#3110 - Certainties, Formalities And Constitution - GDL Equity and Trusts

Three Certainties

- 3 certainties (1. intention; 2. subject matter; 3. object) needed to enforce trust ([Langdale MR], Knight v Knight).

1. Certainty of Intention: imperative, not precatory wording needed.

• no technical language necessary ([Jessel MR], Richards v Delbridge; [Megarry J], Re Kayford).

  • can be by conduct (Paul v Constance).

• NOT precatory language (Lambe v Eaves; e.g. Re Adams v Kensington Vestry: ‘in full confidence she will do what is right’; Jones v Locke: cheque ‘for baby’ insufficient).

• imperative language (Comiskey v Bowring-Hanbury: ‘in full confidence she will leave it to such of my nieces etc’)

• context: whole doc. considered (Re Adams; Comiskey v Bowring-Hanbury: gift over in default certainty)

• if uncertain: absolute gift.

• 2. Certainty of subject matter

  • a. property must be clearly defined:

    • Palmer v Simmonds: ‘bulk’ no.

    • Re Golay’s WT: ‘reasonable yes (as far as courts will go).

  • b. segregation:

    • tangible property: must be segregated – specifically identifiable (Re London Wine; Re Goldcorp).

    • intangible property: need not be segregated (Hunter v Moss, [Dillon LJ]).

      • BUT CRITICISED: all proprietary rights need to be over specific property (Re Harvard Securities: [Neuberger J] criticised, followed Goldcorp for Australian shares; MacJordan Construction v Brookmount Erostin).

  • if uncertain:

    • trust fails (RT).

    • gift with trust attached donee takes free of trust.

  3. Certainty of object

  • fixed trust: complete list test – conceptual + evidential certainty (IRC v Broadway Cottages).

  • discretionary trust: is/is not test – conceptual certainty only (Re Gulbenkian; McPhail v Doulton).

    • application: Re Baden’s DT (No 2) (3 different ratios):

      • [Sachs LJ]: conceptual certainty only – label must be clear; burden on c. to prove part of class.

      • [Megaw LJ]: class certain if ‘substantial number’ can be proved to be within (but: circular).

      • [Stamp LJ]: must be conceptually + evidentially certain (relatives = next of kin) (but: too strict).

    • BUT: subject to admin. workability: R v District Auditor for W Yorks MCC: ‘inhabitants of W. Yorks’.

  • power: is/is not test (Re Gulbenkian).

    • NOT subject to admin. workability (Re Manistry’s ST).

  • gift subject to condition precedent: some conceptual certainty allowed (Re Barlow’s WT: ‘friends’ allowed).

  Formalities

  Creating New Trust

  - Testamentary trusts: s9 Wills Act 1837: 1. writing; 2. signed by testator (or another at his direction + in presence); 3. attested by 2 or more witnesses.

  • failure: will void.

  - Inter vivos trusts:

  • most property: no formalities (Paul v Constance).

  • land: s53(1)(b) LPA 1925: 1. evidenced in writing; 2. signed by settlor.

    • failure: unenforceable (but not void: valid from date of declaration).

    • exception: fraud (express trust: Rouchefoucauld v Boustead; RT: Hodgson v Marks; CT: Bannister v Bannister).

    • exception: implied trusts (CT + RT) – s53(2) LPA 1925 (e.g. Hodgson v Marks: RT, no need to comply with s53(1)(b)).

  Disposing of Subsisting Equitable Interest

  - Prima facie: s53(1)(c) LPA 1925: 1. in writing; 2. signed by grantor (or authorised agent).

  • disposition inc. direction to ts. to hold on trust for another: Grey v IRC: [HoL].

    • but N.B.: oral instruction to ts. + later evidential writing can satisfy s53(1)(c).

      • BUT CRITICISED: transfer itself should be in writing need HC case + leapfrog appeal to SC.

  • exception: implied trusts (s53(2) LPA 1925).

  • failure: disposition void.

  - Vandervell v IRC exception: s53(1)(c) does not apply where: 1. b. absolutely entitled; 2. intention to transfer legal + equitable title (rationale: trust collapsed ts. do not need to know who bs. are).

  • (N.B. only if legal title effectively transferred: Zeitel v Kaye).

  - Contract to assign existing beneficial interest: Neville v Wilson: CT, so s53(1)(c) does not apply (s53(2)).

  - Sub-Trusts: DEBATE over whether s53(1)(c) applies.

  • [Hayton] theory: dep. on whether whole or part of property disposed.

    • whole property disposed s53(1)(c) applies (disposition in effect: original b. drops out of picture).

    • part disposed s53(1)(c) NOT apply (new trust, not disposition).

    • judicial support: Grainge v Wilberforce; Re Lashmar.

  • [Penner] theory: s53(1)(c) NEVER applies (always new trust: original b. can never drop out – must receive 1st).

    • (if land: s53(1)(b) applies; other property: no formalities: Paul v Constance).

    • judicial support: Nelson v Greening & Sykes (original b. now t. of interest for sub-b); Zeitel v Kaye (p36).

  • [Green] theory: s53(1)(c) ALWAYS applies (literal reading of statute) – but: unpopular.

  Constitution

  - Structure:

  • 1. break down q. + identify type of intended transfer – Milroy v Lord:

    • 1. absolute gift: constitution only (intention + transfer of legal title).

    • 2. self-declaration of trust: formalities only (valid declaration of trust).

    • 3. settlement of transfer: constitution + formalities (valid declaration of trust + transfer of legal title).

    • 4. Vandervell exception: constitution only (becomes absolute gift)

  • 2. requirements for effecting that method (Milroy v Lord).

  • 3. general rule: equity will not perfect imperfect transfer.

  • 4. exceptions].

  - Rules of constitution

  • land: s52(1) LPA 1925: by deed (s1 LP(MP)A 1989) + s4/s27 LRA 2002: registration.

  • chattels: deed of gift or actual delivery + intention (Re Cole).

  • shares: Stock Transfer Act 1963:

    • 1. STF signed by transferor.

    • 2. registration in co’s share register (a. send form + certificates to registrar; b. registered by registrar).

    • (private cos: directors can refuse to register transfer if power in arts.)

  • bills of exchange (cheques): Bills of Exchange Act 1882: to 3^rd party by endorsement (sign on back).

  • money: delivery (cheque: only transfers when money cleared).

  • choses in action (debts): s136 LPA 1925: writing + notice to debtor/other party.

  • subsisting equitable interest: s53(1)(c) LPA 1925: in writing, signed.

  - Imperfect constitution: prima facie, equity will not assist a volunteer + perfect an imperfect transfer – court cannot construe failed attempt to use 1 method of transfer as another (Milroy v Lord).

  • failed settlement of transfer: not construed as self-declaration of trust (Milroy v Lord: STF not used for shares).

  • failed absolute gift: not construed as self-declaration of trust (Jones v Lock: cheque not endorsed; Richards v Delbridge: transfer of lease without new deed).

  Exceptions: where equity will perfect imperfect transfer.

  - 1. Choithram v Pagarani: 1 of charity trustees (S) already had property vested in him imperfect gift construed as trust by vesting in other ts.

  • narrow effect: factors – charity (courts more generous: Re Baden’s DT); S. near death (maybe unable to properly transfer).

  - 2. Re Rose: transferor has done all in his power.

  • shares: transfer effective in equity once certificates delivered to directors (before registration) (Re Rose).

  • registered land: transfer effective in equity once all docs. executed + stamped transfer delivered to transferee (before registration) (Mascall v Mascall).

  • test (Re Rose + Mascall v Mascall):

    • 1. correct method of transfer used.

    • 2. transferor does everything within power to effect transfer.

    • 3. transfer irrevocable by transferor: docs. sent to party capable of effecting legal transfer (Re Rose) or delivered to donee/irrevocable (Mascall).

  - 3. Pennington v Waine: unconscionability (extension of Re Rose), BUT DUBIOUS.

  • forgoes Re Rose requirement 3: transfer need not necessarily be irrevocable (STF sent to auditor [not yet to co.] + donee acted in reliance).

  • BUT DUBIOUS:

    • test unclear: [Arden LJ] refused to define unconscionability.

    • based on Choitram v Pagarani: v. specific facts + clear intention to create trust (+PC decision).

    • not applied: Zeitel v Kaye (CoA refused to perfect imperfect gift).

    • better: e.g. of weak estoppel case (Zeitel v Kaye obiter): 1. statement of fact re: ownership; 2. relied upon.

  - 4. Gillett v Holt: proprietary estoppel (1. assurance; 2. detrimental reliance unconscionable to renege).

  • award: minimum equity required to do justice not nec. what promised.

  - 5. Strong v Bird: fortuitous vesting (intended transferee later happens to obtain legal title as PR).

  • application: imperfect release of debt (Strong v Bird); imperfect gift (Re Stewart).

  • conditions:

    • 1. immediate gift intended (Re Freeland).

    • 2. continuing intention at time of death (Re Gonin).

    • 3. intended donee becomes executor on death: sole (Stong v Bird) or 1 of several (Re Stewart).

  • possible extensions of principle: BUT DUBIOUS.

    • Re James: intended donee becomes administrator (e.g. on intestacy)?

      • BUT: Re Gonin obiter: [Walton J]: administrator not intended to be given legal title by testator.

    • Re Ralli’s WT: fortuitous vesting of trust property (e.g. intended t. becomes executor holds as t.)?

      • BUT: ignores ring-fenced nature of trust property (t. holds in different capacity from e.) will not be followed (ignored earlier decision in Re Brooks ST: no fortuitous vesting of trust property).

  - 6. Cain v Moon: donation mortis causa (‘dmc’).

  • conditions:

    • 1. gift made in contemplation of death: subjective test, but cannot be irrational (Re Miller).

    • 2. gift conditional on death: i.e. revoked if donor recovers.

    • 3. actual/constructive delivery of property: donor must pass dominion (indica or ev. of title).

      • land: deeds/key to deeds (Sen v Headley).

      • bank a/c: deposit book (Birch v Treasury Solicitory); post-office savings bank book (Re Weston).

      • cheque: (Re Mead).

  Covenants to settle (promise to create trust – but not constituted: e.g. ‘after-acquired’ property: settlor does not yet own).

  • 1. consideration...