#4629 - Constitution - GDL Equity and Trusts

Formalities: Equitable title

Constitution: Legal Title

• Concerned with constitution during lifetime (as constitution takes place under the will upon death)

Milroy v Lord:

1. Methods appropriate to transferring different types of property

2. Methods of conferring the benefit of property on people set down:

   • An outright gift

   • A transfer on trust – with someone else as the trustee (transfer on trust)

   • Self-declaration of trust – settlor declares himself as trustee

3. That equity will not perfect an imperfect gift

5 main types of property:

1. Chattels – pure personal – you can do it formally – but you don’t have to: intention/delivery (informal transfer)

2. Shares: Shares in a private company:

• Must execute a stock transfer form - s1, Stock Transfer Act 1963

• Must send it with the old share certificate to the company – where registrar of the company will register the new shares (unless exemption in Articles)

• (Shares in public companies: CREST system)

3. Copyright: S90(3), Copyright, Designs and Patents Act 1988

4. Bank Account: A Bank Account = a debt – creditor/debtor relationship – chose in action – if you want to transfer the benefit – s1376 Law of Property Act – signed, written notice to the debtor (the bank)

5. Land: s52, LPA 1925 – by deed

• deed defined in s1 LP(MP)A 1989:

  1. Written

  2. Signed

  3. Witnessed

  4. Headed deed

  5. Delivered

Methods of Benefiting Another:

Legal Interests:

1. Outright gift

2. Transfer on trust

3. Self-declaration of trust

Equitable interests:

4 types from Timpson’s Executors v Yerbury (Above)

Failure to constitute – Ineffectual transfer

The Principle

• Equity will not assist a volunteer - A volunteer is someone who doesn’t provide any consideration – doesn’t give anything in return

• Equity will not perfect an imperfect gift

• Equity will not treat a failed gift as a self-declaration of trust

Application:

1. If as in Milroy v Lord – settlor intends to create a settlement by transfer but fails to vest legal title in the trustees – then equity will not perfect

2. If donor intended absolute gift – but failed to effectively transfer the property – equity will not construe the failed absolute gift (method 1) as a declaration of trust (method 3)

   • Jones v Lock – Jones returned home without a present for his baby so produced a cheque payable to himself and said ‘I give this to baby; it is for himself’ – he died shortly afterwards – but as he had not endorsed the cheque to his son – the property had not been transferred – courts rejected argument that he had declared himself a trustee of the cheque

   • Richards v Delbridge – grandfather endorsed on his lease a memorandum saying ‘this deed and all thereto belonging I give to Edward (a minor) from this time forth’ – he later died – held that lease hadn’t been legally assigned (needs to have a separate deed) – and couldn’t be construed as a declaration of trust because he had intended an absolute gift

   • Paul v Constance – contrast to above cases: effective declaration of trust found because of sufficient intention on the part of Constance to make himself a trustee of the money in the account

   • Shah v Shah –CA construed a letter referring to transfer of shares as a declaration of trust of the shares, rather than a gift

Unless an exception applies:

• Rule in Re Rose

• Rule in Strong v Bird

• Donatio Mortis Causa

• Proprietary Estoppel

• Choithram v Pagarani

• Pennington v Waine

THE EXCEPTIONS:

Transfer Effectual in Equity

Re Rose: A Transferor has done all in his power

• A gift of shares: S1 Stock Transfer Act – stock transfer form needs to be sent with old share certificates to the company for registration

• This was done – but she died before registration had happened: legal title was not completed in lifetime and there was no mention of them in the will so under Milroy v Lord: shares would go into her residue

• CA: if you have (1) Used the correct methods (2) Done all that he/she can (3) Put the matter beyond his control then the transfer will be effective

• Delay here was caused by the company: no fault on the part of the donor

• Mascall v Mascall : principle will also apply where all the relevant documentation has been given to the donee/trustee:

  • Transfer of land: executed deed and gave everything necessary to the son

  • Son hadn’t sent it to the land registry yet – so legal transfer not yet transferred

  • But father had put it beyond his control so equity stepped in

• Re Fry: still more the transferor needed to do: was domiciled abroad and had not obtained Treasury consent (as required by statute at the time) and died before it was obtained: transfer was ineffective

• Zeital v Kaye: handed over a share transfer form signed by the registered shareholder but had not handed over the share certificate: CA held that he had not done everything in his power to transfer the shareholding

Pennington v Waine: under narrow circumstances there will be no legal requirement for the form to be delivered to the donee or the company

• Donor told Mr Pennington (partner in the Company’s auditors), two months before her death, that she wished to immediately transfer 400 shares to her nephew: signed share transfer form and gave it to Mr P who placed it on his file but took no further action, and told her to ‘do nothing’

• Donee was informed of the gift

• Donor also informed donee that she wanted him to become director (needed at least 1 share): form of consent, took on benefits/burdens of directorship

• Documentation given to an agent: not directly to the company or to the donee: so not identical to Re Rose

• But CA said that it would be unconscionable to deny the gift: Arden LJ – if the donor were still alive it would be unconscionable for her to change her mind

• Whether something is unconscionable depends on the facts of the case: has never been defined, very subjective: ‘the refuge of the analytically lazy’

Choithram v Pagarani

Principle revisited by PC: but narrow case, unlikely to be applied to a different set of facts

• PC: affirmed the principle but construed unusual circumstances as amounting to a declaration of trust

• Donor orally declared intention to make a ‘gift on trust’ to a charity, but did not transfer the legal title to the charity before his death

• PC willing to uphold the gift, because the donor was himself one of the trustees of the charity – could be regarded as having manifested an intention that, instead of being legal beneficial owner of the property, he would hold it as trustee

• Lord Browne-Wilkinson: if he had lived it would have been unconscionable for him to go back on it

Fortuitous Vesting in intended Transferee

Strong v Bird

• Immediate intention to give – but you die before you have given it

• But if the person who is going to be the recipient of the gift is also the executor of the estate : then the gift can be perfected

3. requirements:

1. Must be intention to make an immediate gift (Re Freedland 1952) – cannot be an intention to make a gift in the future – effectively just a promise

2. Unchanged intention- settlor must keep that intention until they die (Re Gonin 1979)

3. Donee acquires legal title as executor of the estate

• Must relate to existing property, not future

• Applies whether the done is the sole executor or one of several (Re Stewart)

• Strong v Bird has been extended:

  • To gift of bonds: Re Stewart

  • Extended to administrators on the intenstacy of the donor (Re James 1935) (although this is doubted obiter in Re Gonin)

Extended by analogy to trusts (Re Ralli 1964)

• Specific point hasn’t arisen for decision – but case of Re Ralli went further and suggested that the trust would become constituted if the trust property came into the trustee’s hands in any legitimate way

• Some think this is an unjustifiable extension of Strong v Bird – judge made no reference to requirements of intention which normally apply

Death-bed gifts: Donatio Mortis Causa

1. Contemplation of imminent death

   • Don’t need to be about to die – but must contemplate it as imminent – not as a possibility (e.g. fear of flying )

   • Suicide: Crime until 1961 so no DMC on back of suicide – now it is decriminalised but still unlikely that...