The Constitution of Trusts

Methods of Constitution:1. Self- declaration: the settlor declares himself a trustee of his own property2. Declaration and transfer: settlor transfers legal title to the property to a third party.Milroy v Lord: a settlor may constitute a trust 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.Richards v Delbridge: may transfer legal title and divest himself of legal ownership by declaring another trustee or may retain legal ownership and deprive himself of beneficial ownership by declaring himself trustee. Declaration of Trust (only inter vivos):Richards v Delbridge: Settlor need not to use the words "I declare myself trustee" but must use expressions which have the same meaning. Re Cozens: there must be a present irrevocable declaration of trust (although exact words not needed).Jones v Lock: Father wrote a gift cheque for baby son but used "loose conversation". Although there was an intention to benefit there was real declaration to constitute the trust. Equity will not perfect and imperfect gift in order to fulfil a declaration of constitution. Pappadakis v Pappadakis: Husband's life insurance policy was held on discretionary trust for himself, wife and child, the husband attempted to add second child as beneficiary by improperly executed deed. The deed was held to be invalid, and so was subsequently held to be a failed gift. The trust was not effectively constituted. Paul v Constance: Constance had bank account which he claimed to his mistress was "as much yours as mine" repeated over time. This showed an intention to give the property away absolutely and so effectively declared the constitution of the trust. Don King Productions v Warren (no 1): the general conduct of the parties is relevant in determining the intent of the parties and whether they intended to declare constituting the trust. Transfer of Legal Title (inter vivos and wills): Transferring legal title over Land- conveyance under LPA 1925 and registration under LRA 2002 Transferring legal title over Shares- executing 'share transfer form' + registration of new owner/ company shareholding register or register onlineTransferring legal title over Chattels- deed of gift or physical delivery + intention of transfer

Constitution of trust= trustee has sufficient legal title to the trust property and so the beneficiary has an enforceable interest in the trust property. A beneficiary has no enforceable interest where the trust is not constituted properly because equity will not assist a volunteer and will not perfect an imperfect gift.

Ineffective Transfers:Milory v Lord: Lord was trustee for Milroy. However, the settlor did not transfer the shares to Lord, but merely gave Lord the power to distribute the dividends, which meant that the gift was incomplete. Richards v Delbridge: Richards attempted to make an outright gift through transferring the lease over, however there was no deed and so no gift.Shah v Shah: attempted to give shares as a gift "I am holding shares immediately for you" however, the court held the wording amounted to a trust: the intention of a declaration of trust is "manifested by the words he has used in the context of all the relevant facts"'Every Effort Rule'/ Rose Rule:Re Rose: Deceased executed a transfer of shared to his wife a s a gift of love and affection. The transfer was not registered by the company until later by which time the donor had passed away. Did he fulfil the "every effort rule"? Held, he had done all he could in his own power to transfer the shares.Note: the gift becomes enforceable from the time of transfer instead of registration due to "registration gap". T. Choithram International SA v Pagarani: A man lying on his deathbed sought to declare a trust over his property but failed to transfer legal title in the property to all trustees- the trust was not validly constituted. Held, a valid trust was created, applying the  Re Rose, the settlor could be taken to have done all that was necessary to create a trust.Re Fry: Transferor had not obtained Treasury approval which was mandatory to effect the transfer of the property, he  had not done everything required of him before his death. Mascall v Mascall: father wished to transfer land to his son and so gave him a deed of transfer and the land certificate. Then they fell out and the father argued that the property was still his because the son had not registered the deed in his name through the land registry. Held,  the father had done everything in his power to make the transfer effective. Without registration the legal title had not passed, but title had passed in equity which meant that the property was held on trust for the son by the father.Pennington v Waine: testator gave documents to her agent and told donee her intentions. Agent assured the testator that there was no more for them to do despite the fact that ownership had not been registered by. The testator later died and registration still had not occurred. The 'every effort rule' had not been fulfilled as the testator was aware of the issue and could have taken matters back into her own hands before her death it would have been unconscionable for her to have to do so therefore the transfer was passed. Zeital v Kaye: The deceased owner of a shareholding attempted to transfer the shareholding but the share certificates were missing. Held, he had not done everything in his power to order new copies and so the trust failed. Curtis v Pulbrook: Believed Pennington v Waine was actually an exception to the Rose Rule as opposed to an extension upon the rule

Fortuitous Vesting:Fortuitous Vesting = trust is constituted through coincidental receipt of trust property by the trustee.Strong v Bird: Bird borrowed money from his step-mother, who was living with him and agreed to pay back the loan through reduced rent from her. However, she mostly continued to pay full rent until she died. Upon death, Bird was appointed in her will as the executor of her estate. Her relatives attempted to collect the money owed by Bird. Held, the appointment of Bird as the executor was an evidence that the loan to Bird was a gift to him and there was a continuing intention to give. It would be ridiculous for the executor to sue himself for the debt, therefore the debt was "cancelled".There are four conditions for the rule in Strong v Bird: The donor must have intended to make an inter vivos gift. The intention for the gift must be continuous- it must have persisted until the donor's death. The donee is appointed the donor's executor (or administrator)  The subject matter of the intended gift must have been capable of enduring the death of the donor. Re Stewart: The rule in Strong v Bird also applies where imperfect gifts are made to the donee whom is also appointed executor of the will. The gift becomes "perfected".  Re James: Son inherited his father's house and made an imperfect transfer to the housekeeper. After he died the housekeeper was appointed the administrator of the house thus requiring the legal title and perfecting the imperfect gift. Strong v Bird also applies to administrators, not just executors.Re Conin: Re James deceased did not nominate their executor, it is hard for the court to do so because it becomes a "lottery" if one has a debt to fulfil.  Re Ralli's Will Trusts:  Two sisters had been left father's residuary estate. One died without children and left her's to her sister's own children. The settlement was held to be constituted under the living sister's marriage certificate as her husband already owned the legal title to the estate as a trustee, therefore the remainder residuary interest must have fallen under the marriage certificate. This extended the rule in Strong v Bird to apply to imperfect trusts. A trust may be perfected and constituted where legal title is already vested in another trustee, albeit in a different capacity.  

Deathbed Gifts:Re Beaumont: A deathbed gift is neither inter vivos nor testamentary, it is a gift which is made inter vivos subject to the donor's death. cheques are seen to be revocable property and therefore cannot be passed under a trust after the donors death, for a cheque to pass under a trust it must be cashed within the donor's lifetime or it must be given in contemplation of death. Sen v Headey: the gift is revocable until death occurs.Tate v Hilbert: Uncle intended to make an immediate and outright gift as opposed to a conditional gift therefore this is not a deathbed gift. The delivery of the subject matter- the dominion must pass from donor to donee before the donor's death. Something must be done that shows the donor's intention e.g.. physical delivery of the property, delivery of keys to a safe. Cain v Moon: Gift or donation must be made in contemplation (not necessarily expectation) of death If the circumstances do not occur the property must be capable of going back to the donor, it gift must be conditional upon death. There must have been delivery to the donee of the subject matter of the gift.   Duffield v Elwes: There must be an impending risk of death (the conceived approach) Re Craven's Estate: If death is within near future, it must be learnt off an identified sourceWilkes v Arlington: If death comes from a different contemplated source (ie. if killed in a way other than expected) the gift is still valid.Gardner v Parker: circumstances rather than express words can show contemplation of death. Re Kirbley: The donor was worn out but not ill, the gift was not in contemplation of death. 

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