Express Private Trusts #2

Express Private Trusts #2

1. CREATION/EXISTENCE OF AN EPT

   • Formalities
     • Statutory formality requirements - reduces chances of mistakes
     • Will trusts
       • In the case of a T to be created on death, the testator must comply with requirements
         • s.9 Wills Act 1837
     • Inter vivos trusts
       • s.53(1) LPA 1925
         • (b) - some evidence/proof can be shown later
         • Non-compliance with (b) - rendered unenforceable, but NOT void.
         • Failure to comply with (c) - VOID.
       • s.53(2) - only applies to express.
       • Distinction between declarations of T of land (where (b) applies) and personalty (where there are no express formality requirements)
       • What constitutes 'some writing' under s.53(1)(b)? Will email signatures suffice?
         • J Pereira Fernandes SA v Mehta [2006]
           • Personal guarantee by email. Was fine to constitute memorandum. Email signatures, inserted automatically, do not suffice.
         • Rochefoucauld v Boustead (1897)
         • Bannister v Bannister [1948]
           • Widow conveyed cottage to brother-in-law. Lived there. He tried to kick her out BUT absence of formalities.
       • What constitutes a 'disposition of an equitable interest' under s.53(1)(c)?
         • Grey v IRC [1960]
           • Yes, was disposing.
         • Vandervell v IRC [1967]
           • No need for writing - not disposed, but destroyed.
       • S.53(1)(c) difficult to apply in respect of its interaction with s.53(2)
         • Oughtred v IRC [1960]
         • Neville v Wilson [1997]
   • Constitution of Ts
     • Where a settlor declares himself as T, must be sufficiently clear intention and compliance with formalities.
     • Where a S transfers property to a T, the trust must be sufficiently declared AND the prop. must be adequately transferred in order that the trust can be described as 'completely constituted' and binding on the settlor.
       • Milroy v Lord (1862)
         • '...the settlor must have done everything which...was necessary to be done'
     • A will T will be automatically constituted by a valid will and become effective on testator's death.
     • Inter vivos T - what suffices in respect of the purported transfer will depend on the type of property.
       • Land - s.52 LPA 1925
       • Equitable int. under T - s.53(1)(c) LPA 1925
       • Chattels
       • Copyright
       • Shares (outside CREST system)
     • In asking whether the settlor has 'done enough', the courts will consider intention and action
       • Re Rose, Rose v IRC [1952]
         • New rule! (against MvL) - everything in his power. What might be needed?
         • Husband tries to transfer shares to wife on March 30th; legal transfer would actually happen on JUNE 30th. Had done everything in his power - equity good.
       • Zeital v Kaye [2010]
         • Not done enough?
       • Curtis v Pulbrook [2011]
         • Not done enough?
     • Equity will not construe an imperfect gift or an imperfect transfer as a valid declaration of trust by the donor/settlor as T.
       • Jones v Lock (1865)
       • How is this to be reconciled with Re Rose? To what extent are questions of reliance and detriment and/or unconscionability relevant?
         • Pennington v Waine [2002]
           • Unconscionability - transfer made to nephew. Had not done everything in power but to not allow would be unconscionable.
         • T Choithram International SA v Pagarani [2001]
           • Set up foundation on death bed. Gave everything to son. Had not done anything, but council allowed this because other interpretation was unconscionable.
     • If a trust is not completely constituted, bens who have provided valuable consideration (i.e. money/money's worth/marriage) can compel the settlor to constitute the T. Bens who have no provided valuable consideration, however, cannot - 'equity will not assist a volunteer'.
       • Although they will benefit if some bens are not volunteers and call for the T to be constituted - Davenport v Bishopp (1846)
       • Exceptions (don't worry about these!)
         • Strong v Bird (1874
           • Rule - where the intended done becomes an executor/executrix (or administrator in Re James [1935])
         • Donation mortis causa
         • Proprietary estoppel
         • Unconscionability?
           • Consider Pennington and Choithram

2. CAPACITY

   • Minors?
   • Mentally incapacitated?
   • Must be over 18 and mentally sound/capable

3. ILLEGALITY AND PUBLIC POLICY

   • Capriciousness
     • Silly, irrational; a bit daft.
     • Brown v Burdett (1882)
       • 'A T to block out the windows and doors of my house for 20 years.' VOID. (You twat.)
     • McCaig v Glasgow [1907]
       • A T to build a staggering monument in his memory. Against public policy and a bit of a dick move. VOID.
     • Re Shaw [1957]
       • T left to the development of a 40-letter alphabet! An odd one, but arguably quite intriguing. VOID.
   • Discrimination (speaks for itself)
   • Asset protection/sham trusts
     • Cannot set up a T in order to evade creditors.
     • Midland Bank v Wyatt [1995]
       • Businessman set up private T on business for daughters. Folded - proclaimed wasn't his business anymore. Hadn't told anyone about the trust - sham.
     • Re Gea (1992)

4. PERPETUITIES

   • Three rules!
   • 1. The rule against remoteness of vesting (aka 'the (modern) rule against perpetuities')
     • Essentially, you must vest within the perpetuity period.
     • How far in the future can an interest begin?
     • Applies to ALL trusts.
     • Prior to 1964 - common law rule of 'lives in being plus 21 years'.
       • Effective at the date/time of disposition.
       • Very harsh.
       • If there was any chance of vesting after the 21 years, the WHOLE thing would be VOID.
       • Class closing rules
         • Andrews v Partington (1791)
     • Perpetuities and Accumulations Act 1964
       • Optional express period no exceeding 80 years
       • Otherwise common law rules - but with 'wait and see'
       • If (and only if) void at common law, then 'statutory lives in being' plus 21 years (and preseumptions)
         • s.3 PAA 1964
       • Limited option to provide for 100 year perpetuity period retrospectively
         • s.12 PAA 1964
     • Perpetuities and Accumulations Act 2009
       • On or after 6th April 2010 - 125 years (including 'wait and see') regardless of what is specified in the trust instrument
         • See s.15 PAA 2009
   • 2. The rule against inalienability of capital (aka 'the rule against perpetual trusts')
     • How long can capital be tied up for?
     • Rule does not apply to charitable trusts.
     • Applies to private trusts and trusts of imperfect obligation (mostly TIOs).
       • PTs - 80 years
         • s.15(4) PAA 1964
       • TIOs - 21 years? (or common law lives in being or common law lives in being plus 21 years. Law Commission seemed unsure.
       • Re Dean (1889)
       • Re Astor [1952]
     • 2009 Act made no change to this rule.
   • 3. The rule against excessive accumulations
     • Adding income to capital - favours bens interested in the capital
       • Thelluson v Woodford (1798)
     • s.164 LPA 1925
       • Before 6th April 2010, number of statutory restrictions
       • Amended by s.13 PAA 1964.
       • Restrictions abolished by 2009 Act in respect of PTs.
     • Charitable trusts are subject to a 21 year period - 2009 Act