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Topic 1. What is a Trust? Definition of a trust. ‘A trust is an equitable obligation, binding a person (called a trustee) to deal with property (called trust property) owned by him as a separate fund, distinct from his own private property, for the benefit of persons (called beneficiaries or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation.’ - (Underhill and Hayton, Law of Trusts and Trustees 18th edn (2010) Chapter 1, Article 1). Terminology. - Settlor – person who creates a trust in his or her lifetime - Testator/testatrix – a person who creates a will - Trustees – trusted to hold the property - Trust property - the property itself - Trustee duties – responsibilities to act with the trust property - Beneficiary – who the trust property is intended for. They are the true owner.

Types of Trust. Conditional (contingent) interest: “trust of company shares ‘for X if he attains the age of 21’. Successive interest trust: Trust of shares to ‘X for life then remainder to Y’. Discretionary trust: On trust for ‘such of my children and in such shares as my trustees think fit’.

Beneficiaries proprietary rights. Section 19 TOLATA 1999 (1)This section applies in the case of a trust where— (a) there is no person nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust, and (b) the beneficiaries under the trust are of full age and capacity and (taken together) are absolutely entitled to the property subject to the trust. (2)The beneficiaries may give a direction or directions of either or both of the following descriptions— (a) a written direction to a trustee or trustees to retire from the trust, and (b) )a written direction to the trustees or trustee for the time being (or, if there are none, to the personal representative of the last person who was a trustee) to appoint by writing to be a trustee or trustees the person or persons specified in the direction.

Topic 2. Lifetime Gifts. How to make a valid gift. Standing v Bowring: Once a valid gift has been made, it cannot be revoked by the donor. Richards v Delbridge: However, if the gift is deemed to be invalid/imperfect it will fail. The donor must have mental capacity. - The donor must understand the nature of the transactions & the implications. - Degree of understanding corresponds with the value of the gift. - Re Beaney 1978. The donor must intend to make a gift. - Intention of the transferor at the time of transfer of property. - Can be inferred even if not express word of ‘gift’ if made at time of common gifts (Christmas) or to friends / relatives. The subject-matter and donee(s) must be certain. - Subject matter of the gift must be certain. - Donee must also be certain. The donor must transfer the property in the appropriate manner to the donee(s). - Why? Protection for the donor and certainty regarding property ownership. - If donee knows of gift he must accept. - Correct method depends on type of property & whether donor owns legal title or equitable interest. - Every effort test: if donor take all required steps, equity regard gift as complete and perfect even if legal title has not yet passed. - Every effort test often applied if donor has taken steps but also requires third party action to effect legal transfer (if legal owner needs to be registered).

Equity will not assist a volunteer. A volunteer is defined in equity as one who has not offered consideration for a benefit they have received or expect to receive. For example, if a person A expects from past conversations and friendship to receive property under any will of person B, but person B dies before writing this into their will, person A, having not made any contribution to person B, will not be able to seek equity's aid. Mascall v Mascall 1985. -

Basic principle: ‘equity will not come to the aid of a volunteer’. However, in equity a gift is complete once settlor or donor has done everything that donor has to do. Donee has under his control everything necessary to constitute his title completely without any further assistance from the donor, then equity will not be needed.

‘Equity will not perfect an imperfect gift’. Certain circumstances where procedure for transfer not followed may be unconscionable to allow retraction of gift. If a donor has failed to fulfil all the required legal formalities to effect a transfer, meaning the gift is an imperfect gift, equity will not act to provide assistance to the donee. However, there are certain relaxations to the maxim, including the rule of Re Rose of where the donor has “done all in his power to divest himself of and to transfer” the property. Pennington v Waine 2002. -

Donor had done all required of her. In certain circumstances, delivery of documents not necessary to make perfect gift. A intended to make immediate gift, H had been informed & certain point would be unconscionable for A to have recalled gift.

Methods of transferring Land. Three steps necessary to transfer a legal title to land: - Deed of Transfer (s.52 LPA 1925). - Donor hands deed to donee. - Donee registers at the land registry. Legal title passes. Law of Property (miscellaneous provisions) Act 1989 sets out three requirements for a deed: - Parties must intend it to be a deed. - Must say somewhere that it is a deed. - Must be signed in presence of a witness. Methods of transferring Chattels. ‘Personalty’ – what chattels are also called. Dogs cars etc etc Chattels have to be delivered to the done, in other words ‘handed over’. Alternatively, chattels can be transferred by a deed.

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Jaffa v Taylor Galleries Ltd (1990) - Transfer by deed held to be sufficient to pass the legal title. - Same applies to outright gifts. Thomas v Times book company 1966. There must be sufficient intention.

Methods of transferring Money. -

Donor can hand over cash, bank transfer or cheque. Donee must cash a cheque before the donor dies. Death revokes the mandate to the bank to honour the check.

Method of transferring company shares. CREST. -

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If company member of CREST system (computerised share transfer system shareholders of quoted companies): shareholders recorded electronically on instructions of shareholder & no need to sign a stock transfer form. Crest is voluntary. Paper can still be used.

Shares outside the CREST system? Companies Act 2006. -

Private limited companies.

Three steps necessary to transfer shares which are not in CREST: - Donor completes and signs stock transfer form. S.1 Stock Transfer Act 1963. - Donor hands the share certificate and signed stock transfer form to donee. - Donee is registered by the company as the new shareholder.

Method of transferring equitable interests. Section 53 (1) (c) of the Law of Property Act 1925 provides: a disposition of an equitable interest or trust subsisting at the time of disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. -

This section applies whenever the beneficiary of a trust attempts to transfer his equitable interest in the trust property to someone else, as per Vandervell v IRC.

(a) Meaning of disposition. - Section 53 1(c) only applied to dispositions of subsisting equitable interests.

Continued below …

… continued from above. -

The scope of a ‘disposition’ was considered in Grey v IRC, where it was held that it should be given its natural meaning.

(b) An equitable interest … subsisting at the time of the disposition. -

Section 53 (1)(c) only applies to interests which actually exist at the time of the disposition.

(c) ‘In writing’. -

Unlike s.53 (1)(b) which only requires that a deceleration of trust be evidence in writing, s.53 (1)(c) requires that a disposition must actually be made in writing. Re Danish Bacon co Ltd

(d) ‘Signed by the person disposing of the same or his agent’. -

Grey v IRC

(e) ‘or by will’. -

A disposition of subsisting equitable interest may be effected by will.

Exceptions to the need for writing. Direction by the beneficiary of a bare trust. Vandervell v IRC: the HOL held that s.53(1)(c) did not have to be satisfied where a beneficiary with an equitable interest under a bare trust directed the trustees to transfer the legal title to a third party and the transaction completed. A specifically enforceable contract. -

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Where a beneficiary enters a specifically enforceable contract to transfer a subsisting equitable interest under a trust, that interest passes to the intended transferee immediately on the making of contract. Oughtred v IRC.

Extinguishing a resulting trust. -

There is no need for writing if the act of the third party has the effect of extinguished a subsisting equitable interest which has arisen under an automatic resulting trust. Vandervell v IRC.

Exceptions to the maxim “equity will not perfect an imperfect gift”. Three exceptions: - Every effort test. - Unconscionability. - The rule in Strong v Bird. Every effort test. Equity regards the transfer as complete when the transferor has done everything necessary to effect the transfer. Milroy v Lord (1862): An intended gift cannot become effective via a trust imposed by a court Re Rose (1952): Donor had done all he could & was relying on the third party to finalize. Mascall v Mascall (1984): Equity will not come to the aid of a volunteer. However, in equity a gift is complete once settlor or donor has done everything that the donor has to do. Unconscionability. Pennington v Wane [2002]: An imperfect gift is enforceable in equity where the donor intended an immediate gift and it has reached the point where it would be unconscionable for the donor to revoke the gift. -

‘equity will not strive officiously to defeat an intended gift’

In Curtis v Pulbrook, the judge expressed the view that it was essential for the donee to act to his or her detriment because Pennington was a case of proprietary estoppel. Strong v Bird [1874]. On death of donor, gift becomes perfect & donee has priority claim to property over beneficiaries of will. Four conditions must be met: -

The donor intended to make an immediate, unconditional, lifetime gift. Re Freeland 1952. The intended lifetime gift was imperfect. The intention to give continued up to the donor’s death. Re Gonin 1979. The donee acquired legal title to the asset by becoming the donor’s executor or administrator. (automatic upon death).

Death bed gifts. Gifts to take effect only in the event of death would normally be valid only if made in accordance with the Wills Act (1837). Although, the intended beneficiary will be able to take the property concerned if they can establish a valid donation mortis causa (Cain v Moon (1896)). Requirements; First, the gift must be intended to be conditional on death and intended to be automatically revoked in the event of the donor’s survival. Second, the gift must be made in contemplation of death. Wilkes v Allington 1931. Third, the donor must part with dominion over the subject-matter of the gift. Re Lillingston 1952. In Woodward v Woodward (1992), there was an effective passing of dominion for the purposes of a DMC where the keys to a car were handed over. The vehicle registration document was unnecessary. In Re Mustapha (1891) handing over a key to a locked receptacle containing the gift was ffi i Outright gift to a club. In Re Lipinski (1976), it was held that such trusts are valid and fall under one of two constructions. An unincorporated association is not a legal person capable of holding property. 1. In Re Recher (1972) it was held that an outright gift to a club is likely to be construed as a gift to the members as an accretion to the contractual fund to be dealt with in accordance with the rules of the club. Therefore, it does not offend the beneficiary principle. There are no problems with the rule against inalienability provided the club has a rule allowing the members to dissolve the club and share out the capital between them (or the ability to introduce a new rule to this effect) (Re Grant’s WT (1980)). 2. Alternatively it may be valid as a trust for a purpose which brings a sufficiently direct and tangible benefit to ascertainable beneficiaries (the members) who would be able to enforce the trust as in Re Denley (1969). The members of the club would all be ascertainable and there would be no problem with the rule against inalienability because the whole of the fund would be spent on the construction of the changing rooms.

Outright gift to an unincorporated charity. A gift to an unincorporated charity is construed as a trust for the purposes of the charity (Re Vernon’s Will Trusts (1971). If the charity has ceased to exist, but transferred to a new charity. If the purpose is still capable of being pursued, the Charity Commission will draw up a scheme applying the money for that purpose. Under Re Faraker (1912) the Charity Commission may sanction a scheme whereby the legacy would be given to the new charity.

Topic 3. Validity of Express Trusts. Were the correct procedural steps taken? Method 1

In his lifetime the settlor declares himself a trustee of property for B. Need valid declaration of trust (evidenced in signed writing containing all the terms of the trust, if land, s.53(1)(b) LPA 1925) (deed). No transfer of property required

Method 2

In his lifetime, the settlor transfers property to T to hold on trust for B. Need valid declaration of trust (evidenced in signed writing containing all the terms of the trust, if land, s.53(1)(b) LPA 1925)(deed). + Transfer of property to the trustee

Method 3

In his will, a testator transfers property to T to hold on trust for B.

Need valid declaration of trust + Transfer of property to the trustee

in a will executed in accordance with s9 Wills Act 1837

IS THE DECLARATION OF TRUST VALID? Three Certainties – Knight v Knight. 1. Certainty of intention 2. Certainty of subject-matter 3. Certainty of objects - Beneficiary principle - Rule against perpetuities Procedural steps for creating valid trusts. Method 1 - In his lifetime the settlor declares himself a trustee of property for B. Need a valid declaration of trust Land: Section 53(1)(b) 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 ….” Personalty: Settlors can declare trusts over personalty orally or even by conduct. - No transfer of property needed.

Procedural steps for creating valid trusts. Method 2 - In his lifetime, the settlor transfers property to T to hold on trust for B. -

Need valid declaration of trust (evidenced in signed writing containing all the terms of the trust, if land s.53(1)(b) LPA 1925) and;

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Transfer of property to the trustee.

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The settlor must transfer the property to the trustee(s) using the method of transfer appropriate to the particular asset.

‘Equity will not assist a volunteer’ but consider: • Has settlor satisfied every effort test? • Does Strong v Bird apply? Have the trustees become the settlor’s PRs on the settlor’s death? • Would it be unconscionable for the settlor to withdraw? Procedural steps for creating valid trusts. Method 3 - In his will, a testator transfers property to T to hold on trust for B. -

The declaration of trust and the transfer of property to the trustee must be in a will executed in accordance with s.9 Wills Act 1837. E.g. A clause in a valid will says “I give my house, Barton Lodge, Hazelmere, to my trustees to hold on trust for my wife, Frances, for life remainder to my children.

Section 9 Wills Act 1837. No Will shall be valid unless: - It is in writing, signed by the testator, or by some other person in his presence. - Testators intention to give in will - Two witnesses. N.B. If the will states “as we have discussed privately”, and the person has instructed the trustee to hold property on trust for another person. The trust will fail as it has not complied with s.9 Wills Act. The deceleration of trust must satisfy the three certainties. Knight v Knight 1840: - Certainty of intention. - Certainty of subject-matter. - Certainty of object.

Certainty of intention. Re Adams & Kensington Vestry 1884. - S must intend to make himself or T a trustee of the property e.g. “I am holding my Monet painting on trust for B” or “I am transferring my Monet painting to T to hold on trust for B” -

S’s words must impose a duty on himself or T to act as a trustee.

Intention of a will. The court will ascertain the testator’s intention from the whole will (Comiskey v Bowring Hanbury (1905). Precatory words do NOT create a trust. Re Adams and Kensington Vestry (1884) - Testator’s will left his property to his wife “in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease”. Paul v Constance (1977) - Mr C lived with, but was not married to Mrs P. He received £950 for an industrial injury. They went to the bank intending to open a joint account. On the advice of the bank manager, the account was opened in Mr C’s name alone. The parties treated the account as their joint money paying in joint bingo winnings and making withdrawals for joint purposes. Mr C told Mrs P, “the money is as much yours as mine”.

Certainty of subject matter. (a) The trust property MUST be certain. Palmer v Simmonds (1854): Trust of ‘the bulk of my estate’. Trust of part of a collection of items. Re London Wine Co (Shippers) Ltd [1986] PCC 121 - Customers had ordered and paid for consignments of wine which were stored by the Company. The Company declared itself a trustee of each customer’s consignment but did not separate each customer’s bottles from the general stock. Had it created valid trusts for the customers? - No! Oliver J held that even if the company had said the wine was to come from current stocks, the trust would in any event have been uncertain. … Continued below.

… continued from above. Hunter v Moss [1994] 3 All ER 215: Mr Moss owned 950 shares in a small company. He declared himself a trustee saying he was holding 50 of the shares on trust for Mr Hunter but did not indicate which 50 shares were to form the trust property. The high court declared that since the shares were identical, the lack of segregation did not invalidate the trust. What happens if the trust property is uncertain? Lord Browne-Wilkinson stated in Westdeutsche Landesbank Girozentrale v Islington London Borough Council: ‘In order to establish a trust there must be identifiable trust property.’. An imprecise definition of the intended trust property will render the trust invalid for uncertainty of subject matter’. In Hemmens v Wilson Browne (a firm), it was held that an agreement allowing a person to call for a payment of £110,000 at any time could not create a trust of such a sum arising over the solicitor’s general assets because no specific property had been identified as the subject matter of the obligation. (b) The beneficial interests must be certain. Re Golay (1965): In his will, a testator gave his property to trustees on trust to allow his daughter (“Tossy”) to “enjoy one of my flats during her lifetime” and to enjoy a “reasonable income from my other properties”. Re Golay 1965: “reasonable income” was found to be ascertainable by objective means Certainty of Objects. Beneficiary principle. Fixed trusts. (IRC v Broadway Cottages Trust [1955] Ch 20) - Complete list test, which must be able to draw up a ‘complete list’ of the beneficiaries. Pre-determined individuals. Discretionary tru...