Formalities and Constitution

what does s.53 LPA 1925 require?

instruments to be in writing

is writing required for trusts of personalty (e.g. money, chattels, and shares )?

no; an oral declaration of trust is sufficient

declarations of trust of _________ or _________________ must be proved by writing that is signed by the person declaring the trust

land

interests in land

s.53(2) LPA 1925?

signed writing is not required for resulting, implied, or constructive trusts of land

if ETs are not proved by signed writing, the trust is ____________________

unenforceable (as opposed to void)

the function of the writing requirement is merely to evidence the settlor’s intention to declare the trust; it is not needed to create it - therefore:

the declaration of trust itself need not be in writing and the written evidence need not be contemporaneous with the declaration of trust

facts of Gardner v Rowe?

• a lease was granted to the lessee

• he declared a trust for the benefit of R

• the lessee later created a written declaration of trust in relation to the same lease, confirming prior oral declaration of trust he made the previous year

• between the initial declaration of trust and the execution of the deed, the lessee had become bankrupt so all his property was assigned to his trustee in bankruptcy

what was held in Gardner v Rowe?

the declaration of trust was valid, though executed after bankruptcy

> the formal trust does not need to be contemporaneous with the instrument - all you need is signed writing

key point of Rochefoucauld v Boustead?

suggests that the writing req in s.53(1)(b) LPA 1925 is evidential and not a RoL

> i.e. an ET over land will not be void for lack of writing if it can be proven by some extrinsic written evidence

facts of Rochefoucauld v Boustead?

• B agreed to buy estates from R

• it was orally agreed that B was to hold the estates on trust for R until R could repay B to buy back the estates

• in contravention of his promise, B mortgaged the estates and B sold the estate to pay off the debt

• held: the parol evidence was admissible

key point of Hodgson v Marks?

an automatic resulting trust (ART) arises where an ET fails for lack of formality

facts of Hodgson v Marks?

• C executed a voluntary transfer of the freehold of her house to her lodger for free

• the lodger was registered as proprietor of the house though it was orally agreed that the beneficial interest remained with C

• the lodger sold the house to D1, who then as newly registered proprietor executed a charge on the house in favour of a building society (D2)

• C sought a declaration that D1 was to transfer the house to her free from the charge, on the basis that the lodger held the house on trust for her

what was held in Hodgson v Marks?

if the ET in favour of C was not effective because of s.53(1), a resulting trust of the beneficial interest to C would arise

key point of Bannister v Bannister?

s.53(1)(b) cannot be relied upon to advance a fraud in the form of insisting on the written agreement when it was really agreed that the innocent party will have an interest in the land

facts of Bannister v Bannister?

• D owned 2 adjoining cottages and agreed to sell them to her brother in law, C. for a reduced price

• C orally promised D to let her live rent-free in the cottages

• C sought to claim possession of the cottages

  > C was not entitled to an order for possession

  > C’s oral undertaking created a life interest in the cottage in favour of D

key point of Ong v Ping?

s.53(1)(b) LPA 1925 is a rule of evidence; a trust need not be declared by trust deed alone

facts of Ong v Ping?

• Lim evinced her intention to create a trust for her property in favour of Cs through a letter to her solicitors as well as a signed trust deed that did not specify the house

• Lim wrote a letter to the solicitors indicating that she wanted to cancel the trust; the letter specifically linked the trust to the house

• held: there was a trust of the house

  > the trust Lim declared was manifested and proved by the letter taken together with the executed trust deed

facts of Solomon v McCarthy?

• C and D were in a relationship and had 2 children

• D sought a declaration that one of the properties was held on trust for his 3 sons, including 2 with C

• C denied D’s claim and asserted a 50% share in the property

• D went bankrupt

• held: C held one property on trust for D, and the other property on trust for herself and D in equal shares

key point of Paul v Constance?

no need for explicit words or even knowledge of the trust being created for there to be common intention to create a trust

must the declaration of a sub-trust comply with s.53(1)(b)?

if it relates to land

a sub-trust occurs where:

a beneficiary under a fixed or discretionary trust declares themself as holding their interest on trust for a further individual

how is s.53(1)(c) different to s.53(1)(b)?

s.53(1)(c) states that the disposition ‘must be in writing signed’, rather than being proved by signed writing

what 2 key principles does Virgo identify for analysing the cases on s.53(1)(c)?

1. the interest must be subsisting at the time of the relevant transaction, as s.53(1)(c) relates to the disposition of equitable interests and not their creation

2. a disposition involves a transfer of the equitable interest and not its destruction

key point of Grey v IRC?

a direction to a trustee to hold on trust for another constitutes a disposition of a subsisting equitable interest within s.53(1)(c)

Grey v IRC: if A (beneficiary) wants to hold assets on trust for C, that is the same as A saying to B (trustee) ‘can you hold the assets that you hold on trust for me also on trust for C?’.

SO:

• can’t work around stamp duty by telling trustee to hold shares on trust for another - still in effect the same thing, so it is also a disposition

• disposition is not just direct assignment

• s.53(1)(c) applies

facts of Grey v IRC?

• settlor made 6 settlements in favour of his grandchildren w/o paying stamp duty

• set up 2 trusts where he is a beneficiary - so only ahs to pay stamp duty of 50p because the beneficial interest does not move

• he later transferred substantial blocks of shares to the trustees, which they held on trust for him

• he then orally instructed the trustees to hold the shares upon the trusts of the 6 settlements

• documents were executed in confirmation of the settlor’s oral declaration

  > idea was to say that the docs are not a ‘disposition’ so s.53(1)(c) does not apply

what was held in Grey v IRC?

the documents were subject to stamp duty

> stage 2 transfer (written documents) are void

> the directions given by the settlor were dispositions of his equitable interest in the shares within the meaning of s.53(1)(c) and, because they were not made in writing, they were ineffective

key point of Nelson v Greening & Sykes?

a sub-trust does not dispose of the beneficial interest of the immediate trustee

facts of Nelson v Greening & Sykes?

• G sold land to N, who bought the land with H’s money

• the sale was not completed and legal title in the land remained with G

• G held the land on CT for N, arising from the sale contract

• N owed court costs to G and G sought a charging order on N’s beneficial interest in the property

• N argued that he had divested himself of any beneficial interest as he held the beneficial interest in the land on a sub-trust for H

what was held in Nelson v Greening & Sykes?

• when A held property in trust for B who in turn held it in trust for C, A might as a matter of practicality prefer to deal directly w/ C but that did not mean that as a matter of law B ceased to be a trustee

key point of Vandervell v IRC?

• a direction to the trustee to transfer both legal and beneficial ownership is not a disposition that requires writing under s.53(1)(c)

• an ART can arise when a purported ET is void for lack of objects

facts of Vandervell v IRC?

• V decided to endow a Chair of Pharmacology at Royal College of Surgeons

• V sought to avoid paying tax on the donation

• he directed the trustee to transfer the full legal title and beneficial title of shares in Vandervell Products to RCS

• V hoped that by transferring both legal and beneficial title, the transfer would not fall within the scope of .s53(1)(c)

• upon obtaining the shares, RCS granted an option to repurchase the shares to Vandervell Trustees, a trust company he set up

what was held in Vandervell v IRC?

V still had to pay tax because of the option - he still had an interest in those shares

key point of Re Vandervell (No 2)?

the creation of an ET replacing a RT is not a disposition that requires writing under s.53(1)(c)

key point of Oughtred v IRC?

• a CT arising from the oral agreement does transfer some proprietary interest, but not the FULL beneficial interest under a trust and thus does not amount to a ‘disposition’ under s.53(1)(c)

  > (OVERRULED in Neville v Wilson)

facts of Oughtred v IRC?

• O and her son made an oral agreement to transfer her son’s reversionary interest in some shares to herself

• these arrangements were made orally to avoid stamp duty

• a deed of release was executed stating that trust shares were now held on trust for O alone

• IRC argued that stamp duty had to be paid as the deed transferred the beneficial interest in the shares rather than the oral contract

• O argued that the beneficial interest was already transferred upon CT arising due to the right of specific performance of the oral contract

what was held in Oughtred v IRC?

stamp duty was payable

• this was a disposition of an equitable interest

key point of Neville v Wilson?

an oral contract does not require writing under s.53(1)(c) to transfer equitable interest in the subject of the contract

facts of Neville v Wilson?

• trustees held shares in U ltd on trust for N ltd, a family company

• the shareholders of JE Neville agreed to liquidate their company

• they decided to divide the equitable interest in the Universal shares among themselves in proportion to their existing shareholding in N

• there were oral agreements for consideration purporting to dispose of the equitable interests

what was held in Neville v Wilson?

• the agreement to liquidate the company had involved the division of N’s equitable interest in the shares among the shareholders in N in proportion to their existing shareholdings in N

• the effect of each shareholder’s agreement to the liquidation was to constitute him an implied or constructive trustee for the other shareholders

  > so s.53(2) applied - no need for signed writing

• so the agreement was effective

(followed the Viscount Radcliffe approach in Oughtred)

key point of Hudson v Hathway?

an email was sufficient to effect a disposition in signed writing

> no dispute that it was ‘writing’

> given that so much correspondence nowadays takes place by email, it is approp that the law recognises that tech developments have extended what an ordinary person would understand by a signature

s.9 Wills Act 1837?

a will must be in writing, signed and witnessed

a fully secret trust arises when:

the testator devises property to a primary donee but separately requires that donee to hold some or all of the property on trust for a secret beneficiary

in a half-secret trust:

the will reveals the existence of the trust but not its terms

key point of McCormick v Grogan?

a secret trust can arise w/o reference to it in the will of the settlor/testator

facts of McCormick v Grogan?

• C told G that he made a will leaving all his property with G

• G later received a letter containing a list of beneficiaries, but also had statements such as ‘I leave it entirely to your own good judgment to so as you think I would if living’

• held: there was no trust binding on G

facts of Re Snowden?

• testatrix’s will gave the residue of her estate to her 2 executors and trustees to hold for her brother absolutely

  > a note recorded that she was not clear how best to deal with things but thought the easiest way was to leave legacies to nephews and nieces, leaving it to her brother to split up the remainder as he thought best

• the brother died 6 days after the testatrix, having by his will made his son, his sole beneficiary

• held: brother took the entire residue free from any secret trust

key point of Re Young?

a half-secret trust is independent of the will; a beneficiary under a half secret trust can be a witness to the will

facts of Re Young?

• the witness to a will had received a beneficial interest of £2,000 through a half-secret trust with the settlor’s wife as the trustee

• had the trust been constructed through the will it would have been void as witnesses to a will are unable to benefit under s.15 Wills Act

• held: the half-secret trust had nothing to do with the will because the objects were not identified

key point of Re Gardner (No 2)?

a secret trust is independent of the will; it does not fail even if the beneficiary dies before the testator

key point of Blackwell v Blackwell?

for half-secret trusts to be valid, communication of the trust must be made to the trustee before the will is executed

key point of Re Keen?

a sealed letter to be opened upon the testator’s passing constitutes sufficient communication of a secret trust

key point of Re Baillie?

writing still required for half-secret trusts of land

key point of Ottaway v Norman?

if the property is transferred to the wrong recipient, he will hold it on a RT for the intended beneficiary; fraud is not a requirement of a secret trust

which case suggested that in the case of a fully secret trust no writing is required?

Ottaway v Norman

where the settlor or donor has done everything that she needs to do to effect the transfer, the latter steps being those undertaken by 3rd parties (e.g. registration), what does Virgo state is the best characterisation?

that the donor holds the property under a CT, i.e. the beneficiary of this trust is the intended donee or trustee

key point of Re Rose?

a gift is perfected when the donor has done everything in his power to make the transfer

facts of Re Rose?

• R sought to transfer shares to his wife before he died

• he executed the share transfer form and delivered it together with the share certificates to his wife

• the company delayed registering the shares in his wife’s name and thus the shares remained in R’s name after he died

• held: the shares were held on trust for R’s wife

  > the transferor did everything necessary to be done BY HIM to transfer the shares

in which 2 main situations will equity recognise a transfer as effective, even though the legal requirements have not been satisfied?

1. where the settlor or donor ahs done everything that she needs to do to effect the transfer, the latter steps being those undertaken by 3rd parties (e.g. registration)

2. where the transfer has proceeded to a stage where it would be unconscionable for the donor or settlor to revoke the gift

key point of Dillwyn v Llewellyn?

proprietary estoppel can perfect an imperfect gift

facts of Dillwyn v Llewellyn

• a father indicated that he wanted to give land to his son in a memorandum but did not include the land in his will

• in reliance on that memorandum but did not include the land in his will

• in reliance on that memorandum, the son committed expenditure to building a house on the land

• held: the son was entitled to the land

key point of Pennington v Waine?

suggested that, contrary to Re Rose, a donor does not need to do everything within his power for equity to perfect an imperfect gift if to recall the gift would be unconscionable

facts of Pennington v Waine?

• A intended to transfer shares to her nephew, H

• A failed to hand over the share transfer form to the company secretary who was tasked with the registration of the share transfer, but handed it to the auditor, who as agent of A neglected to pass it to the company secretary

• held: the shares were held on CT for H

Pennington v Waine: what factors indicated that the change of mind is unconscionable?

• A made the gift of her own free will

• she not only told H about the gift, but her agent also told H

• H agreed to become director of the company

key point of King v Dubrey?

criteria for donatio mortis causa:

1. it was made by the donor in contemplation of impending death

2. the gift was conditional and only effective upon his death

3. the donor delivered dominion of the property to the donee

facts of King v Dubrey?

• C’s aunt left the bulk of her estate including her house to charity in her will

• when the aunt was in deteriorating health, she handed the title deeds of the house to C, saying ‘this will be yours when I go’

• held: there was no gift by donatio mortis causa

  > C’s aunt had only been contemplating her natural death

  > the words ‘this will be yours when I go’ together with the failed attempts to create a new will were evidence of intent to dispose by will rather than a gift conditional on death within a limited period of time

facts of Woodard v Woodard?

• D’s father died from leukaemia

• while he had been in hospital, D was in possession of his car and a set of keys

• 3 days before he died the father told D that he could keep the keys

• held: the handing over of the car keys was sufficient to indicate that the father intended to part w/ dominion over the car

  > so there was a valid donatio mortis causa of the car

facts of Sen v Headley?

• during his illness in hospital, the deceased told C ‘the house is yours. you have the keys, they are in your bag. the deeds are in the steel box.’

• the deceased died intestate

• the deceased had put C in possession of the only key to the steel box containing the deeds

• held: the house had been transferred to C by way of donatio mortis causa

key point of Zeital v Kaye?

an imperfect gift is only perfected by trust when the donor has done everything in their power to carry out the transfer

> Pennington v Waine distinguished on its specific facts

facts of Zeital v Kaye?

• Z intended to transfer shares he owned to S

• however, Z did not complete the share transfer form nor hand over the share certificates to S

• Z died intestate

• held: Z’s intended gift to S could not be perfected

key point of Curtis v Pulbrook?

equity will perfect an imperfect gift when there is detrimental reliance by the donee

facts of Curtis v Pulbrook?

• an interim charging order was granted against shares D owned for court damages

• D claimed that he had in given some of his shares to his wife and some to his daughter

• D did not complete the share transfer forms and did not pass them his share certificates but issued them new certificates unauthorised by the company

• held: D did not transfer the shares

in Curtis v Pulbrook, Briggs J identifies what 3 situations in which equity will perfect an imperfect gift?

1. where the donor has done everything in his power to five (Re Rose)

2. where there is detrimental reliance by the donee on the imperfect gift

3. benevolent construction to find an intention to give or declare a trust

facts of Khan v Mahmood?

• dispute between 2 brothers, K and M

• K claimed that he had a right to a share in a property owned by M on the basis of promises made by M

• K had contributed to the purchase + renovation of the property, and he claimed that M had promised him a share in the property in return for his contributions

• held: K had a legit expectation of a share in the property based on M’s promises

  > K had relied on these promises and acted to his detriment by contributing to the purchase and renovation of the property

key point of Pullan v Koe?

persons within marriage consideration can enforce a gratuitous covenant

key point of Re Kay’s Settlement?

trustees of a covenant to settle can neither recover in equity not law if the covenant is breached, assuming the beneficiaries are volunteers

key point of Re Cook’s Settlement Trusts?

affirmed Re Pryce and Re Kay - beneficiaries that are volunteers are not entitled to require trustees to seek specific performance of a covenant to settle

facts of Re Cook’s Settlement Trusts?

• Cook made an agreement w/ his father (H) to exchange his reversionary interests under a will trust in return for certain paintings from H

• pursuant to the agreement, Cook also covenanted w/ H and trustees that some of the paintings shall be held on trust in favour of Cook himself, his then wife and his children

• Cook later remarried several times and gave a painting to one of those wives - she now proposed to sell it

• held: as the beneficiaries were not parties and had given no consideration, the covenant was unenforceable by them

key point of Paul v Paul?

equity will not assist volunteers, except for beneficiaries under a constituted trust

facts of Paul v Paul?

• a husband and wife were trustees under a marriage settlement; they were prevented from separating the assets among themselves under the terms of the trust

• the couple applied for the property in the settlement to be divided among themselves

• the next of kin were also reversionary beneficiaries should the couple die w/o children

• held: the next of kin have an interest as beneficiaries of the trust

  > immaterial that they are volunteers

key point if Cannon v Hartley?

a covenantee who is a party to a deed is entitled to damages for breach of covenant despite being a volunteer

facts of Cannon v Hartley?

• in a deed of separation, D covenanted to settle money he became entitled to in a trust, under which his daughter (C) had an interest in the remainder

• when D became entitled to the money, he refused to settle the money into the trust

• held: C was entitled to damages

key point of Re Pryce?

where a covenant to settle into a trust is breached, the trustee of the covenant can neither sue for specific performance in equity nor breach of covenant in law if the beneficiary is a volunteer

facts of Re Pryce?

• a deceased man was entitled to outstanding sums

• he had covenanted to transfer such sums to his marriage settlement

• the remaining beneficiaries were his next-of-kin who were not within marriage consideration

• held: in the case of the wife’s fund, her next of kin were volunteers who could neither maintain an action to enforce the covenant, nor for damages for breach of it

key point of Davenport v Bishop?

the full amount of damages can be recovered for breach of covenant by a person within marriage consideration even if other beneficiaries were volunteers

key point of Lloyds v Harper?

a contract guarantee can be the subject of a trust

key point of Fletcher v Fletcher?

a covenant to settle can be held on trust by the trustees for the intended beneficiary of the covenant

facts of Fletcher v Fletcher?

• by a voluntary deed, F covenanted w/ trustees to pay £60,000 which the trustees were to hold upon trust for his illegit son (who was a volunteer)

• the trustees were unaware of the deed which was found among F’s parents after his death

• F’s son sued for breach of trust

• held: equity will assist a party claiming under a voluntary deed of covenant

key point of Strong v Bird?

an imperfect gift is perfected when the intended donee is appointed as the executor of the donor’s will, as long as the donor had the immediate intention to gift at the time of death

facts of Strong v Bird?

• B borrowed £1100 from his stepmother who was a tenant at his house

• it was agreed that her rent would be reduced every quarter

• on the 3rd quarter the stepmother insisted on paying the full amount and continued until her death 4 years alter, the total extra amount paid amounting to £900

• B was appointed sole executor of his stepmother after she died

• held =: B was released from his outstanding debt to his stepmother when he was made her executor

  > being a continuation intention to give and a legal act which transferred the owership in the £900 to B, the transaction was perfected

key point of Re Ralli’s Will Trusts?

where the trustee of Trust A from which the covenant is expected to receive property is also the trustee of a future Trust B that the covenant covenants to settle the property received from Trust A into, Trust be is automatically constituted when the property is transferred from Trust A

> extension of the Strong v Bird rule of covenants to settle