Formalities and Imperfect Gifts Summarised Notes for the Equity and Trusts Law module, LLB, at City, University of London (achieved a 1st class using these) - can of course be used for other universities as well! Should be used with the full bundle of notes!
Equity regards that what ought to be done – (maxim) obligated to do certain formal things
Equity requires share certificate for transfer of shares from one individual to another, and
individual who received it, must register the name of shares of the original individual
If miss any of these things, will have an imperfect gift
Ways of setting up a trust (as under Milroy v Lord)
(1)Transferring property to a trustee, must be transferred and delivered
(2)Declaration trust: declare yourself trustee
(3)A trust of a promise to do something
FORMALITIES IN CREATION OF TRUSTS – for a valid express trust
DECLARATION OF TRUST – Means by which trust is declared
DECLARATION OF TRUST ON DEATH: trust declared by settlor, formalities under s.9 Wills Act 1837
(a) It is in writing, signed by testator, or some other person in his presence and by his direction
(b) It appears that the testator intended by his signature to give effect to the will;
(c) Signature is made or acknowledged by testator in presence of two or more witnesses present
(d) Each witness either attests and signs the will or acknowledges signature, in presence of testator
Valid=signed by testator, signed/attested by 2/more witnesses, failure=invalid, testator die intestate
DECLARATION OF TRUST OVER LAND – s.53(1) LPA 1925
Declaration of trust respecting land or any interest must be manifested and proved by some writing
signed by some person who is able to declare such trust or by his will
Declare trust over landwritten + signed by someone has sufficient right in property
• Once trust is created over land, TOLATA 1996 governs obligations of trustees, rights of
beneficiaries to deal with land and circumstances sale of property can be ordered by court
Not need to execute a deed to create a trust, but advisable way to ensure proper settlement
Sufficient if some writing and signed by settlor evidence for trust or settlor settle property in will
DECLARATION OF TRUST INTER VIVOS OVER PERSONAL PROPERTY
Where formal requirements for creation of trust on death or in land, no formalities required for
an inter vivos trust of personalty difficult in proving trust and terms as oral declaration stating
intention sufficient issues from certainty of intention (can infer from actions)
Re Kayford [1975]: mail order business required customers pay in advance or deposit for goods,
money put in a trust deposit account held distinct account shows intent to create express trust
Paul v Constance [1977]:£950+ bingo winnings ‘money as much yours as mine’ held intention to
create a express trust + other factors e.g. joint use of money
For personalty, general intent to create an express trust sufficient for declaration, settlor not
required to use any particular form of words as court will infer intention from circumstances
TRUST CANNOT BE UNDONE ONCE CREATED, unless settlor drafts something contrary –cannot
cancel trust nor recover trust property beneficiaries right to enforce trust
Paul v Paul
Husband and wife contributed property to marriage settlement, was to benefit themselves and
other people, marriage failed, held once constituted cannot unwound trust
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, Only way terminate is under Saunders v Vautier –beneficiaries entitled to terminate trust and call
for delivery of trust fund, provided explicit power trust instrument –revoke has tax consequences
Proper Constitution of a Trust
Settlor demonstrates intent to declare trust over property which they had rights at the time
Person who acts as trustee takes legal title in trust fund
Milroy v Lord (1862): settlor must have done everything according to nature of property in
settlement, to transfer property (to trustee) and render settlement binding upon him – can
transfer property to trustee or declare hold on trust
No trust before legal title to trust fund is transferred to trustee
Where settlor makes themselves sole trustee, it is valid declaration as no need to transfer title
SETTLOR MUST HAVE PROPRIETARY RIGHT IN TRUST PROPERTY AT TIME OF DECLARING TRUST
Before create trust, settlor have SOME proprietary rights at time of declaring trust
Re Brooks*
2 settlements, bank was trustee, beneficiary under 1 settlement, Arthur promised any money he
might receive from first trust, his mother had personal power of appointment, would be passed to
second trust, Arthur not have beneficial interest in first trust but expected his mother will pay
money in future, mother later appointed money to son, bank automatic transfer money in
accordance with promise Arthur made, Arthur sued bank for return held at time of promise to pass
money, he had no right
Re Ralli’s WT [1964]*
Daughter, Helen, had remainder interest under a trust at time purported to promise any money
received from first trust would be settled on a second trust, later money came to Helen, Helen
decided to keep money held as Helen had a remainder interest at time of promise, had proprietary
right, so could declare a trust over it
Re Ellenborough [1903]
Woman purported to declare a trust over property which she hoped to receive in future, held no
trust as at time declaration she had no right to property
Cases involving delay
It is possible if property left for extended period of time as though it were held validly on trust,
equity (in principle that delay defeats equity) settlor not entitled to unwind trust
Re Bowden [1936]
In 1868, before took holy orders, woman purported to settle on trust any property might get in
future when her father died held no trust as no right to property, as he alive at time
Property went on trust when she was a nun, but 65 years later she sought to recover
Still held could not claim for property – exceptional case governed by delay
In cases of estoppel can create valid trust when settlors not have proprietary rights
Re Cavendish Brown [1916]
Testatrix declared trust over land not entitled at time of declaration, she entered in covenant with
her trustees that she would settle property once it was received, failed to get title in trustees on
receiving land held trustees entitled to damages for breach of covenant, equal to lost fund
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