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Seminar 8- Week 16 Constitution of trusts and gifts and exceptions to the rule.1. What is meant by constituting a trust? Be prepared to cite key judgments, such as Milroy v Lord
(1862) 4 De G F & J 264, [1861-73] All ER Rep 783.
A trust is constituted when the legal title on the trust property is vested in the trustees. A trust is
unconstituted when the legal title to the property is not vestes in the trustees. For a trust to be
effective, it is necessary that the settlor must have demonstrated an intention to declare a trust over
property in which she had property rights at the time of declaring the trust, and it is also necessary
that the person who is to act as trustee takes the legal title in the trust fund. The most definitive
statement of the need to vest the trustee is given in Milroy v Lord where Turner LJ held that: “I]n
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 [to the trustee] and render the settlement binding upon him.
He may, of course, 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 he transfers the
property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust
for those purposes … but in order to render the settlement binding, one or other of these 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.”
This statement presents the principle that there can be no trust before legal title to the trust fund is
transferred to the trustee. It should be remembered , however, that where the settlor intends to
make herself sole trustee of the property, it is enough that she effects a valid declaration of trust
because there is no need to transfer the legal title to another person.
In relation to trusts of personality, there are no formalities to be complied with before the trust fund
is transferred to the trustee. For shares to be transferred validly under statute such that a trustee is
vested with the legal title in those shares, it is necessary that the shares be registered in the name of
the trustee. In common with shares, copyrights and patents have their own particular formalities for
the transfer of legal title in the property.
In trusts of land, declarations must comply with s 53 (1)b of the Law of Property act 1925: [A]
declaration of trust respecting any land or any interest therein must be manifested and proved by
some writing signed by some person who is able to declare such trust or by his will.
2. What is the “last-act doctrine”? How does it assist settlors in setting up a trust and donors in giving
a gift?
An issue arises in relation to the situation in which the donor has done everything necessary to
transfer title in the property to another person but where that outright transfer has nevertheless not
been completed. The question is: if the donor has performed all the acts necessary to be performed
by her to complete the making of a gift, should the donor have been deemed to hold the property
on trust for the intended done from that moment of completing the necessary acts? It was held in
Re Rose that if the donor ahs done everything necessary for her to do to make the gift, then equity
will deem an equitable interest in the relevant property to have passed automatically, even if the
donee is a volunteer. This principle, it is suggested is an exception to the rule that equity will not
assist a volunteer.
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