person claiming to be an intended beneficiary

Declaration of trust
Settlor declares himself trustee of his property Jones v Lock (1865) 1 Ch App 25 Paul v Constance [1977] 1 All ER 195 Vandervell v IRC [1967] 2 AC 291

T Choithram International SA v Pagarani [2001] 2 All ER 492

Incomplete Constitution of a Trust

Equity will not complete or enforce an incompletely constituted trust in favour of a volunteer If the trust is completely constituted, the beneficiaries will be able to enforce it even if they provided no consideration. If the trust is not completely constituted, they will only be able to enforce it if they provided consideration.

Incomplete Constitution of a Trust

Exceptions to the general rule that equity will not complete or enforce an incompletely constituted trust in favour of a volunteer Or the slightly wider rule that equity will not perfect an imperfect gift 1. Donatio Mortis Causa 2. Doctrine of proprietary estoppel Dillwyn v Llewelyn (1862) 3. The rule in Strong v Bird (1874) LR 18 Eq 315 if imperfect gift is given to you an you become the executor of the estate it perfects the gift.

The rule in Strong v Bird

The effect of the rule in Strong v Bird is that where an incomplete gift is made during a donors lifetime and the legal title to this property subsequently becomes vested in the donee, the donors prior intention to make the gift is regarded as having been perfected provided that the intention has continued until the date of the donors death.

The rule in Strong v Bird

Strong v Bird (1874) LR 18 Eq 315 Forgiveness of a debt Re Stewart [1908] 2 Ch 251 Imperfect gift It applies where a person intends to make a gift to a person and that person is subsequently appointed the executor or administrator intestate of the donors estate.

The rule in Strong v Bird

Re James [1935] Ch Administrator intestate Criticised in by Stewart J in Re Gonin

Re Wilson [1933] IR 729 Does not apply to future gifts or testamentary gifts Bai v Wilson (1915) 34 NZLR Specific property

The rule in Strong v Bird

Intention to make the gift must have continued up until the time of the donors death Re Wale [1956] 1 WLR

Extension to complete an incompletely constituted trust? Re Rallis Will Trusts [1964]

Recap Questions
What are the three requirements to create a valid express trust? What does it mean to say that a trust should be completely constituted? In Milroy v Lord, the court pointed out 3 ways in which a trust can be constituted. What were they? Declare your self as a trustee or transfer the property to a trustee What is the Re Rose exception? If there is an ineffective transfer of property, what assumption does the court not make?

Recap Questions
What is the position of a volunteer where a trust is incompletely constituted? What are the exceptions to this general rule? What is the rule in Strong v Bird? How has it developed over the years? Why is the rule somewhat controversial? Because it is luck that allows you to become the executor of the estate.