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Trusts & Equity - Constitution (Rules of constitution (Shares (Stock…
Trusts & Equity - Constitution
Applies to transfer of legal title (as opposed to equitable, which is validated by formalities)
Takes place via will, so long as it confirms to Section 9 of the Wills Act 1837
Rules of constitution
Land
s52(1) LPA 1925 - transfer of land must be done by means of deed
s1 LP(MP)A 1989 - specifies requirements for a deed (clear on the face of it, signed in presence of witness, delivered/dated)
ss4/27 LRA 2002 - must be registered
Chattels
Need deed OR
1) Intention to make gift coupled with 2) delivery (Re Cole)
Shares
Stock Transfer Act 1963 - transferor fills out and signs transfer form in favour of transferee
Form and share certificates sent to Companies' Registrar
Registrar registers transferee as new legal title shareholder
Choses in action
s136 LPA 1925 - includes rights under bank accounts etc. - transferred in writing in compliance with section - notice in writing must be given to debtor/other party
Money
Cash amounts to chattel
Rights under bank account amount to chose in action
Cheque - if payer dies before cheque clears, death countermands mandate to bank to transfer money
Can be transferred to third party by transferor endorsing cheque (signing back)
Bills of Exchange Act 1882
Cheque Act 1992
General rule for constitution - Milroy v Lord (1862) - Turner LJ set out three methods for transferring property
Outright gift - constitution applies
Transfer of legal title to trustee to hold on trust - constitution applies
Self-declaration of trust - constitution does not apply as there is no movement of legal title
"There is no equity in this court to perfect an imperfect gift"
If transfer intended to be effectuated via gift or creation of trust, must follow rules of constitution - Court will not give effect by naming it as something other than intended
Application
Jones v Lock (1865) - intended as a gift - could not be treated as a trust just because it wasn't perfected
Per Lord Cranworth: "I think it would be of very dangerous example if loose conversations of this sort, in important transactions of this kind, should have the effect of declarations of trust"
Richards v Delbridge - again fell short of a gift but could not be upheld as a declaration of trust because the grandfather had not intended to declare himself a trustee
Per Sir George Jessel MR - the court "is not at liberty to construe words otherwise than according to their proper meaning"
Choithram v Pagarani (Privy Council) - intended to make gift to charity of which he was trustee - did not perfect - however in practice any gift to charity amounts to a transfer on trust - already vested in one (him)
Ordered personal representative of deceased to vest property in all surviving trustees, as required
Exceptions to Milroy v Lord
Re Rose (1952) - transfer for shares - if rule applies the incomplete legal transfer does create a constructive trust in favour of the recipient and forces completion of the legal title
Transferor must have used the correct method of transferring property
They must have done everything within their power to effect the transfer
Documentation must end up in the hands of someone capable of effect legal title transfer
Mascall v Mascall (1986) - extension of Re Rose
Transferor must have used the correct method
But they need not have done everything within their power
Transfer must be irrevocable by the transferor - it must be out of their hands
Comparisons
Re Fry (1948) - transferor domiciled abroad hadn't obtained treasury consent - died before obtained - transfer of shares held ineffective as transferor had not put beyond their control
Zeital v Kaye (2010) - didn't hand over share certificate though did hand over stock transfer form signed by registered shareholder - held had not done everything in his power
Pennington v Waine (2002) - per Arden LJ: "It is not and cannot be literally true that the donor has to do everything which he can to transfer the property to the done"
Referred to Choithram - argued that while she had not done everything within her power, it would be unconscionable for her to revoke the gift at this point
Reference slightly misplaced - unconscionability only mentioned there to make point that would be just as unconscionable for Mr Choithram to resile from his express declaration of trust as one of a number of trsutees as it would if he had declared himself sole trustee - Lord Browne-Wilkinson did not appear to be suggested unconscionability per se is an exception
Contrast between maxim that equity will not aid a volunteer and the maxim that it will not strive officiously to defeat a gift
Heavily criticised - Arden refused to define what "unconscionable" means - no objective definition
Obiter comments in Zeital v Kaye (2010) - suggest Pennington will only be followed where facts are very similar
Arguably would have been less contentious is held on grounds of proprietary estoppel, as nephew had already started working as Director, which was only possible if shares held
Arguably key test of unconscionability is a form of estoppel - without need to prove detriment - established by virtue of intended donee's reliance - later recognised by Briggs J in Curtis v Pullbrook
Question of nature of trust is nephew can be held to have beneficial interest - can't be express because intended as gift
Unconscionability leading to constructive trust - doesn't undermine principle that equity won't save a gift by finding trust because constructive trusts don't rely on intend
Also key reason why intention to create gift can't be treated as trust is because of onerous obligations - being a bare trust, constructive trust doesn't require this
Fortuitous vesting - Strong v Bird (1874) - per George Jessel MR: "When a testator makes his debtor executor, and thereby releases the debt at law, he is no longer liable at law"
Continuing intention to forgive debt demonstrated by making step-son executor of her will - on paying the next of kind balance of the debt, he would essentially have to sue himself
In Re Stewart, applied to perfection of imperfect gifts if certain requirements met
Immediate intention to make a gift (Re Freeland)
Continuing intention to make a gift (Re Gonin)
Intended donee is also executor/one of the executors of the donor's will (Re Stewart) - legal title ends up in their hands upon death
Extended to administrators of intestate estates in Re James
Obiter comments in Re Gonin doubted this decision - administrator is appointed by a third party, not chosen by testator - therefore Re James extends rule to apply to circumstances that are unjustifiable
Re Walli's Will Trusts (1964) - another dubious extension - incompletely constituted trust can be constituted if trustee receives legal title in another capacity
Aka if trustee is also executor - though only possible here because sole trustee on both trusts - no reference made to immediate and continuing intention
Similar arguments made in Re Brooks (1939) - not held - impossible to make a gift of future property - this case and Re Walli's WT distinguishable on facts - in Walli's it was property in which settlor had vested interest, albeit on in possession
Donationes Mortis Causa - three requirements specified in Cain v Moon
Gift made in contemplation (not necessarily expectation) of death e.g. through illness or doing something inherently dangerous - King v Dubrey (2015)
King overturned earlier authority of Vallee v Birchwood (2014) saying that cannot be upheld if merely contemplating death at some point in future aka because of advanced old age - must be near future from known cause as donor must have insufficient time to deliver through valid inter vivos transfer or will
Gift must be conditional upon death - if donor recovers then gift is revoked
Must be actual/constructive delivery of the property through passing of dominion - control over the asset e.g. account book to account - must be passing of something that connotes ownership, not just access
Sen v Headley (1991) - terminally ill - told friend that the house was hers and that deeds were in steel box - slipped keys to box into her bag - handing over house keys would not have been sufficient as only represent possession
Birch v Treasury Solicitor (1951) - bank deposit pass book
Re Weston (1902) - post-office savings bank book
Difficulty with cheques - revocable as mandate ends on death (Re Beaumont (1902))
Are some circumstances where may be subject matter even without endorsement (Re Mead (1880))
Proprietary estoppel
Promise or assurance
Detrimental reliance
Flexible remedy