Express Trusts

Question 1

The Development of the Trust Concept
The modern trust developed out of the [blank_start]medieval concept[blank_end] of the use whereby the owner of land would give it to another to hold it on his behalf. One of the most significant aspects of the jurisdiction of the [blank_start]Court of Chancery[blank_end] was the enforcement of the use of land. The Statute of Uses was enacted in 1535 and extended to Ireland in 1634. The most important exclusion was that a use upon a use did not come within the ambit of the Statute. It was established in [blank_start]Tyrrel’s case[blank_end] (1557) that where there was a use upon a use, the second use would not be executed by the Act. However the Courts of Chancery decided to enforce this second use in a manner similar to that in which the first use had been enforced prior to the enactment of the Statute of Uses. The second use became known as a trust.

Definition of a Trust 
[blank_start]Keeton and Sheridan[blank_end], The Law of Trusts, define a trust in the following terms: ‘A trust is the [blank_start]relationship[blank_end] which arises wherever a person, called the trustee is compelled in equity to hold property, whether real or personal, and [blank_start]whether by legal or equitable title[blank_end], for the [blank_start]benefit of some person[blank_end]s (of whom he may be one and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit accrues not to the trustee, but to the beneficiaries or other objects of the trust.’

Trusts and Powers
Whether an instrument is a trust or a power is a question of the intention of the settlor ascertained from the construction of the language of the instrument. The key difference is that if it is construed as a trust, a potential beneficiary can require a trustee to exercise discretion. There is a fundamental distinction between trusts and powers; while trusts are of an [blank_start]imperative nature[blank_end], powers are [blank_start]discretionary[blank_end]. A trustee must carry out his functions according to the terms of a trust whereas the donee of a power has considerable discretion as to the manner in which he exercises the power, if indeed he exercises it at all. The beneficiaries under a trust are the owners in equity of the trust property while the objects of a power have only the expectation that the power may be exercised in their favour. While these basic distinctions seem clear in theory, they are confused by the fact that a trust may confer a measure of discretion on a trustee e.g. he may be given a discretion to select beneficiaries from a specified class or to decide the proportions in accordance with which the trust property is to be divided, and this is known as a discretionary trust. There is also a concept known as a power in the nature of a trust or a ‘trust power'. This essentially denotes the situation which arises where a court implies the existence of a trust in default of any appointment being made by the donee of a power.

The manner in which a court should determine whether a mere power or a trust power exists in circumstances where there has been a failure to exercise a power of appointment involves deducing the intention or presumed intention to be derived from the language of the instrument.  In [blank_start]Burrough v Philcox[blank_end] (1840) 5 My & Cr 72, 92 Lord Cottemham stated: ‘When there appears a general intention in favour of a class, and a particular intention in favour of individuals of a class to be selected by another person, and the particular intention fails, from that selection not being made, the [blank_start]court will carry into effect[blank_end] the general intention in favour of the class.’

[blank_start]Re Kieran[blank_end] [1916] 1 IR 289, 297 Pim J stated ‘it is the recognized duty of every court to carry out a trust if it is possible to do so, and if it is possible, a court will avoid a construction which must result in an intestacy and in the carrying of the property, possibly wholly, probably largely, to persons whom the testator never meant to get it.'

Accepted Answer

medieval concept

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Court of Chancery

Accepted Answer

Tyrrel’s case

Accepted Answer

Keeton and Sheridan

Accepted Answer

relationship

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whether by legal or equitable title

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benefit of some person

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imperative nature

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discretionary

Accepted Answer

Burrough v Philcox

Accepted Answer

court will carry into effect

Accepted Answer

Re Kieran

Question 2

Formalities
Primarily with a view to preventing fraud, legislation has intervened to provide that in specific cases certain formalities must be observed in the creation of express trusts. However, no formalities are required for the creation of an inter vivos express trust of personalty and provided that the settlor manifests the intention of creating such a trust it may be established orally.

In relation to the creation of express trusts of land, whether freehold or leasehold, [blank_start]s.4[blank_end] of the [blank_start]Statute of Frauds[blank_end] (Ireland) 1695 requires that the trust be evidenced in [blank_start]writing[blank_end] and signed by a person able to declare the trust, or by his will. Notwithstanding these statutory requirements, the courts will [blank_start]not always[blank_end] insist on strict compliance with the provisions of the Statute of Frauds and the principle has been established that equity will not permit the statute to be used as an instrument of fraud. As Lord Westbury stated in [blank_start]McCormick v Grogan[blank_end] (1869) LR 4 HL 82, 97: 'The Court of Equity has, from a very early period, decided that even an Act of Parliament shall not be used as an instrument of fraud'.  So, the court will not permit a beneficiary to be deprived of an interest in land under a trust in the absence of written evidence of it if such a result would amount to a fraud providing that there is some other evidence to establish the existence and nature of the trust.

[blank_start]Rochefoucauld v Boustead[blank_end] [1897] 1 Ch 196, 206 Lindley LJ stated: ‘It is a fraud on the part of a person to whom land is conveyed as a  trustee, and who knows it was so conveyed, to deny the trust and claim the land for himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the from of conveyance and the statute, in order to keep the land himself.’

This principle was applied in Ireland in [blank_start]McGillicuddy v Joy[blank_end] [1959] IR 189 where Budd J held that the principle in Rochefoucauld applied even though in the case before the court there was only a contract of sale, as opposed to a conveyance.

Where a trust is created by will, the testator must comply with the statutory requirements laid down by s.[blank_start]78 of the Succession Act 1965[blank_end] in relation to the making of [blank_start]statutory dispositions[blank_end]. However, as with trusts created inter vivos, equity will not always strictly enforce the statutory formalities required where the statute is being used as an instrument of fraud and it was in obedience to this principle that so called ‘secret trusts' (considered below) came to be recognised.

Essential Elements
Apart from ensuring compliance with the formalities outlined above, no technical or precise language is necessary to create a valid express trust. However, certain essential elements which have come to be known as ‘the three certainties' must be present if such a trust is to be created. These three conditions of substance are as follows
1. The subject matter of the trust must be [blank_start]certain[blank_end].
2. The objects must be [blank_start]certain[blank_end].
3. The words relied on as creating the trust must have been used in an [blank_start]imperative[blank_end] sense so as to show that the testator intended to create an obligation.
These requirements were laid down by Lord Langdale MR in [blank_start]Knight v Knight[blank_end] (1840) 3 Beav 148, 173 and restated by O’Byrne J in Chambers v Fahy [1931] IR 17, 21.

Certainty of words
The requirement that the words used be imperative does not mean that any precise form of wording must be used, so a trust may be created without actually using the word ‘trust’. Conversely the use of the word ‘trust’ does not conclusively indicate the existence of a trust. The words used must be examined to see whether the intention was to impose the obligations of a trust upon the donee. Initially it was fairly often found that trusts might be constituted by precatory words e.g. where a person gave property to another and expressed the wish, hope, desire or confidence that the donee would deal with the property in a particular manner. However, by the time of [blank_start]Re Hamilton[blank_end] [1895] 2 Ch 370, 374 Lopes LJ stated ‘it seems perfectly clear that the current of decisions with regard to precatory trusts is now changed and that the result of the change is this, that the court will not allow a precatory trust to be raised unless on a consideration of all the words employed it comes to the conclusion that it was the intention of the testator to create a trust.’

In re [blank_start]Humphrey’s Estate[blank_end]  [1916] 1 IR 21, 24  Ross J stated there was no doubt that ‘the tide has turned and is running strong against precatory trusts’.

[blank_start]Re Sweeney[blank_end] [1976-77] ILRM 88 Hamilton J quoted with approval the statement of Ross J in [blank_start]Re Humphrey's Estate[blank_end] to the effect that ‘after a devise and bequest in clear and express terms, if a trust is intended to be created one would expect that this would be done in terms equally clear and explicit’. He concluded that the words used were not intended to create any trust in favour of the other defendants but were merely the expression of his wish for the guidance of his wife as to the manner in which she should dispose of her assets after her death.

Despite the general trend illustrated by these decisions, precatory words may be sufficient to create a trust if it is clear from the language used in the will as a whole that this was the testator's intention. In [blank_start]Comiskey v Bowring Hanbury[blank_end] [1905] AC 84  where the words ‘in full confidence' were used, the majority of the House of Lords held that on the true construction of the will there was an absolute gift of the testator's real and personal estate subject to an executory gift of the same at her death to such of his nieces as survived her, either in accordance with the shares provided for in the wife's will or otherwise equally.

Certainty of subject matter
To ensure the creation of a valid express trust, the subject matter of the trust must be defined with [blank_start]sufficient certainty[blank_end]. This principle applies not just in a general way to the property which should form the subject matter of the trust, but also requires that the beneficial interests to be taken by the beneficiaries are defined with sufficient clarity except in a situation where the trustees are given a discretion to decide what the extent of these beneficial interests should be (a discretionary trust). Where an objective criterion which can be applied by the court is provided by a settlor or testator, a failure to quantify precisely the extent of the subject matter of a trust will not prove fatal to its validity. So, in Re [blank_start]Golay’s Will Trusts[blank_end] [1965] 1 WLR 969 Ungoed Thomas J upheld the validity of a gift directing the executors to allow a beneficiary to use a flat during her lifetime and to ‘receive a reasonable rent’ from other properties.

Difficulties have arisen where a settlor seeks to create a trust of a definite but yet unidentified portion of an asset or assets. Where the asset is tangible, e.g. cases of wine, and it is not segregated, no trust will arise. Where the asset in question is of an intangible nature, the courts have accepted that a trust may arise in these circumstances.

In [blank_start]Hunter v Moss[blank_end] [1993] 1 WLR 934 Colin Rimmer QC, giving the judgment of the Divisional Court, expressed the view that ‘any suggested uncertainty as to subject matter appears to me to be theoretical and conceptual rather than real and practical' and his finding that the trust was not void on the grounds of uncertainty of subject matter was upheld by the Court of Appeal.  
[blank_start]Martin[blank_end] [1996] Conv 223 comments that the Hunter solution is fair, sensible and workable and a welcome example of the court's policy of preventing a clearly intended trust from failing for uncertainty.

Certainty of Objects  
The fundamental rule which must be observed is that the objects or beneficiaries of a trust must be defined with a sufficient degree of certainty to enable the trustees, or if necessary the court, to administer the trust according to the settlor or testator's intentions. The requirements which must be satisfied will depend on whether the instrument being construed is characterised as a trust or a power and in addition may vary according to the nature of the trust involved.

Test for Fixed Trusts - Under the terms of a fixed trust, the interest which each beneficiary is to take is specified in the trust instrument and the trustees have [blank_start]no discretion to determine[blank_end] either who will benefit or the extent of that individual's share. The requirement in this case is that the persons who are to benefit under a trust must be clearly identified or identifiable by the time it comes into operation; the trust must have ascertained or ascertainable beneficiaries.

Test for [blank_start]Mere Powers[blank_end] - The donee of a power of appointment is under no duty to exercise it in a particular manner, if indeed he exercises it at all and to this extent his position differs from that of a trustee.  The test for the certainity of objects in relation to powers was laid down in Lord Upjohn's judgment in the House of Lords in Re [blank_start]Gulbenkian's Settlement Trusts[blank_end] [1970] AC 508, 523 as follows: ‘A mere or bare power of appointment among a class is valid if you can with certainty say whether any given individual is or is not a member of the class; you do not have to be able to ascertain every member of the class.’

Test for Discretionary Trusts - Trustees are under an obligation to distribute the trust property to the beneficiaries, although they have a discretion to select which members of the class should benefit and to what extent. Considerable uncertainty still surrounds the question of the correct test of certainty in relation to objects to apply to such discretionary trusts in this jurisdiction.

The test originally applied in England was as formulated by Jenkins LJ in [blank_start]IRC v Broadway Cottages Trust[blank_end] [1955] Ch 20, 35-36 namely that ‘a trust for such members of a given class of objects as the trustees shall select is void for uncertainty unless the whole range of objects eligible for selection is ascertained or capable of ascertainment.'

The House of Lords reformulated the test of certainty the following year in [blank_start]McPhail v Doulton[blank_end] [1971] AC 424, 456 and Lord Wilberforce stated that the test for discretionary trusts ‘ought to be similar to that accepted by this House in Re Gulbenkian's Settlements for powers, namely, that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class.’

There is good reason for supposing that in this jurisdiction, certainly in relation to specific types of discretionary trusts, the law remains as formulated in [blank_start]IRC v Broadway Cottages[blank_end] Trust. [blank_start]In Re Parker[blank_end] [1966] IR 309 Budd J formulated the test as follows (at 318): ‘[A]n imperative trust for the division of income between such members of the class as the trustees may select is invalid unless the whole class of potential beneficiaries can be ascertained.’

This view was approved, albeit in an obiter context, by Murphy J in [blank_start]O'Byrne v Davoren[blank_end] [1994] 3 IR 373 who commented that not only was the judgment of Budd J a precedent of [blank_start]greater authority[blank_end] than that of the House of Lords but he also preferred the reasoning in the former case, namely that an imperative trust for the division of income between such members of a class as the trustees may select is invalid unless the whole class of potential beneficiaries can be ascertained.

The rationale of the need for equal division which seems to lie behind Parker is far from suitable in the case of many modern discretionary trusts and is based rather on the type of ‘trust powers' which were common in the past. Perhaps before deciding which test is to be preferred in a given case, the question of how the court would exercise its discretion where the trustees fail to do so should be addressed. Where the testator's intentions are likely to be [blank_start]fulfilled by equal division[blank_end] amongst all the potential beneficiaries, clearly the certainty requirement laid down in Parker is to be preferred. However, as the judgment of Lord Wilberforce in McPhail made clear, this is no longer the case in relation to many modern discretionary trusts which are designed to benefit a much wider class of beneficiary and it is difficult to fault the conclusion reached in the latter case on the basis of the nature of the trust involved.

As Lord Wilberforce pointed out in [blank_start]McPhail v Doulton[blank_end], in one instance there might be a difference between the test to be applied to discretionary trusts and powers i.e. where the class of beneficiaries which complied with the requirement of certainty might be so large as to be ‘administratively unworkable’ – as Lord Wilberforce commented in McPhail ‘where the meaning of the words used is clear but the defintition of beneficiaries is so hopelessly wide as not to form ‘anything like a class’ so that the trust is administratively unworkable…or one that cannot be executed’.

In  [blank_start]Re Manisty’s Settlement[blank_end] [1974] Ch 17, 23  Templeman J put forward the view that in the case of a mere power, it should not be found invalid on such grounds ‘a power cannot be uncertain merely because it is wide in ambit'. However, it seems clear that a discretionary trust in favour of such a wide class may be void as administratively unworkable, see R. v [blank_start]District Auditor[blank_end] ex p [blank_start]West Yorkshire Metropolitan[blank_end] County Council [1986] RVR 24 where a trust for the benefit of ‘any or all or some of the inhabitants of the county of West Yorkshire’ was within this category and the trust was therefore void as there were no ’ascertained or ascertainable beneficiaries’. It was not capricious as the council wanted to benefit the inhabitants when it realised that it had not spent all the available funds.

It would appear that both trusts and mere powers may be declared void on the grounds of capriciousness, e.g. a power to benefit the residents of Greater London, since the settlor in such a case could not really intent to benefit 'an accidental conglomeration of persons who had no discernible link with the settlor' per Templeman J in [blank_start]Re Manisty’s Settlement[blank_end] [1974] Ch 17, 27.

Accepted Answer

Statute of Frauds

Accepted Answer

s.4

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writing

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not always

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McCormick v Grogan

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Rochefoucauld v Boustead

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McGillicuddy v Joy

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78 of the Succession Act 1965

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statutory dispositions

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certain

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certain

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imperative

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Knight v Knight

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Re Hamilton

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Humphrey’s Estate

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Re Sweeney

Accepted Answer

Re Humphrey's Estate

Accepted Answer

Comiskey v Bowring Hanbury

Accepted Answer

Golay’s Will Trusts

Accepted Answer

sufficient certainty

Accepted Answer

Hunter v Moss

Accepted Answer

Martin

Accepted Answer

no discretion to determine

Accepted Answer

Mere Powers

Accepted Answer

Gulbenkian's Settlement Trusts

Accepted Answer

IRC v Broadway Cottages Trust

Accepted Answer

McPhail v Doulton

Accepted Answer

IRC v Broadway Cottages

Accepted Answer

In Re Parker

Accepted Answer

O'Byrne v Davoren

Accepted Answer

greater authority

Accepted Answer

fulfilled by equal division

Accepted Answer

McPhail v Doulton

Accepted Answer

Re Manisty’s Settlement

Accepted Answer

District Auditor

Accepted Answer

West Yorkshire Metropolitan

Accepted Answer

Re Manisty’s Settlement

Question 3

Secret Trusts
Equity will not always insist on [blank_start]strict compliance[blank_end] with the statutory formalities required when this would result in a statute being used as an instrument of fraud. The statutory formalities which must normally be complied with to create a valid trust after a testator’s death – that all testamentary dispositions must be in writing - may in some circumstances be waived to give effect to what has become known as a ‘secret trust'. A fully secret trust arises where a [blank_start]testator makes a gift[blank_end] of property to a named person in his will without expressly stating that the latter is to hold it on trust. If either before or after making his will, but during his lifetime, he informs the legatee that he wishes him to hold the property on trust for a third party or a particular purpose and the legatee either expressly or by his silence impliedly agrees to do so, he will be bound by the trust. A half secret trust is said to exist where it is clear from the will that the legatee is to hold the property on trust but neither the terms of the trust nor the identity of the beneficiaries are disclosed in the will.

Joint Tenants and Tenants in Common
There is an issue as to whether a secret trust will arise where several legatees are involved but the testator’s intentions are communicated to one only. Traditionally the view taken has been that where the legatees are tenants in common only those to whom the trust is communicated are bound by it - the others take the gift beneficially.

In [blank_start]Re Stead[blank_end] [1900] 1 Ch 237, 241 Farwell J stated:  ‘If A induces B either to make or to leave unrevoked, a will leaving property to A and C as tenants in common, by expressly promising or tacitly consenting, that he and C will carry out the testator’s wishes, and C knows nothing of the matter until after B’s death, A is bound, but C is not bound.’

In [blank_start]Geddis v Semple[blank_end] [1903] 1 IR 73 the Irish Court of Appeal  (Walker LJ at 83) said that an ‘innocent’ tenant in common will take free of the trust only if his gift can be regarded as an independent one i.e. that it was not induced by his co-tenant’s undertaking in relation to the trust.

The position in relation to joint tenants appeared to be that where the trust was communicated to one of them before the will was drawn up, the trust was binding on all of them if made on the basis of a promise by one to be bound. Farwell J stated in [blank_start]Re Stead[blank_end] at p.241: ‘If however the gift were to A and C as joint tenants, the authorities have established a distinction between those cases in which the will is made on the faith of an antecedent promise by A and those in which the will is left unrevoked on the faith of a subsequent promise. In the former case the trust binds both A and C, the reason stated being that no person can claim an interest under a fraud committed by another; in the latter case, A and not C is bound, the reason stated being that the gift is not tainted with any fraud in procuring the execution of the will.’

The inducement theory was developed by [blank_start]Perrins[blank_end] (1972) 88 LQR 225 who has suggested that the only question to which the court should address itself in such circumstances is whether the gift to the legatee who was unaware of the testator's intention to create a secret trust was induced by the promise of the legatee who knew of his intentions in this regard to carry out his wishes. If this approach is accepted, issues such as whether the legatees take as joint tenants or tenants in common and whether the promise was made prior to or after the execution of the will are merely matters of evidence which may be of assistance to the court in deciding on the question of inducement but will not of themselves determine the issue - although clearly if there is a promise made before the will an inducement is likely.

Onus of Proof
The onus lies on the person seeking to show the existence of a secret trust to establish this on the balance of probabilities. While earlier authorities suggested that a higher standard of proof would be required, it was stated in [blank_start]Re Snowdon[blank_end] [1979] Ch 528, 537 that the ordinary civil standard of proof applies. In this case Megarry VC suggested obiter that this standard might be higher if any question of fraud arose, although in [blank_start]Banco Ambrosiano[blank_end] v [blank_start]Ansbacher & Co[blank_end]  [1987] ILRM 669 the Supreme Court rejected the suggestion that any higher burden of proof should be placed on a plaintiff where an allegation of fraud is made in a civil case.

Half-Secret Trusts
A half secret trust arises where a testator gives property to a [blank_start]legatee on trust[blank_end] (i.e with an express direction in the will that he is to hold it on trust) without disclosing its precise terms or the objects of the trust in the will. Such a trust is treated as arising independently outside the will based on an undertaking by the legatee to hold the trust property in accordance with the testator’s instructions.

[blank_start]Riordan v Banon[blank_end] (1876) IR 10 Eq 469, 477 Chatterton VC stated: ‘The result of the cases appears to me to be that a testator cannot by his will reserve to himself the right of disposing subsequently of property by an instrument not executed as required by the statute, or by parol; but that when, at the time of making his will, he has formed the intention that a legacy thereby given shall be disposed of by the legatee in a particular manner, not thereby disclosed, but communicated to the legatee and assented to by him, at or before the making of the will, or probably according to [blank_start]Moss v Cooper[blank_end], subsequently to the making of it, the court will allow such trust to be proved by admission of the legatee, or other parol evidence and will, if it be legal, give effect to it.’

The enforceability of half secret trusts remained in doubt in England until the case of [blank_start]Blackwell v Blackwell[blank_end] [1929] AC 318. Lord Sumner stated (at 339-340) ‘it is communication of the purpose to the legatee, coupled with acquiesence or promise on his part, that removes the matter from the [blank_start]provision of the Wills Act[blank_end] and brings it within the law of trusts, as applied in this instance to trustees, who happen also to be legatees.’

An issue which has caused controversy is whether there can be effective communication and acceptance of a half secret trust after the date of the will. In [blank_start]Blackwell[blank_end], Lord Sumner stated at 339: ‘A testator cannot reserve to himself a power of making future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards, nor can a legatee give testamentary validity to an unexecuted codicil by accepting an indefinite trust, never communicated to him in the testator’s lifetime.’ This view was taken as authority for the proposition that the communication of a half secret trust cannot be effective if made after the date of the will in

[blank_start]Re Keen[blank_end] [1937] Ch 236. The Court of Appeal held that on the true construction of the will it reserved power to the testator to dispose of property by future unattested disposition contrary to the Wills Act 1837. In addition, the clause in the will referred to future definitions of trust subsequent to the date of the will whereas the notification of the directions had been communicated and accepted prior to the will, so even if subsequent communication was admissible as a matter of principle, it was inadmissible as being inconsistent with what the will prescribed.
 
[blank_start]Prendiville v Prendiville[blank_end] [1995] 2 ILRM 578 Barron J said that Re Keen had been relied on as an authority for the proposition that a half secret trust could not be established unless its terms were communicated and accepted prior to the execution of the will. He felt that this proposition could not be taken from that case, which, in his opinion, turned on the construction of the particular clause in the will and the issue of inconsistency. Barron J concluded that the principles of law to be applied to secret and half secret trusts are the same.

[blank_start]Prendiville[blank_end] is not an entirely satisfactory authority for a number of reasons. Barron J failed to identify precisely the time at which communication and acceptance of the trust occurred although he did find that this had taken place at some stage during the testator's lifetime. The use of the words ‘as she has been advised'  would suggest that such communication was intended to take place either before or at the time of execution of the will and yet one must ask why Barron J took the trouble to refute the suggestion that [blank_start]Re Keen was authority[blank_end] for the proposition that communication must occur prior to the will, unless on the facts of the case before him, communication did not take place until after its execution. Because of his failure to be more specific about the timing of these events, it is therefore still not clear whether Barron J's rejection of the need for prior communication forms part of the ratio of the case. A further possible flaw in his judgment is the failure to address the potential problem of inconsistency. Barron J appeared to endorse this ground of inconsistency as being the basis for the decision in Re Keen and yet, if as his rejection of the wider ground for that decision suggests, communication in the case before him took place after the execution of the will, this would itself lead to inconsistency with the terms of the instrument.

Accepted Answer

strict compliance

Accepted Answer

testator makes a gift

Accepted Answer

Re Stead

Accepted Answer

Geddis v Semple

Accepted Answer

Re Stead

Accepted Answer

Perrins

Accepted Answer

Re Snowdon

Accepted Answer

Banco Ambrosiano

Accepted Answer

Ansbacher & Co

Accepted Answer

legatee on trust

Accepted Answer

Riordan v Banon

Accepted Answer

Moss v Cooper

Accepted Answer

Blackwell v Blackwell

Accepted Answer

Blackwell

Accepted Answer

provision of the Wills Act

Accepted Answer

Re Keen

Accepted Answer

Prendiville v Prendiville

Accepted Answer

Prendiville

Accepted Answer

Re Keen was authority

Question 4

Constitution of Trusts
A trust is said to be completely constituted when the trust property has been [blank_start]vested in the trustee[blank_end] by transfer or declaration for the benefit of the beneficiaries; a trust remains incompletely constituted until this is done. The importance of the distinction between completely and incompletely constituted trusts lies in the fact that once a trust is completely constituted it can be enforced by any beneficiary, whether he has given value or is a mere volunteer. However, if a trust is incompletely constituted, subject to certain exceptions, only beneficiaries who have [blank_start]given value[blank_end] can enforce it and volunteers cannot enforce the trust. (A Voulenteer is someone who does not give consideration)

Generally speaking, equity will not enforce or perfect an [blank_start]incomplete or imperfect[blank_end] trust in favour of a volunteer. See the comments of Turner LJ in [blank_start]Milroy v Lord[blank_end] (1862) 4 De GF & J 264, 274: ‘In order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him.’

There are two main ways in which a trust may be completely constituted (1) by [blank_start]conveyance[blank_end], i.e. by transferring the trust property to the trustees inter vivos or by will or (2) by [blank_start]declaration[blank_end] of trust, i.e. the settlor may declare himself to be a trustee either expressly or by implication. In order to completely constitute a trust by method (1), there must be an effective [blank_start]transfe[blank_end]r of the property to be included in the trust and an intention on the settlor’s part to bring about such a transfer will generally not suffice. This is illustrated by the decision of O’Donovan J in [blank_start]McArdle v O’Donohoe[blank_end] [1999] IEHC 176. Wanted to create daugfhter for daughter however the money had actually not be allocated to the daughter and remained the settelors property.

The statement of Turner LJ in [blank_start]Milroy v Lord[blank_end] to the effect, inter alia, that in order to ensure that a trust is completely constituted, the settlor must have done everything which it is necessary to do to effect the transfer, is subject to some qualification in the following circumstances. Where the settlor has done everything in his power to transfer the title to the property but cannot ensure compliance with some formality which is outside his control, the trust will nevertheless be regarded as completely constituted.

[blank_start]Re Rose[blank_end] [1952] Ch 499 The Court of Appeal held that as the settlor had done all in his power to divest himself of the shares (unlike in Milroy where he had failed to register the transfer), although he remained in law the owner until the transfer was registered, in equity the transfer was regarded as being effective from the date of the deed. BEWARE 2 CASES CALLED RE ROSE ON SIMILAR ISSUES. In this case there were similar to O’Donaghue. However Board of Directors had to approve property beinmg moved to trust. Settler had done everything to try and divest. In equity he was held to try and do everthing possible.

[blank_start]Pennington v Waine[blank_end] [2002] 1 WLR 2075 Arden LJ stated that there was a clear finding that the donor intended to make an immediate gift and that a stage had been reached when it would have been unconscionable for her to recall it. In her view delivery of the share transfer before the donor’s death was unnecessary so far as the perfection of the gift was concerned and it was not a case of equity being asked to complete an imperfect gift.

The alternative method of completely constituting a trust is for a settlor to declare himself a trustee of property for the benefit of third parties. Settleor wnate to transfer shares and had signed form however it had never been fully registered. Clear Donor wanted to give an immediate gift. It would be uncionable to not enforce trust.

The decision of the Privy Council in [blank_start]T. Choithram International SA v Pagarani[blank_end] [2001] 1 WLR 1 makes it clear that where the settlor is one of a number of co-trustees the trust may be completely constituted by a declaration of trust made by him even though the property has still to be vested in the co-trustees. The court said that the trustee was giving money to the foundation so they used benevolce to bring about trusteeship.

There has been some criticism of this decision on the grounds, inter alia, that it may breach the principle laid down in [blank_start]Milroy v Lord[blank_end]  to the effect that a failed transfer will not be interpreted as a successful declaration of the settlor as trustee (see [blank_start]Rickett[blank_end] [2001] Conv 515, 519).  However, it has also been welcomed as showing a willingness to depart from strict legal formalities (see Hopkins [2001] CLJ 483, 485) and it is difficult to argue with the conclusion reached by Lord Browne-Wilkinson that it would be unconscionable to allow a donor to resile from his intention to make a gift in such circumstances.

In [blank_start]Pennington v Waine[blank_end] [2002] 1 WLR 2075, 2090, Arden LJ commented that ‘the principle that, where a gift is imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not prevent the court from construing it to be a trust if that interpretation is permissible as a matter of construction, which may be a benevolent construction.’

There are a number of other exceptions to the rule that equity will not perfect an incomplete trust in favour of a volunteer.

1. Where the settlor subsequently vests the legal title in the donee, known as the Rule in [blank_start]Strong v Bird[blank_end] (1874) LR 18 Eq 315. The effect of the rule is that where an incomplete gift is made during a donor's lifetime and the legal title to this property subsequently becomes vested in the donee by will as executor or administrator, the donor's prior intention to make the gift is regarded as having been perfected provided that the intention has continued until the date of the donor's death so the personal interest prevails.= Creditor appointed man who owed him money as executor. Court said this forgave the dept.

2. [blank_start]Donatio Mortis Causa[blank_end] 
An imperfect voluntary transfer of property will be perfected where the conditions for donatio mortis causa are satisfied - these are gifts made in contemplation of the donor’s death. The essentials of this concept are that (1) there must be a gift made in [blank_start]contemplation of the donor[blank_end]’s death; (2) the subject matter of the gift must be [blank_start]delivered to the donee[blank_end] before the donor’s death and (3) the gift must take effect on the donor’s [blank_start]death[blank_end] only, so that it must remain revocable during his lifetime. See Russell CJ in Cain v Moon [1896] 2 QB 283, 288.

[blank_start]Sen v Headley[blank_end] [1991] 2 WLR 1309 it was held by the Court of Appeal that a gift of land by the delivery of deeds should not be excluded from the doctrine of donatio mortis causa. Ecplained to women how to get house deeds held to be his intention.

[blank_start]Bentham v Potterton[blank_end] [1998] IEHC 84 Barr J made it clear that the onus lay on the party claiming the gift to establish to the court that the requirements for donatio mortis causa had been satisfied. Barr J concluded that he was not satisfied that the deceased 'positively intended to make a radical change in the disposition of her property in contemplation of her death'.

It has been suggested by the Court of Appeal in [blank_start]King v Dubrey[blank_end] [2016] Ch 221 that the doctrine of donatio mortis causa serves little useful purpose today and that the courts should not permit any further expansion of it. Jackson LJ stated that the doctrine paves the way for all of the abuses which legislation such as the Wills Act is intended to prevent and he added that in his view it was important to keep donatio mortis causa within its proper bounds. Patten LJ stated (at [89]) that ‘the paramount principle is that the law’s recognition of a donatio mortis causa as a valid means of transferring property on death operates as an exception rather than an alternative to the requirements of the [blank_start]Wills Act[blank_end] or any other statutory provisions governing the valid transmission of interests in property.’

3. Proprietary Estoppel
Where an imperfect gift has been made and the donor knowingly allows the donee to improve the property or acts to his detriment in some manner, equity will compel the donor to [blank_start]perfect the gift[blank_end] even where the donee is a volunteer.

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vested in the trustee

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given value

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incomplete or imperfect

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Milroy v Lord

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McArdle v O’Donohoe

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conveyance

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declaration

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transfe

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Milroy v Lord

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Re Rose

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Pennington v Waine

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T. Choithram International SA v Pagarani

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Milroy v Lord

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Rickett

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Pennington v Waine

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Strong v Bird

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Donatio Mortis Causa

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contemplation of the donor

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delivered to the donee

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death

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Sen v Headley

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Bentham v Potterton

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King v Dubrey

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perfect the gift

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Wills Act

Express Trusts

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